DCIT, CIRCLE-2, JAIPUR V. M/S PYRAMID TRADELINKS PVT. LTD., JAIPUR

ITA 512/JPR/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1985 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 22-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C KOTHARI CIT DHK
• Keywords: Business income; Transactions in derivatives; Speculation loss; Accommodation entries
• Section: 133(6); 131

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 DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 512/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 THE DCIT, CIRCLE - 2, JAIPUR. CUKE VS. M/S PYRAMID TRADELINKS PVT. LTD., 513 SIN MOON CHAMBERS, PLOT NO. S-4, KALWAD SCHEME, NEAR AJMER FLYOVER, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AAECP9897M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRHDH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI D.C. KOTHARI ( CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03/05/2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 27/07/2017. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-I, JAIPUR DATED 27.03.2015 FOR A.Y. 2011-12 WHEREIN T HE REVENUE HAS TAKEN THE SOLE GROUND OF APPEAL AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALL OWANCE OF BOGUS LOSSES BOOKED THROUGH NMCE AMOUNTING TO RS. 6,18,8 7,338/- 2. BRIEFLY THE FACTS OF THE CASE ARE THAT DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE HAS REPORTED NET PROFIT FROM ITS SPECULATIVE ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 2 BUSINESS ACTIVITY AMOUNTING TO RS. 8,73,82,640/-. T HE BREAKUP OF THE SPECULATIVE BUSINESS INCOME DECLARED BY THE ASSESSE E COMPANY IS AS UNDER:- EXCHANGE PROFIT/LOSS (RS) MCX 20,95,09,389.10 NCDEX (-) 5,79,04,877.16 NMCE (-) 6,18,87,338.87 ACE (-) 23,34,534.69 GRAND TOTAL 8,73,82,638.38 THE DISPUTE RELATES TO SPECULATIVE LOSS OF RS. 6,18 ,87,338.00 RELATING TO TRANSACTIONS ON NMCE PLATFORM. THE ASSESSING OFFIC ER HELD THAT THE SAID LOSS IS BOGUS AND HAS BEEN DELIBERATED CREATED SO AS TO REDUCE SPECULATIVE PROFIT. IT WAS FURTHER HELD BY THE AO THAT EVEN IF THE TRAN SACTION HAS BEEN CARRIED OUT IN A PROPER EXCHANGE WITH PROPER BILLS, THEN ALSO I T DOESNOT MAKE IT GENUINE. IT WAS HELD THAT MERE PAPER COMPANIES BOOKING LOSSE S AND ASSESSEE ALSO PURCHASING LOSSES IS AGAIN A NON-GENUINE ACTIVITY A ND LOSSES BOOKED ARE LIABLE TO BE DISALLOWED. ACCORDINGLY, LOSSES TO THE TUNE OF RS 6,18,87,338 WAS CONSIDERED AS NON-GENUINE AND ADDED BACK TO THE TOT AL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER WHILE MAKING THE SA ID DISALLOWANCE HAS RELIED ON THE REPORT OF DIT (I&CI) RAJASTHAN DATED 21.03.2 014 WHICH WE HAVE EXAMINED IN SUBSEQUENT PARAGRAPHS. 3. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO CALLED FOR A REMAND REPORT FROM THE ASSE SSING OFFICER. AFTER TAKING INTO CONSIDERATION THE SUBMISSION OF THE ASSESSEE A ND THE REMAND REPORT FROM THE ASSESSING OFFICER, THE LD CIT(A) HELD THAT THE ASSESSING OFFICER HAD MADE DISALLOWANCE MERELY ON THE BASIS OF SUSPICION, SURM ISES AND CONJECTURES AND IT IS NOT BACKED BY ANY POSITIVE FINDING OR ENQUIRY CONDUCTED. IT IS BASED MAINLY ON THE GENERAL REPORT OF FORWARD MARKET COMM ISSION (FMC) IN RESPECT ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 3 OF FABRICATED CONTRACTS AND OTHER DOCUMENTS BY MD AND CEO OF NMCE IN THE SAME CANNOT BE ATTRIBUTED TO THE ASSESSEE COMPANY W ITHOUT ANY MATERIAL OR EVIDENCE. ACCORDINGLY, ADDITION OF RS. 6,18,87,338 /- PERTAINING TO THE SPECULATIVE LOSS WAS DELETED BY THE LD CIT(A). 4. THE LD. CIT(DR) SUBMITTED THAT THE DECISION OF L D. CIT(A) IS NOT ACCEPTABLE AS THE ADDITION WAS MADE BY THE ASSESSI NG OFFICER AFTER IN-DEPTH ENQUIRY AND NOT ONLY ON THE BASIS OF REPORT OF FMC. THE AO RELYING ON THE REPORT OF DIT (I&CI), RAJASTHAN HAS HELD THAT M/S M OTISONS COMMODITIES PVT LTD, A BROKER OF NMCE HAD PROVIDED ACCOMMODATION EN TRIES/BOGUS ENTRIES TO THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE AS SESSEE EARNED HUGE PROFITS TILL 18.01.2011 AND THEREAFTER IT STARTED TRANSACTI ONS WITH M/S MOTISONS COMMODITIES PVT. LTD. FROM 18.01.2011 AND SUFFERED HUGE LOSSES OF RS. 6,18,87,338/- UPTO 21.02.2011 WHICH IS UNBELIEVABLE , THEREFORE, THE AO HAS RIGHTLY MADE ADDITION BY WAY OF DISALLOWANCE OF BOG US LOSSES OF NMCE. 5. IN RESPONSE, THE LD. AR SUBMITTED THAT THERE IS NO FINDING IN THE REPORT OF THE FORWARD MARKET COMMISSION WHICH WOULD SUGGES T THAT THE ASSESSEE INDULGED IN ANY BOGUS TRANSACTION WHICH HAS RESULTE D IN BOGUS LOSSES DURING THE YEAR. FURTHER IT WAS SUBMITTED THAT THERE IS NO EVIDENCE THAT M/S MOTISONS COMMODITIES PVT. LTD. A BROKER OF NMCE WAS INVOLVED /INDULGED IN ANY SUCH BOGUS TRANSACTIONS. IT WAS FURTHER SUBMITTED THAT T HE ASSESSING OFFICER IN HIS REMAND REPORT HAS ADMITTED THAT THERE ARE NO BOGUS ENTRIES FOUND IN RESPECT OF THE TRANSACTIONS EXECUTED THROUGH MOTISONS COMMO DITIES PVT. LTD. AS PER THE REPORT OF ITO(INTELLIGENCE)-II AS WELL AS DIREC TOR OF INCOME TAX (I&CI), JAIPUR. 6. FURTHER THE LD. AR RELIED UPON WRITTEN SUBMISSIO N FILED BEFORE THE LD CIT(A) WHICH IS REPRODUCED IS AS UNDER:- THE LD. A.O. ONLY ON THE BASIS OF REPORT OF DIT(I& CI), MUMBAI, THAT THE ASSESSEE COMPANY HAS INCURRED A LOSS OF MORE THAN R S. 5 CRORES WITH NMCE, A ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 4 COMMODITY EXCHANGE, ITO (INTELLIGENCE) II INITIATE D ENQUIRY AGAINST THE COMPANY FOR ASCERTAINING GENUINENESS OF LOSS INCURR ED BY THE COMPANY IN TRANSACTIONS CARRIED IN NMCE THROUGH MOTISONS COMMO DITIES PVT. LTD. JAIPUR A BROKER OF NMCE. HE RECORDED STATEMENTS OF VENU GOPA L AGARWAL, WHO WAS A DIRECTOR OF THE ASSESSEE COMPANY DURING THE RELEVAN T ASSESSMENT YEAR, CALLED FOR VARIOUS DOCUMENTS INCLUDING CONTACT NOTES OF MO TISONS COMMODITIES PRIVATE LIMITED, HINDUSTAN TECHNOSOL PRIVATE LIMITE D AND GANPATI INVESTMENTS REGARDING TRADES CARRIED WITH THE ASSESSEE COMPANY WHICH WERE DULY PROVIDED BY THE RESPECTIVE BROKERS. HOWEVER ON THE VERIFICATION OF THE DOCUMENTS BY I.T .O. (INTELLIGENCE)-II SUBMITTED BY THE COMPANY AND OTHER BROKERS WHO HAS DEALINGS WITH THE ASSESSEE COMPANY HAS NEITHER REVEALED ANY DEFICIENC Y OR SHORT COMINGS IN THE RECORDS NOR ANY MATERIAL WAS FOUND BY ITO (INTELLIG ENCE)-II BY WHICH ANY ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESS EE COMPANY. HOWEVER RELYING SOLELY ON REPORT OF DIT(I&CI), MUMB AI THAT AS SOME OF THE MEMBER/BROKERS FROM WEST BENGAL & UTTAR PRADESH WER E INDULGED IN ARTIFICIALLY CREATING THE VOLUME AND ALSO IN PROVID ING ACCOMMODATION ENTRIES FOR PROFIT & LOSS AND AS SUCH ENTIRE TRANSACTIONS I N NMCE ARE NOT GENUINE, THE LD. ITO(INTELLIGENCE)-II AND WORTHY DIT(C&I) WITHOU T BRINGING ANY COGENT MATERIAL ON RECORD, REPORTED THAT THE LOSS OF RS. 6 1887338/- INCLUDING BROKERAGE INCURRED BY THE COMPANY THROUGH MOTISONS COMMODITIES PVT. LTD. IS NOT GENUINE AND IS LIABLE TO BE DISALLOWED. ACTI NG ON THE REPORT OF LD. ITO(INTELLIGENCE)-II AND WORTHY DIT(C&I), THE A.O. HAS ASKED THE ASSESSEE COMPANY TO EXPLAIN WHY THE LOSS OF RS. 61887338/- I NCLUDING BROKERAGE MAY NOT BE DISALLOWED. IN THIS REGARD, THE ASSESSEE COMPANY SUBMITTED TO A .O. THAT THE ASSESSEE COMPANY HAS CARRIED OUT TRANSACTION IN NMCE THROUGH ITS BROKER MOTISONS COMMODITIES PRIVATE LIMITED (MCPL). ALL THE TRANSAC TIONS HAVE BEEN DONE ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 5 ONLINE THROUGH TRADING TERMINALS OF MCPL. MCPL HAS ISSUED VALID CONTRACTS NOTES EVERY DAY FOR TRADES CARRIED OUT THROUGH IT. THE CONTRACT NOTE CONTAINS DETAILS OF ORDER NO, TRADE NO, TRADE DATE/TIME, TRA DE TYPE I.E. WHETHER PURCHASE OR SELL, KIND OF COMMODITY TRADED, BROKERA GE & OTHER EXPENSES AND NET AMOUNT PAYABLE OR RECEIVABLE BY THE BROKER FOR THAT DAY. THE DETAILS OF ALL THE TRANSACTIONS CARRIED THROUGH MCPL ARE AL SO AVAILABLE WITH NMCE AND ARE VERIFIABLE. THERE IS NO REVERSAL OF TRADES CARR IED THROUGH MCPL WHICH IS ALSO VERIFIABLE FROM NMCE AS NMCE KEEPS RECORDS OF TRADE REVERSALS OR CODE CHANGES. THE ASSESSEE COMPANY HAS KEPT PROPER MARGI NS WITH THE BROKER TO ENABLE IT TO CARRY OUT TRADES. ALL THE PAYMENTS TO MCPL HAVE BEEN MADE THROUGH RTGS WHICH IS VERIFIABLE FROM THE BANK STAT EMENTS OF THE ASSESSEE COMPANY AS WELL AS FROM THE LEDGER OF MCPL. ALL THE TRANSACTIONS CARRIED OUT THROUGH MCPL ARE G ENUINE TRANSACTIONS AND SAME ARE VERIFIABLE FROM THE CONTRACT NOTES ISSUED BY MCPL. THE TRANSACTIONS WERE CARRIED OUT IN THE REGULAR COURSE OF BUSINESS. THE CONTRACT NOTES CONTAINS THE ORDER NO, TRADE NO, TRADE DATE & TIME AND OTHER REQUIRED PARTICULARS AND SAME ARE ALSO VERIFIABLE WITH THE T RADING RECORDS MAINTAINED BY THE EXCHANGE. THERE HAS BEEN NO TAMPERING WITH THE CONTRACT NOTES. NO INSTANCE HAS BEEN POINTED OUT REGARDING TRADE MODIF ICATIONS OR CLIENT CODE CHANGES. THE PAYMENTS HAVE BEEN MADE THROUGH BANKIN G CHANNELS AND ARE DULY ACKNOWLEDGED BY THE MCPL AS PER ITS LEDGER. AL L THE TRANSACTIONS ARE APPEARING IN THE BOOKS OF MCPL WHICH IS EVIDENT FRO M THE ACCOUNT OF ASSESSEE COMPANY APPEARING IN THE BOOKS OF MCPL. THERE IS NO MATERIAL AVAILABLE EXCEPT THE REPORT OF DIT (C & I), MUMBAI WHICH SUGGEST THAT THE LOSS INCURRED BY COMPANY THR OUGH MCPL IN RESPECT OF TRADES IN MCPL IS BOGUS. EVEN THE REPORT OF DIT (C & I) DOES NOT NAME THE BROKER MCPL TO HAVE BEEN ENGAGED IN PROVIDING ACCOM MODATION ENTRIES OF PROFIT OR LOSS. PENALTY OF MEAGER RS. 5000 WAS IMPO SED ON MCPL FOR TRADES IN NICKEL IN THE MONTH OF OCTOBER, 2010. HAD MCPL INDU LGED INTO NON GENUINE ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 6 TRADES IN THE MONTH OF JANUARY TO MARCH 2011, WHEN ASSESSEE COMPANY STARTED TRADING WITH MCPL, NMCE OR FMC WOULD HAVE I MPOSED MORE PENALTIES ON MCPL OR WOULD HAVE SUSPENDED IT FROM THE EXCHANG E. SINCE NO SUCH ACTION HAS BEEN TAKEN AGAINST MCPL, IT CAN REASONAB LY BE ASSUMED THAT FMC/NMCE HAS FOUND THE TRADES OF MCPL AS GENUINE. THE OFFICIALS OF THE NMCE IN THEIR STATEMENTS RECOR DED WITH DIT (C & I) HAS CATEGORICALLY STATED THAT NOT ALL THE MEMBERS HAVE BEEN INVOLVED IN THE ACTIVITY OF TRANSFERRING PROFIT & LOSS. THEY HAVE F URTHER STATED THAT THEY WERE MAINLY INVOLVED IN CREATING ARTIFICIAL TURNOVER ON THE EXCHANGE. THEY HAVE STATED NAMES OF FEW BROKERS OR CLIENTS WHO WERE FOU ND TO BE INDULGED IN ACTIVITIES OF CREATING ARTIFICIAL VOLUMES OR IN TRA NSFERRING THE PROFIT OR LOSS BUT NAME OF MOTISONS COMMODITIES PVT. LTD. OR OF ASSESS EE COMPANY HAS NOT BEEN MENTIONED BY THEM. THE ALLEGATION OF LD. A.O. THAT THE ASSESSEE COMPAN Y HAS PURCHASED LOSS AS IT WAS HAVING PROFITS IN MCX IS ALSO NOT CORRECT. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS, THE NATURE OF WHICH IS SPE CULATIVE WHICH IS HIGHLY RISKY. THE PRICES OF COMMODITIES ARE INFLUENCED BY VARIOUS FACTORS ON WHICH THE TRADERS DO NOT HAVE ANY CONTROL. SOME TIME THER E ARE HUGE FLUCTUATIONS IN THE PRICES OF COMMODITIES WHICH CAN WIPE OUT THE EN TIRE PROFITS. PROFIT AND LOSS ARE THE TWO SIDES OF SAME COINS. IT IS THE WIS DOM OF THE PERSON THAT WHEN HE WANTS TO ENTER INTO COMMODITY MARKET AND WH EN HE WANTS TO EXIT AND IF THE PERSON MAKES HEAVY LOSSES, IT HIS PRUDEN CE TO CONTINUE OR EXIT. THE ASSESSEE COMPANY HAS MADE PROFITS FROM ONE EXCHANGE AND MADE LOSSES FROM OTHER EXCHANGES DOES NOT MEAN THAT PROFITS ARE GENUINE AND THE LOSSES ARE NOT GENUINE. ALL THE ENTRIES PERTAINING TO PROF ITS AND LOSSES SHOULD BE ACCORDED EQUITABLE TREATMENT AND THE SAME STANDARD SHOULD BE APPLIED IN RESPECT THERETO. SAME SETS OF DOCUMENTS AND AUDIT T RAIL IS AVAILABLE IN RESPECT ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 7 OF TRANSACTIONS CARRIED OUT IN EACH EXCHANGE AND IT IS NOT JUSTIFIED TO DISREGARD THE LOSS INCURRED IN ONE EXCHANGE, ACCEPT PROFITS M ADE IN ONE EXCHANGE AND EVEN ACCEPT LOSS INCURRED IN OTHER EXCHANGES VIZ NC DEX & ACE WITHOUT POINTING ANY DEFECTS IN THE DOCUMENTS/EVIDENCES OR INFIRMITY IN THE TRANSACTION PROCESS. IT IS ALSO IMPORTANT THAT MCPL THROUGH ITS AUTHORIZ ED REPRESENTATIVE IN THE STATEMENTS RECORDED BEFORE ITO (INTELLIGENCE) II HA S DENIED TO HAVE PROVIDED ACCOMMODATION ENTRY OF LOSS TO THE ASSESSEE COMPANY . THE STATEMENTS OF DIRECTOR OF ASSESSEE COMPANY ALSO HAS NO DEFICIENCY . IT IS SETTLED LAW THAT ADDITION OR DISALLOWANCE IN ASSESSMENT CANNOT BE MADE WITHOUT EVIDENCE OR MATERIAL (DHAKESHWARI COTTON MI LLS LTD. VS. CIT (1959) 26 ITR 775 (SC). THE GENERAL OBSERVATION OF FORWARD MA RKET COMMISSION (FMC) ON ENQUIRIES ABOUT CONDUCT OF TRANSACTIONS ENTERED INTO BY SOME MEMBERS IN NMCE WITHOUT ANY NAME OF ASSESSEE OR OF MOTISONS CO MMODITIES P. LTD. FORWARDED BY DIT (I & CL), MUMBAI TO DIT (I & CL), JAIPUR CANNOT BE MADE BASIS FOR ASSESSMENT WITHOUT ANY MATERIAL OR EVIDEN CE AGAINST ASSESSEE. FOR ASSESSMENT WITHOUT ANY MATERIAL OR EVIDENCE AGAINST ASSESSEE. THE I.T.O. (INTELLIGENCE) - II, JAIPUR ALSO FOUND NO MATERIAL OR EVIDENCE AGAINST ASSESSEE AND THE STATEMENT OF DIRECTOR OF ASSESSEE COMPANY C ONFIRMED THE TRANSACTIONS AND FURNISHED ALL RELEVANT DOCUMENTS I N WHICH NO DEFECT WAS FOUND BY ITO. THE AUTHORIZED PERSON OF MOTISONS COM MODITIES P. LTD. ALSO APPEARED BEFORE I.T.O. (INTELLIGENCE) - II, JAIPUR AND CONFIRMED THE TRANSACTION AND DENIED TO HAVE PROVIDED ANY ACCOMMO DATION ENTRIES TO ASSESSEE COMPANY BUT I.T.O. (INTELLIGENCE) - II, JA IPUR RELIED ONLY ON SAID GENERAL REPORT OF FORWARD MARKET COMMISSION AND DRA WN WRONG CONCLUSION THAT LOSS OF RS. 6,18,87,338/- BOOKED BY ASSESSEE T HROUGH MOTISONS COMMODITIES P. LTD. IS NOT GENUINE WHICH FINDING IS NOT BASED ON ANY MATERIAL ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 8 OR EVIDENCE AND, THEREFORE IS WRONG AND BAD IN LAW. THE SETTLED RULE OF LAW IS THAT ANY MALPRACTICE, LIKE THAT OF SELLING BY SHORT MEASURES (HIRA BAI VS. CIT 4 ITR 95) OR CHARGING PRICE IN EXCESS OF THE CONTROLL ED PRICE (SIVAN VS. CIT 34 ITR 328, CAG. IT VS. CHERIAN 117 ITR 371) OR SELLIN G SMUGGLED GOODS (LAI CHAND \/S. CIT 37 ITR 288 (SC) ETC. CANNOT BE ATTRIBUTED IN GE NERAL TO THE ASSESSEE THAT HE FOLLOWED SUCH PRACTICE. SIMILARLY THE GENERAL REPORT OF FORWARD MARKET COMMISSION IN RESPECT OF FABRICATED CONTRACTS AND OTHER DOCUMENTS BY MD & CEO OF NMCE CANNOT BE ATTRIBUTED TO ASSESSEE COMPANY WITHOUT ANY MATERIAL OR EVIDENCE THAT ASSESSEE COMP ANY ALSO FOLLOWED IT. THE ORDINARY PRESUMPTION OF LAW IS THAT APPARENT STATE OF AFFAIRS IS REAL UNLESS THE CONTRARY IS PROVED (KALVA VS. UNION OF INDIA 49 ITR 165 (SC), CIT VS. DAULAT RAM 87 ITR 349, 360-61 (SC). THE PRESUMPTION IS IN FAVOUR OF GOOD FAITH AND NON-CONCEALMENT OF INCOME AND THE INITIAL BUR DEN OF FINDING SOME MATERIAL IN SUPPORT OF FINDING OF CONCEALED INCOME IS ON DEPARTMENT (CIT VS. SWAMI 241 ITR 363). IN VIEW OF THIS POSITION OF LAW AND THERE BEING NO MATERIAL OR EVIDENCE AGAINST ASSESSEE COMPANY THE L OSS OF RS. 6,18,87,318/- INCURRED IN TRANSACTIONS WITH MCPL BY ASSESSEE IN NMCE CANNOT BE DISALLOWED IN LAW AND ACTION OF LD. A.O. IS WRONG A ND BAD IN LAW. IN VIEW OF THE ABOVE SUBMISSIONS THAT THE TRANSACTI ONS CARRIED THROUGH MCPL IN NMCE ARE GENUINE, ENTIRE TRANSACTIONS ARE SUPPOR TED BY PROPER CONTRACT NOTES, BILLS, LEDGER AND BANK STATEMENTS AND THERE IS NO COGENT MATERIAL/EVIDENCES ON RECORD TO DISBELIEVE THESE TR ANSACTIONS EXCEPT MERELY BY CONJECTURES AND SURMISES, IT IS HUMBLY PRAYED TH AT DISALLOWANCE OF LOSS RS. 61887338/- INCLUDING BROKERAGE INCURRED BY THE COMP ANY THROUGH MOTISONS COMMODITIES PVT. LTD. IN RESPECT OF TRADE EXECUTED IN NMCE BE ALLOWED AND ADDITION MADE DESERVES TO BE DELETED. 7. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS RA ISED BY BOTH PARTIES, IT WOULD BE RELEVANT TO REFER TO REPORTS OF FMC, DIT ( I&CI) AND OTHER RELATED ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 9 COMMUNICATION AND MATERIAL EVIDENCE AVAILABLE ON RE CORD IN SERIATIM WHICH HAS FORMED THE BASIS OF SUBJECT DISALLOWANCE. LETTER OF DIT(I&CI), MUMBAI DATED 04.02.2014 ADDRES S TO DIT(I&CI), JAIPUR 8. THE LETTER OF DIT(I&CI), MUMBAI DATED 04.02.2014 ADDRESS TO DIT(I&CI), JAIPUR IS THE FIRST COMMUNICATION ON THE SUBJECT AND FORMS THE BEDROCK OF THE WHOLE PROCEEDINGS. IN THE SAID LETTE R, DIT(I&CI), MUMBAI STATED THAT THE FORWARD MARKET COMMISSION (FMC) HAD RECEIVED A COMPLAINT REGARDING ARTIFICIAL TRADING VOLUME AND TAX EVASIO N TRANSACTIONS BY SOME MEMBERS AND CLIENTS IN NATIONAL MULTI COMMODITY E XCHANGE (NMCE), AHMEDABAD. THE COMMISSION CONDUCTED AN INQUIRY INT O THE COMPLAINT OF IRREGULARITIES IN NMCE AND FOUND SUBSTANCE IN THE A LLEGATIONS. A COPY OF THE REPORT ALONG WITH ANNEXURE- I TO X AS RECEIVED FROM FMC IS ENCLOSED. THEREAFTER, THE DIT(I&CI) NOTES THE FINDING OF THE FMC ENQUIRY REPORT. FURTHER, IT WAS STATED IN THE SAID LETTER THAT FMC HAS FORWARDED A LIST OF 72 PERSONS/ENTITIES HAVING SHOWN LOSSES EXCEEDING RS. 5 CRORES AND 30 PARTIES HAVING DECLARED PROFIT EXCEEDING RS. 5 CRORES. IN T HE LIST SO RECEIVED FROM THE FMC, IT WAS NOTICED THAT NINE CLIENTS ARE BASED IN MUMBAI AND NECESSARY INVESTIGATION HAS BEEN CARRIED IN THOSE CASES. IN MOST OF CASES, THE LOSSES INCURRED THROUGH NMCE HAVE BEEN ADJUSTED/ SET OFF A GAINST PROFIT FROM OTHER EXCHANGES/BUSINESS INCOME OR INCOME UNDER OTHER HEA DS. IN THE CASE OF PROFIT ALSO, THE SAME HAS BEEN FULLY/PARTIALLY ADJU STED AGAINST LOSSES. IN ONE OF THE CASES, THE STATEMENT OF THE CLIENT WAS RECOR DED DURING THE COURSE OF ENQUIRY AND THE CLIENT HAS ADMITTED THAT ALL THE TR ANSACTIONS CARRIED OUT THROUGH NMCE WERE NON-GENUINE AND, HAS DISCLOSED AD DITIONAL INCOME OF RS. 6.7 CRORES AND AGREE TO MAKE THE PAYMENT OF TAXES T HEREON. IN THE SAID LETTER, IT WAS FURTHER STATED THAT AS P ER THE LIST RECEIVED FROM THE ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 10 NMCE, FOLLOWING CLIENTS ARE BELONGING TO (DIT)(I&CI ), JAIPUR JURISDICTION: SR. NO. CLIENTS NAME ADDRESS & PAN CLIENT CODE BROKER/MEMB ER NAME AND CODE NET LOSS DECLARED BY THE CLIENT FOR THE YEAR 2010-11 1. RAHI MURTAZA 57,TIKKIWAL BHAWAN, M.I. ROAD, JAIPUR PAN: AUVPM9035G RLS0420 RATAN LAL SOMANI CL0386 7,05,17,997.50 2. PYRAMID TRADELINKS PVT. LTD., 208, ANUKAMPA-II,M.I. ROAD, JAIPUR PAN: AAECP9897M QQ99 MOTISONS COMMODITIES PVT. LTD. CL0233 6,16,04,677.50 IT WAS FURTHER STATED IN PARA 9 OF THE SAID LETTER DATED 4.02.2014 THAT: IN VIEW OF THE DETAILED ENQUIRY REPORT AND THE FAC TS AS BRIEFLY SUMMED UP ABOVE, NECESSARY INVESTIGATION NEEDS TO BE CARRIED OUT IN THE ABOVE CASES. PLEASE NOTE THAT THE ABOVE TRANSACTIONS PERTAIN TO F.Y. 2010-11 AND SCRUTINY PROCEEDINGS MAY BE PENDING IN SOME CASES WHICH ARE GETTING TIME BARRED ON 31 ST MARCH, 2014. THEREFORE, PRIORITY ACTION IN SUCH CA SES IS NECESSARY AND CIT/AO NEED TO BE SUITABLY INFORMED. FURTHER, THE DETAILS OF TRANSACTIONS/LOSSES/PROFITS MADE BY THE ABOVE CLIENTS ON NMCE DURING OTHER F.YEARS PARTICULARLY F.Y. 2009 -10 & 2011-12 ALSO NEED TO BE EXAMINED AS THE ARTIFICIAL TRADING HAS BEEN DONE IN THOSE YEARS ALSO. REPORT OF FORWARD MARKET COMMISSION ON COMPLAINT OF ARTIFICIAL INCREASE IN TRADING VOLUME AND INCOME TAX EVASION BY MEMBERS AN D CLIENTS OF NMCE 9. WE NOW REFER TO THE REPORT OF FMC WHICH HAS BEEN SHARED BY DIT(I&CI), MUMBAI WITH DIT (I&CI), JAIPUR. THE GEN ESIS OF THIS REPORT IS THE COMPLAINT OF IRREGULARITIES IN NMCE RECEIVED BY FORWARD MARKET COMMISSION ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 11 IN DECEMBER 2010 AND THEREAFTER A SPECIFIC COMPLAIN T DATED 08.03.2011 WHEREIN THE COMPLAINANT HAS STATED THAT NMCE HAS S UDDENLY OPEN TODAY CONTRACT CHANA AND SOYA OIL MARCH CONTRACT FOR ARTI FICIAL VOLUME AND TAX EVASION TRANSACTIONS. THE EXCHANGE OFFICER AND INFO RMATION TECHNOLOGY DEPARTMENT ARE PROVIDING FACILITY. VIDE THE SAID C OMMUNICATION; THE COMPLAINANT REQUESTED THE CHAIRMAN, FORWARD MARKET COMMISSION TO INVESTIGATE VOLUME AND OPEN POSITION OF THESE TWO C ONTRACTS. SUBSEQUENTLY THE FORWARD MARKET COMMISSION CARRIED OUT THE ENQUIRY INVOLVING MEMBERS, CLIENTS AND EMPLOYEES OF NMCE AN D THEIR STATEMENTS WERE RECORDED AND DATA RELATING TO TOP 30 LOSS MAKI NG CLIENTS FOR THE FINANCIAL YEAR 2010-11 WERE ANALYSED. THEREAFTER, IT GAVE IT S REPORT WITH FINAL CONCLUSION DRAWN AND SUGGESTIONS WHICH ARE REPRODUC ED AS UNDER: CONCLUSION: NMCE SENIOR MANAGEMENT ALONG WITH EMPLOYEES OF NMCE HAVE CREATED/INTRODUCED MEMBERS FOR MARKET MAKING IN THE YEAR 2010-11. THE ACTIVITY OF MARKET MAKING WAS RUN FROM ONE OF THE O FFICES SITUATED AT C.G. ROAD, AHMEDABAD BY NMCE EMPLOYEES. THE EMPLOYEES LI KE SHRI HEMANT GOENKA HAD INTRODUCED MEMBERS LIKE M/S ATULIT TIEU P PVT. LTD. ( MEMBER CODE CL0150), M/S RAMDOOT MANAGEMENT PVT. LTD.(MEMB ER CODE CL0155) AND M/S KONARK COMDEAL PVT. LTD. (MEMBER CODE CL026 4) TO SENIOR MANAGEMENT OF NMCE. THERE IS MARKET MAKING PRACTICES IN THE MARKET TO B RING LIQUIDITY IN THE ILLIQUID CONTRACTS AND THE IMPACT OF THEIR TRADING IS NMCE V OLUME INCREASE ARTIFICIALLY. THEREFORE, THE CHARGE OF THE COMPLAINANT THAT THERE IS ARTIFICIAL AND FICTITIOUS TRADING VOLUME ON NMCE EXCHANGE IS FOUND TO BE CORR ECT. AS FAR AS THE EVASION OF TAX BY LOSS MAKING CLIENTS AND MEMBERS ARE ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 12 CONCERNED, IT CAN BE ASCERTAINED BY INCOME TAX DEPA RTMENT. THEREFORE, AT THIS MOMENT, THE COMPLAINANTS OTHER CHARGE OF EVAS ION OF INCOME TAX BY THESE CLIENTS/MEMBER CANNOT BE CONFIRMED. FOR THE S AME, THE LIST OF ALL SUCH CLIENTS AND MEMBERS WHO HAVE MADE PROFITS/LOSSES TH ROUGH THIS ACTIVITY MAY BE REFERRED TO THE INCOME TAX DEPARTMENT. SUGGESTION: NMCE MAY BE DIRECTED TO EXPEL 10 MEMBER OF NMCE VIZ M/S SINCERE COMMODITIES AND DERIVATIVES MARKETS LTD. ( CL0149), M/S ATULIT TIEUP PVT. LTD. (CL0150), M/S RAMDOOT MANAGEMENT PVT. LTD. (CL 0155), M/ KONARK COMDEAL PVT. LTD. ( CL0264), M/S SHIV SHAKTI COMMOD ITIES ( CL0397), M/S SANJAY S. PATEL ( CL0352), M/S J.D. SROFF ( CL0312) , M/S D.M. FINANCE ( CL0280), M/S PRACHI COMMODITY (CL0348), M/S MARUTI BROKARAGE HOUSE PVT. LTD. (CL0299) WHO ARE INVOLVED IN THE ARTIFICIAL TR ADING ACTIVITY AND TRANSFERRING OF PROFIT AND LOSS TO EACH OTHER BY AR TIFICIAL WAY. THE COMMISSION MAY FORWARD THE LIST OF MEMBERS/CLIE NTS WHO HAVE BOOKED SUBSTANTIAL PROFITS/LOSSES TO INCOME TAX DEPARTMENT FOR SCRUTINY. 10. IN ITS REPORT, THE FMC HAS STATED THAT THE CLIE NTS HAVING PROFITS OF MORE THAN RS 30 CRORES AND CLIENTS HAVING LOSSES OF MORE RS. 10 CRORES HAVE BEEN TAKEN FOR ANALYSIS PURPOSES AND COMPLETE LIST OF AL L CLIENTS WHO HAVE MADE LOSSES AND PROFITS ARE ENCLOSED AS ANNEXURE-10 TO T HE REPORT OF THE FMC. FURTHER, BASIS SUCH ANALYSIS, THE CHARGE OF THE COM PLAINANT THAT THERE IS ARTIFICIAL AND FICTIOUS TRADING VOLUME ON NMCE EXCH ANGE WAS FOUND TO BE CORRECT. AS FAR AS THE EVASION OF TAX BY LOSS MAKIN G CLIENTS AND MEMBERS ARE CONCERNED, THE FMC REPORT SAYS THAT THE SAME HAS TO BE ASCERTAINED BY THE INCOME TAX DEPARTMENT AND THEREFORE, IT REFRAINED F ROM COMMENTING UPON THE CHARGE OF EVASION OF INCOME TAX. IN THE REPORT OF FMC WHERE IT HAS ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 13 ANALYSED TOP 30 CLIENTS FOR THE FINANCIAL YEAR 2010 -11, WE DO NOT FIND ANY FINDING OR DISCUSSION REGARDING THE INVOLVEMENT OF THE ASSESSEE OR THE MEMBER OF NMCE THROUGH WHICH ASSESSEE HAS CONDUCTED ITS TRANSACTIONS ON THE EXCHANGE NAMELY M/S MOTISONS COMMODITIES PVT. L TD IN RESPECT OF ARTIFICIAL AND FICTITIOUS TRADING VOLUME ON NMCE EX CHANGE. AT THE SAME TIME, IT DEFINITELY RAISES DOUBTS AND APPREHENSION IN THE MIND OF THE TAX AUTHORITIES THAT THE OTHER MEMBERS/CLIENTS (OTHER THAN THOSE AN ALYSED) WOULD HAVE BEEN INVOLVED IN SIMILAR ACTIVITIES AND THUS HAS CALLED FOR FURTHER INVESTIGATION. APPARENTLY BASED ON THE SAID REPORT OF THE FMC, DIT (I&CI), MUMBAI VIDE HIS LETTER DATED 04.02.2014 HAS REFERRED THE MATTER OF M/S PYRAMID TRADELINKS PVT. LTD. TO DIT(I&CI), JAIPUR FOR FURTHER INVESTIG ATION, BEING ONE OF THE CASES LISTED OUT IN ANNEXURE 10 TO THE REPORT OF FMC. IT WOULD THEREFORE BE ESSENTIAL TO EXAMINE THE SPECIFIC INVESTIGATION THAT HAS BEEN CARRIED OUT IN THE INSTANT CASE AND WHAT CREDIBLE EVIDENCE THAT THE REVENUE HA S BROUGHT ON RECORD. REPORT OF DIRECTOR OF INCOME TAX (I&CI) JAIPUR, RAJ ASTHAN DATED 21 ST MARCH, 2014 11. BASIS THE COMMUNICATION RECEIVED FROM DIT(I&CI) MUMBAI, DIT(I&CI) JAIPUR CARRIED OUT THE INVESTIGATION IN THE INSTANT CASE AND WHICH FORMS THE BASIS OF DISALLOWANCE BY THE AO. IN ITS REPORT, TH E DIT(I&CI), JAIPUR HAS REFERRED TO THE VARIOUS FINDINGS OF THE FMC IN ITS REPORT AND ALSO DRAWN REFERENCE TO THE STATEMENT OF SHRI AMIT SHARMA, SHR I TARUN GUPTA AND SHRI HEMANT GOENKA WHO HAPPEN TO BE THE EMPLOYEES AND EX -EMPLOYEES NMCE. FURTHER HE REFERRED TO THE REPORT OF ITO(INTELLIGEN CE)-II, JAIPUR WHO WAS ENTRUSTED TO CARRY OUT THE NECESSARY VERIFICATION I N THE CASE OF ASSESSEE. THE FINDINGS OF THE DIT(I&CI) ARE REPRODUCED AS UNDER: THIS CASE WAS ASSIGNED TO ITO (INTELLIGENCE)-II, J AIPUR FOR VERIFICATION. THE REPORT OF ITO (INTELLIGENCE)-II, JAIPUR DATED 21.03 .2014 IN THE CASE OF SAID ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 14 ASSESSEE IS ENCLOSED FOR YOUR KIND PERUSAL AS ANNEX URE-2. NOTICES U/S 133(6) AND SUMMONS U/S 131 OF THE I.T. ACT WERE RAISED BY THE ITO (INTELLIGENCE). IN RESPONSE, THE ASSESSEE SUBMITTED COPIES OF CONTR ACT NOTES, COPY OF BANK STATEMENT, RETURN OF INCOME TAX AND LEDGER ACCOUNT WITH THE BROKER. HIS STATEMENT ON OATH WAS ALSO RECORDED. THE VOLUMINOUS DATA FILED BY THE ASSESSEE HAS NO EVIDENTIARY VALUE SINCE THESE ARE M ERELY PAPER TRANSACTIONS. THERE IS NO DISPUTE TO THE FACT THAT IN FY 10-11, A S PER FINDINGS OF FMC, ABOUT 90% OF THE TRADING VOLUME OF NMCE WAS ARTIFICIAL. H UGE ACCOMMODATION ENTRIES FOR PROFITS AND LOSSES WERE GIVEN BY THE BR OKERS (MEMBERS) OF NMCE TO THEIR CLIENTS. THE ASSESSEE IS NO EXCEPTION TO I T. IT HAD ALSO INDULGED IN PAPER TRANSACTIONS JUST TO REDUCE ITS PROFITS EARNE D FROM MCX AND NCDEX. IT IS ALSO NOTICED THAT THE ASSESSEE HAD EARNED HUGE P ROFITS FROM MCX AND NCDEX BY 18.01.2011. SOON AFTER, IT ENTERED INTO TR ANSACTIONS WITH NMCE THROUGH MOTISONS COMMODITIES PVT. LTD. TO BOOK LOOS ES. IN FACT, SUBSTANTIAL PAYMENT OF RS. 4 CRORES WAS MADE AGAINST THESE LOSS ES IN FEBRUARY AND MARCH, 2011. THE FACT THAT TRANSACTIONS WERE ROUTED THROUGH BANKING CHANNELS IS NOT SACROSANCT. IT IS A FORMALITY TO CO MPLETE THE CYCLE AND GENERALLY NECESSITATED TO GIVE A SHADE OF GENUINENE SS TO THE ALLEGED TRANSACTIONS. IN LIGHT OF ABOVE FINDINGS, THE LOSS OF RS. 6,18,87,338/- INCLUDING BROKERAGE ARRANGED BY THE ASSESSEE THROUGH MOTISONS COMMODITIES PVT. LTD. IS LIABLE TO BE DISALLOWED. THE ENTIRE TRANSACTIONS ENTERED INTO BY THE ASSESSEE ARE SPECULATIVE IN NATURE HOWEVER THESE HAVE NOT BE EN SET OFF AGAINST ANY BUSINESS PROFITS OR OTHER INCOME. THE ITO(INTELLIGE NCE) HAS ALSO CALLED FOR INFORMATION FROM OTHER BROKERS PERTAINING TO OTHER EXCHANGES SUCH AS MCX, NCDEX AND ACE, HOWEVER NO SPECIFIC EVIDENCE OR MATE RIAL IS IN OUR POSSESSION TO TREAT SUCH LOSSES AS BOGUS. THE AO MA Y COMPLETE THE ASSESSMENT IN LIGHT OF ABOVE FINDINGS AND MATERIAL ON RECORD. ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 15 REPORT OF ITO(INTELLIGENCE)-II, JAIPUR DATED 21.03. 2014 12. WE NOW REFER TO THE REPORT OF ITO(INTELLIGENCE) -II WHICH HAS BEEN RELIED UPON AND REFERRED TO BY THE LD DIT (I&CI) AN D WHICH READS AS UNDER:- 1. THE SUMMONS U/S 131 OF THE I.T. ACT ISSUED TO M /S PYRAMID TRADELINKS PVT. LTD., 208, ANUKAMPA-11, M.I. ROAD, JAIPUR. IN COMPLIANCE TO SUMMON SH. VENU GOPAL AGARWAL, DIRECTOR OF M/S AND STATEME NT OF SH. VENU GOPAL AGARWAL, DIRECTOR M/S PYRAMID TRADELINKS PVT. LTD(P TPL) ATTENDED AND FILED WRITTEN SUBMISSION ALONG WITH ITR, COMPUTATION, P&L , BALANCE SHEET, AUDIT REPORT, BREAK-UP OF SPECULATION BUSINESS, BANK ACCO UNT. 2. STATEMENT OF SH. VENU GOPAL AGARWAL, DIRECTOR (P TPL) WAS RECORDED ON 20/02/2014 ON OATH. DURING THE COURSE OF STATEMENT HE STATED THAT M/S PYRAMID TRADELINKS PVT. LTD.(PTPL) IS ENGAGED IN TR ADING OF COMMODITY FUTURES WITH THE EXCHANGES MCX, NCDEX, NMCE AND ACE . IN THIS COMPANY THERE WERE TWO DIRECTOR ONE OF SH. VENU GOPAL AGARW AL AND OTHER SH. NORTAN KANDOI DURING THE FY 2010-11. 3. DURING THE FINANCIAL YEAR 2010-11, THE COMPANY H AS WORKED WITH PLATFORM OF MCX, NCDEX, NMCE, ACE AND HAS DECLARED PROFIT FR OM TRADING OF FUTURE COMMODITIES AMOUNTING TO RS. 87382639/-. THE ASSESS EE HAS SUBMITTED THE BREAK-UP OF SPECULATION BUSINESS FOR FY 2010-11 IS AS UNDER:- EXCHANGE PROFIT/(LOSS) MCX 206509389.10 NCDEX (-) 57904877.16 NMCE (-) 61887338.87 ACE (-) 2334534.69 GRANT TOTAL 87382638.38 ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 16 4. FROM THE PERUSAL OF THE ABOVE POSITION, IT IS NO TICED THAT THE ASSESSEE HAS EARNED PROFIT FROM MCX RS. 20,95,09,389/- AND SET-O FF LOSSES OF RS. 12,21,26,749/- INCLUDING NMCE LOSS OF RS. 61887338. 87/- DURING THIS FINANCIAL YEAR. THE COMPANY HAS DECLARED NET PROFIT OF RS. 87 382638/- FROM TRADING OF FUTURE COMMODITIES DURING THE FY 2010-11. 5. FROM THE PERUSAL OF ACCOUNT STATEMENT OF M/S MOT ISONS COMMODITIES, M/S GANPATI INVESTMENT AND M/S HINDUSTAN TECHNOSOL, IT IS NOTICED THAT THE ASSESSEE COMPANY COMMENCED BUSINESS WITH M/S GANPAT I INVESTMENTS AND EARNED HUGE PROFITS BY 18 TH JANUARY, 2011. AS PER ACCOUNT STATEMENT OF M/S MOTISONS COMMODITIES, THE ASSESSEE COMMENCED BUSINE SS WITH THE PLATFORM OF NMCE FROM ABOUT 18 TH JANUARY, 2011. ONLY TWO MONTHS WERE REMAINING OF FINANCIAL YEAR 2010-11, IN THESE MONTHS THE ASSESSE E INCREASED THE VOLUME OF FUTURE TRADING WITH THE NMCE AND BOOKED LOSS OF RS. 61887338.87 IN THE END OF THE MONTHS OF FINANCIAL YEAR. MOST OF THE TRADIN G WAS DONE BY THE ASSESSEE IN THE MONTH OF FEBRUARY AND MARCH, 2011. FROM THE PERUSAL OF THE BANK STATEMENT, IT APPEARS THAT THE ASSESSEE HAD BOOKED LOSS IN THE END OF MARCH, 11 AND PAID RS. 4 CRORE TO THE BROKER M/S MOTISONS COMMODITIES ON 29.03.2011 AGAINST THE LOSS. 6. AS PER REPORT, THE INVESTIGATION CONDUCTED BY TH E FMC, THE STATEMENT OF VARIOUS EMPLOYEES OF NMCE AHMEDABAD VIZ SH. AMIT SH ARMA, TARUN GUPTA, THE STATEMENTS OF SOME MEMBERS/CLIENTS WERE ALSO RE CORDED. THE FMC IN ITS CONCLUSION STATED THAT NMCES SENIOR MANAGEMENT ALO NG WITH EMPLOYEES OF NMCE HAVE CREATED/INTRODUCED MEMBERS FOR MARKET MAK ING IN THE YEAR 2010- 11. THERE IS MARKET MAKING PRACTICES IN THE MARKET TO BRING LIQUIDITY IN THE ILLIQUID CONTRACTS AND THE IMPACT OF THEIR TRADING IN NMCE VOLUME INCREASED ARTIFICIALLY. THEREFORE, THE CHARGE OF THE COMPLAIN ANT THAT THERE IS AN ARTIFICIAL ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 17 AND FICTITIOUS TRADING VOLUME ON NMCE EXCHANGE IS F OUND TO BE CORRECT. 7. THE STATEMENT OF SH. AMIT SHARMA, SENIOR MANGANE R, BUSINESS DEVELOPMENT NMCE, AHMEDABAD RECORDED BY THE FMC, ST ATED THAT SOME OF THE MEMBERS AND CLIENTS OF NMCE ARE DOING ACTIVITY OF TRANSFERRING OF PROFIT OR LOSS INTENTIONALLY AS PER THEIR REQUIREMENT TO EVAD E TAXES. IT IS ALSO SEEN BY THE FMC AFTER DATA ANALYSIS RECEIVED FROM NMCE THAT THERE IS ABNORMAL INCREASE IN THE VOLUME AT THE END OF THE YEAR I.E. MONTH OF FEBRUARY, MARCH. 8. THE DOCUMENTS FILED BY THE ASSESSEE DO NOT CARRY ANY WEIGHT AS THESE ARE PAPER TRANSACTION. THERE IS NO DISPUTE TO THE FACT THAT IN FY 2010-11 AS PER FINDINGS OF FMC, ABOUT 90% OF THE TRADING VOLUME OF NMCE WAS ARTIFICIAL. HUGE ACCOMMODATION ENTRIES FOR PROFITS AND LOSSES W ERE GIVEN BY THE BROKERS/MEMBER OF NMCE TO THEIR CLIENTS. THE ASSESS EE IS ALSO ONE OF THE BENEFICIARY. IT HAD ALSO INDULGED IN BOGUS LOSSES J UST TO REDUCE ITS PROFIT EARNED FROM MCX AND NCDEX. 9. IN THE LIGHT OF ABOVE FINDINGS, THE POSITION AS ABOVE IS MADE CLEAR THAT THE LOSS OF RS. 61887338/- BOOKED BY THE ASSESSEE THROU GH MOTISONS COMMODITIES PVT. LTD. IS NOT GENUINE. SINCE THE ASS ESSEE IS ASSESSED WITH THE CIRCLE-2, JAIPUR WHO IS HAVING TERRITORIAL JURISDIC TION OVER THE ASSESSEE MAY BE ADVISED TO DISALLOW THE LOSS OF RS. 61887338/- AS C LAIMED IN THE FY 2010-11. AS REGARD LOSSES BOOKED THROUGH MCX, NCDEX AND ACE, THE INFORMATION WAS CALLED FROM THE BROKERS SUCH AS HINDUSTAN TECHNOSOL S PVT. LTD. AND GANPATI INVESTMENTS AND IT HAS BEEN PLACED ON RECORD. NO AB NORMALITY AS SUCH WAS NOTICED AND NO SPECIFIC EVIDENCE IS AVAILABLE WITH US FROM FMC OR DIT(I & CI) MUMBAI. LETTER OF DIT(I&CI), JAIPUR DATED 27.02.2014 ADDRES SED TO MANAGING DIRECTOR NMCE ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 18 13. ON PERUSAL OF RECORDS, IT IS NOTED THAT DIT(I&C I), JAIPUR HAS WRITTEN A LETTER TO MANAGING DIRECTOR NMCE DATED 27.02.2014 W HEREIN INFORMATION RELATING TO M/S MOTISONS COMMODITIES PVT. LTD. WAS SOUGHT. IT WOULD BE RELEVANT TO THE CONTENTS OF THE SAID LETTER AND THE RESPONSE OF NMCE AS UNDER: IT HAS FURTHER COME TO THE NOTICE THAT PENALTY OF RS. 25,000/- WAS IMPOSED IN THE CASE OF SHRI RATAN LAL SOMANI FOR FY 2011-12. H OWEVER THIS DIRECTORATE IS NOT AWARE OF THE SPECIFIC ALLEGATIONS FOR WHICH PEN ALTY WAS LEVIED IN THE CASE OF SHRI RATAN LAL SOMANI. I SHALL BE HIGHLY OBLIGED , IF YOU COULD FORWARD THE COPY OF PENALTY ORDER TO THIS OFFICE, WHICH WILL HE LP US IN FURTHER STRENGTHENING THE CASE OF THE DEPARTMENT. FURTHER THERE IS NO DIR ECT EVIDENCE TO SHOW THAT THESE TWO MEMBERS NAMELY, SHRI RATAN LAL SOMANI AND M/S MOTISONS COMMODITIES (P) LTD., WERE ACTUALLY DOING THE NON-G ENUINE TRADE. THEREFORE, ANY SPECIFIC EVIDENCE WHICH WAS UTILIZED FOR LEVY O F PENALTY OR COLLECTED IN THESE TWO CASES, SHOULD ALSO BE INTIMATED AND FORWA RDED TO THIS DIRECTORATE. 14. IN RESPONSE TO THE ABOVE-SAID LETTER, THE NMCE VIDE ITS LETTER DATED 10.03.2014 HAS ENCLOSED A COPY OF THE PENALTY ORDER RELATING TO SUSPICIOUS TRADE UNDERTAKEN BY M/S MOTISONS COMMODITIES PVT. L TD. THE SAID PENALTY ORDER DATED 16.11.2010 REFERS TO TRADE IN NICKEL OC TOBER 2010 SERIES EXECUTED ON NMCE PLATFORM ON 25 TH OCTOBER 2010 AND STATED THAT THE MANAGEMENT OF THE EXCHANGE AFTER LOOKING INTO DETAILS OF TRADE AN D FURTHER TO EXPLANATION THEREOF, HAS DECIDED TO IMPOSE PENALTY OF RS. 5,000 /- WITH A WARNING THAT SUCH TRADE WILL NOT BE EXECUTED IN FUTURE. ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 19 THE REMAND REPORT OF DCIT, CIRCLE-2, JAIPUR DATED 0 5.02.2015 DURING APPELLATE PROCEEDINGS BEFORE LD CIT(A) 15. DURING THE COURSE OF APPELLANT PROCEEDINGS BEFO RE THE LD CIT(A), THE AR FILED DETAILED WRITTEN SUBMISSION ALONG WITH THE AS SESSEES LEDGER COPY MAINTAINED BY M/S MOTISONS COMMODITIES PVT. LTD. AN D ASSESSEES CONTRACT NOTES. IN THAT REGARD, THE LD. CIT(A) U/S 250(4) OF THE ACT ASKED THE AO TO OFFER HIS COMMENTS ON THE FOLLOWING TWO ISSUES AS U NDER:- (A) TO SHOW INSTANCES OF BOGUS/ACCOMMODATION ENTR IES FOUND WITH M/S MOTISONS COMMODITIES PVT. LTD. WITH RESPECT TO THE ASSESSEE COMPANY. (B) ALSO TO SHOW/HIGHLIGHT INSTANCES OR REFERENCE O F ASSESSEE COMPANY IN THE FMC REPORT WHERE IT HAS BEEN SPECIFICALLY ME NTIONED THAT EITHER ASSESSEE COMPANY OR M/S MOTISONS COMMODITIES PVT. L TD. (BRIEFLY MENTIONED AS MPCL) ARE INVOLVED IN PROVIDING BOGUS/ ACCOMMODATION ENTRIES TO THE ASSESSEE. 16. IN RESPONSE TO THIS, THE AO SUBMITTED HIS REMAN D REPORT VIDE LETTER DT. 5/02/2015 WHICH READS AS UNDER: 1. AS PER DETAILS FILED DURING THE PROCEEDINGS BEF ORE I&CI, WING, JAIPUR THE ITO (INTELLIGENCE)-II AND THE DIRECTOR OF INCOME-TA X (I&CI), JAIPUR AS WELL DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT APPE ARS THAT NO INSTANCES OF BOGUS/ACCOMMODATION ENTRIES FOUND WITH M/S MOTISONS COMMODITIES PVT. LTD. IN RESPECT TO THE ASSESSEE COMPANY THIS FACT HAS AL SO BEEN REPORT IN THE REPORT OF THE I&CI, WING. HOWEVER, IT IS PERTINENT TO MENTION HERE THAT THE A SSESSEE COMPANY STARTED THE TRANSACTION WITH M/S MOTISONS COMMODITIES PVT. LTD., FROM 18.1.2011 AND THE TRANSACTION WAS CARRIED OUT UP TO 21.02.2011 I. E. AROUND FOR ONE MONTH ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 20 ONLY AND SUFFERED HUGE LOSSES OF RS. 6,18,87,338 WH ICH IS UNBELIEVABLE. THIS TYPE OF TRANSACTION CLEARLY CREATE DOUBT AND THERE IS SOMETHING FISHING, AS THE DIRECTOR OF THE ASSESSEE COMPANY HIMSELF ADMITTED I N HIS STATEMENT TAKEN BY THE ITO(INTELLIGENCE)-II, JAIPUR THAT HE IS LIVING AT CHURU AND ALL THE TRANSACTION ARE DONE THROUGH PHONE/CHAT. 2. THERE IS NO INSTANCES OR REFERENCE OF ASSESSEE C OMPANY IN THE FMC REPORT, HOWEVER, IN THE REPORT OF FMC CALLED BY THE DIT(I&C I), JAIPUR, IT HAS BEEN REPORTED THAT FOR TRADE IN NICKEL A PENALTY OF R S. 5,000/- WAS IMPOSED ON M/S MOTISONS COMMODITIES PVT. LTD. DURING THE F.Y. 2010-11 FOR THEIR CERTAIN SUSPICIOUS TRADES. THIS, THIS FACT CLEARLY ESTABLIS H THAT M/S MOTISONS COMMODITIES PVT. LTD. IS INVOLVED IN PROVIDING BOGU S OR ACCOMMODATION ENTRIES.... 17. IN ITS REJOINDER TO THE REMAND REPORT, THE ASSE SSEE SUBMITTED THE FOLLOWING SUBMISSION BEFORE THE LD CIT(A) WHICH REA DS AS UNDER: 1. IN PARA 1 FIRST SUB PARA LD. AO ACCEPTED THAT A S PER DETAILS FILED BEFORE I&CI WING, JAIPUR, ITO(INTELLIGENCE)-II IN COURSE O F ASSESSMENT PROCEEDINGS NO INSTANCE OF BOGUS/ACCOMMODATION ENTRIES FOUND WI TH MOTISONS COMMODITIES PVT. LTD. PERTAINING TO THE ASSESSEE CO MPANY AND THIS WAS ALSO A FACT REPORTED IN THE REPORT OF I&CI WING FORWARDE D TO AO. THE ASSESSEE ALSO CLAIMED THE SAME IN WRITTEN SUBMISSION AND HEN CE NO COMMENTS. IN NEXT SUB-PARA LD. AO REPORTED THAT ASSESSEE COMP ANY STARTED TRANSACTIONS WITH MOTISONS COMMODITIES PVT. LTD. FROM 18/01/2011 UPTO 21/02/2011. IN THIS CONNECTION IT IS SUBMITTED THAT EARLIER ASSESS EE COMPANY WAS CARRYING TRANSACTION IN OTHER EXCHANGES AND MOTISONS COMMOD ITIES PVT. LTD. WAS NOT MEMBER OF THEM. IN ANY CASE THIS IS NO FACTOR TO DI SBELIEVE THE TRANSACTIONS DONE WITH MOTISONS COMMODITIES PVT. LTD. THE MERE D OUBT RAISED BY LD. AO ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 21 CANNOT TAKE PLACE OF EVIDENCE WHICH IS CORE REQUIRE MENT OF DISALLOWANCE OF LOSS. THE COMMODITY TRANSACTIONS IN EXCHANGE ARE DO NE ONLINE AND SAME CAN BE CARRIED OUT FROM ANY PLACE. THE DIRECTOR OF COMP ANY LIVING IN CHURU AND DID TRANSACTION FROM THERE ON BEHALF OF COMPANY. 2. THE LEVY OF PENALTY OF RS. 5000/- ON MOTISONS CO MMODITIES PVT. LTD. IS NOT IN RELATION TO ANY TRANSACTIONS WITH COMPANY. THE T RANSACTIONS OF COMPANY ARE OF AFTERWARDS DATE WHILE SAID PENALTY WAS IMPOS ED ON SAID PARTY EARLIER IN OCTOBER, 2010. THE PENALTY IMPOSED ON SAID PARTY WA S ALSO NOT FOR DOING ANY SUSPICIOUS TRADE WITH ASSESSEE COMPANY. THE PENALTY WAS IMPOSED FOR TRADE IN NICKEL WHILE THE TRADE OF ASSESSEE COMPANY WAS O F OTHER GOODS MAINLY AND ONLY A VERY SMALL PART IS TRADE IN NICKEL. THE COPY OF PENALTY ORDER IS SUBMITTED FOR YOUR PERUSAL. 18. HAVING CONSIDERED THE VARIOUS INVESTIGATION RE PORTS AND RELATED COMMUNICATION, WE NOW REFER TO THE FOLLOWING FINDIN G OF THE LD. CIT(A) WHICH ARE AS UNDER:- (A) FROM THE ENQUIRY REPORT SUBMITTED AO HAS REPOR TED THAT AS PER DETAILS FILED BEFORE ITO (INTELLIGENCE)-II, I&CI WI NG, JAIPUR DURING THE COURSE OF ASSESSMENT PROCEEDING, NO INSTANCE OF BOG US/ACCOMMODATION ENTRIES HAVE BEEN FOUND WITH M/S MOTISONS COMMODIT IES PVT. LTD. PERTAINING TO TRANSACTIONS WITH ASSESSEE COMPANY. T HIS FACT WAS ALSO REPORTED TO THE AO. (B) AO MERELY ON THE BASIS OF SUSPICION HAD DOUBTED THAT ASSESSEE HAD BOOKED BOGUS LOSS OF RS. 6,18,87,338/- WITH M/S MOT ISONS COMMODITIES PVT. LTD. TO REDUCE PROFIT. (C) NO CREDIBLE INVESTIGATION HAS BEEN CARRIED OUT BY THE AO DURING THE ASSESSMENT PROCEEDING BEFORE ARRIVING AT THIS CONCL USION. (D) ASSESSEE COMPANY STARTED TRANSACTION WITH M/S M OTISONS COMMODITIES PVT. LTD. FROM 18/01/2011 TILL 21/02/20 11, SUPPORTED BY CONTRACT NOTES CONTAINING DETAILS SUCH AS ORDER NO. TRADE NO., TRADE DATE & TIME ETC. WHICH ARE ALSO VERIFIABLE WITH THE RECORDS AVAILABLE WITH THE EXCHANGE. ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 22 (E) PENALTY OF RS. 5,000/- IMPOSED ON M/S MOTISONS COMMODITIES PVT. LTD. FOR TRADE IN NICKEL IN THE MONTH OF OCT. 2010 AND NO WHERE RELATABLE TO THE TRANSACTIONS WITH THE ASSESSEE COM PANY. 19. HAVING CONSIDERED THE ENTIRETY OF FACT AND CIR CUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THERE IS NO BASIS FOR THE REVE NUE TO SUCCEED IN THIS MATTER IN ABSENCE OF ANY CREDIBLE INVESTIGATION AND BRINGING ON RECORD ANY VERIFIABLE EVIDENCE TO SUPPORT THE THEORY OF BOOKIN G ARTIFICIAL SPECULATIVE LOSSES BY THE ASSESSEE COMPANY IN RESPECT OF TRANSA CTIONS EXECUTED ON NMCE PLATFORM. 20. THE WHOLE CASE OF THE REVENUE HAS BEEN BUILT O N INVESTIGATION CARRIED OUT BY THE FMC. IN ITS REPORT, THE FMC HAS STATED CLEARLY THAT IT HAS ANALYSED DATA RELATING TO TOP 30 CLIENTS AND AMONG THEM CLIE NTS WHO HAVE BOOKED PROFITS MORE THAN RS 30 CRORES AND LOSSES MORE THAN RS 10 CRORES. BASIS SUCH ANALYSIS, FMC IN ITS REPORT HAS OBSERVED THAT THERE WAS ABNORMAL INCREASE IN THE VOLUME AT THE END OF THE YEAR, THER E WERE USE OF BLANK CLIENT CODES IN RESPECT OF CLIENTS WHO DO NOT EXIST TO ART IFICALLLY INCREASE THE VOLUME, CREATION OF ARTIFICIAL MEMBERS, EXECUTION OF WASH T RADES. AND FINALLY, FMC HAS COME TO A CONCLUSION THAT THERE IS MARKET MAKING PR ACTICE IN THE MARKET TO BRING LIQUIDITY IN THE ILLIQUID CONTRACTS. THE REP ORT FURTHER STATES THAT EVASION OF TAX BY THESE LOSS MAKING CLIENTS AND MEMBERS CAN BE ASCERTAINED BY INCOME TAX DEPARTMENT AND AT THE MOMENT, THE COMPLA INANTS CHARGE OF ARTIFICIAL AND FICTITIOUS TRADING VOLUME ON MNCE EX CHANGE IS FOUND TO BE CORRECT. THE REPORT FURTHER STATES THAT LIST OF AL L SUCH CLIENTS AND MEMBERS WHO HAVE MADE PROFITS/LOSSES THROUGH THIS ACTIVITY MAY BE REFERRED TO THE INCOME TAX DEPARTMENT FOR FURTHER INVESTIGATION. I N OUR VIEW, THE FINDINGS OF THE FMC HAVE TO BE SEEN IN THE CONTEXT OF DATA WHIC H HAS BEEN ANALYSED FOR ARRIVING AT ITS CONCLUSION. THE QUESTION THAT ARIS ES IS WHETHER THE FINDING OF THE FMC CAN BE APPLIED BLINDLY WITHOUT FURTHER INVE STIGATION IN THE INSTANT ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 23 CASE OR NOT. FURTHER, IRRESPECTIVE OF WHETHER THE S AID DATA REPRESENT THE REASONABLE SAMPLE SIZE OR NOT, CAN THE SAME BE APPL IED BLINDLY IN THE INSTANT CASE WHERE THE SAID DATA DOESNT CONTAIN PARTICULAR S OF EITHER MOTISONS COMMODITIES PVT LTD OR THE ASSESSEE COMPANY. IN OU R VIEW, THE REPORT OF THE FMC DOES POINT TO A DEEP MALICE WHICH EXISTED IN TH E STOCK EXCHANGE WHEREBY THE TRADING VOLUMES WERE ARTIFICIALLY INFLA TED TO BOOK LOSSES IN HANDS OF CERTAIN CLIENTS AND CORRESPONDING PROFITS IN HAN DS OF OTHER CLIENTS AND IT DOES RAISE GRAVE APPREHENSION IN THE MIND OF THE AS SESSING OFFICER. THE SAME COULD THEREFORE ACT AS A GOOD AND STRONG START ING POINT TO CARRY OUT FURTHER INVESTIGATION BY THE ASSESSING OFFICER AS A LSO POINTED OUT BY THE FMC. THE INVESTIGATION BY THE ASSESSING OFFICER IS ALSO RELEVANT FOR THE FACT THAT THE DATA ANALYSED BY FMC DOESNT CONTAIN ANY DATA RELAT ING TO EITHER MOTISONS COMMODITIES PVT LTD OR THE ASSESSEE COMPANY AND THE RE IS NO FINDING OF WRONG DOING EITHER BY EITHER MOTISONS COMMODITIES P VT LTD OR THE ASSESSEE COMPANY. 21. IN TERMS OF INVESTIGATION CARRIED OUT BY DIT( I&CI) IN THE INSTANT CASE, AS NOTED ABOVE, THE ASSESSEE SUBMITTED COPIES OF CO NTRACT NOTES, COPY OF BANK STATEMENT, RETURN OF INCOME TAX AND LEDGER ACC OUNT WITH THE BROKER AND STATEMENT ON OATH OF DIRECTOR OF THE ASSESSEE COMPA NY WERE ALSO RECORDED. IN TERMS OF DOCUMENTS SO FILED AND STATEMENT SO REC ORDED, THE FINDING OF LD DIT(I&CI) IS THAT THE VOLUMINOUS DATA FILED BY THE ASSESSEE HAS NO EVIDENTIARY VALUE SINCE THESE ARE MERELY PAPER TRAN SACTIONS AND BASIS OF SUCH FINDING IS AGAIN THE REPORT OF FMC WHEREIN REFERRIN G TO STATEMENT OF ONE OF THE EMPLOYEES OF NMCE, LD DIT(I&CI) STATED THAT AB OUT 90% OF THE TRADING VOLUME OF NMCE WAS ARTIFICIAL. HUGE ACCOMMODATION E NTRIES FOR PROFITS AND LOSSES WERE GIVEN BY THE BROKERS (MEMBERS) OF NMCE TO THEIR CLIENTS. THE ASSESSEE IS NO EXCEPTION TO IT. IT HAD ALSO INDULGE D IN PAPER TRANSACTIONS JUST TO REDUCE ITS PROFITS EARNED FROM MCX AND NCDEX. THE ASSESSING OFFICER HAS ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 24 THEREAFTER FOLLOWED THE REPORT OF DIT(I&CI) AND DIS ALLOWED THE LOSSES BOOKED BY THE ASSESSEE COMPANY. THERE IS NOTHING ON RECOR D TO SUGGEST THAT INFORMATION WAS CALLED FOR BY THE ASSESSING OFFICER FROM THE NMCE STOCK EXCHANGE TO CROSS-CHECK THE CONTRACT NOTES AND TRAD ING DATA PROVIDED BY THE ASSESSEE COMPANY AND TO EXAMINE THE GENUINENESS OF THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPANY. FURTHER, THE RE IS NOTHING ON RECORD TO SUGGEST THAT ANY INVESTIGATION WERE CARRIED OUT TO EXAMINE THE CLIENTS WHO HAVE BOOKED CORRESPONDING PROFITS IN THEIR BOOKS OF ACCOUNTS AND WHAT IS THE STAND OF ASSESSING OFFICER IN THOSE CASES. IN ABSE NCE OF ANY CREDIBLE INVESTIGATION BEING CARRIED OUT BY ASSESSING OFFICE R AND BRINGING ON RECORD ANY VERIFIABLE EVIDENCE WHICH PROVES WRONG DOING BY THE ASSESSEE COMPANY, WE DONOT SEE ANY BASIS FOR DISALLOWING THE SPECULAT IVE LOSS IN THE INSTANT CASE AND CALLING THE SAME AS MERE PAPER TRANSACTIONS. 22. FURTHER, IN ITS REMAND REPORT, THE ASSESSING O FFICER ADMITTED THAT NO INSTANCES OF BOGUS/ACCOMMODATION ENTRIES FOUND WITH M/S MOTISONS COMMODITIES PVT. LTD. IN RESPECT TO THE ASSESSEE CO MPANY AND THERE IS NO INSTANCES OR REFERENCE OF ASSESSEE COMPANY IN THE F MC REPORT. THE SAME IS CORROBORATED BY THE LETTER OF DIT(I&CI), JAIPUR DAT ED 27.02.2014 TO NMCE WHERE HE STATES THAT THERE IS NO DIRECT EVIDENCE TO SHOW THAT THE ASSESSEE COMPANY WAS ACTUALLY DOING NON-GENUINE TRADE. WHER E THE REVENUE HAS ADMITTED THAT THERE IS NO WRONG DOING BY THE ASSESS EE COMPANY, MERELY THE FACT THAT THERE IS A FMC REPORT TAKING ABOUT WRONG DOING IN RESPECT OF CERTAIN TRANSACTIONS AND MEMBERS, THE SAME CANNOT FORM THE BASIS FOR DISALLOWANCE OF THE SPECULATIVE LOSSES. IN THIS REGARD, IT WOULD BE RELEVANT TO NOTE THAT THE REVENUE IS ADOPTING THE SAME YARDSTICK OF SPECIFIC EVIDENCE FOR ALLOWING OTHER SPECULATIVE LOSSES CLAIMED BY THE ASSESSEE COMPANY WHERE IT STATES THAT THE ITO(INTELLIGENCE) HAS ALSO CALLED FOR INFORMATION F ROM OTHER BROKERS PERTAINING TO OTHER EXCHANGES SUCH AS MCX, NCDEX AND ACE, HOWE VER NO SPECIFIC ITA NO. 512/JP/15 DCIT VS. M/S PYRAMID TRADELINKS PVT. LTD. JAIPUR 25 EVIDENCE OR MATERIAL IS IN OUR POSSESSION TO TREAT SUCH LOSSES AS BOGUS. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE C ASE, AND IN LIGHT OF ABOVE DISCUSSIONS, WE HEREBY CONFIRM THE ORDER OF THE LD CIT(A) AND THE GROUND TAKEN BY THE REVENUE IS DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/07/2017. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 27/07/2017 VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- DCIT, CIRCLE-2, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S PYRAMID TRADELINKS PVT. LTD., JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, 6. XKMZ QKBZY@ GUARD FILE (ITA NO.512/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT REGISTRAR.