2019 (1) TMI 583

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....ssee on account of derivative trading to the tune of Rs. 3,49,14,478/-. 3. Brief facts of the case are that the AO noticed that a search and seizure operation u/s. 132 of the Income-tax Act, 1961 (hereinafter referred to as the "Act") was conducted at the premises of the assessee on 11.04.2013 and it was noted by him that in the assessment year under consideration the assessee had shown loss of Rs. 3,49,14,478/- on derivative trading in the P&L Account for the year. The AO acknowledges that the assessee had filed the details of such loss with the supporting documents namely, contract notes and bank statement. However, according to AO, the loss could not be allowed in the light of the statement of the broker [ whose name not revealed by A....

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.... We note that there was a search action on the assessee's premise on 11.04.2013 (AY 14-15 which is the relevant assessment year under consideration before us). During the course of search, it was found by the search party that the assessee was engaged in trading of derivative transactions in commodities which were not recorded in the books of account. Consequently, a disclosure of Rs. 402.02 lacs was taken on account of such unrecorded transaction of derivatives for the AY 2013-14 was taken from the assessee and assessee offered tax on it. Since the search action happened on 11.04.2013 in the beginning of the AY 2014-15, the assessee thereafter started recording the derivative transaction in its regular books of account. We note that the....

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.... the assessee's claim of loss suffered during derivative transactions. However, we note that the AO has not given a copy of the broker's statement/adverse material to the assessee, so the statement of the broker which is adverse against the assessee cannot be relied upon by the AO for drawing adverse inference against the assessee. We note that the Hon'ble Supreme Court in the case of Kishanchand Chellaram Vs. CIT (1980) 125 ITR 713 (SC) held that any information gathered by the AO without confronting the same to the assessee did not have any evidentiary value and cannot be used for the purpose of assessment or other proceedings. We also note that the assessee's plea to the AO to cross examine the so called broker whose statement was rec....