2019 (12) TMI 1185 - AT - Income Tax

Tribunal remands derivative loss issue for re-examination, dismisses interest charges challenge, upholds deletion under section 68.

Rosewood Buildwell P. Ltd. Versus ITO, Ward-15 (4), New Delhi. And (Vice-Versa)

Rosewood Buildwell P. Ltd. Versus ITO, Ward-15 (4), New Delhi. And (Vice-Versa) - [2020] 78 ITR (Trib) 582 (ITAT [Del]) Issues Involved:1. Disallowance of loss in derivatives claimed by the assessee.2. Charging of interest under sections 234A and 234B.3. Deletion of addition under section 68 by the CIT(A).Issue-wise Detailed Analysis:1. Disallowance of Loss in Derivatives:The assessee, engaged in the real estate business, reported a net derivative loss of Rs. 50,12,337, which was disallowed by the Assessing Officer (AO) due to the broker not trading during the relevant period. The AO's notice to the broker returned unserved, and NCDEX confirmed no trading by the broker. The CIT(A) upheld the AO's decision, citing the lack of trading activity by the broker. The assessee argued that the derivative profit was accepted while the loss was disallowed and provided documentary evidence. The Tribunal found that the primary onus was discharged by the assessee but the broker's non-confirmation warranted re-examination. The issue was remanded back to the AO for fresh examination, directing the assessee to provide the broker's correct address and confirmation.2. Charging of Interest Under Sections 234A and 234B:The assessee challenged the levy of interest under sections 234A and 234B. The Tribunal dismissed these grounds as consequential, implying that the interest charges were dependent on the outcome of the primary issues.3. Deletion of Addition Under Section 68 by the CIT(A):The Revenue appealed against the deletion of Rs. 3,50,00,000 added under section 68, arguing that the AO's findings and evidence were not appreciated. The AO had noted discrepancies in share application money received from four parties, with notices returning unserved and credit entries in bank statements raising doubts. The CIT(A) found that the assessee provided sufficient evidence, including confirmations, ITRs, balance sheets, and bank statements, and noted that the AO did not summon the parties or direct the assessee to produce them. The CIT(A) concluded that the identity, creditworthiness, and genuineness of the transactions were established, and the AO failed to carry out the required inquiries. The Tribunal upheld the CIT(A)'s decision, noting that the AO's adverse inference based on subsequent buy-back of shares was not relevant for the current assessment year. The Tribunal dismissed the Revenue's appeal, affirming that the assessee had discharged its onus under section 68.Conclusion:The Tribunal allowed the assessee's appeal for statistical purposes by remanding the issue of derivative loss back to the AO for re-examination. The grounds related to interest charges were dismissed as consequential. The Revenue's appeal against the deletion of addition under section 68 was dismissed, upholding the CIT(A)'s findings that the assessee had established the identity, creditworthiness, and genuineness of the transactions. The order was pronounced on 9th December 2019.