M/s Ratnabali Commodities Pvt Ltd, Kolkata V. I.T.O Wd - 12(3),kolkata., Kolkata

ITA 787/KOL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1561 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RABIN CHOWDHURY CIT LD SR D
• Assessee Lawyers: RAVI TULSIYAN FCA LD
• Keywords: Transactions in derivatives; Tangible material; Corroborative evidences

Judgement Text

1 ITA NO. 787/KOL/13 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA BEFORE: SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JU DICIAL MEMBER I.T.A NO.787/KOL/2013 A.Y 2008-09 M/S. RATNABALI COMMODITIES VS. THE INCOME-TAX OFFICER PAN: AAACU3187F PVT.LTD WARD 12(3), KOLKATA [APPELLANT] [RESPONDENT] FOR THE APPELLANT : SHRI RAVI TULSIYAN, FCA, LD.AR FOR THE RESPONDENT : SHRI RABIN CHOWDHURY, ADDL .CIT, LD.SR.DR DATE OF HEARING : 25-07-2017 DATE OF PRONOUNCEMENT : 30-08-2017 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), XXX, KOLK ATA DT. 23-11- 2012 FOR THE A.Y 2008-09. 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER TH E CIT(A) WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF LOSS MA DE BY THE AO ON ACCOUNT OF TRANSACTIONS IN DERIVATIVES TO THE EXTEN T OF RS.5,46,885/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. AT THE OUTSET, THE LD.AR OF THE ASSESSEE SUBMITS THAT THE ISSUE IN HAND IS SQUARELY COVERED BY THE ORDER DT. 16-06- 2017 IN ASSESSEES OWN CASE FOR THE A.Y 2009-109 AND PLACED THE COPY O F SUCH ORDER. HE REFERRED TO PARA 7 OF SUCH ORDER AND ARGUED THAT TH E ISSUE OF MODIFICATION WITH REGARD TO CLIENT NAME AND CODE WAS CARRIED OUT BY THE BROKER WITHIN TIME PERMITTED BY NSE FOR THE PUR POSE OF MODIFICATION. THE TRIBUNAL VIDE ITS SAID ORDER DT. 16-06-17 HELD THAT THE DISALLOWANCE MADE BY THE AO WAS ON SURMISES AND CONJECTURES AND AS SUCH DELETED THE ADDITION MADE THEREON. 2 ITA NO. 787/KOL/13 4. ON THE OTHER HAND, THE LD.DR HAS AGREED THAT THE ISSUE AS DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y 2009-10 IS SIMILAR AND IDENTICAL TO THE ISSUE IN HAND. BUT HE ARGUED THAT THERE ARE SOME GUIDELINES FOR MODIFICATION AND THE SAID M ODIFICATIONS CANNOT GO BEYOND GUIDELINES. THE ASSESSEE HAS SHOWN THE CLAIM OF LOSS AT THE END OF RELEVANT F.Y AND ALSO ADJUSTMENT THE PROFIT FROM OTHER SOURCES, WHICH IS NOT PERMISSIBLE. IN SUPPORT OF HIS CONTENTION, HE RELIED ON THE ORDERS OF THE AO AND THE CIT-A. 5. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IN HAND IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE SAID ORDER DT. 16-06-17 IN ASSESSEE S OWN CASE IN ITA NO. 191/KOL/2015 FOR THE A.Y 2009-10, WHEREIN THE A SSESSEE HAS CLAIMED LOSS OF RS. 19,76,538/-. THE AO TREATING TH E SAME AS BOGUS ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE ONLY ON THE GROUND THAT THE BROKER HAS MODIFIED THE NAME AND C ODE OF ASSESSEE. WE FIND THAT THIS TRIBUNAL VIDE ITS SAID ORDER DT. 16-06-17 IN ASSESSEES OWN CASE FOR THE A.Y 2009-10 HELD THAT M ODIFICATIONS ARE PERMITTED BY NSE AND SUCH MODIFICATION CARRIED OUT WITHIN THE PRESCRIBED TIME LIMIT PROVIDED BY NSE. RELEVANT POR TION OF FINDING OF SUCH ORDER IS REPRODUCED HEREIN BELOW:- 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPON. THE ISSUE BEFORE US REVOLVES FOR THE AMOUNT OF LOSS CLAIMED BY ASSESSEE FOR ~ 19,76J38/- WHICH WAS TREATED BY THE AUTHORITIES BELOW AS BOGUS MAINLY DUE TO THE MODIFICATION CARRIED OUT IN THE NAME AND CODE OF THE ASSESSEE BY THE BROKER. THE DIRECTOR OF THE ASSESSEE-COMPANY AND THE DIRECT OR OF THE BROKER COMPANY LISTED WITH NSE ARE SAME PERSON. THE IMPUGNED LOSS WAS TREATED AS BOGUS DUE TO SEVERAL REASONS SUCH AS IT WAS INCURRED AT THE FAG-END OF THE YEAR, TO REDUCE THE TAXABLE PROFIT EARNED BY ASSESSEE DURING THE YEAR AND SIMILAR KIND OF LOSS W AS ALSO DISALLOWED IN THE IMMEDIATE PRECEDING YEAR. 7.1 FROM THE FOREGOING DISCUSSION, WE FIND THAT IND EED THE CLIENT'S CODE AND NAME WERE MODIFIED IN RESPECT OF TRANSACTIONS CLAIMED BY ASSE SSEE. HOWEVER, ON PERUSAL OF RECORD. WE FIND THAT THE IMPUGNED TRANSACTIONS WERE CARRIED OUT THROUGH BANKING CHANNEL AND ALL THE SUPPORTING EVIDENCE SUCH AS CONTRACT NOTE, PAYM ENT OF STT WERE FILED AT THE TIME OF ASSESSMENT PROCEEDINGS. WE ALSO. FIND THAT LD. CIT( A) CONFIRMED THE ORDER OF AO ON THE BASIS OF HIS GUESS-WORK AS EVIDENT FROM HIS APPELLA TE ORDER WHICH IS REPRODUCED BELOW:- 'THERE IS A POSSIBILITY THAT THE MODIFICATIONS MIGH T HAVE BEEN MADE TO ACCOMMODATE THE APPELLANT AS THE BROKER OFTHE APPELLANT WAS A SISTE R CONCERN. ' FURTHER THE ID. CIT -A HAS OBSERVED IN HIS ORDER AS UNDER:- 'EVEN THOUGH APPARENTLY IT HAS NOT BEEN ESTABLISHED THAT THE SUCH MODIFICATION HAD BEEN DONE IN VIOLATION OF RULES AND REGULATION S PRESCRIBED BY SEBI AND THE 3 ITA NO. 787/KOL/13 AO HAD PROCEEDED ON SUSPICION, HOWEVER AT THE SAME TIME IT ALSO CANNOT BE CONCLUDED EITHER THE LOSS WOULD NOT BE ATTRIBUTABL E 10 THESE 'MODIFICATIONS'. ON PERUSAL OF THE ORDER. WE FIND THAT LD. CIT(A) HAS CONFIRMED THE ORDER OF AO ON HIS OWN SURMISE AND CONJECTURE WHICH IS NOT PERM ISSIBLE IN THE EYES OF LAW. LD. DR HAS ALSO NOT-BROUGHT ANYTHING ON RECORD CONTRARY TO THE ADVANCE ARGUMENTS PLACED BY LD. AR FOR THE ASSESSEE AS WELL AS NO DEFECTS OF WH ATSOEVER HAS BEEN POINTED OUT IN THE DOCUMENTS PRODUCED BY ASSESSEE IN SUPPORT OF ITS IM PUGNED LOSS. WE ALSO FIND WHATEVER MODIFICATIONS WERE CARRIED OUT BY THE BROKER THEY W ERE CARRIED OUT WITHIN THE TIME PERMITTED BY THE NSE FOR THE PURPOSE OF MODIFICATIO N. THUS, WE ARE OF THE VIEW THAT THE ORDER OF AUTHORITIES BELOW IS BASED ON SURMISE AND CONJECTURE AND SAME IS NOT BASED ON TANGIBLE MATERIAL TO TREAT THE IMPUGNED LOSS AS BOG US LOSS. 7.2 MOREOVER, WE ALSO FIND THAT THE DETAILS FURNIS HED BY THE ASSESSEE IN RESPECT OF TRANSACTIONS GIVING RISE TO THE LOSS WERE EXACTLY M ATCHING WITH THE DETAILS FURNISHED BY THE NSE. IN NONE OF THE CASE. AUTHORITIES BELOW HAV E BROUGHT ON RECORD WHERE ANY MISMATCH -IS FOUND BETWEEN THE BOOKS OF THE ASSESSE E AND THE CONFIRMATION RECEIVED FROM NSE. HAD THERE BEEN ANY MANIPULATION IN THE IM PUGNED LOSS THEN IT COULD HAVE BEEN REVEALED FROM THE CONFIRMATION RECEIVED FROM N SE. THEREFORE, THE MODIFICATIONS IN THE CLIENT'S NAME AND CODE CANNOT JUSTIFY THE IMPUG NED LOSS AS BOGUS. THUS, WE CONCLUDE THAT THE IMPUGNED ADDITION HAS BEEN MADE B Y THE AUTHORITIES BELOW ON THE BASIS OF SURMISE AND CONJECTURE WHICH IS NOT PERMIS SIBLE IN THE EYES OF LAW AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF LALCHAND B HAGAT AMBICA RAM VS. CIT BIHAR AND ORISSA (1959) 159 ITR 289 (SC). THEREFORE, WE H OLD THAT THE IMPUGNED LOSS CANNOT BE SUBJECT-MATTER OF ADDITION ON THE BASIS OF SUSPI CION. IN THIS REGARD WE ALSO RELY IN THE CASE OF CIT VS. KUNDAN INVESTMENT LTD. REPORTED IN 263 ITR 626 (CAL) WHERE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD:- 'THE TRIBUNAL HAD FOUND THAT ALL RELEVANT DOCUMENTS RELATING TO CONTRACT NOTES, BILLS, THE QUOTED PRICE AND OTHER MATERIALS WERE PR ODUCED THE TRANSACTIONS WERE MADE THROUGH CHEQUES. ALL THE SHARES RELATED TO THE REPU TED COMPANIES AND WERE QUOTED SHARES IN THE STOCK EXCHANGES AND WERE PURCHASED AN D SOLD AT THE PREVALENT QUOTED MARKET RATES, WHICH WAS VERIFIED FROM THE STATEMENT OF THE SLACK EXCHANGES. ON THESE BASIS, THE TRIBUNAL FOUND THAT THE CIT(A) HAD PROCE EDED ON THE BASIS OF SUSPICION THAT THERE MIGHT BE SOME INGENUINITY IN THE TRANSACTIONS . ON THE BASIS OF THE MATERIALS PRODUCED, THE TRIBUNAL CAME TO A FINDING OF FACT, W HICH DOES NOT SEEM TO BE PERVERSE. WHETHER THE SHARES COULD BE SOLD IMMEDIATELY ON THE DATE OF PURCHASE OR NOT WAS A QUESTION OF BUSINESS EXPEDIENCE. WHETHER THE DECISI ON WAS' CORRECT OR 'WRONG CANNOT THE QUESTION, WHICH CAN HE A SUBJECT-MATTER OF DECISION IN SUCH A CASE. IN ORDER TO FIND OUT WHETHER THE TRANSACTION IS GENUINE OR IN GENUINE IT IS NEITHER THE EXPEDIENCE NOR CORRECTNESS OF' THE DECISION NOR THE BUSINESS EXPER TISE OF THE PERSON TO BE CONSIDERED. IT IS TO BE CONSIDERED ON THE BASIS OF THE MATERIALS T HAT THERE WAS NO SUCH TRANSACTION AND THAT THESE SHARE TRANSACTIONS WERE PAPER TRANSACTIO NS. THE SUFFERING OF LOSS, COULD NOT BE A FACTOR FOR SUCH PURPOSE.' HAVING REGARD TO THE FA CTS AND CIRCUMSTANCES OF THE CASE, THE VIEW TAKEN BY THE TRIBUNAL ALLOWING SHARE LOSS CANN OT BE SAID TO BE ERRONEOUS OR PERVERSE.- CIT VS. EMERALD COMMERCIAL LTD & ANR (2001) 171 CTR (CAL) 193: (2001) 250 ITR 539 (CAL), CIT VS. DHAWAN INVESTMENT & TRADING CO. LTD (1999) 238 ITR 486 (CAL) AND CIT VS. CURRENCY INVESTMENT CO . LTD (2000) 158 CTR (CAL) 361: (2000) 241 ITR 494 (CAL) RELIED ON. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE IMPUGNED LOSS CLAIMED BY ASSESSEE IS GENUINE LOSS IN THE ABOVE FACTS AND CIRCUMSTANCES O F THE CASE AND THEREFORE ELIGIBLE FOR DEDUCTION. ACCORDINGLY, AO IS DIRECTED. THIS GROUND OF ASSESSEE'S APPEAL IS ALLOWED. 6. IN VIEW OF ABOVE, WE FIND THAT THE CIT-A WAS NOT JUSTIFIED IN CONFIRMING THE IMPUGNED ADDITION/DISALLOWANCE OF LOSS ON ACCOUNT TRANSACTIONS IN DERIVATIVES TO THE EXTENT OF RS. 5, 46,885/-. ACCORDINGLY, THE SAME IS LIABLE TO BE DELETED. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 4 ITA NO. 787/KOL/13 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 -0 8-2017 SD/- SD/- P.M. JAGTAP S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30-08-2017 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/ASSESSEE: M/S. RATNABALI COMMODITIES PVT. LTD A-7 & 8,FMC FORTUNA, 4 TH FLOOR, 234/3A, AJC BOSE ROAD, KOLKATA-700 020. 2 RESPONDENT/REVENUE : INCOME TAX OFFICER, WARD 12(3) , AAYKAR BHAWAN, P-7 CHOWRINGHEE SQUARE, KOLKATA-69. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCH ES, KOLKATA / TRUE COPY, BY ORDER, SR.PS/H.O.O ITAT KOLKATA