Guiness Commodities Pvt. Ltd., Kolkata V. ITO, Ward - 6(2), Kolkata, Kolkata

ITA 520/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54535 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2011
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 16-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-03-2010
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: D S DAMLE; MIRAJ D. SHAH
• Keywords: Unexplained cash credit; Business income; Transactions in derivatives; Speculation loss; Revenue expenditure
• Section: 69C; 143(3); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , ! . '# . ) [BEFORE SRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM] $ $ $ $ / I.T.A NOS. 520 & 521/KOL/2010 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEARS : 2005-06 & 2006-07 GUINESS COMMODITIES PVT. LTD., VS. INCOME-TAX OF FICER, WD-6(2), KOLKATA (PAN AAACG 9869 L) (*+ /APPELLANT ) (,-*+/ RESPONDENT ) DATE OF HEARING: 21.09.2011 DATE OF PRONOUNCEMENT: 21.09.2011 FOR THE APPELLANT: S/SHRI D. S. DAMLE & MIRAJ D. SHAH FOR THE RESPONDENT: SHRI NIRAJ KUMAR . / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THESE APPEALS BY ASSESSEE ARE ARISING OUT OF SEPARA TE ORDERS OF CIT(A)-VI, KOLKATA IN APPEAL NOS.CIT(A)-VI/KOL/303/WD.6(2)07-08 AND CIT(A )-VI/KOL/643/WD.6(2)08-09 DATED 31.12.2009. ASSESSMENTS WERE FRAMED BY I.T.O., WD-6 (2), KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEARS 2005-06 AND 2006- 07 VIDE ORDERS DATED 31.12.2007 AND 31.12.2008. SI NCE GROUNDS AND FACTS ARE INTERCONNECTED, WE, FOR THE SAKE OF CONVENIENCE, DISPOSE OF BOTH AP PEALS BY THIS CONSOLIDATED ORDER. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2005-06 IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF ASSESSING OFFICER IN DISALLOWING SHARE TRADING LOSS AS BOGUS. EVEN THOUGH, ACCORDING TO ASSESSEE, ENTIRE T RANSACTIONS ARE CARRIED OUT BY SH. M L NATHANY PROP M/S JUGGON PRASAD BAIJNATH AND ADDED I N THE HANDS OF ASSESSEE AS BENAMI FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 1, 2 AND 3: 1)FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS GROSSLY UNJUSTIFIED IN DISMISSING THE APPEAL AND THEREBY UP HOLDING THE ARBITRARY ADDITIONS AND DISALLOWANCE MADE IN THE ASSESSMENT ORDER. 2) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE AOS ORDER, HOLDING HE SHARE TRANSACT IONS OF THE ASSESSEE; CONDUCTED WITH M/S. JUGGON PRASAD BAIJNATH WERE BOGUS AND THEREBY UPHOLDING THE ADDITION AND DISALLOWANCES MADE IN THE ASSESSMENT ORDER. 3) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE DISALLOWANCE OF SHARE TRADING LOSS SU FFERED, AMOUNTING TO RS.39,07,040/-; ON THE ALLEGED GROUND THAT THE SAID LOSS WAS BOGUS. 2 ITA 520&521/K/2010 GUINESS COMMODITIES (P) LTD., A.Y.05-06 & 06-07 3. THE SECOND INTERCONNECTED ISSUE IN THIS APPEAL O F ASSESSEE FOR ASSESSMENT YEAR 2005-06 IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING INC OME OF SHARE TRANSACTION CARRIED OUT BY SH. M L NATHANY PROP OF M/S JUGGON PRASAD BAIJNATH BY H OLDING THE TRANSACTIONS AS BENAMI AND REPRESENTED INCOME FROM BOGUS TRANSACTIONS UNDER TH E HEAD INCOME FROM OTHER SOURCES. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 4 T O 6: 4) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN ASSESSING THE INCOME IN SHARE TRANSA CTIONS CARRIED OUT THROUGH M/S. JUGGON PRASAD BAIJNATH AMOUNTING TO RS.35,76,080/- AND RS.7,87,500/- REPRESENTED INCOME FROM BOGUS TRANSACTIONS AND THEREBY UPHOLDIN G THE ASSESSMENT OF THE INCOME UNDER THE HEAD OTHER SOURCES. 5) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE AUTHORITIES BELOW WERE UNJUSTIFIED IN CONSIDERING THE ASSESSEES SHARE TRA NSACTIONS WITH M/S. JUGGON PRASAD BAIJNATH AS BOGUS AS MERELY BECAUSE AT THE TIME OF ENQUIRY, PROPRIETOR OF M/S. JUGGON PRASAD BAIJNATH WAS NOT AVAILABLE AT HIS GIVEN ADDR ESS AS HE HAD EXPIRED PRIOR TO DATE OF ENQUIRY 6) FOR THAT THE L/D APPELLATE COMMISSIONER HAS FAIL ED OR NEGLECTED TO CONSIDER THE FACT THAT THE ADDITIONS MADE ON THE SAID ASSESSMENT ENTI RELY ON THE BASIS OF THE INSPECTORS REPORT WHICH IS A HEAR SAY EVIDENCE, WITHOUT CONSID ERING THE MATERIAL DOCUMENTARY EVIDENCE RECORD. 4. THE NEXT INTERCONNECTED ISSUE IN THESE APPEALS O F ASSESSEE FOR ASSESSMENT YEARS 2005- 06 AND 2006-07 IS AGAINST THE ORDER OF CIT(A) CONFI RMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF DEPOSITS IN BANK ACCOUNT OF M/S. JUGGON PRASAD BAIJNATH AS UNEXPLAINED CREDIT BY HOLDING THE ASSESSEE AS BENAMI. FOR TH IS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 7 AND 8 FOR ASSESSMENT YEAR 2005-06 AND GROUND NOS. 1 TO 3 OF ASSESSMENT YEAR 2006-07: A.Y. 2005-06: 7) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE ORDER OF THE AO MAKING ADDITION OF RS.3,09,47,655 BEING DEPOSITS MADE IN THE BANK ACCOUNT OF M/S JUGGON PRASAD BAIJNATH A S APPELLANTS INCOME BY WAY OF UNEXPLAINED CASH CREDIT. 8) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE ADDITION OF RS. 3,09,47,655 MADE U/S 68 BE DELETED. A.Y. 2006-07: 1) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE ADDITION OF RS.1,04,31,722/- BEING THE AMOUNT DEPOSITED IN THE ACCOUNT OF M/S. JUGGON PRASAD BAIJNATH AS UNEXPLAINED CASH CREDIT OF THE ASSESSEE CHARGEABLE TO TAX U/S. 68 OF I. T. ACT. 2) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE ADDITION OF RS.1,04,31,722/- BE DELETED AS THE AMOUNT ASSESSED REPRESENTED DEPOSITS MADE IN THE BANK ACCOUNT OF THIRD PARTY AND THE TRANSACTIONS RE FLECTED IN THE SAID BANK ACCOUNT DID NOT IN ANY MANNER BELONGED TO THE APPELLANT. 3) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE ADDITION OF RS.1,04,31,722/- MADE U/S. 68 BE DELETED. 3 ITA 520&521/K/2010 GUINESS COMMODITIES (P) LTD., A.Y.05-06 & 06-07 5. FURTHER, THE INTERCONNECTED ISSUE IS AS REGARDS TO THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN TREATING THE UNEXPLA INED INVESTMENT FOR WHICH CREDIT ENTRIES OF M/S. JUGGON PRASAD BAIJNATH U/S. 69C OF THE ACT. F OR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 9 AND 10: 9) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE ADDITION OF RS. 1,39,15,345/ - BEI NG AMOUNT CREDITED IN THE ACCOUNT OF M/S. JUGGON PRASAD BAIJNATH AS UNEXPLAINED INVESTME NT OF THE APPELLANT U/S 69C OF THE ACT. 10) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ADDITION OF RS.1,39,15.345/- MADE U/S 69 OF THE ACT BE DELETED. 6. THE NEXT INTERCONNECTED ISSUE IS AS REGARDS TO T HE ORDER OF CIT(A) IN UPHOLDING THE ORDER OF ASSESSING OFFICER IN TREATING SPECULATION LOSS IN COMMODITY TRANSACTION. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 11 TO 14: 11) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING THE ASSESSMENT OF RS. 12,1 3,168/- AS SPECULATION LOSS IN COMMODITY TRANSACTION AND THEREBY UPHOLDING THE ORD ER OF THE AO OF NOT ALLOWING ITS SET OFF AGAINST OTHER BUSINESS INCOME. 12) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AO BE DIRECTED TO ASSESS THE LOSS IN PURCHASE & SALE OF COMMODITIES A S BUSINESS LOSS AND BE DIRECTED TO SET OFF THE SAME AGAINST BUSINESS INCOME. 13) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING, THE ORDER OF THE AO DISAL LOWING THE MEMBERSHIP FEE OF THE COMMODITY EXCHANGE ON THE GROUND OF BEING CAPITAL E XPENDITURE. 14) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED THAT SINCE THE APPELLANT WAS DERIVING INCOME FROM COMMODITY TRADING BY VIRTUE OF HIS MEMBERSHIP OF CO MMODITY EXCHANGE, MEMBERSHIP FEE WAS REVENUE EXPENDITURE FULLY ALLOWABLE IN COMP UTATION OF BUSINESS INCOME. 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT LD. COUNSEL FOR THE ASSESSEE FIRST OF ALL STATED THAT THE ONLY CHARGE FOR MAKING ABOVE ADDITIONS BY ASSESSING OFFICER AND THEREAFTER THE ACTION OF CIT(A) IN CONFIRMING THE ADDITIONS IS THAT THE TRANSACTIONS WITH M/S. JUGGON PRASAD BAIJNATH IS BENAMI OF ASSESSEE. HENCE, AO AS WELL AS CIT(A) HAS CONFIRMED THE ADDIT ION ON ACCOUNT OF DISALLOWANCE OF LOSS, ADDITION OF UNEXPLAINED CASH CREDIT, UNEXPLAINED IN VESTMENT U/S. 69C OF THE ACT AND ALSO UNEXPLAINED COMMODITY TRANSACTIONS. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STATED THAT THE CHARGE OF THE LOWER AUTHORITIES IS THAT SH M L NATHANY PROP M/S JUGGON PRASAD BAIJNATH IS NOT AVAILABLE AT THE GIVEN ADDRESS BEING NON-EXISTE NT AND THESE TRANSACTIONS ARE RELATING TO ASSESSEE. THE LOWER AUTHORITIES HAVE WRONGLY HELD THAT ASSESSEE IS BENAMI OF SH. M L NATHANY PROP M/S JUGGON PRASAD BAIJNATH. THE LD. COUNSEL F OR THE ASSESSEE BEFORE US, FILED A COPY OF ORDER OF SECURITIES & EXCHANGE BOARD OF INDIA WHERE BY IT VIDE ORDER NO. WTM/TCN / IVD / 4 ITA 520&521/K/2010 GUINESS COMMODITIES (P) LTD., A.Y.05-06 & 06-07 ID1/02/04/07 DATED 26.4.2007 NOTED THAT SH. M L NAT HANY PROP M/S JUGGON PRASAD BAIJNATH WAS VERY MUCH IN EXISTENCE AND RUNNING THE PROPRIET ARY CONCERN. IN THIS ORDER, LD. COUNSEL FOR THE ASSESSEE STATED THAT, TRANSACTIONS RELATING TO S, K. KHATRY & CO., LYONS RANGE SHARE BROKING P. LTD., LADHA & CO. ARE REFLECTED FROM PER IOD 1997-98 BUT ACCORDING TO LD. COUNSEL SHRI M. N. NATHANY WHO IS PROPRIETOR OF M/S. JUGGON PRASAD BAIJNATH IS VERY MUCH IN EXISTENCE BUT NOW SINCE EXPIRED AND DEATH CERTIFICATE WAS FIL ED AT ASSESSEES PAPER BOOK PAGE 33 ISSUED BY KOLKATA MUNICIPAL CORPORATION DATED 24.3.2008 ST ATING DATE OF DEATH AS 11.6.2006. IN THIS DEATH CERTIFICATE ALSO THE ADDRESS GIVEN IS AS UNDE R: 59, MUKTARAM BABU ST., KOL-7, W.B. LD. COUNSEL FILED COMPLETE DETAILS I.E. SUMMARY OF TRANSACTION DONE IN CASE OF M/S. JUGGON PRASAD BAIJNATH REGARDING TRADING IN SHARES AND ACC OUNT STATEMENT IN ITS BOOKS OF ACCOUNTS. HE STATED THAT ASSESSING OFFICER HAS NEITHER VERIFIED THE TRANSACTIONS NOR GONE INTO FACT THAT SHRI M. L. NATHANY IS ALIVE AT THAT POINT OF TIME. LD. COU NSEL DREW OUR ATTENTION TO THE ORDERS OF THE LOWER AUTHORITIES AND STATED THAT NONE OF AUTHORITI ES BELOW HAVE GONE INTO PRINCIPLE OF BENAMI BEFORE HOLDING ASSESSEE AS BENAMI OF M. L. NATHANY PROPRIETOR M/S. JUGGON PRASAD BAIJNATH. ON THE OTHER HAND, LD. CIT-DR FORCEFULLY ARGUED THA T ASSESSEE DESPITE NOTICE HAS NOT SUBMITTED DETAILS AND EVEN SHRI M. L. NATHANY WAS NOT FOUND A T THE GIVEN ADDRESS. 8. WE FIND THAT ASSESSEE HAS GIVEN COMPLETE ADDRESS AND HE HAS ALSO PROVED EXISTENCE OF THIS PERSON SHRI M. L. NATHANY PROPRIETOR M/S. JUGG ON PRASAD BAIJNATH, WHICH IS CLEARLY PROVED FROM THE ORDERS OF SECURITIES & EXCHANGES BOARD OF INDIA DATED 26.4.2007 AS WELL AS THE DOCUMENTS PRODUCED BEFORE US IN THE SHAPE OF ELECTO RAL ROLL OF 2009 ASSEMBLY CONSTITUENCY 165 JORASHANKO. WE FURTHER FIND THAT SEBI ADJUDICA TION ORDER NO. SD/AO/69/2009 AGAINST SHRI RAMKRISHNA DUDWALA, PROPRIETOR M/S. BAIJ KRISH NA & CO. AND MS. PREMLATA NATHANY, SON AND WIFE RESPECTIVELY OF SHRI M. L. NATHANY ARE ALR EADY ON RECORDS AFTER SAD DEMISE OF SH. M. L. NATHANY. ACCORDINGLY, WE ARE OF THE VIEW, THAT BURDEN OF PROVING THAT PARTICULAR TRANSACTION IS BENAMI AND THE OWNER IS NOT THE REAL OWNER ALWAY S RESTS ON THE PERSON ASSERTING IT TO BE SO AND THIS BURDEN HAS TO BE STRICTLY DISCHARGED BY AD DUCING LEGAL EVIDENCE OF A DEFINITE CHARACTER WHICH WOULD EITHER DIRECTLY PROVE THE FACT OF BENAM I OR ESTABLISH CIRCUMSTANCES UNERRINGLY AND REASONABLY RAISING AN INFERENCE OF THAT FACT. THE ESSENCE OF BENAMI IS THE INTENTION OF PARTIES AND NOT UNOFTEN, SUCH INTENTION IS SHROUDED IN A TH ICK VEIL WHICH CANNOT BE EASILY PIERCED THROUGH. BUT SUCH DIFFICULTIES DO NOT RELIEVE THE P ERSON ASSERTING THE TRANSACTION TO BE BENAMI OF THE SERIOUS ONUS THAT RESTS ON HIM, NOR JUSTIFY THE ACCEPTANCE OF MERE CONJECTURES OR SURMISES AS A SUBSTITUTE FOR PROOF. IT IS NOT ENOUGH MERELY TO SHOW CIRCUMSTANCES WHICH MIGHT CREATE SUSPICION, BECAUSE COURTS CANNOT DECIDE ON THE BASI S OF SUSPICION. ACCORDINGLY, FOR PROVING A BENAMI TRANSACTION THERE SHOULD BE MATERIAL ON RECO RD TO SHOW SOURCE OF CAPITAL FOR TRANSACTION 5 ITA 520&521/K/2010 GUINESS COMMODITIES (P) LTD., A.Y.05-06 & 06-07 AND THE FACTUM THAT THE ASSET IS IN THE CONTROL AND MANAGEMENT VESTED IN BENAMIDAR AND THE USUFRUCT WAS ALSO ENJOYED BY THE SAME PERSON AND IN CASE THESE FACTS ARE PROVED, THE ASSESSEE CAN BE HELD AS BENAMI. SINCE NONE OF THE AUTHORITI ES BELOW HAVE GONE INTO THESE DETAILS, WE HAVE NO ALTERNATIVE EXCEPT TO SET ASIDE THE ISSUE I N ENTIRETY, THAT ALSO DE NOVO TO THE FILE OF THE ASSESSING OFFICER TO DECIDE AFRESH ACCORDING TO LAW . APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOW ED FOR STATISTICAL PURPOSES. 10. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- . '# '#'# '# . ! , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( #! #! #! #!) )) ) DATED : 21 ST SEPTEMBER, 2011 /0 %12 3 JD.(SR.P.S.) . 4 , 5 '6- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT M/S. GUINESS COMMODITIES PVT. LTD., C/O D. J. SHAH & CO., 2, ELGIN ROAD, KOLKATA-26 2 ,-*+ / RESPONDENT, ITO, WD-6(2), KOLKATA. . 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA 5 . => ,% / DR, KOLKATA BENCHES, KOLKATA - ,/ TRUE COPY, .%?/ BY ORDER, 2 /ASSTT. REGISTRAR .