M/s. Dhanalakshmi Jewellers, Shivamogga V. Income Tax Officer, Ward-1, Shivamogga

ITA 1609/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6513 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-09-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 27-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Assessee Lawyers: V SRINIVASAN
• Keywords: Opportunity of being heard; Principle of natural justice; Speculation loss
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI A.K GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.1609/BANG/2017 ASSESSMENT YEAR : 2012-13 M/S DHANALAKSHMI JEWELLERS, NEHRU ROAD, SHIVAMOGGA. PAN AACFD 1913 H VS. THE INCOME-TAX OFFICER, WARD-1, SHIVAMOGGA. APPELLANT RESPONDENT ASSESSEE BY : SHRI V SRINIVASAN, ADVOCATE REVENUE BY : SHRI PRIYADARSHI MISHRA, JCIT (DR) DATE OF HEARING : 09-09-2020 DATE OF PRONOUNCEMENT : 16-09-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 22/02/2017 PASSED BY LD.CIT(A) DAVANGERE, FOR ASSESSMENT YEAR 2011-12 ON FOLLOWING GROUNDS OF APP EAL: 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR A S THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVI DENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN SUSTAININ G AN ADDITION OF RS.18,95,478/- OUT OF THE ORIGINAL ADDITION OF RS.2 4,71,028/- AS UNPROVED LIABILITY UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 3. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 28,81,267/- BEING THE LOSS INCURRED BY THE APPELLAN T FROM FUTURES TRADING IN OTHER COMMODITIES OUT OF THE ORIGINAL ADDITION OF R S.80,87,243/- CONSIDERED AS SPECULATIVE LOSS UNDER THE FACTS AND IN THE CIRC UMSTANCES OF THE APPELLANT'S CASE. 4. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PAGE 2 OF 7 ITA NO.1609/BANG/2017 PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUN D OF THE INSTITUTION FEES AS PART OF THE COSTS. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS A FIRM CARRYING ON BUSINESS IN TRADI NG IN GOLD AND SILVER AND ALSO ORNAMENTS. FOR YEAR UNDER CONSIDERATION ASSESSEE FILED ITS RETURN OF INCOME O N 28/09/2012 DECLARING LOSS OF RS.38,67,610/-. THE CA SE WAS SELECTED FOR SCRUTINY. LD.AO CALLED FOR VARIOUS DET AILS AND BOOKS OF ACCOUNTS. FROM DETAILS FILED, LD.AO OBSERV ED THAT ASSESSEE WAS CARRYING ON BUSINESS IN RUNNING GOLD B ENEFIT SCHEME BY COLLECTING MONTHLY INSTALMENT FROM VARIOU S CUSTOMERS. IN GOLD BENEFIT SCHEME ASSESSEE HAD A L IABILITY OF RS.95,67,028/- AS ON 31/03/2012. LD. AO CALLED FOR DETAILS OF LIABILITY IN RESPONSE TO WHICH, ASSESSEE COULD F URNISH DETAILS AMOUNTING TO RS.70,96,000/-WITH A REQUEST T O GRANT SOME MORE TIME TO FURNISH BALANCE DETAILS. AS DETA ILS WERE NOT FURNISHED, LD.AO MADE ADDITION AMOUNTING TO RS.24,71,028/- AS UNAPPROVED LIABILITY. 3. LD.AO NOTED THAT, ASSESSEE ENTERED INTO BUYING AND SELLING OF GOLD AND SILVER WITH JRG WEALTH MANAGEME NT LTD., WHICH WAS ALSO PART OF ASSESSEES BUSINESS. IT WAS OBSERVED THAT ASSESSEE CARRIED OUT THIS BUSINESS ONLY WITH A N INTENTION TO HEDGE AGAINST LOSS IN RESPECT OF EXIST ING STOCK OF GOLD AND SILVER JEWELLARY. LD.AO CALLED UPON ASSESS EE TO FURNISH ALL DETAILS/EVIDENCES REGARDING FUTURE TRA DING FOR PERIOD UNDER CONSIDERATION. ON PERUSAL OF INFORMATI ON FURNISHED BY ASSESSEE, LD.AO CONCLUDED THAT FUTURE TRADING WAS NOTHING BUT SPECULATION BUSINESS, AND ACCORDING LY DISALLOWED LOSS OF RS.80,87,243/-. PAGE 3 OF 7 ITA NO.1609/BANG/2017 4. AGGRIEVED BY ADDITIONS MADE BY LD.AO, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A). ASSESSEE IN RESP ECT OF ADDITION MADE AS UNAPPROVED LIABILITY, FURNISHED CR EDITORS DETAILS UNDER THE SCHEME IN ACCORDANCE TO GROUPS T HEY WERE CATEGORISED AS. LD.CIT(A) REMANDED EVIDENCES FILED BY ASSESSEE TO LD.AO. IN REMAND REPORT, LD.AO ACCEPTED SUM OF RS.5,75,550/- AS PROVED. LD.CIT(A) THEREFORE GRANTE D RELIEF TO ASSESSEE TO THE EXTENT OF RS.5,75,550/- CONFIRMED T HE BALANCE. 5. IN RESPECT OF SPECULATIVE LOSSES ADDED IN HANDS OF ASSESSEE, LD.CIT(A) UPHELD OBSERVATIONS OF LD.AO AN D WAS OF THE OPINION THAT, TRANSACTION ENTERED INTO BY ASSES SEE IS NOT MERELY SPECULATIVE ESPECIALLY GOLD AND SILVER TRADI NG BUT IS NOT COVERED BY PROVISIONS OF SECTION 43(5) OF THE A CT. LD.CIT(A) HELD THAT, THERE IS NO CONNECTION BETWEEN ASSESSEES TRADE AND COMMODITY TRADE IN FUTURE OTHE R THAN GOLD AND SILVER. 6. AGGRIEVED BY ORDER OF LD.CIT(A), ASSESSEE IS IN APPEAL BEFORE US NOW. 7. LD.AR SUBMITTED THAT, GROUND NO.1,4 ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ADJUDICATION. 8. GROUND NO.2 IS IN RESPECT OF ADDITION OF RS.18,95,478/- AS UNAPPROVED LIABILITY. LD.AR DURIN G THE COURSE OF HEARING, SUBMITTED THAT, ASSESSEE FILED V ARIOUS DOCUMENTS TO SUPPORT ITS CLAIM OF BALANCE AMOUNT OF RS.24,71,028/- WHICH WAS REMANDED TO LD.AO FOR VERIFICATION BY LD.CIT(A). HE SUBMITTED THAT, REMA ND REPORT BY LD.AO HAS NOT BEEN FORWARDED TO ASSESSEE, THEREB Y PAGE 4 OF 7 ITA NO.1609/BANG/2017 VIOLATED PRINCIPLES OF NATURAL JUSTICE. HE SUBMITTE D THAT, ASSESSEE IS NOT AWARE ABOUT HOW RELIEF COULD ONLY B E LIMITED TO RS.5,75,550/- EVEN THOUGH, ENTIRE AMOUNT OF RS.24,71,028/- STANDS EXPLAINED. HE REFERRED TO PAG E 59-75 OF PAPER BOOK, WHEREIN DETAILS WERE PROVIDED. 8.1 LD.CIT.DR PLACED RELIANCE ON ORDERS PASSED BY AUTHORITIES BELOW. 8.2 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 8.3 IT HAS BEEN SUBMITTED BY LD.AR THAT, LD LD.CIT( A) DID NOT AFFORD OPPORTUNITY TO REBUT REMAND REPORT BY L D.AO, AS THE SAME WAS NOT PROVIDED TO ASSESSEE. IN VIEW OF T HE ABOVE, WE DO NOT INTEND TO EXPRESS OUR OPINION, AND REMAND THIS ISSUE TO LD.CIT(A) WITH A DIRECTION TO PROVIDE COPY OF REMAND REPORT TO ASSESSEE. ASSESSEE IS THEN DIRECTED TO FI LE REPLY IN RESPECT OF THE SAME. LD.CIT(A) SHALL CONSIDER SUBMI SSIONS MADE BY ASSESSEE IN LIGHT OF EVIDENCES FILED AND DE CIDE THE ISSUE ON MERITS IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEING HEARD MUST BE GRANTED T O ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY, THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO.3 IS IN RESPECT OF DISALLOWANCE OF RS.80,87,243/- AS SPECULATIVE LOSSES. 9.1 LD.AR SUBMITTED THAT, ASSESSEE ENTERED INTO BUY ING AND SELLING OF GOLD AND SILVER WITH JRG WEALTH MANA GEMENT LTD., WHICH WAS CONSIDERED AS INTEGRAL PART OF ASSE SSEES BUSINESS AGAINST WHICH LOSS OF RS.49,32,524/- WAS I NCURRED. PAGE 5 OF 7 ITA NO.1609/BANG/2017 HE ALSO SUBMITTED THAT ASSESSEE ENTERED INTO BUYING AND SELLING OF OTHER COMMODITIES ON MCX STOCK EXCHANGE, AGAINST WHICH LOSS OF RS.28,81,267/- WAS INCURRED. HE PLACED RELIANCE ON CBDT CIRCULAR NO. 46/2009, DATED 25/05/2009, WHEREIN ASSESSEE IS ELIGIBLE FOR SUCH L OSSES ARISING OUT OF COMMODITIES INCLUDING STOCK AND SHAR ES. 9.2 IT IS ALSO BEEN SUBMITTED THAT, CIRCULAR WAS NO T BROUGHT TO THE NOTICE OF AUTHORITIES BELOW. 9.3 ACCORDINGLY WE ARE OF THE OPINION THAT, THIS IS SUE NEEDS TO BE REVISITED BY LD.CIT(A) IN LIGHT OF CIRCULAR N O. 46/2009 DATED 25/05/2009. ASSESSEE IS DIRECTED TO FILE DETA ILS BEFORE LD. CIT (A) IN ACCORDANCE WITH REQUIREMENT MENTIONE D IN THE CIRCULAR RELIED UPON. 9.4 LD.CIT(A) SHALL THEN VERIFY DETAILS FILED BY AS SESSEE AND PASS DETAILED ORDER ON MERITS BASED UPON EVIDENCES FILED IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEING HEARD MUST BE GRANTED TO ASSES SEE IN ACCORDANCE WITH LAW. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT, APPEAL FILED BY ASSESSEE STANDS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPT, 2020. SD/- SD/- (A.K GARODIA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 16 TH SEPT., 2020. /VMS/ PAGE 6 OF 7 ITA NO.1609/BANG/2017 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL. BANGALORE. PAGE 7 OF 7 ITA NO.1609/BANG/2017 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -09-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -09-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -09-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -09-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -09-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -09-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -09-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS