SHRI SUNIL KUMAR, JHUNJHUNU V. INCOME TAX OFFICER, JHUNJHUNU

ITA 29/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3626 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 09-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI
• Assessee Lawyers: K L MOOLCHANDAN I
• Keywords: Transactions in derivatives; Set aside
• Section: 44AD; 133(6)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK L NL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 29/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 SHRI SUNIL KUMAR, S/O SHRI SURAT SINGH VILLAGE- MEHRANA, POST- KHAMPUR, TEH. MUHANA, DISTT. JHUNJHUNU CUKE VS. THE ITO, WARD-2, JHUNJHUNU. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ASEPK 7083 K VIHYKFKHZ@ A PPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI K.L. MOOLCHANDANI (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. POONAM RAI (DCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 31/05/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 04/06/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 29.11.2017 OF CIT (A), JAIPUR FOR THE ASSESSMENT YE AR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1 (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS FACTUALLY AND LEGALLY ERRED IN UP- HOLDING THE VIEW OF THE LD. AO IN INVOKING THE PROV ISIONS OF SECTION 44AD OF THE ACT IN RESPECT OF THE TRANSACTI ONS OF ITA NO. 29/JP/2018 SHRI SUNIL KUMAR VS. ITO 2 MCX & NEDEX UNDERTAKEN BY THE APPELLANT WITHOUT APPRECIATING THE FACTS OF THE CASE IN RIGHT PERSPEC TIVE. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE AUTHORITIES BELOW HAVE FACTUALLY AND LEGALLY ERRED IN TREATING SUCH TRANSACTIONS OF MCX & NEDEX AS BUSINE SS OPERATIONS. (C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE AUTHORITIES BELOW HAVE TAKEN SELF-CONTRADICTORY VIEW IN WORKING OUT THE FIGURES OF TOTAL TURN OVER EXCEE DING RS. ONE CRORE AND APPLYING PROVISIONS OF SECTION 44 AD OF THE ACT TO APPLY NP RATE OF 8% IN RESPECT OF THE TU RN-OVER EXCEEDING RS.1 CRORE, MAKING ADDITION OF RS.5,47,53 8/- WHICH IS OBVIOUSLY INCORRECT AND CONTRARY TO THE PR OVISIONS OF LAW. DESERVES TO BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITIES BELOW HAVE FACTUALLY AND LEGALLY ERRED IN WORKING OUT THE FIGURES OF THE TURN-OVER OF MCX & N EDEX AT RS.1,24,12,471/- AS AGAINST RS. 41,22,898/- WORK ED OUT BY THE APPELLANT, IGNORING THE RULES OF SEBI AN D WITHOUT POINTING OUT ANY MISTAKE IN THE WORKING OF THE APPELLANT AND MAKING AND CONFIRMING THE ADDITION OF RS.5,47,538/-BY THE AUTHORITIES BELOW, WHICH IS BAD IN LAW AND DESERVES TO BE DELETED SUMMARILY. 3. THE APPELLANT CRAVES TO ADD, AMEND OR WITHDRAW A NY OF THE GROUND OF APPEAL EITHER BEFORE OR AT THE TIM E OF HEARING OF APPEAL. 2. THE ASSESSEE IS AN INDIVIDUAL DOING THE BUSINESS OF GRAINS BUT DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNTS. THE ASS ESSEE HAS ALSO CARRIED OUT FUTURE AND OPTIONS TRANSACTS IN COMMODITY AT MCX STOCK ITA NO. 29/JP/2018 SHRI SUNIL KUMAR VS. ITO 3 EXCHANGE THROUGH THREE BROKERS. SINCE, THE ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNT ACCORDINGLY THE ASS ESSEE HAS DECLARED ITS INCOME IN THE RETURN OF INCOME IN TERMS OF SECT ION 44AD OF THE ACT BY ESTIMATING INCOME @ 8% OF TOTAL TURNOVER OF FUTU RE AND OPTION TRANSACTIONS. THE AO NOTED THAT DURING THE YEAR UND ER CONSIDERATION THE ASSESSEE HAS CARRIED OUT FORWARD & OPTION COMMODITY TRANSACTION THROUGH THREE BROKERS M/S HINDUSTAN TECHNOSOL PVT. LTD., M/S TRADESWIFT DERIVATIVES PVT. LTD. AND M/S TRADESWFIT COMMODITIES PVT. LTD. THE AO HAS ACCEPTED THE TOTAL TURNOVER DECLARE D BY THE ASSESSEE IN RESPECT OF TWO BROKERS HOWEVER, THE AO FOUND DISCRE PANCIES IN THE TURNOVER DECLARED BY THE ASSESSEE IN RESPECT OF THE FUTURE AND OPTIONS TRANSACTIONS DONE THROUGH M/S HINDUSTAN TECHNOSOL P VT. LTD. THE AO NOTED THAT AS PER INFORMATION CALLED FOR U/S 133(6) OF THE ACT THE TOTAL TURNOVER IS SHOWN AT RS. 1,08,12,209/- WHEREAS THE ASSESSEE HAS SHOWN THE TURNOVER OF RS. 41,22,898/-. ACCORDINGLY, THE AO ESTIMATED THE INCOME OF THE ASSESSEE @ 8% ON THE TOTAL TURNOV ER OF RS. 1, 24,12,471/- AND CONSEQUENTLY MADE AN ADDITION OF RS . 5,47,538/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. ITA NO. 29/JP/2018 SHRI SUNIL KUMAR VS. ITO 4 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMI TTED THAT ONCE THE TOTAL TURNOVER OVER THE ASSESSEE WAS COMPUTED A T RS. 1, 24,12,471/- THEN THE PROVISIONS OF SECTION 44AD OF THE ACT WOULD BE APPLIED IN THE CASE OF THE ASSESSEE AND THUS, THE A O IS NOT JUSTIFIED IN ESTIMATING THE INCOME OF THE ASSESSEE @ 8% ON THE S AID TOTAL TURNOVER EXCEEDING LIMIT U/S 44AD OF THE ACT. HE HAS FURTHER SUBMITTED THAT AS PER THE INSTITUTION OF CHARTERED ACCOUNTANT OF INDI A (ICAI) GUIDELINES THE TURNOVER OF FUTURE AND OPTION SHALL BE THE TOTA L OF FAVORABLE AND UNFAVORABLE DIFFERENCES INSTEAD OF THE VALUE OF THE TRANSACTIONS. HE HAS THUS SUBMITTED THAT THE ASSESSING OFFICER HAS WRONG LY COMPUTED THE TURNOVER OF THE ASSESSEE BY NOT FOLLOWING THE CORRE CT METHOD OF COMPUTING THE TURNOVER. 4. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HIMSELF HAS DECLARED THE INCOME @ 8% OF THE TURNOVE R AS THE ASSESSEE IS NOT MAINTAINING THE REGULAR BOOKS OF ACCOUNTS. T HE ASSESSING OFFICER HAS NOT DISTURBED THE RATE OF INCOME APPLIED BY THE ASSESSEE BUT HAS COMPUTED THE CORRECT TURNOVER AS PER THE DETAILS OB TAINED FROM THE BROKERS. THUS, THE LD. DR HAS CONTENDED THAT THE AS SESSEE CANNOT DISPUTE THE RATE OF 8% FOR ESTIMATION OF INCOME WHE N THE ASSESSEE ITA NO. 29/JP/2018 SHRI SUNIL KUMAR VS. ITO 5 HIMSELF APPLIED THE SAME WHILE FILING THE RETURN OF INCOME. SHE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIALS ON RECORD. THE ASSESSEE IS NOT MAINTAININ G THE REGULARS BOOKS OF ACCOUNTS, THEREFORE, DECLARED INCOME U/S 44AD OF THE ACT @ 8% ON THE TURNOVER INCLUDING THE TRANSACTIONS OF FUTURE A ND OPTION IN COMMODITY. THE ASSESSEE HAS DECLARED THE TURNOVER O F RS. 41,22,898/- WHEREAS THE AO HAS COMPUTED THE TOTAL TURNOVER OF T HE ASSESSEE AT RS. 1,24,12,471/-. WE FIND THAT THE ASSESSING OFFICER H AS OBTAINED THE DETAILS FROM THE BROKERS AND FOUND THAT IN RESPECT OF THE FUTURE AND OPTIONS TRANSACTIONS DONE BY THE ASSESSEE THROUGH M /S HINDUSTAN TECHNOSOL PVT. LTD., JAIPUR, THE TURNOVER DECLARED BY THE ASSESSEE IS NOT CORRECT. SO FAR AS THE DETAILS FURNISHED BY THE SAI D BROKER THE ASSESSEE HAS NOT DISPUTED THE SAME AND THEREFORE WE DO NOT F IND ANY REASON TO INTERFERE WITH THE ORDER OF THE AO IN COMPUTING THE TURNOVER OF THE ASSESSEE. WE FIND THE AO HAS APPLIED THE RATE OF 8% FOR COMPUTATION OF INCOME OF THE ASSESSEE ON THE TOTAL TURNOVER OF MOR E THAN RS. 1.24 CRORES AND THE BASIS OF ADOPTING THE RATE OF 8% TO ESTIMATE THE INCOME IS NOT SUPPORTED BY ANY MATERIAL OR COMPARABLE INST ANCE. FURTHER, THOUGH THE ASSESSEE HAS NOT MAINTAINED THE REGULAR BOOKS OF ACCOUNT ITA NO. 29/JP/2018 SHRI SUNIL KUMAR VS. ITO 6 HOWEVER, ALL THE DETAILS OF FUTURE AND OPTIONS TRAN SACTIONS WERE AVAILABLE WITH THE ASSESSING OFFICER AND THEREFORE, THE INCOME OF THE ASSESSEE COULD HAVE BEEN DETERMINED ON THE BASIS OF THE DETAILS OF THE TRANSACTIONS OF FUTURE AND OPTION ONLY. THE ONLY DI SPUTE WHICH COULD HAVE BEEN ARISEN IN THE MATTER WAS CLAIM OF EXPENDI TURE WITHOUT MAINTAINING THE REGULAR BOOKS OF ACCOUNT. THE LD. A R OF THE ASSESSEE HAS CONTENDED THAT THOUGH THE ASSESSEE HAS FILED TH E RETURN BY ESTIMATING THE INCOME AS PER THE PROVISIONS OF SECT ION 44AD OF THE ACT HOWEVER, THE ACTUAL OUTCOME OF THE FUTURE AND OPTIO N TRANSACTIONS IS NATIVE. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMS TANCES OF THE CASE WHEN ALL THE DETAILS OF FUTURE AND OPTION TRANSACTI ONS WERE AVAILABLE BEFORE THE AO THEN THE INCOME OF THE ASSESSEE HAS T O BE COMPUTED ON THE BASIS OF THE PURCHASE AND SALE TRANSACTIONS INS TEAD OF ESTIMATING THE SAME BY APPLYING A RATE OF 8%. ACCORDINGLY, WE SET ASIDE THE MATTER TO THE RECORD OF THE ASSESSING OFFICER TO RE DO THE EXERCISE OF DETERMINATION OF INCOME OF THE ASSESSEE BASED ON AC TUAL OUTCOME OF THE FUTURE AND OPTION TRANSACTIONS. NEEDLESS TO SAY THE BROKERAGE CHARGES AND OTHER DIRECT EXPENSES IN RESPECT OF THE TRANSACTIONS IN FUTURE AND OPTION IF ANY SHALL BE ALLOWED. ITA NO. 29/JP/2018 SHRI SUNIL KUMAR VS. ITO 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 04/06/2018. SD/- SD/- HKKXPAN FOT; IKY JKO (BHAGCHAND) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04/06/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SUNIL KUMAR, JHUNJHUNU. 2. IZR;FKHZ@ THE RESPONDENT - ITO, WARD-2, JHUNJHUNU. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 29/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR