The DCIT, Circle-1(2), Ahmedabad V. Shri Pravin Kumar Hiralal Vora, Ahmedabad

ITA 328/AHD/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9983 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Keywords: Speculation loss; Capital Gains
• Section: 143(3); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.328/AHD/2016 (ASSESSMENT YEAR : 2012-13) DCIT, CIRCLE 1(2), AHMEDABAD. VS. SHRI PRAVIN KUMAR HIRALAL VORA, A-71, TIRTHBHUMI APARTMENT, NR, THAKORBHAI DESAI HALL, LAW GARDEN, ELLIS BRIDGE, AHMEDABAD. [ PAN NO. ABJPV 2934 B ] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S. K. DEV, SR. D.R. RESPONDENT BY : SHRI SAKAR SHARMA, A.R. DATE OF HEARING 27.03.2019 DATE OF PRONOUNCEMENT 17.05.2019 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE REVENUE IS DIRECTE D AGAINST THE ORDER DATED 16.12.2015 PASSED BY THE COMMISSIONER OF INCO ME TAX (APPEALS)-10, AHMEDABAD UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) ARISING OUT OF THE ORDER DATED 29.12.2014 PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(2), A HMEDABAD FOR THE ASSESSMENT YEAR 2012-13. 2. THE APPELLANT, AN INDIVIDUAL DERIVED INCOME FROM THE BUSINESS OF TRADING IN LAND, SHARES, CAPITAL GAINS AND INCOME F ROM OTHER SOURCES, FILED ITS RETURN OF INCOME ON 28.09.2012 DECLARING TOTAL INCO ME AT RS.53,53,630/- ITA NO.328/AHD/2016 DCIT VS. SHRI PRAVIN KUMAR H. VORA ASST.YEAR 2012-13 - 2 - THROUGH ELECTRONIC MEDIA. UNDER SCRUTINY, A NOTICE U/S 143(2) OF THE ACT DATED 04.09.2014 WAS SERVED UPON THE ASSESSEE AND THE DET AILED INFORMATION WAS CALLED FOR WHEREUPON THE ASSESSEE HAS FURNISHED THE COMPLETE DETAILS IN RESPECT OF THE LOSS OF RS.1,40,69,748/- SUFFERED FROM THE A PPELLANT-COMPANY IN THE TRANSACTION, TRADING FROM THE BROKER NAMED HRIM COM TRADE. HOWEVER, THE SAID HRIM COMTRADE HAS DENIED SUCH TRANSACTION TO T HE LEARNED AO WHEREUPON A SHOW-CAUSE NOTICE WAS ISSUED UPON THE A PPELLANT IN ORDER TO JUSTIFY THE CLAIM OF LOSS OF RS.1,40,69,748/- BY AN D UNDER THE WRITTEN SUBMISSION DATED 15.12.2014 AND 16.12.2014, THE ASS ESSEE ELABORATELY EXPLAINED IN RESPECT TO THE LOSSES SUFFERED IN COMM ODITY TRADING. THE DETAILS OF PAYMENT MADE BY THE ASSESSEE IN SETTLEMENT OF THE T RANSACTION OF PURCHASE/SALES OF COMMODITIES TO THE BROKER WERE AL SO FURNISHED BEFORE THE LEARNED AO. IT WAS SUBMITTED THAT SUCH PAYMENT WAS MADE THROUGH THE ACCOUNT PAYEE CROSSED CHEQUE DRAWN IN FAVOUR OF THE HRIM COMTRADE. THOSE WERE DEPOSITED BY THE BROKER IN HIS BANK ACCOUNT AN D THE APPELLANT ASSESSEES BANK ACCOUNT WAS DEBITED. THE CONFIRMATION/CERTIFIC ATE ISSUED BY THE CONCERNED BANK OF THE ASSESSEE WAS ALSO FURNISHED B EFORE THE LEARNED AO. HOWEVER, THE LEARNED AO ULTIMATELY FINALIZED THE AC COUNT BY AND UNDER AN ORDER DATED 29.12.2014 U/S 143(3) BY MAKING ADDITIO N OF RS.1,40,69,748/- FOR THE YEAR UNDER CONSIDERATION. IN APPEAL, THE SAME W AS DELETED BY THE LEARNED CIT(A) HENCE THE INSTANT APPEAL BEFORE US. 3. AT THE TIME OF HEARING OF THE INSTANT APPEAL, TH E LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE APPELLANT BEFORE THE AUTHORITIES BELOW HAD BEEN ABLE TO ESTABLISH THAT T HERE IS CORRELATION OF TRANSACTION PRICE WITH THE REAL TIME MCX PRICES. TH E SUBMISSION MADE BY THE ASSESSEE THAT HE HAS CARRIED OUT TRANSACTION OF COM MODITY TRADING IN MCX ITA NO.328/AHD/2016 DCIT VS. SHRI PRAVIN KUMAR H. VORA ASST.YEAR 2012-13 - 3 - THROUGH BROKER WITH CORROBORATING EVIDENCES IN THE FORM OF DAILY CONTRACT NOTES ISSUED TO THE APPELLANT BY THE SUB BROKER IN THE NA ME OF HRIM COMTRADE SHOWS THAT SUCH TRANSACTION ON THE GIVEN DATE WAS R EALLY CARRIED OUT WAS ACCEPTED RIGHTLY BY THE LEARNED CIT(A). SUCH CONTRA CT NOTE WAS THE PRIMARY DOCUMENT ON THE BASIS OF WHICH THE LEARNED CIT(A) C ONFIRMED THE GENUINENESS OF THE TRANSACTION AND THUS SUCH TRANSA CTION HAS NOT BEEN TREATED AS LOSS AS BOGUS. TREATING THE SAME AS SPECULATION LOS S THE LEARNED CIT(A) WITHOUT ANY AMBIGUITY DIRECTED THE SAME TO BE CARRI ED FORWARD TO THE SUBSEQUENT ASSESSMENT YEAR TO BE SET OFF AGAINST FU TURE SPECULATION PROFIT. HE THUS RELY UPON THE ORDER PASSED BY THE FIRST APPELL ATE AUTHORITY. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDER PASSED B Y THE LEARNED AO. 4. HEARD THE RESPECTIVE PARTIES, PERUSED THE RELEVA NT MATERIALS AVAILABLE ON RECORD. BEFORE THE REVENUE THE APPELLANT SUBMITTED THE FOLL OWING DETAILS: A) DAILY CONTRACT NOTES AS REQUIRED UNDER REGULATI ON 5.5; B) PERIODIC CLIENT'S ACCOUNT STATEMENT; C) CORRELATION OF TRANSACTION PRICES WITH REAL T IME MCX PRICES; D) TRADING MEMBER NO. - 12220 (I.E. OF HRIM COMTR ADE); E) FMC CODE NO. - MCX/TCM/PART/0338 (I.E. OF HRIM COMTRADE); F) ADDRESS - 33, VEERAPPAN STREET, MAHAVEER COMP LEX, CHENNAI - 600079; ] G) COPY OF ACCOUNT PAYEE CHEQUE ISSUED - PAYMENTS BY ACCOUNT PAYEE CHEQUE ONLY; H) BANK CERTIFICATE FOR PAYMENTS CREDITED IN A/C OF HRIM COMTRADE IT APPEARS THAT THE APPELLANT MADE A REQUEST TO TH E LEARNED AO TO CALL FOR THE STATEMENT ALONG WITH KYC FROM BANK OF HRIM COMTRADE WHICH WAS HOWEVER, NOT ACTED UPON. IT WAS THE SUBMISSION OF T HE ASSESSEE THAT UNLESS AND UNTIL THE FACTS OF THE SAID BANK ACCOUNT WAS NOT AW ARE EITHER BY THE AO OR BY ITA NO.328/AHD/2016 DCIT VS. SHRI PRAVIN KUMAR H. VORA ASST.YEAR 2012-13 - 4 - THE ASSESSEE, THE POSSIBLE OPPORTUNITY OF CROSS EXA MINATION IS A PAPER OPPORTUNITY ONLY. THE ASSESSEE FURTHER MADE AN ALTE RNATIVE SUBMISSION TO TREAT THE SAID LOSS AS SPECULATION LOSS TO BE CARRIED FOR WARD FOR ADJUSTMENT AGAINST THE SPECULATION PROFIT IN FUTURE. HOWEVER, SUCH PLE A OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE LEARNED AO. FURTHER THAT THE APPELLANT REQUESTED THE LEARNED A O TO CONSIDER THE LOSS SUSTAINED DUE TO COMMODITY TRADING AS SPECULATIVE L OSS. IN FACT, SINCE THE ASSESSEE HAS BEEN A VICTIM OF THE FRAUD COMMITTED B Y THE BROKER, IN SUCH SITUATION, THE TRANSACTION OF TRADING IN COMMODITIE S CANNOT BE CONSIDERED AS ALTOGETHER BOGUS OR NON-GENUINE. MOREOVER, THE TRANSACTIONS OF BUYING AND SELLING W ITHOUT TAKING DELIVERY OUGHT TO HAVE BEEN CONSIDERED AS SPECULATIVE TRANS ACTION AND THE LOSS ARISING THEREFROM IS NOT ELIGIBLE TO BE SET OFF AGAINST THE INCOME FROM NORMAL BUSINESS BUT IS ELIGIBLE FOR SET OFF AGAINST THE SPECULATIVE PROFITS ONLY. IT APPEARS THAT UPON CONSIDERING THE ENTIRE EVIDENC ES PLACED BEFORE THE AUTHORITIES BELOW, THE LEARNED CIT(A) WHILE ALLOWIN G THE CLAIM OF THE ASSESSEE ON THE BASIS OF ITS ALTERNATIVE SUBMISSION AS DISCU SSED HEREINABOVE OBSERVED AS FOLLOWS: 5.1 I FIND MERIT IN THE APPELLANT SUBMISSION THAT HE HAD CARRIED OUT TRANSACTION OF COMMODITY TRADING IN MCX THROUGH BRO KER. THE DOCUMENTARY EVIDENCE IN FORM OF DAILY CONTRACT NOTES ISSUED TO THE APPELLANT BY THE SUB BROKER IN THE NAME OF HRIM COMTRADE CLEARLY SHOWS T HAT ON THE GIVEN DATE TRANSACTION MENTIONED THEREIN CARRIED OUT. THE DAIL Y CONTRACT NOTE IS THE PRIMARY DOCUMENT IN RESPECT OF COMMODITY TRADING TH ROUGH MCX. THE DETAILS OF THE CONTRACT NOTE WITH RESPECT TO THE NAME OF TH E BROKER, MCX MEMBERSHIP ID, FMC CODE AND THE ADDRESS AS MENTIONED IN THE DA ILY CONTRACT NOTES CLEARLY MATCHES WITH ALL THE RELEVANT PARTICULARS O F HRIM COMTRADE, THEREFORE THE APPELLANT HAD NO REASON TO DOUBT THAT THE SUB BROKER TO WHOM HE ITA NO.328/AHD/2016 DCIT VS. SHRI PRAVIN KUMAR H. VORA ASST.YEAR 2012-13 - 5 - WAS CARRIED OUT THE TRANSACTION COMMODITY TRADING I S NOT A GENUINE PERSON. THE PERIODIC CLIENTS ACCOUNT STATEMENT ISSUED BY TH E SUB BROKER TO THE APPELLANT ASSESSEE ALSO SHOW THE NAME OF HRIM COMTR ADE AND THE PAN REFLECTING ON THE PERIODIC ACCOUNT STATEMENT MATCHE S WITH VIE PAN OF THE HRIM COMTRADE AS PER THE WEBSITE OF THE INCOME TAX. THE APPELLANT :IAS THEREFORE NO REASON TO DOUBT ABOUT THE GENUINENESS OF THE TRANSACTION BEING CARRIED OUT THROUGH HRIM COMTRADE. THE APPELLANT HA D BEEN ABLE TO ESTABLISH THAT THERE IS CORRELATION OF TRANSACTION PRICE WITH THE REAL TIME MCX PRICES. 5.2 THE APPELLANT HAD ALSO PROVED THAT PAYMENT IN R ESPECT OF THE TRANSACTION OF TRADING OF COMMODITY TO THE SUB BROKER HRIM HAD BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES AS UNDER: SR. NO. DATE CHEQUE NO. AMOUNT BENEFICIARY 1 21-12-11 111148 17,22,153 HRIM COMTRADE 2 12-01-12 111150 23,15,241 HRIM COMTRADE 3 01-02-12 111151 29,53,539 HRIM COMTRADE 4 13-02-12 111152 17,07,998 HRIM COMTRADE 5 22-02-12 111154 18,50,595 HRIM COMTRADE 6 01-03-12 111156 17,32,165 HRIM COMTRADE 7 17-03-12 111159 18,52,726 HRIM COMTRADE 1,41,34,417 THE APPELLANT HAD ALSO FURNISHED BEFORE THE A.O. AS WELL AS BEFORE ME IN THE COURSE OF APPELLATE PROCEEDING CERTIFICATE ISSUED B Y THE HDFC BANK LIMITED DATED 11/12/2014 TO THE EFFECT THAT THE AFFIRMATION CHEQUE ISSUED IN FAVOUR OF HRIM COMTRADE HAD BEEN DULY CLEARED AND THE APPELLA NT BANK ACCOUNT HAD BEEN DEBITED ACCORDINGLY. THE BANK CERTIFICATE DATE D 11/12/2014 CLEARLY PROVES THAT THE PAYMENT HAS BEEN MADE BY THE APPELL ANT BY THE ASSESSEE TO HRIM COMTRADE THROUGH ACCOUNT PAYEE CHEQUE AND THE CHEQUES HAD BEEN DULY CLEARED AND HONORED AND THE APPELLANT BANK ACC OUNT HAD BEEN DEBITED FOR THE CORRESPONDING AMOUNT OF THE CHEQUES ISSUED. 5.2 THE APPELLANT FURTHER ARGUED THAT THE APPELLANT HAD IN FACT CARRIED OUT ANSACTION AT COMMODITY TRADING IN MCX THROUGH SUB B ROKER AND HAD SUFFERED LOSS OF RS.1,40,69,748 AND NECESSARY DOCUMENTARY EV IDENCE IN SUPPORT THEREOF IN PRODUCED BEFORE THE A.O. 5.3 TAKING INTO CONSIDERATION THE TOTALITY THE FACT S AND CIRCUMSTANCE OF THE CASE AND THE WRITTEN SUBMISSION FILED BY APPELLANT, I AM INCLINED TO HOLD THAT THE APPELLANT HAD CARRIED OUT TRANSACTION OF COMMOD ITY TRADING IN MCX ITA NO.328/AHD/2016 DCIT VS. SHRI PRAVIN KUMAR H. VORA ASST.YEAR 2012-13 - 6 - THROUGH THE SUB BROKER AND HAD SUFFERED OF LOSS OF RS. 1,40,69,748. ON THE FACE OF EVIDENCE PRODUCED BY THE APPELLANT BEFORE T HE A.O. AND ALSO BEFORE ME IN COURSE OF THE APPELLANT PROCEEDING IN SUPPORT OF THE TRANSACTION OF COMMODITY TRADING IN MCX CARRIED BY APPELLANT THROU GH THE SUB BROKER, IT IS NOT JUSTIFIED TO TREAT THE TRANSACTIONS AND RESULTA NT LOSS AS BOGUS. IN FACT THE APPELLANT HAD CARRIED OUT TRANSACTION OF TRADING IN COMMODITY IN MCX THROUGH SUB BROKER AND THE APPELLANT HAD SUFFERED L OSS OF RS. 1,40,69,748 IN SUCH TRANSACTION, HOWEVER SINCE TRANSACTION OF BUYI NG AND SELLING WITHOUT TAKING DELIVERY IS TO BE CONSIDERED AS SPECULATIVE TRANSACTION , THE LOSS ARISING THEREFORE IS TO BE TREATED AS SPECULATION LOSS WHIC H IS NOT ELIGIBLE TO BE SET OFF AGAINST THE BUSINESS OR PROFESSION. THEREFORE, THE A.O. IS JUSTIFIED IN DISALLOWING THE AMOUNT OF RS. 1,40,69,748 AS SPECUL ATION LOSS CANNOT BE SET OFF AGAINST THE BUSINESS OR PROFESSION. THIS GROUND OF APPEAL IS DISMISSED AND THE ADDITIONS MADE BY THE AO ARE CONFIRMED. 6. HOWEVER, THE A.O. IS HEREBY DIRECTED TO TAKE THE LOSS OF RS. 1,40,69,748 AS SPECULATION LOSS TO BE CARRIED FORWARD TO THE SUBSE QUENT ASSESSMENT YEAR TO BE SET OFF AGAINST FUTURE SPECULATION PROFIT. GROUND N UMBER- 3 IS ALLOWED. WHEN THE TRANSACTION OF COMMODITY TRADING IN MCX CA RRIED BY THE APPELLANT THROUGH THE SUB BROKER WAS ESTABLISHED BY THE APPELLANT BEFORE THE LEARNED CIT(A) WITH CORROBORATING EVIDENCES THE LEA RNED CIT(A) RIGHTLY HAS TREATED SUCH TRANSACTION AS GENUINE AND NOT BOGUS. FURTHER THAT SINCE SUCH TRANSACTION OF BUYING AND SELLING WITHOUT TAKING DE LIVERY IS REQUIRED TO BE TREATED AS SPECULATIVE TRANSACTION, THE LOSS ARISIN G OUT OF SUCH TRANSACTION THOUGH COULD NOT BE ELIGIBLE TO BE SET OFF AGAINST THE BUSINESS OR PROFESSION WE FIND NO FRAILTY IN DIRECTING SUCH SPECULATIVE LOSS TO BE CARRIED FORWARD TO THE SUBSEQUENT ASSESSMENT YEAR TO BE SET OFF AGAINST FU TURE SPECULATION PROFIT AS HELD BY THE LEARNED CIT(A). 5. IN THE LIGHT OF THE ABOVE DISCUSSION, THIS COURT DOES NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE LEARN ED CIT(A) AS TO WARRANT INTERFERENCE. THE QUESTION IS ACCORDINGLY ANSWERED IN THE AFFIRMATIVE, I.E. IN ITA NO.328/AHD/2016 DCIT VS. SHRI PRAVIN KUMAR H. VORA ASST.YEAR 2012-13 - 7 - FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. CON SEQUENTLY, THE APPEALS FAILS AND ACCORDINGLY DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 17/05/2019 SD/- SD /- ( PRAMOD KUMAR ) ( M S. MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 17/05/2019 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-10, AHMEDABAD. 5. , ! ', #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 14/05/2019 (DICTATION PAGES 5) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16/05/2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 16/05/2019 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER