TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 692
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....t of TCS of Rs. 3,14,257/- as per Rule 37BFA in case of liquor business of M/s Dev Karan, Kota, whereas income of such business of Rs. 8,01,917/- included in appellants income. 4. Any other matter with prior permissions of the chair. 3. Succinctly, the fact as culled out from the records is that the assessee has originally filed his E- return of income for the assessment year 2016-17 on 17.10.2016 declaring total income of Rs. 15,20,600/-. There after the assessee has revised his return of income on 28.03.2017 declaring total income of Rs. 10,90,570/-. The case was selected for limited scrutiny through CASS and thereby the statutory notices as require were issued to the assessee and were served upon him. The assessee is proprietor of Liquor shops of IMFL & Beer retail shop at Jaipur, Kota. Assessee also received rental income, income from shares trading business and bank interest, during the year under consideration. Selection of the case was for limited scrutiny and following issues were flagged for verification; I. Whether sales turnover /receipts has been correctly offered for tax. II. Whether the investment and income relating to securities transac....
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....purchase 60,94,81,809) and now as per purchase cost the value of closing balance shares are Rs. 13,21,06,629/-. The difference is STT and other charges and assessee is having 38650 share/derivatives. It means the report submitted by the SW capital and MTM Summary and Global Report are true and correct and near to the result. Therefore, he issued a show cause notice issued to the assessee on 28.11.2018 contending that ; "In your case assessment of A.Y.2016-17 is pending for limited Scrutiny. Necessary details your have field which have examined and it is found that during the year under consideration you have earned profit of Rs. 34,50,071/- from 1.4.2015 to 31.03.2016. As per Global Report, MTM Summary submitted by you SW Capital. But on perusal of P & L account you have shown gross profit of Rs. 284330/- and after deduction indirect expenses net loss of Rs 5045/-. Now it is proposed to add Rs. 3159558/-(3450071-290513) in your total income undisclosed profit from share transaction. Your case is fixed for hearing on 30.11.2018 The AR of the assessee submitted his reply on 03.12.2018 the relevant part of the same is reproduce here under:- "That since it....
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....found that it was not tenable, and noted as under: The assessee is traded on 30.03.2015 or 31.03.2015, and that is the date of trade instead of settlement day. If he doesn't want to settle the shares in that case there is no trade. It is not acceptable. The date of trade is the date on which assessee/ client place his order to the broker to buy or sale the shares, so that he has earned profit on that date. If broker doesn't buy share on the date of order placed by assessee/client, who bear the loss, if loss occurred, naturally assessee/ client. Therefore, the date of trade is the date on which order is placed by the assessee/client. In this case assessee/client has placed the order to buy or sale his share in his account on 30.03.2015 or 31.03.2015 and I would like to mention here that the assessee has adopted the Mercantile System of accounting (para 4.1) in which actual trade date is the date of business. Therefore the profit mentioned in the Global Report or MTM summary (Page No.13 to 20 of this order) is the actual profit of the assessee during the year under consideration. Hence the profit declared by the assessee in profit and loss account Rs. 2,90,513/- is n....
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....tment and income relating to securities transactions are duly disclosed. Notices u/sec. 133(6) of Act were issued to (a) M/s RSBCL, Jaipur for liquor trade (b) M/s CDSL Ltd., Mumbai (c) M/s NSDL; National Stock Exchange Mumbai (d) BSE & SW Capital (P) Ltd., Mumbai for verification. (4) The A.O. based on audit report (Form 3CD) has observed that assessee is following "MERCANTILE SYSTEM OF ACCOUNTING" for last many years. Even in past A.Y. 2015-16 the A.O. has finalized the order u/sec. 143(3) of Act dated 13.11.2017 On same postulates. Copy of order enclosed. (Page 46) GROUNDS OF APPEAL Ground No. 1:- Confirming the addition of Rs. 3159558/- (3450071-290513) is bad in law. And Ground No. 2:- Applicability of provisions of section I I5BBE(1)(a) of Act is bad in law, since no addition made u/sec. 68 to 69C of Act. (No Provision Invoked) Applicability of provisions of section I I5BBE(1)(a) of Act is bad in law, since no addition made u/sec. 68 to 69C of Act. (Both the ground has common in nature hence dealt jointly) (1) That a per "MTM SUMMARY" (M/s SW Capital Broker) or "GLOBAL REP....
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....of the Previous year have a Settlement Date after 31.03.2016 & than only the Actual Profit / Loss accrued considered as "INCOME" / "LOSS" in next year. Thus Rs. 34,50,071.00 is not actual Earned Profit for the year but includes "REALISED" & "UNREALIZED PROFIT" as per chart enclosed. (Page 31 To 41) Complete details day wise inform of "CONTRACT NOTE CUM BILL" & ledger of shares derivatives traded was submitted to A.O. to justify these facts & it was also made clear that the profit as per Global Report of SW Capital & reflect profit of Rs. 34,50,071/- is not correct & the actual gain is only Rs. 2,90,513/- as per "CONTRACT NOTE CUM BILLS" & it was also requested to A.O. to call the details or verify the facts u/sec. 133(6) of Income Tax Act, 1961 from the respective brokers. (6) The A.O. has stated that as per form 3CD (Auditors Report dated 17.10.2016) (Page 8) it has been mentioned "METHOD OF ACCOUNTING - MERCANTIL SYSTEM" but this form 3CD is for "LIQUOR TRADE". In case of derivatives / f & o trade in shares it is profit / loss earned only when transaction is settled / squared - up or does not remain pending to settle as on closing of the year. Even in p....
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....futures contracts like transactions in stock and shares when settled otherwise than by actual delivery would be speculative transactions u/sec. 43(5), (CIT V. Shri Bharat R. Ruia (HUF) (2011) 10 taxmann.com 265/199 taxman 87 (Bom.)" Thus when it is a case of "DERIVATIVES" "F & O TRASNACTIONS" on sale / purchase of shares on Bolt; it is Margin (+) or (-) which is important & when settlement of transactions take; place accrued / arise. Further the A.O. based on information received u/sec. 133(6) of Act duly in reconciliation of evidences filed by assessee has ascertained & verified that source is "Share Trading" and assessee has already disclosed the said source than further addition / alternation in said profit cannot be considered as "Unexplained" u/sec. 115BE(1)(a) which states as under"- "Tax on total income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D. 115BBE. (1) Where the total income of an assessee:- (a) Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139". ....
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.... include Future Contract Options, Forwards & Swaps. 2. That under these Provisions the Steps / Procedure is:- a) Assessee either Purchase or Sale in Advance Certain Scrip / Share on a Rate for settled on a future date. b) Thus it is a Future rate Contract for Sale / Purchase (on a Settled Date by Stock Exchange) c) ON A "SETTLEMENT DATE" the Assessee has to square this transaction for Sale / Purchase. Thus "Settlement Date" may be a Week; A Fortnite etc. depending on Stock Market Conditions. d) Thus the Profit / Loss shall Accrue on a Date of "SETTLEMENT" / Squared up the transaction but not on year end eg. 31st March. e) According as per MTM SUMMARY for 01.04.2015 to 31.03.2016 of SW Capital shows Profit / Loss of Rs. 34,50,071/- as below:- (Page 27 of 1st Submission) S No. Particulars Amount 1. Profit on Not Squared up transactions 27,48,814/- 2. Profit on Squared up transactions for the year 7,01,257/- Total (1+2) Details page 48 of 1st Submission 34,50,071/- f) Thus the Trading Profit is Rs. 7,01,257/- for the year & Rs. 27,48,814/- is not the Profit of the year bu....
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....ec. 143(3) dated 13.11.17 for A.Y. 2015-16 46 8. Copy of computation of income 31.03.2015 47 9. Summary of capital gain for the year 48 S No. Particulars Page 1. Summary of Stock of derivatives as on 31.03.2015 / 01.04.2015 settled in FY 01.04.2015 to 31.03.2016 & Final Profit / Loss thereon Page..1 2. Chart of Gain / Loss of NIL / NO Quantity included in Unsettled transaction for Fy 2015-16 Page..2 3. Copy of Asstt. Order u/sec 143(3) of Act dt. 13.11.17 for AY 2015-16 with Computation. Page 46 to 47 Submission 1st dated 07.08.2025 4. Summary of Gain Calculated on "NOT Squared up transactions" v/s Total Gain Page 48 - Submission 1st dated 07.08.2025 5. Copy of Income Tax Return, Computation for AY 2017-18 (01.04.2016 to 31.03.2017) where Gain / loss shown on such derivatives Page 3 to 8. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee ld. AO misconceived the facts of the business wherein the mercantile system of accounting employed with the derivative and speculative transaction is done and further that the transactions which w....