Carry Forward Loss

Hi, I read articles on your website which were very helpful. I have some query and it would be really great if you could please help me with your suggestions. Thank you very much in advance. Background: I am a salaried employee and I had traded in F&O in AY21-22 (only 2 Large transactions during lockdown) and incurred a huge combined loss of approx. Rs.21 lakhs total. This was reported as Business Loss (non-speculative) in the IT Return and carried forward to the next year. I received the Assessment Order wherein Income Tax Department also allowed it as reported. Further, I filed returns for AY22-23 and AY23-24 reporting it as carry forward Business Loss (non-speculative) and also received Assessment Orders for all returns filed so far. Now, I have Mutual Funds portfolio of Rs.80 lakhs value, which I intend to redeem in the current financial year and there is approx. Rs.25 lakhs unrealized gain. This gain will materialize on redemption of the Mutual Funds. I recently met a friend of mine who is a CA and he suggested two options: Option A: I can use carry forward loss as originally reported under Business Loss (non-speculative) and use it to set off STCG or LTCG on redemption of Mutual Funds. This is my friend’s suggested option. Option B: Alternatively, he suggested, F&O loss can be claimed as Short-Term Capital Loss since there were only 2 one-off transactions and I am not in the business of F&O. Accordingly, I should File Revised Return for AY21-22 claiming F&O loss as ST Capital Loss instead of Business Loss (non-speculative) as reported earlier. I should also file Revised Returns for AY22-23 and AY23-24 changing the carry forward treatment to ST Capital Loss. This carried forward ST Capital Loss can then be used to set off against ST Capital Gain or LT Capital Gain on Mutual Funds which will materialize when I redeem Mutual Funds in the current financial year. Please let me know: 1. In case of Option A, can F&O loss originally carried forward as Business Loss (non-speculative) be used to set off against STCG or LTCG on Mutual Funds. 2. In case of Option B, can F&O loss be considered as ST Capital Loss instead of Business Loss (non-speculative) as reported by me (and also assessed and approved by IT). 3. If answer to Question 2 above is Yes, then can I file Revised Return for AY21-22 and subsequently for AY22-23 and AY23-24? I would be extremely grateful, if you can help me with your suggestions and guidance on the above. Thank you very much. Best regards, Rohit