Manoj Jain , Kolkata V. ITO, Ward - 35(4), Kolkata , Kolkata

ITA 1548/KOL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7569 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 19-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHURY CIT RESPOND
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Unexplained cash credit; Transactions in derivatives; Question of law
• Section: 260A; 133(6); 195; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, KOLKATA BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A. NO. 1548/KOL/2018 ASSESSMENT YEAR: 2013-14 MANOJ JAIN...............................APPELLANT [PAN :ADYPJ 1347 E] ITO, WARD-35(4), KOLKATA.......RESPONDENT APPEARANCES BY: SHRI MIRAJ D. SHAH, AR, APPEARED ON BEHALF OF THE APPELLANT. SHRI ROBIN CHOUDHURY, ADDL. CIT, APPEARED ON BEHALF OF THE RESPONDENT. DATE OF CONCLUDING THE HEARING : JANUARY 5, 2019 DATE OF PRONOUNCING THE ORDER : JANUARY 16, 2019 ORDER PER J. SUDHAKAR REDDY :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-10, (HEREINAFTER THE LD. CIT(A)), DATED 29.06.2018 PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT) FOR THE ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM CAPITAL GAINS AND OTHER SOURCES. HE FILED HIS RETURN OF INCOME ON 31.07.2013 DECLARING TOTAL INCOME OF RS.3,15,030/-. THE ASSESSEE DECLARED PROFIT ON COMMODITIES DERIVED BY HIS MINOR SON OF RS.5,98,998/- AND CLUBBED THE SAME IN THE HANDS OF THE ASSESSEE. THE ASSESSEE SUBMITTED CONTRACT NOTES ISSUED BY THE BROKER IN RESPECT OF SHRI MANAV JAIN, HIS MINOR SON. THE TRANSACTION IN COMMODITY WAS CLAIMED TO HAVE BEEN MADE THROUGH M/S KALI COMMODITIES PVT. LTD. IN THE MULTI COMMODITY EXCHANGE. THE ASSESSING OFFICER CONDUCTED ENQUIRY BY ISSUING OF NOTICE U/S 133(6) TO MULTI COMMODITY EXCHANGE OF INDIA (MCX). MCX REPLIED THAT NO CLIENT IS REGISTERED WITH THE NAME OF SRI MANAV JAIN AND THAT M/S KALI 2 MANOJ JAIN I.T.A. NO. 1548/KOL/2018 ASSESSMENT YEAR: 2013-14 COMMODITIES PVT. LTD. WAS EXPELLED FROM TRADING PLATFORM OF THE EXCHANGE VIDE CIRCULAR DATED 20.05.2015. HE REJECTED THE CONTENTION OF THE ASSESSEE THAT THE TRANSACTIONS HAVE BEEN ENTERED THROUGH A MEMBER OF RECOGNIZED STOCK EXCHANGE AND PAYMENTS HAVE BEEN RECEIVED THROUGH BANKS. COPIES OF THE LEDGER ACCOUNT, CONTRACT NOTES AND BANK STATEMENTS WERE SUBMITTED BY THE ASSESSEE. IT WAS FURTHER CONTENDED THAT THE TRANSACTION IN QUESTION WERE MADE DURING F.Y 2012- 13 AND THE M/S KALI COMMODITIES PVT. LTD. WAS ADMITTEDLY EXPELLED ON A MUCH LATER DATE I.E. 20.05.2015. THE ASSESSING OFFICER TREATED THE COMMODITY INCOME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WITHOUT SUCCESS. FURTHER AGGRIEVED THE ASSESSEE IS IN BEFORE ME. 4. AFTER HEARING RIVAL CONTENTIONS, CONSIDERING THE PAPERS AND RECORDS OF THE ORDER OF AUTHORITIES BELOW, I FIND THAT SIMILAR ISSUE HAS COME UP BEFORE THIS TRIBUNAL IN THE CASE OF M/S. ASIAN CAPITAL MARKET LTD. ITA NO.1984/KOL/2017 ORDER DATED 12.12.2018 WHEREIN IT WAS HELD AS FOLLOWS : 4. WE FIND NO INFIRMITY IN THIS ORDER AS ADMITTEDLY ALL THE DETAILS OF THE PROFIT AS WELL AS LOSS ALONG WITH SUPPORTING DOCUMENTS SUCH AS CONTRACT NOTES, BANK STATEMENTS ETC. HAVE BEEN FILED BY THE ASSESSEE. THE DISALLOWANCE WAS MADE ON PRESUMPTIONS AND SURMISES. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME VS M/S. BLB CABLES AND CONDUCTORS; ITAT NO.78 OF 2017, GA NO.747 OF 2017; DT. 19 JUNE, 2018, HAD UPHELD THE ORDER OF THE TRIBUNAL BY OBSERVING AS FOLLOWS:- 4. WE HAVE HEARD BOTH THE SIDE AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LD. AR SUBMITTED TWO PAPERS BOOKS. FIRST BOOK IS RUNNING IN PAGES NO. 1 TO 88 AND 2ND PAPER BOOK IS RUNNING IN PAGES 1 TO 34. BEFORE US THE LD. AR SUBMITTED THAT THE ORDER OF THE AO IS SILENT ABOUT THE DATE FROM WHICH THE BROKER WAS EXPELLED. THERE IS NO LAW THAT THE OFF MARKET TRANSACTIONS SHOULD BE INFORMED TO STOCK EXCHANGE. ALL THE TRANSACTIONS ARE DULY RECORDED IN THE ACCOUNTS OF 3 MANOJ JAIN I.T.A. NO. 1548/KOL/2018 ASSESSMENT YEAR: 2013-14 BOTH THE PARTIES AND SUPPORTED WITH THE ACCOUNT PAYEE CHEQUES. THE LD. AR HAS ALSO SUBMITTED THE IT RETURN, LEDGER COPY, LETTER TO AO LAND PAN OF THE BROKER IN SUPPORT OF HIS CLAIM WHICH IS PLACED AT PAGES 72 TO 75 OF THE PAPER BOOK. THE LD. AR PRODUCED THE PURCHASE & SALE CONTRACTS NOTES WHICH ARE PLACED ON PAGES 28 TO 69 OF THE PAPER BOOK. THE PURCHASE AND SALES REGISTERS WERE ALSO SUBMITTED IN THE FORM OF THE PAPER BOOK WHICH IS PLACED AT PAGES 76 TO 87. THE BOARD RESOLUTION PASSED BY THE COMPANY FOR THE TRANSACTIONS IN COMMODITY WAS PLACED AT PAGE 88 OF THE PAPER BOOK. ON THE OTHER HAND THE LD. DR RELIED IN THE ORDER OF THE LOWER AUTHORITIES. 4.1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE ASSESSEE HAS INCURRED LOSSES FROM THE OFF MARKET COMMODITY TRANSACTIONS AND THE AO HELD SUCH LOSS AS BOGUS AND INADMISSIBLE IN THE EYES OF THE LAW. THE SAME LOSS WAS ALSO CONFIRMED BY THE LD. CIT(A). HOWEVER WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE HAS TO BE SOME CONCRETE EVIDENCE WHERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HAVE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PARTY. BOTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH HAVE BEEN DULY SUPPORTED WITH THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD. AR HAS ALSO SUBMITTED THE BOARD RESOLUTION FOR THE TRADING OF COMMODITY TRANSACTION. THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HOLD THE TRANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE COMMON GROUNDS OF ASSESSEE'S APPEAL.' [QUOTED VERBATIM] THIS IS ESSENTIALLY A FINDING OF THE TRIBUNAL ON FACT. NO MATERIAL HAS BEEN SHOWN TO US WHICH WOULD NEGATE THE TRIBUNAL'S FINDING THAT OFF MARKET TRANSACTIONS ARE NOT PROHIBITED. AS REGARDS VERACITY OF THE TRANSACTIONS, THE TRIBUNAL HAS COME TO ITS CONCLUSION ON ANALYSIS OF RELEVANT MATERIALS. THAT BEING THE POSITION, TRIBUNAL HAVING ANALYSED THE SET OF FACTS IN COMING TO ITS FINDING, WE DO NOT THINK THERE IS ANY SCOPE OF INTERFERENCE WITH THE ORDER OF THE TRIBUNAL IN EXERCISE OF OUR JURISDICTION UNDER SECTION 260A OF THE INCOME TAX ACT, 1961. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL AND THE STAY PETITION, ACCORDINGLY, SHALL STAND DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. 4.1. THE KOLKATA BENCH OF ITAT IN THE CASE OF KAMLA PRASAD KAJARIA (HUF) VS. ITO; ITA NO. 1760/KOL/2017; ORDER DT. 24/05/2018, UNDER SIMILAR CIRCUMSTANCES HELD AS FOLLOWS:- 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE CLAIM OF THE ASSESSEE FOR THE IMPUGNED LOSS INCURRED IN TRADING IN DERIVATIVES WAS DISALLOWED BY THE AUTHORITIES BELOW MAINLY ON THE GROUND THAT THE ASSESSEE HAD NOT GIVEN ANY MARGIN MONEY TO THE 4 MANOJ JAIN I.T.A. NO. 1548/KOL/2018 ASSESSMENT YEAR: 2013-14 BROKER BEFORE THE RELEVANT TRANSACTIONS AND IN HIS STATEMENT, THE DIRECTOR OF THE BROKER COMPANY HAD ADMITTED THAT HIS COMPANY WAS INDULGING IN PROVIDING BOGUS LOSS IN CURRENCY DERIVATIVES AS PER THE REQUIREMENT OF THE CLIENTS. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, THE LEARNED DR HAS LAID EMPHASIS ON THESE TWO ASPECTS IN SUPPORT OF THE REVENUE'S CASE. HOWEVER, AS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE BY RELYING ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF BONANJA COMMODITIES BROKERS PVT. LTD. VS MRS. ROSHANARA BHINDER (ARBITRATION PETITION 195 OF 2015 DATED 16.04.2015), THE COLLECTION OF MARGIN MONEY AS PER THE BY-LAWS OF MCX STOCK EXCHANGE LTD. IS ONLY DISCRETIONARY IN NATURE AND THE TRANSACTIONS ENTERED INTO BY THE CLIENTS WITHOUT PAYMENT OF MARGIN MONEY CANNOT BE CONSIDERED AS ILLEGAL. AS FURTHER CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THERE IS NOTHING IN THE STATEMENT OF SHRI SACHIT SARAF, DIRECTOR OF THE BROKER COMPANY NOR ANYTHING HAS BEEN BROUGHT ON RECORD BY THE A.O. TO SHOW THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPANY THROUGH THE SAID BROKER WERE BOGUS. AS MATTER OF FACT, A PERUSAL OF THE ORDER OF THE A.O. SHOWS THAT ENQUIRY WAS DIRECTLY MADE BY HIM FROM MCX STOCK EXCHANGE LTD. BY ISSUING THE NOTICE U/S 133(6) OF THE ACT IN ORDER TO VERIFY THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE THROUGH M/S. MARIGOLD VANIJYA PVT. LTD. AND IN REPLY TO THE SAID NOTICE, MCX STOCK EXCHANGE LTD. HAD NOT ONLY CONFIRMED THE TRANSACTIONS BUT HAD ALSO FURNISHED THE REQUIRED INFORMATION ALONG WITH A CD CONTAINING DETAILS OF ALL TRANSACTIONS MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION THROUGH BROKER MARIGOLD VANIJYA PVT. LTD. AS FOUND BY THE A.O. ON VERIFICATION OF THE SAID DETAILS, TOTAL TRANSACTIONS INVOLVING SALES OF RS. 15,19,22,392/- AND PURCHASES OF RS. 15,19,23,880/- WERE MADE BY THE ASSESSEE RESULTING INTO A LOSS OF RS. 1,488/-. THIS RELEVANT EVIDENCE CONFIRMING THE GENUINENESS OF THE TRANSACTIONS MADE BY THE ASSESSEE ON MCX STOCK EXCHANGE LTD. WAS BRUSHED ASIDE BY THE A.O. ON THE GROUND THAT LOSS SHOWN THEREIN WAS RS. 1,488/- WHEREAS THE ASSESSEE HAD CLAIMED A LOSS OF RS. 5,17,141/-. AS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE US, EXPENDITURE WAS INCURRED BY THE ASSESSEE RELATING TO THE SAID TRANSACTIONS ON ACCOUNT OF BROKERAGE, SERVICE TAX AND OTHER CHARGES LEVIED BY THE BROKER AGGREGATING TO RS. 5,15,653/- AND ACCORDINGLY THE TOTAL LOSS AS CLAIMED BY THE ASSESSEE WAS TO THE TUNE OF RS. 5,17,141/-. AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THIS ADDITIONAL EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF BROKERAGE, SERVICE TAX AND OTHER CHARGES WAS DULY SUPPORTED BY THE DOCUMENTARY EVIDENCE IN THE FORM OF RELEVANT BILLS ISSUED BY THE BROKER AND THERE WAS NO REASON WHATSOEVER GIVEN BY THE A.O. FOR NOT ACCEPTING THIS EXPLANATION OF THE ASSESSEE. KEEPING IN VIEW ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE GENUINENESS OF THE TRANSACTIONS MADE BY THE ASSESSEE ON MCX STOCK EXCHANGE LTD. THROUGH BROKER MARIGOLD VANIJYA PVT. LTD. WAS DULY ESTABLISHED AND THE ACTION OF THE AUTHORITIES BELOW IN DISALLOWING THE CLAIM OF THE ASSESSEE FOR THE RESULTANT LOSS IN DEALING IN CURRENCY DERIVATIVES IS NOT TENABLE. I, THEREFORE, DELETE THE SAID DISALLOWANCE AND ALLOW THE APPEAL OF THE ASSESSEE. 5. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUND NO. 1 OF THE REVENUE. 5. SIMILARLY, IN THE CASE OF MANOJ JAIN HUF, ITA NO.580/KOL/2018 ORDER DATED 07.09.2018 WHEREIN IT WAS HELD AS FOLLOWS: 5 MANOJ JAIN I.T.A. NO. 1548/KOL/2018 ASSESSMENT YEAR: 2013-14 5.1. THE SOLE ISSUE THAT ARISES FOR OUR ADJUDICATION IS THE RATE OF TAXABILITY OF THIS AMOUNT OF RS.1,48,588/-. THE ASSESSEE HAS DECLARED THE SAME AS PROFIT FROM DERIVATIVE TRANSACTIONS AND FURNISHED SUPPORTING DOCUMENTS BY WAY OF CONTRACT NOTES AND BANK PAYMENT DETAILS. THE ASSESSING OFFICER HAS NOT CONDUCTED ANY INVESTIGATION TO DISPROVE THE CLAIMS MADE BY THE ASSESSEE THAT THESE ARE OFF MARKET TRANSACTIONS. THE BROKER M/S. KALI COMMODITIES PVT. LTD., HAS NOT BEEN QUESTIONED. THE TRANSACTIONS IN QUESTION WERE CARRIED OUT BETWEEN 01/03/2014 TO 07/03/2014 AND WHEREAS M/S. KALI COMMODITIES PVT. LTD., WAS EXPELLED ON 20/03/2015 I.E. AFTER ONE YEAR. ALL THE TRANSACTIONS WERE CONFIRMED. OFF MARKET VALUE TRANSACTIONS ARE LEGALLY VALID. WITHOUT CONDUCTING PROPER ENQUIRY, THE CHARACTER OF THE TRANSACTIONS CANNOT BE CHANGED. THUS, WE UPHOLD THIS CONTENTION OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO TAX THESE PROFITS ONLY AS PROFITS FROM DERIVATIVE TRANSACTIONS. 6. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE ALLOW THIS GROUND OF ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. KOLKATA, THE 16 TH JANUARY, 2019. SD/- [J. SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED : 16.01.2019 RS(SR.PS) COPY OF THE ORDER FORWARDED TO: 1 .MANOJ JAIN, 15B, CLIVE ROW, KOLKATA 700 001. 2 . ITO, WARD-35(4), KOLKATA, AAYAKAR BHAWAN, POORVA, 110, SHANTIPALLY, KOLKATA 700 107. 3. CIT(A)- 4. CIT- , 5. CIT(DR), TRUE COPY BY ORDER ASSISTANT REGISTRAR , KOLKATA BENCHES