I.T.O Wd - 5(1),kolkata, Kolkata V. M/s SPT Comodities Pvt Ltd, Kolkata

ITA 1066/KOL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1566 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHOWNGTHU CITSRDR
• Assessee Lawyers: SHRU SUBASH AGARWAL
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1066 / KOL / 2013 ASSESSMENT YEAR :2009-10 ITO WARD-5(1), AAYKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-69 V/S . M/S SPT COMMODITIES PVT. LTD. 11, CLIVE ROW, 2 ND FLOOR, ROOM NO. 3, KOLKATA-01 [ PAN NO.AAHCS 9522 M ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI DAVID Z. CHOWNGTHU, ADDL. CIT-SR-DR /BY RESPONDENT SHRU SUBASH AGARWAL, ADVOCATE /DATE OF HEARING 26-07-2017 !' /DATE OF PRONOUNCEMENT 30-08-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI KOLKATA DAT ED 11.12.2012. ASSESSMENT WAS FRAMED BY JCIT(OSD), CIRCLE-5, KOLKA TA U/S 143(3) & 115WE(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER R EFERRED TO AS THE ACT) VIDE HIS ORDER DATED 05.12.2008 FOR ASSESSMENT YEAR 2009-10. SHRI DAVID Z. CHOWNGTHU, LD. DEPARTMENTAL REPRESENT ATIVE REPRESENTED ON BEHALF OF REVENUE AND SHRI SUBASH AGARWAL, LD. ADVO CATE APPEARED ON BEHALF OF ASSESSEE. 2. AT THE OUTSET, IT WAS NOTICED THAT THE APPEAL FI LED BY REVENUE IS DELAYED BY JUST 49 DAYS. THE CONDONATION PETITION HAS BEEN FILED EXPLAINING THE REASONS FOR DELAY ALONG WITH SUPPORTING AFFIDAVIT. ON QUERY, FROM THE BENCH, LD. COUNSEL FOR THE ASSESSEE HAS NOT OPPOSED THE CO NDONATION RATHER HE ITA NO.1066/KOL/2013 A.Y. 2009-10 ITO WD-5(1) KOL. VS. M/S SPT COMMODITIES PVT. LTD. PAGE 2 CONCEDED THAT DELAY CAN BE CONDONED. IN VIEW OF THE ABOVE REASONS GIVEN IN THE CONDONATION PETITION AND CONCESSION GIVEN BY LD . AR FOR THE ASSESSEE, WE CONDONE THE DELAY AND ADMIT THE APPEAL. 3. SOLE ISSUE RAISED BY REVENUE IN THIS APPEAL IS T HAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER FOR 3,59,47,660/- ON ACCOUNT OF NOTIONAL LOSS CLAIMED BY ASSESSEE. 4. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY AND ENGAGED IN COMMODITY DERIVATIVE TRADING WHICH WAS D ELIVERY BASED AS WELL AS NON-DELIVERY BASED. 5. THE ASSESSEE DURING THE YEAR HAS CLAIMED LOSS IN RESPECT OF CERTAIN UNEXPIRED DERIVATIVE COMMODITY CONTRACTS AS ON 31.0 3.2009 FOR 3,59,49,660/- . THE IMPUGNED LOSS WAS DETERMINED ON THE BASIS OF MARK TO MARKET BASIS AS THIS CONTRACT WAS NOT EXPIRED ON THE REPORTING DATE . THEREFORE, THE IMPUGNED LOSS CLAIMED IS NOTIONAL IN NATURE. ACCORDINGLY, AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED AS UNDER:- I) THAT THE LD. DCIT ERRED IN ADDING RS.3,59,47,660 /- ON A BELIEF THAT LOSS OF MARK TO MARKET ON UNEXPIRED FUTURE/OPTIONS CONTRACT S AS BUSINESS LOSS HAS BEEN CLAIMED IN PROFIT AND LOSS ACCOUNT. II) THE ASSESSEE IS ENGAGED IN DELIVERY BASED COMMO DITY TRADING AND NON DELIVERY BASED COMMODITY TRADING. DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE IS BEING ENGAGED IN THE VARIOUS SALE AND P URCHASE TRANSACTIONS. III) THE LD. ASSESSING OFFICER WHILE PASSING THE O RDER MENTIONED THAT THE ASSESSEE HAS DEBITED LOSS OF RS.3,59,47,660/- IN R ELATION TO OUTSTANDING SAUDA ON FUTURES/OPTIONS COMMODITY CONTRACTS ON MAR KED TO MARKET BASIS. SO THE LOSS BOOKED IS NOTIONAL AND NOT ACTUAL. THUS H E MADE ON ADDITION OF RS.3,59,47,660/- IV) SIR, WE WOULD LIKE TO MENTION THAT THE ASSESSEE HAS NOT CLAIMED ANY NOTIONAL LOSS IN THE CURRENT YEAR. THE LD. ASSESSIN G OFFICER SHOULD HAVE APPLIED HIS MIND BEFORE PASSING THE ORDER AS NO LOS S WAS CLAIMED BY THE ASSESSEE. IN ORDER TO EXPLAIN OUR CONTENTION WE WOU LD LIKE TO EXPLAIN IT WITH AN EXAMPLE. FOR EXAMPLE, LET US ASSUME THAT THE ASSESS EE PURCHASED AN APRIL FUTURE CONTRACT ON A UNIT OF COMMODITY AT RS.1,000/ - PER UNIT ON 29 TH MARCH, 2012. THE ASSESSEE PASSES AN ENTRY AS FOLLOWS:- ITA NO.1066/KOL/2013 A.Y. 2009-10 ITO WD-5(1) KOL. VS. M/S SPT COMMODITIES PVT. LTD. PAGE 3 PURCHASE A/C DR. 1000 TO MCX 1000 THE CLOSING RATE OF THE SAME DAY I.E.29.03.12 IS SA Y RS.990/-. THE ASSESSEE RECORDS THE FOLLOWING TRANSACTION AT THE E ND OF THE DAY DERIVATIVE SUSPENSE A/C DR 10(1000-990) TO MCX A/C 10(1000-990) ON THE NEXT DAY I.E. 30.3.12 LET US ASSUME THAT THE CLOSING RATE IS RS.985/- DERIVATIVE SUSPENSE A/C DR 5(990-985) TO MCX A/C 5(990-985) ON THE LAST DAY IE. 31.03.09 LET US ASSUME THAT THE CLOSING RATE IS RS.970/- DERIVATIVE SUSPENSE A/C ..DR 15(985-970) TO MCX A/C 15(985-970) THIS SUSPENSE ACCOUNT CONTAINING NOTIONAL LOSS IS T RANSFERRED TO DERIVATIVE TRADING ACCOUNT DERIVATIVE TRADING A/C .DR 30 TO DERIVATIVE SUSPENSE A/C 30 TO NULLIFY THIS NOTIONAL LOSS THE ASSESSEE HAS PASS ED THE FOLLOWING ENTRY IN THE BOOKS OF ACCOUNT. COMMODITY MTM (SUNDRY DEBTORS)DR 30 TO DERIVATIVE TRADING A/C 30 NOW CONSIDERING THE CASE OF THE APPELLANT YOUR HONO UR WILL FIND THAT THE ASSESSEE IS HAVING A NOTIONAL LOSS OF RS.3,59,47,66 0 ON UNEXPIRED DERIVATIVE COMMODITY CONTRACTS AS ON THE LAST DATE. THE ENTRY PASSED BY THE ASSESSEE ON 31.3.2009 WAS AS FOLLOWS:- DERIVATIVE TRADING A/C .DR 3,59,47,660 TO DERIVATIVE SUSPENSE A/C 3,59,47,660 IN ORDER TO NULLIFY THE SAID LOSS THE ASSESSEE PASS ED THE FOLLOWING JOURNAL ENTRY. COMMODITY MTM (SUNDRY DEBTORS)..DR 3,59,47,660 TO DERIVATIVE TRADING 3,59,47,660 V) ON CAREFUL OBSERVATION YOUR HONOUR WILL FIND THA T THE NOTIONAL LOSS WAS NULLIFIED BY DEBITING COMMODITY, MTM (SUNDRY DEBTOR S) WHICH IS SHOWN IN THE BALANCE SHEET OF THE ASSESSEE. THE BREAK-UP OF SUND RY DEBTORS IS ALSO ENCLOSED HEREWITH. THUS THERE WAS NO EFFECT IN PROF IT AND LOSS ACCOUNT OF THE ASSESSEE (COPY ENCLOSED). VI) SIR, IN VIEW OF ABOVE EXPLANATION WE REQUEST YO UR HONUR TO BE KIND ENOUGH TO DELETE THE ADDITION IN TOTO. AFTER CONSIDERING THE SUBMISSION OF ASSESSEE LD. CI T(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. THE APPELLANT IS ENGAGED IN THE BUSINESS OF BROKING OF COMMODITIES AND IS EN GAGED IN THE DELIVERY BASED COMMODITIES TRADING AND NON DELIVERY BASED CO MMODITY TRADING. THE ITA NO.1066/KOL/2013 A.Y. 2009-10 ITO WD-5(1) KOL. VS. M/S SPT COMMODITIES PVT. LTD. PAGE 4 APPELLANT HAS EXPLAINED THE ENTRIES IN BOOKS OF ACC OUNT AS GIVEN IN THE SUBMISSIONS (SUPRA). THE DETAILS FILED BY THE APPEL LANT FILED DURING APPELLATE PROCEEDINGS E.G. SHOW THAT THE NOTIONAL LOSS FROM F UTURE TRADING IN COMMODITY ITEM TURMERIC (JUNE FUTURE) WAS RECORDED IN THE BOO KS OF ACCOUNT AND THE SAME WAS REVERSED AT THE END OF THE FINANCIAL YEAR ON 31 ST MARCH, 2009. IN THIS REGARD IT FURTHER SUBMITTED THE DETAILS OF SEQ UENCE OF EVENT OF THE TRANSACTIONS THAT TOOK PLACE I.E. PURCHASE, RECORDI NG OF DAILY PROFIT OR LOSS AND REVERSAL OF SUCH NOTIONAL LOSS AT THE END OF THE YE AR IN RESPECT OF THE AFORESAID ITEM I.E. TURMERIC (JUNE FUTURE). IT ALSO FILED COP IES OF OBLIGATION STATEMENT, DERIVATIVE TRADING ACCOUNT OF TURMERIC (JUNE FUTURE ) AND BILLS RAISED RELEVANT TO NON-SEQUARED OFF TRANSACTIONS, COPIES OF LEDGER ACC OUNT OF DERIVATIVE SUSPENSE A/C ALONG WITH BILLS RAISED AND OBLIGATION STATEMENT ON VARIOUS DATES TO ILLUSTRATE THAT DAILY PROFIT OR LOSS WAS RECORDE D IN THE BOOKS OF ACCOUNT. THE APPELLANT HAS SUBMITTED AND HAS SHOWN IN THE BOOKS OF ACCOUNT THAT THERE WAS NO NOTIONAL LOSS BOOKED AND IN THE LAST THE FIN AL ENTRY WAS PASSED BY DEBITING COMMODITY MTM AND CREDITING DERIVATIVE TRA DING ACCOUNT. THE NOTIONAL LOSS WAS NULLIFIED BY DEBITING COMMODITY M TM (SUNDRY DEBTORS) WHICH HAS BEEN SHOWN IN THE BALANCE SHEET OF THE AS SESSEE. 6. IT HAS BEEN FOUND THAT THE APPELLANT IS IN THE B USINESS SINCE LONG AND THIS ADDITION HAS NEVER BEEN DONE IN THE EARLIER YEARS. THE SAME POSITION HAS BEEN ACCEPTED BY THE DEPARTMENT SINCE LONG. THE MET HOD FOLLOWED BY THE APPELLANT HAS BEEN FOUND TO BE AS PER THE ACCOUNTIN G STANDARDS. 7. THE ASSESSING OFFICER HAS ADDED THE AMOUNT WHICH WAS NOT DEBITED IN THE PROFIT AND LOSS ACCOUNT IN THE ASSESSMENT YEAR, 200 9-10 AND HAS INCREASED THE PROFIT INSTEAD OF REDUCING IT. THE APPELLANT HA S NOT TAKEN THE AMOUNT OF RS.3,59,47,660/- IN THE PROFIT AND LOSS ACCOUNT DUR ING THE ASSESSMENT YEAR 2009-10 THEREFORE, IT IS HELD THAT THE PROFIT AND L OSS ACCOUNT WAS NOT PREPARED FOR THE ASSESSMENT YEAR 2009-10 IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 ( 1 OF 1956) FOR THE PURPOSES OF SECTION 115JB. THE CARRIED FORWARD LOSS IN THE LEDGER ACCOUNT WITHOUT DEBITING THE PROFIT AND LOSS ACCOUNT IN ASS ESSMENT YEAR 2009-10 MAY ALSO IMPACT THE PROFIT AND LOSS ACCOUNT OF AY 2010- 11 TO BE PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III FOR SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956) FOR THE PURPOSES OF SECTION 115JB. 8. THE APPELLANT HAS NOT DEBITED ANY NOTIONAL LOSS AND THERE IS ONLY PROFIT OF RS.1,46,410/- IN THE PROFIT AND LOSS ACCOUNT AND AS PER COMPUTATION OF INCOME RS.1,86,758/-. THERE IS NO MARK TO MARKET LO SS IN THE BOOKS OF ACCOUNT. THEREFORE, IN THE FACTS AND CIRCUMSTANCES AS EXPLAINED BY THE APPELLANT DURING APPELLATE PROCEEDINGS AND TAKING I NTO CONSIDERATION THE CONSISTENCY BEING FOLLOWED BY THE APPELLANT IN ITS ACCOUNTING METHOD AND DUTY ACCEPTED BY THE DEPARTMENT, THE ADDITION OF RS.3,59 ,47,660/- IS DELETED. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 7. BEFORE US LD. DR SUBMITTED THAT ASSESSEE HAS FIL ED ADDITIONAL EVIDENCE BEFORE LD. CIT(A) WHO HAS CONSIDERED THE SAME WITHO UT CALLING FOR THE REMAND REPORT FROM AO. HE REQUESTED THE BENCH TO RESTORE T HIS MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. ITA NO.1066/KOL/2013 A.Y. 2009-10 ITO WD-5(1) KOL. VS. M/S SPT COMMODITIES PVT. LTD. PAGE 5 ON THE OTHER HAND, LD. AR FOR THE ASSESSEE SUBMITTE D THAT NO DETAIL WAS SOUGHT BY AO WHILE MAKING ASSESSMENT PROCEEDINGS. T HEREFORE, NECESSARY DETAILS WERE NOT SUBMITTED. HOWEVER, LD. AR RAISED NO OBJECTION IF THE MATTER BE REMITTED BACK TO THE FILE OF AO. LD. AR FURTHER SUBMITTED THAT NO LOSS WAS CLAIMED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT IN RESPECT OF UNEXPIRED DERIVATIVE CONTRACTS. THE IMPUGNED LOSS WAS SET OFF BY PASSING A JOURNAL ENTRY IN THE BOOKS OF ACCOUNT. HE RELIED ON THE ORDER OF LD. CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AT THE OUTSET, WE FIND THAT ADD ITIONAL INFORMATION HAS BEEN SUBMITTED BY THE ASSESSEE AT THE APPELLATE STAGE WH ICH IN OUR CONSIDERED VIEW REQUIRES TO BE CONSIDERED BY THE AO. THEREFORE , IN THE INTEREST OF NATURAL JUSTICE AND FAIR PLAY WE RESTORE THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. NEEDLESS TO SA Y, ASSESSEE SHOULD CO- OPERATE BEFORE AO AS AND WHEN REQUIRED. HENCE, THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, FOR STATISTICAL PURPOSE, THE APPEAL OF REVENUE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 30 /08/2017 SD/- SD/- ($%&) ( %&) (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S (%)*- 30 / 08 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO WARD-5(1), P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-69 2. /RESPONDENT-M/S SPT COMMODITIES PVT. LTD. 11, CLIVE R OW, 2 ND FLOOR, ROOM NO.3, KOLKATA-1 3.)2)3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5.789$$3 , 3 , / DR, ITAT, KOLKATA 6.9;<=> / GUARD FILE. BY ORDER/ %, /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3 ,