Cimsys Research India Pvt. Ltd., , Kolkata V. ITO, Ward - 8(1), Kolkata , Kolkata

ITA 1435/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4492 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 04-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHRUBAJYOTI ROY J
• Assessee Lawyers: DILIP KUMAR PATRI
• Keywords: Unexplained cash credit; Additional evidence
• Section: 143(3); 142(1); 133(6); 143(1); 143(2); 148; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1435/KOL/2018 ASSESSMENT YEAR: 2012-13 CIMSYS RESEARCH INDIA PVT. LTD., 56D, MIRZA GHALIB STREET, 2 ND FLOOR, KOLKATA-700 016 [ PAN NO.AABCC 2581 L ] / V/S . INCOME TAX OFFICER, WARD-8(1), AAYAKAR BHAWAN, 5 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI DILIP KUMAR PATRI, CA /BY RESPONDENT SHRI DHRUBAJYOTI ROY, JCIT-DR /DATE OF HEARING 18-02-2020 /DATE OF PRONOUNCEMENT 26-02-2020 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-3 KOLKATAS OR DER DATED 26.04.2018 PASSED IN CASE NO.284/CIT(A)-3/WD-8(1)/KOL/15-16, INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE RAISED IN THE INSTANT APPEAL SEEKS TO REVERSE BOTH THE LOWER AUTHORITIES ACTION TREATING ITS CURRENCY DERIVATIVE LOSS OF 30,48,249/- AS BOGUS UNEXPLAINED CASH CREDITS BASED ON SEARCH STATEMENT OF SHRI ITA NO.1435/KOL/2018 ASSESSMENT YEAR 2012-13 CIMSYS RESEARCH INDIA PVT. LTD. VS ITO-WD -8(1) KOL. PAGE 2 SAHET SARAF; ONE OF THE DIRECTOR IN M/S MARIGOLD VA NIJYA PVT.LTD. (REGISTERED COMMODITY BROKER) THAT IT HAD BEEN PROVIDING ACCOMM ODATION ENTRY OF LOSS BY WAY OF CURRENCY DERIVATIVE TRANSACTIONS. LEARNED DEPARTMEN TAL REPRESENTATIVES CASE IS THAT BOTH THE LOWER AUTHORITIES HAVE BEEN RIGHTLY DISALL OWED THE ASSESSEES CURRENCY DERIVATIVE LOSS SINCE SUFFERING FROM LACK OF GENUIN ENESS AND CREDITWORTHINESS IN VIW OF THE OVERWHELMING EVIDENCE COLLECTED DURING THE COUR SE OF FOREGOING SEARCH PROCEEDINGS. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL PLEADINGS AGAINST AND IN SUPPORT OF THE INSTANT IMPUGNED LOSS. THE ASSESSEE S DETAILED PAPER BOOK COMPRISING OF 200 PAGES INCLUDING CONTRACT NOTES ISSUED BY THE BROKER RELATING TO CURRENCY DERIVATIVE TRANSACTIONS, CORRESPONDING BANK STATEME NT, VARIOUS JUDICIAL PRECEDENTS AND TAXPAYERS SUBMISSION BEFORE THE CIT(A) STANDS PERU SED. WE FIND THAT THE INSTANT ISSUE OF BOGUS CURRENCY DERIVATIVE LOSS BASED ON SHRI SAC HET SARAFS SEARCH STATEMENT IS NO MORE RES INTEGRA AS TRIBUNALS CO-ORDINATE BENCHS DECISION IN ITA 1560/KOL/2016 ACIT, CIRCLE-12(2) KOLKATA VS. M/S TIRUPATI AWAS PV T. LTD. , DECIDED ON 28.03.2018 HAS DELETED THE IDENTICAL DISALLOWANCE VIDE FOLLOWI NG DETAILED DISCUSSION:- 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT & INVESTMENT IN SHARES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y UNDER CONSIDERATION DE CLARING TOTAL INCOME OF RS.10,68,100/- ON 30-01-2015, AND THE SAME WAS PROC ESSED U/S. 143(1) OF THE ACT ON 28-01-2012. 5. A SEARCH & SEIZURE OPERATION WAS CONDUCTED IN TH E OFFICE OF SACHET SARAF & OTHERS U/S. 132 OF THE ACT ON 22-03-2013, WHEREIN A STATEM ENT OF SHRI SACHET SARAF, DIRECTOR OF M/S. MARIGOLD VANIJYA P.LTD WAS TAKEN. HE STATED THAT M/S. MARIGOLD VANIJYA P.LTD IS A BROKER OF CURRENCY DERIVATIVES LISTED WI TH MCX STOCK EXCHANGE. A NOTICE U/S. 148 OF THE ACT WAS ISSUED THE ASSESSEE. IN RES PONSE, THE ASSESSEE REQUESTED TO TREAT THE RETURN ORIGINALLY FILED ON 08-08-11, AS A RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S. 148 OF THE ACT. THE AO FURTHER ISSUED N OTICES U/S. 143(2) AND 142(1) OF THE ACT AND IN RESPONSE TO WHICH, THE AR OF THE ASSESSE E APPEARED. FOR VERIFICATION OF TRANSACTION NOTICE U/S. 133(6) OF THE ACT WAS ISSUE D TO MCX, MUMBAI AND ASSESSEE WAS ALSO ASKED TO CLARIFY THE ALLEGED LOSS OF RS.43 ,90,251/-. IT FAILED TO DO SO. THEREFORE, AO ADDED BACK THE SUM OF RS. 43,90,251/- AS UNEXPLAINED LOSS BY HIS ORDER DT. 31-03-2015 PASSED U/S. 147/143(3). 6. THE ASSESSEE CHALLENGED THE ABOVE ORDER OF AO BE FORE THE CIT-A AND CONTENDED THAT THE SAID TRANSACTION WAS ONLINE THROUGH MCX ST OCK EXCHANGE BY ITS BROKER, M/S. MARIGOLD VANIJYA PVT. LTD, IS A REGISTERED 3 ITA NO . 1560/KOL/2016 MEMBER OF MCX ITA NO.1435/KOL/2018 ASSESSMENT YEAR 2012-13 CIMSYS RESEARCH INDIA PVT. LTD. VS ITO-WD -8(1) KOL. PAGE 3 STOCK EXCHANGE LIMITED. THE CLAIM OF LOSS WAS DULY REFLECTED IN THE AUDITED FINANCIAL STATEMENT AS WELL AS IN THE RETURN OF INCOME BY APP LYING THE PROVISIONS OF SECTION 43(5)(D) OF THE ACT. THE ASSESSEE COMPANY IS REGIST ERED WITH THE SAID BROKER AND COMPLIED WITH ALL KYC NORMS. THE ASSESSEE HAS BEEN ALLOTTED CLIENT (CODE) NO. CK0105 FOR TRADING PURPOSE IN CURRENCY DERIVATIVES IN THE SEGMENT OF EXCHANGE. THE MCX STOCK EXCHANGE IS A NOTIFIED/LISTED STOCK EXCHA NGE UNDER THE INCOME TAX ACT. THE ASSESSEE HAS BEEN ISSUED VALID CONTRACT NOTES I N RESPECT OF ON LINE TRADE, WHEREIN, ORDER NUMBER, TRADE NUMBER, TRADE TIME ETC. ARE PRO PERLY MENTIONED AS PRESCRIBED BY CONCERNED AUTHORITIES/STOCK EXCHANGE. THE ASSESSEE MADE THE PAYMENTS TO ABOVE SAID REGISTERED/LISTED BROKER FOR THE SAID TRANSACTION B Y WAY OF ACCOUNT PAYEE CHEQUES. THE ASSESSEE SUBMITTED ALL THE DETAILS RELATING TO CONT RACT NOTES AND LEDGER COPIES OF ASSESSEE IN THE BOOKS OF SAID BROKER. APART FROM AB OVE, THE ASSESSEE ALSO SUBMITTED AN AFFIDAVIT OF MR. SACHET SARAF, DIRECTOR OF M/S. MAR IGOLD VANIJYA PVT. LTD ADMITTING THAT ALL THE FOREIGN CURRENCY TRANSACTIONS DONE BY ASSESSEE ARE BOAN FIDE, GENUINE AND RECORDED BY SAID MCX STOCK EXCHANGE REFERRING TO TH E STATEMENT GIVEN BY SHRI SACHET SARAF DURING THE COURSE OF SEARCH & SEIZURE OPERATION, IT WAS SUBMITTED THAT THERE NO DIRECT CONNECTION WITH THE ASSESSEE. 7. THE CIT-A CONSIDERING THE ABOVE SUBMISSIONS OF A SSESSEE WAS SATISFIED THAT THE ASSESSEE SUBMITTED ALL THE REQUIRED DETAILS IN SUPP ORT OF ITS TRANSACTION/CLAIM. THE CIT-A HELD THAT THE AO DID NOT PLACE ON RECORD ANY COGENT AND FACTUAL OR PALPABLE MATERIAL/EVIDENCE IN SUPPORT OF HIS VIEW AND THEREF ORE, DELETED THE SAID ADDITION MADE BY THE AO BY OBSERVING AS UNDER :- 4.2 I HAVE CONSIDERED THE SUBMISSION OF THE AR OF THE APPELLANT AS WELL AS THE CASE LAWS REFERRED TO IN HIS SUBMISSION. I FIND THA T THE APPELLANT HAS INCURRED LOSS OF RS.43,90,251/- ON ACCOUNT OF DEALING IN FOR EIGN EXCHANGE DERIVATIVES. THE ASSESSMENT IN THE INSTANT CASE WAS REOPENED BY THE AO BASED ON INFORMATION RECEIVED BY THE AO OF MARIGOLD VANIJYA (P) LTD. MR. SHRI SACHET SARAFT, ONE OF THE DIRECTORS OF MARIGOLD VANIJYA (P ) LTD DURING THE COURSE OF SEARCH & SEIZURE OPERATION U/S. 132 OF THE ACT, HAD DEPOSED BEFORE THE CONCERNED DDIT THAT THE COMPANY WAS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION OF LOSSES AND PROFITS TO THE BENEFICI ARIES AS AND WHEN DESIRED. THE APPELLANT IN THE INSTANT CASE BEING AN ALLEGED BENEFICIARY WAS ISSUED NOTICE U/S. 148 OF THE ACT. IN COURSE OF THE REASSE SSMENT PROCEEDINGS, THE APPELLANT FURNISHED ALL THE REQUISITE DOCUMENTS IN SUPPORT OF TRANSACTIONS ENTERED INTO BY IT IN RESPECT OF FOREIGN EXCHANGE D ERIVATIVES. ON THIS SCORE, I FIND THAT NO ENQUIRY, WHATSOEVER, HAS BEEN CONDUCTE D BY THE AO WITH EITHER THE BROKER OR THE MCX STOCK EXCHANGE TO VERIFY THE GENUINENESS OF THE TRANSACTIONS ENTERED INTO BY THE APPELLANT. NO CONV INCING MATERIAL, EXCEPT FOR THE STATEMENT OF MR. SACHET SARAF, HAS BEEN RELIED UPON BY THE AO IN MAKING THE IMPUGNED ADDITION. IT HAS BEEN BROUGHT TO MY NO TICE THAT EVEN THE STATEMENT OF MR. SACHET SARAF WAS RETRACTED AT A LA TER POINT OF TIME (SUPRA). THIS FACT HAS NOT BEEN CONTROVERTED BY THE AO IN AN Y MANNER. IT IS TRITE LAW THAT ADDITIONS CANNOT BE MADE, BASED MERELY ON THE STATEMENT OF A THIRD PARTY, IN THE ABSENCE OF ANY CORROBORATIVE MATERIAL EVIDEN CE. THERE MUST BE COGENT AND PALPABLE MATERIAL EVIDENCE MATERIAL EVIDENCES O N RECORD FOR ANY JUSTIFIABLE ACTION IN THE MATTER. I FIND THAT THE AO HAS NOT DO NE JUSTICE IN THE MATTER IN THIS RESPECT FOR WHICH THE IMPUGNED ADDITION CANNOT STAN D THE TEST OF APPEAL. I FIND THAT THE APPELLANT HAS DISCHARGED ITS INITIAL ONUS BY FURNISHING ALL THE REQUISITE ITA NO.1435/KOL/2018 ASSESSMENT YEAR 2012-13 CIMSYS RESEARCH INDIA PVT. LTD. VS ITO-WD -8(1) KOL. PAGE 4 DETAILS IN RESPECT OF FOREIGN EXCHANGE LOSS INCURRE D BY IT. IT IS NOT THE CASE OF THE AO THAT THE APPELLANT HAS FAILED TO FURNISH DOC UMENTARY EVIDENCES IN SUPPORT OF THE SAID FOREIGN CURRENCY LOSS. THUS, CO NSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE ISSUE AT HAND IN THE BACKDROP OF THE VARIOUS CASE LAWS CITED IN THE SUBMISSION SUPRA AND IN THE ABSENCE OF ANY COGENT FINDING OR CORROBORATIVE MATERIALS BROUGHT ON RECORD BY THE AO TO SUBSTANTIATE HIS STAND IN SUBVERTING THE SUBMISSION OF THE APPELLANT ON TH E IMPUGNED MATTER AT THE ASSESSMENT STAGE. I DO NOT FIND ANY MERIT IN THE AC TION OF THE AO IN MAKING THE IMPUGNED DISALLOWANCE OF RS.43,90,251/- AS UNEXPLAI NED LOSS WITH REGARD TO THE SAID TRANSACTIONS. IN VIEW OF THE FOREGOING, I FIND THAT THE ADDITION MADE ON THIS COUNT IS NOT SUSTAINABLE AT THE APPELLATE STAG E WHICH IS NOW DIRECTED TO BE DELETED. THE AO IS DIRECTED ACCORDINGLY. 8. BEFORE US THE LD. DR SUBMITS THAT THE ASSESSEE F AILED TO PRODUCE ANY EVIDENCE GATHERED BY THE AO IN RE-ASSESSMENT PROCEEDINGS. MC X STOCK EXCHANGE DID NOT FURNISH FULL DETAILS IN RESPECT OF SAID TRANSACTION OF ASSESSEE IN RESPONSE TO NOTICE ISSUED U/S. 133(6) OF THE ACT. THUS THE AO HAS RIGH TLY ADDED THE SAID AMOUNT TO THE TOTAL INCOME OF ASSESSEE. THE CIT-A BASING ON SUBMI SSIONS OF ASSESSEE HAS GIVEN RELIEF TO ASSESSEE WITHOUT CALLING REMAND REPORT OF AO IN ADMITTING ADDITIONAL EVIDENCE. THUS, THE CIT-A HAS ERRED IN ACCEPTING WR ONG CONTENTION OF ASSESSEE. HE ALSO VIOLATED THE PROVISIONS OF RULE 46A IN ADMITTI NG THE SAME. THE CIT-A HAS ALSO FAILED TO GIVE AN OPPORTUNITY TO AO FOR VERIFICATIO N OF THE DETAILS AS SUBMITTED BY THE ASSESSEE. IN VIEW OF ABOVE, HE PRAYED TO ALLOW THE GROUNDS OF APPEAL OF THE REVENUE. 9. ON THE OTHER HAND, THE LD. AR SUBMITS THAT THERE WAS NO NEW SUBMISSION/EVIDENCE BEFORE THE CIT-A AS ALLEGEDLY ARGUED BY THE LD.DR. THE CIT-A ONLY CONSIDERED THOSE DETAILS WHICH WERE AVAILABLE BEFORE THE AO. IN RESP ONSE TO NOTICES ISSUED U/S. 143(2) AND 142(1) OF THE ACT, THE ASSESSEE PRODUCED ALL TH E DETAILS BEFORE THE AO IN SUPPORT OF THE CONTENTION AND CLAIM. IN RESPONSE TO NOTICE ISSUED U/S. 133(6) OF THE ACT, SAID MCX STOCK EXCHANGE, MUMBAI PROVIDED ALL THE DETAILS REGARDING THE SAID TRANSACTIONS. THE AO AFTER EXAMINING THE SAME, HAS HIGH HANDEDLY HELD THAT THE CLAIM OF ASSESSEE IS BOGUS AND THEREFORE, ADDED THE IMPUG NED AMOUNT, WHICH IS NOT AT ALL JUSTIFIED. THE LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT-A AND PRAYED TO DISMISS THE GROUNDS RAISED BY THE REVENUE IN THE AP PEAL. 10. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L ON RECORD. WE FIND THAT THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT TO MCX STOCK E XCHANGE, MUMBAI. ADMITTEDLY THE SAID STOCK EXCHANGE COMPLIED WITH THE NOTICE ISSUED BY THE AO ALONG WITH SUPPLYING VARIOUS DETAILS IN RESPECT OF SAID TRANSACTION. ACC ORDING TO AO, IT IS INCOMPLETE DETAILS. HOWEVER, THE CIT-A NOTED IN HIS ORDER THAT THE AO FAILED TO VERIFY THE GENUINENESS OF TRANSACTION WITH THAT OF BROKER OF M CX STOCK EXCHANGE. IT IS ALSO OBSERVED THAT THE CIT-A FOUND SATISFIED THAT THE AS SESSEE FILED ALL THE REQUIRED DETAILS AND DOCUMENTS IN SUPPORT OF THE TRANSACTIONS ENTERE D INTO BY IT IN RESPECT OF FOREIGN EXCHANGE DERIVATIVES. WE FIND THAT THE AO MADE THE ADDITION ONLY ON THE BASIS OF STATEMENT RECORDED DURING THE SEARCH & SEIZURE OPER ATION IN THE PREMISES OF THE SAID SHRI SACHET SARAF, DIRECTOR OF M/S. MARIGOLD VANIJY A P.LTD. THE SAID STATEMENT OF MR. SARAF WAS RETRACTED AT A LATER POINT OF TIME. THE C IT-A FOUND SATISFIED THAT THERE WAS NO CORROBORATIVE EVIDENCE WHICH SUPPORTS THE VIEW O F THE AO THAT THE SAID TRANSACTION WAS UNEXPLAINED. THEREFORE, WE FIND NO ADDITIONAL E VIDENCE, WHICH WAS FILED BEFORE THE CIT-A, BUT NOT BEFORE THE AO. THE CIT-A DELETED THE 6 ITA NO. 1560/KOL/2016 ITA NO.1435/KOL/2018 ASSESSMENT YEAR 2012-13 CIMSYS RESEARCH INDIA PVT. LTD. VS ITO-WD -8(1) KOL. PAGE 5 SAID ADDITION ONLY ON THE BASIS OF MATERIAL/EVIDENC E AVAILABLE ON RECORD, WHICH WERE VERY MUCH BEFORE THE AO IN THE RE-ASSESSMENT PROCEE DINGS. THE CASE LAWS AS RELIED ON BY THE ASSESSEE BEFORE THE CIT-A WERE RELEVANT AND APPLICABLE TO THE PRESENT FACTS OF THE CASE. THE CIT-A HAS DISCUSSED THE EACH CASE LAW THOROUGHLY. THUS, THE CIT-A WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO O N THIS ISSUE. THE GROUNDS RAISED BY THE REVENUE IN THE APPEAL ARE DISMISSED . WE ADOPT THE ABOVE EXTRACTED REASONING MUTATIS MUTA NDIS AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED CURRENCY DERIVATIVE LOSS DISALLOWANCE OF 30,48,249/-. NECESSARY COMPUTATION SHALL FOLLOW AS PER LAW. 4. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26/02/2020 SD/- SD/- ( ') () ') (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS * - 26/02/2020 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-CIMSYS RESEARCH INDIA PVT. LTD., 56D, MI RZIA GALIB STREET KOLKATA-700 016 2. /RESPONDENT-ITO WD-8(1), 5 TH FL. P-7 CHOWRINGHEE SQ.KOLKATA-69 3. - . / CONCERNED CIT 4. . - / CIT (A) 5. / ))- , - /DR, ITAT, KOLKATA 6. 3 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ -,