Smt. Shruti Devi Kajaria, Kolkata V. DCIT, Circle - 36, Kolkata , Kolkata

ITA 1761/KOL/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0831 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 31-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAPIL MONDAL J
• Keywords: Search and seizure; Onus to prove; Sham transactions
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC KOLKATA BEFORE SHRI S.S, GODARA, JUDICIAL MEMBER ITA NO.1759 & 1761/KOL/2017 ASSESSMENT YEAR:2012-13 SMT. SUSHILA DEVI KAJARIA, 32 ARMENIAN STREET, KOLKATA-001 [ PAN NO.AFYPK7990Q ] SMT SHRUTI DEVI KAJARIA, 32 ARMENIAN STREET, KOLKATA-001 [ PAN NO.AFSPK9378L ] / V/S . / V/S . DCIT, CIRCLE-36 AAYKAR BHAWAN, POORVA, 110, SHANTIPALLY, 7 TH FLOOR, KOLKATA-107 DCIT, CIRCLE-36 AAYKAR BHAWAN, POORVA, 110, SHANTIPALLY, 7 TH FLOOR, KOLKATA-107 /APPELLANT .. /RESPONDENT /BY ASSESSEE SHRI SUNIL SURANA, CA /BY RESPONDENT SHRI KAPIL MONDAL, JCIT-DR /DATE OF HEARING 17-09-2018 /DATE OF PRONOUNCEMENT 05-10-2018 /O R D E R THESE TWO ASSESSEES HAVE FILED THEIR AS MANY APPEA LS FOR ASSESSMENT YEAR 2012- 13, AGAINST THE COMMISSIONER OF INCOME-TAX (APPEALS )-10, KOLKATAS SEPARATE ORDER(S) BOTH DATED 12.06.2017 PASSED IN CASE NO.36 & 46/CI T(A)/10/CIR-36/2015-16/KOL AFFIRMING THE ASSESSING OFFICERS IDENTICAL ACTION DISALLOWING LOSS CLAIM(S) OF 5,17,374/- AND 5,35,886/- INCURRED IN DEALING IN CURRENCY DERIVATI VES; RESPECTIVELY, INVOLVING PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. IT EMERGES AT THE OUTSET THAT CIT(A)S ORDERS UN DER CHALLENGE CONTAIN IDENTICAL DISCUSSION ON THE DISALLOWANCE OF LOSS ISSUE AS FOL LOWS:- ITA NO. 1759 & 1761/KOL/2017 A.Y . 2012-13 SMT. SUSHILA DEVI KAJARIA VS. DCIT, CI R-36 KOL. PAGE 2 D ECISION: I HAVE CAREFULLY EXAMINED THE ACTION OF THE LD. AO IN MAKING THE IMPUGNED DISALLOWANCE OF RS.5,17,374/-, BEING THE AMOUNT OF TRADING LOSS IN EXCHANGE FUTURES. 2. IN ARRIVING AT SUCH CONCLUSIONS, I FIND THAT THE - MAIN FINDINGS AND REASONS RECORDED BY THE LD. AO ARE AS UNDER: A. THE TRADE HAS BEEN FACILITATED BY THE BROKER M/S MARIGOLD VANLJYA (P) LTD, AND IN THIS CASE IN A SEARCH AND SEIZURE OPERATION, U/S 13I OF THE INCOME TAX ACT WAS CARRIED OUT BY THE DEPARTMENT IN THE CASE O F THE BROKER, AND THE DIRECTOR OF THE BRAKING COMPANY SHRL SACHET SARAF H AD UNDER OATH STATED THAT HE WAS PROVIDING PROFIT / LOSS IN CURRENCY DERIVATI VE AS PER REQUIREMENT OF CLIENTS, THOUGH IN ACTUAL FACT THERE WERE NO PROFIT S AND LOSSES. B. UNDER OATH THE 'DIRECTOR OF THE BRAKING COMPANY HAD STATED THAT THE IMPUGNED LOSSES (AS CLAIMED) RECEIVED THROUGH CHEQU E WAS RETURNED BACK IN CASH TO THE ASSESSEE. 3. QUITE ON THE OTHER HAND, IN APPEAL, THE APPELLAN T I LD. A.R FOR THE APPELLANT HAS PLACED THE FOLLOWING ARGUMENTS CONTENTIONS : A. THE APPELLANT IS NOT AWARE OF THE STATEMENT OF T HE BROKER BEFORE THE IT AUTHORITIES, AND SHOULD NOT BE MADE TO SUFFER ON AC COUNT OF SUCH STATEMENT. B. THE TRANSACTIONS WERE CARRIED OUT IN BONA FIDE B ELIEF AND WERE RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. C. THE TRANSACTIONS ARE GENUINE AND SUPPORTED BY VA LID CONTRACT NOTES, AND THE LOSS INCURRED WAS GENUINE AND NOT BOGUS AS CLAIMED BY THE LD. AO. THE LD AO HAS MADE THE DISALLOWANCE ON MERE SUSPICION AND CONJECTURE. D. THE LD ASSESSING OFFICER INSTEAD OF INDEPENDENT) Y VERIFYING THE GENUINENESS OF TRANSACTIONS EFFECTED ON RECOGNIZED STOCK EXCHANGE THROUGH ,REGISTERED BROKER HAS DISALLOWED ASSESSEE'S GENUIN E CLAIM MERELY RELYING ON THE STATEMENT GIVEN BY' ONE OF THE DIRECTOR OF MARI GOLD VANIJYA PRIVATE LIMITED THAT HE WAS PROVIDING BOGUS ENTRIES OF LOSS IN EXCHANGE DERIVATIVES BY TAKING CHEQUE AND RETURNING' CASH TO THE BENEFICIAR IES WITHOUT BRINGING AN IOTA OF EVIDENCE ON RECORD TO PROVE THE SAME. E. THE LD. AO HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE TRANSACTIONS IN EXCHANGE DERIVATIVES IN WHICH THE A PPELLANT HAS SUFFERED THE LOSS WERE NOT GENUINE TRANSACTIONS. ON THE OTHER HA ND, THE APPELLANT HAS SUBMITTED THE COMPLETE DOCUMENTARY EVIDENCE TO PROV E HIS TRANSACTIONS IN EXCHANGE DERIVATIVES. THE LD AO HAS NOT PROVED THAT THE EVIDENCE SUBMITTED BY THE APPELLANT WERE FALSE OR FICTITIOUS. 4. I HAVE CAREFULLY CONSIDERED ALL THE FACTUAL ISSU ES WHICH EMANATE FROM THE ACTION OF THE LD. AO IN MAKING THE IMPUGNED DISALLOWANCE. THE LD. AO HAS MOSTLY DEPENDED ON THE STATEMENT OF THE BROKER COMPANY'S DIRECTOR S HRI SACHET SARAF MADE BEFORE THE DEPARTMENT DURING THE SEARCH AND SEIZURE OPERATION, WHEREAS IT IS THE CONTENTION OF THE APPELLANT THAT THE LD. AO HAS IGNORED ALL THE D IRECT EVIDENCE SUBMITTED IN THIS REGARD. ON CAREFUL PERUSAL, I FIND THAT THE TRANSAC TIONS OF THE APPELLANT IN TRADING IN CURRENCY DERIVATIVES IN THE MCX STOCK EXCHANGE LTD DO HAVE CERTAIN FEATURES WHICH HAVE LED TO SUSPICION IN THE MINDS OF THE LD. AO, A ND THAT THESE ARE MOSTLY THAT THE APPELLANT HAD NO TRANSACTIONS WITH THE BROKER IN EA RLIER OR IN LATER YEARS, AND THAT THE ASSESSEE HAS ALSO NOT ENTERED INTO TRANSACTIONS OF DEALING IN FUTURES CURRENCY IN USD IN PAST OR FUTURE. THE LD. AO HAS ALSO RECKONED THA T THE RATE OF BROKERAGE CHARGED BY ITA NO. 1759 & 1761/KOL/2017 A.Y . 2012-13 SMT. SUSHILA DEVI KAJARIA VS. DCIT, CI R-36 KOL. PAGE 3 WAY OF COMMISSION TO BE EXTREMELY HIGH AS COMPARED TO OTHER REPUTED BROKERS OF THE CITY. AFTER EXAMINATION OF THE MATTER, I WOULD TEND TO AGREE WITH THE LD. AO THAT THE TRANSACTIONS ARE OF SUSPICIOUS NATURE ON ACCOUNT OF THE REASONS OFFERED BY THE LD.AO. IN THAT VIEW I FIND THAT ALL. THE OTHER DIRECT EVID ENCES ARE MERE ARRANGEMENTS OF THE PARTIES TO GIVE THE TRANSACTIONS A SHEEN OF GENUINE NESS. THERE IS NO REASON FOR ANY BROKER TO CONFESS TO SHAM TRANSACTIONS WERE THIS NO T THE CASE, AS HAS BEEN DONE BY THE DIRECTOR OF THE BROKING COMPANY WHILE GIVING THE ST ATEMENT DURING THE SEARCH 'AND SEIZURE OPERATIONS CARRIED OUT BY THE DEPARTMENT. T HE DIRECT EVIDENCE MAY WELL BE IN FAVOUR OF THE ASSESSEE, BUT THE SAME CANNOT BE ACCE PTED DUE TO THE CIRCUMSTANCES OF NORMAL PROBABILITY BEING AGAINST THE ASSESSEE-INDIV IDUAL AS BROUGHT ON RECORD BY THE LD. AO. THEREFORE, I HAVE TO RECORD THAT ALL THE JU DICIAL CITATIONS DO NOT COME TO THE RESCUE OF THE APPELLANT. IT IS TO BE SAID THAT 'THA T THE ENTIRE TRANSACTIONS WERE CARRIED OUT ON THE STOCK EXCHANGE TO GIVE IT A COLOR OF REA L TRANSACTIONS, WITH THE CONNIVANCE OF THE BROKER, TO WHICH HE (THE DIRECTOR OF THE BRO KING COMPANY) HAS CONFESSED. 5. IT MUST ALSO BE STATED HERE THAT IN COMMISSIONER OF INCOME TAX VS NR PORTFOLIO PVT LTD ON 22 NOVEMBER, 2013, THE HON'BLE DELHI HIGH CO URT HAS HELD ..... ' THE ASSESSING OFFICER IS BOTH AN INVESTIGATOR AND AN ADJUDICATOR. WHEN A FACT IS ALLEGED AND STATED BEFORE THE ASSESSING OFFICER BY AN ASSESSEE, HE MUS T AND SHOULD EXAMINE AND VERIFY, WHEN IN DOUBT OR WHEN THE ASSERTION IS DEBATABLE. N ORMALLY A FACTUAL ASSERTION MADE SHOULD BE ACCEPTED BY THE ASSESSING OFFICER UNLESS FOR JUSTIFICATION AND REASONS THE ASSESSING OFFICER FEELS THAT HE NEEDS/REQUIRES A DE EPER AND DETAILED VERIFICATION OF THE FACTS ALLEGED. THE ASSESSEE IN SUCH CIRCUMSTANCES S HOULD COOPERATE AND FURNISH PAPERS, DETAILS AND PARTICULARS. THIS MAY ENTAIL IS SUE OF NOTICES TO THIRD PARTIES TO FURNISH AND SUPPLY INFORMATION OR CONFIRM FACTS OR EVEN 'ATTEND AS WITNESSES. THE ASSESSING OFFICER CAN ALSO REFER TO INCRIMINATING M ATERIAL OR EVIDENCE AVAILABLE WITH HIM AND CALL UPON THE ASSESSEE TO FILE THEIR RESPON SE. WE CANNOT LAY DOWN OR STATE A GENERAL- OR UNIVERSAL PROCEDURE OR METHOD WHICH SHO ULD BE ADOPTED BY THE ASSESSING OFFICER WHEN VERIFICATION OF FACTS IS REQUIRED. THE MANNER AND MODE OF CONDUCTING ASSESSMENT PROCEEDINGS HAS TO BE LEFT TO THE DISCRE TION OF THE ASSESSING OFFICER, AND THE SAME SHOULD BE JUST, FAIR AND SHOULD NOT CAUSE ANY HARASSMENT TO THE ASSESSEE OR THIRD PERSONS FORM WHOM CONFIRMATION OR VERIFICATION IS R EQUIRED. THE VERIFICATION AND INVESTIGATION SHOULD BE ONE WITH THE LEAST AMOUNT O F INTRUSION, INCONVENIENCE OR HARASSMENT ESPECIALLY TO THIRD PARTIES, WHO MAY HAV E ENTERED INTO TRANSACTIONS WITH THE ASSESSEE. THE ULTIMATE FINDING OF THE ASSESSING OFFICER SHOULD REFLECT DUE APPLICATION OR MIND ON THE RELEVANT FACTS AND THE D ECISION SHOULD TAKE INTO CONSIDERATION THE ENTIRE MATERIAL, WHICH IS GERMANE AND WHICH SHOULD NOT BE IGNORED AND EXCLUDE THAT WHICH IS IRRELEVANT. CERTAIN FACTS OR ASPECTS MAY BE NEUTRAL AND SHOULD BE NOTED. THESE SHOULD NET BE IGNORED BUT TH EY CANNOT BECOME THE BEDROCK OR SUBSTRATUM OF THE CONCLUSION. THE PROVISIONS OF EVI DENCE ACT ARE NOT APPLICABLE, BUT THE ASSESSING OFFICER BEING A QUASI JUDICIAL AUTHOR ITY, MUST TAKE CARE AND CAUTION TO ENSURE THAT THE DECISION IS REASONABLE AND SATISFIE S THE CANONS OF EQUITY, FAIRNESS AND JUSTICE. THE EVIDENCE SHOULD BE IMPARTIALLY AND OBJ ECTIVELY ANALYZED TO ENSURE THAT THE ADVERSE FINDINGS AGAINST THE ASSESSEE WHEN RECORDED ARE ADEQUATELY AND DULY SUPPORTED BY MATERIAL AND EVIDENCE AND CAN WITHSTAN D THE CHALLENGE IN APPELLATE PROCEEDINGS. PRINCIPLE OF PREPONDERANCE OF PROBABIL ITIES APPLIES. WHAT IS STATED AND THE SAID STANDARD, EQUALLY APPLY TO THE TRIBUNAL AN D INDEED THIS COURT. THE REASONING AND THE GROUNDS GIVEN IN ANY DECISION OR PRONOUNCEM ENT WHILE DEALING WITH THE CONTENTIONS AND ISSUES SHOULD REFLECT APPLICATION O F MIND ON THE RELEVANT ASPECTS. WHEN AN ASSESSEE DOES NOT PRODUCE EVIDENCE OR TRIES TO AVOID APPEARANCE BEFORE THE ITA NO. 1759 & 1761/KOL/2017 A.Y . 2012-13 SMT. SUSHILA DEVI KAJARIA VS. DCIT, CI R-36 KOL. PAGE 4 ASSESSING OFFICER, IT NECESSARILY CREATES DIFFICULT IES AND PREVENTS ASCERTAINMENT OF TRUE AND CORRECT FACTS AS THE ASSESSING OFFICER IS DENIE D ADVANTAGE OF THE CONTENTION OR FACTUAL ASSERTION BY THE ASSESSEE BEFORE HIM. IN CA SE AN ASSESSEE DELIBERATELY AND INTENTIONALLY FALLS TO PRODUCE EVIDENCE BEFORE THE ASSESSING OFFICER WITH THE DESIRE TO PREVENT INQUIRY OR INVESTIGATION, AN ADVERSE VIEW S HOULD BE TAKEN . 6. IN THIS CONNECTION, I WOULD ALSO WISH TO REFER T O THE DECISION OF THE HON'BLE ITAT BOMBAY BENCH 'B' (ITA NO.614/BOM/87 A.Y. 1983-84) I N THE CASE OF M/S. MONT BLANE PROPERTIES AND INDUSTRIES PVT. LTD., WHICH WAS UPHE LD BY THE HON'BLE SUPREME COURT. THE HON'BLE TRIBUNAL HELD THAT THE WORD ' EVIDENCE ' AS USED IN SEC. 143(3) COVERED CIRCUMSTANTIAL EVIDENCE ALSO. THE WORD 'EVIDENCE' A S USED IN SEC.143 (3) OBVIOUSLY COULD NOT BE CONFINED TO DIRECT EVIDENCE. THE WORD ' EVIDENCE ' WAS COMPREHENSIVE ENOUGH TO COVER THE CIRCUMSTANTIAL EVIDENCE ALSO. U NDER THE TAX JURISPRUDENCE, THE WORD 'EVIDENCE' HAD MUCH WIDER CONNOTATIONS. WHILE THE WORD ' EVIDENCE ' MIGHT RECALL THE ORAL AND DOCUMENTARY EVIDENCE AS MAY BE ADMISSI BLE UNDER THE INDIAN EVIDENCE ACT THE USE OF WORD ' MATERIAL ' IN SEC.143(3) SHOWED THAT THE ASSESSING OFFICER, NOT BEING A COURT COULD RELY UPON MATERIAL, WHICH MIGHT NOT STRICTLY BE EVIDENCE ADMISSIBLE UNDER THE INDIAN EVIDENCE ACT FOR THE PU RPOSE OF MAKING AN ORDER OF ASSESSMENT. COURT OFTEN TOOK JUDICIAL NOTICE OF CER TAIN FACTS WHICH NEED NOT BE PROVED BEFORE THEM. THE PLAIN READING OF SECTION. 142 AND 143 CLEARLY SUGGESTS THAT THE ASSESSING OFFICER MAY ALSO ACT ON THE MATERIAL GATH ERED BY HIM. THE WARD 'MATERIAL' CLEARLY SHOWS THAT THE ASSESSING OFFICER IS NOT FET TERED BY THE TECHNICAL RULES OF EVIDENCE AND THE LIKE, AND THAT HE MAY ACT ON MATER IAL WHICH MAY NOT STRICTLY SPEAKING BE ACCEPTED EVIDENCE IN COURT OF LAW. 7. THE HON'BLE SUPREME COURT IN CIT V. DURGA PRASAD MORE[1971] 82 ITR 540 AT PAGES 545-547 MADE A REFERENCE TO THE TEST OF HUMAN PROBABILITIES IN THE FOLLOWING FACT SITUATION: - IT IS TRUE THAT AN APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL. IN A CASE OF THE PRESENT KIND A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS. OTHERWISE IT WILL BE VERY EASY TO MAKE SE LF- SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY AND R ELY ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX IS TO HAVE SOME RECITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE-OPEN TO EVADE TAX. A LITTLE PROBING WA S SUFFICIENT IN THE PRESENT CASE TO SHOW THAT THE APPARENT WAS NOT THE REAL. TH E TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DO CUMENTS PRODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK INTO THE SURROUNDI NG CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUM ENTS . 8. IT IS A WELL SETTLED PRINCIPLE OF LAW AS DECLARE D BY THE HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS.CIT'{214 ITR 801)(SC) THAT THE TRUE NATURE OF TRANSACTION HAVE TO BE ASCERTAINED IN THE LIGHT OF SURROUNDING CIRCUMSTANCES. IT NEEDS TO BE EMPHASIZED THAT STANDARD OF PROOF BEYOND REASONABLE DOUBT HAS NO APPLICABILITY IN DETERMINATION OF MATTERS UNDER TAXING STATUTES. IN THE PRESENT CASE, IT IS CLEAR THAT APPARENT IS NOT THE REAL AS EVIDENCED FROM THE INVE STIGATION REPORT. FURTHER, THE HON'BLE SUPREME COURT, IN THE CASE OF CHUHAR MAL V CIT (1988) 172 ITR 250, HIGHLIGHTED THE FACT THAT THE PRINCIPLE OF EVIDENCE LAW ARE NOT TO BE IGNORED BY THE AUTHORITIES, BUT AT THE SAME TIME, HUMAN PROBABILIT Y HAS TO BE THE GUIDING PRINCIPLE, ITA NO. 1759 & 1761/KOL/2017 A.Y . 2012-13 SMT. SUSHILA DEVI KAJARIA VS. DCIT, CI R-36 KOL. PAGE 5 SINCE THE AD IS NOT FETTERED, BY TECHNICAL RULES OF EVIDENCE, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF DHAKESHWARI COTTON MIL LS V CIT (1954) 261 TR 775. THE HON'BLE SUPREME COURT, IN THE CASE OF CHUHAR MA L V CIT (SUPRA) HELD THAT WHAT WAS MEANT BY SAYING THAT EVIDENCE ACT DID NOT APPLY TO THE PROCEEDINGS UNDER INCOME-TAX ACT,1961, WAS THAT THE RIGORS OF RULES O F' EVIDENCE, CONTAINED IN THE EVIDENCE ACT WAS NOT APPLICABLE; BUT THAT DID NOT, MEAN THAT WHEN THE TAXING AUTHORITIES WERE DESIROUS OF INVOKING THE PRINCIPLE S OF EVIDENCE ACT, IN PROCEEDINGS BEFORE THEM, THEY WERE PREVENTED FROM DOING SO. IT WAS FURTHER HELD BY THE HON'BLE APEX COURT THAT ALL THAT SECTION 110 OF THE EVIDENC E ACT, 1872 DID, WAS TO EMBODY A SALUTARY PRINCIPLE OF COMMON LAW, JURISPRUDENCE VIZ , WHERE ~ PERSON WAS FOUND IN POSSESSING OF ANYTHING, THE ONUS OF PROVING THAT HE WAS VIZ ITS OWNER, WAS ON THAT PERSON. THUS, THIS PRINCIPLE COULD BE ATTRACTED TO A SET OF CIRCUMSTANCES THAT SATISFIES ITS CONDITIONS AND WAS APPLICABLE TO TAXING PROCEED INGS. 9. I AM IN AGREEMENT WITH THE LD. AO THAT THE TRANS ACTIONS RELATING TO THE CLAIM OF LTCG AS MADE BY THE LD. AO COME WITHIN THE AMBIT OF SUSPICIOUS TRANSACTIONS, AND THEREFORE THE RULES OF SUSPICIOUS TRANSACTIONS WOULD APPLY TO THE CASE. PAYMENT THROUGH BANKS, PERFORMANCE THROUGH STOCK EXCHANGE A ND OTHER SUCH FEATURES ARE ONLY APPARENT' FEATURES. THE REAL FEATURES ARE THE MANIP ULATED AND ABNORMAL PRICE OF OFF LOAD AND THE SUDDEN DIP THEREAFTER. THEREFORE, I HA VE TO REACH THE INEVITABLE CONCLUSION THAT THE TRANSACTIONS AS DISCUSSED BY TH E LD.AO FALL IN THE REALM OF SUSPICIOUS AND DUBIOUS TRANSACTIONS. THE. LD. AO HAS THEREFORE NECESSARI LY TO CONSIDER THE SURROUNDING CIRCUMSTANCES, WHICH HE IN DEED HAS DONE IN A VERY METICULOUS AND CAREFUL MANNER. IN THE CASE OF WIN C HADHA V. CIT (INTERNATIONAL TAXATION) IN. ITA NO.3088 & 3107/DEL/2005, THE HON' BLE DELHI ITAT B BENCH HAS OBSERVED, ON 31.12.2010 AS UNDER : 'SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEAL T WITH: 6.11. THE TAX LIABILITY IN THE CASES OF SUSPICIOUS TRANSACTIONS, IS TO BE ASSESSED ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD, S URROUNDING CIRCUMSTANCES, HUMAN CONDUCT, PREPONDERANCE OF PROBABILITIES AND N ATURE OF INCRIMINATING INFORMATION/ EVIDENCE AVAILABLE WITH AO. 6.12. IN THE CASE OF SUMATI DAYAL V. CIT (1995) 80 TAXMAN 89 (SC), THE HON'BLE SUPREME COURT HAS DEALT WITH THE RELEVANCE OF HUMAN CONDUCT, PREPONDERANCE OF PROBABILITIES AND SURROUNDING CIRC UMSTANCE, BURDEN OF PROOF AND ITS SHIFTING ON THE DEPARTMENT IN CASES OF SUSP ICIOUS CIRCUMSTANCES, BY FOLLOWING OBSERVATIONS: ' ..... IT IS, NO DOUBT, TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTME NT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUS E IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSE E. BUT IN VIEW OF SECTION 68, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHA RGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH CASE THERE IS PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE, VIZ., TH E RECEIPT OF MONEY, AND IF HE FAILS TO REBUT THE SAME, THE SAID EVIDENC E BEING UN-REBUTTED, ITA NO. 1759 & 1761/KOL/2017 A.Y . 2012-13 SMT. SUSHILA DEVI KAJARIA VS. DCIT, CI R-36 KOL. PAGE 6 CAN BE USED AGAINST HIM BY HOLDING THAT IT IS A REC EIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANATION OF THE A SSESSEE, THE DEPARTMENT CANNOT, HOWEVER, ACT UNREASONABLY. ........... HAVING REGARD TO THE CONDUCT OF THE APP ELLANT AS DISCLOSED IN HER SWORN STATEMENT AS WELL AS OTHER MATERIAL ON TH E RECORD, AN INFERENCE COULD REASONABLY BE DRAWN THAT THE WINNIN G TICKETS WERE PURCHASED BY THE APPELLANT AFTER THE EVENT. THE MAJ ORITY OPINION AFTER CONSIDERING SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES HAD RIGHTLY CONCLUDED THAT THE APPELL ANT'S CLAIM ABOUT THE AMOUNT BEING HER WINNING FROM RACES, WAS NOT GENUIN E. IT COULD NOT BE SAID THAT THE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE SAID AMOUNTS HAD BEEN REJECTED UNREASONABLY AND THAT THE FINDING THAT THE SAID AMOUNTS WERE INCOME OF THE APPELLANT FROM OTHE R SOURCES WAS NOT BASED ON EVIDENCE. CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13. IT WOULD, AT THIS STAGE, BE RELEVANT TO CONSI DER THE ADMISSIBILITY AND USE OF CIRCUMSTANTIAL EVIDENCE IN INCOME TAX PROCEEDINGS. CIRCUMSTANTIAL EVIDENCE IS EVIDENCE OF THE CIRCUMSTANCES, AS OPPOSED TO DIRECT EVIDENCE. IT MAY CONSIST OF EVIDENCE AFFORDED BY THE BEARING ON THE FACT TO BE PROVED, OF OTHER AND SUBSIDIARY FACTS, WHICH ARE RELIED ON AS INCONSISTENT WITH ANY RESULT OTHER THAN THE TRUTH OF THE PRINCIPAL FACT. IT IS EVIDENCE OF VENOUS FACTS, OTH ER THAN THE FACT IN ISSUE WHICH ARE SO ASSOCIATED WITH THE FACT IN ISSUE, THAT TAKEN TOGET HER, THEY FORM A CHAIN OF CIRCUMSTANCES LEADING TO AN INFERENCE OR PRESUMPTIO N OF THE EXISTENCE OF THE PRINCIPAL FACT. IN THE APPRECIATION OF CIRCUMSTANTIAL EVIDENC E, THE RELEVANT ASPECTS, AS LAID DOWN FROM TIME TO TIME ARE - (1) THE CIRCUMSTANCES ALLEGED MUST BE ESTABLISHED B Y SUCH EVIDENCE, AS IN THE CASE OF OTHER EVIDENCE (2) THE CIRCUMSTANCES PROVED MUST BE OF A CONCLUSIV E NATURE AND NOT TOTALLY INCONSISTENT WITH THE CIRCUMSTANCES OR CONTRADICTOR Y TO OTHER EVIDENCE. (3) ALTHOUGH THERE SHOULD BE NO MISSING LINKS IN TH E CASE, .YET IT IS NOT ESSENTIAL THAT EVERY ONE OF THE LINKS MUST APPEAR O N THE SURFACE OF THE EVIDENCE ADDUCED ; SOME OF THESE LINKS MAY HAVE TO BE INFERR ED FROM THE PROVED FACTS ; (4) IN DRAWING THOSE .INFERENCES OR PRESUMPTIONS, T HE AUTHORITIES MUST HAVE REGARD TO THE COMMON COURSE OF NATURAL EVENTS, TO H UMAN CONDUCT AND THEIR RELATION TO THE FACTS OF THE PARTICULAR CASE. (5)THE CIRCUMSTANTIAL EVIDENCE CAN, WITH EQUAL FACI LITY, BE RESORTED TO IN PROOF OF A FACT IN ISSUE WHICH ARISES IN PROCEEDINGS FOR THE ASSESSMENT OF TAXES BOTH DIRECT AND INDIRECT, CIRCUMSTANTIAL EVIDENCE CAN BE MADE USE OF IN ORDER TO PROVE OR DISPROVE A FACT ALLEGED OR IN ISSUE. IN FA CT, IN WHATEVER PROCEEDINGS OR CONTEXT INFERENCES ARE REQUIRED TO BE DRAWN FROM TH E EVIDENCE OR MATERIALS AVAILABLE OR LACKING, CIRCUMSTANTIAL EVIDENCE HAS I TS PLACE TO ASSIST THE PROCESS OF ARRIVING AT THE TRUTH.' 6.14. IT WILL ALSO BE WORTHWHILE TO CONSIDER THE NA TURE OF BURDEN OF PROOF ON THE AO FOR PROVING A FACT OR CIRCUMSTANCE IN THE IN COME TAX PROCEEDINGS. THE QUESTIONS RAISED ABOUT THE TAX LIABILITY BY THE AO ARE TO BE ANSWERED BY THE ASSESSEE BY FURNISHING REASONABLE AND PLAUSIBLE EXP LANATIONS, IF ASSESSEE IS NOT FORTHCOMING WITH PROPER OR COMPLETE FACTS OR HIS ST ATEMENT OR EXPLANATION IS ITA NO. 1759 & 1761/KOL/2017 A.Y . 2012-13 SMT. SUSHILA DEVI KAJARIA VS. DCIT, CI R-36 KOL. PAGE 7 CONTRADICTORY, DRAWING OF SUITABLE INFERENCES AND E STIMATION OF FACTS IS INEVITABLE. COURTS GENERALLY WILL NOT INTERFERE WIT H SUCH ESTIMATE OF FACTS, UNLESS THE INFERENCES OR ESTIMATES ARE PERVERSE OR CAPRICIOUS. 6.15. THE ASSESSEE'S TECHNICAL CONTENTIONS ABOUT AD MISSIBILITY AND RELIANCE ON MATERIAL AVAILABLE ON THE AO'S RECORD ARE IN THE NA TURE OF CONTENTIONS CHALLENGING CRIMINAL OR CIVIL LIABILITIES IN A COURT OF LAW. WE ARE DEALING WITH A PROCESS OF ADJUDICATION OF ASSESSES TAX LIABILITY I.E. ASSESSM ENT UNDER INCOME TAX ACT RATHER THAN CONDUCTING CRIMINAL OR CIVIL COURT PROCEEDINGS. AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF S.S. GADGIL (SUPRA) NO ' LIS ' IS INVOLVED IN ADJUDICATION OF TAX LIABILITY. THE ASSESSEE'S CONTENTION THAT THERE WAS NO NEW MAT ERIAL BEFORE THE AO AFTER THE CIT(A)'S SETTING ASIDE ORDER CANNOT BE ACCEPTED. NE W INFORMATION AND MATERIAL DID INDEED COME ON RECORD. IN OUR VIEW, IN A SENSITIVE MATTER LIKE THIS, EVEN A SINGLE CLUE OR REVELATION CAN BE OF GREAT IMPORTANCE. TO REVERS E THE ORDER OF THE AO ON THIS TECHNICAL PLEA WILL AMOUNT TO TAKING A LOPSIDED VIE W OF THE PROCEEDINGS. BESIDES, THE JPC HAS UNDERLINED THE IMPORTANCE OF REPORTS OF INV ESTIGATION AGENCIES LIKE CBI, DRI, ED WHOSE WERE IN THE OFFING, AS THE RELEVANT I NVESTIGATIONS WERE IN PROCESS. IN VIEW OF THESE OBSERVATIONS, WE DO NOT ACCEDE TO THE ASSESSEE'S PLEAS IN THIS BEHALF.' THE ASSESSEE'S CONTENTIONS AND OBJECTIONS IN THIS B EHALF THAT THE MATERIAL AVAILABLE ON RECORD WAS NOT ADMISSIBLE AS EVIDENCE AND THAT IT C ANNOT BE RELIED ON BY THE AO, ARE DEVOID OF ANY MERIT AND ARE REJECTED OUTRIGHT.. ' IN VIEW OF THE ABOVE DISCUSSION, I FIND NO INFIRMIT Y IN THE FINDING OF THE LD. AO, AND CONFIRM THE SAME. GROUNDS 2 TAKEN BY THE APPELLANT- INDIVIDUAL STANDS DISMISSED. BOTH THE LEARNED REPRESENTATIVES REITERATE THEIR RE SPECTIVE STANDS AGAINST AND IN FAVOUR OF THE IMPUGNED LOSS DISALLOWANCE. THE REVENUE VEHE MENTLY CONTENDS THAT THE LOWER AUTHORITIES HAVE RIGHTLY DISALLOWED THE IMPUGNED LO SS(ES) FOR THE REASON THAT SHRI SACHET SARAF (DIRECTOR/ MAIN PERSON) OF M/S MARIGOL D VANIJYA PVT. LTD HAD DEPOSED BEFORE THE DIT(INV) KOLKATA TO HAVE PROVIDED BOGUS ENTRIES OF LOSS IN CURRENCY DERIVATIVES BY TAKING CHEQUES AND RETURNING CASH TO THE BENEFICIARIES / ASSESSEES. I FIND NO MERIT IN REVENUES INSTANT SUBSTANTIVE PLEA. THI S TRIBUNALS CO-ORDINATE BENCHS DECISION IN ITA NO. 1760/KOL/2017 KAMLA PRASAD KAJA RIA (HUF) VS. ITO DECIDED ON 24.05.2018 HAS DELETED IDENTICAL DISALLOWANCE AS FO LLOWS:- 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE CLAIM O F THE ASSESSEE FOR THE IMPUGNED LOSS INCURRED IN TRADING IN DERIVATIVES WAS DISALLOWED B Y THE AUTHORITIES BELOW MAINLY ON THE GROUND THAT THE ASSESSEE HAD NOT GIVEN ANY MARG IN MONEY TO THE BROKER BEFORE THE RELEVANT TRANSACTIONS AND IN HIS STATEMENT, THE DIR ECTOR OF THE BROKER COMPANY HAD ADMITTED THAT HIS COMPANY WAS INDULGING IN PROVIDIN G 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 REVENUES CASE. HOWEVER, AS CONTENDED BY THE LEARNE D COUNSEL FOR THE ASSESSEE BY RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF BONANJA ITA NO. 1759 & 1761/KOL/2017 A.Y . 2012-13 SMT. SUSHILA DEVI KAJARIA VS. DCIT, CI R-36 KOL. PAGE 8 COMMODITIES BROKERS PVT. LTD. VS MRS. ROSHANARA BHI NDER (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 CANN OT BE CONSIDERED AS ILLEGAL. AS FURTHER CONTENDED BY THE LEARNED COUNSEL FOR THE AS SESSEE, THERE IS NOTHING IN THE STATEMENT OF SHRI SACHIT SARAF, DIRECTOR OF THE BRO KER COMPANY NOR ANYTHING HAS BEEN BROUGHT ON RECORD BY THE A.O. TO SHOW THAT THE TRAN SACTIONS 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 DIRECT LY MADE BY HIM FROM MCX STOCK EXCHANGE LTD. BY ISSUING THE NOTICE U/S 133(6) OF T HE 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 IN FORMATION 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 TRANSACTION S INVOLVING SALES OF RS.15,19,22,392/- AND PURCHASES OF RS. 15,19,23,880/- WERE MADE BY TH E ASSESSEE RESULTING INTO A LOSS OF RS.1,488/-. THIS RELEVANT EVIDENCE CONFIRMING THE G ENUINENESS 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 INCUR RED 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 POIN TED 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 S UPPORTED BY THE DOCUMENTARY EVIDENCE IN THE FORM OF RELEVANT BILLS ISSUED BY TH E 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 O F THE CASE, I AM OF THE VIEW THAT THE GENUINENESS OF THE TRANSACTIONS MADE BY THE ASSESSE E 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 A SSESSEE 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. I FIND THAT THE FACTUAL POSITION IS NO DIFFERENT IN BOTH THE INSTANT CASES AS SHRI SACHET SARAFS STATEMENT RECORDED U/S 132(4) OF THE ACT FO RMING PART OF RECORD HAS NOWHERE MENTIONED THESE TWO ASSESSEES NAMES. I FURTHER NOT ICE THAT THESE TWO ASSESSEES HAVE FILED ALL THE RELEVANT DETAILS IN THE NATURE OF CON TRACT NOTES, BILLS, GENERAL LEDGER ACCOUNTS REGARDING THE BROKER CONCERNED WITH BANK S TATEMENT, SYNOPSIS AND MR SACHET SARAFS AFFIDAVITS RETRACTING THE SEARCH STATEMENT. I ACCEPT ASSESSEESS SOLE SUBSTANTIVE GROUND RAISED IN THESE APPEALS AND DIRECT THE ASSES SING OFFICER TO DELETE THE IMPUGNED ITA NO. 1759 & 1761/KOL/2017 A.Y . 2012-13 SMT. SUSHILA DEVI KAJARIA VS. DCIT, CI R-36 KOL. PAGE 9 DISALLOWANCE OF LOSS INCURRED IN CURRENCY DERIVATIV ES ACTIVITY. ALL OTHER GROUNDS OF INTEREST ETC. ARE TREATED TO BE MERE CONSEQUENTIAL. 3. THESE TWO ASSESSEES APPEALS ARE PARTLY ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN OPEN COURT ON 05/10/2018 SD/- (S.S. GODARA) JUDICIAL MEMBE R KOLKATA, *DKP/SR.PS # - 05/10/2018 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-SMT. SUSHILA DEVI KAJARIA, 32 ARMENIAN ST REET, KOLKATA-001 2. /REVENUE-DCIT, CIR-36, AAYKAR BHAWAN, POORVA, 110, SHANTIPALLY, 7 TH FLOOR, KOLKATA-107 3. & ( / CONCERNED CIT 4. ( - / CIT (A) 5. ) ,,& , & / DR, ITAT, KOLKATA 6. . / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO &,