ACIT, Central Circle - 2(4), Kolkata, Kolkata V. M/s. Asian Housing & Infrastructure Pvt. Ltd., Kolkata

ITA 1985/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1093 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 06-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: M D SHAH
• Keywords: Search and seizure; Earning of tax free income
• Section: 14A; 132

Judgement Text

1 ITA NO. 1985/KOL/2017 ASIAN HOUSING & INFRASTRUCTURE PVT. LTD., AY 2014-1 5 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1985/KOL/2017 ASSESSMENT YEAR: 2014-15 ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(4), KOLKATA. VS. M/S. ASIAN HOUSING & INFRASTRUCTURE PVT. LTD. (PAN: AACCA1806F) APPELLANT RESPONDENT DATE OF HEARING 06.09.2018 DATE OF PRONOUNCEMENT 30.11.2018 FOR THE APPELLANT SHRI ROBIN CHOUDHURY, ADDL. CIT, SR. DR FOR THE RESPONDENT SHRI M. D. SHAH, AR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF THE LD. CIT(A)-20, KOLKATA DATED 07.06.2017 FOR AY 2014-15. 2. THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF DERIVATIVE TRADING TO THE TUNE OF RS.3,49,14,478/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE AO NOTICED THAT A SEARCH AND SEIZURE OPERATION U/S. 132 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERR ED TO AS THE ACT) WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 11.04.2013 AND IT WAS N OTED BY HIM THAT IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN LOSS OF RS.3,49,14,478/- ON DERIVATIVE TRADING IN THE P&L ACCOUNT FOR THE YEAR. THE AO ACKNOWLEDGES THAT THE ASSESSEE HAD FILED THE DETAILS OF SUCH LOSS WITH THE SUPPORTING DOCUMENTS NAMELY, CONTRACT NOTES AND BANK STATEMENT. HOWEVER, ACCORDING TO AO, THE LOSS COULD NOT BE ALL OWED IN THE LIGHT OF THE STATEMENT OF THE BROKER [ WHOSE NAME NOT REVEALED BY AO] FROM WHOM H E CAME TO KNOW THAT THE ASSESSEE 2 ITA NO. 1985/KOL/2017 ASIAN HOUSING & INFRASTRUCTURE PVT. LTD., AY 2014-1 5 WAS NOT A REGULAR TRADER IN THE DERIVATIVE MARKET A ND HAD ONLY ENGAGED SIXTEEN TIMES IN TRADING AND HAD LOSS EXCEPT WHILE TRADING IN FEBRUA RY. ACCORDING TO AO, HE UNDERSTOOD FROM THE STATEMENT OF THE BROKER THAT THE BROKERAGE CHARGED FROM THE ASSESSEE WAS VERY HIGH AND THE LOSSES WERE CAUSED BECAUSE OF VERY HIGH BRO KERAGE AND SERVICE TAX. THE AO ALSO NOTED THAT THE ASSESSEE CONDUCTED ITS TRADING NOT I N A REPUTED EXCHANGE AND, THEREFORE, MANIPULATION WAS POSSIBLE. THE AO NOTED THAT THE A SSESSEE HAD CONDUCTED ITS TRADING THROUGH THE UNITED STOCK EXCHANGE OF INDIA (USEI), WHICH ACCORDING TO AO, CANNOT BOAST OF ANY POPULARITY. ACCORDING TO AO, FROM A PERUSAL OF THE CONTRACT NOTES OF THE TRANSACTIONS DONE BY THE ASSESSEE HE COULD INFER THAT THE ASSESS EE WAS DOING TRANSACTION IN PAIRS I.E. THE BUY ORDERS AND SELL ORDERS MATCH EXACTLY. THE AO N OTED THAT THE TIME GAPS BETWEEN EACH PAIRS OF BUY AND SELL TRADES WERE VERY LITTLE AND, THEREFORE, IT RAISES SUSPICION AND ACCORDING TO AO, THE BROKER INFORMED HIM THAT THIS WAS DUE TO THE PREMEDITATED TRADING BY THAT FELLOW ONLY. THEREFORE, HE DISALLOWED THE CLAIM OF ASSESS EE IN RESPECT TO LOSS IN DERIVATIVE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DELETE TH E SAME. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THERE WAS A SEARCH ACTION ON TH E ASSESSEES PREMISE ON 11.04.2013 (AY 14-15 WHICH IS THE RELEVANT ASSESSMENT YEAR UNDER C ONSIDERATION BEFORE US). DURING THE COURSE OF SEARCH, IT WAS FOUND BY THE SEARCH PARTY THAT THE ASSESSEE WAS ENGAGED IN TRADING OF DERIVATIVE TRANSACTIONS IN COMMODITIES WHICH WER E NOT RECORDED IN THE BOOKS OF ACCOUNT. CONSEQUENTLY, A DISCLOSURE OF RS.402.02 LACS WAS TA KEN ON ACCOUNT OF SUCH UNRECORDED TRANSACTION OF DERIVATIVES FOR THE AY 2013-14 WAS T AKEN FROM THE ASSESSEE AND ASSESSEE OFFERED TAX ON IT. SINCE THE SEARCH ACTION HAPPENE D ON 11.04.2013 IN THE BEGINNING OF THE AY 2014-15, THE ASSESSEE THEREAFTER STARTED RECORDI NG THE DERIVATIVE TRANSACTION IN ITS REGULAR BOOKS OF ACCOUNT. WE NOTE THAT THE ASSESSEE HAS CAR RIED OUT THE DERIVATIVE TRANSACTIONS THROUGH THE USEI WHICH HAS APPROVAL FROM THE SEBI I N THE YEAR 2010 ONWARDS AND THIS EXCHANGE HAS BEEN RECOGNIZED BY CBDT VIDE NOTIFICAT ION NO. 12/2011 DATED 25.02.2011. WE NOTE THAT THE ASSESSEE CARRIED OUT CURRENCY DERI VATIVE TRANSACTION IN USEI WHICH IS A 3 ITA NO. 1985/KOL/2017 ASIAN HOUSING & INFRASTRUCTURE PVT. LTD., AY 2014-1 5 CURRENCY DERIVATIVE ARM OF THE BOMBAY STOCK EXCHANG E. THE USEI IS PROMOTED BY BSI AND OTHER 21 PSU BANKS AND IT DEALS ONLY IN CURRENCY DE RIVATIVE AND INTEREST SWAP OPTIONS. THE AO ERRED IN FINDING THAT THE ASSESSEE WAS NOT REGUL AR TRADER IN THE DERIVATIVE MARKET BECAUSE THE AO HIMSELF DURING THE COURSE OF SEARCH HAS FOUN D THAT ASSESSEE IS ACTIVELY ENGAGED IN DERIVATIVE TRADING AND RS.4,02,02,600/- WAS ASSESSE D TO TAX FROM THE DERIVATIVE TRADING FOR AY 2013-14 (PREVIOUS ASSESSMENT YEAR) . HOWEVER, W HEN THE ASSESSEE CLAIMED THE LOSS IN THIS ASSESSMENT YEAR THE AO HAS TAKEN AN ABOUT-TURN AND DID NOT ACCEPT THE SAME, WHICH ACTION OF THE AO CANNOT BE COUNTENANCED. WE NOTE T HAT THE AOS ALLEGATION THAT THE SEBI HAS SUSPENDED THE BROKER THROUGH WHOM THE ASSESSEE HAD TRANSACTED THE DERIVATIVE BUSINESS IS NOT CORRECT. WE NOTE THAT THE BROKER OF THE ASS ESSEE THROUGH WHOM ASSESSEE DID DERIVATIVE TRADING WAS M/S. EXPRO SECURITIES WHICH BROKER HAS NOT BEEN SUSPENDED BY SEBI OR ANY OTHER AUTHORITIES. WE ALSO NOTE THAT THE ASSESSEE HAD PRAYED FOR THE COPY OF THE STATEMENT OF THE PURPORTED BROKERS STATEMENT WHICH THE AO HAD H EAVILY RELIED UPON FOR DRAWING ADVERSE INFERENCE AGAINST THE ASSESSEES CLAIM OF LOSS SUFF ERED DURING DERIVATIVE TRANSACTIONS. HOWEVER, WE NOTE THAT THE AO HAS NOT GIVEN A COPY O F THE BROKERS STATEMENT/ADVERSE MATERIAL TO THE ASSESSEE, SO THE STATEMENT OF THE B ROKER WHICH IS ADVERSE AGAINST THE ASSESSEE CANNOT BE RELIED UPON BY THE AO FOR DRAWING ADVERSE INFERENCE AGAINST THE ASSESSEE. WE NOTE THAT THE HONBLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM VS. CIT (1980) 125 ITR 713 (SC) HELD THAT ANY INFORMATION GATHERED BY THE AO WITHOUT CONFRONTING THE SAME TO THE ASSESSEE DID NOT HAVE ANY EVIDENTIARY V ALUE AND CANNOT BE USED FOR THE PURPOSE OF ASSESSMENT OR OTHER PROCEEDINGS. WE ALSO NOTE T HAT THE ASSESSEES PLEA TO THE AO TO CROSS EXAMINE THE SO CALLED BROKER WHOSE STATEMENT WAS RE CORDED BY THE AO WAS ALSO NOT DONE BY THE AO WHICH OMISSION ALSO MAKES THE ORDER OF AO B AD IN THE EYES OF LAW AS HELD BY THE HONBLE SUPREME COURT IN ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTRAL EXCISE 62 TAXMAN.COM 3. (SC). THE AOS ACTION FOR TAXING THE DERIVATIVE INCOME FOR AY 2013-14 AND NOT ACCEPTING THE LOSS FOR AY 2014-15 C ANNOT BE COUNTENANCED AND, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD . CIT(A) DIRECTING DELETION OF THE ADDITION MADE ON THIS COUNT AND, THEREFORE, THE REVENUES GR OUND OF APPEAL IS DISMISSED. 5. THE SECOND AND THIRD GROUND IS AGAINST THE ACTIO N OF THE LD. CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF SECTION 14A READ WITH R ULE 8D. 4 ITA NO. 1985/KOL/2017 ASIAN HOUSING & INFRASTRUCTURE PVT. LTD., AY 2014-1 5 6. AT THE OUTSET ITSELF, IT HAS BEEN BROUGHT TO OUR NOTICE THAT THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME. SINCE THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME THE DISALLOWANCE U/S. 14A READ WITH RULE 8D OF THE RULE S WAS NOT WARRANTED AS HELD BY THE HONBLE DELHI HIGH COURT IN CIT VS. CHEMINVEST LTD. (2015) 378 ITR 33 (DEL.), WHEREIN IT HAS HELD THAT SEC. 14A ENVISAGES THAT THERE SHOULD BE ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDIBLE IN TOTAL INCOME AND THE SAID SECTION WIL L NOT APPLY WHERE THERE IS NO EXEMPT INCOME RECEIVED OR RECEIVABLE DURING THE RELEVANT Y EAR. SINCE LD. DR COULD NOT CONTROVERT THE FACT THAT ASSESSEE WAS NOT IN RECEIPT OF ANY EX EMPT INCOME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RELIED UPON THE ORDER OF HONBLE DELHI HIGH COURT IN CHEMINVEST LTD., SUPRA TO GIVE RELIEF TO THE ASS ESSEE. THEREFORE, THE ACTION OF THE LD. CIT(A) DOES NOT REQUIRE ANY INTERFERENCE FROM OUR P ART AND THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30/11/201 8 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30TH NOVEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT ACIT, CENTRAL CIRCLE-2(4), KOLKATA. 2 RESPONDENT M/S. ASIAN HOUSING & INFRASTRUCTURE PV T. LTD., 4/1, MIDDLETON STREET, 5 TH FLOOR, KOLKATA-700 071. 3 4 5 CIT(A)-20, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY