S. NARENDRAKUMAR & CO., MUMBAI V. PR. CIT. CIRCLE- 27, MUMBAI, MUMBAI

ITA 1605/MUM/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5172 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 22-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Transactions in derivatives; Difference of opinion; Change of opinion; Set aside
• Section: 263; 63; 143(3); 43(5); 101

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI AMARJIT SINGH(JM) I.T.A. NO. 1605/MUM/2020 (ASSESSMENT YEAR 2015-16) S. NARENDRAKUMAR & CO. 5 TH FLOOR, KRUSHAL COMMERCIAL COMPLEX G.M. ROAD, CHEMBUR WEST MUMBAI-400 089. PAN : AAAFS1245B VS. PRINCIPAL COMMISSIONER OF INCOME TAX CIRCLE-27 MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI PARESH SHAPARIA DEPARTMENT BY SHRI H.N. SINGH DATE OF HEARING 16.02 .2021 DATE OF PRONOUNCEMENT 15.04.2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX DATED 18.3.202 0 UNDER SECTION 263 FOR A.Y. 2015-16. 2. THE GROUNDS OF APPEAL READ AS UNDER : I. ORDER PASSED U/S 263 IS BAD IN LAW:- 1. THE LEARNED PR. CIT 27 ERRED IN TREATING THE ORD ER PASSED BY A.O. U/S 143(3) DATED 27.12.2017 AS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE AND THEREBY SETTING ASIDE THE ORDER OF THE A.O. U/S 263. 2. THE LEARNED PR CIT 27 ERRED IN DRAWING CONCLUS IONS THAT : I. THE AO HAS FAILED TO VERIFY WHETHER THE TRANSACTIO NS IN COMMODITY DERIVATIVES ARE CARRIED OUT IN RECOGNIZED STOCK EXCHA NGES AND THEREBY WHETHER THE CRITERIA U/S 43(5) HAVE BEEN FULFILLED A T THE TIME OF COMPLETION OF ASSESSMENT U/S 143(3). 3. THE LEARNED PR. CIT-27 OUGHT NOT TO HAVE TREATED O RDER PASSED U/S. 143(3) AS ERRONEOUS OR PREJUDICIAL TO THE INTEREST O F REVENUE. 4. THE ORDER PASSED U/S. 263 IS BAD IN LAW AND REQ UIRES TO BE QUASHED. S. NARENDRAKUMAR & CO. 2 3. BRIEF FACTS OF THE CASE ARE THAT IN THE ABOVE CA SE, THE ASSESSEE HAD FILED RETURN OF INCOME FOR A.Y. 2015-16 ON 28.09.2015 DEC LARING TOTAL INCOME OF RS.46,38,53,870/-. THE ASSESSMENT WAS COMPLETED U/S . 143(3) OF THE I.T.ACT,1961 ON 27.12.2017 AT AN ASSESSED INCOME OF RS.56,81,76,120/-. ON PERUSAL OF THE RETURN OF INCOME, PROFIT AND LOSS AC COUNT AND OTHER DETAILS, LEARNED CIT OBSERVED THAT DURING THE YEAR ASSESSEE HAD CLAIMED LOSS OF RS. 1,28,39,534/- IN COMMODITY DERIVATIVES. THAT ASSESS EE HAD SUBMITTED ONLY NAME OF THE BROKER AND STATEMENT OF TRANSACTIONS. THAT AS PER SECTION 43(5)(E) OF THE I. T. ACT, TRANSACTION SHALL NOT BE DEEMED T O BE A SPECULATIVE TRANSACTION IF IT IS CARRIED OUT IN A RECOGNISED EXCHANGE AND W HICH IS CHARGEABLE TO COMMODITIES TRANSACTION TAX. THAT ASSESSEE HAD NOT FURNISHED THE COPY OF CONTRACT NOTES RELATING TO THE SAID TRANSACTION IN COMMODITY DERIVATIVES. THAT IN ABSENCE OF ANY CONTRACT NOTES IT IS NOT ASCERTAI NABLE WHETHER THESE TRANSACTIONS HAVE BEEN CARRIED OUT IN A RECOGNISED EXCHANGE AS DEFINED IN EXPLANATION-2 TO SECTION 43(5) OF THE I.T. ACT. THA T IN ABSENCE OF ANY EVIDENCE SUGGESTING THE FULFILLMENT OF CRITERIA MENTIONED IN THE SECTION 43(5) OF THE ACT, THE AFORESAID LOSS OF RS. 1,28,39,534/- INCURRED IN COMMODITY DERIVATIVES TRANSACTIONS, CANNOT BE ALLOWED AS 'BUSINESS LOSS' FOR THE YEAR ENDED ON 31.03.2015. HENCE, LEARNED CIT OPINED THAT THE ASSESSING OFFICE R HAS NOT VERIFIED THE DETAILS GATHERED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HENCE, HE OBSERVED THAT THE AFORESAID ASSESSMENT OR DER PASSED U/S. 143(3) OF THE INCOME-TAX ACT, 1961 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE MEANING OF SEC.263 O F THE INCOME-TAX ACT, 1961. ACCORDINGLY, NOTICE UNDER SECTION 263 WAS ISSUED TO THE ASSESSEE. 4. ASSESSEE RESPONDED AS UNDER : - TRANSACTIONS IN AGRICULTURAL COMMODITIES ARE EXEMPT FR OM LEVY OF COMMODITIES TRANSACTION TAX AS SPECIFIED IN CHAPTER II OF FINANCE BILL 2013 AND AS NOTIFIED ON 19.06.2013. - AS PER DETAILS SUBMITTED, ALL THE TRANSACTIONS IN COMM ODITIES DERIVATIVES ARE THROUGH ANGEL COMMODITIES BROKING PVT. LTD. WHO A RE MEMBER OF BOTH THE EXCHANGES I.E. NCDEX AND MCX. WE ARE ENCLOSING H EREWITH COPIES OF CERTIFICATE OF MEMBERSHIP. S. NARENDRAKUMAR & CO. 3 - WE ARE SUBMITTING HEREWITH DETAILED NOTE ON LOSS ON TR ADING IN COMMODITY DERIVATIVES AND SECTION 43(5) OF I.T.ACT, 1961 WITH V ARIOUS JUDGEMENTS. ACCORDINGLY, THE LOSS ON TRADING AGRICULTURAL COMMODI TIES IS ALSO NON- SPECULATIVE AND DEDUCTIBLE AGAINST NORMAL BUSINESS P ROFIT. - AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED LETTER DATED 14.12.2017 ALONG WITH SAMPLE COPIES OF BILLS OF NON-AGRICULTURAL COMMODITY LIKE SILVER AND AGRICULTURE COMMODITY LIKE JEERU. THE ASSESSMENT COMPLETED U/S 143(3) ON 27.12.2017 AFTER C ONSIDERING THE SAID DETAILS AND ALSO AFTER DUE EXAMINATION OF FINAN CIALS, RECORDS AND OTHER SUBMISSION WITH DOCUMENTS. THEREFORE, CONSIDERIN G VARIOUS JUDGEMENTS NOW FRESH ASSESSMENT IS NOTHING BUT CHANGE O F OPINION, WHICH IS NOT PERMITTED BY LAW. FROM THE ABOVE AND AS PER ATTACHED DETAIL NOTE IT IS VERY MUCH CLEAR THAT THE TRANSACTIONS IN COMMODITY DERIVATIVES ARE CARRIED OUT IN RECOGNIZED ASSOCIATION, WHICH IS CHARGEABLE TO COMMODITY TRANSAC TION TAX WHERE APPLICABLE, THROUGH RECOGNIZED BROKER MJ/S ANGEL COM MODITY BROKING PVT. LTD.' 5. HOWEVER, LEARNED CIT WAS NOT SATISFIED. HE REFER RED TO FOLLOWING CASE LAWS :- MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83 (SC), BISMILLAH TRADING CO. V. INTELLIGENCE OFFICER [2001 ] 248 ITR 292 (KER.) VENKATAKRISHNA RICE CO. VS. CIT (1987) 163 ITR 129 ( MAD) SMT. TARA DEVI AGGARWAL VS. CIT (1973) 88 ITR 323(S C) THALIBAI F. JAIN VS. ITO (1975) 101 ITR 1 (KAR.) 6. HE REFERRED TO EXPLANATION 1 BELOW SUBSECTION (1 ) OF SECTION 263 AND HELD AS UNDER :- IN VIEW OF THE ABOVE AND ALSO IN LIGHT OF THE FACTS AN D CIRCUMSTANCES OF THE CASE, IT IS CLEAR THAT THE ASSESSING OFFICER HAD ALLOW ED LOSS OF RS.1,28,39,534/-INCURRED IN COMMODITY DERIVATIVES TR ANSACTIONS AS 'BUSINESS LOSS' WITHOUT CARRYING OUT PROPER VERIFICATION AS TO W HETHER THE ASSESSEE HAD FULFILLED THE CRITERIA MENTIONED IN THE SECTION 43(5) OF THE ACT OR NOT. HENCE, ON THE FACTS & CIRCUMSTANCES OF THE CASE, ALLOWING OF A FORESAID 'BUSINESS LOSS' WITHOUT PROPER VERIFICATION HAS RENDERED THE ASSESSME NT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, IT IS HELD THAT THE ORDER DATED 27.12.2017 PASSED U/S. 143(3) OF THE INCOME-TAX ACT, 1961 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WITHIN THE MEANING OF SEC. 2 63 OF THE INCOME-TAX ACT, 1961 AND, AS THE ASSESSING OFFICER FAILED TO CON DUCT PROPER INQUIRIES, INVESTIGATION AND EXAMINATION, THE ASSESSMENT ORDER I S SET ASIDE TO THE ASSESSING OFFICER WITH THE DIRECTION TO PASS A FRESH A SSESSMENT ORDER CONSIDERING THE ISSUES RAISED IN THE NOTICE U/S 263, IN ACCORDANCE WITH LAW AND AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ORDER S. NARENDRAKUMAR & CO. 4 SHALL BE PASSED UNDER THE SUPERVISION AND GUIDANCE O F THE JT. CIT, RANGE- 27(3), MUMBAI. 7. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BE FORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT ON THE ISSUE OF LOSS ON COMMODITY DERIVATION AMOUNTING TO RS. 1,28,39,534/- LEARNED CIT WAS OF THE OPINION THAT THE ASSESSING O FFICER HAS NOT MADE ANY INQUIRY AND HAS ALLOWED THE ASSESSEES CLAIM HENCE, THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. WE NOTE THAT IN THE ASSESSMENT ORDER THERE IS NO DISCUSSION WHATSOEVER ON THE SUBJECT. HOWEVER, IT IS THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS MADE THE INQUIRY AND ASSESSEE HAD SUBMITTED SAMPLE CONTRACT NOTES AND UPON SATISFACTION THE ASSESSING OFFICER HAS ALLOWED THE CLAIM. LEARNED COUNSEL OF THE ASSESSEE FURTHER SUBMITS THAT DUE SUBMISSIONS W ERE GIVEN TO THE LEARNED CIT. THAT THOUGH LEARNED CIT HAS REPRODUCED THE SUB MISSION HE HAS NOT AT ALL ADDRESSED THE SUBMISSION. WE NOTE THAT THE ASSESSEE HAS GIVEN THE FOLLOWING SUBMISSION BEFORE LEARNED CIT, WHO HAS REPRODUCED T HE SAME IN HIS ORDER :- 1) THE ASSESSEE RECEIVED NOTICE U/S 263 OF THE I.T. ACT-1961 ON 28.11.2019 AND SUBMITTED REPLY DATED 11.12.2019 WITH SUPPORTING DETAILS. WE ARE ENCLOSING HEREWITH COPIES OF THE SAID LETTER WITH DETA ILS FOR YOUR HONOUR'S READY REFERENCE. 2) THE ASSESSEE AGAIN RECEIVED NOTICE U/S 263 ON 1 5.01.2019 GIVING ONE MORE OPPORTUNITY TO FURNISH EXPLANATION ALONG WITH DE TAILS ON OR BEFORE 24.01 2020. 3) THE COMMODITY DERIVATIVE TRANSACTIONS ARE CARRIE D ON THROUGH RECOGNIZED EXCHANGES MCX (MULTI COMMODITY EXCHANGE) AND NCDEX ( NATIONAL COMMODITY & DERIVATIVES EXCHANGE). 4) TRANSACTION IN AGRICULTURAL COMMODITIES ARE EXEMP T FROM LEVY OF COMMODITIES TRANSACTION TAX AS SPECIFIED IN CHAPTER II OF FINANCE BILL 2013 AND AS NOTIFIED ON 19.06.2013. 5) AS PER DETAILS SUBMITTED, ALL THE TRANSACTIONS IN COMMODITIES DERIVATIVES ARE THROUGH ANGEL COMMODITIES BROKING PVT. LTD. WHO A RE MEMBER OF BOTH THE EXCHANGES I.E. NCDEX AND MCX. WE ARE ENCLOS ING HEREWITH COPIES OF CERTIFICATE OF MEMBERSHIP. 6) WE ARE SUBMITTING HEREWITH DETAILED NOTE ON LOS S ON TRADING IN COMMODITY DERIVATIVES AND SECTION 43(5) OF I.T.ACT, 1961 WITH VARIOUS S. NARENDRAKUMAR & CO. 5 JUDGEMENTS. ACCORDINGLY, THE LOSS ON TRADING AGRICULT URAL COMMODITIES IS ALSO NON-SPECULATIVE AND DEDUCTIBLE AGAINST NORMAL BUSINESS PROFIT. 7) AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSE E HAD SUBMITTED LETTER DATED 14.12.2017 ALONG WITH SAMPLE COPIES OF BILLS O F NON-AGRICULTURAL COMMODITY LIKE SILVER AND AGRICULTURE COMMODITY LIK E JEERU. THE ASSESSMENT COMPLETED U/S 143(3) ON 27.12.2017 AFTER CONSIDERING THE SAID DETAILS AND ALSO AFTER DUE EXAMINATION OF FINAN CIALS, RECORDS AND OTHER SUBMISSION WITH DOCUMENTS. THEREFORE, CONSIDERIN G VARIOUS JUDGEMENTS NOW FRESH ASSESSMENT IS NOTHING BUT CHANGE OF OPINION, WHICH IS NOT PERMITTED BY LAW. FROM THE ABOVE AND AS PER ATTACHED DETAIL NOTE IT IS VERY MUCH CLEAR THAT THE TRANSACTIONS IN COMMODITY DERIVATIVES ARE CARRIED OUT I N RECOGNIZED ASSOCIATION, WHICH IS CHARGEABLE TO COMMODITY TRANSAC TION TAX WHERE APPLICABLE, THROUGH RECOGNIZED BROKER M/S ANGEL COM MODITY BROKING PVT. LTD.' 9. WE NOTE THAT LEARNED CIT IN HIS ORDER AFTER REPR ODUCING THE SUBMISSION HAS NOT AT ALL REFERRED OR CONSIDERED THOSE SUBMISS ION, LEAVE ALONE REJECT THEM. HE HAS ONLY REFERRED TO CASE LAWS AND PROVISIONS OF LAW AND HIS POWERS TO PASS REVISION ORDER. NO CASE LAW OR PROVISION OF ACT MAN DATE THE LEARNED CIT TO NOT EVEN CONSIDER THE SUBMISSION AND PASS A NON-SPEAKIN G ORDER. HENCE, IN THE INTEREST OF JUSTICE, WE REMIT THE ISSUE TO THE FILE OF LEARNED CIT. LEARNED CIT SHALL GIVE HIS FINDING ON THE ASSESSEES SUBMISSION AND THEREAFTER PASS THE ORDER IN ACCORDANCE WITH LAW. NEEDLESS TO ADD ASSES SEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 15.4.2021. SD/- SD/- (AMARJIT SINGH) (SHAMIM Y AHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 15/04/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT S. NARENDRAKUMAR & CO. 6 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI