TaxTMI 
TaxTMI 
2016 (3) TMI 586
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....the facts and in the circumstances of the case, the learned Commissioner of Income Tax(Appeals) should have held that the said speculation loss of Rs. 22696157/- was incurred in the usual course of business carried on by the appellant for the first time and he should not have been influenced by irrelevant facts including the expelling of the broker M/s Vatika Merchants Pvt. Lt. from the membership of the commodity exchange which was not within the control of the appellant. 3. For that on the facts and in the circumstances of the case, the learned Commissioner of Income Tax(Appeals) should have held that the speculation loss of Rs. 22696157/- was absolutely genuine having been incurred in the usual course of appellant's business and consequently he should have directed the said loss to be carried forward. 4. For that on the facts and in the circumstances of the case, the learned Commissioner of Income Tax(Appeals) further erred in holding that the said speculation loss of Rs. 22695157/- has to be ignored for the purpose of computing income under section 115JB of Income Tax Act 1961 in complete disregard of the Balance Sheet & Profit & Loss Account prepared in accor....
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....te to the stock exchange as these transactions were made off the market. All the transactions were duly confirmed by the broker and were supported with bank statements and ledger copy of the account. The ld. AR also pointed out that the assessee was never confronted to the confirmation submitted by the broker, so the order passed by the AO is without providing the opportunity of being heard. However the CIT(A) disregarded the plea of the assessee and upheld the order of the AO by observing as under : "9. I have considered the observations of the Assessing Officer in the assessment order and submissions of the appellant. The appellant has incurred loss of Rs. 2,26,96,157/- in commodity trading in off market through a broker who has been suspended by the commodity exchange due to issuing the fraudulent contract notes. The contract notes show that the appellant started doing commodity trading from 11.03.2008 to 24.03.2008 and incurred a loss or Rs. 2,26,96,157/- mainly in 14 days only. The bank a/c. reveals that difference amount of sale and purchase loss was being paid on day to day basis from 15.03.2008 to 27.03.2008 by cheque in Sr. No. i.e. 35182 to 89. The amounts wer....
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....ons on behalf of pp. He did not inform about the experience of the person and competence who was entering in such huge amount of transaction. The appellant has not produced any documents showing that the fluctuation of silver and other commodities has been so much rapid during the day that every time he bought and sold it at a loss and there was no gain on any day. He has given details of silver buying 158 times and all the transactions resulted into loss. It appears that he is buying silver at a higher price and selling the same at lower price and again buying at a higher price and selling at lower price and so on every day and completes huge number of transaction s on every day. There is no stock to be carried forward on the next day and rather after every purchase same amount is old to square up the account of sale and purchase. In the normal human transaction, it is not possible for a person who is indulging in commodity trading for Fourteen(14) days in an off market condition from a broker who has been suspended subsequently and incurring loss on all transactions and making payment everyday for the loss incurred in commodity trading.... While passing the order the ld.....
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....t the explanation offered by the appellant in respect of the said payment has been rejected unreasonably. Further, relying on the judgment of the Hon'ble "A" Bench of the jurisdictional ITAT, Kolkata in ITA No. 1871/Kol/2008 dated 21-07-2011 in the case of ITO ward 7(3), Kolkata vs. M/s. Ellenbarrie Exim Ltd. for Assessment Year 2005-06 it is held that the action of the AO in the facts and circumstances of the case that all transactions pertaining to the so-called Commodity Trade Loss transactions is bogus and colourable device to evade the taxes is to be confirmed." Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us. Shri S.M.Surana, Ld. Authorized Representative appearing on behalf of assessee and Shri David Z. Chowngtho, Ld. Departmental Representative appearing on behalf of Revenue. 4. We have heard both the side and perused the materials available on record. The ld. AR submitted two papers books. First book is running in pages no. 1 to 88 and 2nd paper book is running in pages 1 to 34. Before us the ld. AR submitted that the order of the AO is silent about the date from which the broker was expelled. There is no law that the off m....
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....assessee preferred an appeal before Ld. CIT(A) who confirmed the action of AO by observing as under:- "21. I have considered the observations of the Assessing Officer in the assessment order and submissions of the appellant. The Assessing Officer has disbelieved the transactions regarding speculation loss from commodity trading transactions. The Assessing Officer has concluded that the loss is bogus and inadmissible. When the transactions itself are doubtful, these cannot find place in the books of a/cs. For computing the loss incurred by the appellant. The commodity trading transactions are found to be bogus. The appellant has created these entries in a fraudulent manner jut to reduce the profit and to carry forward loss, if any in future adjustments. Therefore, once the genuineness of the transaction is doubtful, these cannot form a part of the P&L a/c. and it can be added back u/s. 115JB of the Income Tax Act, 1961. The Assessing Officer has calculated the profits both under the normal provisions of the Income Tax Act, 1961 and as well as u/s 115JB and to find where it was more as per the Income Tax Act, 1961. 22. The STT is not expenditure but tax to be allowe....
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.... by them. In our considered opinion, the controversy involved in this case is no longer res integra. A three Judge Bench of this Court in Apollo Tyres (supra) has clearly interpreted s. 115J of the 1961 Act. There is no scope for any further discussion. 29. Consequently, the appeals are allowed and the impugned order of the High Court is accordingly set aside. In the facts and circumstances of the case, we direct the parties to bear their own costs. CIT v. C.J. International Hotels Ltd. 325 ITR 313 (Del), the relevant extract is reproduced below : While the AO would be well within his jurisdiction to compute depreciation under s. 32 on the rats provided in Appendix I to IT Rules, 1962, for computing total income under other provisions of the Act, he cannot disturb the book profit, which has been certified to be drawn in the P&L a/c as per the Companies Act. Therefore, we are of the view that the order passed by the AO was not erroneous, which is one of the preconditions for invoking jurisdiction under s. 263 of the Act. Since it was no erroneous, it could not have been termed to be prejudicial to the interest of the Revenue. In this view of the matter, we set asid....