The ITO, Guntur V. Smt, Kanna Maria Rani, Guntur

ITA 129/VIZ/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6706 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-06-2017
• Assessment Year: misc
• Appeal Filed On: 18-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Additional evidence
• Section: 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 129 /VIZ/ 201 6 ( / ASSESSMENT YEAR: 201 1 - 1 2 ) THE INCOME TAX OFFICER WARD - 1(3), GUNTUR SMT.KANNA MARIA RANI D.NO.4 - 20 - 34/2 4 TH LANE, NAVABHARAT NAGAR GUNTUR - 522 006 [ PAN : A KAPK5022A ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI M.K.SETHI, DR / RESPONDENT BY : SHRI I.KAMA SASTRY, AR / DATE OF HEARING : 0 4 .0 9 .2017 / DATE OF PRONOUNCEMENT : 08 . 0 9 .2017 / O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 1, GUNTUR VIDE ITA NO.126/CIT(A) - 1/GNT/2014 - 15 DATED 30.12.2015. 2 ITA NO. 129 /VIZ/201 6 SMT.KANNA MARIA RANI, GUNTUR 2. ALL GROUNDS OF APPEAL ARE RELATED TO THE DELETION OF ADDITION MADE BY THE ASSESSING OFFICER ON ESTIMATION BASIS ON TURNOVER. THE ASSESSEE FILED RETURN OF INCOME DECLARI NG TOTAL INCOME OF RS.2,72,340/ - ON 15 .06.2012. THE ASSESSEE IS IN THE BUSINESS OF TRADING IN ONLINE COMMODITY EXCHANGE AND ALSO THERE WERE CASH DEPOSITS IN BANK ACCOUNT. THE CASE WAS SELECTED FOR SCRUTINY UNDER THE CASS AND THE ASSESSING OFFICER ISSUED NOTICES CALLING FOR INFORMATION, BUT THE ASSESSEE DID NOT RESPOND T O THE NOTICES ISSUED. THE TOTAL TRANSACTIONS OF THE ASSESSEE DURING THE YEAR WAS RS.52,28,56,160/ - . THE ASSESSING OFFICER TREATED THE ENTIRE TRANSACTION AL VALUE AS BUSINESS TURNOVER AND ESTIMATED THE INCOME @ 5% ON TOTAL TU RNOVER WHICH WORKED OUT TO RS.2,61,42,808/ - AND THE SAME WAS BROUGHT TO TAX. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 144 OF I . T . ACT ON TOTAL INCOME OF RS.2,64,15,150/ - . AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT ON APPEAL BEFORE THE LD .CIT(A) AND ARGUED TH AT THE TRANSACTIONS WERE PERTAINING TO ONLINE COMMODIT Y EXCHANGE TRANSACTIONS AND IN COMMODITY EXCHANGE T RANSACTIONS, THE ENTIRE TRANSACTIONAL VALUE SHOULD NOT BE TREATED AS BUSINESS TURNOVER, ONLY THE NET DIFFERENCE OF EACH TRANSACTION WOULD CONSTITUTE THE TURNOVER. THE ASSESSE FURTHER 3 ITA NO. 129 /VIZ/201 6 SMT.KANNA MARIA RANI, GUNTUR ARGUED BEFORE THE LD. CIT(A) THAT , SHE HAS DONE ONLINE COMMODITIES TRAD ING AND INCURRED LOSS OF RS.12,21,171/ - AND LOST THE TRANSACTION TAX, TURNOVER CHARGES ETC. AND THE LD. AR RELIED ON THE GUIDANCE NOTE FROM THE INSTITUTE OF CHARTERED ACCOUNT ANT S OF INDIA AND FILED THE WRITTEN SUBMISSIONS STATING THAT THE ASSESSEE IN THE WRITTEN SUBMISSIONS IT IS MENTIONED THAT SHE HAS DONE ONLINE COMMODITIES TRADING AND INCURRED LOSS OF RS.12,21,171/ - PLUS TRANSACTION TAX, TURNOVER CHARGES ETC. WHICH SHE HAS NOT CLAIMED IN HER RETURN OF INCOME FILED. THE A SSESSEE HAS INVESTED A SUM OF RS.12,61,200/ - IN THE SAID BUSINESS AND LOST THE TOTAL INVESTMENT IN THE SAID BUSINESS. IN PROOF OF INVESTMENT A COPY OF STATEMENT OF ACCOUNT ISSUED BY M/S INDIA INFOLINE COMMODITIES LIMITED IS ENCLOSED HEREWITH. THE LEARNED ASSESSING OFFICER HAS FINALIZED THE ASSESSMENT UNDER HIS BEST OF JUDGEMENT UNDER SECTION 144 OF I.T.ACT BY ESTIMATING INCOME AT 5% ON TOTAL TURNOVER OF COMMODITY EXCHANGE TRANSACTION AND RAISED A HUGE DEMAND OF TAX OF RS.1,17,74,290/ - .T HE TRANSACTION OF BUYING AND S ELLING THE COMMODITIES WAS A SPECULATIVE TRANSACTION. NO PHYSICAL DELIVERY OF GOODS HAS TAKEN PLACE. THE ACCOUNT HAS BEEN SETTLED ONLY BY CREDITING / DEBITING THE DIFFERENCE AND THE ASSESSEE HAS CARRIED OUT NO OTHER ACTIVITY. THE LEARNED ASSESSING OFFIC ER OUGHT TO HAVE CONSIDERED ONLY THE DIFFERENCE IN PURCHASE AND SALE OF COMMODITIES AS THE INCOME / LOSS OF THE ASSESSEE. 2.2. THE LD.CIT(A) CONSIDERING THE WRITTEN SUBMISSIONS MADE BY THE ASSESSE E , AND THE DECISIONS OF VARIOUS TRIBUNALS AND ALSO REFERRING THE GUIDANCE NOTE OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) 4 ITA NO. 129 /VIZ/201 6 SMT.KANNA MARIA RANI, GUNTUR HELD THAT THE BUSINESS TURNOVER SHOULD BE DIFFERENCE OF EACH TRANSACTION I.E. DIFFERENCE BETWEEN PURCHASE AND SALE VALUE. THE LD.CIT(A) TAKEN THE HELP OF GUIDANCE NOTE OF ICAI ON SPECULATIVE TRANSACTION WHICH READS AS UNDER : SPECULATIVE TRANSACTION : A SPECULATIVE TRANSACTION MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTL ED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS. THUS, IN A SPECULATIVE TRANSACTION, THE CONTACT FOR SALE OR PURCHASE, WHICH IS ENTERED INTO IS NOT COMPLETED BY GIVING OR RECEIVING DELIVERY SO AS TO RESULT IN THE SALE AS PE R VALUE OF CONTRACT NOTE. THE CONTRACT IS SETTLED OTHERWISE AND SQUARED UP BY PAYING OUT THE DIFFERENCE, WHICH MAY BE POSITIVE OR NEGATIVE. AS SUCH, IN SUCH TRANSACTION, THE DIFFERENCE AMOUNT IS TURNOVER. IN THE CASE OF AN ASSESSEE DOING SPECULATIVE T RANSACTIONS THERE CAN BE BOTH POSITIVE AND NEGATIVE DIFFERENCES ARISING BY SETTLEMENT OF VARIOUS SUCH CONTRACTS DURING THE YEAR. EACH TRANSACTION RESULTING INTO WHETHER A POSITIVE OR NEGATIVE DIFFERENCE IS AN INDEPENDENT TRANSACTION. FURTHER, AMOUNT PAID BECAUSE OF NEGATIVE DIFFERENCE PAID IS NOT RELATED TO THE AMOUNT RECEIVED ON ACCOUNT OF POSITIVE DIFFERENCE. IN SUCH TRANSACTIONS, THOUGH THE CONTRACT NOTES ARE ISSUED FOR FULL VALUE OF THE PURCHASED OR SOLD ASSET THE ENTRIES IN THE BOOKS OF ACCOUNT ARE MADE ONLY FOR THE DIFFERENCES. ACCORDINGLY, THE AGGREGATE OF BOTH POSITIVE AND NEGATIVE DIFFERENCE IS TO BE CONSIDERED AS THE TURNOVERS OF SUCH TRANSACTIONS FOR DETERMINING THE LIABILITY TO AUDIT VIDE SECTION 44AB. 2.3. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER WITHOUT EXAMINING THE BOOKS OF 5 ITA NO. 129 /VIZ/201 6 SMT.KANNA MARIA RANI, GUNTUR ACCOUNTS AND THE RELEVANT MATERIAL . AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 3. APPEARING FOR THE REVENUE, THE LD.DR ARG UED THAT THE ASSESSING OFFICER HAS GIVEN NUMBER OF OPPORTUNITIES BUT THERE WAS NO REPLY FROM THE ASSESSEE, HENCE, ASSESSMENT WAS COMPLETED U/S 144 ESTIMATING THE INCOME @5% ON GROSS TURNOVER. THE ASSESSEE HAS NEITHER PRODUCED THE BOOKS OF ACCOUNTS NOR FUR NISHED THE DETAILS CALLED FOR BY THE ASSESSING OFFICER, THEREFORE, IT CANNOT BE DECIDED WHETHER THE TURNOVER WA S RELATED TO THE COMMODITIES TURNOVER OR NOT? NATURE OF RECEIPT REQUIRED TO BE EXAMINED WITH THE BOOKS OF ACCOUNTS. THE LD. CIT(A) ENTERTAINED FRESH EVIDENCE RELATING TO THE TRANSACTIONS, WHICH WAS NOT PRODUC ED BEFORE THE ASSESSING OFFICER AND THE LD.CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE FACTS. THEREFORE, LD.DR ARGUED THAT ADDITION MADE BY THE ASSESSING OF FICER BE CONFIRMED. 4. ON THE OTHER HAND, LD.AR RELIED ON THE ORDERS OF THE LD.CIT(A) AND ARGUED THAT THE ASSESSEE IS IN THE LINE OF BUYING AND SELLING COMMO DITIES, 6 ITA NO. 129 /VIZ/201 6 SMT.KANNA MARIA RANI, GUNTUR DERIVATIVE TRANSACTIONS AND NO PHYSICAL DELIVERY OF GOODS HAS TAKEN PLACE. T HE ACCOUNT HAS BEEN SETTLED ONLY BY CREDITING/DEBITING THE DIFFERENCES AND THE ASSESSEE HAS NOT CARRIED OUT ANY OTHER ACTIVITY. THEREFORE, LD.AR ARGUED THAT THE NET DIFFERENCE OF EACH TRANSACTION IS THE BUSINESS TURNOVER AND THE LD.CIT(A) HAS RIGHTLY DELE TED THE ADDITION. LD.AR FUR THER ARGUED THAT THE NOTICES WERE NOT BEING SERVED ON THE ASSESSEE. 4.1. PER CONTRA, RESPONDING TO THE ARGUMENT OF THE LD.AR, LD.DR SUBMITTED THAT THE NOTICES WERE ISSUED AND SERVED IN THE ADDRESS GIVEN BY THE ASSESSEE AT PIDUGURALLA, GUNTUR A S PER THE PROCEDURE FOR SERVING NOTICES. T HE ASSESSEE HAS NOT FURNISHED THE CHANGE OF ADDRESS TO THE ASSESSING OFFICER HENCE THE NOTICES COULD NOT BE SENT TO THE NEW ADDRESS . THEREFORE, LD.DR SUBMITTED THAT THE NOTICES WERE SERVED ON THE ASSESSEE AS PER THE PROCEDURE. FOR A QUERY FROM THE BENCH, LD.AR CON CED ED THAT THE CHANGE OF ADDRESS HAS NOT BEEN NOTIFIED TO THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, BEFO RE THE ASSESSING OFFICER, THE ASSESSEE 7 ITA NO. 129 /VIZ/201 6 SMT.KANNA MARIA RANI, GUNTUR HAS NOT SUBMITTED THE DETAILS AND THERE WAS NO RESPONSE FROM THE ASSESSEE FOR THE NOTICE S ISSUED ON VARIOUS OCCASIONS. THE ASSESSING OFFICER HAS ISSUED NUMBER OF NOTICES AND THE CASE WAS FIXED FOR HEARING ON SEVERAL OCCASIONS. SINCE, THERE WAS NO RESPONSE FROM THE ASSESSEE, THE ASSESSMENT WAS COMPLETED U/S 144 OF I.T.ACT AS PER THE INFORMATION AVAILABLE ON RECORD. DURING THE APPEAL PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THE DETAILS AND MADE WRITTEN SUBMISSIONS BEFO RE THE LD. CIT(A) STATING THAT T HE ASSESSEE WAS DEALING IN THE SHARE, SECURITIES AND DERIVATIVES AND THE TURNOVER IN THIS LINE OF BUSINESS WOULD BE AGGREGATE OF THE DIFFERENCE IN EACH TRANSACTION AFTER SETTLEMENT BUT NOT THE TOTAL TRANSACTION VALUE. THE LD .AR FURTHER ARGUED THAT THE TRANSACTIONS ARE PERIODICALLY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TR ANSFER OF COMMODITIES OR SCRIPS AND THE E ACH TRANSACTION RESULT S INTO POSITIVE OR NEGATIVE DIFFERENC E DEPENDING ON THE TRANSACTION AND THE AGGREGATE OF POSITIVE AND NEGATIVE TRANSACTION REPRESENTS THE TURNOVER BUT NOT THE ENTIRE TRANSACTIONAL VALUE. THE ASSESSEE HAS FILED EVIDENCES BEFORE THE LD. CIT(A) REGARDING THE TU RNOVER AND TRADING I N ONLINE COMMODITIES BUSINESS. HOWEVER, LD.CIT(A) HAS ALLOWED THE APPEAL OF THE ASSES SEE WITHOUT REFERRING THE ADDITIONAL EVIDENCES TO THE ASSESSING 8 ITA NO. 129 /VIZ/201 6 SMT.KANNA MARIA RANI, GUNTUR OFFICER OR CALL ING FOR THE REMAND REPORT. THE CIT(A) ALSO DID NOT VERIFY THE BOOKS OF ACCOUNTS AND GIVEN FINDING ON THE DETERMINATION OF TRUE AND CORRECT INC OME. THOUGH THE CIT(A) PERMITTED TO CONDUCT ENQUIRIES AND DECI DE APPEAL, WHEN THE ASSESSMENT WAS COMPLETED EX PARTE, THE LD.CIT(A) C A NNOT SIMPLY DELETE THE ADDITION IN APPEAL BUT EXAMINE THE BOOKS OF ACCOUNTS , CALL FOR THE DETAILS AND DETERMINE THE TRUE A ND CORRECT INCOME. IF THERE IS ANY DISCREPANCY , OPPORTUNITY SHOULD BE GIVEN TO THE AO IN THE INTEREST OF JUSTICE. IN THE INSTANT CASE, LD.CIT(A) HAS NOT UNDERTAKEN SUCH EXERCISES. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSMENT SHOULD BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO CONSIDERATION. THE ASSESSING OFFICER SHOULD EXAMINE THE BOOKS OF ACCOUNTS AND DETERMINE THE TRUE AND CORRECT INCOME. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND REMIT THE ASSESSMENT BACK TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO CONSIDERATION. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 9 ITA NO. 129 /VIZ/201 6 SMT.KANNA MARIA RANI, GUNTUR T HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8 TH SEP 20 17 . SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 08 . 0 9 .2017 L. RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE APPELLANT THE INCOME TAX OFFICER, WARD - 1(3), GUNTUR 2 . / THE RESPONDENT SMT.KANNA MARIA RANI, D.NO.4 - 20 - 34/2 , 4 TH LANE, NAVABHARAT NAGAR, GUNTUR - 522 006 3 . THE PR. COMMISSIONER OF INCOME - TAX - 1 , GUNTUR 4 . ( ) / THE CIT (A) - 1, GUNTUR 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM