M/s. Niraj Kumar Kajaria, Kolkata V. ITO, Ward-35(2), Kolkata, Kolkata

ITA 1219/KOL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6357 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 26-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S M TANHEED
• Keywords: Search and seizure; Sham transactions
• Section: 143(3); 132

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1219 / KOL / 20 17 ASSESSMENT YEAR :2012-13 M/S NIRAJ KUMAR KAJARIA 32, ARMENIAN STREET, KOLKATA-700 001 [ PAN NO.AGCPK 9823 B ] V/S . INCOME TAX OFFICER WARD-35(2), AAYKAR BHAWAN, POORVA, 110, SHANTIPALLY, KOLKATA-107 /APPELLANT .. / RESPONDENT /BY APPELLANT NONE /BY RESPONDENT S.M.TANHEED, ADDL, CIT-DR /DATE OF HEARING 04-06-2018 /DATE OF PRONOUNCEMENT 15-06-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 IS DIRECTED AGAINST THECOMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATAS ORDER DATED 10.03.2017, IN CASE NO.93/CIT(A)-10/WD-35(2)/ 2015-16/KOL, AFFIRMING THE ASSESSING OFFICERS ACTION DISALLOWING ITS LOSS CLAIM OF 8,47,821/- INCURRED IN DEALING WITH CURRENCY DERIVATIVES RESULTING IN A DDITION OF 8,50,591/-, INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. CASE CALLED TWICE NONE APPEARS AT ASSESSEES BE HEST. THE REGISTRY HAS ALREADY SENT THE ASSESSEE AN RPAD NOTICE DATED 20.4 .2018 FOR TODAYS ITA NO.1219/KOL/2017 A.Y. 2012-13 M/S NIRAJ KUMAR KAJARIA VS ITO WD-35 (2),KOL PAGE 2 HEARING. WE THEREFORE PROCEED EX PARTE AGAINST THE ASSESSEE. THE CASE IS NOW TAKEN UP ADJUDICATION ON MERITS. 3. IT EMERGES THAT CIT(A)S DETAILED DISCUSSION IN AFFIRMING THE IMPUGNED DISALLOWANCE OF LOSS READS AS UNDER:- 06. DECISION: 1. I HAVE CAREFULLY EXAMINED THE ACTION OF THE LD. AO IN MAKING THE IMPUGNED DISALLOWANCE OF RS.8,47,821/-, BEING THE AMOUNT OF TRADING LOSS IN EXCHANGE FUTURES. THE LD. AO HAS ALSO ADDED A SUM OF RS.2,77 0/- TO THE TOTAL INCOME OF THE APPELLANT BEING THE ACTUAL PROFIT OF TRANSACTIO NS MADE THROUGH THE MCX STOCK EXCHANGE LTD. IN TOTAL THE LD. AO HAS ADDED A SUM OF RS.~!.50,591/- (RS.8,47,821/- + RS.2,770/-) TO THE RETURNED INCOME FOR THE A.Y 2012~13. 2. IN ARRIVING AT SUCH CONCLUSIONS, I FIND THAT THE MAIN FINDINGS AND REASONS RECORDED BY THE LD. AO ARE AS UNDER: A. THE TRADE HAS BEEN FACILITATED BY THE BROKER M/S MARIGOLD VANIJYA (P) LTD, AND IN THIS CASE IN A SEARCH AND SEIZURE OPERA TION, U/S 132 OF THE INCOME TAX ACT WAS CARRIED OUT BY THE DEPARTMENT IN THE CASE OF THE BROKER, AND THE DIRECTOR OF THE BROKING COMPANY SHR I SACHET SARAF HAD UNDER OATH STATED THAT HE WAS PROVIDING PROFIT I LO SS IN CURRENCY DERIVATIVE AS PER \ REQUIREMENT OF CLIENTS, THOUGH IN ACTUAL FACT THERE WERE NO PROFITS AND I LOSSES. B, THE LD. AO HAS WRITTEN TO THE MCX STOCK EXCHANGE LTD, AND OBTAINED THE ACTUAL FIGURES OF BUYING AND SELLING O F IN RESPECT OF THE TRANSACTIONS OF THE ASSESSEE-INDIVIDUAL. ACCORDING TO THE LD. AO, THE FIGURES SO OBTAINED SUGGESTED LOSS OF RS.2,770/-, W HERE THE APPELLANT HAS CLAIMED LOSSES OF RS.8,47,8217- FROM TRADING IN THE EXCHANGE. C. UNDER OATH THE DIRECTOR OF THE BROKING COMPANY H AD STATED THAT THE IMPUGNED LOSSES (AS CLAIMED) RECEIVED THROUGH CHEQU E WAS RETURNED BACK IN CASH TO THE ASSESSEE. D. THE ASSESSEE HAD NEVER ENTERED INTO ANY TRANSACT IONS OF DEALING IN SHARES I DERIVATIVES WITH THE BROKER M/S MARIGOLD V ANIJYA PVT. LTD IN THE PAST, NOR WERE ANY DEALINGS ENTERED INTO IN THE FUT URE. E. THE ASSESSEE HAS NEVER ENTERED INTO ANY TRANSACT IONS OF DEALING IN FUTURE CURRENCY IN USD IN THE PAST OR FUTURE WITH A NY OTHER BROKER EITHER. F. THE BROKER M/S MARIGOLD VANIJYA PVT. LTD WAS CHA RGING AN UNUSUALLY HIGH RATE OF COMMISSION (0.189% ) WHERE THE REPUTED BROKERS SUCH AS M/S MOTILAL OSWAL, ICICI SECURITIES AND SUCH OTHERS WERE CHARGING COMMISSION IN THE RANGE OF 0.01 % TO 0.04 %. 3. QUITE ON THE OTHER HAND, IN APPEAL, THE APPELLAN T I LD. A.R FOR THE APPELLANT HAS PLACED THE FOLLOWING ARGUMENTS/ CONTENTIONS: A. THE APPELLANT IS NOT AWARE OF THE STATEMENT OF T HE BROKER BEFORE THE IT AUTHORITIES, AND SHOULD NOT BE MADE TO SUFFER ON ACCOUNT OF SUCH STATEMENT. B. THE TRANSACTIONS WERE CARRIED OUT IN BONA FIDE B ELIEF AND WERE RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ITA NO.1219/KOL/2017 A.Y. 2012-13 M/S NIRAJ KUMAR KAJARIA VS ITO WD-35 (2),KOL PAGE 3 C. THE TRANSACTIONS ARE GENUINE AND SUPPORTED BY VA LID CONTRACT NOTES, AND THE LOSS INCURRED WAS GENUINE AND NOT BOGUS AS CLAIMED BY THE LD. AO. THE LD AO HAS MADE THE DISALLOWANCE ON MERE SUS PICION AND CONJECTURE. D. THE INFORMATION OBTAINED BY THE LD. AO ALSO MATC HES THE INFORMATION OFFERED BY THE ASSESSEE DURING SCRUTINY , AND THE DIFFERENCE WAS ON ACCOUNT OF THE BROKERAGE, SERVICE TAX AND OT HER CHARGES OF RS.8,45,051/- ON ACCOUNT OF EH BROKER, AS EVIDENCED BY THE CONTRACT NOTES. E. THE LD.AO HAD MADE ALLEGATION ABOUT THE BROKER T AKING CHEQUES AND RETURNING CASH, WHICH WERE WITHOUT ANY PROOF. F. THE ASSESSEE WAS NOT ALLOWED TO EXAMINE THE BROK ER ON WHOSE STATEMENT THE LD. AO WAS DEPENDING. G. THE DIRECT DOCUMENTARY EVIDENCE WHICH WAS SUBMIT TED BEFORE THE LD. AO HAD BEEN IGNORED. H. THE APPELLANT HAS CITED SEVERAL JUDGMENTS FROM V ARIOUS HON'BLE COURTS INCLUDING THE JURISDICTIONAL ITAT IN SUPPORT OF ITS CONTENTIONS THAT THE LOSSES AS CLAIMED WERE GENUINE AND THAT THE DIR ECT EVIDENCE IN THE MATTER OUGHT NOT TO BE IGNORED IN THE LIGHT OF THE INDIRECT EVIDENCE PROVIDED BY WAY OF THE STATEMENT OF THE BROKER. 4. I HAVE CAREFULLY CONSIDERED ALL THE FACTUAL ISSU ES WHICH EMANATE FROM THE ACTION OF THE LD. AO IN MAKING THE IMPUGNED DISALLO WANCE. THE LD. AO HAS MOSTLY - DEPENDED ON THE STATEMENT OF THE BROKER CO MPANY'S DIRECTOR SHRI SACHET SARAF MADE BEFORE THE DEPARTMENT DURING THE SEARCH AND SEIZURE OPERATION, WHEREAS IT IS THE CONTENTION OF THE APPE LLANT THAT THE LD. AO HAS IGNORED ALL THE DIRECT EVIDENCE SUBMITTED IN THIS R EGARD. ON CAREFUL PERUSAL, I FIND THAT THE TRANSACTIONS OF THE APPELLANT IN TRAD ING IN CURRENCY DERIVATIVES IN THE MCX STOCK EXCHANGE LTD DO HAVE CERTAIN FEATURES WHICH HAVE LED TO SUSPICION IN THE MINDS OF THE LD. AO, AND THAT THES E ARE MOSTLY THAT THE APPELLANT HAD NO TRANSACTIONS WITH THE BROKER IN EA RLIER OR IN LATER YEARS, AND THAT THE ASSESSEE HAS ALSO NOT ENTERED INTO TRANSAC TIONS OF DEALING IN FUTURES CURRENCY UN USD IN PAST OR FUTURE. THE LD. AO HAS A LSO RECKONED THAT THE RATE OF BROKERAGE CHARGED BY WAY OF COMMISSION TO BE EXT REMELY HIGH AS COMPARED TO OTHER REPUTED BROKERS OF THE CITY. AFTE R EXAMINATION OF THE MATTER, I WOULD TEND TO AGREE WITH THE LD. AO THAT THE TRANSACTIONS ARE OF SUSPICIOUS NATURE ON ACCOUNT OF THE REASONS OFFERED BY THE LD.AO. IN THAT VIEW I FIND THAT ALL THE OTHER DIRECT EVIDENCES ARE MERE ARRANGEMENTS OF THE PARTIES TO GIVE THE TRANSACTIONS A SHEEN OF GENUINE NESS. THERE IS NO REASON FOR ANY BROKER TO CONFESS TO SHAM TRANSACTIONS WERE THIS NOT THE CASE, AS HAS BEEN DONE BY THE DIRECTOR OF THE BROKING COMPANY WH ILE GIVING THE STATEMENT DURING THE SEARCH AND SEIZURE OPERATIONS CARRIED OU T BY THE DEPARTMENT. THE DIRECT EVIDENCE MAY WELL BE IN FAVOUR OF THE ASSESS EE, BUT THE SAME CANNOT BE ACCEPTED DUE TO THE CIRCUMSTANCES OF NORMAL PROB ABILITY BEING AGAINST THE ASSESSEE-INDIVIDUAL AS BROUGHT ON RECORD BY THE LD. AO. THEREFORE, I HAVE TO RECORD THAT ALL THE JUDICIAL CITATIONS DO NOT COME TO THE RESCUE OF THE APPELLANT. IT IS TO BE SAID THAT THAT THE ENTIRE TRANSACTIONS WERE CARRIED OUT ON THE STOCK EXCHANGE TO GIVE IT A COLOR OF REAL TRANSACTIONS, W ITH THE CONNIVANCE OF THE BROKER, TO WHICH HE (THE DIRECTOR OF THE BRAKING CO MPANY) HAS CONFESSED. ITA NO.1219/KOL/2017 A.Y. 2012-13 M/S NIRAJ KUMAR KAJARIA VS ITO WD-35 (2),KOL PAGE 4 IT EMERGES THAT CIT(A) HAS RAISED SERIOUS DOUBTS ON ASSESSEES CLAIM OF THE IMPUGNED LOSS TO HAVE ARISE FROM TRANSACTION IN CUR RENCY DERIVATIVES. THERE IS NO MATERIAL ON RECORD IN THE CASE FILE REBUTTING TH E SAID CLINCHING FINDINGS. THE ASSESSEE HAS FAILED TO PROVE ITS TRADING IN CURRENC Y DERIVATIVES IN MCS STOCK EXCHANGE LTD. THE ASSESSING OFFICER HAD OBTAINED TH E RELEVANT INFORMATION AS WELL AS FROM THE SAID STOCK EXCHANGE AGAINST THE SA ID DETAILS. WE KEEP IN MIND ALL THESE FACTS ON RECORD TO REJECT ASSESSEES SOLE SUBSTANTIVE GROUND. BOTH THE LOWER AUTHORITIES ACTION IN CHALLENGE IS A CCORDING CONFIRMED. 4. THIS ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 15 /06/2018 SD/- SD/- ( %) (' %) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 15 / 06 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S NIRAJ KUMAR KAJARIA, 32 ARMENIAN ST, KOLKATA-001 2. /RESPONDENT-ITO WARD 35(2),AAYAKAR BHAWN,POORVA110, SHANTIPALLY,7 TH FL, KOL-107 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,