The ACIT, Circle-1(3), Ahmedabad V. Shri Narendrasingh L. Rathod, Ahmedabad

ITA 2115/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5867 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Retrospective amendment; Speculation loss
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI N. K. BILLAIYA , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NOS. 2115 & 2116/AHD/2016 (ASSESSMENT YEAR: 2012-13) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1(3), ROOM NO. 109, B WING, 1 ST FLOOR, PRATYAKSHKAR BHAVAN, PANJRAPOLE, AMBAWADI, AHMEDABAD APPELLANT VS. SHRI NARENDRASINGH L. RATHOD, 166/7, SUNIL BHAVAN, OPP. DEDKANI POLE, MANEKCHOWK, AHMEDABAD - 380001 RESPONDENT PAN: ADXPR1249L / BY REVENUE : SHRI ALOK KUMAR, SR. D.R. / BY ASSESSEE : NONE /DATE OF HEARING : 12.03.2018 /DATE OF PRONOUNCEMENT : 13.03.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THE REVENUE HAS FILED ITS INSTANT QUANTUM AND PENALT Y APPEALS ITA NOS. 2116 & 2115/AHD/2016 FOR ASSESSMENT YEAR 2012-2013 AGAINST THE CIT(A)-10, AHMEDABADS SEPARATE ORDERS DATED 14.06.2016 & 20.0 6.2016, IN CASE NO. ITA NOS. 2115 & 2116/AHD/2016 [ACIT VS. SHRI NAREND RASINGH L. RATHOD] A.Y. 2012-13 - 2 - CIT(A)-10/ACIT-CIR.1(3)/313/15-16 & CIT(A)-10/ACIT-CI R.1(3)/312/15-16, REVERSING ASSESSING OFFICERS ACTION TREATING ASSES SEES NORMAL BUSINESS LOSS OF RS. 42,55,595/- PERTAINING TO HEDGING TRANSACTIONS CARRIED OUT AT MCX TO BE SPECULATION LOSS NOT ENTITLED TO BE SET OFF AGAINST SUCH NORMAL BUSINESS INCOME AS WELL AS LEVYING CONSEQUENTIAL PENALTY OF RS.19,7 2,470/-; RESPECTIVELY, IN PROCEEDINGS U/S. 143(3) & 271(1)(C) OF THE INCOME TA X ACT, 1961; IN SHORT THE ACT. 2. CASE CALLED TWICE. NONE APPEARS AT ASSESSEES B EHEST. THE REGISTRY HAS ALREADY SENT IT A COMBINED RPAD NOTICE DATED 19.02. 2018. WE THUS PROCEED EX PARTE AGAINST THE RESPONDENT ASSESSEE IN INSTANT TWO CASES. 3. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIV E STRONGLY REITERATING ASSESSING OFFICERS CASE QUA THE INSTANT QUANTUM AS WELL AS CONSEQUENTIAL PENALTY ISSUE. IT EMERGES FROM REVENUES QUANTUM A PPEAL ITA NO.2116/AHD/2016 THAT THE ASSESSING OFFICER DISALLO WED ASSESSEES LOSS CLAIM OF RS.42,55,595/- ARISING FROM MCX TRADING DIFFEREN CE AFTER HOLDING THE SAME TO BE SPECULATION LOSS AND NOT NORMAL BUSINESS LOSS . HE APPEARS TO HAVE REITERATED HIS FINDINGS ON THE VERY ISSUE IN PRECED ING ASSESSMENT YEAR 2011-12 IN CONCLUDING THAT ALTHOUGH THE MCX STOCK EXCHANGE IN QUESTION STOOD RECOGNIZED AS PER NOTIFICATION NO.92/2013 DATED 29. 01.2013, THE SAME HOWEVER WOULD NOT COVER ITS CASE SINCE FALLING IN EARLIER A SSESSMENT YEARS. ALL THIS MADE THE ASSESSING OFFICER TO HOLD THAT THE ASSESSEES T RANSACTIONS IN QUESTION WERE NON DELIVERY BASED AS CARRIED OUT IN EXCHANGE NOT N OTIFIED U/S.43(5)(D) OF THE ACT. 4. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) REVERSES THE ASSESSING OFFICERS ABOVE ACTION DISALLOWING ITS CLAIM AS UND ER: 5.2 REGARDING THE DISALLOWANCE OF MCX TRADING LOSS OF RS. 42,55,595/-, I HAVE PERUSED THE SUBMISSIONS FILED BY THE APPELLANT AND THE SAME HAVE BEEN ITA NOS. 2115 & 2116/AHD/2016 [ACIT VS. SHRI NAREND RASINGH L. RATHOD] A.Y. 2012-13 - 3 - PLACED ON RECORD. IT IS SEEN THAT ON IDENTICAL ISSU E, MY PREDECESSOR IN THE A.Y. 2011-12 VIDE ORDER NO. CIT(A)-10/DCIT-CIR-3/389/14- 15 DATED 22/12/2015, HAS DELETED THE ADDITION AFTER CONSIDERING THE JUDG EMENT OF HON'BLE ITAT, AHMEDABAD, IN THE CASE OF VIMAL OIL & FOODS LTD. VS ACIT, CIRCLE-8, AHMEDABAD, ITA NO. 2392/AHD/2011. THE MAIN REASONS FOR DELETING THE ADDITION BY MY PREDECESSOR ARE REPRODUCED AS UNDER: ' AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLAN T AND AFTER CONSIDERING THE JUDGMENT OF HON'BLE ITAT AHMEDABAD IN THE CASE OF VIMAL OIL & FOODS LTD. VS ACIT, CIRDE-8, AHMEDABAD, ITA NO. ITA.NO.2392/AHD/2011 ASST. YEAR 2008-09 PRONOUNCED ON 09.01.2015 ALONG WITH OTHER JUDICIAL PRONOUNCEMENTS AS DISCUSSED ABOVE, IT IS HELD THAT MCX TRANSACTION EVEN PRIOR T O ITS RECOGNITION AS NOTIFIED BY CENTRAL GOVERNMENT IS ALLOWABLE AS NORM AL BUSINESS LOSS WITH RETROSPECTIVE EFFECT I.E. WITH EFFECT FROM 1-4 -2006. IN THE CASE OF VIMAL OILS & FOODS LTD. VS ACIT, THE HON'BLE ITAT, AHMEDABAD ADJUDICATED AS MENTIONED BELOW: '5. IN VIEW OF ABOVE, WE ARE OF THE VIEW THAT ASSES SEE'S DERIVATIVE TRADING THROUGH MCX STOCK EXCHANGE IN A.Y. 2007-08 WAS NON SPECULATED TRANSACTION; THEREFORE, LOSS INCURRED IN SUCH TRANSACTIONS WAS TO BE TREATED AS NORMAL BUSINESS LOSS. WE FIND THAT BY FINANCE ACT, 2005 CLAUSE (D) WAS INSERTED, IN PROVISO TO SUB SEC TION (5) OF SECTION 43 W.E.F. 1.4.2006 WHICH PROVIDED THAT AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVE REFERRED TO IN CLA USE 9A) OF SUB SECTION 92) OF SECURITIES CONTRACT (REGULATION) ACT, 1956 C ANNED OUT IN A RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE SPECULATIVE TRANSACTIONS. THUS, FROM 1ST APRIL, 2006 TRADING IN DERIVATIVE CARRIED THROUGH THE RECOGNIZED STOCK EXCHANGE WAS TREATED A S NON-SPECULATIVE TRANSACTIONS. FOR THE PURPOSE OF CLAUSE (D), RU LE 6DDA AND 6DDB OF IT RULES, 1962, PROVIDED THAT NOT IFICATION OF RECOGNISED STOCK EXCHANGE HAS TO BE DONE BY THE CENTRAL GOVT ( CBDT). IN PURSUANCE OF THIS RULE, THE CBDT HAS NOTIFIED TH E MCX STOCK EXCHANGE LTD. BY S.O. 1327 (E) DATED 22.04.29 90. THE ISSUE IN SUCH NOTIFICATION GIVEN ON 22.05.2009, BY WHICH MCX STOCK EXCHANGE HAS BEEN RECOGNIZED, COULD BE HELD TO BE APPLICABLE FOR THE TRANSACTION UNDERTAKEN IN THE A.Y. 2007-08 I.E. AFTER 1ST APRIL , 2006. FROM THE COMBINED READING OF CLAUSE (D) OF PROVISO TO SECTIO N 43(5), RULE 6DDA, 6DDB AND EXPLANATION (II) TO SECTION 43(5), IT WOULD BE SEEN THAT RULES WHICH HAVE BEEN PRESCRIBED ARE O NLY PROCEDURAL IN NATURE, AS IT PRESCRIBES THE METHOD AS TO HOW TO APPLY FOR NECESSARY RECOGNITION AND CONSEQUENT NOTIFICA TION. HENCE, THESE ARE PURELY PROCEDURAL MECHANISM ADOPTED FOR THE SAM E WHEN A RULE OR PROVISION DOES NOT AFFECT OR EMPOWER ANY RIGHT OR C REATE AN OBLIGATION BUT MERELY RELATES TO PROCEDURAL MECHANISM, THEN I T IS DEEMED TO BE RETROSPECTIVE UNLESS SUCH AN INFERENCE IS LIKELY TO LEAD TO AN ABSURDITY. IF THE AMENDMENT IS MADE IN PROCEDURAL MECHANISM, I T WILL APPLY TO ALL THE PROCEEDINGS PENDING OR TO BE INITIATED. ONCE IN THE STATUTE, IT HAS ITA NOS. 2115 & 2116/AHD/2016 [ACIT VS. SHRI NAREND RASINGH L. RATHOD] A.Y. 2012-13 - 4 - BEEN PROVIDED THAT W.E.F. 1.4.2006, AN ELI GIBLE TRANSACTION CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE WILL NOT BE TREATED AS SPECULATIVE TRANSACTION, THEN SIMPLY BECAUSE PROCEDURAL MECHANISM HAS TAKEN A LONG TIME TO RECOGNIZE THE ST OCK EXCHANGE, IT WILL NOT LEAD TO AN INFERENCE THAT THE SAME WOULD B E APPLICABLE FROM THE DATE WHEN THE STOCK EXCHANGE HAS BEEN RECOGNIZE D BY THE CENTRAL GOVT. THE NOTIFICATION ISSUED UNDER RULE 6DDB, DOES NOT EMPOWER ANY RIGHT OR CREATE OBLIGATION BUT ONLY RECOGNIZED WHAT IS ALREADY PROVIDED IN STATURE. THUS, THE TRANSACTIONS CARRIED OUT THROUGH MCX STOCK EXCHANGE AFTER 1.4.2006, WOULD BE ELIGIBL E FOR BEING TREATED AS NON-SPECULATIVE DERIVATES WITHIN THE MEA NING OF CLAUSE (D) OF PROVISO TO SECTION 43(5). 6, IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS D IRECTED TO DELETE THE DISALLOWANCE OF LOSS OF RS. 4,82,270/- INCURRED BY ASSESSEE COMPANY ON TRADE IN COMMODITY DERIVATES.' AS THE FACTS OF THE APPELLANT'S CASE IS IDENTICAL T O THE FACTS OF THE CASE DECIDED BY THE HON'BLE ITAT, AHMEDABAD, BY RES PECTFULLY FOLLOWING THE ORDER OF THE JURISDICTIONAL ITAT, AHM EDABAD, THE ADDITIONS MADE BY THE AO DESERVE TO BE DELETED, HEN CE THESE ARE DELETED . THIS GROUND OF APPEAL IS ALLOWED. 5.3 THE FACTS OF THE CASE ARE IDENTICAL IN THIS YEA R ALSO. BY RESPECTFULLY FOLLOWING THE ORDER OF MY PREDECESSOR AS WELL AS HO NBLE TRIBUNAL, THE ADDITIONS MADE BY THE AO ARE DELETED. THEREFORE, T HIS GROUND OF APPEAL IS ALLOWED . 5. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO REVENU ES VEHEMENT CONTENTION THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONCLUDING THAT THE ASSESSEES LOSS IN QUESTION ARISING FROM I TS TRANSACTIONS CARRIED OUT IN MCX ARE NOT DELIVERY BASED SINCE NOT EXECUTED IN A RECOGNIZED EXCHANGE. IT FAILS TO DISPUTE THE FACT THAT THE RELEVANT EXCHANG E I.E. MCX STOCK EXCHANGE STOOD RECOGNIZED W.E.F. FINANCIAL YEAR 2013-14. IT HAS COME ON RECORD THAT A CO-ORDINATE BENCH IN CASE OF VIMAL OIL & FOODS LTD. (SUPRA) HAS FOLLOWED ASSESSEES CASE ITSELF IN PRECEDING ASSESSMENT YEAR 2011-12 AS HELD THAT SUCH A SUBSEQUENT NOTIFICATION OF STOCK EXCHANGE COVERS PR ECEDING ASSESSMENT YEARS AS WELL. THIS IS NOT THE REVENUES CASE THAT THE CI T(A)S IDENTICAL FINDINGS IN PRECEDING ASSESSMENT YEAR 2011-12 HAVE NOT ATTAINED FINALITY. WE ADOPT ITA NOS. 2115 & 2116/AHD/2016 [ACIT VS. SHRI NAREND RASINGH L. RATHOD] A.Y. 2012-13 - 5 - JUDICIAL CONSISTENCY IN THESE FACTS TO DECLINE REVE NUES SOLE SUBSTANTIVE GRIEVANCE AS WELL AS ITS QUANTUM APPEAL ITA NO. 211 6/AHD/2016. 6. SAME ORDER TO FOLLOW IN REVENUES CONSEQUENTIAL PENALTY APPEAL ITA NO. 2115/AHD/2016 AS THE PENALTY IN QUESTION DOES H AVE NO LEGS TO STAND SINCE THE QUANTUM DISALLOWANCE/ADDITION ITSELF STANDS DEL ETED. 7. THESE TWO REVENUES APPEALS ARE DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 13 TH DAY OF MARCH, 2018.] SD/- SD/- (N. K. BILLAIYA) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD: DATED 13/03/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ()*+ ,--. ./0 / DR, ITAT, AHMEDABAD 1+2345 / GUARD FILE. BY ORDER / . // ./0