M/s. Ambuja Bullion, Ahmedabad V. The ACIT.,Circle-3, Ahmedabad

ITA 1324/AHD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80236 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: P J JAIN
• Keywords: Speculation loss
• Section: 143(3); 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) I.T. A. NO. 1324 & 1325/AHD/2012 (ASSESSMENT YEAR: 2008-09) M/S. AMBUJA BULLION 1, NISARG PALACE, NEAR MAHURAT POLE, MANEKCHOWK, AHMEDABAD 380001 PAN NO. AANFA 8906A V/S ACIT. CIRCLE-3, AHMEDABAD (APPELLANT) (RESPONDENT) M/S. BALAJI BULLION 14, JANKI CHAMBERS, NEAR MAHURAT POLE, MANEKCHOWK, AHMEDABAD 380001 PAN NO. AAHFB 0242L V/S ACIT. CIRCLE-3, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.J. JAIN, A.R. RESPONDENT BY : SHRI DINESH SINGH SR. D.R. ( )/ ORDER DATE OF HEARING : 31-07-2014 DATE OF PRONOUNCEMENT : 07-08-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE 2 APPEALS ARE FILED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A)-6, AHMEDABAD DATED 23.04.2012 FOR A. Y. 2008-09. 2. BEFORE US AT THE OUTSET, THE LD. A.R SUBMITTED THAT THOUGH THE APPEALS ARE OF 2 DIFFERENT ASSESSEES BUT THE FACTS AND CIRCUMST ANCES IN BOTH THE CASES ITA NOS. 132 4 & 1325/AHD/2012 . A.Y. 2008- 09 2 ARE SAME EXCEPT FOR THE AMOUNT. HE THEREFORE SUBMIT TED THAT THE SUBMISSIONS MADE BY HIM IN CASE OF ONE WOULD BE EQU ALLY APPLICABLE TO THE OTHER CASE AND THEREFORE BOTH THE APPEALS CAN B E HEARD TOGETHER. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS BY WAY OF A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. WE THUS PROCEED WITH THE FACTS IN THE CASE OF AMBUJA BULLION IN ITA NO. 1324/AHD/2012. 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF GOLD BAR. ASSESSEE FILED ITS RETURN OF INCOME FOR A .Y. 08-09 ON 01.09.2008 DECLARING TOTAL INCOME OF RS. 21,19,574/ -. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 29.10.2010 AND THE TOTAL INCOME WAS DETERMINED AT RS. 27,49,650/-. AGGRIEVED BY THE ORD ER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 23.04.2012 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND:- 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AN D ON FACTS IN DISALLOWING MCX TRADING LOSS OF RS.5,59,074/- TREATING THE SAME AS SPECULATION LOSS WITHOUT APPRECIATING IN ITS PROPER PERSPEC TIVE, THE FACTS AND THE EXPLANATION FURNISHED BY THE A PPELLANT. 2. HE HAS ERRED IN LAW AND ON FACTS IN NOT PROPERLY APPRECIATING THE DECISION OF GUJARAT HIGH COURT PUNKAJ OIL MILLS 115 ITR 824 AND THE BOARD CIRCULAR DISCUSSED THEREIN IN AS MUCH AS THAT THE SAME APPLIES FAVORABLY TO THE FACTS OF THE APPELLANT. 3. ON THE FACTS OF THE APPELLANT THE MCX TRADING LO SS INCURRED DURING THE YEAR OUGHT TO HAVE BEEN ALLOWED AS TRADING LOSS. 5. THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS, THE ISSUE IS WITH RESPECT TO CONSIDERING THE MCX TRADING LOSS AS SPECULATION LOSS. ITA NOS. 132 4 & 1325/AHD/2012 . A.Y. 2008- 09 3 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VER IFICATION OF THE TRADING ACCOUNT, A.O. NOTICED THAT ASSESSEE HAD DEB ITED AN AMOUNT OF RS. 5,59,074/- AS MCX TRADING DIFFERENCE. A.O WAS OF T HE VIEW THAT THE TRANSACTION WAS OF SPECULATIVE NATURE AND THEREFORE THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE MCX LOSS NOT BE TREA TED AS SPECULATION LOSS. ASSESSEE INTERALIA SUBMITTED THAT ASSESSEE HA D ENTERED INTO THE TRANSACTION TO GUARD AGAINST THE LOSS AND IT WAS NO T IN THE NATURE OF SPECULATION LOSS AS PROVIDED IN SECTION 43(5)(A) OF THE ACT. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. AS HE WAS OF THE VIEW THAT ASSESSEE WAS REQUIRED TO PROVE GENUINE HEDGING LOSS IN VIEW OF THE PRINCIPLES LAID DOWN BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PANKAJ OIL MILLS 115 ITR 824 AS WELL AS CIRCULAR NO. 23 DATED 15.09.1960. HE CONCLUDED THAT ASSESSEE HAS FAILED TO PROVE THAT IT WAS HAVING THE STOCK ON HAND AT TH E TIME OF MAKING FORWARD TRANSACTIONS FOR SALE IN FORWARD MARKET. HE WAS THEREFORE OF THE VIEW THAT ASSESSEE HAS FAILED TO PROVE THAT THE TRA NSACTIONS WERE OF HEDGING IN NATURE AND THEREFORE HE WAS OF THE VIEW THAT PROVISO TO SECTION 43(5)(A) WAS NOT APPLICABLE TO THE ASSESSEE AND THEREFORE THE MCX LOSS OF RS. 5,59,074/- WAS TO BE TREATED AS SPE CULATION LOSS AND THE SAME CANNOT BE ALLOWED TO BE SET OFF AGAINST THE BU SINESS INCOME. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) UPHELD THE ORDER OF A.O BY HOLDING A S UNDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESS MENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. ASSESSING OFFICER TREATED LOSS ON COMMODITY DERIVAT IVES TRANSACTIONS IN GOLD AND SILVER DONE ON MCX AS SPECULATIVE UNDER SECTION 43(5) SINCE THERE WAS NO ACTUAL PHYSICAL DELIVERY IN THESE CONTRACTS. APPELLANT SUBMITTED THAT SINCE IT WAS DEALER IN GOL D AND SILVER BULLION, THE DERIVATIVE TRANSACTIONS A RE IN THE NATURE OF HEDGING AS PROVIDED IN CLAUSE (A) OF SECTION 43(5). ASSESSING OFFICER DISCUSSED APPELLANT'S SUBMISSION IN DETAIL IN THE LIGHT OF HO NORABLE GUJARAT HIGH COURT DECISION IN THE CASE OF PANKAJ OIL MILLS AND CBDT CIRCULAR ISSUED IN THIS R EGARD. AS PER THIS CIRCULAR AND JUDICIAL DECISION, THE NON-DELIVERY TRANSACTIONS IN FORWARD OR FUTURES CAN BE TREATED AS HEDGING AS AGAINST SPECULATION IF THE TRANSACTION IS TO GUARD AGAINST LOSS ON PRICE FLUCTUATION IN FUTURE. FROM THE BUSINESS OF THE APPELLANT, IT IS SEEN THAT APPELLANT WAS BUYING AND SELLING GOLD AND SILVER BULLION ON ---- DAILY BASI S. ITA NOS. 132 4 & 1325/AHD/2012 . A.Y. 2008- 09 4 SUCH PURCHASE AND SALE OF GOLD AND SILVER BULLION O N DAILY BASIS CANNOT BE HEDGED BY FUTURES CONTRACTS EXPIRING AFTER CERTAIN PERIOD OF TIME. OBVIOUSLY TH ERE IS NO LINK BETWEEN APPELLANT'S BUSINESS OF TRAD ING GOLD AND SILVER BULLION AND FUTURES CONTRACTS UNDER TAKEN BY THE APPELLANT. JUST BECAUSE APPELLANT DEAL S IN GOLD AND SILVER BULLION, THE FUTURES CONTRACTS I N GOLD AND SILVER WILL NOT AUTOMATICALLY BECOME HEDGING TRANSACTIONS. TO PROVE ANY TRANSACTION AS H EDGING, APPELLANT HAS TO DEMONSTRATE ITS EXPOSURE TO PRICE FLUCTUATION IN THE COMMODITY TRADING AND T HEN LINK THE SAID EXPOSURE TO FUTURES CONTRACT. THE FUTURES CONTRACTS SHOULD BE ENTERED INTO IN SUCH A WAY THAT IT OFFSETS THE LOSS ON SPOT TRANSACTIONS. IN THE APPELLANT'S CASE, ASSESSING OFFICER PROVIDED OP PORTUNITIES TO THE APPELLANT TO ESTABLISH THAT FURT URES TRASACTIONS WERE UNDERTAKEN TO GUARD AGAINST THE LO SSES ON ACCOUNT OF PRICE FLUCTUATION IN THE BUSINES S OF TRADING OF GOLD AND SILVER BULLION, HOWEVER APPE LLANT FAILED TO ESTABLISH ANYTHING AND JUST MENTION ED GENERAL STATEMENT THAT BECAUSE IT IS IN THE BUSINES S OF TRADING OF BULLION, THE TRANSACTIONS IN FUTURE S ARE HEDGING TRANSACTIONS. SINCE APPELLANT DID NOT ATTEM PT TO LINK FUTURES TRANSACTIONS WITH ITS TRADING TRANSACTIONS TO SHOW THAT FUTURES WERE UNDERTAKEN T O GUARD AGAINST THE LOSSES OF TRADING IN BULLION, T HE FUTURES TRANSACTIONS CANNOT BE TREATED AS HEDGING. IF APPELLANT HAS PURCHASE POSITION IN SPOT MARKET THEN APPELLANT HAS TO SELL FUTURES CONTRACTS TO GUA RD AGAINST THE LOSSES ON ACCOUNT PRICE FLUCTUATION. AS AGAINST THIS IF APPELLANT IS BUYING FUTURES CONTRAC TS THEN INSTEAD OF GUARDING AGAINST PRICE FLUCTUATI ON, IT WILL INCREASE THE RISK OF PRICE FLUCTUATION. THE REFORE JUST BY HAVING DELIVERY BASED TRADING OF GOL D AND SILVER BULLION, APPELLANT CANNOT CLAIM THAT FUT URES TRANSACTIONS RESULTING IN NO PHYSICAL DELIVERY ARE HEDGING TRANSACTIONS. CONSIDERING THE FACTS I U PHOLD THE DECISION OF ASSESSING OFFICER IN TREATING THE LOSS SUFFERED ON MCX AS SPECULATIVE. THE ADDITI ON MADE BY THE ASSESSING OFFICER IS CONFIRMED. 7. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW I N APPEAL BEFORE US. 8. BEFORE US, THE LD. A.R. SUBMITTED THAT DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAD SUBMITTED BILLS OF MCX AT THE TIME OF HEARING HELD ON 29.10.2010 BUT SINCE THE ASSESSMENT ORDER I TSELF WAS FRAMED ON 29.10.2010.A.O HAD NOT VERIFIED THE BILLS. HE ALSO SUBMITTED THAT THE A.O. HAS NOT GIVEN A FINDING AS TO HOW THE MCX TRAN SACTION CARRIED OUT BY THE ASSESSEE DO NOT FALL UNDER THE CATEGORY OF N ON SPECULATION IN THE LIGHT OF DECISION OF PANKAJ OIL MILLS (SUPRA). HE F URTHER SUBMITTED THAT IN SUBSEQUENT YEAR I.E. A.Y. 09-10, THE MCX PROFIT EAR NED BY THE ASSESSEE HAS BEEN ACCEPTED AS REGULAR BUSINESS PROFIT BY THE A.O IN SCRUTINY ASSESSMENT. HE FURTHER SUBMITTED THAT HONBLE GUJAR AT HIGH COURT IN THE CASE OF JAY ENTERPRISE TAX APPEAL NO. 45/AHD/2011 D ATED 20.03.2012 ON IDENTICAL FACTS HAD DISMISSED THE APPEAL OF THE REVENUE. HE THEREFORE SUBMITTED THAT IN VIEW OF THE AFORESAID FACTS THE A SSESSEE BE GRANTED ONE MORE OPPORTUNITY TO EXPLAIN ITS CASE AND THEREFORE THE MATTER MAY BE ITA NOS. 132 4 & 1325/AHD/2012 . A.Y. 2008- 09 5 RESTORED TO THE FILE OF A.O. THE LD. D.R. ON THE OT HER HAND SUPPORTED THE ORDER OF A.O AND LD. CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US, LD. A.R. HAS SUBMITTED THAT IN SUPPORT O F ITS CLAIM OF LOSS, ASSESSEE HAD SUBMITTED VARIOUS DOCUMENTS AT THE TIM E OF HEARING FIXED ON 29.10.2010 BUT NO QUERY OR FOR FURTHER DETAILS W ERE CALLED FOR BY THE ASSESSEE AND THE ORDER WAS ALSO PASSED ON 29.10.201 0 AND THEREFORE THE DETAILS FURNISHED BY THE ASSESSEE COULD NOT BE EXAM INED BY A.O. WE THEREFORE FEEL THAT IN THE INTEREST OF JUSTICE, THE MATTER NEEDS TO BE RE- EXAMINED AT THE END OF A.O IN VIEW OF THE SUBMISSIO NS MADE BY THE ASSESSEE AND THE CASE LAWS RELIED UPON BY HIM. WE T HEREFORE REMIT THE MATTER TO THE FILE OF A.O. TO DECIDE THE ISSUE AFRE SH AS PER LAW AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ANY OTHER DETAILS THAT MAY BE REQUIRED FOR DECIDING THE ISSUE. THE ASSESSE E IS ALSO DIRECTED TO FURNISH HIS EXPLANATIONS AND ANY OTHER INFORMATION CALLED FOR BY THE A.O PROMPTLY. NEEDLESS TO STATE THAT THE A.O SHALL GRAN T ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT, THIS GRO UND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. THUS THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTI CAL PURPOSES. ITA NO. 1325/AHD/2012 IN THE CASE OF BALAJI BULLIO N 11. BEFORE US, SINCE IT IS SUBMITTED THAT THE FACTS OF THE CASE ARE IDENTICAL TO THAT OF AMBUJA BULLION IN ITA NO. 1324/AHD/2012, WE THEREFORE FOR THE SAME REASONS AND SIMILAR DIRECTIONS GIVEN HEREINABO VE WHILE DECIDING THE ITA NOS. 132 4 & 1325/AHD/2012 . A.Y. 2008- 09 6 ISSUE IN THE CASE OF AMBUJA BULLION IN ITA NO. 1324 /AHD/2012 ALSO REMIT THIS CASE TO THE FILE OF A.O. AND THUS THIS A PPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 07 - 08 - 2014. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD