S. R. Enterprises , Kolkata V. ACIT, Circle - 28, Kolkata , Kolkata

ITA 1932/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2119 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-06-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 06-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHURY CIT SR DR R
• Keywords: Search and seizure; Bonafide belief; Additional evidence; Sham transactions
• Section: 143(3); 133(6); 195; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA SMC BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER] I.T.A. NO. 1932/KOL/2018 ASSESSMENT YEAR: 2011-12 S.R. ENTERPRISES............APPELLANT 49/51, PRINCE GULAM MD. SHAH ROAD KOLKATA 700 033 [PAN : AALFS 3100 J] ASST. COMMISSIONER OF INCOME TAX, CIRCLE-28, KOLKATA............................RESPONDENT APPEARANCES BY: SHRI SUBASH AGARWAL, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. SHRI ROBIN CHOUDHURY, ADDL. CIT SR. D/R, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JUNE 10 TH , 2019 DATE OF PRONOUNCING THE ORDER : JUNE 19 TH , 2019 O R D E R PER J. SUDHAKAR REDDY :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 10, KOLKATA, (HEREINAFTER THE LD. CIT (A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 14/06/2018, FOR THE ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE IS A PARTNERSHIP FIRM AND DERIVES INCOME FROM TRADING IN ZINC, COPPER AND OTHER METALS. DURING THE YEAR, THE ASSESSEE FILED IT RETURN OF INCOME ON 19/09/2011 DECLARING TOTAL INCOME OF RS.4,98,185/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT, ON 26/03/2015 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.11,09,080/-. 2.1. THE FACTS OF THE ISSUE BEFORE ME ARE BROUGHT OUT AT PAGE 3 OF THE ASSESSMENT ORDER, WHICH IS EXTRACTED FOR READY REFERENCE:- (A) THE ASSESSEE IS DEALING IN DERIVATIVE COMMODITY AND CURRENCY DERIVATIVE HAS BEEN DOING REGULAR ON-LINE TRADING THROUGH ANGELA BROKING LTD, ANGELA CAPITAL & DEBT MARKET LTD. AND ANGEL COMMODITY BROKING PVT. LTD. AND ADITYA INCORPORATION. TILL 29TH MARCH, 2011, THE ASSESSEE HAS EARNED PROFITS ON ON-LINE TRADING IN COMMODITY AND CURRENCY FUTURES. IT ALSO APPEARS THAT THE ASSESSEE IS DEALING THROUGH THESE BROKERS OVER THE YEARS. THEN ON 30TH MARCH, 2011, THE ASSESSEE APPROACHED TILE NEW BROKER M/S. MARIGOLD VANIJYA 2 I.T.A. NO. 1932/KOL/2018 ASSESSMENT YEAR: 2011-12 S.R. ENTERPRISES PVT. LTD. AND DERIVATIVE TRANSACTIONS IN CURRENCY ON 30 TH AND 31 ST MARCH, 2011 AND EARNED A LOSS OF RS.15,39,234/- WITHOUT GIVING ANY MARGIN MONEY. THE ASSESSEE SET OFF THIS LOSS AGAINST THE PROFITS EARNED ON COMMODITY AND CURRENCY FUTURES DURING THE YEAR AND DECLARED NET LOSS OF RS.10,39,297/-. IN ORDER TO VERIFY THE GENUINENESS OF TRANSACTIONS THROUGH M/S. MARIGOLD VANIJYA PVT. LTD., THE INFORMATION WAS COLLECTED UNDER SECTION 133(6) OF THE ACT FROM MCX STOCK EXCHANGE LTD. WHO SUPPLIED THE REAL TIME DATA ON CD AND THE SOFT COPY OF THIS INFORMATION WAS SUPPLIED TO THE ASSESSEE FOR RECONCILIATION. 2.2. THE ASSESSEE WAS ASKED TO EXPLAIN THE ABOVE TRANSACTIONS. THE EXPLANATION GIVEN BY THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER BY HOLDING AS FOLLOWS:- A) THE ASSESSEE WAS UNABLE TO SUBSTANTIATE THE CLAIM BY PRODUCING THE MANAGING DIRECTOR/PRINCIPAL OFFICER OF M/S MARIGOLD VANIJYA PVT. LTD., BEFORE THE ASSESSING OFFICER. B) THE SUBMISSIONS OF THE ASSESSEE LACK DOCUMENTARY SUPPORT OR EVIDENCES. C) THE EVIDENCE GIVEN BY THE DEPARTMENT IS REAL TIME DATA IN RESPECT OF TRANSACTIONS DONE BY THE ASSESSEE FROM M/S. MARIGOLD VANIJYA PVT. LTD. D) THE ASSESSEE HAS NOT SUBMITTED A COPY OF THE COMMUNICATION RECEIVED BY IT FROM MCX STOCK EXCHANGE, DT. 31 ST MARCH, 2011 GIVING DETAILS OF ONE OF THE TRANSACTIONS. E) IT CANNOT BE EXPECTED THAT THE ASSESSEE WHO HAS BEEN REGULARLY DOING COMMODITY AND CURRENCY TRANSACTIONS ONLINE AND THAT IT WOULD NOT VERIFY ITS TRADES ONLINE FOR WHICH THE TRADE VERIFICATION IS AVAILABLE WHEREBY THE INVESTORS CAN VERIFY THE TRADE EXECUTED PER DAY. F) DOCUMENTARY EVIDENCE HAVE COME ON RECORD THAT THE ASSESSEE HAS EARNED A PROFIT OF RS.22,088/- AND NOT A LOSS OF RS.15,39,234/- AS DEBITED IN THE ASSESSEES BOOKS OF ACCOUNTS. G) AFTER THE SET OFF OF CARRY FORWARD BUSINESS LOSS (SPECULATION) OF RS.10,25,413/-, THE BALANCE AMOUNT OF RS.5,35,909/- IS ADDED TO THE INCOME. 3. ON APPEAL THE LD. FIRST APPELLATE AUTHORITY HELD AS FOLLOWS:- 3. QUITE ON THE OTHER HAND, IN APPEAL, THE APPELLANT / LD. A.R FOR THE APPELLANT HAS PLACED THE FOLLOWING ARGUMENTS / CONTENTIONS: A. THE APPELLANT IS NOT AWARE OF THE STATEMENT OF THE BROKER BEFORE THE IT AUTHORITIES, AND SHOULD NOT BE MADE TO SUFFER ON ACCOUNT OF SUCH STATEMENT. 3 I.T.A. NO. 1932/KOL/2018 ASSESSMENT YEAR: 2011-12 S.R. ENTERPRISES B. THE TRANSACTIONS WERE CARRIED OUT IN BONAFIDE BELIEF AND WERE RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. C. THE TRANSACTIONS ARE GENUINE AND SUPPORTED BY VALID 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 INFORMATION OBTAINED BY THE LD. AO ALSO MATCHES THE INFORMATION OFFERED BY THE ASSESSEE DURING SCRUTINY, AND THE DIFFERENCE WAS ON ACCOUNT OF THE BROKERAGE, SERVICE TAX AND OTHER CHARGES ON ACCOUNT OF THE BROKER, AS EVIDENCED BY THE CONTRACT NOTES. E. THE LD.AO HAD MADE ALLEGATION ABOUT THE BROKER TAKING CHEQUES AND RETURNING CASH, WHICH WERE WITHOUT ANY PROOF. F. THE ASSESSEE WAS NOT ALLOWED TO EXAMINE THE BROKER ON WHOSE STATEMENT THE LD. AO WAS DEPENDING. G. THE DIRECT DOCUMENTARY EVIDENCE WHICH WAS SUBMITTED BEFORE THE LD. AO HAD BEEN IGNORED. H. THE APPELLANT HAS CITED SEVERAL JUDGMENTS FROM VARIOUS HON'BLE COURTS INCLUDING THE JURISDICTIONAL ITAT IN SUPPORT OF ITS CONTENTIONS THAT THE LOSSES AS CLAIMED WERE GENUINE AND THAT THE DIRECT EVIDENCE IN THE MATTER OUGHT NOT TO BE IGNORED IN THE LIGHT OF THE INDIRECT EVIDENCE PROVIDED BY WAY OF THE STATEMENT OF THE BROKER. 4. I HAVE CAREFULLY CONSIDERED ALL THE FACTUAL ISSUES 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 SHRI 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 DIRECT EVIDENCE SUBMITTED IN THIS REGARD. ON CAREFUL PERUSAL, I FIND THAT THE TRANSACTIONS 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, AND THAT THESE ARE MOSTLY THAT THE APPELLANT HAD NO TRANSACTIONS WITH THE BROKER IN EARLIER OR IN LATER YEARS, AND THAT THE ASSESSEE HAS ALSO NOT ENTERED INTO TRANSACTIONS OF DEALING IN FUTURES CURRENCY UN USD IN PAST OR FUTURE. THE LD. AO HAS ALSO RECKONED THAT THE RATE OF BROKERAGE CHARGED BY 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 EVIDENCES' ARE MERE ARRANGEMENTS OF THE PARTIES TO GIVE THE TRANSACTIONS A SHEEN OF GENUINENESS. THERE IS NO REASON FOR ANY BROKER TO CONFESS TO SHAM TRANSACTIONS WERE THIS NOT THE CASE, AS HAS BEEN DONE BY THE DIRECTOR OF THE BROKING COMPANY WHILE GIVING THE STATEMENT DURING THE SEARCH AND SEIZURE OPERATIONS CARRIED OUT BY THE DEPARTMENT. THE DIRECT EVIDENCE MAY WELL BE IN FAVOUR OF THE ASSESSEE, BUT THE SAME CANNOT BE ACCEPTED DUE TO THE CIRCUMSTANCES OF NORMAL PROBABILITY BEING AGAINST THE ASSESSEE-INDIVIDUAL AS BROUGHT ON RECORD BY THE LD. AO. THEREFORE, I HAVE TO RECORD THAT ALL THE JUDICIAL CITATIONS DO NOT COME TO THE RESCUE OF THE APPELLANT. IT IS TO BE SAID THAT THAT THE ENTIRE TRANSACTIONS WERE CARRIED OUT ON THE STOCK EXCHANGE TO GIVE IT A COLOR OF REAL TRANSACTIONS, WITH THE CONNIVANCE OF THE BROKER, TO WHICH HE ( THE DIRECTOR OF THE BROKING COMPANY) HAS CONFESSED. 4 I.T.A. NO. 1932/KOL/2018 ASSESSMENT YEAR: 2011-12 S.R. ENTERPRISES 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE ME. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ENTIRE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) ARE BASED ON SURMISES AND CONJECTURES. HE ARGUED THAT THE ASSESSEE HAD PRODUCED EVIDENCE TO PROVE THAT THE TRANSACTIONS ARE GENUINE AND THE RECONCILED ACCOUNTS TO THE ACCOUNTS HAVE BEEN FURNISHED BY IT. HE SUBMITTED THAT HE ASSESSING OFFICER RELIED ON THE STATEMENT OF THE DIRECTOR OF M/S MARIGOLD VANIJYA PVT. LTD., RECORDED U/S 132(4) OF THE ACT AND ARGUED THAT THE NAME OF THE ASSESSEE WAS NOT STATED BY THIS DIRECTOR OF M/S MARIGOLD VANIJYA PVT. LTD. AND HENCE THIS STATEMENT CANNOT BE APPLIED TO THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE TRIBUNAL IN VARIOUS ORDER HAS RECORDED THAT THIS DIRECTOR OF THE BROKER M/S MARIGOLD VANIJYA PVT. LTD., RETRACTED ITS STATEMENT. 5.1. HE SPECIFICALLY SUBMITTED THAT THE SEBI RULES AUTHORIZES THE BROKER TO CARRY ON TRANSACTIONS IN THE CLIENT CODE WITH THEIR CONSENT PREFERABLY IN WRITING AND THAT THE BROKER USED THE ASSESSEES CODE TO CARRY ON UNAUTHORIZED TRANSACTIONS WITH AN INTENTION TO PASS ON THE BENEFIT TO SOME OTHER CLIENTS BY CHANGING THE CODE. HE CLAIMED THAT HE IS NO AWARE OF SUCH TRANSACTIONS IN THEIR CODE AND THAT THE ASSESSEE HAS NOT DISBELIEVED THIS BROKER. HE SUBMITTED THAT THE ASSESSEE COULD VERIFY ONLINE TRANSACTIONS STATED IN THE CONTRACT NOTE FURNISHED BY THE BROKER AND THAT HE HAD NO OTHER MEANS TO CHECK WHETHER THE TRANSACTIONS WERE EXECUTED IN THE CODE BY THE BROKER. HE VEHEMENTLY CONTENDED THAT THE ASSESSEE COULD NOT HAVE THOUGHT OR EVEN DREAMT THAT THE BROKER HAD ENHANCED THEIR CODE FOR EXECUTING TRANSACTIONS, WHERE THE CODE WAS LATER CHANGED. HE RELIED ON THE FOLLOWING DECISIONS OF THE TRIBUNAL FOR THE PROPOSITION THAT, UNDER SIMILAR CIRCUMSTANCES, THE DISALLOWANCE MADE OF SIMILAR TRANSACTIONS ON MCX STOCK EXCHANGE LTD., WAS DELETED BY THE TRIBUNAL:- ACIT VS. M/S. TIRUPATI AWAS PVT. LTD. IN ITA NO. 1569/KOL/2016; ASSESSMENT YEAR 2011-12, ORDER DT. 28/03/2018 RIDDHI SIDDHI COMMERCIAL PVT. LTD. V. ITO IN ITA NO. 1586/KOL/2018; ASSESSMENT YEAR 2012-13, ORDER DT. 14/11/2018 5 I.T.A. NO. 1932/KOL/2018 ASSESSMENT YEAR: 2011-12 S.R. ENTERPRISES 6. THE LD. D/R, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) AND ARGUED THAT, THOUGH DIRECT EVIDENCE WAS NOT AVAILABLE WITH THE AUTHORITIES BELOW, THE PATTERN IN WHICH THE TRANSACTION HAS TAKEN PLACE AND THE CIRCUMSTANTIAL EVIDENCE COUPLED WITH THE REPORT OF THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT AND THE STATEMENT OF THE DIRECTOR M/S MARIGOLD VANIJYA PVT. LTD., SUPPORT THE CONCLUSIONS DRAWN BY THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A). HE SUBMITTED THAT THE CIRCUMSTANTIAL EVIDENCE AS WELL AS THE DUBIOUS AND SUSPICIOUS NATURE OF THE TRANSACTIONS HAVE TO BE CONSIDERED AND THE ORDER OF THE LOWER AUTHORITIES TO BE UPHELD. 7. HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, I HOLD AS FOLLOWS:- 8. A PERUSAL OF THE ORDER OF THE LD. CIT(A) DEMONSTRATES THAT THE ORDER OF THE ASSESSING OFFICER IS SOLELY DEPENDENT ON THE STATEMENT OF THE BROKER COMPANYS DIRECTOR, SHRI SACHET SARAF, MADE DURING THE SEARCH AND SEIZURE OPERATION. A COPY OF THIS STATEMENT IS NOT CONFRONTED TO THE ASSESSEE NOR IS PLACED BEFORE US FOR OUR CONSIDERATION. IT WAS SUBMITTED THAT SHRI SACHET SARAF, HAS RETRACTED THE STATEMENT IN QUESTION MADE BEFORE THE DEPARTMENT. IT WAS ALSO SUBMITTED THAT HE NAME OF THE ASSESSEE WAS NEVER TAKEN BY SHRI SACHET SARAF, IN THIS STATEMENT. THE LD. CIT(A) HAS ALSO RECORDED THAT THE ASSESSEE HAS FILED DIRECT EVIDENCES IN SUPPORT OF THESE TRANSACTIONS. 8.1. THE LD. CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER FOR THE REASON THAT THE TRANSACTIONS OF THE ASSESSEE HAVE LED TO CERTAIN SUSPICION IN THE MIND OF THE ASSESSING OFFICER FOR THE REASON THAT THE ASSESSEE HAD NO TRANSACTIONS WITH THESE BROKERS IN THE EARLIER OR IN THE LATER YEARS. THIS, IN MY VIEW, CANNOT BE THE REASON TO REJECT THE DIRECT EVIDENCE PRODUCED BY THE ASSESSEE. THE LD. CIT(A) ALSO RECORDS THAT THE RATE OF BROKERAGE CHARGED IS HIGH. NO FIGURES ARE IN SUPPORT OF THESE CONCLUSIONS. THIS REASON ALSO DOES NOT TAKE ME TO A CONCLUSION THAT THE TRANSACTIONS ARE BOGUS. DIRECT EVIDENCES WERE REJECTED ON THE SOLE GROUND THAT THESE WERE MERE ARRANGEMENTS OF THE PARTIES TO GIVE THE TRANSACTIONS A SHEEN OF GENUINENESS. THERE IS NO INVESTIGATION MADE EITHER BY THE ASSESSING OFFICER OR THE 6 I.T.A. NO. 1932/KOL/2018 ASSESSMENT YEAR: 2011-12 S.R. ENTERPRISES LD. CIT(A) WITH THIRD PARTIES, SO AS TO REJECT THE EVIDENCE PRODUCED. FROM THE ABOVE OBSERVATIONS IT IS CLEAR THAT THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE REJECTED THE EVIDENCE PRODUCED BY THE ASSESSEE AND CAME TO A CONCLUSION THAT THE TRANSACTIONS ARE BOGUS, ONLY BASED ON SUSPICION, SURMISES AND CONJECTURES. SUCH CONCLUSIONS CANNOT BE PROVED. 9. THIS BENCH OF THE TRIBUNAL IN THE CASE OF M/S. TIRUPATI AWAS P. LTD. (SUPRA) AT PARA 10 HELD AS FOLLOWS:- 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. 10. IN THE CASE OF RIDDHI SIDDHI COMMERCIAL PVT. LTD. (SUPRA) , THIS BENCH OF THE TRIBUNAL RELIED ON DECISION OF SMT. SUSHILA DEVI KAJARIA & SMT. SHRUTI DEVI KAJARIA VS. DCIT, CIRCLE-36, KOLKATA IN ITA NO. 1759 & 1761/KOL/2017; ORDER DT. 05/10/2018 AND FURTHER HELD AS FOLLOWS:- BOTH THE LEARNED REPRESENTATIVES REITERATE THEIR RESPECTIVE STANDS AGAINST AND IN FAVOUR OF THE IMPUGNED LOSS DISALLOWANCE. THE REVENUE VEHEMENTLY CONTENDS THAT THE LOWER AUTHORITIES HAVE RIGHTLY DISALLOWED THE IMPUGNED LOSS(ES) FOR THE REASON THAT SHRI SACHET SARAF (DIRECTOR/ MAIN PERSON) OF M/S MARIGOLD 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 REVENUE'S INSTANT SUBSTANTIVE PLEA. THIS TRIBUNAL'S CO- ORDINATE BENCH'S DECISION IN ITA NO. 1760/ KOL/2017 KAMLA PRASAD KAJARIA (HUF) VS. ITO DECIDED ON 24.05.2018 HAS DELETED IDENTICAL DISALLOWANCE AS FOLLOWS:- 7 I.T.A. NO. 1932/KOL/2018 ASSESSMENT YEAR: 2011-12 S.R. ENTERPRISES '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 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 ITA NO.1586/KOL/2018 A.Y. 2012-13 RIDDHI SIDDHI COMMERCIAL PVT. LTD. VS. ITO WD-4(1), KOL. PAGE 8 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.' I FIND THAT THE FACTUAL POSITION IS NO DIFFERENT IN BOTH THE INSTANT CASES AS SHRI SACHET SARAF'S STATEMENT RECORDED U/S 132(4) OF THE ACT FORMING PART OF RECORD HAS NOWHERE MENTIONED THESE TWO ASSESSEES NAMES. I FURTHER NOTICE THAT THESE TWO ASSESSEES HAVE FILED ALL THE RELEVANT DETAILS IN THE NATURE OF CONTRACT NOTES, BILLS, GENERAL LEDGER ACCOUNTS REGARDING THE BROKER CONCERNED WITH BANK STATEMENT, SYNOPSIS AND MR SACHET SARAF'S AFFIDAVITS RETRACTING THE SEARCH STATEMENT. I ACCEPT ASSESSEESS' SOLE SUBSTANTIVE GROUND RAISED IN THESE APPEALS AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE OF LOSS INCURRED IN CURRENCY DERIVATIVES ACTIVITY. ALL OTHER GROUNDS OF INTEREST ETC. ARE TREATED TO BE MERE CONSEQUENTIAL.' THERE IS NO DISPUTE THAT THIS TAXPAYER HAS ALSO FILED SIMILAR EVIDENCE IN SUPPORT OF ITS LOSS CLAIM. I ADOPT THE ABOVE DETAILED REASONS MUTATIS MUTANDIS TO DELETE THE IMPUGNED DISALLOWANCE OF LOSS FORMING SUBJECT-MATTER OF THE INSTANT LIS. 8 I.T.A. NO. 1932/KOL/2018 ASSESSMENT YEAR: 2011-12 S.R. ENTERPRISES 11. APPLYING THE PROPOSITIONS OF LAW LAID DOES IN THE ABOVE CASE-LAW TO THE FACTS OF THE CASE OF HAND, WE DELETE THE DISALLOWANCES AND ALLOW THIS APPEAL OF THE ASSESSEE. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. KOLKATA, THE 19 TH DAY OF JUNE, 2019. SD/- [ J. SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED : 19.06.2019 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. S.R. ENTERPRISES 49/51, PRINCE GULAM MD. SHAH ROAD KOLKATA 700 033 2. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-28, KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES