TaxTMI 
TaxTMI 
2025 (3) TMI 1777
X X X X Extracts X X X X
X X X X Extracts X X X X
....ker for any commodity, financial products etc. It is a trading member of Indian Bullion Market Association Ltd (IBMA) in NSEL. It filed its return of income for AY 2013-14 and 2014-15 declaring total loss of Rs. 28,82,775/- and NIL income (after set off of brought forward loss) respectively. Subsequently, the AO reopened the assessment of both the years on the basis of information received from CBDT with regard to irregularities committed by some persons in NSEL. It was noticed that the assessee herein was actively trading in paired contracts on its own accord through clearing cum trading member Indian Bullion Market Association Ltd (IBMA) without taking delivery of commodities. 4. For the year relevant to AY 2013-14, the AO received information that the assessee was having outstanding receivables of Rs. 14.34 crores from IBMA. The information received from CBDT mentioned that the assessee has bought commodities for a value of Rs. 54.34 crores and sold the commodities for Rs. 55.34 crores. Thus, it made a profit of Rs. 1.00 crores in trading. The information also contained details of trading carried on by the assessee as broker to certain customers. Though the assessee denied an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cuments/material before the Tribunal also. Hence, on this count alone, the additions made in both the years are liable to be deleted. 7. Be that as it may, we shall examine the additions on their merits. We notice that the assessee has furnished all the information available with it to prove that the information received by the AO was contrary to facts available on record. We notice that the assessee has made detailed submissions before the Ld CIT(A) on each of the additions made by the AO in both the years under consideration. The Ld CIT(A) has summarized them and after considering them, he has rendered his decision in respect of each of the additions. We notice that the discussion so made by the Ld CIT(A) and decision rendered by him in respect of each of the issue is comprehensive in nature and hence we extract the same below:- ASSESSMENT YEAR 2013-14:- 8. The first issue relates to the addition of outstanding receivable of Rs. 14.34 crores. The submissions made by the assessee against this addition have been summarized by the Ld CIT(A) as under:- 11.2 The gist of submission made by the appellant is reproduced hereunder: - (i) During the entire assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Rs. 18,52,190/- (i.e. closing balance of F.Y.2012-13). The difference of Rs. 46,426/- was on account of certain margin money which was to be settled by both parties mutually (Copy of the mail reply & the ledger attached with the said reply is enclosed at page no. 23-32 of the paper book). (ix) During the course of assessment proceeding appellant has duly submitted various details such as contract notes issued by appellant to its clients in respect of transactions undertaken by it on NSEL. The appellant has already offered brokerage income arising out of such transaction. Copy of the brokerage income ledger account is placed at page no. 33-34 of paper book. Further, the client of the appellant has also offered income being profit arising out of such purchase & sale of commodity. Copy of the financials of Sital Mercantile & Credit Private Limited ((hereinafter referred to as "SMCPL") and Urmila Real Estates Private Limited (hereinafter referred to as "UREPL") are enclosed at page no. 35-59 of the paper book. Both these entities have duly disclosed commodity trading in their financials. (x) Trade receivable by itself does not represent income which is liable to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....NSEL in the form of letter sent to Member, CBDT. The AO has not carried out any further verification with NSEL (National Spot Exchange Limited) or IBMA (Indian Bullion Market Association) regarding the nature and volume of transactions as well as the balances of the trade receivable. Since, no contradictory evidences have been brought on record to rebut the submission of the appellant the addition made merely on the basis of the letter dated 13.06.2016 of the NSEL has no basis. Further, the appellant objections that the appellant was not granted copy of "annexure-VII" to the letter dated 13.06.2016 during the assessment proceedings nor during reopening proceedings are grave and incorrigible lacuna. The appellant has further argued that the addition has been made without providing the material on which he has taken adverse view against the appellant. 11.4 Considering the discussion made by the AO in the assessment order and submissions filed by the appellant, it is seen that no documentary evidences have been brought on record by the AO rebut the documentary evidences filed by the appellant in the form of ledger account of IBMA (Indian Bullion Market Association Ltd) for th....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... (ii) The amount of purchases & sales of commodities stated by the AO is incorrect. Transactions carried out as a broker has also been considered as appellant own transactions. (iii) Appellant has actually made purchases of commodities of Rs. 20.83 Cr. (Excl. charges). (iv) Reconciliation has been furnished and total amount of purchases Rs. 54,34,13,350/- as per NSEL (as alleged by the AO) has been reconciled as under: Net Purchases Rs. 20,83,38,950/- Purchases considered in F.Y. 2013-14 Rs. 3,71,52,000/- Purchases on behalf of client M/s. Sital Mercantile & Credit Pvt. Ltd. Rs. 23,27,69,043/- Purchases on behalf of client Mr. Gordhan Lai Agrawal Rs. 6,51,53,537/- Total Rs. 54,34,13,530/- Net Sales Rs. 18,31,54,475/- Sales considered in F.Y. 2013-14 Rs. 6,70,10,940/- Sales on behalf of client M/s. Sital Mercantile & Credit Pvt. Ltd. Rs. 23,70,72,569/- Sales on behalf of client Mr. Gordhan Lai Agrawal Rs. 6,62,97,811/- Total Rs. 55,35,35,795/- (v) Out of the total amount of sales as alleged by AO, a sum of Rs. 6,70,10,940/- pertains to F.Y. 2013-14 and thus no question arises o....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 1.00 crore made by the AO. 10. The last issue relates to addition of estimated brokerage income @ 2% amounting to Rs. 6.48 crores. The submissions made by the assessee against this addition have been summarized by the Ld CIT(A) as under:- 13. Ground No.12 to 15:- Addition of Rs. 6,48,00,007/- by way of commission 13.2 The gist of submission made by the appellant is reproduced hereunder: - (i) The AO has not dealt with the submissions filed by the appellant during the assessment proceedings. No discussion has been made regarding factual position and submissions made by the appellant. The AO simply on the basis of reasons recorded in appellant's case has made such a huge addition which is baseless. (ii) Neither rate of brokerage and nor turnover as specified in the reasons are correct. The rate of 2% as alleged by AO is completely on presumption without considering practical scenario. It is pertinent to mention that nowhere in the country such a high rate of brokerage is being charged on the commodity transaction. The appellant has charged brokerage @ 0.02% on purchases and sales amount. Sample copy of contract note is enclosed at page no. 80-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed the brokerage income in its books of accounts and has offered the same for tax. Copy of Financial Statements is enclosed at page no. 17-22 of the paper book. 10.1. The decision rendered by the Ld CIT(A) on this issue reads as under:- 13.3 The AO has worked out the brokerage income to the tune of Rs. 6.48 Cr. @2% on the turnover of Rs. 324.11 Cr. The AO has not brought on record any documentary evidences to establish the turnover as claimed by him. Further, the AO has not brought any documentary evidences to establish the brokerage rate of 2%. The AO has not brought any material on record to reject the claim of the appellant that the brokerage charged to its clients is not 0.02%. A copy of contract bill submitted by the appellant showing brokerage charged @0.02% is reproduced hereunder: - The AO has not brought on records any documentary evidences to prove that the appellant has earned brokerage income more than what it has offered in the return of income at Rs. 2,98,593/-. In absence of any documentary evidences to establish receipt of brokerage income to the tune of Rs. 6.48 crore, it is not possible to sustain the addition and hence the same is deleted. Gr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... form part of share capital. The Id. AO has merely made the addition without application of mind. 47. Thus, it is apparent that the Id. AO misinterpreted that the said funds received by the appellant from its directors were in the form of share capital and therefore contended that the same is not recorded in the books of accounts of the appellant. 48. However, he had overlooked the fact apparent from the balance sheet itself that the said funds are received in the form of unsecured recoded under the head "short term borrowings". Thus, it is submitted that capital infusion as alleged by the Id.AO has duly been recorded in the books of accounts of the appellant. Accordingly, the loans received are duly explained. 49. It is further submitted the issue related to unsecured loan was duly examined by ld.AO in the original assessment proceedings. The Id. AO in the notice issued u/s 142(1) of the Act dated 18.07.2016 had specifically sought details regarding the unsecured loan. In response to the same, the details were also filed by the appellant. With such thorough examination of this issue, now reassessing the same issue with incorrect facts is nothing but non ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... specifically called for the details of Short Term Borrowing as unsecured loan amounting to Rs. 12,43,71,830/-. The relevant part of the questionnaire is reproduced hereunder: - NOTICE UNDER SECTION 142(1) OF THE INCOME-TAX ACT. 1961. To, The Principal Officer M/s. Kunal Comtrade Pvt.Ltd. C/303, Orchid Enclave J.B.Nagar Andheri (E), Mumbai 400 059. Sir, Sub : Scrutiny Assessment proceedings in the case of M/s. Kunal Comtrade Pvt. Ltd. - A.Y. 2014-15 - PAN : AAECK7870K - reg. - In connection with ongoing scrutiny assessment proceedings in your case for A.Y. 2014-15, you are hereby required to furnish the following details : (i) Details of Short Term Borrowings shown as unsecured Loan amounting to Rs. 124,371,830/- in following format Sr. No. Name & Address .of the Party PAN Opening Balance Received During the Year Repaid During the Year Outstanding Balance Rate of Interest charged, if any Please also furnish the following : (a) Loan confirmations of all ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble of the appellant is from its clients as under: - Sr. No Name of the Creditor Amount (Rs.) 1. M/s. Sital Mercantile & Credit Pvt. Ltd 67,77,720 2. M/s. Urmila Real Estates Pvt. Ltd 23,23,33,668 Total 23,91,11,388 The addition made by the AO is on basis of incorrect facts. The addition being factually incorrect the same cannot be sustained. The addition of Rs. 23.91 Cr. made by the AO is deleted. Ground No.10 & 11 of the appellant are allowed." 12.2. Since the facts relating to this addition is identical to the similar issue decided by us in AY 2013-14, following the same, we uphold the order passed by Ld CIT(A) on this issue. 13. The next issue urged by the revenue relates to the addition of estimated brokerage income. This issue is also identical with the similar addition made by the AO in AY 2013-14. The AO has made this addition on estimated basis without rejecting the books of accounts of the assessee and also without bringing any material on record to validate the information received from CBDT. Accordingly, following the decision rendered by us in AY 2013-14, we uphold the decision rendered by the Ld CIT(A) in delet....