DCIT, CENT. CIR-2(2), KOLKATA, KOLKATA vs. M/S RAMPURIA INDUSTRIES AND INVESTMENTS LIMITED, KOLKATA

आयकर अपीलीय अधिकरण कोलकाता 'बी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA श्री राजपाल यादव, उपाध्यक्ष (कोलकाता क्षेत्र) एवं डॉ. मनीष बोरड, लेखा सदस्य के समक्ष Before SRI RAJPAL YADAV, VICE PRESIDENT & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 1961/KOL/2017 Assessment Year: 2012-2013 DCIT, Central Circle- 2(2), Kolkata...........................Appellant Vs. M/s. Rampuria Industries and Investments Limited……………………………………….Respondent [PAN: AABCR 6319 P] Appearances by: Sh. P.P Barman, Addl. CIT, appeared on behalf of the Revenue. Sh. Soumitra Choudhury, Adv., appeared on behalf of the Assessee. Date of concluding the hearing : February 8th, 2023 Date of pronouncing the order : March 28th, 2023 ORDER Per Manish Borad, Accountant Member: This appeal filed by the Revenue pertaining to the Assessment Year (in short “AY”) 2012-2013 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the

I.T.A. No.: 1961/KOL/2017 Assessment Year: 2012-2013 M/s. Rampuria Industries and Investments Limited. “Act”) by ld. Commissioner of Income Tax (Appeal)-12, Kolkata [in short “ld. CIT(A)”] dated 16.05.2017 arising out of the Assessment Order framed u/s 143(3) of the Act dated 28.03.2015. 2. The Revenue is in appeal before this Tribunal raising the following grounds: “(1) That on the fact and in the circumstance of the case and under law Ld. CIT(A) has erred in deleting the addition of Rs. 2,62,58,857/- , made on account of disallowing the net loss on foreign currency transaction without examining the entire facts and circumstances of claim of such loss by the assessee continuously every year, as discussed by the AO in the Assessment Order and without looking into the fact that the loss claimed by the assessee on account of foreign currency transaction, does not match with the loss as computed on the basis of data provided by MCX Stock Exchange Ltd. (2) That the department craves leave to add, alter or modify any grounds of appeal in the course of Appellate proceedings.” 3. Brief facts of the case as culled out from the records are that the assessee is a limited company engaged in the business as trader in share and service provider. NIL income declared in the return filed for AY 2012-13 on 30.09.2012. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Ld. AO noticed that in the profit and loss account the assessee has claimed a net loss on foreign currency transactions at Rs. 2,62,58,847/-. Ld. AO initiated necessary inquiry but was only able to verify the sale transactions. So far as the purchase transactions are concerned the broker through which these transactions were carried out could not be traced. Ld. AO also noticed that the assessee is incurring such type of loss on foreign currency derivatives transactions in the past. Even though

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I.T.A. No.: 1961/KOL/2017 Assessment Year: 2012-2013 M/s. Rampuria Industries and Investments Limited. the assessee was incurring losses again and again but in spite of that it kept on giving the funds to the broker and landed up into a huge loss of Rs. 2,62,58,847/-. Ld. AO was of the view that the alleged loss is bogus and accommodation entry arranged by the assessee to reduce the tax liability and accordingly disallowed the said claim. Disallowance u/s 14A of the Act was also made at Rs. 17,328/-. Income assessed at Rs. 5,21,45,930/-. 4. Aggrieved, the assessee preferred appeal before ld. CIT(A) challenging the disallowance of foreign currency derivatives transactions loss of Rs. 2,62,58,847/- carried out through recognized stock exchange namely MCX and was able to succeed. 5. Aggrieved, the Revenue is now in appeal before this Tribunal. Ld. D/R vehemently argued supporting the order of ld. AO and submitted that the said loss is bogus. The broker through whom such transactions were carried out cannot be located and the assessee has not filed complete details to verify the sale transactions. 6. On the other hand, ld. Counsel for the assessee reiterated the submissions made before ld. CIT(A), relied heavily on the finding of ld. CIT(A) who gave reference to various documents in the paperbook containing 196 pages and relied on the following decisions: “1. ITR Acknowledgement, Computation of Income and Final Accounts for the A.Y.: 2012-13 2. Ledger Account of the assessee in the books of Geometry Vanijya (P) Ltd 3. Copies of difference bills raised by the broker

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I.T.A. No.: 1961/KOL/2017 Assessment Year: 2012-2013 M/s. Rampuria Industries and Investments Limited. 4. Sample copies of Contract Notes 5. Details of Contracts and Derivatives trading profit & loss 6. Annexures to Assessment Order 7. Written Submissions dated 26.03.15 filed before AO And 1. Rampuria Industries & Investments Ltd. vs DCIT, Central Circle- 2(2) Kolkata. [Kolkata ITAT] MA No.- 12/KOl/2022 dt. 24.11.2022. 2. Rampuria Industries & Investments Ltd. vs DCIT, Cir- 7(2) Kolkata. [Kolkata ITAT] I.T.A. No. 1891/Kol/2018 dt.22.11.2019. 3. A.C.I.T, Cir-12(2) vs. M/s. Tirupati Awas P. Ltd [Kolkata ITAT] I.T.A. No. 1560/Kol/2016 dt. 28.03.2018. 4. M/s. Ratnabali vs. ITO Ward- 12 (3). Kolkata. [Kolkata ITAT] I.T.A. No. 191/KO1/2015 dt. 16.06.2017 5. Ana Vincom Pvt. Ltd. vs. ITO Ward- 7(1) Kolkata. [Kolkata ITAT] I.T.A. No. 1449/Kol/2018 dt. 23.07.2019. 6. Riddhi Siddhi Commercial Pvt. Ltd. vs. ITO Ward- 4(1) Kolkata. [Kolkata ITAT] I.T.A. No. 1586/Kol/2018 dt. 14.11.2018 7. S.R.Enterprises vs. ACIT, Cir- 28, Kolkata. [Kolkata ITAT] I.T.A. No. 1932/Kol/2018 dt. 19.06.2019 8. M/s. Vivek Bhaia vs. ITO Ward- 36(4) Kolkata. [Kolkata ITAT] I.T.A. No.2295/Kol/2018 dt. 15.05.2019 9. Cimsys Research India Pvt. vs. ITO Ward- 8(1) Kolkata. [Kolkata ITAT] I.T.A. No. 1435/Kol/2018 dt. 26.02.2020” 7. We have heard rival contentions and perused the records placed before us. Revenue is aggrieved with the finding of ld. CIT(A) deleting the disallowance of foreign exchange fluctuation derivative loss of Rs. 2,62,58,847/-. We notice that ld. AO made the said disallowance observing as follows: “Net loss on Foreign Currency Transaction: In the P&L A/c. the assessee has claimed a net loss on Foreign currency transaction amounting to Rs.26,258,847/-. The assessee claims to have traded through the broker M/s Geomerty Vanijya Pvt Ltd during the year. The broker was not traceable in the given address by the Departmental Inspector. The caretaker of the said building had certified in writing that that there was no such assessee during the past ten years in the said premises. The A/R was confronted with the findings. The A/R stated that there may be some mistake on the part

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I.T.A. No.: 1961/KOL/2017 Assessment Year: 2012-2013 M/s. Rampuria Industries and Investments Limited. of the care taker. Thus, he assured to produce the current address of the Broker on 20/3/2015. However, till date there is no compliance. Reference was made to MCS-SX, Mumbai to verify the loss. The details furnished were test checked with the contract notes supplied by the assessee. The sale transaction on those dates were verifiable. However, there were buy transactions which could not be verified in absence of complete contract notes from the assessee. Further, the assessee has a history of taking bogus loss on foreign currency derivatives. In the AY 2011-12, its case was reopened on the basis of deposition from the Director of M/s Marigold Vanijya Pvt. Ltd. amounting to Rs.26,68,128/-. The assessee has again in the assessment year 2010 - 11 has taken bogus entry of loss amounting to Rs.1,45,42,614/- through client code modification, as reported again by the Investigation Wing, West Bengal Region. Again on going through the assessee's ledger in the books of the broker, as provided by the A/R it was found that the broker had incurred continuous loss most of the time and yet again went on to carry out the trading in spite of mounting losses. The assessee's payment was in most of the time quite delayed. The point to note here is that the assessee has not been working with the same broker year after year and always choosing a new broker every year. It is intriguing to note that even a new broker is ready to carry on the trading on behalf of the assessee without margin money and against mounting losses. The total purchase on 26/12/2011 was Rs.56,979,560/- and sale on the same date for number of transactions 1077 each was Rs.56,978,877/-. The gross gain from the transactions on 26/12/2011 was Rs.683/-. This is excluding brokerage, CTT and service tax. Therefore, it is elementary that there should be a loss on the whole on 26/12/2011. However, from the ledger of the assessee on the books of the broker it is seen that there was a gain of Rs.115,530.95. Therefore, it is evident that the loss on foreign currency is bogus and fabricated (extracts of transaction on 26/12/2011 as regards Buy and Sale are enclosed in two pages along with ledger of the assessee company in the books of the broker as part of order). No buy details for 26/12/2011 was provided by the A/R. Since, the assessee has failed to provide complete contract notes with regard to buy and sale details for the verification could not be done.

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I.T.A. No.: 1961/KOL/2017 Assessment Year: 2012-2013 M/s. Rampuria Industries and Investments Limited. In the above background the contention of the A/R that the losses is genuine cannot be accepted. Hence, Rs. 26,258,847/- is disallowed being bogus and added back. Penalty u/s. 271(1)(c) separately initiated for concealment of income. [Addition: Rs. 2,62,58,847/-]” 8. Further, we notice that ld. CIT(A) decided in favour of the assessee observing as follows:

“I have considered the facts of the case and the submissions of the appellant. This ground of appeal of the appellant is directed against the action of A.O. in disallowing the loss of Rs. 2,62,58,847/- incurred by the assessee during the A.Y. 2012-13 while dealing in currency derivatives. I find that in the assessment order that the A. O. Has made the addition of Rs. 2,62,58,847/- on account of Net Loss in Foreign Currency Transaction mainly on the ground that loss as per contracts of the broker does not match with the ledger of the broker. The broker is a registered broker of the Currency Exchange with a proper business address and is an Income Tax assessee having PAN. I have also carefully gone through the contract notes & ledger of the broker and I am of the opinion that the A.O. has totally ignored the accounting practice followed by the brokers which is approved by the respective Exchanges and thereby arrived at wrong conclusion in the matter. The A.O. has ignored the fact that ledger entries are made by the broker at the end of a day on day-to-day basis and on the basis of brought forward and carry forward positions as well as any new sauda or transaction entered by the client on that day, at closing market prices. Therefore, there can be an entry in the ledger on any particular day even if no contract note is generated on that day, that is to say, no transaction is done on behalf of his client on that day, because there may be carried forward positions which have to be accounted for at the end of the day at closing prices. This accounting practice is followed not only by all the brokers of Foreign Currency Exchange but also by all the brokers of Commodity and Stock Exchanges like MCX, NSE, and BSE as well. After going through the submissions, various evidences & documents filed by the appellant both before me as well as before the A.O. during the course of assessment I find that there is no discrepancy or mismatch in contract notes and ledger of the broker. All the

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I.T.A. No.: 1961/KOL/2017 Assessment Year: 2012-2013 M/s. Rampuria Industries and Investments Limited. transactions are supported by respective contract notes and proper entries are made to the ledger. Therefore, I direct the A.O. to allow the loss of Rs 2,62,58,847/- on account of Net Loss on Foreign Currency Transactions as claimed by the Appellant and delete the addition of Rs. 2,62,58,847/- made by him on this account.” 9. On going through the above finding of both the lower authorities and further on examining the details filed by the assessee we took note of the ledger account placed at page 15 to 16 of the paperbook which has been issued by the broker M/s. Geometry Vanijya Pvt. Ltd. Perusal of this ledger account shows that starting from 08.11.2011 to 31.03.2012 except at the close of the year i.e. on 30.03.2012 throughout the year the assessee has only given cheques and has incurred the losses. There is not a single instance when the assessee has been able to receive a cheque of profit. Though it is not mandatory that a person always earns profit and may end up into losses but looking to the magnitude of amounts it goes beyond human probability to accept this fact of suffering of huge losses by the assessee and still moving ahead to give more funds to the broker to carry out the transactions. Further, when we made the efforts to verify the transactions in the ledger account with the contract notes and the bills, we found that either in some case the MCX documents are missing and in some cases the broker contract notes are missing. The situation was prevalent at the time of assessment proceedings also when ld. AO made all necessary efforts to examine the transactions but after calling the information from MCX only the sale transactions were verifiable. The loss for the year can be factually verified only if the figures of both the purchases and sales

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I.T.A. No.: 1961/KOL/2017 Assessment Year: 2012-2013 M/s. Rampuria Industries and Investments Limited. are verifiable. We are conscious of the fact that this appeal is of 2017 and the matter pertains to AY 2012-13 but the fact is that the broker who carried out these transactions was not traceable at the given address when verified by the Departmental Inspector and even the caretaker of the building has certified in writing that there was no such assessee (i.e. the broker) during the past 10 years in the said premises. Though opportunity was given to the assessee to produce the broker but it could not be complied. The suspicion about the genuineness of the transaction arises because in the preceding year also similar type of loss has been claimed. In the audited financial statement the assessee has shown profit of Rs. 53,17,609/- (after claiming the alleged bogus loss). In the preceding year also such bogus loss has been claimed. One cannot ignore the possibility that the alleged losses are bogus in nature. However, in the interest of justice the assessee deserves an opportunity to bring forth all the necessary documents i.e. the contract notes, bills, sauda and evidences to confirm the purchases and sales, genuineness of the transactions so as to arrive at a conclusion that whether the alleged loss is genuine or bogus in nature. 10. Considering the fact that transactions are voluminous and involves huge revenue we deem it proper to restore the issue under appeal to ld. AO to carry out necessary verification, examination and if required further investigation to verify the genuineness of the alleged loss claimed by the assessee from foreign currency derivative transactions. Needless to mention that proper opportunity of being heard should be provided to the assessee. The

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I.T.A. No.: 1961/KOL/2017 Assessment Year: 2012-2013 M/s. Rampuria Industries and Investments Limited. assessee is also directed to remain vigilant and file necessary documents, if considered necessary, in support of its grounds of appeal and should not take adjournment, unless otherwise required for reasonable cause. 11. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Kolkata, the 28th March, 2023 Sd/- Sd/- [Rajpal Yadav] [Manish Borad] Vice President Accountant Member Dated: 28.03.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. DCIT, Central Circle- 2(2), Kolkata. 2. M/s. Rampuria Industries and Investments Limited, P 10/2, Hungerford Street, Kolkata-700 017. 3. CIT(A)-12, Kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order

Assistant Registrar ITAT, Kolkata Benches Kolkata

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