Nandkishor Laxminarayan Agarwal, Jalna V. Income-tax Officer,

ITA 1485/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5168 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 07-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Business income; Principle of natural justice; Transactions in derivatives; Additional evidence; Speculation loss; Speculative transactions
• Section: 142(1); 43(5); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO.1485/PUN/2016 / ASSESSMENT YEAR : 2011-12 SHRI NANDKISHOR LAXMINARAYAN AGARWAL. KUNAL APARTMENT, MANISHNAGAR, BHOKARDAN ROAD, JALNA. PIN-431203 PAN : ADPPA7327N .... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD-1(3), JALNA / RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI SUDHENDU DAS / DATE OF HEARING : 31.01.2019 / DATE OF PRONOUNCEMENT : 04.02.2019 / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM T HE ORDER OF THE LD. CIT(APPEALS)-1, AURANGABAD DATED 14.03.2016 FOR THE ASSE SSMENT YEAR 2011-12 AS PER FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. HON'BLE CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION OF RS.49,29,010/- AS IN EXPLAINED CASH DEPOSITS AS AGAINST SALE PROCE EDS SAME MAY PLEASE BE ALLOWED. 2. HON'BLE CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION OF RS.16,25,942/- TREATING COMMODITY LOSS AS SPECULATION LOSS SAME MA Y PLEASE BE ALLOWED. 3. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF R S.2,50,000/- AS TAKEN ADDITION OUT DISALLOWANCE MADE BY THE ASSESSING OFF ICER OF RS.40,61,348/- SAME MAY PLEASE BE DELETED. 2 ITA NO.1485/PUN/2016 A.Y.2011-12 4. HON'BLE CIT(A) HAS ERRED IN NOT ADJUDICATING ISS UE OF DISALLOWANCE OF INTEREST RS.17,54,623/- SAME MAY PLEASE BE ALLOWED. 5. APPELLANT PRAYS FOR JUST AND EQUITABLE RELIEF. 6. APPELLANT PRAYS FOR CANCELLATION OF INTEREST CHA RGES U/S.234B. 7. APPELLANT PRAYS TO ADD, ALTER, AMEND, CLARIFY, M ODIFY, TAKE ADDITIONAL GROUND/S AND /OR WITHDRAW THE GROUND/S DURING APPEL LATE PROCEEDING. 2. WHEN THE MATTER WAS CALLED UP FOR HEARING TODAY, NO O NE HAS APPEARED ON BEHALF OF THE ASSESSEE. IT APPEARS FROM THE RECORD THAT ON EARLIER DATES OF HEARING ALSO, NEITHER THE ASSESSEE NOT HIS AUTHORIZED REP RESENTATIVE WAS PRESENT TO REPRESENT ITS CASE. THE NOTICE OF HEARING SEN T TO THE ASSESSEE HAS NOT BEEN RETURNED UN-SERVED. IN THESE CIRCUMSTANCES, IT APP EARS THAT THE ASSESSEE IS NOT INTERESTED IN PROSECUTING ITS APPEAL. WE HAVE RECO RDED THE PRESENCE OF LD. DR. IN THESE FACTS AND CIRCUMSTANCES, WE PROCEED TO DEC IDE THE APPEAL WITH THE ASSISTANCE OF THE LD. DR AND MATERIALS/ DOCUMENTARY EVID ENCES AVAILABLE ON RECORD. 3. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN STEEL PRODUCTS INCLUDING SCRAP. HE FILED RETURN INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING NIL INCOME. AT THE END OF ASSESSMENT PROCEEDINGS U/S.143(3) R.W.S 144 OF THE ACT, THE ASSESSING OFFICER ASSESSED THE TOTAL INCOME OF ASSESSEE AT RS.1,94,23,519/- BY MAKING FOLLOWING ADDITIONS : I) RS.49,29,010/- ON ACCOUNT OF CASH DEPOSITS IN SAVING BAN K ACCOUNTS. II) RS.16,25,942/- ON ACCOUNT OF IN COMMODITY AS SPECULATION LOSS. III) RS.2,50,000/- ON ACCOUNT OF PURCHASES OF SCRAP. IV) RS.17,54,623/- ON ACCOUNT OF DISALLOWANCE OF INTEREST. 4. AGGRIEVED WITH THE ASSESSMENT ORDER, THE ASSESSEE P REFERRED APPEAL BEFORE THE LD. CIT(A). WITH REGARD TO GROUND NO.1, DURING THE FIRS T APPELLATE PROCEEDINGS, THE LD. AR OF THE ASSESSEE SUBMITTED THAT A SSESSING OFFICER ADDED 3 ITA NO.1485/PUN/2016 A.Y.2011-12 AN AMOUNT OF RS.49,29,010/- BEING THE CASH DEPOSITED IN TH E COSMOS BANK AND JALNA MERCHANT CO-OPERATIVE BANK AS INCOME FROM UNDISCLO SED SOURCES U/S.69 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). HE HAS FURTHER ARGUED THAT THE CASH HAD BEEN DEPOSITED OUT OF CASH S ALES OF RS.69,02,253/- DURING THE YEAR UNDER CONSIDERATION. AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(APPEALS) CONFIRMED THE ADDITION OF RS.49 ,29,010/- MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: 5. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. THE APPELLANT IS ENGAGED IN THE BUSINESS OF TRADING IN STEEL PROD UCTS INCLUDING SCRAP. HE HAD FILED HIS RETURN OF INCOME FOR A.Y 2011-12 DECL ARING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTIC E U/S.143(2) DATED 09.08.2012 WAS ISSUED AND DULY SERVED ON THE APPELL ANT ON 11.08.2012 FIXING THE HEARING ON 22.08.2012. IN RESPONSE TO TH IS NOTICE, THE APPELLANT FILED COPIES OF PROFIT & LOSS ACCOUNT, BALANCE SHEE T AND TAX AUDIT REPORT. SUBSEQUENTLY A NOTICE U/S.142(1) DATED 23.05.2013 W AS ISSUED ALONG WITH QUESTIONNAIRE AND SERVED ON THE APPELLANT ON 28.05. 2013. THE HEARING WAS FIXED ON 03.06.2013 HOWEVER NEITHER THE APPELLANT N OR HIS AUTHORIZED REPRESENTATIVE BOTHERED TO APPEAR OR SEEK ADJOURNME NT. THE LETTER DATED 11.06.2013 FIXING THE HEARING ON 27.06.2013 WAS ALS O NOT COMPLIED WITH BY THE APPELLANT. THIS WAS FOLLOWED BY SHOW CAUSE N OTICE DATED 12.11.2013 FOR LEVY OF PENALTY U/S 27L(1)(B) HOWEVER THERE WAS NO RESPONSE BY THE APPELLANT. THE AO THEREFORE IMPOSED PENALTY OF RS.10,000/- VIDE HIS ORDER DATED 18.03.2014. THE AO FINALLY ISSUED SHOW CAUSE NOTICE DATED 18.03.2014 TO THE APPELLANT WHEREIN HE WAS ASKED TO EXPLAIN AS TO WHY HIS ASSESSMENT SHOULD NO T BE COMPLETED EX- PARTE U/S 144 OF THE INCOME TAX ACT. THE COMPLIANCE WAS DUE ON 26.03.2014 HOWEVER THE APPELLANT HAD MADE UP HIS MI ND NOT TO RESPOND TO THESE STATUTORY NOTICES. IT IS NOT UNDER STOOD AS TO WHAT WERE THE COMPELLING CIRCUMSTANCES WHICH PREVENTED THE AS SESSEE TO APPEAR BEFORE THE AO. HOWEVER THE FACT REMAINS THAT THE AP PELLANT WAS TOTALLY NON COOPERATIVE DURING THE ASSESSMENT PROCEEDINGS. THE AO NOTICED THAT THERE WERE CASH DEPOSITS OF RS.49,29,010/- IN THE SAVING BANK ACCOUNT OF THE ASSESSEE WITH COSMOS BANK & JALNA MERCHANT CO- OPERATIVE BANK. SINCE THE ASSESSEE HAD FAILED TO OF FER ANY EXPLANATION REGARDING THE SOURCES OF CASH DEPOSITS, THEREFORE T HE AO HAD NO ALTERNATIVE BUT TO MAKE AN ADDITION OF RS.49,29,010 /- U/S 69 OF THE INCOME TAX ACT. DURING THE COURSE OF APPELLATE PROC EEDINGS, THE COUNSEL OF THE APPELLANT SUBMITTED COPY OF CASH BOOK AND IT WAS ARGUED THAT CASH DEPOSITS WERE MADE OUT OF CASH SALES. SINCE TH ESE EVIDENCES WERE IMPERATIVE FOR THE ADJUDICATION OF THIS GROUND OF A PPEAL, THESE WERE ADMITTED UNDER SUB-RULE 4 OF RULE 46A. THE AO WAS ALSO PROVIDED AN OPPORTUNITY VIDE MY LETTER NO.ABD/CIT(A)- 1/NLA/REP ORT/2015- 16/1497 DATED 15.12.2015. IN RESPONSE, THE AO VIDE HIS REMAND REPORT DATED 03.03.2016 STATED THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS DESPITE SUFFICIENT AND REASONABLE OPPOR TUNITIES OF BEING HEARD, GIVEN TO THE ASSESSEE, THE ASSESSEE HAD NEVE R PRODUCED HIS BOOKS OF ACCOUNTS ALONG WITH CORRESPONDING PURCHASE BILLS, SALE BILLS INCLUDING CIRCUMSTANTIAL EVIDENCES FOR THE TRANSACT IONS JUSTIFYING HIS RECEIPTS/EXPENSES AND VARIOUS CLAIMS. THEREFORE, TH E ASSESSMENT WAS COMPLETED EX-PARTE BASED ON THE SOUND FOOTINGS AND EVIDENCES AVAILABLE. IN VIEW OF THIS POSITION, THE ADDITIONAL EVIDENCES NOW 4 ITA NO.1485/PUN/2016 A.Y.2011-12 ADDUCED BY THE ASSESSEE DESERVED TO BE REJECTED. AT THE OUTSET, THE AO HAS RAISED OBJECTIONS AGAINST ADMISSION OF THESE AD DITIONAL EVIDENCES SUBMITTED BY THE APPELLANT IN THE LIGHT OF SUB-RULE 4 OF RULE 46A OF THE INCOME-TAX RULES, 1962 DURING THE APPELLATE PROCEED INGS. SINCE THESE ADDITIONAL EVIDENCES ARE RELATED AND HAVE CLOSE NEX US WITH THE ISSUE UNDER CONSIDERATION, THESE ARE BEING ADMITTED UNDER SUB-RULE 4 OF RULE 46A FOR PROPER ADJUDICATION OF THE APPEAL AND THE AO WA S ALSO PROVIDED AN OPPORTUNITY TO EXAMINE THESE ADDITIONAL EVIDENCES AND SUBMIT REMAND REPORT. IN THE CASE OF CIT VS. K. RAVINDRANATHAN NAIR (131 TAXMAN 743), IT WAS HELD BY HON'BLE KERALA HIG H COURT THAT ON A CONSIDERATION OF THE PROVISIONS OF RULE 46A, PARTIC ULARLY SUB-RULE (4) THEREOF AND THE PROVISIONS OF SECTION 250(1) CONFERRING POWER ON THE COMMISSIONER (APPEALS), IT WAS CLEAR THAT IN SPITE OF THE PROVISION OF RULE 46A(L), THE PROVISIONS OF SECTION 250 ENABLE T HE COMMISSIONER (APPEALS) TO ACCEPT ADDITIONAL EVIDENCE IN APPROPRI ATE CASES, WHICH POWER HAS BEEN PRESERVED BY SUB-RULE (4) OF RULE 46 A ALSO. IF THE PROVISIONS OF RULE 46A, SUB-RULE (4) THEREOF, WERE HELD TO BE MANDATORY, THAT WOULD GO AGAINST THE PROVISIONS OF SECTION 250 CONFERRING POWER ON THE FIRST APPELLATE AUTHORITY TO ENQUIRE INTO TH E MATTER AND PASS APPROPRIATE ORDERS. IN OTHER WORDS, RULE 46A WITHOU T SUB-RULE (4) WOULD BE OPEN TO CHALLENGE AS ULTRA VIRES SECTION 2 50. IN THE CITED CASE, FOR LACK OF CONFIRMATION LETTERS FROM CREDITO RS, THE ASSESSING OFFICER HAD MADE ADDITION UNDER SECTION 68 AND THOU GH ON APPEAL BEFORE THE COMMISSIONER (APPEALS), THE ASSESSEE PRO DUCED CONFIRMATION LETTERS, THE COMMISSIONER (APPEALS) RE JECTED THE SAID ADDITIONAL EVIDENCE BY HOLDING THAT THE ASSESSEE'S CASE DID NOT FALL UNDER ANY OF THE EXCEPTIONAL CIRCUMSTANCES MENTIONE D IN RULE 46A. THE COURT HELD THAT THE TRIBUNAL WAS JUSTIFIED IN HOLDI NG THAT IN VIEW OF SUB-RULE (4) OF RULE 46A AND THE PROVISIONS OF SECT ION 250, THE COMMISSIONER (APPEALS) WAS NOT JUSTIFIED IN REJECTI NG CONFIRMATION LETTERS PRODUCED BY THE ASSESSEE AND HE SHOULD HAVE DIRECTED THE ASSESSING OFFICER TO CONSIDER SAID CONFIRMATION LET TERS AND FIND OUT IDENTITY, CREDITWORTHINESS, ETC. OF PERSONS WHO HAD MADE FIXED DEPOSITS. ACCORDINGLY THIS OBJECTION OF THE AO TO A DMIT ADDITIONAL EVIDENCES IS REJECTED. THE AO HAS FURTHER STATED IN THE REMAND REPORT THAT HE HAD ISSUED SUMMONS U/S 131 OF THE INCOME TA X ACT DATED 22.12.2015 DIRECTING THE ASSESSEE TO SUBMIT HIS BOO KS OF ACCOUNT INCLUDING CASH BOOK, BANK BOOK, LEDGER, PURCHASE/SA LE BILLS, DELIVERY CHALLANS, TRANSPORT BILLS, VOUCHER FOR VARIOUS EXPE NSES ETC. THE COMPLIANCE WAS DUE ON 29.12.2015. IN RESPONSE, THE AR OF THE ASSESSEE SOUGHT AN ADJOURNMENT FOR A WEEK AND CASE WAS THEREFORE ADJOURNED TO 11.01.2016. HOWEVER NEITHER THE APPELL ANT NOR HIS AR BOTHERED TO APPEAR ON THE SAID DATE. THE COPY OF RE MAND REPORT WAS ALSO MADE AVAILABLE TO THE COUNSEL OF THE APPELLANT VIDE MY LETTER DATED 04.03.2016. IN RESPONSE, THE COUNSEL OF THE A PPELLANT HAS AGAIN REITERATED THAT THE CASH DEPOSITS WERE MADE OUT OF CASH SALES. IT HAS ALSO BEEN ARGUED THAT SINCE THE BOOKS OF ACCOUNT OF THE APPELLANT WERE AUDITED, THE AO SHOULD NOT HAVE MADE THE IMPUGNED A DDITION. ON CAREFUL CONSIDERATION OF FACTS & CIRCUMSTANCES IN THE PRESENT CASE, I AM NOT INCLINED TO ACCEPT THE ARGUMENTS OF THE APPE LLANT. IN SPITE OF REASONABLE OPPORTUNITY BEING PROVIDED TO THE APPELL ANT DURING THE APPELLATE PROCEEDINGS, HE HAS FAILED TO AVAIL HIMSE LF OF THAT FOR THE REASONS BEST KNOWN TO HIM. I HAVE ALSO EXAMINED THE COPIES OF INVOICES SUBMITTED BY THE COUNSEL OF THE APPELLANT DURING TH E COURSE OF APPELLATE PROCEEDINGS. THE APPELLANT HAS CLAIMED TO HAVE MADE CASH SALES OF RS.69,02,253/- DURING THE YEAR UNDER REFERENCE. IN THE COPIES OF INVOICES SO FURNISHED, NAMES OF THE BUYERS ARE NOT LEGIBLE. MOREOVER THEIR ADDRESSES ARE ALSO INCOMPLETE. EVEN THE BILL NUMBER IS NOT LEGIBLE. HAD THE ORIGINAL SALE BILLS BEEN SUBMITTED BEFORE T HE AO, HE COULD HAVE MADE THE REQUISITE ENQUIRIES. FURTHER THE RELEVANT ENTRIES IN THE CASH BOOK COULD HAVE BEEN SUBJECTED TO VERIFICATION. HOW EVER THE APPELLANT 5 ITA NO.1485/PUN/2016 A.Y.2011-12 HAS DELIBERATELY NOT SUBMITTED THE RELEVANT DOCUMEN TS BEFORE THE AO AND ALSO FAILED TO APPEAR BEFORE HIM. IN THESE FACT S & CIRCUMSTANCES, THE GENUINENESS OF CASH SALES HAS NOT BEEN ESTABLIS HED BY THE APPELLANT. THE POWER OF FRAMING ASSESSMENT RESTS WI TH THE ASSESSING OFFICER WHO HAS TO MAKE ASSESSMENT ON THE BASIS OF MATERIAL PRODUCE D BEFORE HIM AND AFTER HEARING THE ASSESSEE AND PERUS ING THE EVIDENCE PLACED BEFORE HIM DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. IN THIS RESPECT, IT IS THE DUTY OF THE ASSESSEE TO EXTEND C OOPERATION TO THE ASSESSING OFFICER AND FURNISH DETAILS AS REQUIRED E NABLING HIM TO MAKE ASSESSMENT. WHEN SUCH MATERIAL/EVIDENCE AS REQUIRED BY THE ASSESSING OFFICER IS MADE AVAILABLE TO HIM, THEN TH E DUTY SHIFTS ON THE ASSESSING OFFICER TO MAKE PROPER ASSESSMENT, AS PER LAW IN THE LIGHT OF MATERIAL/EVIDENCE PROVIDED TO HIM. THUS THE PRIMARY ONUS IS ON THE ASSESSEE TO MAKE AVAILABLE THE REQUISITE INFORMATIO N CALLED FOR BY THE ASSESSING OFFICER. IF THE ASSESSEE FAILS TO COMPLY WITH THE TERMS OF NOTICE ISSUED UNDER SECTION 142(1) OR WITH ALL THE TERMS OF NOTICE ISSUED UNDER SECTION 143(2), THE ASSESSING OFFICER GETS PO WER TO MAKE ASSESSMENT OF TOTAL INCOME OR LOSS TO THE BEST OF H IS JUDGMENT AFTER TAKING INTO ACCOUNT ALL THE RELEVANT MATERIAL WHICH HE HAS GATHERED. THE ASSESSEE IS LIABLE TO BE VISITED WITH THE ADVER SE CONSEQUENCES IF HE FAILS IN DISCHARGING THE DUTY CAST UPON HIM BY NOT FURNISHING NECESSARY PARTICULARS CALLED FOR BY THE ASSESSING OFFICER. TH ERE IS NO RULE THAT IF THE ASSESSEE HAD NOT ADDUCED NECESSARY EVIDENCE/MAT ERIAL AT THE ASSESSMENT STAGE, THEN THE APPELLATE AUTHORITIES MU ST REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSI DERING THE ADDITIONAL EVIDENCE LATER ON SOUGHT TO BE PRODUCED BEFORE THEM . ONLY IF THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN MAKIN G AVAILABLE NECESSARY EVIDENCE TO THE ASSESSING OFFICER OR THE ASSESSMENT WAS IMPROPERLY FRAMED BY THE ASSESSING OFFICER BY EITHE R NOT ALLOWING ADEQUATE OPPORTUNITY TO THE ASSESSEE OR BY NOT CONS IDERING THE RELEVANT MATERIAL, THEN THE MATTER CAN BE RESTORED FOR A FRE SH DECISION. THUS IT HAS TO BE DECIDED BY THE APPELLATE AUTHORITIES IN EACH AND EVERY CASE DISTINCTLY AS TO WHETHER THE ADDITION MADE FOR NON-COMPLIANCE ON THE PART OF THE ASSESSEE AT THE ASSESSMENT STAGE BE SUSTAINED OR TH E ASSESSEE BE ALLOWED A FRESH OPPORTUNITY TO MAKE UP THE DEFICIENCY IN TH E SECOND ROUND. HOWEVER IN THE INTERESTS OF NATURAL JUSTICE, THE UNDERSIGNE D HAD PROVIDED A SECOND OPPORTUNITY TO THE APPELLANT TO LEAD EVIDENCE IN TH E MATTER. HOWEVER HE HAS MISERABLY FAILED TO ESTABLISH THE GENUINENESS OF HI S CLAIM THAT HE HAD MADE CASH SALES OF RS.69,02,253/- IN THE YEAR UNDER REFE RENCE. IN THESE CIRCUMSTANCES, I HAVE NO HESITATION IN CONFIRMING T HE ADDITION MADE BY THE AO. THE ADDITION OF RS.49,29,010/- IS SUSTAINED AND THIS GROUND OF APPEAL IS DISMISSED. 5. ON PERUSAL OF THE FINDINGS OF THE LD. CIT(APPEAL S) WITH REGARD TO THE GROUND NO.1 IN THE GROUNDS OF APPEAL BEFORE US, WE FIND THAT ENTIRE FACTS AND CIRCUMSTANCES HAVE BEEN ANALYZED AND REASONED D ECISION HAS BEEN GIVEN BY THE LD. CIT(APPEALS). WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF LD. CIT(APPEALS). AT THE SAME TIME, THE ASSESSEE IS NOT VIGILANT BEFORE US TO CONTROVERT THE FINDINGS OF THE ASSESSING OFFICER AND LD. CIT(APPEALS). 6 ITA NO.1485/PUN/2016 A.Y.2011-12 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE A RE OF THE CONSIDERED VIEW THAT THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENC E AND THE SAME IS THEREBY, UPHELD. ACCORDINGLY, GROUND NO.1 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED . 6. WITH REGARD TO GROUND NO.2, IT IS NOTICED THAT T HE ASSESSING OFFICER MADE ADDITION OF RS.16,25,942/- ON ACCOUNT OF DISAL LOWANCE OF COMMODITY LOSS AS SPECULATIVE LOSS. 7. DURING FIRST APPELLATE PROCEEDINGS, THE LD. AR O F THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAD TREATED TH E COMMODITY LOSS AS SPECULATION LOSS WHEREAS THE ASSESSEE WAS REGULARLY TRADING IN COMMODITY AND SAME CONSTITUTED HIS BUSINESS. THE PROFIT/LOSS FROM THE COMMODITY TRADING WAS SHOWN AS BUSINESS INCOME. AFTER CONSI DERING THE SUBMISSIONS OF THE LD. AR, THE LD.CIT(APPEALS) CONF IRMED THE ADDITION BY OBSERVING AS UNDER: 7. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. THE APPELLANT IS ENGAGED IN THE TRADING OF M.S BARS, M. S. PATTI AND M. S. SCRAP. THE AO HOWEVER NOTICED THAT THE ASSESSEE HAD ALSO ENTERED INTO THE COMMODITIES TRANSACTIONS IN VARIOUS METALS SUCH AS COPPER, SILV ER AND STEEL PRODUCTS. THE AFORESAID TRANSACTIONS INVOLVED A CONTRACT FOR THE PURCHASE AND SALE OF COMMODITIES WHICH WAS PERIODICALLY AND ULTIMATELY S ETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OF THE COMMODITIES. THE AO T HEREFORE HELD THAT THE COMMODITIES TRANSACTIONS ENTERED BY THE ASSESSEE WE RE SPECULATIVE IN NATURE WITHIN THE MEANING OF SECTION 43(5) OF THE I NCOME TAX ACT. THE ASSESSEE WAS NOT ENGAGED IN THE DERIVATIVES TRADING BUT HAD ENTERED INTO COMMODITIES TRANSACTIONS WITH MCX EXCHANGE. THEREFO RE IT IS CLEAR THAT THE PROVISIONS OF SECTION 43(5)(D) WERE NOT APPLICABLE IN THE CASE OF ASSESSEE. THE DEFINITION OF DERIVATIVE UNDER THIS ACT APPLI ED ONLY TO DERIVATIVES HAVING OR OTHER FINANCIAL INSTRUMENTS AS THE UNDERLYING SHARE S & SECURITIES. THEREFORE, THE COMMODITY DERIVATIVES WE RE NOT GOVERNED BY SECURITIES CONTRACTS (REGULATION) ACT, 1956 BUT BY THE FORWARD CONTRACTS (REGULATION) ACT, 1956. ONE OF THE AMENDM ENTS CARRIED OUT BY THE 2013 BUDGET WAS THE INTRODUCTION OF COMMODIT IES TURNOVER TAX (CIT), EFFECTIVE FROM 1ST OF JULY 2013 WHICH AMENDE D THE DEFINITION OF SPECULATIVE TRANSACTION UNDER INCOME-TAX LAWS TO EX CLUDE COMMODITY DERIVATIVE TRANSACTIONS UNDER INCOME-TAX LAWS CARRI ED OUT IN A RECOGNIZED COMMODITY EXCHANGE. THE EXCLUSION APPLIE D TO ALL COMMODITY DERIVATIVES TRANSACTIONS IN AGRICULTURAL AS WELL AS NON- 7 ITA NO.1485/PUN/2016 A.Y.2011-12 AGRICULTURAL COMMODITIES FROM 01.07.2013 AND NOT JU ST NON AGRICULTURAL COMMODITY DERIVATIVES, WHICH WERE SUBJ ECT TO CIT. THIS AMENDMENT WAS HOWEVER, EFFECTIVE FROM ASSESSMENT YE AR 2014-15 AND IT APPLIED TO ALL TRANSACTIONS ON OR AFTER 1ST APRIL 2013. THEREFORE, THIS AMENDMENT WAS NOT APPLICABLE TO THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION AND ACCORDINGLY, THE ASSESSEE'S TRANS ACTIONS IN COMMODITIES WERE NOTHING BUT SPECULATIVE TRANSACTIONS. THE AO D ISALLOWED COMMODITY LOSS OF RS.16,25,942/- AS SPECULATIVE IN NATURE ON EXAMINATION OF THE RELEVANT BILLS/CONTRACT NOTES OF M/S.ADINATH COMMOD ITIES FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. ON CAREFUL EXAMINATION OF THESE BILLS/CONTRACT NOTES, IT IS SE EN THAT FUTURE TRADING WAS DONE ON NCDX & MCX IN COPPER, SILVER & STEEL WITHOUT TAKING ANY DELIVERY. IT IS NOT IN DISPUTE THAT THE ASSESSEE WA S NOT DEALING IN THESE COMMODITIES. IT IS SEEN THAT THE APPELLANT HA D INCURRED SPECULATIVE LOSSES OF RS.16,25,942/- WHICH HAVE BEE N SET OFF AGAINST THE BUSINESS PROFITS IN THE COMPUTATION OF INCOME. THE COUNSEL OF THE APPELLANT HAS MERELY CALLED THESE TRANSACTIONS AS ' BUSINESS TRANSACTIONS', HOWEVER SAME IS NOT ACCEPTABLE. IN T HE PRESENT CASE, THE TRANSACTIONS DONE BY THE ASSESSEE RELATE TO FIN ANCIAL YEAR 2010- 11. FOR THESE TRANSACTIONS, THERE WERE NO PROVISION S IN THE STATUTE TO GIVE THE BENEFIT TO THE ASSESSEE IN RESPECT OF TRAN SACTIONS OF COMMODITIES, WHICH WERE ULTIMATELY SETTLED OTHERWIS E THEN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY AS PER SECTIO N 43(5) OF THE ACT. THIS VIEW IS ALSO FORTIFIED BY THE DECISION OF HON' BLE MUMBAI ITAT IN THE CASE OF M/S.VARSHA CORPORATION LTD. VS. DCIT IN ITA NO.6534/MUM/2012 DATED 17.01.2014 FOR AY 2009-10. I N THE CITED CASE, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSIN ESS OF TRADING IN GOLD. THE COMPANY HAD OBTAINED GOLD FROM STATE B ANK OF INDIA, OPERA HOUSE BRANCH AS GOLD LOAN FOR WHICH THE PRICE WAS UNFIXED AND HAVING REGARD TO THE PRICE FLUCTUATION FOR NON FIXED DATE I.E. 90 DAYS. IN SUCH TRANSACTION RISK WAS INVOLVED ACCORDI NG TO PRICE FLUCTUATION FOR NON-FIXED QUALITY OF GOLD AND IN OR DER TO MINIMIZE SUCH RISK, THE ASSESSEE COMPANY HEDGED THE GOLD IN MCX. IT WAS CONTENDED THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE C OMPANY THROUGH MCX WAS DERIVATIVE TRANSACTION, IN WHICH IT HAD INC URRED A LOSS OF RS.21,04,331/-. IT WAS ARGUED THAT THE MCX WAS NOW RECOGNIZED AS STOCK EXCHANGE FOR THE PURPOSE OF SECTION 43(5) VID E NOTIFICATION NO.46/09, DATED 22-5-2009, ISSUED BY CBDT. REFERENC E WAS MADE TO PROVISIONS OF SECTION 43(5)(D) TO CONTEND THAT SUCH TRANSACTION COULD NOT BE TREATED AS SPECULATIVE TRANSACTION. HOWEVER THE HON'BLE MUMBAI ITAT HELD THE LOSS TO BE SPECULATIVE IN NATU RE AND NOT BUSINESS LOSS. THIS DECISION IS FULLY APPLICABLE TO THE PRESENT CASE. IN THESE FACTS & CIRCUMSTANCES, I HAVE NO HESITATION IN CONFIRMING T HE ADDITION MADE BY THE AO. THE ADDITION OF RS.16,25,9 42/- IS SUSTAINED AND ACCORDINGLY THIS GROUND OF APPEAL IS DISMISSED. 8. ON PERUSAL OF THE FINDINGS OF THE LD. CIT(APPEAL S) WITH REGARD TO THE FIRST GROUND OF APPEAL, WE FIND THAT THE LD.CIT(APP EALS) WHILE CONFIRMING ADDITION, HAS PLACED RELIANCE ON THE DECISION OF TH E CO-ORDINATE BENCH OF THE TRIBUNAL, MUMBAI IN THE CASE OF M/S.VARSHA CORP ORATION LTD. VS. DCIT IN ITA NO.6534/MUM./2012 DATED 17.01.2014 FOR THE ASSESSMENT 8 ITA NO.1485/PUN/2016 A.Y.2011-12 YEAR 2009-10 WHEREIN THE CO-ORDINATE BENCH OF THE T RIBUNAL HAS HELD THAT THE LOSS TO BE SPECULATIVE IN NATURE AND NOT B USINESS LOSS. AS STATED EARLIER, THE ASSESSEE IS NOT KEEN TO PUR SUE HIS APPEAL BEFORE US AND NOTHING HAS BEEN BROUGHT ON RECORD TO CONTROVERT THE FINDINGS OF THE LD. CIT(APPEALS). IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE FI ND NO INFIRMITY IN THE ORDER OF THE LD. CIT(APPEALS) AND THE SAME IS T HEREBY, UPHELD. ACCORDINGLY, GROUND NO.2 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED . 9. GROUND NO.3 DEALS WITH THE ADDITION TO THE EXTEN T OF RS.2,50,000/- MADE BY THE LD.CIT(APPEALS) ON ACCOUNT OF TOTAL PUR CHASES OF SCRAP AS BOGUS PURCHASES AMOUNTING TO RS.40,61,348/- MADE BY THE ASSESSING OFFICER. 10. DURING FIRST APPELLATE PROCEEDINGS, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE AO HAD MADE ADDITION OF RS.40,61,348/- ON ACCOUNT OF UNEXPLAINED PURCHASES. THE TOTAL SCRAP PURCHASES AS PER BOOKS OF ACCOUNTS WERE AT RS.54,78,795/- AND THE ASSESSEE HA D PAID ALL THE AMOUNTS TO THE CREDITORS THROUGH BANKING CHANNELS. THE BALANCE AMOUNT PAYABLE WAS ONLY IN RESPECT OF M/S.BHAGYALAXMI ROLL ING MILL PVT. LTD. JALNA FOR RS.16,13,231/- THE ASSESSING OFFICER HOWEVER HA D STATED IN HIS ORDER THAT AS PER OFFICE RECORDS, AN AMOUNT OF RS.40,61,3 48/- WAS PERTAINING TO PURCHASE OF SCRAP BUT IT COULD NOT BE QUANTIFIED FR OM THE BANK ACCOUNT EXTRACT WHETHER THE PAYMENT TOWARDS THESE PURCHASE WERE ROUTED THROUGH BANKING CHANNEL OR NOT. BUT THE FACT WAS THAT ALL T HE PAYMENTS HAD BEEN MADE THROUGH BANKING CHANNELS. THE COPY OF LEDGER E XTRACT OF PURCHASES OF 9 ITA NO.1485/PUN/2016 A.Y.2011-12 SCRAP AND LEDGER EXTRACT OF ALL THE SUPPLIERS WERE ALSO SUBMITTED WHICH WERE SELF EXPLANATORY. THE BANK STATEMENT WAS ALSO SUBMITTED. IT WAS ARGUED THAT ALL THE PAYMENTS WERE MADE THROUGH RTGS MOSTLY. SINCE ASSESSMENT WAS MADE U/S.144 OF THE ACT, NOTHING COU LD BE SUBMITTED BY ASSESSEE, SO THE ASSESSING OFFICER HAD ESTIMATED TH E FIGURE AND MADE THE ADDITION OF RS.40,61,348/-. AFTER CONSIDERING THE S UBMISSIONS OF THE ASSESSEE, THE LD. CIT(APPEALS) RESTRICTED THE ADDIT ION TO THE TUNE OF RS.2,50,000/- ON THIS ACCOUNT INSTEAD OF RS.40,61,3 48/- BY OBSERVING AS UNDER: 11. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT. THE AO HAD MADE ADDITION OF RS.40,61,348/- ON ACCOUNT OF PURCH ASES OF SCRAP AS NEITHER THE RELEVANT DETAILS WERE FILED BY THE ASSE SSEE NOR WAS THE MODE OF PAYMENT I.E. IN CASH OR THROUGH BANKING CHANNELS, E XPLAINED. IN THESE FACTS & CIRCUMSTANCES, THE AO WAS CONSTRAINED TO MAKE AN ADDITION OF RS.40,61,348/- ON ACCOUNT OF UNEXPLAINED PURCHASES. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE COUNSEL OF THE APPELLANT HAS ARGUED THAT IT WAS NOT UNDERSTOOD AS TO HOW THE ABOVE FIGURE WAS CALCU LATED BY THE AO. THE TOTAL PURCHASES OF SCRAP DURING THE YEAR UNDER REFE RENCE STOOD AT RS.54,78,795/- AS EVIDENT FROM THE PROFIT & LOSS AC COUNT. IT WAS FURTHER ARGUED THAT THE APPELLANT HAD ALSO PAID EXERCISE DU TY AND CST ON THE ABOVE PURCHASES. PURCHASES. IT WAS FURTHER ARGUED THAT THE ENTIRE M. S. SCRAP HAD BEEN SOLD FOR RS.56,39,481/- AND SALE PRO CEEDS WERE ALSO CREDITED TO THE PROFIT & LOSS ACCOUNT. IN THESE CIRCUMSTANCES, IT WAS NOT UNDERSTOOD THAT WHEN THE AO HAD ACCEPTED THE SALES THEN HOW COULD HE HAVE DISALLOWED THE PURCHASES OF RS.40,61,348/-. ON CAREFUL CONSIDERATION OF FACTS & CIRCUMSTANCES IN THE PRESENT CASE, I AM PARTLY INCLINED TO ACCEPT THE ARGUMENTS OF THE APPELLANT. IT IS NOT IN DISPUTE THAT M.S. SCRAP SO PURCHASED BY THE APPELLANT HAD B EEN SOLD TO VARIOUS BUYERS IN THE CURRENT YEAR ITSELF. THEREFOR E THE ACTION OF THE AO TO DISALLOW AN AMOUNT OF RS.40,61,348/- OUT OF TOTAL PURCHASES OF RS.54,78,795/- SUFFERS FROM FALLACY. IT IS NOT DISC ERNIBLE FROM THE ASSESSMENT ORDER AS TO HOW THE SAID FIGURE HAD BEEN WORKED OUT. IT IS FURTHER SEEN THAT ALL THE PAYMENTS FOR PURCHASES HA VE BEEN MADE THROUGH BANKING CHANNELS. IF THE PURCHASES WERE BOG US THEN HOW THE ASSESSEE HAD MADE CORRESPONDING SALES WHICH HAVE NO T BEEN DISTURBED BY THE AO AND THEREFORE STOOD ACCEPTED. H OWEVER THE FACT REMAINS THAT THE APPELLANT HAS NOT FURNISHED THE CO PIES OF INVOICES AND COMPLETE NAMES/ADDRESSES OF THE SUPPLIERS AND C ORROBORATIVE EVIDENCE FOR TRANSPORTATION OF THE MATERIAL. ACCORD INGLY TO PLUG POSSIBLE LEAKAGE OF REVENUE AND MEET ENDS OF JUSTIC E, A TOKEN DISALLOWANCE OF RS.2,50,000/- IS SUSTAINED. I ACCOR DINGLY DIRECT THE AO TO RESTRICT THE ADDITION TO RS.2,50,000/- ON THIS A CCOUNT INSTEAD OF RS.40,61,348/- MADE BY HIM. THIS GROUND OF APPEAL IS PARTLY ALLOWE D. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE FI ND THAT THE LD. CIT(A) HAS RIGHTLY RESTRICTED THE ADDITION TO THE E XTENT OF RS.2,50,000/- 10 ITA NO.1485/PUN/2016 A.Y.2011-12 AND THE SAME IS THEREBY, UPHELD. ACCORDINGLY, GROUND NO.3 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED . 11. WITH REGARD TO GROUND NO.4, THE FACTS RELATE TO THIS ISSUE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER, ON VERIFICATION OF PROFIT AND LOSS ACCOUNT, FOUND THAT A SUBSTANTIAL I NTEREST AT RS.17,54,623/- IS DEBITED AND THERE ARE NOMINAL SUNDRY DEBTORS AND CREDITORS. CONSIDERING THE TOTAL TURNOVER, THE ASSESSING OFFICER CAME TO T HE CONCLUSION THAT THERE IS NO APPLICATION FUNDS FOR THE PURPOSE OF BUSINESS AND HENCE THE INTEREST OF RS.17,54,623/- IS DISALLOWED AND ADDED TO THE TO TAL INCOME OF THE ASSESSEE HAS DIVERTED THE FUNDS FOR NON BUSINESS PU RPOSE. 12. DURING THE FIRST APPELLATE PROCEEDINGS, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THERE HAS BEEN A GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE IN THE PRESENT CASE. HOWEVER, HE HAS FAILED TO SHOW AS TO HOW AND THERE THE PRINCIPLES OF NATURAL JUSTICE WERE VIOLAT ED BY THE ASSESSING OFFICER. RATHER, IT IS FOUND THAT SINCE THE ASSESSM ENT HAS BEEN PASSED EX- PARTE U/S.144 OF THE ACT, THE ASSESSEE IS THEREFORE GUILTY OF ADOPTING EVASIVE ATTITUDE DURING THE COURSE OF ASSESSMENT PROCEEDING S. EVEN IT IS UNDISPUTED FACT THAT THE ASSESSEE DID NOT SUBMIT TH E NECESSARY DETAILS/DOCUMENTS IN SPITE OF REPEATED OPPORTUNITIE S BY THE ASSESSING OFFICER. THIS GROUND OF APPEAL IS THEREFORE DISMISS ED BEING REDUNDANT. THE LD. CIT(A) HAS NOT ADJUDICATED THE ISSUE BY OBSERVI NG AS UNDER: 13. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E COUNSEL OF THE APPELLANT HAS RAISED VARIOUS ARGUMENTS AGAINST THE ADDITION OF DISALLOWANCE OF INTEREST OF RS.17,54,623/- MADE BY THE ASSESSING OFFICER ON THE GROUND OF APPLICATION OF FUNDS FOR N ON BUSINESS PURPOSE. HOWEVER, NO SPECIFIC GROUND OF APPEAL IN THIS REGAR D HAS BEEN FILED AS PER FORM-35 AND NO ADDITIONAL GROUND OF APPEAL HAS BEEN RAISED DURING THE COURSE OF APPELLATE PROCEEDINGS. ACCORDI NGLY, IT IS NOT NECESSARY FOR THE UNDERSIGNED TO GO INTO THE MERIT OF THE ADDITION AND ADJUDICATE THE SAME. 11 ITA NO.1485/PUN/2016 A.Y.2011-12 CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE NON- VIGILANT ATTITUDE OF THE ASSESSEE TO MOVE HIS APPEAL BEFORE THE TRIBUNAL, WE ARE OF CONSIDERED VIEW THAT ORDER OF THE LD. CIT(A) ON THIS ISS UE IS JUST AND PROPER AND IT DOES NOT REQUIRE ANY INTERFERENCE. HENCE, GROUND NO.4 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED . 13. GROUND NOS. 5 TO 6 ARE GENERAL AND CONSEQUENTIAL IN NATURE AND HENCE, REQUIRE NO ADJUDICATION. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 04 TH DAY OF FEBRUARY, 2019. SD/- SD/- R.S.SYAL PA RTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 04 TH FEBRUARY, 2019. SB !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-1, AURANGABAD. 4. THE PR. CIT-1, AURANGABAD. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 12 ITA NO.1485/PUN/2016 A.Y.2011-12 DATE 1 DRAFT DICTATED ON 31 .01.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 04 .0 2 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER