DCIT 3(2), MUMBAI V. MOBILE TRADING & INVESTMENT P. LTD, MUMBAI

ITA 4926/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92835 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 31-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIRAM; AMAR GAHLOT
• Keywords: Business expenditure; Additional evidence; Speculation loss
• Section: 131

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.4926/MUM/2012 ASSESSMENT YEAR: 2008-09 DY. COMMISSIONER OF INCOME TAX,-3(2), 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S MOBILE TRADING & INVESTMENT PVT. LTD., 141-C MITTAL TOWER NARIMAN POINT, MUMBAI-400021 ( / REVENUE) ( '#$% & /ASSESSEE) P.A. NO.AAC CM1419N '#$% & / ASSESSEE BY SHRI AMAR GAHLOT & SHRI S. SRIRAM / REVENUE BY SHRI VIJAY KUMAR BORA-DR ' '( ) & * / DATE OF HEARING 09/04/2015 ) & * / DATE OF ORDER: 10/06/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 31/05/2012 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI, BROADLY ON THE GROUND IN DELETING THE M/S MOBILE TRADING & INVESTMENT PVT. LTD., 2 DISALLOWANCE OF RS.2,63,53,556/- MADE ON ACCOUNT OF SPECULATION LOSS FROM TRADING IN GOLD BULLIONS WITH OUT APPRECIATING THE FACT THAT THE INTENTION OF THE ASS ESSEE WAS NOT TO EARN PROFIT BUT TO INCUR LOSSES SIMPLY T O REDUCE THE TAXABLE PROFIT MORE SPECIFICALLY WHEN NO ACTUAL DELIVERY WAS TAKEN IN NORMAL COURSE AND FURTHER ACCEPTING TH E ADDITIONAL EVIDENCE FOR THE PROOF OF DELIVERY WITHO UT GIVING OPPORTUNITY TO THE ASSESSING OFFICER CONTRAVENING R ULE 46A OF THE INCOME TAX RULES. 2. DURING HEARING OF THIS APPEAL, LD. DR, SHRI VIJ AY KUMAR BORA, ADVANCED HIS ARGUMENTS WHICH ARE IDENTI CAL TO THE GROUND RAISED. ON THE OTHER HAND, SHRI AMAR GAHLOT ALONG WITH S. SRIRAM, LD. COUNSEL FOR THE AS SESSEE, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE CO MING TO ANY CONCLUSION WE ARE REPRODUCING HEREUNDER THE REL EVANT PORTION FROM THE CONCLUSION DRAWN IN THE IMPUGNED O RDER FOR READY REFERENCE AND ANALYSIS:- 4. I HAVE CONSIDERED THE FACTS OF THE CASE AND AND SUBMISSIONS OF THE ASSESSEE. THE A.O. HAS FINALLY H ELD THAT THE LOSS INCURRED BY THE ASSESSEE IN TRADING O F GOLD AND BULLION IS A SPECULATIVE LOSS, THOUGH WHILE DISCUSSING THE ISSUE IN THE ASSESSMENT ORDER, SHE H AS DOUBTED ABOUT THE TRADING ACTIVITY OF THE ASSESSEE IN GOLD AND BULLION WHETHER IT IS FICTITIOUS OR ACTUAL BUT FINALLY THE A.O. HAS ACCEPTED THE TRANSACTIONS BUT HELD M/S MOBILE TRADING & INVESTMENT PVT. LTD., 3 THEM OF SPECULATIVE NATURE AND, THEREFORE, THERE IS NO DISPUTE THAT THE ASSESSEE ACTUALLY ENTERED INTO THE TRANSACTIONS. A.O. HAS FINALLY NOT EVEN DISPUTED TH E LOSS INCURRED BY THE ASSESSEE IN TRADING OF GOLD AND BUL LION BECAUSE FINALLY SHE HAS ACCEPTED THE LOSS BUT THE O NLY DISPUTE IS THAT SHE HAS HELD IT AS SPECULATION LOSS , WHEREAS, ASSESSEE CLAIMED IT AS NORMAL BUSINESS LOS S. THE A.O. HAS GIVEN THREE REASONS FOR TREATING IT AS SPECULATIVE LOSS I.E. INTENTION OF THE COMPANY NOT TO EARN PROFIT BUT TO INCUR LOSS, NO ACTUAL DELIVERY WAS TA KEN AND NO STOCK REGISTER IS MAINTAINED, WHEREAS, AS FA R AS STOCK REGISTER IS CONCERNED, ASSESSEE HAS HELD A CO PY OF ITEM LEDGER AS ANNEXURE-A WITH ITS SUBMISSIONS DURI NG APPELLATE PROCEEDINGS WHICH IS CLAIMED TO HAVE BEEN FILED BEFORE THE A.O. ALSO. THE ITEM LEDGER IS FOR 'GOLD KG BAR 995,' THIS IS THE ONLY ITEM IN WHICH THE ASSESS EE HAS DEALT AND THIS LEDGER A/C GIVES THE COMPLETE DETAIL OF THE STOCK AVAILABLE WITH THE ASSESSEE GIVING THE DETAIL OF QUANTITY AND VALUE, THEREFORE, THERE IS NO OTHER REQUIREMENT OR NECESSITY OF MAINTAINING ANY STOCK REGISTER SEPARATELY. IN ANY CASE NATURE OF TRADING ACTIVITY SPECULATIVE OR NORMAL TRADING CANNOT BE BA SED ON MAINTENANCE OF STOCK REGISTER AT ALL. IF A PERSO N HAS PURCHASED ANY ITEM AND THEN SOLD THE SAME AND AT BO TH TIMES PHYSICAL DELIVERY IS TAKEN AND GIVEN THEN IT WILL NOT BE A SPECULATIVE TRADING IRRESPECTIVE OF THE FA CT WHETHER THE STOCK REGISTER IS MAINTAINED OR NOT. THE A.O. HAS DISPUTED THE INTENTION OF THE COMPANY AND HELD THAT COMPANY WANTED TO INCUR LOSSES BUT IN THI S REGARD IT IS RELEVANT TO MENTION THAT IN THE EARLIE R YEAR SIMILAR TRANSACTIONS WERE HELD A NORMAL TRADING ACT IVITY, THOUGH FOR A SMALLER AMOUNT. IN THE YEAR UNDER M/S MOBILE TRADING & INVESTMENT PVT. LTD., 4 CONSIDERATION THERE IS NO EVIDENCE OR FACT ON RECOR D WHICH CAN PROVE THAT THE INTENTION OF THE ASSESSEE WAS TO INCUR LOSSES. A.O. HAS MERELY BASED HER DECISIO N ON THE FACT THAT ASSESSEE HAD EARNED PROFIT IN ANOTHER LINE OF BUSINESS AND, THEREFORE, IT WANTED TO SET OFF TH E SAME AGAINST THE LOSS, WHEREAS, CONTRARY TO HER WHOLE DISCUSSION SHE HAS ACCEPTED THE LOSS INCURRED BY TH E ASSESSEE AND THE FACTS OF TRANSACTIONS HAVE NOT BEE N DISPUTED, THOUGH THE LOSS IS ALLOWED AS SPECULATIVE LOSS. ON THE CONTRARY' THE ASSESSEE HAS BEEN CLAIMING THA T IT WANTED TO ENTER INTO THE BUSINESS AND FURTHER WANTE D TO HAVE TRANSACTIONS WITH MMTC AND, THEREFORE, THE DECLARED INTENTION IS TO EARN PROFIT FROM THE TRADI NG ACTIVITY. COMING TO THE ISSUE OF DELIVERY OF GOODS TRANSACTED I.E. ACTUAL DELIVERY OF GOLD AND BULLION INVOLVED IN THE TRANSACTIONS THE ASSESSEE HAS PRODUCED ALL THE PART IES WITH WHOM IT HAD THE DEALINGS RELATING TO GOLD AND BULLION TRADING WHICH INCLUDED 8HRI RAKESH PATEL P/ O JORSS BULLION. PUSHPAK BULLION AND RS BULLION, IT H AS BEEN ACCEPTED AND DISCUSSED BY THE A.O. AT PAGE :2 OF THE ASSESSMENT ORDER. ALL THE PARTIES HAVE CONFIRME D THE TRANSACTIONS WITH THE ASSESSEE AND NONE OF THEM HAS DENIED THAT THE TRANSACTIONS WERE NOT BY PHYSICAL DELIVERY. AT THE SAME TIME, ASSESSEE HAS ALSO PRODU CED RECORDS ALONG WITH CHALLANS (DELIVERY NOTE) FOR EAC H TRANSACTION WHICH CLEARLY SHOWS RECEIPTS AND DELIVE RY OF THE GOLD AND BULLION TRADED. THESE CHALLANS WERE PRODUCED BEFORE THE A.O. ALSO AS CLAIMED BY THE ASSESSEE AND NO DEFECT, WHATSOEVER HAS BEEN FOUND I N THE CHALLANS BY THE A.O. THEREFORE, IT IS ONLY ON T HE BASIS OF CONJUNCTURE AND SURMISES THAT A.O. HAS HEL D M/S MOBILE TRADING & INVESTMENT PVT. LTD., 5 THAT THE TRANSACTIONS WERE WITHOUT ANY PHYSICAL DELIVERY, WHEREAS, THERE IS NO EVIDENCE TO SUGGEST THAT THERE WAS NO PHYSICAL DELIVERY. ON THE CONTRARY ASSESSEE HAS PRODUCED CHALLANS (DELIVERY NOTE) AND THE CONCERNED PARTIES BEFORE THE A.O. WHICH PROVES THAT THE DELIVERIES HAD ACTUALLY TAKEN PLACE. ASSESSEE HAS A LSO PAID A HIGHER VAT @ 1% OF THE TURNOVER WHICH IS APPLICABLE TO DELIVERY BASED TRADING, WHEREAS, 0.25 % VAT IS APPLICABLE TO NON-DELIVERY BASED TRANSACTION S. EVEN THE TRANSACTIONS OF PURCHASE AND SALE ARE WITH DIFFERENT PARTIES, WHEREAS, THE TRANSACTIONS OF PUR CHASE AND SALE NEED TO BE WITH THE SAME PARTY FOR A SPECULATIVE TRANSACTION. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION IT IS CLEAR THAT THE ASSESSEE GENUINELY TRANSACTED IN GOLD AND BULLION IN THE NORMAL COURSE OF BUSINESS WITH THE INTENTION TO EARN PROFIT AND TO E NTER INTO THIS BUSINESS IN A BIG WAY AND PHYSICAL DELIVE RY OF GOLD AND BULLION WAS TAKEN AND GIVEN IN THE NORMAL COURSE. HENCE THE LOSS INCURRED BY THE ASSESSEE IN TRANSACTIONS RELATING TO TRADING OF GOLD AND BULLIO N ARE TREATED AS NORMAL BUSINESS LOSS AND NOT SPECULATION LOSS. IN RESULT, THE GROUND OF APPEAL OF THE ASSESS EE IS ALLOWED. 2.2. THE FACTS IN BRIEF, ARE THAT THE ASSESSEE, I S ENGAGED IN THE BUSINESS OF TRADING OF GOLD BULLION AND CONSULTANCY FOR MINING PROJECTS, DECLARED INCOME O F RS.13,12,04,200/- IN ITS RETURN FILED ON 16/09/2008 , WHICH WAS PROCESSED U/S143(1) OF THE INCOME TAX ACT , 1961 (HEREINAFTER THE ACT) ON 30/06/2009, SUBSEQUEN TLY, THE CASE WAS SELECTED FOR SCRUTINY, NOTICE U/S 143( 2) OF THE ACT WAS ISSUED ON 05/08/2009 AND SERVED UPON THE M/S MOBILE TRADING & INVESTMENT PVT. LTD., 6 ASSESSEE ON 12/08/2009. DURING THE YEAR UNDER CONSIDERATION, THE NET PROFIT OF THE ASSESSEE WAS R S.13.14 CRORES AGAINST THE PROFIT OF RS.27.7 LAKHS IN THE I MMEDIATE PRECEDING YEAR. THE ASSESSEE EARNED A PROFIT OF RS .16.94 CRORES FROM ITS CONSULTANCY BUSINESS WHICH WAS SET OFF AGAINST THE LOSS OF RS.2.64 CRORES FROM THE BULLION TRADING BUSINESS. THE LD. ASSESSING OFFICER ASKED THE ASSE SSEE TO SUBMIT THE DETAILS OF PURCHASE AND SALE OF GOLD. ON THE BASIS OF DETAILS, SUBMITTED BY THE ASSESSEE, IT WAS FOUND BY THE ASSESSING OFFICER THAT:- 1. THE TRANSACTION OF PURCHASE AND SALE OF GOLD WER E DONE FOR THE PERIOD BEGINNING FROM NOVEMBER, 2007 TO MAR CH, 2008. 2. IN ALL, ACCEPT THREE TRANSACTIONS, THE GOLD PURC HASE WAS SHOWN HAVE BEEN SOLD ON THE SAME DAY. 3. ON MAJORITY OF DAYS, THE GOLD PURCHASE AND SOLD WAS RANGING BETWEEN 20 TO 30 KGS. 4. THE ASSESSEE CONSISTENTLY INCURRED LOSS IN ALL T RANSACTIONS FOR SALE OF GOLD. 2.3. THE ASSESSEE WAS ASKED TO SUBMIT TIME-WISE DETAILS OF PURCHASE AND SALE OF GOLD AND ALSO THE E VIDENCE WITH REGARD TO RATE AT WHICH THE GOLD WAS SOLD. THE ASSESSEE VIDE COMMUNICATION DATED 01/11/2010 CLAIME D THAT THE TYPE OF TRANSACTION IS NOT AVAILABLE ON RE CORD AS THE DEALER DID NOT INCLUDE THE TIME IN THE INVOICE AND FURTHER ALL THE PURCHASES AND SALES ARE BY WAY OF C HEQUES AND ALSO THE GOLD WAS TRANSPORTED PHYSICALLY TO THE DEALER BY THE STAFF MEMBERS OF THE ASSESSEE FIRM. THE LD. ASSESSING OFFICER ISSUED NOTICED U/S 131 OF THE INC OME TAX M/S MOBILE TRADING & INVESTMENT PVT. LTD., 7 ACT, TO THE DEALERS FROM WHOM THE ASSESSEE CLAIMED TO HAVE MADE PURCHASES AND SALES, NAMELY, PUSHPAK BULLIONS, M/S JORSS BULLIONS, M/S R.S. BULLION AND M/S SHIYON ENTERPRISES. IN RESPONSE TO THE NOTICE, THE DIRECT ORS OF PUSHPAK BULLIONS AND JORSS BULLIONS EXPLAINED THAT THEY ENTERED INTO TRANSACTION FOR PURCHASE AND SALE WITH THE ASSESSEE ON THE BASIS OF INTERNATIONAL PRICES AND F URTHER FIXING OF TRANSACTIONS MAY BE ON A DIFFERENT DAY AN D ALSO THE INVOICE OF A DIFFERENT DATE. IF THE OBSERVATIO N MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO T HE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MAT ERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RES PECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT BROADLY THE LD. ASSESSING OFFICER OPINED THAT THE L OSS INCURRED BY THE ASSESSEE ON ACCOUNT OF PURCHASE AND SALE OF GOLD AND BULLION IS A SPECULATIVE LOSS AND FURTH ER DOUBTED THE TRADING ACTIVITY BY THE ASSESSEE IN THE PRECIOUS METAL BUT THE FACT REMAINS THAT SHE ACCEPTED THE TRANSACTION BY HOLDING THE SAME AS OF SPECULATIVE I N NATURE. MEANING THEREBY, ULTIMATELY, SHE ACCEPTED T HAT THE ASSESSEE ACTUALLY ENTERED INTO THE TRANSACTIONS BY INCURRING LOSSES IN THE TRADING OF GOLD. THE ASSESSEE CLAIME D THE TRADING IN GOLD AS A NORMAL BUSINESS LOSS WHEREAS T HE ASSESSING OFFICER TERMED IT AS SPECULATION LOSS BY HOLDING THAT THE INTENTION OF THE ASSESSEE WAS NOT TO EARN PROFIT BUT TO INCUR LOSSES AS THERE WAS NO ACTUAL DELIVERY AND NO STOCK REGISTER WAS MAINTAINED. THE ASSESSEE FILED THE COP Y OF THE LEDGER ACCOUNT DURING ASSESSMENT PROCEEDINGS AS WEL L AS M/S MOBILE TRADING & INVESTMENT PVT. LTD., 8 BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) , WHICH GIVES THE COMPLETE DETAILS OF STOCK AVAILABLE WITH THE ASSESSEE. IN ANY CASE, THE NATURE OF TRADING ACTIVI TY WHETHER SPECULATIVE ARE NORMAL IS NOT IN DISPUTE. WE NOTE THAT IF A PERSON PURCHASES ANY ITEM AND THEN SOLD T HE SAME IN BOTH SITUATIONS, THERE IS A PHYSICAL DELIVERY IS TAKEN AND GIVEN. IT IS ALSO NOTED THAT THE PARTIES FROM WHOM THE DEALING IN GOLD WAS MADE LIKE SHRI RAKESH PATEL OF JORSS BULLIONS, PUSHPAK BULLIONS AND R.S. BULLIONS WERE PRODUCED BEFORE THE ASSESSING OFFICER, WHO ACCEPTED THE TRANSACTIONS AS HAS BEEN DISCUSSED EVEN IN THE ASSE SSMENT ORDER. ALL THE PARTIES CONFIRMED THE TRANSACTION A ND NONE OF THE PARTIES EVER DENIED ABOUT PHYSICAL DELIVERY. ASSESSEE ALSO PRODUCED THE RECORDS ALONG WITH CHALLANS (DELI VERY NOTE) WHICH CLEARLY SHOWS THAT THE GOLD WAS TRADED. EVEN THE LD. ASSESSING OFFICER DID NOT POINT OUT ANY DEF ECTS IN THE CHALLANS, THEREFORE, THE CONCLUSION OF THE LD. ASSESSING OFFICER THAT THERE WAS NO PHYSICAL TRANSACTION IS W ITHOUT ANY BASIS. IT IS ALSO NOTED THAT THE ASSESSEE PAID VAT ON THE TURNOVER, WHICH IS APPLICABLE TO DELIVERY BASED TRADING. THE TOTALITY OF FACTS CLEARLY INDICATES THAT THE AS SESSEE IN FACT TRANSACTED IN GOLD AND BULLIONS IN THE NORMAL COURSE OF BUSINESS TO EARN PROFIT. NO PRUDENT BUSINESSMAN WIL L INTENTIONALLY INCUR LOSSES. EVEN OTHERWISE, ALL THE PAYMENTS ARE THROUGH BANKING CHANNEL; THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMIS SIONER OF INCOME TAX (APPEALS). M/S MOBILE TRADING & INVESTMENT PVT. LTD., 9 3. SO FAR AS, THE CONTENTION RAISED IN GROUND NO.2 WITH RESPECT TO VIOLATION OF RULE 46A OF THE INCOME TAX RULES IS CONCERNED, THIS GROUND WAS NOT PRESSED BY THE LD. D R, IT IS DISMISSED AS NOT PRESSED. 4. THE LAST GROUND PERTAINS TO DELETING THE DISALL OWANCE OF EXPENSES AMOUNTING TO RS.13,14,839/-, ON ACCOUNT OF TRADING IN GOLD, WHICH IS CONSIDERED AS SPECULATIVE IN NATURE BY THE DEPARTMENT IS CONCERNED, IN VIEW OF T HE DISCUSSION MADE BY US, WHILE DELIBERATING UPON GROU ND NO.1 AND THE CONCLUSION DRAWN IN THE IMPUGNED ORDER , WE FIND THAT THESE ARE NORMAL BUSINESS EXPENSES, CONSEQUENTLY, THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS AFFIRMED, MORE SPECIFICALLY, WHEN THERE IS NO BASIS FOR MAKING SUCH DISALLOWANCE AND EVEN OTHE RWISE, THE AD-HOC DISALLOWANCE, IF ANY, UNDER THE FACTS, I S NOT PERMISSIBLE. FINALLY, THE APPEAL OF THE REVENUE IS HAVING NO MER IT, THEREFORE, DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE ON 10/06/2015. SD/- SD/- ( D.KARUNAKARA RAO ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ' ( MUMBAI; +' DATED : 10/06/2015 F{X~{T? P.S/. '. . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 01./ / THE RESPONDENT. M/S MOBILE TRADING & INVESTMENT PVT. LTD., 10 3. 2 2 ' 3& ( ,- ) / THE CIT, MUMBAI. 4. 2 2 ' 3& / CIT(A)- , MUMBAI 5. 56 0&'# , 2 ,-* ,# , ' ( / DR, ITAT, MUMBAI 6. $ 7( / GUARD FILE. / BY ORDER, 15-& 0& //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI