ACIT-9(3)(2), MUMBAI V. GLOBAL JEWELLERY PYT LTD., MUMBAI

ITA 2657/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8585 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 04-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHIR RAM TIWARI
• Keywords: Opportunity of being heard; Transactions in derivatives; Speculation loss; Revised return
• Section: 143(3); 43(5); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2657/MUM/2016 ASSESSMENT YEAR: 2012 - 13 DCIT - 9(3)(2) 418, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020. VS. M/S GLOBAL JEWELLERY PVT. LTD. G - 49, GEM & JEWELLERY COMPLEX, SEEPZ, ANDHERI (E), MUMBAI - 400096. PAN NO. AABCG5222E APPELLANT RESPONDENT REVENUE BY : SHIR RAM TIWARI, DR ASSESSEE BY : NONE DATE OF HEARING : 29 /08/2017 DATE OF PRONOUNCEMENT : 16/11/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE . THE REL EVANT ASSESSMENT YEAR IS 2012 - 13 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 1 6, MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. WE FIND FROM THE RECORD THAT THERE WAS NO COMPLIANCE EITHER BY THE ASSESSEE OR ITS AUTHORIZED REPRESENTATIVE TO THE NOTICE ISSUED BY THE REGISTRY FIXING THE CASE FOR HEARING ON 29.11.2016, 23.01.2017, 14.03.2017, 18.05.2017, 24.05.2017, 04.07.2017 AND 24.07.2017. 3. M/S GLOBAL JEWELLERY ITA NO. 2657/MUM / 2016 2 THE GROUND RAISED BY THE REVENUE IN THIS APPEAL IS AGAI NST THE ORDER OF THE LD. CIT(A) HOLDING THAT GOLD IS A DERIVATIVE AND THE TRANSACTIONS ARE CARRIED OUT THROUGH RECOGNIZED STOCK EXCHANGE AND THE CASE OF THE ASSESSEE IS COVERED BY PROVISO ( D) TO SECTION 43(5) OF THE ACT. IT IS THE CONTENTION OF THE REVENUE THAT THE LD. CIT(A) ERRED IN LAW AS WELL AS IN FACTS IN OVERLOOKING THE FACTUAL OBSERVATION BY THE AO IN THE ASSESSMENT ORDER THAT THE HEDGING COVER IN SEVERAL INDIVIDUAL DAYS EXCEED THE STOCK OF THE ASSESSEE BY NEARLY TEN TIMES AND THUS THE CONTENTION OF THE ASSESSEE THAT THIS TRADING HAS BEEN DONE ONLY TO HEDGE AGAINST PRICE FLUCTUATION RISK IS UNTENABLE, SINCE THE HEDGING COVER SHOULD COMMENSURATE WITH THE STOCK - IN - TRADE OF THE ASSESSEE. ALSO IT IS STATED BY THE REVENUE THAT THE LD. CIT(A) ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT SAID TRANSACTIONS WERE ELIGI BLE TRANSACTIONS AS PER EXPLANATION 1 TO CLAUSE (D) OF 45(3); NO T APPRECIATING THAT RELEVANT TIME - STAMPED CONTRACT NOTES PERTAINING TO GOLD TRADING WERE NOT SU BMITTED BY THE ASSESSEE AND THAT A PREREQUISITE TO QUALIFY AS AN ELIGIBLE TRANSACTION, AS PER SAID EXPLANATION IS THAT THE TRANSACTION MUST BE SUPPORTED BY A TIME - STAMPED CONTRACT NOTE ISSUED BY THAT BROKER/SUB - BROKER. 4 . BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY FILE D ITS RETURN OF INCOME FOR THE AY 2012 - 12 ON 30.09.2012 DECLARING TOTAL INCOME OF RS.1,51,980/ - . A REVISED RETURN OF INCOME WAS FILED ON 10.12.2012 DECLARING LOSS OF RS.72,28,935/ - . THE ASSESSING OFFICER (AO) MADE AN ASSESSMENT U/S 143(3) ON 28 .02.2015 ASSESSING THE INCOME AT RS.21,39,100/ - AFTER MAKING DISALLOWANCE OF SPECULATION LOSS OF RS.92,96,787/ - . M/S GLOBAL JEWELLERY ITA NO. 2657/MUM / 2016 3 5 . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER REFERRING TO SECTION 43(5)(D) HA S HELD THAT (I) GOLD IS CLASSIFIED AS DERIVATIVE ACCORDING TO CLAUSE (AC) OF SECTION 2 OF SECURITIES CONTRACT (REGULATION) ACT, 1956, (II) AS LONG AS THE TRANSACTIONS IN DERIVATIVES ARE BONA FIDE ON SCREEN BASED SYSTEMS IN ACCORDANCE WITH THE RULES, REGULA TIONS AND BYE LAWS OF THE RESPECTIVE GOVERNING BODIES AND CARRIED OUT THROUGH RECOGNIZED STOCK EXCHANGES, THESE TRANSACTIONS COULD NOT BE HELD TO BE SPECULATIVE TRANSACTION. THE LD. CIT(A) THUS HELD THAT THE CASE OF THE ASSESSEE IS COVERED BY THE PROVIS O (D) TO SECTION 43(5) OF THE ACT. 6. BEFORE US, THE LD. DR RELIES HEAVILY ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DLF COMMERCIAL DEVELOPERS LTD . (2013) 35 TAXMANN.COM 280 (DEL). HE SUPPORTS THE ORDER PASSED BY THE AO. 7. AS MENTIONED EARLIER THERE WAS NO COMPLIANCE BY THE ASSESSEE TO THE NOTICE ISSUED BY THE REGISTRY FIXING THE CASE FOR HEARING BEFORE THE TRIBUNAL. THEREFORE, AFTER HEARING THE LD. DR AND PERUSING THE MATERIALS ON RECORD, WE GIVE THE REASONS FOR OUR DECISIONS BELOW. IN THE CASE OF DLF COMMERCIAL DEVELOPERS LTD . (SUPRA) THE HONBLE DELHI HIGH COURT HAS HELD THAT IN CASE OF CERTAIN TYPES OR CLASSES OF COMPANIES, LOSS IN TRADING OF DERIVATIVES IS SPECULATION LOSS, INELIGIBLE TO BE CARRIED FORWARD. WE FIND THAT THE ASSESSEE FAILED TO FILE BEFORE THE AO THE RELEVANT TIME - STAMPED CONTRACT NOTES PERTAINING TO GOLD TRADING. THERE IS NO M/S GLOBAL JEWELLERY ITA NO. 2657/MUM / 2016 4 DENYING THE FACT THAT THE SAID TRANSACTION MUST BE SUPPORTED BY A TIME - STAMPED CONTRACT NOTE ISSUED BY THE BROKER/SUB - BROKER. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DOCUMEN TS/EVIDENCE LIKE CONTRACT NOTES BEFORE THE AO. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16/11/2017. SD/ - SD/ - ( D.T. GARASIA ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 16/11/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI