SAMEER AGARWAL, Jaipur V. ITO, Jaipur

ITA 41/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1998 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 11-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DR DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Transactions in derivatives; Additional evidence; Speculation loss; Corroborative evidences
• Section: 43(5)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,O JH HKKXPUN] YS[KK LNL; LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 41/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2007-08 SHRI SAMEER AGARWAL 534, MAHAVEER NAGAR TONK ROAD, JAIPUR CUKE VS. THE ITO WARD- 6(4) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AFWPA 9565 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI S.L PODDAR, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY:SMT. POONAM RAI, DCIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13/03/2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 14 /03/2018 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-2, JAIPUR DATED 13-12-2016 FOR THE ASSESSMEN T YEAR 2012-13 RAISING THEREIN FOLLOWING GROUNDS OF APPEAL. 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1,82,974/- AS SPECULATION LOSS TREATING THE F&O LOSS. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1,82,974/- U/S 43(5) OF THE I.T. ACT, 1961 WITHOUT CONSIDERING THE SUBMI SSION OF THE ASSESSEE. ITA NO.41/JP/2017 SHRI SAMEE R AGARWAL VS ITO, WARD- 6(4) ,JAIPUR 2 2.1 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE VIDE LETTER DATED 22-05-2017 PRAYED AS UNDER FOR ADMISSION OF A DDITIONAL EVIDENCE. 1. ..IT IS SUBMITTED THAT INCOME TAX AUTHORITIES I.E. THE ASSESSING OFFICER AND LD. CIT(A) HAVE DECIDED THE C ASE OF THE ASSESSEE WITHOUT GIVING SUFFICIENT OPPORTUNITY FOR ADDUCING EVIDENCE. IN VIEW OF THIS THE ASSESSEE SEEKS PERMISSION OF THE HON'BLE I TAT FOR FURNISHING THE ADDITIONAL EVIDENCE. 2. IN THE CASE OF THE ASSESSEE IN RESPECT OF EVIDEN CE FOR TRANSACTION ON MCX IN THE FORM OF CONTRACT NOTES/BI LLS ARE AVAILABLE AND ARE BEING FURNISHED. THESE DOCUMENTARY EVIDENCE COULD NOT BE FURNISHED BEFORE THE LOWER AUTHORITIES FOR WANT OF ADEQUATE OPPORTUNITIES AND TIME. THUS THE ADDITIONAL EVIDENC ES BEING FURNISHED ARE ONLY OF THE SUPPORTING AND SUPPLEMENTARY NATURE BUT THESE GO TO THE ROOT OF THE MATTER IN SUPPORT OF TRANSACTION WITH M /S. ANAND RATHI COMMODITIES LTD. THE ADDITIONAL EVIDENCES ARE CRUCI AL FOR THE DISCHARGE OF JUSTICE. THEREFORE, THESE MAY KINDLY B E ADMITTED. 3. IT IS SUBMITTED THAT WHEN TECHNICALITIES ARE PIT CHED AGAINST THE SUBSTANTIVE DISCHARGE OF JUSTICE, THE L ATER HAS TO PREVAIL, IN A CASE WHERE THE BONAFIDES ARE NOT IN DOUBT (MARUTI C IVIL WORKS VS ITO [2011] 136 TTJ 448 [PUNE]). IT IS FURTHER SUBMITTE D THAT ALL THE JUDICIAL INSTITUTIONS THE HON'BLE ITAT BEING ONE OF THEM ARE RESPECTED NOT ON ACCOUNT OF ITS POWER TO LEGALIZE INJUSTICE ON TE CHNICAL GROUNDS BUT THESE ARE CAPABLE OF REMOVING INJUSTICE. THE ASSESS EE IS ONLY FURNISHING SUPPORTING EVIDENCES ONLY. THESE ARE NOT COOKED UP OR MANIPULATED IN ANY WAY. IN VIEW OF THIS THE HON'BLE ITAT IS REQUES TED TO ADMIT THE ADDITIONAL EVIDENCE AND CONSIDER THE SAME FAVOURABL Y. THE FOLLOWING CASE LAWS ARE QUOTED IN SUPPORT FOR THE ADMISSION O F THE ADDITIONAL EVIDENCE. (I) NTPC LTD. VS CIT (1998) 229 ITR 383 (SC) (II) CIT VS RAORAJA HANUT SINGH 252 ITR 528 (RAJ( (III) ELECTRA (JAIPUR) PVT. LTD VS IAC 26 ITD 236 (IV) SMT.PRABHAVATI S SHAH VS CIT 231 ITR 1 (BOM) (V) CIT GANI BHAI WAHAB BHAI 232 ITR 900 (M.P) (VI) SMT. SURINDER KAUR VS ITO (2008) 118TTJ 710 (L UCK) (VII) MASCON GLOBAL LTD VS ACIT (2010) 37 SOT 202 (CHENNAI). ITA NO.41/JP/2017 SHRI SAMEE R AGARWAL VS ITO, WARD- 6(4) ,JAIPUR 3 3.1 APROPOS GROUND NO. 1 AND 2 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 3.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASS ESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. DURING THE YEAR THE ASSESSEE HAS RETURNED A MCX COMMODITY LOSS OF RS. 1,82,974/- UNDER INCOME FROM OTHER SOURCES. AS NOTED BY THE AS SESSING OFFICER, IT WAS SUBMITTED THAT THE ASSESSEE HAS SUF FERED FUTURE AND OPTION LOSS BUT AT THE TIME OF FILING OF INCOME TAX RETURN COMMODITY LOSS IS MENTIONED. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS MADE PURCHASE AND SALE OF SHARE / GOOD S ON THE SAME DAY AND HENCE PROVISIONS OF SECTION 43(5) OF THE I. T. ACT, 1961 ARE CLEARLY APPLICABLE AND HENCE DID NOT ALLOW LOSS. IN THE PRESENT PROCEEDINGS, THE AUTHORIZED REPRESEN TATIVE SUBMITTED THAT THE PROVISIONS OF SECTION 43(5) OF T HE I.T. ACT, 1961 NOWHERE STATE THAT TRANSACTION DONE ON DAY TO DAY B ASIS ARE NOT COVERED. IT WAS CLAIMED THAT THE CASE OF THE ASSESS EE IS FULLY COVERED UNDER PROVISIONS (E) OF SECTION 43(5) OF TH E I.T. ACT, 1961. THE AUTHORIZED REPRESENTATIVE WAS ASKED TO SUBMIT T HE DETAILS OF THE TRANSACTION AND THE EXCHANGE WHERE THE SAME TOO K PLACE, WITH DOCUMENTARY EVIDENCE. THE AUTHORIZED REPRESENTATIVE IN ITS WRITTEN SUBMISSIONS FILED ON30-11-2016 SUBMITTED A LEDGER ACCOUNT OF SHRI SAMEER AGARWAL WITH M/S. ANAND RATHI COMMOD ITIES LTD., JAIPUR OBTAINED FROM THE WEBSITE AND ALSO STATED TH AT IT IS UNABLE TO PRODUCE THE BILLS FOR VERIFICATION. FOR APPLICATION OF SECTION 43(5)(E), CERTAIN CONDITIONS ARE TO BE FULFILLED. S INCE THE AUTHORISED REPRESENTATIVE HAS EXPRESSED HIS INABILITY TO PRODU CE THE BILLS, THESE CONDITIONS CANNOT BE EXAMINED. THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER IS UPHELD. THE GROUND OF APPE AL IS DISMISSED. 3.2 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE PRAYED FOR DELETION OF ADDITION CONFIRMED BY THE LOWER AUTHORI TIES. ITA NO.41/JP/2017 SHRI SAMEE R AGARWAL VS ITO, WARD- 6(4) ,JAIPUR 4 3.3 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ERS OF THE LOWER AUTHORITIES. 3.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND ALSO TAKEN INTO CONSIDERATI ON THE LETTER DATED 22- 05-2017 OF THE LD.AR OF THE ASSESSEE FOR CONSIDERAT ION AND ADMITTING THE ADDITIONAL EVIDENCES. BRIEF FACTS OF THE CASE ARE T HAT THE ASSESSEE- INDIVIDUAL FILED HIS E-RETURN OF INCOME ON 31-12-20 12 FOR THE A.Y. 2012-13 DECLARING INCOME AT RS. 6,00,910/-. THE CAS E OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER COMPULSORY SCRUTINY. IN THIS CASE, THE AO OBSERVED THAT THE ASSESSEE DERIVED INCOME FROM SALA RY, CAPITAL GAIN AND OTHER SOURCES. THE AO NOTED THAT THE ASSESSEE HAS C LAIMED MCX COMMODITY LOSS OF RS. 1,82,974/- FROM THE INCOME OF OTHER SOURCES. THE AO ASKED THE ASSESSEE TO JUSTIFY THE DEDUCTION OF S UCH LOSS WHEN THE TRANSACTION ON MCX ARE IN THE NATURE OF THE SPECULA TIVE TRANSACTION. THE ASSESSEE SUBMITTED THAT HE HAD SUFFERED FUTURE AND OPTION LOSS BUT AT THE TIME OF ITR FILING COMMODITY LOSS WAS MENTIONED IN STEAD OF FUTURE AND OPTION LOSS. THE AO WAS NOT CONVINCED WITH THE SUB MISSIONS OF THE ASSESSEE AS ASSESSEE HIMSELF ADMITTED THAT HE HAD C ARRIED ON TRANSACTION ON MCX DURING THE YEAR AND INCURRED LOSS OF RS. 1,8 2,974/-. THE AO ITA NO.41/JP/2017 SHRI SAMEE R AGARWAL VS ITO, WARD- 6(4) ,JAIPUR 5 NOTED THAT TREATMENT OF SUCH TRANSACTION IS DEFINED IN SECTION 43(5) OF THE ACT. HENCE, THE AO MADE THE ADDITION OF RS. 1,82,97 4/- WITH FOLLOWING OBSERVATIONS. 4.3 THE CRUX OF THIS DEFINITION IS THAT THOSE TRA NSACTION OF PURCHASE AND SALES WHICH ARE SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OF THE GOODS WHICH INCLUDES SECURITIES ALSO ARE CON SIDERED AS SPECULATIVE TRANSACTION. IN THE STOCK MARKET THE TR ANSACTIONS ARE UNDERTAKEN BY BROKERS ON BEHALF THE INVESTOR/ TRADE RS IN THE FOLLOWING WAY:- (A) PURCHASE OF SHARES (TO BE SUBSEQUENTLY RECEIVED IN D- MAT ACCOUNT) (B) SALES OF SHARES (TO BE SUBSEQUENTLY CLEARED FRO M THE BALANCE IN D-MAT ACCOUNT) PURCHASE AND SALARY OF SAME SHARES ON THE SAME DA Y. THE THIRD TYPE OF SHARE TRANSACTIONS ARE CALLED AS SQUARE OFF TRANSACTIONS. IN THIS CATEGORY NO DELIVERY OF SHARE S EFFECTIVELY TAKE PLACE I.E. NEITHER SHARES ARE RECEIVED IN D- MAT AC COUNT FOR SUCH PURCHASES SQUARED OFF THE SAME NOR SHARES ARE CLEAR ED FROM BALANCE IN D-MAT ACCOUNT SQUARED OFF THE SAME DAY. THIS IS THE CATEGORY WHEREIN ALL THE TRANSACTIONS CAN BE CLASSIFIED AS SPECULATI VE TRANSACTIONS. IN THE CASE OF THE ASSESSEE, THE ASSESSEE MADE PURC HASE AND SALE OF SHARE/GOODS ON THE SAME DAY, THEREFORE, THE PROV ISIONS OF SECTION 43(5) IS CLEARLY APPLICABLE IN THE CASE OF THE ASSE SSEE. THE ASSESSEE HAS DECLARED COMMODITY LOSS OF RS. 1,82,974/- AND THIS LOSS CAN ONLY BE SET OFF AGAINST PROFIT FROM SPECULATIVE TRANSACTION S. SINCE THE ASSESSEE DOES NOT HAVE ANY PROFIT FROM SPECULATIVE TRANSACTI ON, THE LOSS OF RS. 1,82,974/- CANNOT BE SET OFF AGAINST INCOME FROM OT HER HEADS DURING THE YEAR. THE SET OFF CLAIMED BY THE ASSESSEE IS THEREF ORE, DISALLOWED AND THE LOSS IS ALLOWED TO BE CARRIED FORWARD TO THE SU CCEEDING ASSESSMENT YEAR AS PER PROVISIONS OF THE ACT. IN FIRST APPEAL THE LD. CIT(A) HAS CONFIRMED THE AC TION OF THE AO WITH FOLLOWING OBSERVATIONS. ITA NO.41/JP/2017 SHRI SAMEE R AGARWAL VS ITO, WARD- 6(4) ,JAIPUR 6 IN THE PRESENT PROCEEDINGS, THE AUTHORIZED REPRES ENTATIVE SUBMITTED THAT THE PROVISIONS OF SECTION 43(5) OF T HE I.T. ACT, 1961 NOWHERE STATE THAT TRANSACTION DONE ON DAY TO DAY B ASIS ARE NOT COVERED. IT WAS CLAIMED THAT THE CASE OF THE ASSESS EE IS FULLY COVERED UNDER PROVISIONS (E) OF SECTION 43(5) OF THE I.T. A CT, 1961. THE AUTHORIZED REPRESENTATIVE WAS ASKED TO SUBMIT THE D ETAILS OF THE TRANSACTION AND THE EXCHANGE WHERE THE SAME TOOK PL ACE, WITH DOCUMENTARY EVIDENCE. THE AUTHORIZED REPRESENTATIVE IN ITS WRITTEN SUBMISSIONS FILED ON30-11-2016 SUBMITTED A LEDGER A CCOUNT OF SHRI SAMEER AGARWAL WITH M/S. ANAND RATHI COMMODITIES LT D., JAIPUR OBTAINED FROM THE WEBSITE AND ALSO STATED THAT IT I S UNABLE TO PRODUCE THE BILLS FOR VERIFICATION. FOR APPLICATION OF SECT ION 43(5)(E), CERTAIN CONDITIONS ARE TO BE FULFILLED. SINCE THE AUTHORISE D REPRESENTATIVE HAS EXPRESSED HIS INABILITY TO PRODUCE THE BILLS, THESE CONDITIONS CANNOT BE EXAMINED. THE DISALLOWANCE MADE BY THE ASSESSING OF FICER IS UPHELD. THE GROUND OF APPEAL IS DISMISSED. THE LD.AR OF THE ASSESSEE DURING THE COURSE OF THE HEARING RELIED ON THE ITAT MUMBAI BENCH JUDGEMENT IN THE CASE OF SUNDARA M MULTI PAP LTD VS ACIT (ITA NO.8419/MUM/2011 DATED 27-11-2013). IT IS PERTINENT TO NOTE THAT THE PROVISIONS OF SECTION 43(5)(E) CAME I NTO EXISTENCE W.E.F. 1-04-2014 ONLY WHICH IS REPRODUCED AS UNDER:- 43(5) SPECULATIVE TRANSACTION MEANS A TRANSAC TION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY CO MMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULT IMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER O F THE COMMODITY OR SCRIPS: PROVIDED THAT FOR THE PURPOSES OF THIS CLAUSE (E) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING I N COMMODITY DERIVATIVES CARRIED OUT IN A RECOGNIZED A SSOCIATION, ] [ WHICH IS CHARGEABLE TO COMMODITIES TRANSACTION TAX UNDER CHAPTER VII OF THE FINANCE ACT, 2013 (17 OF 2013).] ITA NO.41/JP/2017 SHRI SAMEE R AGARWAL VS ITO, WARD- 6(4) ,JAIPUR 7 PRIOR TO AMENDMENT NO EXCHANGE DEALING IN COMMODITY FUTURE & OPTIONS WERE RECOGNIZED. HENCE, THE DECISION OF ITAT MUMABI BENCH (SUPRA) IS BASED ON WRONG ASSUMPTION OF FACTS. THEREFORE, IN SUCH A SITUATION, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE L D. CIT(A). THUS THE APPEAL OF THE ASSESSEE DISMISSED. 4.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 -03-2018 . SD/- SD/- FOT; IKY JKO HKKXPUN (VIJAY PAL RAO) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 14 /03/ 2018 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SAMEER AGARWAL, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 6(4), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.41/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR