Smt.Sandhya T.N., Tiptur V. The Income Tax Officer Ward-1 , Tiptur

ITA 2346/BANG/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2448 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 09-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH R GHALE TO D EPT
• Assessee Lawyers: SOUMYA K
• Keywords: Peak credit; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN , ACCOUNTANT MEMBER ITA NO.2346/BANG/2018 ASSESSMENT YEAR : 2009-10 SMT. SANDHYA T.N, LEGAL HEIR OF LATE K.R MALLIKARJUNASWAMY, PROP : M/S BASAVESHWARA JEWELLERS & BANKERS, HULIYAR, C.N HALLI, TIPTUR-572 201. PAN ADJPM 3668 G VS. THE INCOME-TAX OFFICER, WARD-1, TIPTUR. APPELL ANT RESPONDENT APPELLANT BY : SMT. SOUMYA K, ADVOCATE RESPONDENT BY : SHRI GANESH R GHALE, ADVOCATE STANDING COUNSEL TO D EPT. DATE OF HEARING : 28.11.2019 DATE OF PRONOUNCEMENT : 03.12.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 04-06-2018 PASSED BY LD CIT(A)-7, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2009-10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION MADE BY THE AO AND FURTHER ENHANCING THE SAME. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN JEWELLERY AND PAWN BROKING BUSINESS. THE ASSESSEE HAS ALSO CARRIED ON DERIVAT IVE TRADING IN ITA NO.2346 /BANG/2018 PAGE 2 OF 7 GOLD AND SILVER COMMODITIES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEES TURNOVER IN DERIVATIVE TRANSACTIONS WAS RS.196.49 CRORES. THE AO NOTICED THAT THE ASSESSEE HAS START ED DERIVATIVE TRADING BY INVESTING A SUM OF RS.19,07,500/- AS MAR GIN MONEY. HE FURTHER NOTICED THAT THE ASSESSEE HAS TO PAY MARGIN MONEY @ 7% OF THE VALUE OF TRANSACTIONS AS PER TRADING RULES. AC CORDINGLY THE AO WORKED OUT PEAK CREDIT OF TRADING ACTIVITY AT RS.6, 89,37,371/-. THE MARGIN MONEY @ 7% ON THE ABOVE SAID PEAK AMOUNT WAS WORKED OUT AT RS.48,25,616/-. THE AO WORKED OUT THE SHORT AGE IN THE MARGIN MONEY AS UNDER:- 7% MARGIN MONEY ON PEAK CREDIT - 48,25,616 LESS:- INITIAL INVESTMENT IN TRADING ACTIVITY - 19 ,03,520 -------------- BALANCE 29,22,096 LESS:- SOURCES AVAILABLE. 20,34,850 ------------- BALANCE 8,87,246 ========= THE AO CONSIDERED THE ABOVE SAID AMOUNT OF RS.8,87, 246/- AS MARGIN MONEY FOR WHICH SOURCES WERE NOT AVAILABLE W ITH THE ASSESSEE. ACCORDINGLY HE ADDED THE SAME TO THE TOT AL INCOME OF THE ASSESSEE. 3. THE LD CIT(A) CONFIRMED THE SAME. HE FURTHER NOTICED THAT THE AO HAS DEDUCTED THE INITIAL INVESTMENT OF RS.19,03, 520/- MADE BY THE ASSESSEE AGAINST THE MARGIN MONEY DEPOSIT WORKE D OUT BY HIM. THE LD CIT(A) TOOK THE VIEW THAT THE SAME ACTUALLY REPRESENTED INITIAL PURCHASE MADE BY THE ASSESSEE. THE INITIAL PURCHASE AMOUNT AS PER DETAILS OF PURCHASES WAS RS.19,03,141 /-. ACCORDINGLY, THE LD CIT(A) TOOK THE VIEW THAT THE A O WAS NOT CORRECT ITA NO.2346 /BANG/2018 PAGE 3 OF 7 IN ALLOWING DEDUCTION OF RS.19,03,141/- AGAINST THE MARGIN MONEY DEPOSIT COMPUTED ON PEAK CREDIT. ACCORDINGLY HE DI RECTED THE AO TO ENHANCE THE ADDITION BY RS.19,03,141/-. THE ASSESS EE IS AGGRIEVED BY THE ORDER SO PASSED BY LD CIT(A). 4. THE LD A.R SUBMITTED THAT THE BOOKS OF ACCOU NTS OF THE ASSESSEE HAVE BEEN AUDITED. FURTHER THE ASSESSEE H AS NOT PAID ANY MARGIN MONEY AS PRESUMED BY THE AO, AS THE ASSESSEE WAS LIVING IN A SMALL TOWN AND WAS DEALING WITH A KNOWN BROKER. A CCORDINGLY SHE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN MAKING A DDITION TOWARDS MARGIN MONEY ON ESTIMATED BASIS. SHE FURTHER SUBMI TTED THAT THE LD CIT(A) HAS ENHANCED THE ADDITION WITHOUT GIVING ANY ENHANCEMENT NOTICE AND WITHOUT PROVIDING OPPORTUNIT Y TO THE ASSESSEE. ACCORDINGLY SHE SUBMITTED THAT THE ACTIO N OF THE LD CIT(A) IS IN VIOLATION OF PROVISIONS OF SEC. 251(2) OF THE ACT. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSEE HAS NOT SUPPORTED HIS CLAIM THAT HE DID NOT PAY ANY MAR GIN MONEY. HE SUBMITTED THAT THE BROKERS ARE GOVERNED BY THE RULE S GOVERNING THE BUSINESS OF TRADING IN DERIVATIVES, WHICH STIPULATE THAT 7% OF THE AMOUNT SHALL BE COLLECTED AS MARGIN MONEY. THIS FA CT WAS BROUGHT OUT BY THE AO IN THE REMAND REPORT SUBMITTED TO LD CIT(A). HE FURTHER SUBMITTED THAT THE AUTHORIZED REPRESENTATIV E OF THE ASSESSEE HAS APPEARED BEFORE LD CIT(A) AND HENCE IT IS NOT C ORRECT TO SAY THAT THE ASSESSEE WAS NOT GIVEN OPPORTUNITY BEFORE ENHAN CING THE INCOME. ITA NO.2346 /BANG/2018 PAGE 4 OF 7 6. I HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. I NOTICE THAT THE LD CIT(A) HAS CALLED FOR A REMAND REPORT F ROM THE AO DURING THE COURSE OF APPELLATE PROCEEDINGS AND THE AO HAS REPORTED THAT THERE IS REQUIREMENT OF DEPOSITING MARGIN MONE Y @ 7% AS PER RULES GOVERNING THE TRADE. THE LD CIT(A) HAS ALSO MADE FOLLOWING OBSERVATIONS:- AT THE OTHER HAND, THE APPELLATE HAS SUBMITTED T HAT HE WAS NOT REQUIRED TO DEPOSIT ANY MARGIN MONEY DUE TO HIS CREDIT WORTHINESS AND TRACK RECORD WITH THE BROKER. HOWEVER, NOTHING, SUCH AS ANY CORRESPONDENCE WITH THE TRADIN G AGENT AS REGARDS WAIVER OF MARGIN MONEY, HAS BEEN BROUGHT ON RECORD TO SUBSTANTIATE THIS CLAIM OF THE APPELLANT. THUS, THE APPELLANT HAS ADMITTED THAT THE REQUIREMENT OF DEPO SITING MARGIN MONEY DOES EXIST BUT HE WAS EXEMPTED FROM TH AT REQUIREMENT. IN VIEW OF ABOVE FACTS, IT IS OBSERVE D THAT IN ABSENCE OF ANY SUPPORTING EVIDENCE, IT IS NOT POSSI BLE TO ACCEPT THE CLAIM OF THE APPELLANT THAT HE WAS NOT R EQUIRED TO DEPOSIT ANY MARGIN MONEY FOR HIS BUSINESS OF TRADIN G IN DERIVATIVES. 7. BEFORE ME ALSO, THE ASSESSEE DID NOT PRODUCE ANY DOCUMENT/EVIDENCE TO SHOW THAT HE DID NOT MAKE ANY MARGIN MONEY DEPOSIT AS COMPUTED BY THE AO. THE ASSESSEE HAS FURNISHED LEDGER ACCOUNT COPY IN THE NAME OF THE ASSESSEE AS AVAILABLE IN THE BOOKS OF M/S PRASIDDHI MULTI COMMODITIES. A PERUSA L OF THE SAME WOULD SHOW THAT THE ABOVE SAID BROKER IS LOCATED AT NO.300/44, 10 TH MAIN, 4 TH BLOCK, RAJAJI NAGAR 560 002, WHICH MEANS THAT TH E BROKER OF THE ASSESSEE WAS LOCATED IN BANGALORE AND NOT IN A SMALL ITA NO.2346 /BANG/2018 PAGE 5 OF 7 TOWN AS CLAIMED BY THE ASSESSEE. HENCE, I AM UNABL E TO COMPREHEND AS TO WHY THE ASSESSEE COULD NOT PROCURE A CERTIFICATE FROM THE BROKER WITH REGARD TO THE QUERY RAISED BY THE AO. AT THE SAME TIME, I NOTICE THAT THE AO HAS ARRIVED AT THE MARGIN MONEY DEPOSIT ON ESTIMATED BASIS. THE ASSESSING OFFICER ALSO DID NOT ATTEMPT TO COLLECT THE DETAILS OF MARGIN MONEY DEPO SIT, IF ANY, PAID BY THE ASSESSEE BY ISSUING NOTICES/SUMMONS TO M/S P RASIDDHI MULTI COMMODITIES, REFERRED ABOVE. 8. I ALSO NOTICE THAT THE LD CIT(A) HAS ENHANCE D THE ADDITION BY RS.19,03,141/-. WHILE THE DEPOSIT CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE INITIALLY, WHICH WAS SET OFF BY THE AO AGA INST HIS OWN WORKINGS, WAS RS.19,03,520/-, THE LD CIT(A) HAS PRE SUMED THAT THE SAME REPRESENTS FIRST PURCHASE MADE BY THE ASSESSEE , EVEN THOUGH THE FIGURES OF DEPOSIT AND FIRST PURCHASE DID NOT T ALLY, I.E., THE AMOUNT OF FIRST PURCHASE WAS RS.19,03,141/-, WHILE THE DEPOSIT AMOUNT WAS RS.19,03,520/-. AS NOTICED EARLIER, THE LD CIT(A) HAS ENHANCED THE ADDITION BY RS.19,03,141/-, BEING THE VALUE OF FIRST PURCHASE. THE ASSESSEE HAS ALSO CONTENDED THAT THE LD CIT(A) HAS NOT GIVEN OPPORTUNITY BEFORE ENHANCING THE ADDITION . 9. ACCORDINGLY I AM OF THE VIEW THAT THE ENHANC EMENT MADE BY LD CIT(A) IS NOT JUSTIFIED, AS THE REASONING/BASIS OF ENHANCEMENT WAS ONLY PRESUMPTION ENTERTAINED BY THE LD CIT(A). ACC ORDINGLY I DELETE THE ENHANCEMENT MADE BY LD CIT(A). HOWEVER, SINCE THE ASSESSEE HAS FAILED TO FURNISH ANY MATERIAL/EVIDENCE TO CONT ROVERT THE ADDITION MADE BY THE AO IN THE ASSESSMENT ORDER, I AM OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE SAID ADDITION. ITA NO.2346 /BANG/2018 PAGE 6 OF 7 10. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DECEMBER, 2019. SD/- (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, THE 3RD DECEMBER, 2019. /VMS/ COPY TO: 1. APPELLANT (S) / CROSS OBJECTOR(S) 2. RESPONDENT(S) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE ITA NO.2346 /BANG/2018 PAGE 7 OF 7 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED