BLB Cables & Conductors(P)Ltd, Kolkata V. DCIT, Circle -5, Kolkata

ITA 1070/KOL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3192 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 17-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHOWNGTHO
• Assessee Lawyers: S M SURANA
• Keywords: Depreciation; Opportunity of being heard; Transactions in derivatives; Question of law; Speculation loss
• Section: 143(3); 115JB; 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1070 / KOL / 2012 ASSESSMENT YEAR:2008-09 BLB CABLES & CONDUCTORS PVT. LTD., 56, NETAJI SUBHAS ROAD, 2 ND FLOOR, KOLKATA 700 001 [ PAN NO. AABCB 2001 J ] V/S . DCIT, CIRCLE-5, AYAKAR BHAWAN, 8 TH FLOOR, P- 7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI S.M.SURANA, ADVOCATE /BY RESPONDENT SHRI DAVID Z. CHOWNGTHO, ADDL-CIT-DR /DATE OF HEARING 08-12-2015 /DATE OF PRONOUNCEMENT 03-02-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA IN APPEAL NO.138/C IT(A)-VI/CIR.-5/2010- 11/KOL/08-09 DATED 05.06.2012. ASSESSMENT WAS FRAME D BY DCIT, CIRCLE-5, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 29.12.2010 FOR ASSESSMEN T YEAR 2008-09 AND ASSESSEE RAISED FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE DISALLOWANCE OF SPECULATION LOSS OF RS.22696157 ARI SING FROM PURCHASE ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 2 AND SALE OF SILVER AND OTHER METALS BY HOLDING SUCH LOSS AS BOGUS AND INADMISSIBLE. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE HELD THAT THE SAID SPECULATION LOSS OF RS.22696157/- WAS INCU RRED IN THE USUAL COURSE OF BUSINESS CARRIED ON BY THE APPELLANT FOR THE FIRST TIME AND HE SHOULD NOT HAVE BEEN INFLUENCED BY IRRELEVANT FACT S INCLUDING THE EXPELLING OF THE BROKER M/S VATIKA MERCHANTS PVT. L T. FROM THE MEMBERSHIP OF THE COMMODITY EXCHANGE WHICH WAS NOT WITHIN THE CONTROL OF THE APPELLANT. 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE HELD THAT THE SPECULATION LOSS OF RS.22696157/- WAS ABSOLUTEL Y GENUINE HAVING BEEN INCURRED IN THE USUAL COURSE OF APPELLANTS BU SINESS AND CONSEQUENTLY HE SHOULD HAVE DIRECTED THE SAID LOSS TO BE CARRIED FORWARD. 4. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FURTHER ERRED IN HOLDING THAT THE SAID SPECULATION LOSS OF RS.22695157/- HAS TO BE IGNORED FOR THE PURPOSE OF COMPUTING INCOME UNDER SECTION 115JB OF INCOME TAX ACT 1961 IN COMPLETE DISREGARD OF THE BALANCE SHEET & P ROFIT & LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PARTS I & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 AND THE PROV ISIONS CONTAINED IN THE TWO PROVISIONS TO SECTION 115JB(1) OF IT ACT , 1961. 5. FOR THAT IN ANY EVENT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ACTED ILLEGALLY IN HOLDING THAT THE SAID S PECULATION LOSS OF RS.22,696157/- CANNOT FORM PART OF THE PROFIT & LOS S ACCOUNT AND THAT THE SAME CAN BE ADDED BACK U/S/. 115JB OF THE INCOM E TAX ACT, 1961 WHICH IS NOT PERMISSIBLE AT ALL IN TERMS OF SECTION 115JB(1) AND THE PROVISOS THERETO. 2. GROUNDS NO. 1 TO 3 ARE COMMON THEREFORE THEY ARE CLUBBED TOGETHER, THE COMMON ISSUES RAISED BY ASSESSEE IN THIS APPEAL ARE THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER FOR DISALLOWING THE SPECULATION LOSS OF 2,26,96,157/- ARISING FROM PURCHASE AND SALE OF SIL VER AND OTHER METALS BY HOLDING SUCH LOSS BOGUS AND INADMIS SIBLE. ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 3 2.1 THE FACTS OF THE CASE ARE THAT ASSESSEE IS A PR IVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF GRANTING OF LOANS AND DEALING IN COMMODITIES. DURING THE YEAR ASSESSEE WAS ENGAGED I N THE TRADING BUSINESS OF COMMODITIES IN NATIONAL MULTI COMMODITY EXCHANGE (NMCE FOR SHORT). ASSESSEE USED THE SERVICES OF THE BROKER NAMELY, VA TIKA MERCHANT PVT. LTD. FOR THE TRADING IN THE NMC EXCHANGE. THE ASSESSEE H AD CLAIMED A LOSS OF RS.2,26,96,157/- IN THE BUSINESS OF TRADING IN COMM ODITIES. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS MADE ENQUIRY FROM THE NMCE TO ESTABLISH THE GENUINENESS OF THE ABOVE LOSS BUT FOUND THAT TH E ABOVE SAID BROKER WAS EXPELLED BY THE NMCE FOR HAVING INVOLVED IN ISSUING FORGED AND FRAUDULENT CONTRACT NOTES. IN REPLY TO THE SHOW CAUSE NOTICE, ASSESSEE SUBMITTED THAT ALL THESE TRANSACTIONS ARE OFF MARKET TRANSACTION SO NO T PASSED THROUGH THE COMMODITY EXCHANGE. THE ASSESSEE ALSO SUBMITTED ALL THE PURCHASE AND SALE CONTRACTS NOTES BEFORE AO IN SUPPORT OF ITS CLAIM. HOWEVER, AO DISREGARDED THE CLAIM OF ASSESSEE BY TREATING THE TRANSACTIONS AS BOGUS. ACCORDINGLY THE AO DISALLOWED THE SAME AND ADDED IT TO THE TOTAL IN COME OF ASSESSEE. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHERE THE ASSESSEE SUBMITTED THAT THE BROKER HAS ISSUED CONTR ACT NOTES THAT FOR THE PURCHASE AND SALES BEFORE THE AO. BESIDE THE ASSESS EE SUBMITTED THAT ALL THE PAYMENTS WERE MADE BY CHEQUES ON THE BASIS OF THESE CONTRACT NOTES. THERE WAS NO NEED TO INTIMATE TO THE STOCK EXCHANGE AS TH ESE TRANSACTIONS WERE MADE OFF THE MARKET. ALL THE TRANSACTIONS WERE DULY CONFIRMED BY THE BROKER AND WERE SUPPORTED WITH BANK STATEMENTS AND LEDGER COPY OF THE ACCOUNT. THE LD. AR ALSO POINTED OUT THAT THE ASSESSEE WAS N EVER CONFRONTED TO THE CONFIRMATION SUBMITTED BY THE BROKER, SO THE ORDER PASSED BY THE AO IS WITHOUT PROVIDING THE OPPORTUNITY OF BEING HEARD. HOWEVER THE CIT(A) DISREGARDED THE PLEA OF THE ASSE SSEE AND UPHELD THE ORDER OF THE AO BY OBSERVING AS UNDER : ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 4 9. I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. THE APPELLANT HAS INCURRED LOSS OF RS.2,26,96,157/- IN COMMODITY TRAD ING IN OFF MARKET THROUGH A BROKER WHO HAS BEEN SUSPENDED BY THE COMM ODITY EXCHANGE DUE TO ISSUING THE FRAUDULENT CONTRACT NOTES. THE C ONTRACT NOTES SHOW THAT THE APPELLANT STARTED DOING COMMODITY TRADING FROM 11.03.2008 TO 24.03.2008 AND INCURRED A LOSS OR RS.2,26,96,157/- MAINLY IN 14 DAYS ONLY. THE BANK A/C. REVEALS THAT DIFFERENCE AMOUNT OF SALE AND PURCHASE LOSS WAS BEING PAID ON DAY TO DAY BASIS FR OM 15.03.2008 TO 27.03.2008 BY CHEQUE IN SR. NO. I.E. 35182 TO 89. T HE AMOUNTS WERE BEING CREDITED TIN THE ACCOUNT OF THE APPELLANT REG ULARLY FROM SOME OTHER SOURCES AND BEING DEBITED TO BE PAID TO M/S VATIKA MERCHANTS PVT. LTD. DURING THE APPELLATE PROCEEDINGS, THE AR WAS ASKED TO PRODUCE THE DATA REGARDING THE PRICE OF THE SILVER TO SHOW SUCH A HUGE FLUCTUATION RESULTING INTO THE LOSS OF RS.2,26,96,157/- TO THE APPELLANT. THE DATE OF EACH ENTRY IN THE COMMODITY EXCHANGE IS RECORDED ON DAY TO DAY BASIS OR MAY BE AT REGULAR INTERVAL OF TIMES DURING THE D AY SINCE SUCH TRANSACTIONS ARE RECORDED. HOWEVER, NO SUCH SUPPORT ING DATA WAS PRODUCED BY THE AR DURING THE APPELLATE PROCEEDINGS . 10. IT IS A SIMPLE CASE OF PROCURING CONTRACT NOTES , MAKING ENTRIES IN A PLAIN SIMPLE REGISTER SHOWING PURCHASE AND SALE INC URRING COMMODITY LOSS IN EVERY PURCHASE AND SALE THEREOF, AS COMPLIE D IN THE ANNEXURE A ATTACHED WITH THIS ORDER. SIMILAR TRANSACTIONS HA VE BEEN SOWN BY THE APPELLANT IN ZINC, NICKEL, SACK, GOLD, ETC. THE APPELLANT HAS ENTERED IN TO 169 TRANSACTIONS OF SILVER OUT OF WHICH COMPL ETE DETAILS WERE GIVEN FOR 158 TRANSACTIONS AND THE APPELLANT INCURRED LOS S IN ALL SUCH TRANSACTIONS. THERE IS NEVER GAIN IN ANY COMMODITY TRANSACTION. THE APPELLANT HAS ENTERED IN TO 42, 34, 5 AND 3 TRANSAC TIONS OF ZINC, NICKLE, SACK AND GOLD RESPECTIVELY AND THE APPELLAN T HAS INCURRED LOSS IN ALL TRANSACTIONS EXCEPT TWO IN GOLD WHERE I T WAS OLD ON SAME PRICE. THERE IS NEVER GAIN IN ANY OF THE COMMODITY TRADE TRANSACTION TO THE APPELLANT. THE ORIGINAL REGISTER OF TRANSACTION S WAS NOT PRODUCED INSPITE OF SPECIFICALLY ASKING THE APPELLANT TO PRO DUCE THE SAME. IT WAS TO BE CHECKED WHETHER IT WAS MAINTAINED IN REGULAR CURSE OF BUSINESS SAND TO TEST THE TRUTHFULNESS & VERACITY OF THE TRA NSACTIONS. IT IS NOT KNOWN WHO PREPARED IT AND ON WHOSE INSTRUCTIONS WER E ENTERED AND ON WHICH DATA BASE IT WAS PREPARED AND WHEN IT WAS PRE PARED. 11. THE APPELLANT DID NOT FURNISH EVEN A COPY OF TH E BOARD RESOLUTION OR ANY AUTHORISATION BY THE COMPETENT PERSON, GIVEN TO SOMEBODY FOR ENTERING INTO COMMODITY TRADE. THE APPELLANT DID NO T FURNISH THE INFORMATION WHO DID THE COMMODITY TRADE TRANSACTION S I.E. WHETHER IT WAS A DIRECTOR OR EMPLOYEE, WHAT WAS THE EXPERIENCE OF THE SAID PERSON(S) IN THE COMMODITY TRADING AND WHETHER THE SAID DIRECTOR/EMPLOYEE HAS ENTERED IN THESE KIND OF TRAN SACTIONS IN INDIVIDUAL ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 5 CAPACITY OR OTHERWISE EVER BEFORE ENTERING INTO THE SE TRANSACTIONS ON BEHALF OF PP. HE DID NOT INFORM ABOUT THE EXPERIENC E OF THE PERSON AND COMPETENCE WHO WAS ENTERING IN SUCH HUGE AMOUNT OF TRANSACTION. THE APPELLANT HAS NOT PRODUCED ANY DOCUMENTS SHOWING TH AT THE FLUCTUATION OF SILVER AND OTHER COMMODITIES HAS BEEN SO MUCH RA PID DURING THE DAY THAT EVERY TIME HE BOUGHT AND SOLD IT AT A LOSS AND THERE WAS NO GAIN ON ANY DAY. HE HAS GIVEN DETAILS OF SILVER BUYING 158 TIMES AND ALL THE TRANSACTIONS RESULTED INTO LOSS. IT APPEARS THAT HE IS BUYING SILVER AT A HIGHER PRICE AND SELLING THE SAME AT LOWER PRICE AN D AGAIN BUYING AT A HIGHER PRICE AND SELLING AT LOWER PRICE AND SO ON E VERY DAY AND COMPLETES HUGE NUMBER OF TRANSACTION S ON EVERY DAY . THERE IS NO STOCK TO BE CARRIED FORWARD ON THE NEXT DAY AND RAT HER AFTER EVERY PURCHASE SAME AMOUNT IS OLD TO SQUARE UP THE ACCOUN T OF SALE AND PURCHASE. IN THE NORMAL HUMAN TRANSACTION, IT IS NO T POSSIBLE FOR A PERSON WHO IS INDULGING IN COMMODITY TRADING FOR FO URTEEN(14) DAYS IN AN OFF MARKET CONDITION FROM A BROKER WHO HAS BEEN SUSPENDED SUBSEQUENTLY AND INCURRING LOSS ON ALL TRANSACTIONS AND MAKING PAYMENT EVERYDAY FOR THE LOSS INCURRED IN COMMODITY TRADING . WHILE PASSING THE ORDER THE LD. CIT(A) RELIED ON TH E FOLLOWING JUDGMENTS OF VARIOUS COURTS. 1) THE HON'BLE SUPREME COURT IN THE CASE OF JUGGILAL KAMLAPAT V. CIT [1969] 73 ITR 702 HAS HELD THAT THE INCOME-TAX AUTH ORITIES ARE ENTITLED TO PIERCE THE VEIL OF CORPORATE ENTITY AND LOOK AT THE REALITY OF THE TRANSACTION AND THAT IN EXCEPTIONAL CASES THE C OURT CAN LIFT THE VEIL OF CORPORATE ENTITY AND TO PAY REGARD TO THE E CONOMIC REALITIES BEHIND THE LEGAL FAADE. SIMILARLY, THE ASSESSING O FFICER HAS POWER TO DISREGARD THE CORPORATE ENTITY IF IT IS USED FOR TAX EVASION OR TO CIRCUMVENT TAX OBLIGATION OR TO PERPETUATE FRAUD. 2) THE HON'BLE DELHI HIGH COURT IN PNB FINANCE LTD. V. SHRI SHITAL PRASAD JAIN [1983] 54 COMP. CAS. 66 HAS HELD THAT T HE DOCTRINE OF PIERCING THE CORPORATE VEIL WHEREVER NECESSARY MIGH T BE INVOKED BY THE CURT IN THE INTEREST OF JUSTICE TO PREVENT THE CORPORATE ENTITY FROM BEING USED AS AN INSTRUMENT OF FRAUD AND THE FUNDAM ENTAL PRINCIPLE OF CORPORATE PERSONALITY ITSELF MIGHT BE DISREGARDE D HAVING REGARD TO THE EXIGENCIES OF THE SITUATION AND FOR THE ENDS OF JUSTICE. IF THE ECONOMIC REALITIES OF A TRANSACTION BETWEEN THE APP ELLANT AND OTHERS ARE ARRANGED AND THE EXIGENCY OF THE CIRCUMSTANCES SURROUNDING IT REVEAL THAT THE TRANSACTION HAS BEEN ENTERED ONLY T O DEFRAUD THE REVENUE CAUSING INJUSTICE TO IT, THE AUTHORITIES SH OULD LOOK BEHIND THE REAL PURPOSE OF THE TRANSACTION AND DEAL WITH THE C ONSEQUENCE OF THE TRANSACTION IN A MANE WITH WHICH IT SHOULD HAVE BEE N DEALT WITH OTHERWISE. ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 6 3) MERE PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACR OSANCT NOR CAN IT MAKE A NON-GENUINE TRANSACTION GENUINE HAS BEEN HELD BY HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT V PRECISI ON FINANCE (P)) LIMITED REPORTED IN 208 ITR 540 (CAL); [1995] 82 TA XMAN 31 (CAL). 4) AN INFERENCE ABOUT THE GENUINENESS OF APPARENT C OMMODITY TRADE LOSS TRANSACTIONS HAS TO BE DRAWN ON THE BASIS OF T HE CIRCUMSTANCES AVAILABLE ON THE RECORD AND HAVING REGARD TO THE CO NDUCT OF THE APPELLANT IN MAKING PAYMENT AS WELL AS OTHER MATERI AL ON THE RECORD, AN INFERENCE COULD REASONABLY BE DRAWN THAT THE COM MODITY TRADE LOSS TRANSACTIONS ARE NON-GENUINE. IT IS HELD THAT AFTER CONSIDERING THE SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES IT IS RIGHTLY CONCLUDED THAT THE APPE LLANTS COMMODITY TRADE LOSS TRANSACTIONS IS NOT GENUINE. IT CANNOT B E SAID THAT THE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE SAID PAYMENT HAS BEEN REJECTED UNREASONABLY. FURTHER, RELYING ON THE JUDGMENT OF THE HON'BLE A BENCH OF THE JURISDICTIONAL ITAT, K OLKATA IN ITA NO. 1871/KOL/2008 DATED 21-07-2011 IN THE CASE OF ITO W ARD 7(3), KOLKATA VS. M/S. ELLENBARRIE EXIM LTD. FOR ASSESSME NT YEAR 2005-06 IT IS HELD THAT THE ACTION OF THE AO IN THE FACTS A ND CIRCUMSTANCES OF THE CASE THAT ALL TRANSACTIONS PERTAINING TO THE SO -CALLED COMMODITY TRADE LOSS TRANSACTIONS IS BOGUS AND COLOURABLE DEV ICE TO EVADE THE TAXES IS TO BE CONFIRMED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. SHRI S.M.SURANA, LD. AUTHORIZED REPRESENTATIVE APPE ARING ON BEHALF OF ASSESSEE AND SHRI DAVID Z. CHOWNGTHO, LD. DEPARTMEN TAL REPRESENTATIVE APPEARING ON BEHALF OF REVENUE. 4. WE HAVE HEARD BOTH THE SIDE AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. THE LD. AR SUBMITTED TWO PAPERS BOOKS. FIRS T BOOK IS RUNNING IN PAGES NO. 1 TO 88 AND 2 ND PAPER BOOK IS RUNNING IN PAGES 1 TO 34. BEFORE U S THE LD. AR SUBMITTED THAT THE ORDER OF THE AO IS SILENT ABO UT THE DATE FROM WHICH THE BROKER WAS EXPELLED. THERE IS NO LAW THAT THE OFF M ARKET TRANSACTIONS SHOULD BE INFORMED TO STOCK EXCHANGE. ALL THE TRANSACTIONS ARE DULY RECORDED IN THE ACCOUNTS OF BOTH THE PARTIES AND SUPPORTED WITH THE ACCOUNT PAYEE CHEQUES. THE LD. AR HAS ALSO SUBMITTED THE IT RETURN, LEDGER COPY, LETTER TO AO AND PAN ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 7 OF THE BROKER IN SUPPORT OF HIS CLAIM WHICH IS PLAC ED AT PAGES 72 TO 75 OF THE PAPER BOOK. THE LD. AR PRODUCED THE PURCHASE & SALE CONTRACTS NOTES WHICH ARE PLACED ON PAGES 28 TO 69 OF THE PAPER BOOK. THE PURCHASE AND SALES REGISTERS WERE ALSO SUBMITTED IN THE FORM OF THE PA PER BOOK WHICH IS PLACED AT PAGES 76 TO 87. THE BOARD RESOLUTION PASSED BY THE COMPANY FOR THE TRANSACTIONS IN COMMODITY WAS PLACED AT PAGE 88 OF THE PAPER BOOK. ON THE OTHER HAND THE LD. DR RELIED IN THE ORDER OF THE LO WER AUTHORITIES. 4.1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE ASSESSEE HAS INCURRED LOSSES FROM THE OFF MARKET COMMODITY TRANSACTIONS A ND THE AO HELD SUCH LOSS AS BOGUS AND INADMISSIBLE IN THE EYES OF THE LAW. T HE SAME LOSS WAS ALSO CONFIRMED BY THE LD. CIT(A). HOWEVER WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE A SSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE HAS TO BE SOME C ONCRETE EVIDENCE WHERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTI VE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HA VE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMAT ION OF THE PARTY. BOTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH HAVE BEEN DULY SUPPORTED WITH THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD . AR HAS ALSO SUBMITTED THE BOARD RESOLUTION FOR THE TRADING OF COMMODITY T RANSACTION. THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HOLD THE TRANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE COMMON GROUNDS OF ASSESSE ES APPEAL. 5. NEXT COMMON GROUNDS 4 AND 5 ARE CLUBBED TOGETHER . THE ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY IGNORING THE SPECULATION LOSS AT 2,26,96,157/- WHILE COMPUTING THE INCOME U/S 115JB OF THE ACT. ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 8 IN THE PRESENT CASE, AO HAS COMPUTED THE TAX LIABIL ITY UNDER THE PROVISIONS OF SEC. 115JB OF THE ACT AFTER DISALLOWING THE ABOVE S TATED LOSS OF 2,26,96,157/- . 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER:- 21. I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER HAS DISBELIEVED THE TRANSACTIONS REGARDING SPECULATION LOSS FROM COMMODITY TRADING TRANSACTIONS. THE ASSESSING OFFIC ER HAS CONCLUDED THAT THE LOSS IS BOGUS AND INADMISSIBLE. WHEN THE T RANSACTIONS ITSELF ARE DOUBTFUL, THESE CANNOT FIND PLACE IN THE BOOKS OF A /CS. FOR COMPUTING THE LOSS INCURRED BY THE APPELLANT. THE COMMODITY TRADI NG TRANSACTIONS ARE FOUND TO BE BOGUS. THE APPELLANT HAS CREATED THESE ENTRIES IN A FRAUDULENT MANNER JUT TO REDUCE THE PROFIT AND TO C ARRY FORWARD LOSS, IF ANY IN FUTURE ADJUSTMENTS. THEREFORE, ONCE THE GENU INENESS OF THE TRANSACTION IS DOUBTFUL, THESE CANNOT FORM A PART O F THE P&L A/C. AND IT CAN BE ADDED BACK U/S. 115JB OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER HAS CALCULATED THE PROFITS BOTH U NDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961 AND AS WELL AS U/S 115JB AND TO FIND WHERE IT WAS MORE AS PER THE INCOME TAX ACT, 1 961. 22. THE STT IS NOT EXPENDITURE BUT TAX TO BE ALLOWE D AS DEDUCTION FROM THE TAX AS PER THE PROVISIONS OF SECTION 88E. THERE FORE, THE ASSESSING OFFICER HAS RIGHTLY ADDED THE AMOUNT OF RS.36,538/- PAID AS STT SINCE IT IS NOT AN EXPENDITURE DEDUCTIBLE IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, IT IS HELD THAT THE ADDITION OF RS.36538 /- AS STT AND SPECULATION LOSS OF RS.226,96,157/- INCURRED IN CO MMODITY TRANSACTIONS HAVE BEEN RIGHTLY ADDED WHILE DETERMINING THE PROFI T AS PER SECTION 115JB OF THE INCOME TAX ACT, 1961. THESE GROUNDS OF APPEAL ARE ACCORDINGLY HELD TO BE DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E PREFERRED SECOND APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL PARTIES OF BOTH SIDES AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US THE LD. AR SUBMITTED THAT THE AO HAS NO JURISDICTION TO DISREGARD THE NET PROFIT SHOWN IN T HE PROFIT & LOSS ACCOUNT OF THE ASSESSEE TO THE EXTENT PROVIDED IN THE EXPLANATION TO SUB SECTION (2) OF ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 9 SECTION 115JB OF THE ACT. ON THE OTHER HAND THE LD . DR RELIED IN THE ORDER OF THE LOWER AUTHORITIES. 7.1 WE FIND FROM THE AFORESAID DISCUSSION THAT THE AO HAS DISALLOWED THE ABOVE STATED LOSS WHILE COMPUTING THE TAX LIABILITY UNDER THE PROVISIONS OF MAT UNDER SECTION 115 JB OF THE ACT. WE FIND FROM THE O RDERS VARIOUS COURT THAT THE AO IS DUTY BOUND TO ACCEPT THE PROFIT AS SHOWN IN T HE PROFIT & LOSS ACCOUNT OF THE ASSESSEE. WE ARE PUTTING OUR RELIANCE IN DECISI ONS OF HONBLE APEX COURT, HONBLE DELHI HIGH COURT AND ITAT DELHI BENCH WHICH ARE GIVEN AS UNDER : APOLLO TYRES LTD. V. CIT 255 ITR 273 (SC), THE REL EVANT EXTRACT IS REPRODUCED BELOW : THEREFORE, WE ARE OF THE OPINION, THE AO WHILE COMP UTING THE INCOME UNDER S. 115J HAS ONLY THE POWER OF EXAMINING WHETH ER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE AO THEREAFTER HAS THE LIMITED POWER OF MAK ING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO TH E SAID SECTION. TO PUT IT DIFFERENTLY, THE AO DOES NOT HAVE THE JURISDICTI ON TO GO BEHIND THE NET PROFIT SHOWN IN THE P&L A/C EXCEPT TO THE EXTENT PR OVIDED IN THE EXPLANATION TO S. 115J MALAYALA MANORAMA CO. LTD. V. CIT 300 ITR 251 (SC) THE RELEVANT EXTRACT IS REPRODUCED BELOW : 28. WE HAVE HEARD THE LEARNED COUNSEL FOR THE PARTI ES AT LENGTH AND CAREFULLY PERUSED THE WRITTEN SUBMISSIONS FILED BY THEM. IN OUR CONSIDERED OPINION, THE CONTROVERSY INVOLVED IN THI S CASE IS NO LONGER RES INTEGRA . A THREE JUDGE BENCH OF THIS COURT IN APOLLO TYRES (SUPRA) HAS CLEARLY INTERPRETED S. 115J OF THE 1961 ACT. TH ERE IS NO SCOPE FOR ANY FURTHER DISCUSSION. 29. CONSEQUENTLY, THE APPEALS ARE ALLOWED AND THE I MPUGNED ORDER OF THE HIGH COURT IS ACCORDINGLY SET ASIDE. IN THE FAC TS AND CIRCUMSTANCES OF THE CASE, WE DIRECT THE PARTIES TO BEAR THEIR OW N COSTS. ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 10 CIT V. C.J. INTERNATIONAL HOTELS LTD. 325 ITR 313 ( DEL), THE RELEVANT EXTRACT IS REPRODUCED BELOW : WHILE THE AO WOULD BE WELL WITHIN HIS JURISDICTION TO COMPUTE DEPRECIATION UNDER S. 32 ON THE RATS PROVIDED IN AP PENDIX I TO IT RULES, 1962, FOR COMPUTING TOTAL INCOME UNDER OTHER PROVIS IONS OF THE ACT, HE CANNOT DISTURB THE BOOK PROFIT, WHICH HAS BEEN CERT IFIED TO BE DRAWN IN THE P&L A/C AS PER THE COMPANIES ACT. THEREFORE, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE AO WAS NOT ERRONEOUS, WHICH IS ONE OF THE PRECONDITIONS FOR INVOKING JURISDICTION UNDER S. 26 3 OF THE ACT. SINCE IT WAS NO ERRONEOUS, IT COULD NOT HAVE BEEN TERMED TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THIS VIEW OF THE MATTER , WE SET ASIDE THE ORDER OF THE LEARNED CIT. IN THE RESULT, GROUND NO.2 IS ALLOWED. 5. WE AGREE WITH THE VIEWS EXPRESSED BY THE TRIBUNA L. CONSEQUENTLY, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSI DERATION. THE APPEAL IS DISMISSED. DCIT CIRCLE-10(1) V. DUNE LEASING & FINANCE LTD. 126 ITD 255 (DEL), WHEREIN THE TRIBUNAL HELD PARAGRAPH NO. 3.2 & 5 (LA ST 3 LINES) 3.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND RI VAL SUBMISSIONS. HAVING CONSIDERED THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF APOLLO TYRES LTD. (SUPRA), WE ARE OF THE VIEW TH AT THE AO CANNOT REOPEN THE ACCOUNTS OF A COMPANY, WHICH HAVE BEEN A UDITED AND CERTIFIED BY THE STATUTORY AUDITOR, PASSED BY THE M EMBERS OF THE COMPANY IN GENERAL BODY MEETING, FILED BEFORE THE R OC, AND TO WHICH HE HAS NOT TAKEN ANY OBJECTION UNDER THAT ACT. THE IMPUGNED AMOUNT WAS NOT ENTERED IN THE BOOKS AS LIABILITY AND THE A UDITOR HAD MADE CERTAIN REMARKS ONLY IN REGARD TO THE IMPUGNED AMOU NT. NO OBJECTION HAS BEEN TAKEN BY THE REGISTRAR TO THE ACCOUNTS FIE LD BEFORE HIM. THEREFORE, THE BOOK PROFIT HAS TO BE TAKEN AS PER T HE AFORESAID P&L A/C. NO ADJUSTMENT IS PERMISSIBLE IN THE BOOK PROFIT IN RESPECT OF AFORESAID AMOUNT UNDER ANY OF THE CLS. (I) TO (VII) OF THE EX PLANATION TO S. 115JB. IN VIEW THEREOF, IT IS HELD THAT THE LEARNED CIT(A) ER RED IN DIRECTING THE AO TO REDUCE THIS AMOUNT FROM THE BOOK PROFIT. THUS, THIS GROUND IS ALLOWED. FOLLOWING OUR FINDING ON THAT GROUND OF THE REVENUE , IT IS HELD THAT THE INTEREST INCOME OF RS.1,19,07,474 COULD NOT HAVE BE EN ADDED TO THE BOOK PROFIT UNDER S. 115JB. THUS, THIS GROUND IS ALLOWED . ITA NO.1070/KOL/2012 A.Y. 2008-09 BLB CABLES & CONDUCTORS P. LTD. V. DCIT, CIR-5, K OL PAGE 11 IN TERMS OF THE VARIOUS JUDICIAL PRONOUNCEMENTS AS WELL AS ORDER OF TRIBUNAL, AS DISCUSSED ABOVE, WE ARE INCLINED TO REVERSE THE ORDERS OF AUTHORITIES BELOW. BESIDES IN THE CASE IN HAND, WE HAVE ALLOWED THE SP ECULATION LOSS AS GENUINE LOSS. HENCE THIS GROUND OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 03/ 01/2016 SD/- SD/- (MAHAVIR SINGH) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 03 / 02 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-BLB CABLES & CONDUCTORS PVT. LTD., 56, N ETAJI SUBHAS ROAD, 2 ND FLOOR, KOLKATA-01 2. /RESPONDENT-DCIT, CIR-5, AYAKAR BHAWAN, 8 TH FL, P-7, CHOWRINGHEE SQ., KOL-69 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,