The DCIT, Circle-3, Ahmedabad V. M/s. C.D. Commodities Broking Limited, Ahmedabad

ITA 286/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9446 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 07-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G C DAXINI
• Assessee Lawyers: A C SHAH
• Keywords: Business income; Additional evidence; Speculation loss; Corroborative evidences
• Section: 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ./ ITA NO. 286/AHD/2014 / ASSESSMENT YEAR : 2009-2010 DCIT, CIRCLE-3, AHMEDABAD VS M/S. C.D. COMMODITIES BROKING LIMITED, A-101/102, PREMIUM HOUSE, OPP. GANDHIGRAM RAILWAY STATION, ASHRAM ROAD, AHMEDBAAD PAN : AACCC 0854 B / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI G C DAXINI, SR DR ASSESSEE BY : SHRI A C SHAH, AR DATE OF HEARING : 0 7/12/2016 DATE OF PRONOUNCEMENT IN COURT : 17/01/20 17 / O R D E R THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-6, AHM EDABAD DATED 29.11.2013 FOR ASSESSMENT YEAR 2009-2010. 2. FOLLOWING GROUNDS ARE RAISED:- (1) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATIN G THE SPECULATIVE LOSS OF RS.33.15 LACS AS GENUINE DESPITE THE FACT THAT T HE ASSESSEE HAD FAILED TO FURNISH PROPER SUPPORTING EVIDENCES OF TRANSACTION LEADING TO SUCH LOSS. (2) THE CIT(A) HAS OVER LOOKED THE FACT THAT THE ASSESS EE BEING A MEMBER OF MCX/NCDEX HAS ENTERED INTO A SPECULATIVE TRANSACTIO N THROUGH ACEL AND SHOWN LOSS OF RS.35.15 LACS ON THE LAST DAY OF THE FINANCIAL YEAR WITHOUT PAYING ANY MARGIN MONEY. 3. LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE OR DER OF THE LD. ASSESSING OFFICER. SMC-ITA NO. 286 /AHD/2014 DCIT VS.M/S. CD COMMODITIES BROKING LTD AY : 2009-2010 2 4. LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, CONTENDS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BROKING AND DEALING IN COMMODITIES. IT FILED THE RETURN OF INCOME ADMITTING TOTAL INCOM E OF RS. 8,77,134/-. IT ADMITTED PROFIT OF RS.55,88,926/- FROM THE TRADING IN FUTURES & OPTIONS. AGAINST THIS INCOME FROM SPECULATION, ASSESSEE HAD CLAIMED SPECULATION LOSS OF RS.35,15,574/- ARISING OUT OF THE TRANSACTIONS I N CASTOR CARRIED OUT THROUGH SHRI BHARATKUMAR ISHWARLAL PATEL. THE ISSUE FOR CON SIDERATION IS THE GENUINENESS OR OTHERWISE OF THE LOSS CLAIMED. 4.1 IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HELD THAT THE LOSS CLAIMED FROM TRANSACTIONS OF THE CASTOR DONE THROUG H SHRI BHARATKUMAR ISHWARLAL PATEL WAS BOGUS AND ACCORDINGLY HE MADE D ISALLOWANCE OF THE SAID LOSS CLAIMED OF RS.35,15,574/-. WHILE DOING SO , HE OBSERVED THAT ASSESSEE WAS A MEMBER OF MCX AND NCDEX; IT MADE TRA NSACTIONS THROUGHOUT THE YEAR THROUGH THESE 2 EXCHANGES; HOWE VER, THE 8 TRANSACTIONS IN CASTOR WERE CLAIMED TO HAVE BEEN MADE THROUGH SH RI BHARATKUMAR ISHWARLAL PATEL; THESE 8 TRANSACTIONS WERE CARRIED OUT BETWEEN 24.02.2009 & 12.03.2009; IT WAS STRANGE THAT WHEN THE ASSESSEE S ELF WAS A MEMBER OF MCX AND NCDEX, WHICH DEAL IN COMMODITIES, THE TRANSACTI ONS OF CASTOR WERE CARRIED ON THROUGH SHRI BHARATKUMAR ISHWARLAL PATEL ; ASSESSEE FAILED TO SUBMIT EVIDENCE TO SHOW THAT THESE TRANSACTIONS WER E DONE THROUGH RECOGNIZED COMMODITY EXCHANGE; RATES OF CASTOR MENT IONED WERE NOT SUPPORTED BY THE RATES PREVAILING IN MCX AND NCDEX; NO MARGIN MONEY WAS PAID IN RESPECT OF THE TRANSACTIONS; ASSESSEE S UBMITTED THE PAN OF SHRI BHARATKUMAR ISHWARLAL PATEL, COPY OF ITS LEDGER ACC OUNT IN THE BOOKS OF SHRI BHARATKUMAR ISHWARLAL PATEL; HOWEVER, THESE 8 ENTRI ES WERE NOTHING BUT ACCOMMODATING ENTRIES; ACCORDINGLY, THE LOSS CLAIME D FROM THESE TRANSACTIONS WAS HELD TO BE BOGUS AND WAS BEING DIS ALLOWED. SMC-ITA NO. 286 /AHD/2014 DCIT VS.M/S. CD COMMODITIES BROKING LTD AY : 2009-2010 3 5. DURING THE APPELLATE PROCEEDINGS THE ASSESSEE FU RNISHED EVIDENCE TO CONTROVERT THE OBSERVATIONS MADE BY THE A.O. LD. CI T(A) WHILE CALLING FOR REMAND REPORT CATEGORICALLY STATED THAT THESE EVIDE NCES WERE ADMITTED AS ADDITIONAL EVIDENCE. HE DIRECTED THE A.O TO EXAMINE THE EVIDENCE AND ALSO TO RECORD THE STATEMENT OF SHRI BHARATKUMAR ISHWARL AL PATEL U/S 131. IN THE REMAND REPORT A.O. OBJECTED TO ADMISSION OF ADDITIO NAL EVIDENCE. HOWEVER, IT IS SEEN THAT THE ASSESSEE WAS NOT ASKED TO FURNI SH THESE EVIDENCES DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREFORE THE ASSESSEE COULD NOT FURNISHED THE SAME. WHILE CALLING FOR THE REMAND REPORT, LD. CIT(A) ADMITTED ADDITIONAL EVIDENCES AND OBSERVED THAT THE SE EVIDENCES WERE GERMANE TO ADJUDICATE THE ISSUE. THE LD. CIT(A)S L ETTER DTD. 30.05.2012 TO AO IS REPRODUCED BELOW: 'TO THE I.T.O, WARD-](3J, AHMEDABAD. SUB: APPEAL IN THE CASE OF C.D.COMMODITIES BROKIN G. LTD.-A.Y. 2009-10- SUBMISSION OF REMAND REPORT-REG- PLEASE REFER TO THE ABOVE. 2. IN THE AFORESAID APPEAL HEARING APPELLANT'S COUN SEL SUBMITTED PAPER BOOK ON THE ISSUE OF ADDITION MADE BY YOU ON ACCOUNT OF BOGUS SPECULATION LOSS. (COPY OF THE SAME IS ENCLOSED).IT IS SEEN THAT PAGE S 27 TO 36 WERE OBTAINED AFTER ASSESSMENT ORDER WAS PASSED HENCE THESE ARE A DDITIONAL EVIDENCES. THESE EVIDENCES PROVE THAT AHMEDABAD COMMODITIES EXCHANGE LTD IS AN APPROVED EXCHANGE BY FORWARD MARKET COMMISSION AND ON-LINE T RADING STARTED W.E.F. 27TH OCTOBER, 2007. THESE EVIDENCES ARE SIGNIFICANT BECAUSE THE SPECULATION LOSS WAS DISALLOWED ON THE GROUND THAT THE TIME STA MPED CONTRACT NOTES WERE NOT SUBMITTED AND DOCUMENTARY EVIDENCES TO SHOW THA T TRANSACTIONS WERE DONE THROUGH ANY RECOGNIZED COMMODITY EXCHANGE WERE NOT SUBMITTED. SINCE APPELLANT HAS NOW SUBMITTED THESE EVIDENCES OBTAINE D AFTER ASSESSMENT ORDER FROM COMMODITY EXCHANGE, THESE ARE ADMITTED AS ADDI TIONAL EVIDENCES. HOWEVER, THE TRANSACTIONS OF SPECULATION LOSS WILL NOT GET PROVED TO BE GENUINE FROM THESE EVIDENCES, A.O. IS JUSTIFIED IN SUSPECTING THESE TRANSACTIONS. HOWEVER, ADDITIONS CANNOT BE MADE ON MERE SUSPICIOUS. IN SMC-ITA NO. 286 /AHD/2014 DCIT VS.M/S. CD COMMODITIES BROKING LTD AY : 2009-2010 4 VIEW OF THIS, A.O. IS DIRECTED TO EXAMINE THE BROKE R SHRI BHARATKUMAR ISHWARLAL PATEL TO FIND OUT WHETHER THE COMMODITY T RANSACTIONS WERE GENUINELY DONE OR THE BROKER HAS ISSUED BILLS FOR L OSS ONLY. YOU ARE DIRECTED TO EXAMINE THE FOLLOWING AND ALSO OBTAIN PHOTO COPY OF THE SAME AND FORWARD THE SAME ALONGWITH REMAND REPORT. (1) COPY OF ORDER BOOK FROM THE BROKER FOR THE PERI OD OF TRANSACTIONS DONE ON BEHALF OF THE ASSESSEE. (2) SAUDA BOOK AND SAUDA BLOCK FOR THE RELEVANT PER IOD SHOWING THE TRANSACTIONS DONE ON BEHALF OF THE ASSESSEE. (3) THE NAME AND ADDRESS OF THE COUNTER PARTY TO TH E TRANSACTIONS DONE ON BEHALF OF THE APPELLANT (4) THE AFORESAID BROKER SHOULD BE CALLED U/S 131 O F IT.ACT ALONGWITH AFORESAID DOCUMENTS IN ORIGINAL AND IF NECESSARY TH E STATEMENT OF THE BROKER SHOULD BE RECORDED TO ELICIT TO THE FACTS OF APPELL ANT'S CLAIM OF LOSS. YOU ARE DIRECTED TO CARRY OUT THE AFORESAID ENQUIRY U/S 250(4) OF THE IT.ACT. THE REPORT OF COMPLETED ENQUIRY SHOULD BE SUBMITTED LATEST BY 20/06/2012. FOR THIS PURPOSE, IF YOU REQUIRE ANY CLARIFICATION ON ANY OF THE ISSUE, KINDLY CONTACT THE UNDERSIGNED. SD/- (D.C.PATWARI) COMMISSIONER OF INCOME-TAX (APPEALS)-6, AHMEDABAD.' ADDITIONAL EVIDENCE STANDS ADMITTED. 5.1 AND, THE LD. CIT(A) FINALLY CONCLUDED AS UNDER: - COMING TO THE MERITS OF THE DISALLOWANCE MADE, I A M INCLINED TO ACCEPT THE CONTENTIONS OF THE APPELLANT THAT THE LOSS WAS INCU RRED GENUINELY. THE TRANSACTIONS UNDER CONSIDERATION WERE CARRIED OUT T HROUGH AHMEDABAD COMMODITY EXCHANGE LTD. IT IS PERMITTED TO TRADE IN CASTOR SEEDS, GROUND NUT OIL & COTTON SEEDS. IT PERMITS ITS MEMBERS TO E NTER INTO CONTRACTS. APPELLANT IS A REGISTERED NON-MEMBER OF THE EXCHANG E. NON-MEMBERS ARE PERMITTED TO TRADE ONLY THROUGH MEMBERS. SHRI BHARA TKUMAR ISHWARLAL PATEL IS A MEMBER OF ACEL. IN THE STATEMENT RECORDED U/S 131 DURING THE REMAND PROCEEDINGS HE CONFIRMED THAT THE TRANSACTIONS UNDE R CONSIDERATION WERE CARRIED OUT BY HIM THROUGH ACEL. NECESSARY EVIDENCE IN SUPPORT THEREOF WAS FURNISHED TO THE A.O. MARGIN MONEY WAS NOT REQU IRED TO BE PAID IF THE TRANSACTIONS ARE SETTLED INTRA-DAY AND IT IS REQUIR ED TO BE PAID IF THE SMC-ITA NO. 286 /AHD/2014 DCIT VS.M/S. CD COMMODITIES BROKING LTD AY : 2009-2010 5 TRANSACTIONS GET CARRIED OVER TO THE NEXT DAY. AS C ONTENDED BY THE ID. A.R., MCX DOES NOT DEAL IN CASTOR COMMODITY AND NCDEX PER MITTED TRANSACTIONS IN CASTOR ON DELIVERY BASIS BUT NOT SP ECULATIVE TRANSACTIONS AND THEREFORE APPELLANT HAD CARRIED OUT TRANSACTIONS IN CASTOR THROUGH ACEL. IN RESPONSE TO THE NOTICE U/S 133(6) ACEL CONFIRMED TH E TRANSACTIONS VIDE ITS LETTER DTD. 18/06/2012. IT WAS STATED FURTHER IN TH E SAID LETTER THAT ACEL STARTED ONLINE TRANSACTIONS FROM 27/10/1010. IN THE INSTANT CASE THE PURCHASE AND SALE SLIPS CONTAIN THE DETAILS OF DATE AND TIME , THOUGH THEY WERE FILLED IN MANUALLY. AS CONTENDED BY THE LEARNED A.R., THE REQ UIREMENT OF TIME STAMPED RECEIPTS U/S 43(5)(D) IS WHEN THE SPECULATI ON INCOME/LOSS IS CLAIMED AS BUSINESS INCOME/LOSS. IN THE INSTANT CASE APPELL ANT CLAIMED SPECULATION LOSS AND NOT BUSINESS LOSS. THE OBSERVATIONS OF THE A.O. IN THE REMAND REPORT ARE BESIDE THE POINT AND DO NOT CONTROVERT THE EXPL ANATION AND EVIDENCE FURNISHED BY THE APPELLANT IN SUPPORT OF THE TRANSA CTIONS DONE BY IT IN CASTOR THROUGH SHRI BHARATKUMAR ISHWARLAL PATEL. THEREFORE THERE IS NO REASON TO HOLD THAT THE SPECULATION LOSS OF RS. 35,15,574/- C LAIMED BY THE APPELLANT IS BOGUS. DISALLOWANCE OF THE SAID LOSS IS DELETED. TH IS GROUND OF APPEAL IS ALLOWED. 5.2 THUS, IN A NUTSHELL, THE LD. CIT(A) CALLED FOR TWO REMAND REPORTS FROM THE ASSESSING OFFICER AND HELD THAT:- (I) THE TRANSACTIONS WERE CARRIED OUT THROUGH AHMEDABAD COMMODITY EXCHANGE LTD (ACEL) WHERE TRADING IN CASTOR SEEDS, GROUNDNUT OIL & COTTON SEEDS WAS PERMISSIBLE TO THE MEMBER. THE A SSESSEE IS A REGISTERED NON-MEMBER OF THE EXCHANGE WHO ARE PERMI TTED TO TRADE ONLY THROUGH MEMBERS; (II) THE ASSESSEE CARRIED OUT THE TRANSACTIONS THROUGH S HRI BHARATKUMAR ISHWARLAL PATEL WHO IS MEMBER OF ACEL FOR WHICH THE EVIDENCE WAS PRODUCED WHICH WAS NOT CONTROVERED BY THE ASSESSING OFFICER; (III) SINCE THE MCX DID NOT DEAL IN CASTOR COMMODITY AND NCDEX PERMITTED TRANSACTIONS IN CASTOR ON DELIVERY BASIS, THE ASSESSEE CARRIED THE SAME THROUGH ACEL IN WHICH THEY ARE PER MISSIBLE. SMC-ITA NO. 286 /AHD/2014 DCIT VS.M/S. CD COMMODITIES BROKING LTD AY : 2009-2010 6 (IV) THE LD. CIT(A) HAS HELD THAT, DESPITE THESE TWO REM AND REPORTS, THE ASSESSING OFFICER HAS NOT BEEN ABLE TO CONTROVERT A NY INFIRMITY IN THE TRANSACTIONS CARRIED OUT BY ACEL MEMBER SHRI BH ARATKUMAR ISHWARLAL PATEL. THE ORDER OF THE LD. CIT(A) IS RE LIED ON. 6. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. I FIND MERIT IN THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE . THE ASSESSEE IS A REGISTERED NON-MEMBER OF EXCHANGE; SHRI BHARATKUMAR ISHWARLAL PATEL IS A MEMBER OF ACEL THROUGH WHICH THE TRANSACTIONS HAVE BEEN CARRIED OUT WHICH IS NOT DISPUTED BY THE ASSESSING OFFICER IN THE REM AND REPORTS. ACEL PERMITS SUCH TRANSACTIONS UNDER ITS DOMAIN. IN VIE W OF THESE FACTS AND CIRCUMSTANCES, I HOLD THAT THE LD. CIT(A) HAS RIGHT LY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY ELABORATE OBSERVATIONS, D ISCUSSIONS AND REASONS WHICH CANNOT BE FOUND FAULT WITH. IN VIEW THEREOF, THE ORDER OF LD. CIT(A) IS UPHELD AND THE REVENUES APPEAL IS THUS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 17/01/2017 *BIJU T., SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD