TaxTMI 
TaxTMI 
2025 (7) TMI 45
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.... (ii) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law by deleting the addition ignoring the fact that the assessee was found indulged in booking contrived commodity losses and thereby indulged in organised way of tax evasion. (iii) On the facts and in the circumstances of the case, the assessee is involved in organised tax evasion activity by booking contrived commodity loss through premeditated synchronized trading. Accordingly, this case is covered under exceptional clauses of CBDT Circulars for filing further appeal. (iv) Any other grounds that may be urged at the time of hearing." 3. Brief facts of the case are that the assessee company is engaged in the business of commodity trading and the case was reopened by issuing notice u/s 148 of the Act. In response to the notice issued, the assessee filed the return of income showing total income of Rs.7,06,150/- and tax was also paid u/s 115JB of the Act at Rs.22,21,835/-. On the basis of the information received from the Investigation Directorate, Kolkata, information was called for from the assessee and after considering the reply received, the assessment was made by assess....
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....rofits in the earlier part of the year and contrived losses were booked to offset or minimise the profit. The Ld. AO noted that the assessee had earned commodity profit of Rs.1,19,69,973/- for which the transactions were done during the beginning of the financial year from April, 2010 to May, 2010 with M/s. Fast Commodity Markets Ltd., the broker and in the last quarter of the financial year commodity trading losses amounting to Rs.1,04,90,377/- in respect of the commodity trading done through the brokers namely M/s. Subh Commodities Pvt. Ltd. and M/s. Marina Commotrade Pvt. Ltd. were shown, which was a planned attempt of tax evasion by the assessee company. On perusal of the contract notes, it was found by the Ld. AO that almost each buy-sell pair of a day resulted in loss. The company bought commodity at a high rate and sold at a lower rate and each such squared off transactions led to almost consistent loss, which is evident from the perusal of the contract notes. In the case of transactions made through M/s. Marina Commotrade Pvt. Ltd. at the end of FY 2010-11, only losses of Rs.30,24,457/- had been booked. So, the low-high trade pattern was very much discernible in the case of....
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....0:16 PM BUY 25 3429.50 125 10717187.50 4 SACK FUTURES 30/03/201101:32:49 PM BUY 50 3429.50 125 21434375.00 30 SACK FUTURES 30/03/2011 01:32:51 PM BUY 50 3429.50 125 21434375.00 17 RAW JUTE FUTURES 24/03/201112:16:00 PM BUY 25 3407.60 100 8519000.00 22 RAW JUTE FUTURES 24/03/2011 12:16:09 PM BUY 25 3407.60 100 8519000.00 29 RAW JUTE FUTURES 24/03/201112:16:11 PM BUY 25 3407.60 100 8519000.00 30 SACK FUTURES 30/03/201101:21:54 PM SELL 25 3378.60 125 10558125.00 16 SACK FUTURES 30/03/2011 01:21:54 PM SELL 25 3378.60 125 10558125.00 12 SACK FUTURES 30/03/2011 01:35:54 PM SELL 25 3378.50 125 10557812.50 2 SACK FUTURES 30/03/201101:35:55 PM SELL 25 3378.50 125 10557812.50 3 SACK FUTURES 30/03/201101:36:06 PM SELL 25 3378.50 125 10557812.50 5 SACK FUTURES 30/03/201101:36:14 PM SELL 25 3378.50 125 10557812.50 8 RAW JUTE FUTURES 24/03/2011 12:20:05 PM SELL 1 3390.60 100 339060.00 5 RAW J....
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....01101:25:50 PM BUY 10 115.45 5000 5772500.00 6 NICKEL FUTURES 16/03/201101:28:12 PM BUY 12 115.45 5000 6927000.00 9 NICKEL FUTURES 16/03/2011 01:28:23 PM BUY 12 115.45 5000 6927000.00 7 ZINC FUTURES 21/03/2011 03:59:29 PM BUY 12 115.45 5000 6927000.00 4 ZINC FUTURES 21/03/201103:59:40 PM BUY 12 115.45 5000 6927000.00 2 ZINC FUTURES 21/03/2011 04:04:10 PM BUY 1 113.75 5000 568750.00 0 ZINC FUTURES 21/03/201104:04:30 PM BUY 1 114.30 5000 571500.00 0 ZINC FUTURES 21/03/2011 04:05:56 PM BUY 1 114.85 5000 574250.00 0 ZINC FUTURES 21/03/2011 04:06:09 PM BUY 1 115.40 5000 577000.00 0 ZINC FUTURES 21/03/2011 04:06:55 PM BUY 8 115.45 5000 4618000.00 6 NICKEL FUTURES 16/03/2011 01:17:26 PM SELL 1 113.20 5000 566000.00 3 NICKEL FUTURES 16/03/2011 01:17:29 PM SELL 23 113.20 5000 13018000.00 4 NICKEL FUTURES 16/03/2011 01:28:33 PM SELL 1 114.85 5000 574250.00 0 NICKEL FUTURES 16/03/201101....
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....o. Product Date Broker Counter Party Counter Party Broker 01 Zinc Futures 21/03/2011 Marina Commotrade Pvt. Ltd. Lalit Kumar & Rajesh Kumar Nature Dealcomm Pvt. Ltd 02 Aluminium 5 Ton Futures 15/03/2011 Marina Commotrade Pvt. Ltd. Tulshyan Metals Pvt. Ltd. Zaliog Commodities Pvt. Ltd. 03 Raw Jute Futures 24/03/2011 Subh Commodities Pvt. Ltd. Subh Metals, Unit of Sarda Melcast Pvt.Ltd Shaharsh Comm Services Pvt Ltd 04 Rape/Mustard 28/03/2011 Subh Commodities Pvt. Ltd. HEMANT KUMAR AGARWAL SAHAL COMMODITIES PVT LTD 5.3. The assessee replied to the show cause letter denying the findings of manipulative losses alleged by the Ld. AO and stated that while drawing conclusion of fictitious losses, all the facts and documents such as contract notes, bank statements, copy of ledgers and confirmations from the brokers were ignored, which otherwise clearly proved the genuineness of transactions and actual losses which occurred to the assessee. It was stated that the inference drawn from the information received from NMCE is a figment of imagination and non-conclusive in nature. The Ld. AO has further conc....
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....edabad in his letter dated 05.12.2018 also reported that M/s Marina Commotrade Pvt. Ltd. (CL0337) was suspended by the Exchange and M/s Subh Commodities Pvt. Ltd. (CL0369) was declared a defaulter. The above broker facilitated the synchronized trading at the instance of the assessee. Having regard to the above findings, the contention of the assessee that inference drawn on manipulative loss is based on imagination and non-conclusive is not tenable. On the strength of above discussed facts and findings, it is conclusively proved and established that the assessee company has booked contrived commodity trading losses by resorting to manipulative ways and misusing NMCE, Platform. With the above findings, it is concluded that the commodity trading loss incurred through brokers M/s Subh Commodities Pvt. Ltd. & M/s Marina Commotrade Pvt. Ltd. aggregating to Rs. 10490377/- are fictitious & contrived losses booked through synchronized trading which is wholly disallowed and added to the income of the assessee." {emphases supplied} 5.4. In the course of the appeal before the Ld. CIT(A), the assessee raised objection to the initiation of proceedings u/s 147 of the Act and also ....
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.... On same platform, assessee has done transaction with 3 brokers, which is also mentioned in table in Page 2 of the Assessment Order. The A.O. has made certain remarks and also mentioned transactions done with M/s Shubh Commodities Pvt Ltd. & M/s Marina Commotrade Pvt Ltd., whereas he is totally silent on transactions with Fast Commodity Markets Pvt Ltd. If the transactions are wrong, all 3 transactions of the broker should be wrong and if the transactions are right, all 3 of them should be right because all the transactions are made on same platform of NMCE. The A.O. has taken around that the transaction was squared up in the same day, in this we would like to mention here that the transaction was squared up in the same day is not illegal if the same was illegal the terminal itself does not allow to do so, therefore the view taken by A.O is unjustified and illogical. Therefore, the pick and choose or the Ad-hoc approach taken by the A.O. that transaction of 2 brokers are wrong and 1 broker is right is totally doubtful and beyond expectation. In view of this, it is requested to kindly allow the commodity losses through these 2 brokers i.....
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.... based on surmises and conjectures. The disallowance of loss of Rs. 1,04,90,377/- on account of commodity trading has no merit as the A.O. has arbitrary disallowed the loss without specifying any proper reason on the basis of pick and choose as loss arises from the two brokers namely Subh Commodity Pvt. Ltd. and Marina Commotrade Pvt. Ltd. has been disallowed and profit arises from one another broker has been ignored. The amounts to making an addition on the basis of conjecture and does not appear to be maintainable in my opinion. In view of the above, the addition of Rs. 1,04,90,377/- made by the A.O. is therefore deleted." 6. Rival contentions were heard and the details were examined. The Ld. AR stated that the case is not covered under the exceptional clauses as it is not an organized tax evasion of capital gains but is a business transaction. The counter party are the same and the Ld. AO is only taking the loss and not the profit but the profit is higher than the loss. It was stated that the net profit of Rs.14,79,589/- is already accounted for. The assessee traded in Jute, Copper, Aluminium, Nickel and Zinc and the purchase and sale were through Stock Exch....
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.... assessee indulged into a sale transaction and within a span of 09 seconds squared off the transaction through a buy transaction, thereby incurring the loss in the same commodity through Shrestha Beneficiary Trust in which loss had already been incurred three minutes back through squared off transaction from Saket Singhal. This defies the test of human probability and of a prudent businessman that despite incurring losses, repetitive transactions were carried out which can be for no other purpose except to incur a loss. The transactions through the brokers have been concluded in the case of Rashi Maheshwari, Shrestha Beneficiary Trust, Saket Singhal within a span of either a few seconds or within less than a minute. Similar is the case for the transactions carried out with other brokers, which defies business prudence and logic, leading to the conclusion that the assessee apparently had wanted to incur loss. The Ld. CIT(A) has mentioned that in his opinion the commodity loss may by itself appear to be suspicious to the Ld. AO as the same is offsetting the earlier commodity profit, yet before coming to any conclusion about this issue, the Ld. AO is required to bring on record, the r....
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....said explanation had been considered in the light of the sworn statement of the appellant and other material on record The ITO and the AAC had not accepted the explanation offered by the appellant. The two members constituting the majority in the Settlement Commission had also taken the same view. There was no dispute that the amounts were received by the appellant from various race clubs on the basis of winning tickets presented by her. What was disputed was that they were really the winnings of the appellant from the races. This raised the question whether the apparent could be considered as real. Apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The Chairman of the Settlement Commission, in his dissenting opinion, had laid emphasis on the fact that the appellant had produced evidence in support of the credits in the form of certificates from the racing clubs giving particulars of the crossed cheques for payment of the amo....
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....f the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence. Therefore, no case was made out for interference with the order of the Settlement Commission." 7.1. Further in the case of Commissioner of Income-tax vs. Durga Prasad More [1971] 82 ITR 540 (SC)[26-08-1971], the Hon'ble Supreme Court has also held as under: "8. Now we shall proceed to examine the validity of those grounds that appealed to the learned judges, (it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, other wise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the....