Sacheta Metals Ltd., Dist.Sabarkantha V. The DCIT, Sabarkantha Circle, Himatnagar

ITA 2704/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9884 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 04-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Speculation loss; Revised return; Speculative transactions; Set aside
• Section: 43(5); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 2704/AHD/2017 & C.O. NO. 03/AHD/18 (ASSESSMENT YEAR: 2014-15) M/S. SACHETA METALS LTD. PLOT NO. 3-8-9, OPP. COLLEGE ROAD MAHIYAL, TALOD PRATIJ, SABARKANTHA DEPUTY COMMISSIONER OF INCOME TAX, SABARKANTHA CIRCLE, HIMATNAGAR V/S V/S DEPUTY COMMISSIONER OF INCOME TAX, SABARKANTHA CIRCLE, HIMATNAGAR M/S. SACHETA METALS LTD. PLOT NO. 3-8-9, OPP. COLLEGE ROAD MAHIYAL, TALOD PRATIJ, SABARKANTHA (APPELLANT) (RESPONDENT) PAN: AACCS 8742C APPELLANT BY : SHRI SUNIL TALATI, A.R. RESPONDENT BY : SHRI JAMES KURIAN, SR. D.R. ( )/ ORDER DATE OF HEARING : 06 -05-201 9 DATE OF PRONOUNCEMENT : 13-05-2019 PER AMARJIT SINGH, A.M. 1. THIS APPEAL BY THE ASSESSEE AND THE CROSS OBJECTION OF THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-2, AHMEDABAD DA TED 13.10.2017 PERTAINING TO A.Y. 2014-15. ITA NO. 2704 /AHD/2017 & C.O. NO. 03/ AHD/2018 . A.Y. 2014-15 2 2. ALL THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE A GAINST THE ORDER OF LD. CIT(A)- 2, AHMEDABAD IN RESTRICTING THE ADDITION MADE BY TH E ASSESSING OFFICER OF RS. 2,11,47,128/- BEING HEDGING LOSS TO RS. 1,14,06,103 /- TREATING AS SPECULATION LOSS. ALL THE GROUNDS OF APPEAL IN THE C.O. OF THE REVENUE ARE RELATING TO SUPPORTING THE ORDER OF LD. CIT(A) IN HOLDING THAT SUCH LOSSES AS SPECULATION LOSSES AND NOT HEDGING LOSSES. 3. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RETURN OF INCOME ON 29.09.2014 DECLARING TOTAL INCOME OF RS. 88,71,670/-. THEREAFT ER FILED REVISED RETURN OF INCOME ON 27.03.2016 DECLARING TOTAL INCOME OF RS. 87,31,700/-. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S 143(2) ON 28.08.2015. 4. DURING THE COURSE OF ASSESSMENT, THE A.O. HAS NOTI CED THAT ASSESSEE COMPANY HAS DEBITED PROFIT AND LOSS ACCOUNT BY AN AMOUNT OF RS. 1,41,06,103/- ON ACCOUNT OF HEDGING LOSS. THEREFORE, THE ASSESSEE WA S ASKED TO EXPLAIN THE COMMODITY EXCHANGE TRANSACTION. THE ASSESSEE HAS EX PLAINED VIDE LETTER DATED 13.12.2016 AS REPRODUCED AT PAGE NO. 2 TO 3 OF ASSE SSMENT ORDER STATING THAT IT HAS UNDERTAKEN MCX TRANSACTION ONLY FOR THE PURPOSE OF HEDGING ITS COMMODITY PRICE. IT WAS ALSO EXPLAINED THAT DURING F.Y. 2012- 13, THERE WAS SOME OF CONTRACT WHICH WERE PENDING FOR SQUARE OFF SO IT HA S NOT BOOKED OUT CONTINGENT LOSS OF RS. 2,11,47,126/- AND CARRIED FORWARD THE S AME TO F.Y. 2013-14. IT IS ALSO SUBMITTED THAT ASSESSEE COMPANY HAS NOT BOOKED CONTINGENT LOSS OF RS. 2,42,26,500/- TO THE EXTENT OF CONTRACT PENDING FOR SQUARE OFF AND THEREFORE IT HAS DEBITED ONLY RS. 1,41,06,103/- FOR HEDGING LOSS . THE A.O. HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND STATED THAT ASS ESSEE HAS BOOKED LOSS OF RS. ITA NO. 2704 /AHD/2017 & C.O. NO. 03/ AHD/2018 . A.Y. 2014-15 3 2,11,47,128/- WHICH PERTAIN TO PRECEDING YEAR. THER EFORE, SAME WAS DISALLOWED BY TREATING AS PRIOR PERIOD EXPENSES AND ADDED TOTA L INCOME TO THE ASSESSEE. 5. AGGRIEVED, ASSESSEE HAS FILED BEFORE THE LD. CIT(A) . THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE AMOUNT OF RS. 1, 41,06,103/- STATING THAT THE TRANSACTION UNDERTAKEN BY THE ASSESSEE WERE IN THE NATURE OF SPECULATION TRANSACTION WITHIN THE MEANING OF SECTION 43 SUB-SE CTION (5) OF THE ACT. 6. DURING THE COURSE OF APPELLATE PROCEEDING BEFORE US . THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING DETAIL AND SUBMISSI ON MADE BEFORE THE A.O. AND LD. CIT(A) DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCEEDINGS. THE LD. COUNSEL HAS CONTENDED THAT THE LD. CIT(A) HAS I NCORRECTLY SUSTAIN THE ADDITION TO THE EXTENT OF RS. 1,41,06,103/- BY TREA TING IT AS SPECULATION LOSS WITHOUT DISPROVING THE MATERIAL AND SUBMISSION MADE BY THE ASSESSEE. HE HAS VEHEMENTLY CONTENDED THAT THE LD. CIT(A) HAS NOT GI VEN ANY SHOW CAUSE NOTICE TO THE ASSESSEE FOR TREATING THE AFORESAID HEDGING LOSS AS SPECULATION LOSS AND THE LD. CIT(A) HAS ALSO NOT PROVIDED RELEVANT REASO NING IN SUPPORT OF HIS FINDING. 7. ON THE OTHER HAND, LD. D.R. HAS SUPPORTED THE ORDER OF LD. CIT(A). 8. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERI AL ON RECORD CAREFULLY. IT IS UNDISPUTED FACT THAT THE A.O. HAS MADE DISALLOWANCE OF RS. 2,11,47,128/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. THE A.O. HAS STAT ED THAT THE ASSESSEE COMPANY HAS DEBITED AN AMOUNT OF RS. 1,41,06,103/- IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF HEDGING TRANSACTIONS HOWEVER, NO SUCH LOSS WAS CLAIMED DURING THE PRECEDING YEARS AND WITHOUT ANY DETAILED REASONING THE ASSESSEE HAS ITA NO. 2704 /AHD/2017 & C.O. NO. 03/ AHD/2018 . A.Y. 2014-15 4 TREATED THE OPENING BALANCE OF THE LOSS OF RS. 2,11 ,47,128/- FOR THE YEAR UNDER CONSIDERATION AS PRIOR PERIOD EXPENSES. 9. CONTRARY TO THE FINDINGS OF THE A.O., THE LD. CIT(A ) HAS HELD THAT THE ASSESSEE COMPANY HAS NOT CLAIMED THE OPENING BALANCE OF RS. 2,11,47,128/- IN THE YEAR UNDER CONSIDERATION, HOWEVER WITHOUT GIVING ANY REA SONING, THE LD. CIT(A) HAS TREATED THE MCX LOSS OF RS. 1,41,06,103/- CLAIMED B Y THE ASSESSEE COMPANY AS SPECULATION TRANSACTIONS WITHIN THE MEANING OF SECT ION 43(5) OF THE ACT. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVE, WE HAVE G ONE THROUGH THE MATERIAL ON RECORD AND NOTICED THAT THE LD. CIT(A) HAS NOT ASSI GNED ANY RATIOCINATION FOR TREATING THE IMPUGNED CLAIM OF HEDGING LOSS TO SPEC ULATIVE LOSS AS PROVIDED UNDER SECTION 43(5) OF THE I.T. ACT. IT IS NOTICED THAT THE LD. CIT(A) HAS NOT ISSUED ANY SHOW CAUSE AND NOT PROVIDED REQUIRED OPP ORTUNITIES TO THE ASSESSEE COMPANY. THE RELEVANT PART OF THE PROCEDURE TO BE A DHERED WHILE ADJUDICATING THE APPEAL AS PRESCRIBED IN SECTION 250 OF THE I.T. ACT ARE REPRODUCED AS UNDER: SEC. 250(5)- THE ORDER OF THE COMMISSIONER APPEAL D ISPOSING THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POIN TS FOR DETERMINATION THE DECISION THEREON AND THE REASON FOR THE DECISIO N . 10. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, WE CONSIDER THAT THE LD. CIT(A) HAS NOT GIVEN ANY REASON TO SUBSTANTIATE THA T HEDGING TRANSACTIONS CARRIED OUT BY THE ASSESSEE AS PER MCX ACCOUNT WERE SPECULATIVE TRANSACTIONS AS PRESCRIBED UNDER THE ACT. CONSIDERING THE AFORES AID ANOMALIES, WE SET ASIDE THE ISSUES IN THE APPEAL OF THE ASSESSEE TO THE FIL E OF THE LD. CIT(A) FOR DECIDING ITA NO. 2704 /AHD/2017 & C.O. NO. 03/ AHD/2018 . A.Y. 2014-15 5 A FRESH AFTER FREEZING OUT THE DEFICIENCIES AS DEMO NSTRATED ABOVE IN THIS ORDER. THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. 11. IN VIEW OF THE ABOVE FINDINGS, THE C.O. OF THE REVE NUE HAS BECOMES INFRUCTUOUS, THEREFORE, THE SAME STAND DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES AND C.O. OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 05- 2019 SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIALMEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 13/05/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD