Rampuria Industries & Investments Ltd., , Kolkata V. DCIT, Circle - 7(2), Kolkata , Kolkata

ITA 1891/KOL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1692 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 03-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Keywords: Additional evidence; Accommodation entries; Reassessment proceedings
• Section: 143(3); 142(1); 133(6); 143(2); 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH KOLKATA BEFORE SHRI S. S. GODARA, JM & DR. A. L. SAINI, AM ./I.T.A NO.1891/KOL/2018 ( [ [ / ASSESSMENT YEAR: 2011-12) RAMPURIA INDUSTRIES & INVESTMENTS LTD. C/O. SUBASH AGARWAL & ASSOCIATES, SIDDHA GIBSON, 1, GIBSON LANE, 2 ND FLOOR, SUITE-213, KOLKATA-700069. VS. DCIT, CIRCLE-7(2), KOLKATA. ./ ./PAN/GIR NO.: AABCR6319P (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SUBASH AGARWAL, ADVOCATE RESPONDENT BY : SHRI SUPRIYO PAL, JCIT, SR. DR / DATE OF HEARING : 05/11/2019 /DATE OF PRONOUNCEMENT : 22/11/2019 / O R D E R PER SHRI S. S. GODARA: THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (A) - 3, KOLKATA DATED 03.08.2018 PASSED IN CASE NO.347/CIT(A)-3/CIR-7(2)/15-16/KOL INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES TWIN SUBSTANTIVE GROUNDS RAISED IN THE INSTANT APPEAL CHALLENGE CORRECTNESS OF VALIDITY OF THE IMPUGNED REOPENING FOLLOWED BY DISALLOWANCE OF LOSSES OF RS.26,68,128/- DERIVED FROM CURRENCY DERIVATIVE TRANSACTIONS AS BOGUS IN THE COURSE OF RE-ASSESSMENT AS AFFIRMED IN THE LOWER APPELLATE PROCEEDINGS. I.T.A NO.1891/KOL/2018 RAMPURIA INDUSTRIES & INVESTMENTS LTD. PAGE | 2 3. WE STRAIGHT AWAY COME TO ASSESSEES LATTER SUBSTANTIVE GROUND SEEKING TO DELETE BOGUS CURRENCY DERIVATIVE LOSS DISALLOWANCES OF RS.26,68,128/- MADE IN THE LOWER PROCEEDINGS. THE ASSESSING OFFICER AS WELL AS CIT(A) WENT BY THE SEARCH STATEMENT OF MR. SACHET SARAF; DIRECTOR OF THE BROKERAGE FIRM M/S MARIGOLD VANIJYA PVT. LTD, SEARCHED ON 22.03.2013. MR. SARAF STATED IN HIS ALLEGED SEARCH STATEMENT U/S 132(4) THAT HIS COMPANY HAD BEEN PROVIDED BOGUS ENTRIES OF CURRENCY DERIVATIVE TRANSACTION LOSSES IN ISSUE TO THE ASSESSEE. THE ASSESSING OFFICER THEREFORE DISALLOWED THE ASSESSEES LOSS IN ASSESSMENT/REASSESSMENT IN ISSUE FRAMED ON 30.03.2015 AS UPHELD BY THE CIT(A)S ORDER UNDER CHALLENGE. 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDED DURING THE COURSE OF HEARING THAT BOTH THE LOWER AUTHORITIES HAVE RIGHTLY REOPENED THE ASSESSMENT AS PER SHRI SARAFS SEARCH STATEMENT ADMITTING TO HAVE PROVIDED BOGUS ACCOMMODATION ENTRIES OF CURRENCY DERIVATIVE LOSS TO THE ASSESSEE. WE FIND THAT THE INSTANT ISSUE ON MERITS IS NO MORE RES INTEGRA AS THE TRIBUNALS COORDINATE BENCHS ORDER IN ACIT VS. M/S. TIRUPATI AWAS P. LTD. ITA NO.1560/KOL/2016 DATED 28.03.2018 HAS DECIDED THE SAME AGAINST THE REVENUE AS UNDER: 5. A SEARCH & SEIZURE OPERATION WAS CONDUCTED IN THE OFFICE OF SACHET SARAF & OTHERS U/S. 132 OF THE ACT ON 22-03-2013, WHEREIN A STATEMENT OF SHRI SACHET SARAF, DIRECTOR OF M/S. MARIGOLD VANIJYA P.LTD WAS TAKEN. HE STATED THAT M/S. MARIGOLD VANIJYA P.LTD IS A BROKER OF CURRENCY DERIVATIVES LISTED WITH MCX STOCK EXCHANGE. A NOTICE U/S. 148 OF THE ACT WAS ISSUED THE ASSESSEE. IN RESPONSE, THE ASSESSEE REQUESTED TO TREAT THE RETURN ORIGINALLY FILED ON 08-08-11, AS A RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S. 148 OF THE ACT. THE AO FURTHER ISSUED NOTICES U/S. 143(2) AND 142(1) OF THE ACT AND IN RESPONSE TO WHICH, THE AR OF THE ASSESSEE APPEARED. FOR VERIFICATION OF TRANSACTION NOTICE U/S. 133(6) OF THE ACT WAS ISSUED TO MCX, MUMBAI AND ASSESSEE WAS ALSO ASKED TO CLARIFY THE ALLEGED LOSS OF RS. 43,90,251/- . IT FAILED TO DO SO. THEREFORE, AO ADDED BACK THE SUM OF RS. 43,90,251/- AS UNEXPLAINED LOSS BY HIS ORDER DT. 31-03-2015 PASSED U/S. 147/143(3). 6. THE ASSESSEE CHALLENGED THE ABOVE ORDER OF AO BEFORE THE CIT-A AND CONTENDED THAT THE SAID TRANSACTION WAS ONLINE THROUGH MCX STOCK EXCHANGE BY ITS BROKER, M/S. MARIGOLD VANIJYA PVT. LTD, IS A REGISTERED MEMBER OF MCX STOCK EXCHANGE LIMITED. THE CLAIM OF LOSS WAS DULY REFLECTED IN THE AUDITED FINANCIAL STATEMENT AS WELL AS IN THE RETURN OF INCOME BY APPLYING THE PROVISIONS OF SECTION 43(5)(D) OF THE ACT. THE ASSESSEE COMPANY IS REGISTERED WITH THE SAID BROKER AND COMPLIED WITH ALL KYC NORMS. THE ASSESSEE HAS BEEN ALLOTTED CLIENT (CODE) NO. CK0105 FOR TRADING PURPOSE IN CURRENCY DERIVATIVES IN THE SEGMENT OF EXCHANGE. THE MCX STOCK EXCHANGE IS A NOTIFIED/LISTED STOCK EXCHANGE UNDER THE INCOME TAX ACT. THE ASSESSEE HAS BEEN ISSUED VALID CONTRACT NOTES IN RESPECT OF ON LINE TRADE, WHEREIN, ORDER NUMBER, TRADE NUMBER, TRADE TIME ETC. ARE PROPERLY MENTIONED AS PRESCRIBED BY CONCERNED AUTHORITIES/STOCK EXCHANGE. THE ASSESSEE MADE THE PAYMENTS TO ABOVE SAID REGISTERED/LISTED BROKER FOR THE SAID TRANSACTION BY WAY OF ACCOUNT PAYEE CHEQUES. THE ASSESSEE SUBMITTED ALL THE DETAILS RELATING TO CONTRACT NOTES AND LEDGER COPIES OF ASSESSEE IN THE BOOKS OF SAID BROKER. APART FROM ABOVE, THE ASSESSEE ALSO SUBMITTED AN AFFIDAVIT OF MR. SACHET SARAF, DIRECTOR OF M/S. MARIGOLD VANIJYA PVT. LTD ADMITTING THAT ALL THE FOREIGN CURRENCY TRANSACTIONS DONE BY ASSESSEE ARE BOANFIDE, GENUINE AND I.T.A NO.1891/KOL/2018 RAMPURIA INDUSTRIES & INVESTMENTS LTD. PAGE | 3 RECORDED BY SAID MCX STOCK EXCHANGE REFERRING TO THE STATEMENT GIVEN BY SHRI SACHET SARAF DURING THE COURSE OF SEARCH & SEIZURE OPERATION, IT WAS SUBMITTED THAT THERE NO DIRECT CONNECTION WITH THE ASSESSEE. 7. THE CIT-A CONSIDERING THE ABOVE SUBMISSIONS OF ASSESSEE WAS SATISFIED THAT THE ASSESSEE SUBMITTED ALL THE REQUIRED DETAILS IN SUPPORT OF ITS TRANSACTION/CLAIM. THE CIT-A HELD THAT THE AO DID NOT PLACE ON RECORD ANY COGENT AND FACTUAL OR PALPABLE MATERIAL/EVIDENCE IN SUPPORT OF HIS VIEW AND THEREFORE, DELETED THE SAID ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 4.2 I HAVE CONSIDERED THE SUBMISSION OF THE AR OF THE APPELLANT AS WELL AS THE CASE LAWS REFERRED TO IN HIS SUBMISSION. I FIND THAT THE APPELLANT HAS INCURRED LOSS OF RS. 43,90,251/- ON ACCOUNT OF DEALING IN FOREIGN EXCHANGE DERIVATIVES. THE ASSESSMENT IN THE INSTANT CASE WAS REOPENED BY THE AO BASED ON INFORMATION RECEIVED BY THE AO OF MARIGOLD VANIJYA (P) LTD. MR. SHRI SACHET SARAFT, ONE OF THE DIRECTORS OF MARIGOLD VANIJYA (P) LTD DURING THE COURSE OF SEARCH & SEIZURE OPERATION U/S. 132 OF THE ACT, HAD DEPOSED BEFORE THE CONCERNED DDIT THAT THE COMPANY WAS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION OF LOSSES AND PROFITS TO THE BENEFICIARIES AS AND WHEN DESIRED. THE APPELLANT IN THE INSTANT CASE BEING AN ALLEGED BENEFICIARY WAS ISSUED NOTICE U/S. 148 OF THE ACT. IN COURSE OF THE REASSESSMENT PROCEEDINGS, THE APPELLANT FURNISHED ALL THE REQUISITE DOCUMENTS IN SUPPORT OF TRANSACTIONS ENTERED INTO BY IT IN RESPECT OF FOREIGN EXCHANGE DERIVATIVES. ON THIS SCORE, I FIND THAT NO ENQUIRY, WHATSOEVER, HAS BEEN CONDUCTED BY THE AO WITH EITHER THE BROKER OR THE MCX STOCK EXCHANGE TO VERIFY THE GENUINENESS OF THE TRANSACTIONS ENTERED INTO BY THE APPELLANT. NO CONVINCING MATERIAL, EXCEPT FOR THE STATEMENT OF MR. SACHET SARAF, HAS BEEN RELIED UPON BY THE AO IN MAKING THE IMPUGNED ADDITION. IT HAS BEEN BROUGHT TO MY NOTICE THAT EVEN THE STATEMENT OF MR. SACHET SARAF WAS RETRACTED AT A LATER POINT OF TIME (SUPRA). THIS FACT HAS NOT BEEN CONTROVERTED BY THE AO IN ANY MANNER. IT IS TRITE LAW THAT ADDITIONS CANNOT BE MADE, BASED MERELY ON THE STATEMENT OF A THIRD PARTY, IN THE ABSENCE OF ANY CORROBORATIVE MATERIAL EVIDENCE. THERE MUST BE COGENT AND PALPABLE MATERIAL EVIDENCE MATERIAL EVIDENCES ON RECORD FOR ANY JUSTIFIABLE ACTION IN THE MATTER. I FIND THAT THE AO HAS NOT DONE JUSTICE IN THE MATTER IN THIS RESPECT FOR WHICH THE IMPUGNED ADDITION CANNOT STAND THE TEST OF APPEAL. I FIND THAT THE APPELLANT HAS DISCHARGED ITS INITIAL ONUS BY FURNISHING ALL THE REQUISITE DETAILS IN RESPECT OF FOREIGN EXCHANGE LOSS INCURRED BY IT. IT IS NOT THE CASE OF THE AO THAT THE APPELLANT HAS FAILED TO FURNISH DOCUMENTARY EVIDENCES IN SUPPORT OF THE SAID FOREIGN CURRENCY LOSS. THUS, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE ISSUE AT HAND IN THE BACKDROP OF THE VARIOUS CASE LAWS CITED IN THE SUBMISSION SUPRA AND IN THE ABSENCE OF ANY COGENT FINDING OR CORROBORATIVE MATERIALS BROUGHT ON RECORD BY THE AO TO SUBSTANTIATE HIS STAND IN SUBVERTING THE SUBMISSION OF THE APPELLANT ON THE IMPUGNED MATTER AT THE ASSESSMENT STAGE. I DO NOT FIND ANY MERIT IN THE ACTION OF THE AO IN MAKING THE IMPUGNED DISALLOWANCE OF RS.43,90,251/- AS UNEXPLAINED LOSS WITH REGARD TO THE SAID TRANSACTIONS. IN VIEW OF THE FOREGOING, I FIND THAT THE ADDITION MADE ON THIS COUNT IS NOT SUSTAINABLE AT THE APPELLATE STAGE WHICH IS NOW DIRECTED TO BE DELETED. THE AO IS DIRECTED ACCORDINGLY. 8. BEFORE US THE LD. DR SUBMITS THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE GATHERED BY THE AO IN RE-ASSESSMENT PROCEEDINGS. MCX STOCK EXCHANGE DID NOT FURNISH FULL DETAILS IN RESPECT OF SAID TRANSACTION OF ASSESSEE IN RESPONSE TO NOTICE ISSUED U/S. 133(6) OF THE ACT. THUS THE AO HAS RIGHTLY ADDED THE SAID AMOUNT TO THE TOTAL INCOME OF ASSESSEE. THE CIT-A BASING ON SUBMISSIONS OF ASSESSEE HAS GIVEN RELIEF TO ASSESSEE WITHOUT CALLING REMAND REPORT OF AO IN ADMITTING ADDITIONAL EVIDENCE. THUS, THE CIT-A HAS ERRED IN ACCEPTING WRONG CONTENTION OF ASSESSEE. HE ALSO VIOLATED THE PROVISIONS OF RULE 46A IN ADMITTING THE SAME. THE CIT-A HAS ALSO FAILED TO GIVE AN OPPORTUNITY TO AO FOR VERIFICATION OF THE DETAILS AS SUBMITTED BY THE ASSESSEE. IN VIEW OF ABOVE, HE PRAYED TO ALLOW THE GROUNDS OF APPEAL OF THE REVENUE. 9. ON THE OTHER HAND, THE LD. AR SUBMITS THAT THERE WAS NO NEW SUBMISSION/EVIDENCE BEFORE THE CIT-A AS ALLEGEDLY ARGUED BY THE LD. DR. I.T.A NO.1891/KOL/2018 RAMPURIA INDUSTRIES & INVESTMENTS LTD. PAGE | 4 THE CIT-A ONLY CONSIDERED THOSE DETAILS WHICH WERE AVAILABLE BEFORE THE AO. IN RESPONSE TO NOTICES ISSUED U/S. 143(2) AND 142(1) OF THE ACT, THE ASSESSEE PRODUCED ALL THE DETAILS BEFORE THE AO IN SUPPORT OF THE CONTENTION AND CLAIM. IN RESPONSE TO NOTICE ISSUED U/S. 133(6) OF THE ACT, SAID MCX STOCK EXCHANGE, MUMBAI PROVIDED ALL THE DETAILS REGARDING THE SAID TRANSACTIONS. THE AO AFTER EXAMINING THE SAME, HAS HIGH HANDEDLY HELD THAT THE CLAIM OF ASSESSEE IS BOGUS AND THEREFORE, ADDED THE IMPUGNED AMOUNT, WHICH IS NOT AT ALL JUSTIFIED. THE LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT-A AND PRAYED TO DISMISS THE GROUNDS RAISED BY THE REVENUE IN THE APPEAL. 10. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT TO MCX STOCK EXCHANGE, MUMBAI. ADMITTEDLY THE SAID STOCK EXCHANGE COMPLIED WITH THE NOTICE ISSUED BY THE AO ALONG WITH SUPPLYING VARIOUS DETAILS IN RESPECT OF SAID TRANSACTION. ACCORDING TO AO, IT IS INCOMPLETE DETAILS. HOWEVER, THE CIT-A NOTED IN HIS ORDER THAT THE AO FAILED TO VERIFY THE GENUINENESS OF TRANSACTION WITH THAT OF BROKER OF MCX STOCK EXCHANGE. IT IS ALSO OBSERVED THAT THE CIT-A FOUND SATISFIED THAT THE ASSESSEE FILED ALL THE REQUIRED DETAILS AND DOCUMENTS IN SUPPORT OF THE TRANSACTIONS ENTERED INTO BY IT IN RESPECT OF FOREIGN EXCHANGE DERIVATIVES. WE FIND THAT THE AO MADE THE ADDITION ONLY ON THE BASIS OF STATEMENT RECORDED DURING THE SEARCH & SEIZURE OPERATION IN THE PREMISES OF THE SAID SHRI SACHET SARAF, DIRECTOR OF M/S. MARIGOLD VANIJYA P.LTD. THE SAID STATEMENT OF MR. SARAF WAS RETRACTED AT A LATER POINT OF TIME. THE CIT-A FOUND SATISFIED THAT THERE WAS NO CORROBORATIVE EVIDENCE WHICH SUPPORTS THE VIEW OF THE AO THAT THE SAID TRANSACTION WAS UNEXPLAINED. THEREFORE, WE FIND NO ADDITIONAL EVIDENCE, WHICH WAS FILED BEFORE THE CIT-A, BUT NOT BEFORE THE AO. THE CIT-A DELETED THE SAID ADDITION ONLY ON THE BASIS OF MATERIAL/EVIDENCE AVAILABLE ON RECORD, WHICH WERE VERY MUCH BEFORE THE AO IN THE RE-ASSESSMENT PROCEEDINGS. THE CASE LAWS AS RELIED ON BY THE ASSESSEE BEFORE THE CIT-A WERE RELEVANT AND APPLICABLE TO THE PRESENT FACTS OF THE CASE. THE CIT-A HAS DISCUSSED THE EACH CASE LAW THOROUGHLY. THUS, THE CIT-A WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO ON THIS ISSUE. THE GROUNDS RAISED BY THE REVENUE IN THE APPEAL ARE DISMISSED. 4. WE ADOPT THE ABOVE EXTRACTED REASONING MUTATIS MUTANDIS TO HOLD THAT THE IMPUGNED DISALLOWANCE OF BOGUS CURRENCY DERIVATIVE LOSS DOES NOT DESERVE TO BE UPHELD. THE SAME IS DIRECTED TO BE DELETED. THE ASSESSEE SUCCEEDS IN ITS INSTANT LATTER SUBSTANTIVE GROUND. 5. MR. AGARWAL IS FAIR ENOUGH IN NOT PRESSING FOR ASSESSEES FORMER LEGAL GROUND (SUPRA). 6. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOVE TERMS. ORDER IS PRONOUNCED IN THE OPEN COURT ON 22.11.2019. SD/- ( A. L. SAINI ) SD/- (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER /KOLKATA; / DATE:22/11/2019 RS I.T.A NO.1891/KOL/2018 RAMPURIA INDUSTRIES & INVESTMENTS LTD. PAGE | 5 / COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER ASSISTANT REGISTRAR, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. THE APPELLANT - RAMPURIA INDUSTRIES & INVESTMENTS LTD. 2. THE RESPONDENT- DCIT, CIRCLE-7(2), KOLKATA. 3. ( ) / THE CIT(A), KOLKATA [SENT THROUGH EMAIL] 4. / CIT 5. , , / DR, ITAT, KOLKATA [SENT THROUGH EMAIL] 6. [ / GUARD FILE.