TaxTMI 
TaxTMI 
2018 (9) TMI 1902
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....act and in law in enhancing the income and Making the addition of Rs. 74,57,230/- based on the judgment of Hon'ble Delhi High Court in the case of CIT Vs. DLF Commercial Developers Ltd. (2013) which is against the facts and circumstances of the case. 2. Briefly stated facts of the case are that in the case of the assessee a search and seizure operation under section 132 of the Income-tax Act, 1961 (in short 'the Act') was carried out on 28/03/2011 along with the other cases of 'Samir Thukral Group'. During the course of search action, along with other assets and documents, a cash of Rs. 58,00,000/- was found from premise of the assessee located at 6B, Jorbagh, Delhi, out of which Rs. 13,50,000/- was explained as belonging to various persons of the group and balance Rs. 44,50,000/- was seized as unexplained. The assessee was issued notice under section 142(1) of the Act on 10/05/2012 for filing return of income for the year into consideration. In response, the assessee filed a letter intimating that the return of income was filed on 30/09/2011 declaring income of Rs. 26,56,590/-. Subsequently, the assessment proceedings were commenced and notice under section 14....
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....ted that as per the statement on oath of Sh. Karan Amin, of the assessee company recorded by the DDIT, New Delhi, the said Rs. 44.5 lakhs of the cash represented sale of sugar locally at Kandala. The assessee submitted that it has already shown cash sales of Rs. 44,50,000/-in the audited profit and loss account, and thus making an addition for unaccounted cash of Rs. 44,50,000/- to returned income of the assessee, amounted to duplication of the addition. According to the assessee, the cash seized of Rs. 44.50 lakhs stands duly explained by way of cash sales entered in the books of accounts. In view of the various inconsistencies observed in the claim of the assessee, the Ld. CIT(A) rejected the contention of the assessee and confirmed addition made by the Assessing Officer. 3.4 Before us, the Ld. counsel of the assessee submitted that the assessee has duly recorded cash sales in its books of accounts and thus the source of the cash of Rs. 44.50 lakhs stands explained and thus no addition is warranted in the case of the assessee. He submitted that the action of the Assessing Officer in accepting the cash sales recorded in books of accounts as well as making addition for the....
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....hich the receipt of excess sugar is claimed, is purchase of Raw Cane Sugar, whereas the assessee in its sale register has recorded Sale of white sugar for Rs. 44.50 lakhs. The Ld. CIT(A) has pointed out various discrepancies in the claim of the assessee. According to the Ld. CIT(A), the assessee failed to explain the source of the cash during the course of search proceeding. He also observed that statement of Mr. Karan Amin was recorded on 18/08/2011 i.e. almost after 5 months from the date of the search, and thus not much reliable. No purchase of the Sugar, which was claimed as sold, was shown by the assessee and it was claimed that Sugar was received as excess in another purchase transactions. The said claim of the excess sugar was also not found to be justified by the Ld. CIT(A). The Ld. CIT(A) further observed that no name of the buyer has been shown in the cash sale invoice raised by the assessee. The Ld. CIT(A) further observed that the excess sugar claimed to have been received was "Raw Cane Sugar" whereas the Sugar claimed to have been sold was " White Sugar". The relevant finding of the Ld. CIT(A) is reproduced as under: "4.3.5 I have considered the su....
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....ts submitted during appeal proceedings. It is observed that the appellant has made a claim which does not merit serious consideration. The sugar of quantity 132.100 Metric Tonnes, has been claimed to be the one, which was received as excess in the purchase transaction involving Haidergarh Chinni Mills. At para 4.4 below I have enhanced the total income by Rs. 74,57,230/-. While making the said enhancement, I have examined the documents furnished by the appellant in respect of their claim that the loss on importing sugar in Joint Venture with Dhampur Sugar Mills Ltd. was not a speculative loss. It is observed that the appellant has submitted a copy of a synopsis submitted before the AO to claim that the sugar sold in cash (receipts of which were yet to be accounted) represented excess sugar received in their transaction involving High-Sea purchase of sugar from Haidergarh Chinni Mills. I do not find any merit in the submissions. The report of the Dr. Amin Controllers Pvt. Ltd. at page 47 of the paper book, shows that there was excess quantity of sugar, but appellant's share in the same was just 10.576 Metric Tonnes. The relevant table appearing in the said report is reproduced below....
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....ne Sugar and not White Sugar. To convert the Raw Cane Sugar into White Sugar the same is required to be processed and cost is around Rs. 3000 per Metric Tonnes as per the joint venture agreement between appellant and Dhampur Sugar. From the said sales register it is also seen that there is considerable price difference of almost Rs. 16,000/- per Metric Tonne between Raw Cane sugar and White Refined Sugar. Thus the submissions of the appellant are full of inconsistencies and do not merit any consideration. The argument of the assessee that the sale accounted for on 30 March, 2011 represents the cash found at the appellant's premises does not merit any consideration. The cash sales accounted as on 30.03.2011 in the sale register cannot be source of cash found at the appellant's premises. The sugar which was in excess was raw sugar and not white refined sugar. The explanation of the assessee are full of inconsistencies and therefore it would be incorrect to accept the argument of duplicate/double addition also. Considering all these factors, 1 hereby confirm the addition of Rs. 45,50,000/- towards unaccounted cash found and seized from the appellant's premises in the course of search.....
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....on importing Sugar in joint-venture with Dhampur Sugar Mills P. Ltd. According to the Ld. CIT(A) as per the explanation to section 73 of the Act, the assessee company was liable to be treated as carrying on speculation business to the extent to which the business consist of purchase and sale of shares/derivatives. The Ld. CIT(A) issued a show cause notice under section 251(2), proposing as why the loss from speculation business should not be disallowed to be adjusted against current year's profit from other businesses. The Ld. CIT(A) has reproduced the said notice in the impugned order. The assessee challenged power of the Ld. CIT(A) in enhancing the income in appeal against the order under section 153A of the Act. The Ld. CIT(A) rejected the contention of the assessee in this regard and held that he was well within his powers to enhance the income of the assessee on this count. The Ld. CIT(A) also rejected the objection of the assessee on merit. 4.2 Before us, the Ld. counsel submitted that the Assessing Officer has not discussed the issue of adjustment of losses from purchase and sale of shares (derivatives) against the profit from other businesses and, therefore, the Ld....
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....n - Trib.):- It was held by ITAT Cochin that as per clause (d) of section 43(5), derivative transaction in shares is not a speculative transaction as defined in the said section. Therefore, both the profit and loss from share delivery transactions and derivative transactions are having the same meaning, as far as section 43(5) of the Act is concerned. In view of the fact that both delivery transactions and derivative transactions are nonspeculative as far as section 43(5) is concerned, it follows that both will have same treatment as per application of Explanation to section 73 of the Act. Therefore, aggregation of the share trading profit and loss from derivative transaction should be done before Explanation to section 73 is applied. 7. CIT v. Vegetable Products Ltd. [1973] 88 ITR 192." 4.4 Alternatively, the Ld. counsel also submitted that the Explanation below Section 73(4) has deemed only the activity of purchase and sale of shares as speculation business. According to him, the assessee has entered into trading of futures and options, i.e., derivative transactions, and which are not covered by the section 73(4) of the Act. 4.5 On the contrary, the Ld....
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....and pleads that the members of the association shall be assessed only individually. The expression ''denial of liability'' is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances. In either case the denial is a denial of liability to be assessed under the provisions of the Act. In one case the assessee says that he is not liable to be assessed to tax under the Act, and in the other case the assessee denies his liability to tax under the provisions of the Act if the option given to the appropriate officer under the provisions of the Act is judicially exercised. We, therefore, hold that such an assessee has a right of appeal under s. 30 of the Act against the order of the ITO assessing the association of members instead of the members thereof individually. If an appeal lies, s. 31 of the Act describes the powers of the AAC in such an appeal. Under s. 31(3)(a) in disposing of such an appeal the AAC may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the ITO to make a fresh assessment. The AA....
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....nji Mistry (supra). Accordingly, the ground 2.1 of the appeal is dismissed. 5. On the issue of the merit of the enhancement of income of Rs. 74,57,230/-, the Ld. CIT(A) has followed the decision of the Hon'ble Delhi High Court. The relevant finding of the Ld. CIT(A) is reproduced as under: "4.4.7 I have considered the AR's submission. I do not agree with the AR that the decision of Hon'ble High Court of Delhi in the case of DLF Commercial Developers (Supra) did not decide on the issue of adjustment of current year's speculation loss against current years non-speculative profit. The Hon'ble High Court of Delhi in the said case has clearly held that Explanation in section 73 has an overriding effect on section 43(4) of the Act. Sub clause 1 of section 73 clearly prohibits the set off of current year's speculation loss against current year's non speculation profit. The explanation below S.73(4) gives meaning of speculation business which is applicable to all sub sections of S.73. Speculation Transaction defined in S. 43(4) is a general section applicable to all assessees. But the one given in S.73 is a special provision, applicable to special category of assessee. Sp....
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....fit of Rs. 49,55,392/-, the same is evident from schedule 15 of the audited accounts. Therefore, the appellant is entitled to adjust current year's speculation loss against current year's speculation profit to the extent of Rs. 49,55,392/- only. The balance cannot be allowed to be adjusted against profit from other business. The AO is directed to re-compute the total income by disallowing the set off of current year's speculative business loss of Rs. 74,57,230/- against any other income. To this extent, the total income of the assessee gets enhanced by Rs. 74,57,230/-. Ordered accordingly." 5.1 The issue in dispute raised in the ground is whether the Explanation in section 73 has an overriding effect on section 43(4) of the Act. The claim of the assessee is that the activity of trading in futures and options is not a speculative activity in view of the provisions of section 43(4) of the Act, and, thus, the loss on account of said activity of trading in future and option is eligible for setoff against other losses from non-speculative business. 5.2 The contention of the Revenue, on the other hand, is that a speculative transactions defined in section 43(4) is a general ....