Kshamta Investors (P) Ltd., , Kolkata V. ITO, Ward - 8(3) , Kolkata

ITA 61/KOL/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2408 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-06-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 11-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K BANDHOPADHAY J
• Keywords: Accommodation entries; Reassessment proceedings
• Section: 143(3); 142(1); 133(6); 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC KOLKATA BEFORE SHRI S.S, GODARA, JUDICIAL MEMBER ITA NO.61KOL/2019 ASSESSMENT YEAR:2012-13 KSHAMTA INVESTORS (P) LTD., C/O SUBASH AGARWAL & ASSOCIATES, ADVOCATES SIDDHA GIBSON, 1, GIBSON LANE, SUITE 213, 2 ND FLOOR, KOLKATA-700069 [ PAN NO.AABCK 1107 C ] / V/S . INCOME TAX OFFICER, WARD-8(3), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SUBASH AGARWAL, ADVOCATE /BY RESPONDENT SHRI A.K. BANDHOPADHAY, JCIT-DR /DATE OF HEARING 18-06-2019 /DATE OF PRONOUNCEMENT 21-06-2019 /O R D E R THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 , ARISES AGAINST THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, KOLKATAS O RDER DATED 18.12.2018 PASSED IN CASE NO.616/CIT(A)-3/15-16/KOL, INVOLVING PROCEEDIN GS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES SOLE SUBSTANTIVE GROUND CHALLENGE S CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DISALLOWING HIS LOSS AMOUNTING O F 9,33,633/- FROM DERIVATIVE TRADING. THERE IS HARDLY ANY DISPUTE THAT BOTH THE LOWER AUTHORITIES HAVE DISALLOWED ASSESSEES LOSS ON ACCOUNT OF FACT THAT THE BROKERA GE THROUGH M/S MARIGOLD VANIJYA PVT. LTD.S DIRECTOR SHRI SACHET SARAF HAD GOT RECO RDED HIS SEARCH STATEMENT ADMITTING ITA NO.61/KOL/2019 A.Y. 2012-13 KSHAMTA INVESTORS VS. ITO WD-8(3), KOL PAGE 2 TO HAVE BEEN PROVIDING ACCOMMODATION ENTRIES OF LOS S IN DERIVATIVE TRADING. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDS DUR ING THE COURSE OF HEARING THAT IT IS IN VIEW OF THE SAID SEARCH STATEMENT ONLY THAT T HE ASSESSING OFFICER AS WELL AS CIT(A) HAVE HELD THE ASSESSEES DERIVATIVE LOSS IN QUESTION TO BE BOGUS LACKING GENUINENESS. I FIND NO REASON TO SUSTAIN THE IMPUGN ED DISALLOWANCE. THIS TRIBUNALS CO-ORDINATE BENCHS DECISION IN ITA NO.1560/KOL/2016 IN ACIT VS. M/S TIRUPATI AWAS PVT. LTD . DECIDED ON 28.03.2018 HAS DELETED IDENTICAL DISAL LOWANCE BASED ON SHRI SACHED SARAFS SEARCH STATEMENT ITSELF VIDE FO LLOWING DETAILED DISCUSSION:- 5. A SEARCH & SEIZURE OPERATION WAS CONDUCTED IN TH E OFFICE OF SACHET SARAF & OTHERS U/S. 132 OF THE ACT ON 22-03-2013, WHEREIN A STATEMENT OF SHRI SACHET SARAF, DIRECTOR OF M/S. MARIGOLD VANIJYA P.LTD WAS TAKEN. HE STATED THAT M/S. MARIGOLD VANIJYA P.LTD IS A BROKER OF CURRENCY DERIVATIVES L ISTED WITH MCX STOCK EXCHANGE. A NOTICE U/S. 148 OF THE ACT WAS ISSUED THE ASSESSEE. IN RESPONSE, THE ASSESSEE REQUESTED TO TREAT THE RETURN ORIGINALLY FILED ON 08-08-11, AS A RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S. 148 OF THE ACT. THE AO FURTHER ISSUED N OTICES U/S. 143(2) AND 142(1) OF THE ACT AND IN RESPONSE TO WHICH, THE AR OF THE ASSESSE E APPEARED. FOR VERIFICATION OF TRANSACTION NOTICE U/S. 133(6) OF THE ACT WAS ISSUE D TO MCX, MUMBAI AND ASSESSEE WAS ALSO ASKED TO CLARIFY THE ALLEGED LOSS OF RS. 43,90 ,251/- . IT FAILED TO DO SO. THEREFORE, AO ADDED BACK THE SUM OF RS. 43,90,251/- AS UNEXPLA INED LOSS BY HIS ORDER DT. 31-03- 2015 PASSED U/S. 147/143(3). 6. THE ASSESSEE CHALLENGED THE ABOVE ORDER OF AO BE FORE THE CIT-A AND CONTENDED THAT THE SAID TRANSACTION WAS ONLINE THROUGH MCX ST OCK EXCHANGE BY ITS BROKER, M/S. MARIGOLD VANIJYA PVT. LTD, IS A REGISTERED MEMBER O F MCX STOCK EXCHANGE LIMITED. THE CLAIM OF LOSS WAS DULY REFLECTED IN THE AUDITED FINANCIAL STATEMENT AS WELL AS IN THE RETURN OF INCOME BY APPLYING THE PROVISIONS OF SECT ION 43(5)(D) OF THE ACT. THE ASSESSEE COMPANY IS REGISTERED WITH THE SAID BROKER AND COMPLIED WITH ALL KYC NORMS. THE ASSESSEE HAS BEEN ALLOTTED CLIENT (CODE) NO. CK 0105 FOR TRADING PURPOSE IN CURRENCY DERIVATIVES IN THE SEGMENT OF EXCHANGE. THE MCX ST OCK EXCHANGE IS A NOTIFIED/LISTED STOCK EXCHANGE UNDER THE INCOME TAX ACT. THE ASSESS EE HAS BEEN ISSUED VALID CONTRACT NOTES IN RESPECT OF ON LINE TRADE, WHEREIN, ORDER N UMBER, TRADE NUMBER, TRADE TIME ETC. ARE PROPERLY MENTIONED AS PRESCRIBED BY CONCERNED A UTHORITIES/STOCK EXCHANGE. THE ASSESSEE MADE THE PAYMENTS TO ABOVE SAID REGISTERED /LISTED BROKER FOR THE SAID TRANSACTION BY WAY OF ACCOUNT PAYEE CHEQUES. THE AS SESSEE SUBMITTED ALL THE DETAILS RELATING TO CONTRACT NOTES AND LEDGER COPIES OF ASS ESSEE IN THE BOOKS OF SAID BROKER. APART FROM ABOVE, THE ASSESSEE ALSO SUBMITTED AN AF FIDAVIT OF MR. SACHET SARAF, DIRECTOR OF M/S. MARIGOLD VANIJYA PVT. LTD ADMITTING THAT AL L THE FOREIGN CURRENCY TRANSACTIONS DONE BY ASSESSEE ARE BOANFIDE, GENUINE AND RECORDED BY SAID MCX STOCK EXCHANGE REFERRING TO THE STATEMENT GIVEN BY SHRI SACHET SAR AF DURING THE COURSE OF SEARCH & SEIZURE OPERATION, IT WAS SUBMITTED THAT THERE NO D IRECT CONNECTION WITH THE ASSESSEE. 7. THE CIT-A CONSIDERING THE ABOVE SUBMISSIONS OF A SSESSEE WAS SATISFIED THAT THE ASSESSEE SUBMITTED ALL THE REQUIRED DETAILS IN SUPP ORT OF ITS TRANSACTION/CLAIM. THE CIT- ITA NO.61/KOL/2019 A.Y. 2012-13 KSHAMTA INVESTORS VS. ITO WD-8(3), KOL PAGE 3 A HELD THAT THE AO DID NOT PLACE ON RECORD ANY COGE NT AND FACTUAL OR PALPABLE MATERIAL/EVIDENCE IN SUPPORT OF HIS VIEW AND THEREF ORE, DELETED THE SAID ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 4.2 I HAVE CONSIDERED THE SUBMISSION OF THE AR OF T HE APPELLANT AS WELL AS THE CASE LAWS REFERRED TO IN HIS SUBMISSION . I FIND THAT THE APPELLANT HAS INCURRED LOSS OF RS. 43,90,251/- ON A CCOUNT OF DEALING IN FOREIGN EXCHANGE DERIVATIVES. THE ASSESSMENT IN THE INSTANT CASE WAS REOPENED BY THE AO BASED ON INFORMATION RECEIVED BY THE AO OF MARIGOLD VANIJYA (P) LTD. MR. SHRI SACHET SARAFT, O NE OF THE DIRECTORS OF MARIGOLD VANIJYA (P) LTD DURING THE COURSE OF SE ARCH & SEIZURE OPERATION U/S. 132 OF THE ACT, HAD DEPOSED BEFORE T HE CONCERNED DDIT THAT THE COMPANY WAS ENGAGED IN THE BUSINESS OF PRO VIDING ACCOMMODATION OF LOSSES AND PROFITS TO THE BENEFICI ARIES AS AND WHEN DESIRED. THE APPELLANT IN THE INSTANT CASE BEING AN ALLEGED BENEFICIARY WAS ISSUED NOTICE U/S. 148 OF THE ACT. IN COURSE OF THE REASSESSMENT PROCEEDINGS, THE APPELLANT FURNISHED ALL THE REQUIS ITE DOCUMENTS IN SUPPORT OF TRANSACTIONS ENTERED INTO BY IT IN RESPE CT OF FOREIGN EXCHANGE DERIVATIVES. ON THIS SCORE, I FIND THAT NO ENQUIRY, WHATSOEVER, HAS BEEN CONDUCTED BY THE AO WITH EITHER THE BROKER OR THE MCX STOCK EXCHANGE TO VERIFY THE GENUINENESS OF THE TRANSACTI ONS ENTERED INTO BY THE APPELLANT. NO CONVINCING MATERIAL, EXCEPT FOR T HE STATEMENT OF MR. SACHET SARAF, HAS BEEN RELIED UPON BY THE AO IN MAK ING THE IMPUGNED ADDITION. IT HAS BEEN BROUGHT TO MY NOTICE THAT EVE N THE STATEMENT OF MR. SACHET SARAF WAS RETRACTED AT A LATER POINT OF TIME (SUPRA). THIS FACT HAS NOT BEEN CONTROVERTED BY THE AO IN ANY MAN NER. IT IS TRITE LAW THAT ADDITIONS CANNOT BE MADE, BASED MERELY ON THE STATEMENT OF A THIRD PARTY, IN THE ABSENCE OF ANY CORROBORATIVE MATERIAL EVIDENCE. THERE MUST BE COGENT AND PALPABLE MATERIAL EVIDENCE MAT ERIAL EVIDENCES ON RECORD FOR ANY JUSTIFIABLE ACTION IN THE MATTER. I FIND THAT THE AO HAS NOT DONE JUSTICE IN THE MATTER IN THIS RESPECT FOR WHICH THE IMPUGNED ADDITION CANNOT STAND THE TEST OF APPEAL. I FIND TH AT THE APPELLANT HAS DISCHARGED ITS INITIAL ONUS BY FURNISHING ALL THE R EQUISITE DETAILS IN RESPECT OF FOREIGN EXCHANGE LOSS INCURRED BY IT. IT IS NOT THE CASE OF THE AO THAT THE APPELLANT HAS FAILED TO FURNISH DOCUMEN TARY EVIDENCES IN SUPPORT OF THE SAID FOREIGN CURRENCY LOSS. THUS, CO NSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE ISSUE AT HAND IN THE BACKDROP OF THE VARIOUS CASE LAWS CITED IN THE SUBMISSION SUPRA AND IN THE ABSENCE OF ANY COGENT FINDING OR CORROBORATIVE MATERIALS BROUG HT ON RECORD BY THE AO TO SUBSTANTIATE HIS STAND IN SUBVERTING THE SUBM ISSION OF THE APPELLANT ON THE IMPUGNED MATTER AT THE ASSESSMENT STAGE. I DO NOT FIND ANY MERIT IN THE ACTION OF THE AO IN MAKING THE IMP UGNED DISALLOWANCE OF RS.43,90,251/- AS UNEXPLAINED LOSS WITH REGARD T O THE SAID TRANSACTIONS. IN VIEW OF THE FOREGOING, I FIND THAT THE ADDITION MADE ON THIS COUNT IS NOT SUSTAINABLE AT THE APPELLATE STAG E WHICH IS NOW DIRECTED TO BE DELETED. THE AO IS DIRECTED ACCORDIN GLY. 8. BEFORE US THE LD. DR SUBMITS THAT THE ASSESSEE F AILED TO PRODUCE ANY EVIDENCE GATHERED BY THE AO IN RE-ASSESSMENT PROCEEDINGS MCX STOCK EXCHANGE DID NOT FURNISH ITA NO.61/KOL/2019 A.Y. 2012-13 KSHAMTA INVESTORS VS. ITO WD-8(3), KOL PAGE 4 FULL DETAILS IN RESPECT OF SAID TRANSACTION OF ASSE SSEE IN RESPONSE TO NOTICE ISSUED U/S. 133(6) OF THE ACT. THUS THE AO HAS RIGHTLY ADDED TH E SAID AMOUNT TO THE TOTAL INCOME OF ASSESSEE. THE CIT-A BASING ON SUBMISSIONS OF ASSESS EE HAS GIVEN RELIEF TO ASSESSEE WITHOUT CALLING REMAND REPORT OF AO IN ADMITTING AD DITIONAL EVIDENCE. THUS, THE CIT-A HAS ERRED IN ACCEPTING WRONG CONTENTION OF ASSESSEE . HE ALSO VIOLATED THE PROVISIONS OF RULE 46A IN ADMITTING THE SAME. THE CIT-A HAS ALSO FAILED TO GIVE AN OPPORTUNITY TO AO FOR VERIFICATION OF THE DETAILS AS SUBMITTED BY THE ASSESSEE. IN VIEW OF ABOVE, HE PRAYED TO ALLOW THE GROUNDS OF APPEAL OF THE REVENU E. 9. ON THE OTHER HAND, THE LD. AR SUBMITS THAT THERE WAS NO NEW SUBMISSION/EVIDENCE BEFORE THE CIT-A AS ALLEGEDLY A RGUED BY THE LD.DR. THE CIT-A ONLY CONSIDERED THOSE DETAILS WHICH WERE AVAILABLE BEFORE THE AO. IN RESPONSE TO NOTICES ISSUED U/S. 143(2) AND 142(1) OF THE ACT, T HE ASSESSEE PRODUCED ALL THE DETAILS BEFORE THE AO IN SUPPORT OF THE CONTENTION AND CLAI M. IN RESPONSE TO NOTICE ISSUED U/S. 133(6) OF THE ACT, SAID MCX STOCK EXCHANGE, MUMBAI PROVIDED ALL THE DETAILS REGARDING THE SAID TRANSACTIONS. THE AO AFTER EXAMI NING THE SAME, HAS HIGH HANDEDLY HELD THAT THE CLAIM OF ASSESSEE IS BOGUS AND THEREF ORE, ADDED THE IMPUGNED AMOUNT, WHICH IS NOT AT ALL JUSTIFIED. THE LD.AR OF THE AS SESSEE SUPPORTED THE ORDER OF THE CIT- A AND PRAYED TO DISMISS THE GROUNDS RAISED BY THE R EVENUE IN THE APPEAL. 10. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L ON RECORD. WE FIND THAT THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT TO MCX STOC K EXCHANGE, MUMBAI. ADMITTEDLY THE SAID STOCK EXCHANGE COMPLIED WITH THE NOTICE IS SUED BY THE AO ALONG WITH SUPPLYING VARIOUS DETAILS IN RESPECT OF SAID TRANSA CTION. ACCORDING TO AO, IT IS INCOMPLETE DETAILS. HOWEVER, THE CIT-A NOTED IN HIS ORDER THAT THE AO FAILED TO VERIFY THE GENUINENESS OF TRANSACTION WITH THAT OF BROKER OF MCX STOCK EXCHANGE. IT IS ALSO OBSERVED THAT THE CIT-A FOUND SATISFIED THAT THE ASSESSEE FILED ALL THE REQUIRED DETAILS AND DOCUMENTS IN SUPPORT OF THE TRANSACTIONS ENTERE D INTO BY IT IN RESPECT OF FOREIGN EXCHANGE DERIVATIVES. WE FIND THAT THE AO MADE THE ADDITION ONLY ON THE BASIS OF STATEMENT RECORDED DURING THE SEARCH & SEIZURE OPER ATION IN THE PREMISES OF THE SAID SHRI SACHET SARAF, DIRECTOR OF M/S. MARIGOLD VANIJY A P.LTD. THE SAID STATEMENT OF MR. SARAF WAS RETRACTED AT A LATER POINT OF TIME. THE C IT-A FOUND SATISFIED THAT THERE WAS NO CORROBORATIVE EVIDENCE WHICH SUPPORTS THE VIEW OF T HE AO THAT THE SAID TRANSACTION WAS UNEXPLAINED. THEREFORE, WE FIND NO ADDITIONAL EVIDE NCE, WHICH WAS FILED BEFORE THE CIT-A, BUT NOT BEFORE THE AO. THE CIT-A DELETED THE SAID ADDITION ONLY ON THE BASIS OF MATERIAL/EVIDENCE AVAILABLE ON RECORD, WHICH WERE V ERY MUCH BEFORE THE AO IN THE RE- ASSESSMENT PROCEEDINGS. THE CASE LAWS AS RELIED ON BY THE ASSESSEE BEFORE THE CIT-A WERE RELEVANT AND APPLICABLE TO THE PRESENT FACTS O F THE CASE. THE CIT-A HAS DISCUSSED THE EACH CASE LAW THOROUGHLY. THUS, THE CIT-A WAS J USTIFIED IN DELETING THE ADDITION MADE BY THE AO ON THIS ISSUE. THE GROUNDS RAISED BY THE REVENUE IN THE APPEAL ARE DISMISSED. 3. I ADOPT THE ABOVE DETAILED REASONING MUTATIS MUT ANDIS TO CONCLUDE THAT THE ASSESSING OFFICER AS WELL AS CIT(A) HAVE ERRED IN D ISALLOWING THE ASSESSEES IMPUGNED DERIVATIVE LOSS CLAIM DULY SUPPORTED BY AL L THE DETAILS OF MCX STOCK ITA NO.61/KOL/2019 A.Y. 2012-13 KSHAMTA INVESTORS VS. ITO WD-8(3), KOL PAGE 5 EXCHANGE WHICH HAVE NOWHERE BEEN REBUTTED EITHER IN ASSESSMENT OR IN LOWER APPELLATE PROCEEDINGS. THE IMPUGNED DISALLOWANCE ST ANDS DELETED ACCORDINGLY. 4. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21 /06/2019 SD/- (S.S. GODARA) JUDICIAL MEMBE R KOLKATA, *DKP/SR.PS - 21/06/2019 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-KSHAMTA INVESTORS (P) LTD.C/O SUBASH AGA RWAL & ASSOCIATES ADVOCATES SIDDH A GIBSON, 1 GIBSON LANE, SUITE 213, 2 ND FLOOR, KOLKA TA-69 2. /RESPONDENT-ITO WARD-8(3), AAYAKAR BHAWAN, P-7, CHO WRINGHEE SQ.KOL-69 3. ' % / CONCERNED CIT 4. % - / CIT (A) 5. & ))' , ' / DR, ITAT, KOLKATA 6. + / GUARD FILE. BY ORDER/ , /TRUE COPY/ ',