M/s Din Dayal Purshotam Lal, Sirsa V. DCIT, Sirsa

ITA 1404/CHANDI/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5436 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 13-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Speculation loss; Speculative transactions
• Section: 43(5); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: A BENCH: CH ANDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS. SUSHMA CHOWL A, JM ITA NO. 1404/CHANDI/2010 ASSESSMENT YEAR: 2 004-05 M/S DIN DAYAL PURSHOTAM LAL V. D.C.I.T., SIRSA 40-41, JANTA BHAWAN ROAD, SIRSA PAN: AACFD 0107 B APPELLANT BY: SHRI D.K. GOYAL RESPONDENT B Y: SHRI N.K. SAINI ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 4.11.2010, ON THE FOLLO WING GROUNDS: 1 THAT THE LD. CIT(A) ROHTAK HAS ERRED BOTH IN LAW AND, ON FACTS IN CONFIRMING THE DISALLOWANCE OF SUM OF RS. 5,73,520/ - BY HOLDING THE LOSS CLAIMED IN GUWAR ACCOUNT OF RS. 3,80,489/- IN SARSO N ACCOUNT OF RS. 32,209/- AND BARLEY ACCOUNT OF RS. 1,60,462/- AGGREGATING TO RS. 5,72,520/- TO BE SPECULATIVE LOSS WITHOUT APPRECIATING THE FACTS AN D CIRCUMSTANCES OF THE CASE OF THE APPELLANT AND STATUTORY PROVISIONS CONTAINED IN SEC 43(5) OF THE ACT. 1.1 THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE T HAT AFORESAID DISALLOWANCE MADE TO THE DECLARED INCOME OF THE APPELLANT WAS WI THOUT JURISDICTION IN AS MUCH IT HAD BEEN MADE BY MAKING FISHING AND ROVING ENQUIRIES WHICH IS NOT PERMISSIBLE IN LIGHT OF THE JUDGMENT OF HON'BLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF VIPIN KHANNA AV. CIT REPORTED IN 255 ITR 22 0 AND M.P. IRON TRADERS V. CIT REPORTED IN 189 ITR 154. 1.2 THAT THE LD. CIT(A) WHILE UPHOLDING THE IMPUGN ED DISALLOWANCE HAS MIS-INTERPRETED THE EXPRESSION ACTUAL DELIVERY AS APPEARING IN SECTION 43(5) OF THE ACT BY MISINTERPRETING THE JUDGMENT OF HON' BLE SUPREME COURT IN THE CASE OF DEVENPORT AND COMPANY PVT LTD V. CIT REPORT ED IN 100 ITR 715 AND EXPLANATION 2 TO SEC 24(1) OF IT ACT, 1922 AND OVER LOOKING THE DOCUMENTARY EVIDENCE TENDERED BY THE APPELLANT ALONG WITH VARIO US JUDICIAL PRONOUNCEMENTS TO ESTABLISH THAT LOSS SO INCURRED BY THE ASSESSEE WAS OF BUSINESS LOSS. IT IS THEREFORE, PRAYED THAT THE DISALLOWANCE SO MA DE OF RS.5,73,520/- MAY KINDLY BE DELETED AND APPEAL OF THE APPELLANT BE AL LOWED. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN OF INCOME ON 20.10.2004 RETURNING ITS TOTAL INCOME AT RS. 1,97,890/-. THE INFORMATION DIN DAYAL PURSHOTAM LAL, SIRSA 1404/CHANDI/2010 2 2 WAS RECEIVED SUBSEQUENTLY BY THE AO FROM THE INVEST IGATION WING THAT A SEARCH OPERATION HAS BEEN CARRIED OUT U/S 132(1) AT THE RE SIDENTIAL PREMISES OF THE PARTNERS OF M/S BADRI PARSAD SANJAY KUMAR, FATEHABAD AND SIM ULTANEOUS SURVEY OPERATION WAS ALSO CARRIED OUT AT THE BUSINESS PREMISES OF THE AS SESSEE FIRM. DURING THE COURSE OF THE AFORESAID OPERATIONS, CERTAIN INCRIMINATING DOC UMENTS WERE REPORTEDLY FOUND AND SEIZED. THOSE DOCUMENTS WERE EXAMINED BY THE AO. HE NOTICED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MAKING UNACCOUNTED S ALES OF COTTON THROUGH M/S BADRI PARSAD SANJAY KUMAR. HE ALSO NOTICED THAT TH E ASSESSEE HAD MADE UNACCOUNTED SALES TO THE AFORESAID FIRM IN THE YEAR UNDER APPEA L. THE AO THEREFORE, INITIATED PROCEEDINGS U/S 147/148 OF INCOME-TAX ACT. DURING THE COURSE OF SCRUTINY THE AO FOUND THAT THE MAIN BUSINESS OF THE ASSESSEE WAS CO MMISSION AGENCY. HE PERUSED THE ACCOUNTS AND NOTICED THAT THE ASSESSEE HAD INDU LGED IN SPECULATIVE TRANSACTIONS BEING THE TRANSACTIONS NOT SUPPORTED BY ACTUAL DELI VERY. IN THIS VIEW OF THE MATTER, HE DISALLOWED THE IMPUGNED LOSS. 3. AGGRIEVED BY THE ORDER PASSED BY THE ASSESSING O FFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HOWEVE R CONFIRMED THE IMPUGNED DISALLOWANCE WITH THE FOLLOWING OBSERVATIONS:- 8 I HAVE CAREFULLY CONSIDERED THE ISSUE AND THE SU BMISSIONS MADE BY THE AR. IT HAS BEEN CLEARLY BROUGHT OUT BY THE AO WHIL E SUMMARIZING HIS CONCLUSIONS, AS REPRODUCED IN PARA 3 ABOVE, THAT CO LUMN MEANT FOR VEHICLE NO. HAS BEEN LEFT BLANK IN RESPECT OF THE PURCHASES, AS VERIFIED FROM THE BILLS/VOUCHERS FURNISHED BY THE APPELLANT. IN VIEW OF THE ABOVE, THE AO STATED THAT IT CAN BE FAIRLY CONCLUDED THAT THERE HAS BEEN NO MOVEMENT OF THE COMMODITIES. FURTHER DELIVERY OF COMMODITIES HAS N EITHER BEEN PROVED TO BE GIVEN NOR TAKEN BY THE ASSESSEE OR ITS COMMISSION A GENTS. 8.1 HON'BLE APEX COURT IN THE CASE OF DEVENPORT & C O. LTD V. CIT (SUPRA) HELD AS UNDER:- SECTION 6 OF THE INDIAN INCOME-TAX ACT, 1922 ENUME RATES THE HEADS OF THE INCOME CHARGEABLE TO INCOME-TAX. SECTION 24(1) OF THE ACT PROVIDES THAT WHERE AN ASSESSEE SUSTAINS A LOSS UNDER ANY OF THESE HEADS IN ANY YEAR, HE SHALL BE ENTITLED TO HAVE THE LOSS SET OFF AGAINST HIS INCOME, PROFITS OR GAINS UNDER ANY OTHER HEAD IN THAT YEAR. THE GENERAL PROVISION IS QUALIFIED BY THE FIRST PROVISO WHICH P ERMITS THE SET-OFF OF A LOSS IN SPECULATIVE BUSINESS AGAINST THE ASSESSEES PROFITS AND GAINS, IF ANY, IN A SIMILAR BUSINESS ONLY. EXPLANATION 1 SAY S THAT WHERE THE DIN DAYAL PURSHOTAM LAL, SIRSA 1404/CHANDI/2010 3 3 SPECULATIVE TRANSACTIONS ARE OF SUCH A NATURE AS TO CONSTITUTE A BUSINESS, THE BUSINESS SHALL BE DEEMED TO BE DISTIN CT AND SEPARATE FROM ANY OTHER BUSINESS. EXPLANATION 2 DEFINES A SPECUL ATIVE TRANSACTION AS A TRANSACTION IN WHICH A CONTRACT FOR PURCHASE AND SALE OF ANY COMMODITY IS PERIODICALLY OR ULTIMATELY SETTLED OTH ERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY. THE WORDS ACTUAL DELIVERY IN EXPLANATION 2 MEAN REAL AS OPPOSED TO NOTIONAL DELIVERY. FOR INCOME-TAX PURPOSES SPECULATIVE TRANSACTION MEA NS WHAT THE DEFINITION OF THAT EXPRESSION IN EXPLANATION 2 SAYS . WHETHER A TRANSACTION IS SPECULATIVE IN GENERAL SENSE OR UNDE R THE CONTRACT ACT IS NOT RELEVANT FOR THE PURPOSE OF THIS EXPLANATION. THE DEFINITION OF DELIVERY IN SECTION 2(2) OF THE SALE OF GOODS ACT WHICH HAS BEEN HELD TO INCLUDE BOTH ACTUAL AND CONSTRUCTIVE OR SYMBOLIC AL DELIVERY HAS NO BEARING ON THE DEFINITION OF SPECULATIVE TRANSACTIO N IN THE EXPLANATION. A TRANSACTION WHICH IS OTHERWISE SPECULATIVE WOULD NOT BE A SPECULATIVE TRANSACTION WITHIN THE MEANING OF EXPLANATION 2 IF ACTUAL DELIVERY OF THE COMMODITY OR THE SCRIPS HAS TAKEN PLACE; ON THE OTH ER HAND A TRANSACTION WHICH IS NOT OTHERWISE SPECULATIVE IN N ATURE MAY YET BE SPECULATIVE ACCORDING TO EXPLANATION 2 IF THERE IS NO ACTUAL DELIVERY OF THE COMMODITY OR THE SCRIPS. THE EXPLANATION DOES N OT INVALIDATE SPECULATIVE TRANSACTION WHICH ARE OTHERWISE LEGAL B UT GIVES A SPECIAL MEANING TO THAT EXPRESSION FOR PURPOSE OF INCOME-TA X ONLY. 8.2 IN VIEW OF THE FINDING BY THE AO THAT THERE HAS BEEN NO MOVEMENT OF THE COMMODITIES AND FURTHER THAT THE DELIVERY OF TH E COMMODITIES HAS NEITHER BEEN PROVED TO BE GIVEN NOR TAKEN BY THE ASSESSEE O R ITS COMMISSION AGENTS, THE RATIO OF DEVENPORT & CO. LTD V. CIT ((SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT. THEREFORE, THE ACTION OF T HE AO IS UPHELD AND GROUNDS OF APPEAL ARE DISMISSED. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD . COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE IM PUGNED LOSS AS THE TRANSACTION GIVING RISE TO THE LOSS WERE NOT SPECULATIVE, IN VI EW OF THE FOLLOWING JUDGMENTS: I MAKHAN LAL SURESH KUMAR V. ITO (2004) 1 SOT 323 (DEL) II SMT. JAYASREE ROYCHOWDHURY V. ACIT (2005) 93 TT J (CAL) 714 III C. BHARATH KUMAR V. DCIT (2005) 4 SOT 593 (BAN G) DIN DAYAL PURSHOTAM LAL, SIRSA 1404/CHANDI/2010 4 4 IV CIT V. MANGAL CHAND (2002) 255 ITR 329 (RAJ) V CIT V. M.P. IRON TRADERS (2004) 189 CTR (P & H) 154 5. IN REPLY THE DR SUPPORTED THE ORDER PASSED BY TH E LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. THE SHORT ISSUE IS WHETHER THE IMPUGNED LOSS WAS SP ECULATIVE LOSS ARISING OUT OF SPECULATIVE TRANSACTIONS. SPECULATIVE TRANSACTION IS DEFINED IN SUB-SEC 5 OF SEC 43 AS A TRANSACTION IN WHICH THE CONTRACT FOR THE PURCHAS E OR SALE OF ANY COMMODITY IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN B Y THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY. AT THE TIME OF HEARING, THE LD. COUN SEL FOR THE ASSESSEE WAS SPECIFICALLY ASKED TO PIN-POINT THE ACTUAL EVIDENCE TO ESTABLISH THAT THE IMPUGNED TRANSACTIONS WERE SETTLED BY ACTUAL DELIVERY. THE O NLY EVIDENCE ON WHICH THE ASSESSEE COULD RELY WAS COMPARATIVE CHART OF PURCHASE/SALE, COPY OF ACCOUNT OF VARIOUS PARTIES ETC. IN OUR VIEW THE EVIDENCE WHICH HAS BEEN FILED BY THE ASSESSEE DOES NOT ESTABLISH THAT THE IMPUGNED TRANSACTIONS WERE SETTLED THROUGH ACTUAL DELIVERY. NEITHER COMPARATIVE CHART OF PURCHASE/SALE NOR THE COPY OF ACCOUNT NOR ANY DOCUMENT OF SIMILAR NATURE IS SUFFICIENT TO ESTABLISH THE ACTUA L DELIVERY. THE LD. CIT(A) HAS CORRECTLY APPRECIATED THE FACTUAL AND LEGAL ASPECTS OF THE CA SE. IN THIS VIEW OF THE MATTER, THE ORDER OF LD. CIT(A) IS CONFIRMED. 7. RELIANCE PLACED BY THE ASSESSEE ON SEVERAL DECIS IONS AT THE TIME OF HEARING IS OF NO HELP BECAUSE OF THE SPECIFIC FINDING OF FACT IN THE MATTER UNDER APPEAL THAT THE IMPUGNED TRANSACTIONS WERE SETTLED OTHERWISE THAN B Y THE ACTUAL DELIVERY. 8. IN VIEW OF THE FOREGOING THE APPEAL OF THE ASSES SEE IS DISMISSED. ORDER PRONOUNCED ON 29TH APRIL, 2011 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEM BER CHANDIGARH: THE 29 APRIL, 2011 SURESH COPY TO: 1. THE APPELLANT, M/S DIN DAYAL PURSHOTAM LAL, SIRS A 2. THE RESPONDENT, D.C.I.T. SIRSA 3. THE CIT(A), ROHTAK 4. THE LD. CIT, ROHTAK 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH