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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI BASKARAN BR & SHIR PAVAN KUMAR GADALE
Appellant .. Respondent (A.Y: 2013-14) ACIT – 10(1)(1) Vs. M/s Indian Bullion Mumbai. Market Association Ltd 6th floor, Chintamani Plaza, Chakala, Andheri, Kurla Road, Andheri (E) Mumbai – 400099. PAN/GIR No. : AABCI8236Q Appellant .. Respondent Appellant None /Respondent by Respondent/Appellant Mr.K.C.Selvamani.DR By Date of Hearing 08.02.2023 Date of Pronouncement 27.02.2023 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: These are the appeals filed by the assessee and the cross appeal filed by the revenue for(A.Y.2013-14) against the separate orders of the Commissioner of Income Tax (Appeals)-17, Mumbai passed u/sec250 of the Act.
Since the issues in these appeals are common and identical, hence are clubbed, heard and consolidated M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 3 - order is passed. For the sake of convenience, we shall take up the for the A.Y. 2011-12 as a lead case and the facts narrated.
A. The assessee has raised the following grounds of appeal:
1. That based on the facts and circumstances of the case, the CIT(A) has erred in making addition of income from procurement activity for Rs. 3,00,00,000/- by taxing the same income two times, one under S. 28 as offered by the appellant and S. 68 of the Income Tax Act, 1961, as assessed by the Assessing Officer and had further erred in treating such income as ad hoc income by raising doubts about the agreement entered into between Indian Bullion Market Association Ltd. (IBMA) and National Spot Exchange Ltd. (NSEL) and had further erred in taxing the same income twice and had further erred in making addition although the same was not relevant both U/s. 115BBE of the Act and provisions of setting off losses against such income as admitted by CIT(A) in para 3.2.5.
2. That based on the facts and circumstances of the case, the CIT(A) has erred in disallowing transaction charges for Rs. 14184446/- on account of the argument that there was no any business intent and that the appellant had not explained as to how the proprietary trading could help in development of market and on account of lack of commercial expediency, and CIT(A) had further erred in observing that trading in e- series contracts was without underlying commodity, and had further erred in relying upon event taking place in August 2013 and had erred in M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 4 -
relying on the observation of special auditor, without carrying out any independent investigation by the Assessing Officer.
3. That based on the facts and circumstances of the case, CIT(A) has erred in disallowing Storage Charges for Rs. 234556/- on account of the observations made by special auditor stating that such payments were with related parties specified u/s. 40A(2)(b) and on account of non- providing of comparables and had further erred in treating payment from a subsidiary company to a holding company as related party transaction.
That based on the facts and circumstances of the case, CIT(A) has erred in disallowing 100% of Deputation Charges for Rs. 3345410/-, on account of the observations made by special auditor stating that such payments were made with related parties specified u/s. 40A(2)(b), by treating Multi Commodity Exchange of India Ltd. (MCX) as related party and on account of the payee continuing to be on pay roll of both the companies i.e. MCX and IBMA.
5. That based on the facts and circumstances of the case, CIT(A) has erred in disallowing Rent Paid to MCX for Rs. 12228/- at 25% of Rs. 48912/-, on account of the observations made by special auditor stating that such payments were made to related parties specified u/s. 40A(2)(b), by treating payment to MCX as payment to related party.
M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 5 -
That based on the facts and circumstances of the case, CIT(A) has erred in disallowing Rent Payment made to ultimate holding company M/s. Financial Technology India Ltd. for Rs. 528000/- at 25% of Rs. 2640000-/- on account of non providing of comparable rent and on account of observation made by special auditors and disregarding the submissions and comparables provided by the appellant.
7. That based on the facts and circumstances of the case, CIT(A) has erred in disallowing 100% of Commission Payment for Rs. 709500/-, paid to NSEL on account of the procurement activity on the ground that such activities were not genuine, relying upon the observations made by special auditors and disregarding the submissions and evidences provided by the appellant
8. That based on the facts and circumstances of the case, CIT(A) has erred in disallowing the claim of loss on Hedging Activity for Rs. 8180340/- to be set off against other income on account of transactions carried out as in genuine and relying upon the observations made by special auditors that hedging activity was more than stock in hand and had further erred in not allowing the genuine claim of deduction u/s. 43(5)(a) of the Act.
9. That based on the facts and circumstances of the case, both the Assessing Officer and CIT(A) have erred in wholly relying upon the observations made by special auditors appointed by Assessing Officer u/s. 142(2A) of the Act, without carrying out any independent verification M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 6 -
and without taking into account the evidence and submissions made by the appellant from time to time.
10. That based on the facts and circumstances of the case, CIT(A) has erred in ignoring the Ground No. 16 of not allowing proper and sufficient opportunity of being heard.
B.The additional grounds of appeal filed are as under:
1. On facts and circumstances of the case, the Ld AO has erred in making reference for special audit u/s 142(2A) of the Income Tax Act without forming an opinion based on objective consideration having regard to the nature and complexity of the accounts of the appellant and the interests of the Revenue.
2. On facts and circumstances of the case, The Ld AO has also erred in making reference u/s 142(2A) of the Income Tax Act without disposing of the objections filed by the appellant.
Request for admission
The above referred Additional Grounds were neither taken before the Ld CIT(A) nor before the Ld AO & hence, it's taken before the Hon'ble Bench for the First Time. The said ground goes to the root of the issues involved. A prayer is therefore made to entertain the above ground No.1 apart from the grounds raised in Form 36 in appeal before your Honours. In this regards, reliance is also M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 7 -
placed on the Hon'ble Bombay High Court decision in case of CIT Vs Pruthvi Brokers & Shareholders, reported in 349 ITR 336 2. The brief facts of the case are that the assessee company is an Institutional Trading and Clearing (ITC) Member of National Spot Exchange Ltd (NSEL). The assessee has filed the return of income for the A.Y 2011-12 on 22.09.2011 disclosing total income of Rs.24,50,171/- and the return of income was processed u/s 143(1) of the Act. Subsequently the assessee has filed revised return of income on 30.03.2013 for claim of additional TDS Credit. Subsequently the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act was issued. In compliance to the notices, the Ld.AR of the assessee appeared from time to time and filed the details and the case was discussed. Whereas, due to volume of transactions and complexity of accounts, doubts about the correctness, multiplicity of transactions, interest of revenue.The Assessing officer(A.O.) with the previous approval of CIT-8 Mumbai has directed the assessee company to get books of accounts audited under the provisions of Sec. 142(2A) of the Act (Special Audit) and the M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 8 - reasonable opportunity of being heard was provided to the assesssee by the A,O. Accordingly the assessee vide its letter submitted the report of special auditor M/s SGCO & Co in Form No. 6B to the A.O. office. The audit report dealt on the facts, basis and terms referred at Para 5 to 8 of the assessment order and the issues are emerged out of the Special Audit report.
The A.O. found that the assessee company in the profit and loss account has disclosed an income of Rs. 3crores from agricultural produce procurement activity and the assessee was called to explain the nature of transactions. Incompliance, the assessee has submitted explanations. Whereas the total volume of transactions are more than the disclosures and further the entire exercise is market building activity resulting in liquidity creation and the A.O has dealt at para9.4 to 9.14 of the order and observed that no proper details of transactions were produced and treated the receipt of Rs.3crores as income under the provisions of section 68 of the Act.(ii)the AO found that the assessee has paid transaction charges of Rs.7,15,78,486/- and the assessee was asked to M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 9 - explain the nature of charges and details.The transactions charges were paid to NSEL for various services rendered. The A.O dealt on these facts and the total volume of transactions and the amount of transactions charges paid by the assessee to NSEL and found that the payment of Rs.1,41,84,446/- as transaction charges on artificial turnover is not incurred wholly and exclusively for the purpose of business and disallowed the claim.
4.(iii) the AO found that the assessee has debited storage charges of Rs.9,67,197,/- and the assessee has filed the submission referred at Para 11.2 and 11.3 of the order but the assessee could not produce the details and made the disallowance of storage expenses.(iv) the assessee has paid lease line charges of Rs.1,31,750/- since the assessee could not produce the bills, invoices raised by NSEL and hence the claim of the assessee was not allowed.(v)the assessee has claimed deputation charges in the profit and loss account pertaining to the payments to staff and the persons who are involved/ deployed by NSEL and the assessee could not prove the nature of deputation charges and hence addition of M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 10 - Rs.33,45,410/- made by the A.O. (vi) the AO has made addition of 25% of rent paid to MCX as the transactions are not at Arm’s length Rs.12,228/-. Further the assessee has paid rent to FTIL and the AO found that the assessee has furnished only the report “Mumbai office market overview” and the claims are not supported with the material evidences, hence disallowed the payments to the extent@ 25% of total rent which worked out of Rs.5,28,000/-.
(vii) the assessee has paid commission to NSEL of Rs. 7,09,500/- for procurement activity. The assessee was called to furnish the details, but there is no clarity on the submissions, hence the A.O observed that the commission payments are not for the purpose of business and disallowed of Rs.7,09,500/-.(viii) the assessee has claimed a loss of Rs.81,80,340/- as business loss, the assessee was called to furnish the details in the hedging activity and the net loss in trading of derivatives. The assessee has filed the submissions and the A.O was not satisfied with the explanations as the proper material information was not filed and the hedging activities are more than the stock in hand and the A.O. has observed that the M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 11 - loss is in the nature of speculation loss and denied the claim of loss of Rs. 81,80,340/-.(ix)the last disputed issue, that the Assessee has made investments in the dividend yielding financial instruments and no disallowance of expenditure relating to earning the exempt income on the investments was made and the A.O invoked the provisions of section 14A r.w.r 8D of the I T rules and worked out the disallowance of Rs. 86,652/-. Finally the AO has assessed the total income of Rs.3,29,75,260/- and passed the order u/s 143(3) of the Act dated 14.11.2014.
6. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the appellate authority considered the grounds of appeal, statement of facts, submissions of the assessee and findings of the AO and special audit report and has confirmed the action of the A.O in disallowing the claim of transaction charges, storage charges, deputation charges, rent paid to MCX&FTIL, commission payment to NSEL, Hedging charges and income from procurement activities U/sec68 of the Act as they are not properly supported with the evidences and M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 12 - explanations and the CIT(A) has granted partial relief in the other grounds of appeal and partly allowed the assessee appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Hon’ble Tribunal. At the time of hearing, none appeared on behalf of the assessee.
We heard the Ld.DR submissions and perused the material on record. The CIT(A) has consider the facts and transactions of the assessee and observed that the AO has gave a categorical finding on the disputes and the assessee could not substantiate before the authorities with complete information. We find even before the Honble tribunal, the assessee could not substantiate with the requisite details. We are of the opinion that the assessee should not suffer for the lapses and there could be various reasons and circumstances for non submission of details. We considering the principles of natural justice shall provide one more opportunity of hearing to the assessee to substantiate the case along with evidences and information. Accordingly, we set aside the order of the CIT(A) and restore the entire disputed issues to the file of the CIT(A) to adjudicate afresh M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 13 - and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of appeal and allow the grounds of appeal of the assessee for statistical purposes.
The additional grounds of appeal
are filed as referred at page
2. Para B challenging the action of the Asssessing Officer for making reference for special Audit U/sec142(2A) of the Act and non disposal of the objections filed by the assessee. On perusal of request for admission of additional grounds of appeal, which are filed before the Honble Tribunal for the first time, it was noticed that the additional grounds were not filed in accordance with the provisions of law. The proceedings before the Honble Tribunal are quasi judicial proceedings and governed by the Income Tax (Appellate Tribunal) Rules 1963. Whereas, the Form No.36 filed by the assessee is accompanied with the grounds of appeal and is signed by the whole time director &CEO of the assessee company as per ITAT rules and provisions of section 140 of the Income Tax Act 1961. Whereas the additional grounds of appeal filed in the hearing proceedings are signed by the M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 14 - authorized representative. The additional grounds of appeal raised by the assessee should also be signed as per the provisions discussed above. Accordingly, the request for admission of additional grounds of appeal is rejected. Since these grounds of appeal are raised for the first time before the Honble Tribunal and there are no findings and observations of the CIT(A),which goes to the roots of the case, hence to meet the ends of justice, we shall provide one more opportunity to the assessee to raise the additional grounds of appeal duly signed in accordance with the prescribed rules before the CIT(A) and cooperate in submitting the information expeditiously for the early disposal of the appeal.
In the result, the appeal filed by the assessee is treated as allowed for statistical purpose.
ITA.NO.2354/M/2018--A.Y.2010-11
As the facts and circumstances and the grounds of appeal
no 1,2 & 3 in this appeal are identical to grounds of appeal in for A.Y.2011
12. (except the variance in figures). Therefore, the decision rendered in above paragraph M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 15 - no. 7 would apply mutatis mutandis for this appeal . In respect of additional grounds of appeal raised for the first time before the Honble Tribunal challenging the order passed by the assessing officer U/sec143(3)r.w.s147 of the Act without disposing of the objections filed by the assessee. The decision rendered in Para 8 discussed above with the similar directions shall apply and restore the disputed issues to the file of the CIT(A) and we allow the grounds of appeal filed by the assessee for statistical purpose.
ITA.NO.2356/M/2018--A.Y.2012-13
As the facts and circumstances and the grounds of appeal
no 1,2,3,4,5, in this appeal are identical to grounds of appeal in for A.Y.2011
12. (except the variance in figures). Therefore, the decision rendered in above paragraph no. 7 would apply mutatis mutandis for this appeal. Whereas in the present appeal, the ground of appeal no 6 pertains to action of the CIT(A) in confirming the disallowance of gratuity for non furnishing the details by the assessee and the ground of appeal no 7 pertains to addition of nonaccrual of income by the M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 16 - A.O. Whereas, even before us no evidence was produced supporting the claim by the assessee. In respect of additional grounds of appeal raised for the first time before the Honble Tribunal challenging the order passed by the assessing officer U/sec143(3) of the Act without disposing of the objections filed by the assessee on reference to special audit U/sec142(2A) of the Act by the A,O. The decision rendered in Para 8 discussed above with the similar directions shall apply and restore the disputed issues to the file of the CIT(A)and we allow the grounds of appeal filed by the assessee for statistical purpose.
ITA.NO.2338/M/2018--A.Y.2013-14
As the facts, circumstances and the grounds of appeal
no 1,2,3,4, in this appeal are identical to grounds of appeal in for A.Y.2011-12 (except the variance in figures). Therefore, the decision rendered in above paragraph no. 7 would apply mutatis mutandis for this appeal. Whereas the ground of appeal no 5 pertains to addition of nonaccrual of income by the A.O. even before us no evidence was produced supporting the M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 17 - claim by the assessee and accordingly restore the disputed issues to the file of the CIT(A) with similar directions and we allow the grounds of appeal filed by the assessee for statistical purpose. ITA.NO.2988/M/2018--A.Y.2013-14(Revenue appeal)
13. Since the assessee appeal as discussed in the above Para 12 is restored to the file of the CIT(A), hence considering the facts and circumstances in the revenue appeal, we find it appropriate to restore the issues in the revenue appeal also to the file of CIT(A) and we allow the grounds of appeal filed by the revenue for statistical purpose.
ITA.NO.2339/M/2018--A.Y.2014-15
As the facts and circumstances and the grounds of appeal
no 1,2,3, in this appeal are identical to grounds of appeal in for A.Y.2011
12. (except the variance in figures). Therefore, the decision rendered in above paragraph no. 7 would apply mutatis mutandis for this appeal and restore the disputed issues to the file of the CIT(A)
M/s Indian BullionMarkets Associations Ltd., Mumbai. ITA.no2354,2356,2338,2355,2339&2988/Mum/2018. - 18 - with similar directions and we allow the grounds of appeal filed by the assessee for statistical purpose.
In the result, the five appeals filed by the assessee and one appeal filed by the revenue are treated as allowed for statistical purposes.
Order pronounced in the open court on 27.02.2023. Sd/- Sd/- (BASKARAN BR) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 27.02.2023 KRK, PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / The CIT(A) आयकर आयु�त(अपील) / Concerned CIT 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Mumbai 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//()
( Asst. Registrar) ITAT, Mumbai