Shri Lalit Ramlal Oswal, Pune V. Assistant Commissioner of Income-Tax, Central Circle 1(1), Pune

ITSSA 83/PUN/2022

AI Insights

The case involves appeals by two different assessees, Shri Lalit Ramlal Oswal and Shri Ramesh Ramlal Oswal, against the orders of the Commissioner of Income Tax (Appeals) for various assessment years. The appeals were related to additions made by the Assessing Officer following search and seizure operations that revealed involvement in illegal dabba trading. The Tribunal dismissed the appeals, upholding the additions made by the Assessing Officer, which included undisclosed profits and unaccounted opening balances. The Tribunal emphasized the illegality of dabba trading under the Securities Contracts (Regulation) Act, 1956, and the consequent tax implications.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137121 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-05-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-05-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 21-09-2022
• Other Referred Cases: Apex Laboratories (P.) Ltd. vs. DCIT, 442 ITR 1 (SC)
• Laws Referred To: Income Tax Act, Securities Contracts (Regulation) Act, 1956
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Search and seizure; Document seized; Documents seized
• Section: 37; 143(3); 153A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / IT(SS)A Nos.81 to 84/PUN/2022 Assessment Years : 2013-14 to 2015-16 & 2018-19 Shri Lalit Ramlal Oswal, 589/B, Lunkad Highland, Vidhyasagar Colony, Market Yard, Pune- 411037. PAN : AAXPO4996J Vs. ACIT, Central Circle- 1(1), Pune. Appellant Respondent आयकर अपील सं. / IT(SS)A Nos.85 to 90/PUN/2022 Assessment Years : 2012-13 to 2015-16, 2017-18 & 2018-19 Shri Ramesh Ramlal Oswal, 3,76/77, Lunkad High Land, Vidhyasagar Colony, Market Yard, Pune- 411037. PAN : AABPO3074H Vs. ACIT, Central Circle- 1(1), Pune. Appellant Respondent आदेश / ORDER PER BENCH : These are the appeals filed by two different assessees against the separate orders of ld. Commissioner of Income Tax (Appeals)- Assessee by : Adjournment application rejected Revenue by : Shri Keyur Patel Date of hearing : 09.05.2023 Date of pronouncement : 15.05.2023 IT(SS)A Nos.81 to 84/PUN/2022 IT(SS)A Nos.85 to 90/PUN/2022 2 11, Pune [‘the CIT(A)’] dated 29.07.2022 for the assessment years 2012-13 to 2015-16, 2017-18 & 2018-19 respectively. 2. Since the identical facts and common issues are involved in all the above captioned ten appeals, we proceed to dispose of the same by this common order. IT(SS)A Nos.81 to 84/PUN/2022, A.Ys. 2013-14 to 2015-16 & 2018-19 : 3. Briefly, the facts of the case are that the appellant, namely, Shri Lalit Ramlal Oswal had filed the returns of income, the details of which are as under :- A. Y. Date of filing original return Returned Income 2013-14 10/07/2013 4,43,100/- 2014-15 26/07/2014 4,84,660/- 2015-16 27/08/2015 4,99,820/- 2016-17 28/12/2016 5,23,150/- 2017-18 31/03/2018 20,60,900/- 2018-19 27/07/2018 10,76,670/- 4. The search and seizure operations were conducted in the case of appellant, Shri Lalit Ramlal Oswal as a part of Dabba Trading Group on 04.11.2017. During the course of such search and seizure operations, the I.T. Department had found and seized documents indicating day to day transactions, day to day trades and day to day profit and loss for the financial years 2012-13 to 2014-15. When IT(SS)A Nos.81 to 84/PUN/2022 IT(SS)A Nos.85 to 90/PUN/2022 3 the assessee was called upon to explain the notings in the Bundle No.6 containing page nos.1 to 12, it was explained that the assessee was engaged in the illegal trade of Dabba Trading, whereas, the commodities and profits earned from the said dabba trade were not disclosed to the Department. Based on the said incriminating materials found during the course of search and seizure operations, the Assessing Officer issued notice u/s 153A of the Act. In response to the notice u/s 153A, the appellant filed returns of income disclosing additional income, the details of which are as under :- A. Y. Date of filing return u/s 153A Income declared in return u/s 153A Additional Income offered, if any 2013-14 25/03/2019 44,35,393/- 39,92,293/- 2014-15 25/03/2019 35,17,370/- 30,32,707/- 2015-16 25/03/2019 1,26,660/- (3,73,160) 2016-17 25/03/2019 20,34,030/- 15,10,880/- 2017-18 25/03/2019 20,60,900/- 20,00,000/- 2018-19 NA NA 10,00,000/- 5. Subsequently, the assessment was completed by the Assessing Officer vide order dated 30.12.2019 passed u/s 153A r.w.s. 143(3) after making addition on account of (i) undisclosed interest income earned from money lending of Rs.25,027/-, (ii) unaccounted profit from business of dabba trade of Rs.43,24,375/- and (iii) unaccounted and unexplained opening balance of Rs.25,57,275/-. IT(SS)A Nos.81 to 84/PUN/2022 IT(SS)A Nos.85 to 90/PUN/2022 4 6. Being aggrieved by the order of assessment, an appeal was preferred before the ld. CIT(A). The ld. CIT(A) after discussing the factual matrix of the case confirmed the additions. However, for the assessment year 2018-19, the addition made on account of unexplained jewellery of Rs.24,57,600/- was deleted by the ld. CIT(A) giving the benefit of telescoping the addition. 7. Being aggrieved, the appellant is in appeal before us in the present appeals. 8. When the matter was called on, none appeared on behalf of the assessee. It is found that the adjournment was granted at the request of the assessee on several earlier occasions. Today i.e. on 09.05.2023, when the matter was called on, we find that the adjournment petition was moved by the appellant stating that one Mr. Pawan Chakrapani, Chartered Accountant was to represent the matter, could not attend the hearing due to his high fever. However, we find that there was no Power of Attorney executed in the name of said Mr. Pawan Chakrapani, Chartered Accountant is available on record nor was there any request for adjournment from the said Chartered Accountant. Since the matter was adjourned at the request of the appellant on earlier seven occasions, we are not inclined to grant any further adjournment. Accordingly, the IT(SS)A Nos.81 to 84/PUN/2022 IT(SS)A Nos.85 to 90/PUN/2022 5 adjournment petition moved by the assessee is rejected. Therefore, we proceed to decide the issue in appeal after hearing the ld. CIT- DR. 9. We had carefully gone through the assessment order and the order of the ld. CIT(A), the additions made by the Assessing Officer are based on the incriminating material and the statement given by the assessee u/s 132(4) of the Act. Further, we find that the Assessing Officer made additions only on account of profits made in the dabba trading and the capital invested in the said dabba trading. The term “dabba trading” is defined to mean that buying and selling of securities outside the stock exchange mechanism, which is barred under the provisions of the Securities Contracts (Regulation) Act, 1956. The consequences of dabba trading are as under :- a. The activity is carried out in cash and hence encourages growth of the ‘Black Money’; b. Perpetuation of parallel economy; risk of money laundering and criminal activities; c. Evasion of taxes hence loss to the exchequer of Government; d. There is no guarantee for settlement of transaction; e. Circumvention of regulatory requirement as follows: i) Know Your Client (KYC) norms / requirements viz., client due diligence, PAN Card and Anti Money Laundering (AML) requirements; IT(SS)A Nos.81 to 84/PUN/2022 IT(SS)A Nos.85 to 90/PUN/2022 6 ii) Risk management and various other prudential requirements for taking membership of stock exchange, viz., capital requirement, payment of margin etc. iii) Payment using banking channels; 10. An entity which is engaged in the dabba trading violates the following provisions of Securities Contracts (Regulation) Act, 1956 :- i) Section 13 of SCRA- Contracts in securities otherwise than between members of a recognized stock exchange in a notified area are prohibited by this section. Application of Section 13 to a particular state or area is done by Central Government through notification in the Official Gazette. ii) Section 16- As notified under SCRA, all contracts in securities except spot delivery contracts and contracts permissible under SCRA and the rules, bye-laws and regulations of a recognized stock exchange, are illegal. iii) Section 17 of SCRA- This section prohibits the business of dealing in securities except with a license granted by SEBI. iv) Section 18A of SCRA- This Section provides that contracts in derivatives shall be legal and valid only if such contract are traded on a recognized stock exchange and settled on the clearing house of the recognized stock exchange in accordance with the rules and bye laws of such stock exchange. v) Section 19 of SCRA- This section specifically prohibits organizing or assistance in organizing or being a member of any stock exchange (other than a recognized stock exchange) for the purpose of assisting in, entering into or performing any contract. 11. Thus, in view of the above legal provisions of the Securities Contracts (Regulation) Act, 1956, it can be safely concluded that the activities of dabba trading is totally illegal activities. In view of Explanation (1) to section 37 of the Act, any expenditure incurred by an assessee for any purpose, which is prohibited by law shall not IT(SS)A Nos.81 to 84/PUN/2022 IT(SS)A Nos.85 to 90/PUN/2022 7 be deemed to have been incurred for the purpose of business and profession and no deduction or allowance shall be made in such expenditure. In view of the decision of the Hon’ble Apex Court in the case of ApexLaboratories (P.) Ltd. vs. DCIT, 442 ITR 1 (SC), the Assessing Officer should have disallowed the entire expenditure claimed to have incurred to earn the profits on dabba trading. Thus, we do not find any merits of the contention offered by the assessee. Therefore, without going into the merits of the contention of the appellant as regards to the addition made by the Assessing Officer, we find that the entire value of transactions is taxable as business income in view of the settled position of law discussed above (supra). Accordingly, the assessment orders as confirmed by the ld. CIT(A) are hereby confirmed. Hence, the grounds of appeal filed by the assessee stand rejected. 12. In the result, the appeals filed by the assessee in IT(SS)A Nos.81 to 84/PUN/2022 A.Ys. 2013-14 to 2015-16 & 2018-19 stand dismissed. IT(SS)A Nos.85 to 90/PUN/2022, A.Ys. 2012-13 to 2015-16, 2017-18 & 2018-19 : 13. Since the facts and issues involved in all the above captioned ten appeals of two different assessees are identical, therefore, our IT(SS)A Nos.81 to 84/PUN/2022 IT(SS)A Nos.85 to 90/PUN/2022 8 decision in IT(SS)A Nos.81 to 84/PUN/2022 for A.Ys. 2013-14 to 2015-16 & 2018-19 shall apply mutatis mutandis to the appeals of the assessee in IT(SS)A Nos.85 to 90/PUN/2022 for A.Ys. 2012-13 to 2015-16, 2017-18 & 2018-19 respectively. Accordingly, the appeals of the assessee in IT(SS)A Nos.85 to 90/PUN/2022 for A.Ys. 2012-13 to 2015-16, 2017-18 & 2018-19 stand dismissed. 14. To sum up, all the above captioned ten appeals of different two assessees stands dismissed. Order pronounced on this 15 th day of May, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 15 th May, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-11, Pune. 4. The Pr. CIT (Central), Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.