Hill Queen Investment Private Limited , Kolkata V. ITO, Ward - 5(4), Kolkata

ITA 2192/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2006 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-03-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 15-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Unexplained cash credit; Principle of natural justice; Transactions in derivatives; Additional evidence
• Section: 143(3); 234B; 133(6)

Judgement Text

1 ITA NO. 2192/KOL/2018 HILL QUEEN INVESTMENT PVT. LTD.., AY 2009-10 , B SMC , IN THE INCOME TAX APPELLATE TRIBUNAL B SMC BENCH: KOLKATA ( ) . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 2192/KOL/2018 ASSESSMENT YEAR: 2009-10 HILL QUEEN INVESTMENT PRIVATE LIMITED. (PAN: AAACH2324P) VS. INCOME-TAX OFFICER, WD-5(4), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 20.03.2019 DATE OF PRONOUNCEMENT 17.06.2019 FOR THE APPELLANT SHRI MIRAJ D. SHAH, AR FOR THE RESPONDENT SHRI ROBIN CHOUDHURY, ADDL. CIT, SR. DR ORDER THIS APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A)-8, KOLKATA DATED 11.06.2018 FOR AY 2009-10 ON THE FOLLOWING GROUNDS: 1. FOR THAT THE LD AO ISSUING NOTICES FOR ASSESSMENT PROCEDURE DID NOT HAVE JURISDICTION OVER THE ASSESSEE CASE AND HENCE THE ASSESSMENT PROCEEDINGS AND ASSESSMENT ORDER WAS BAD IN LAW AND HENCE THE SAME BE QUASHED. 2. FOR THAT THE APPELLATE ORDER PASSED WAS IN VIOLATION OF PRINCIPALS OF NATURAL JUSTICE AND HENCE THE ENTIRE PROCEEDING WAS BAD IN LAW AND THUS THE ASSESSMENT ORDER BE CANCELLED/ QUASHED. 3. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD CIT(APPEALS) ERRED IN DISALLOWING RS.40,00,537/- BEING LOSS ON DERIVATIVE TRANSACTION AS UNEXPLAINED CASH CREDIT AND THUS INCOME OF THE ASSESSEE. THIS ADDITION WAS UNCALLED FOR AND UNWARRANTED AND HENCE THE SAME BE DELETED. 4. WITHOUT PREJUIDICE TO THE ABOVE, THE LOSS OF RS. RS.40,00,537/- BE ALLOWED AS OFF MARKET TOSS/BUSINESS LOSS. 5. FOR THAT THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE INTEREST U/S 234 A/B/C OF THE INCOME TAX ACT,1961 THE SAME WAS UNJUSTIFIED AND HENCE THE SAME BE DELETED OR RECALCULATED AS PER LAW. 2 ITA NO. 2192/KOL/2018 HILL QUEEN INVESTMENT PVT. LTD.., AY 2009-10 6. THE APPELLANT CRAVES LEAVE TO PRODUCE ADDITIONAL EVIDENCES IN TERMS OF RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES 1963. 7. THE APPELLANT CRAVES TO PRESS NEW, ADDITIONAL GROUNDS OF APPEAL OR MODIFY, WITHDRAW ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING OF THE APPEAL. 2. GROUND NO. 1 WAS NOT SERIOUSLY CONTENDED AT THE TIME OF HEARING AND IS THEREFORE DISMISSED. 3. GROUND NOS. 2 TO 4 OF ASSESSEES APPEAL ARE AGAINST THE ACTION OF LD. CIT(A) IN DISALLOWING RS.40,00,537/- BEING LOSS ON DERIVATIVE TRANSACTION AS UNEXPLAINED CASH CREDIT. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING AN INCOME OF RS.6,86,860/-. THE SAID RETURN WAS ASSESSED TO AN INCOME OF RS.15,01,900/- BY AN ORDER U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE ORDER DATED 27.12.2011. IN THE SAID ORDER THE AO DISALLOWED THE LOSS ON DERIVATIVE TRANSACTION OF RS.40,00,537/- AS CLAIMED BY THE ASSESSEE. ACCORDING TO AO, ON PERUSAL OF THE DETAILS FURNISHED BY THE ASSESSEE COMPANY I.E. IN THE P&L ACCOUNT THE ASSESSEE HAD DEBITED RS.40,00,537/- AS DERIVATIVE LOSS. TO VERIFY THIS TRANSACTION, NOTICE U/S. 133(6) OF THE ACT WAS ISSUED TO NATIONAL STOCK EXCHANGE, WHICH IS AS UNDER: DURING THE FINANCIAL YEAR 2008-09, THE ABOVE COMPANY I.E. M/S. HILL QUEEN INVESTMENT PVT. LTD. PAN-AAACH2324P HAS MADE CERTAIN TRANSACTIONS THROUGH M/S. AMI SECURITIES, MEMBER NSE (SEBI) REGN. NO. INB230875534) HAS DEALT ON THE NATIONAL STOCK EXCHANGE ON THE FUTURES & OPTION SEGMENT. YOU ARE REQUESTED TO PROVIDE US THE DETAIL OF TRANSACTIONS MADE BY THE ABOVE M/S. HILL QUEEN INVESTMENT PVT. LTD. ON THE EXCHANGE FOR THE PERIOD 01.04.2008 TO 31.03.2009 ON BOTH THE CAPITAL MARKET AND F.O. SEGMENT OF YOUR EXCHANGE ALONG WITH THE TOTAL SECURITY TRANSACTION TAX PAID BY THE ABOVE ASSESSEE. IN REPLY, THE NSE STATED THAT NO TRADES ARE FOUND TO BE EXECUTED FOR THE COMBINATION OF MEMBER AND CLIENT CODE DURING THE PERIOD FROM APRIL 01, 2008 TO MARCH 31, 2009 IN THE FUTURES & OPTIONS SEGMENT. THERE WERE NO STT DETAILS FOR TM CODE AND CLIENT CODE COMBINATION DURING THE PERIOD FROM APRIL 01, 2008 TO MARCH 31, 2009 IN THE 3 ITA NO. 2192/KOL/2018 HILL QUEEN INVESTMENT PVT. LTD.., AY 2009-10 FUTURES & OPTIONS SEGMENT. ON RECEIPT OF THE ABOVE REPLY, THE AO NOTED THAT NO TRADES ARE FOUND TO BE EXECUTED FOR THE COMBINATION OF M/S. AMI SECURITIES I.E. THE MEMBER AND M/S. HILL QUEEN INVESTMENT PVT. LTD. I.E. THE CLIENT DURING THE PERIOD FROM 01.04.2008 TO 31.03.2009. ACCORDINGLY, THE AO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE COMPANY AS TO WHY ITS CLAIM OF LOSS IN DERIVATIVES SHALL NOT BE DISALLOWED AND ADDED BACK TO ITS TOTAL INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED ITS REPLY WHICH IS AS UNDER: I) THAT YOUR ASSESSEE COMPANY HAD ENTERED INTO F&O TRANSACTION WITH BROKER M/S.AMI SECURITIES BY SIGNING CLIENT AGREEMENT FORM AND KYC FORM ETC. AS REQUIRED AND THE TRANSACTION HAS BEEN DONE THROUGH REGISTERED BROKER. -, II) THAT WE ARE SUBMITTING COPY OF CERTIFICATE RECEIVED FROM THE BROKER SHOWING THE LOSS AND GAIN ALONG WITH PAYMENT DETAIL FOR YOUR RECORD. COPY OF ALL CONTRACT NOTES HAS ALREADY BEEN FILED DURING THE COURSES OF HEARING FOR EXAMINING THEGENUINENESS OF TRANSACTION. III)THAT LOSS OF RS.40,00,537/- INCLUDES PROFIT OF RS. 84,664/- WHICH IS EARNED BY YOUR ASSESSEE AND HAS BEEN OFFERED FOR TAXATION THUS PROFIT ON DERIVATIVE TRANSACTION IS RS,84,664/- AND LOSS ON DERIVATIVE TRANSACTION IS RS.40,85,201/- AND NET FIGURE HAS BEEN SHOWN IN THE PROFIT & LOSS ACCOUNT UNDER THE HEADING LOSS ON DERIVATIVES OF RS.40, 00,537/-. IV)THAT THERE MIGHT BE SOME TECHNICAL MISTAKE IN THE SYSTEM OF NSE WHICH NOT RECOLLECT THE TRANSACTION IN THE YEAR. THUS, THE ASSESSEE COMPANY CLAIMED THAT IT HAS SUFFERED A LOSS ON DERIVATIVES AND ALSO OFFERED GAIN AS WELL FOR TAXATION. AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT IN THE NAME OF THEBROKER M/S. AMI SECURITIES WHICH WAS RETURNED BACK BY THE POSTAL AUTHORITY AS IT WAS UNABLE TO SERVE THE SAME, SO, ACCORDING TO AO, THE IDENTITY OF THE SAID BROKER IS NOT PROVED. ACCORDING TO AO, 4 ITA NO. 2192/KOL/2018 HILL QUEEN INVESTMENT PVT. LTD.., AY 2009-10 ONCE FROM NSE THE CLINCHING EVIDENCE IS RECEIVED BY HIS OFFICE AND TAKEN ON RECORD AND PLACED THE SAME BEFORE THE ASSESSEE, THE ONUS OF PROOF SHIFTED TO THE ASSESSEE. HOWEVER, ACCORDING TO AO, THE ASSESSEE MERELY REITERATED ITS DEPENDENCE ON THE PAPERS, RECITALS PROVIDED BY THE BROKERS WHICH CANNOT BE ACCEPTED AS THE EVIDENCE AT STAGE IN SUPPORT OF ITS CLAIM OF LOSS ON DERIVATIVE TRADING (F& 0) OF RS.40,00,537/- ON THE CONTRARY, THE WHEREABOUTS OF THE SAID BROKER IS ALSO NOT KNOWN TO EVEN TO THE POSTAL AUTHORITY. ACCORDING TO AO, THE ASSESSEE'S CONTENTION THAT THERE MIGHT BE SOME MISTAKE ON THE PART OF THE NSE IS ALSO NOT ACCEPTABLE IN ABSENCE OF ANY CORROBORATIVE EVIDENCE. THEREFORE, THE ASSESSEE'S EXPLANATION WAS NOT ACCEPTABLE AND THE ASSESSEE'S CLAIM OF LOSS ON DERIVATIVE AMOUNTING RS. 40,00,537/- WAS DISALLOWED. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO UPHELD THE ACTION OF THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED, ASSESSEE IS BEFORE US. 3. AFTER HAVING HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIALS AVAILABLE ON RECORD, IT IS NOTED THAT DURING THE APPELLATE PROCEEDINGS THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO WHO FORWARDED THE REMAND REPORT DATED 19.12.2013 WHICH IS REPRODUCED AS UNDER: 5 ITA NO. 2192/KOL/2018 HILL QUEEN INVESTMENT PVT. LTD.., AY 2009-10 4. THE CONFIRMATION LETTER OF BROKER M/S. AMI SECURITIES DATED 10.12.2013 PURSUANT TO NOTICE OF AO U/S. 133(6) IS REPRODUCED AS UNDER: 6 ITA NO. 2192/KOL/2018 HILL QUEEN INVESTMENT PVT. LTD.., AY 2009-10 5. UPON RECEIPT OF THE REMAND REPORT, IT IS NOTED THAT THE LD. CIT(A) EMBARKED ON HIS OWN TO MAKE INDEPENDENT ENQUIRIES AND GATHERED FROM THE DATA AVAILABLE IN THE 7 ITA NO. 2192/KOL/2018 HILL QUEEN INVESTMENT PVT. LTD.., AY 2009-10 PUBLIC DOMAIN THAT THE BROKER M/S AMI SECURITIES WAS EXPELLED BY NSE IN 2004. THE RELEVANT CIRCULAR ISSUED BY THE SEBI WAS EXTENSIVELY REPRODUCED IN THE ASSESSMENT ORDER. THEREAFTER THE LD. CIT(A) MADE HIS OWN INDEPENDENT ENQUIRY FROM THE NSE U/S 133(6) OF THE ACT. IN THEIR REPLY DATED 26.03.2018 TO THE LD. CIT(A), THE NATIONAL STOCK EXCHANGE REITERATED THAT THEY WERE UNABLE TO LOCATE ANY TRANSACTION DETAILS UNDER THE PAN OF THE APPELLANT IN ANY OF THEIR THREE MARKET SEGMENTS AND ALSO EXPRESSED THEIR INABILITY TO VERIFY THE GENUINENESS OF THE CONTRACT NOTES ISSUED BY THEIR TRADING MEMBER TO ITS CLIENT. IT IS NOTED THAT VIDE NOTICE DATED 19.04.2018 THE LD. CIT(A) HAD SHOW-CAUSED THE APPELLANT TO EXPLAIN ITS CASE WITH REFERENCE TO THIS FRESH MATERIAL & EVIDENCE. HOWEVER THE NOTICE RETURNED UN-SERVED ANDTHE LD. CIT(A) PROCEEDED TO DECIDE THE APPEAL EX-PARTE. ON THESE FACTS THE LD. AR SUBMITTED THAT SUCH HASTY ACTION OF THE LD. CIT(A) TO ADJUDICATE THE APPEAL WITHOUT GIVING SUFFICIENT OPPORTUNITY OF HEARING TO THE APPELLANT WAS UNJUSTIFIED AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND PRAYED THAT THE MATTERS BE RESTORED BACK TO THE FILE OF THE AO. PER CONTRA THE LD. DR SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 6. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE, IT IS NOTED FROM THE REPLY OF THE NSE DATED 26.03.2018 THAT IT HAD NOWHERE DENIED THAT THE BROKER, M/S AMI SECURITIES WAS NOT ITS TRADING MEMBER DURING THE RELEVANT FINANCIAL YEAR 2012-13 OR THAT THE CONTRACT NOTES ISSUED BY THE TRADING MEMBER WAS FAKE OR IN-GENUINE. ACCORDINGLY THE ADVERSE INFERENCE DRAWN BY THE LD. CIT(A) REFERRING TO THIS REPLY OF THE NSE IS FOUND TO BE PRESUMPTUOUS. THE LD. AR ALSO POINTED OUT THE LD. CIT(A)S REFERENCE TO THE CIRCULAR NO. 421 DATED 10.09.2004 ISSUED BY THE SEBI EXPELLING THE BROKER M/S AMI SECURITIES PENDING INVESTIGATION ALSO WARRANTED VERIFICATION AS TO ITS FINAL OUTCOME. I ALSO FIND MERIT IN THE CONTENTION OF THE LD. AR THAT NO ADEQUATE AND FAIR OPPORTUNITY WAS AFFORDED TO THE APPELLANT TO CROSS-EXAMINE NSE IN RESPECT OF THE REPLIES SUBMITTED BY THEM BEFORE BOTH THE LOWER AUTHORITIES. I FURTHER NOTE THAT THESE MATERIALS WHICH WERE INDEPENDENTLY COLLECTED BY THE LD. CIT(A) WAS NEITHER SERVED ON THE APPELLANT NOR PUT TO THE NOTICE OF THE AO. I ALSO NOTE THAT THE FINDINGS OF THE LD 8 ITA NO. 2192/KOL/2018 HILL QUEEN INVESTMENT PVT. LTD.., AY 2009-10 CIT(A) WERE CONTRARY TO THE MATERIAL INFORMATION GATHERED BY THE AO IN REMAND PROCEEDINGS. AS SUCH THERE IS APPARENT CONTRADICTION BETWEEN THE INFORMATION WHICH THE AO GATHERED IN REMAND PROCEEDINGS BY ISSUING NOTICE U/S 133(6) AND THE FINDING RECORDED BY THE LD. CIT(A) WHICH NEEDS TO BE RECONCILED. I ALSO FIND MERIT IN THE LD. ARS CONTENTION THAT THE PRINCIPLES OF NATURAL JUSTICE DEMANDED THAT THE LD. CIT(A), BEING A JUDICIAL AUTHORITY, OUGHT TO HAVE AFFORDED THE APPELLANT SUFFICIENT AND FAIR OPPORTUNITY TO REBUT THE NEW INFORMATION COLLECTED INDEPENDENTLY BY THE LD. CIT(A) AND FURNISH ITS EXPLANATION ALONG WITH SUPPORTING DOCUMENTATION AND SIMULTANEOUSLY PUT THESE NEW FACTS & MATERIAL ALONG WITH THE APPELLANTS REBUTTALS TO THE NOTICE OF THE AO. THEREFORE IN THE INTERESTS OF FAIR PLAY & JUSTICE AND ALSO IN THE FITNESS OF THE MATTER, I DEEM IT FIT AND APPROPRIATE, TO REMAND THIS ISSUE BACK TO THE FILE OF THE AO FOR DE-NOVO ADJUDICATION. THE APPELLANT IS AT LIBERTY TO ADDUCE ANY EXPLANATION OR EVIDENCE IN SUPPORT OF ITS CLAIM BEFORE THE AO. GROUND NOS. 3 TO 4 ARE THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO. 5 IS AGAINST THE LEVY OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT. THE SAID GROUND IS CONSEQUENTIAL IN NATURE. THE LEVY OF INTEREST IS MANDATORY AND THE AO IS ACCORDINGLY DIRECTED TO CHARGE INTEREST IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL OF ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 JUNE, 2019 SD/- (A. T. VARKEY) JUDICIAL MEMBER DATED: 17 JUNE, 2019 JD.(SR.P.S.) 9 ITA NO. 2192/KOL/2018 HILL QUEEN INVESTMENT PVT. LTD.., AY 2009-10 COPY OF THE ORDER FORWARDED TO: 1 APPELLANT HILL QUEEN INVESTMENT PRIVATE LIMITED, SUROBALA APARTMENTS, FLAT NO. 202, 3 RD FLOOR, BLOCK-B, REKHJUANI BHATINDA, RAJARHAT, KOLKATA-700135. 2 RESPONDENT ITO, WARD-5(4), KOLKATA. 3 4 5 CIT(A)-8, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR