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Income Tax Appellate Tribunal, PUNE BENCH “C”, PUNE
Before: SHRI R.S. SYAL & SHRI S.S.VISWANETHRA RAVI
PER R.S.SYAL, VP : These two appeals by the assessee are directed against the final assessment orders - both dated 30-01-2023 - passed by the Assessing Officer (AO) u/s.147 r.w.s.144C(13) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment years 2013-14 & 2014-15. Since some of the issues raised in these appeals are common, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience.
A.Y. 2013-14 :
Ground No.1 challenging the initiation of re-assessment proceedings, was not pressed by the ld. AR. The same is, therefore, dismissed.
3. The second ground is against the addition of Rs.3,47,760/- made by the AO in Paddy Basmati account.
Succinctly, the facts of the case are that the assessee is a non- resident, who filed his return declaring total income at Rs.10,60,310/-. It transpired that the assessee had not offered profit earned on certain transactions made on National Spot Exchange Ltd. (NSEL). On this basis, notice u/s.148 was issued.
Compliance was made by the assessee. During the course of assessment proceedings, the AO called for the information from NSEL and the assessee’s broker, namely, Anand Rathi Commodities Ltd. u/s.133(6) of the Act, which divulged that the assessee had not properly recorded transactions in respect of purchase and sale of Paddy, routed by the broker through his Sauda Register. There were two unrecorded Paddy Buy transactions as per his Sauda Register, namely, of Rs.1,23,66,000/- on 19-03-2013 with quantity of 7200 and of Rs.34,44,000/- on 11-03-2013 with quantity of 2400; and corresponding unrecorded Paddy Sell transactions of the same quantity on same dates for Rs.1,26,41,400/- and Rs.35,16,360/- respectively. On being called upon to explain as to why profit from these sets of transactions, totalling to Rs.3,47,760/-, was not recorded in the books, the assessee submitted that the profit was actually recorded in the subsequent year. However, the assessee failed to disclose the depiction of such profit in the subsequent year. The same position prevailed before the Dispute Resolution Panel (DRP) as well.
There also the assessee could not substantiate his claim that the profit of Rs.3,47,760/- was shown in the subsequent year. This led to the passing of the final assessment order making the addition to this extent. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.
Having heard the rival submissions and gone through the relevant material on record, it is seen that Sauda Summary Report of Anand Rathi Commodities Ltd. showed two sets of transactions of Paddy Buy and Paddy Sell on 19-03-2013 and 11-03-2013, which were not recorded in the books of account for the year under consideration. The assessee kept raising a claim before the AO as well as the DRP that these transactions were recorded in the subsequent year. However, the assessee failed to substantiate his contention. Neither any material could be placed before the AO/DRP to demonstrate the booking of profit from such transactions in the immediately succeeding year, nor the position has improved any further before the Tribunal. In view of the admitted facts that the transactions did take place, and profit from them was neither recorded in the year under consideration nor the next year, we hold that the AO was justified in making the addition. The ground is, therefore, dismissed.
The next issue is against the addition of Rs.1,35,840/- made by the AO. The facts apropos this ground are that a perusal of statement of Anand Rathi Commodities Ltd., Multi Commodity Exchange of India Limited (MCDX), disclosed that the assessee had the transaction of Buy GOLDM worth Rs.94,96,186/- with quantity of 3200 and Sell GOLDM of the same quantity for Rs.96,91,360/-. The assessee, in his Profit and Loss account, had shown the purchase transaction of GOLDM at Rs.47,88,186/- and sale transaction of GOLDM at Rs.48,47,520/-, giving profit of Rs.59,334/-. The AO observed that the assessee additionally purchased Gold for Rs.47,08,000/-, which was sold for Rs.48,47,520/-. Such transactions were found not to have been recorded. He, therefore, computed profit from such unrecorded transactions at Rs.1,35,840/- and proposed the addition in the draft order. No succour was provided by the DRP. This resulted in the addition in the final assessment order.
Having heard the rival submissions and gone through the relevant material on record, it is seen that the assessee declared profit of Rs.59,334/- from the Buy and Sell transactions of Gold.
The AO, apart from considering these transactions, also noted that another set of transactions took place, profit from which was not disclosed. We have gone through Contract note of Anand Rathi Commodities Ltd. with trade date 01-02-2013 for purchase of 3200 quantity of GOLDM by 05-02-2013 and sale of such quantity by 05-03-2013. The purchase transaction got actually concluded on 04-02-2013. A copy of Contract-cum-bill dt. 04-02-2013 has been placed at page 37 of the paper book with value of Rs.48,47,160/-.
Similarly, the sale transaction got actually concluded on 01-03-2013. A copy of Contract-cum-bill dated 01.03.2013 has been placed at page 38 of the paper book with value of Rs.47,04,514/-. We have also gone through the ledger of transactions of Anand Rathi Commodities Ltd. with the assessee, whose copy has been placed at page 25 onwards of the paper book, showing Buy Sauda date as 01-02-2013 and the actual transactions date of sale and purchase, namely, 01-03-2013 and 04-02-2013. In fact, there was only one set of transactions of GOLDM purchase and sale, but the AO inadvertently additionally took the dates of Contract-cum-bills of purchase and sale as separate and distinct transactions. The addition so made by the AO is, thus, directed to be deleted.
The only other ground is against the disallowance of expenses of Rs.5,45,693/- out of total expenses incurred at Rs.6,82,453/-. The assessee debited Rs.6,82,453/- as expenses in his Profit and loss account under different heads, such as, Insurance, Car expenses, Bank charges, Accountant salary, Driver salary, Car fuel, Travelling, Printing and Depreciation etc. The AO held that since the business was transacted only through Anand Rathi Commodities Ltd. and hence, the assessee was not required to incur any further expenditure in relation thereto. He, therefore, disallowed 80% of the expenses by allowing deduction only at 20%, against which the assessee has approached the Tribunal.
Having heard both the sides and gone through the relevant material on record, it is seen as an admitted position that the assessee did carry on the business in the year under consideration.
Even though Anand Rathi Commodities Ltd was acting on behalf of the assessee, still the assessee also was required to incur usual necessary expenses to carry on his business. The expenses claimed are in the nature of day-to-day expenses, such as, Accountant salary, Driver Salary, Car expenses, Travelling and Depreciation etc. Considering the facts in entirety, we are of the considered opinion that it would be just and fair if the disallowance is restricted to 20% towards personal element in expenses and unverified expenses. The assessee gets the relief accordingly.
A.Y. 2014-15 :
The first ground regarding initiation of re-assessment proceedings was not pressed by the ld. AR. The same is, therefore, dismissed.
The second ground is against the addition of profit of Rs.1,72,844/- on the transaction in Paddy Basmati. From the Sauda report received from Anand Rathi Commodities Ltd., the AO observed that there was one transaction of Buy Paddy Basmati of Rs.1,26,67,200/- and the corresponding Sell Paddy of Rs.1,28,97,750/-, with differential amount of Rs.2,30,550/-. After considering the amount of expenses, the AO worked out the amount of profit of Rs.1,72,844/-. On being called upon to explain as to why this transaction was not offered for taxation, the assessee submitted that the transaction of sale was terminated and was not honoured by NSEL. Information was called for from Anand Rathi Commodities Ltd. u/s.133(6), in response to which the Sauda Report was produced recording the Sauda date at 18-07-2013. The AO computed profit at Rs.1,72,844/- and proposed the addition thereof in the draft order. No relief was allowed by the DRP, which led to the making of addition to this extent in the final assessment order.
We have heard both the sides and gone through the relevant material on record. It is seen that the AO once again went through Sauda dates to compute profit from the transaction which was not offered for taxation. As against that, we have perused the statement of the assessee’s account in the books of Anand Rathi Commodities Ltd. This statement shows the Buy date of 18-07-2013 with Buy amount at Rs.1,26,67,200/-. Before the transaction could be actually finalised and delivery obtained, scam in NSEL came to light and all the relevant accounts were freezed.
Statement of account of Anand Rathi Commodities Ltd. with the Report dt. of 17-03-2022, copy placed at page 25 onwards of the paper book, records only the sauda date and not any corresponding sale transaction. At the end of the statement, it has been mentioned that: “In view of National Spot Exchange Ltd. (NSEL), Circular No.NSEL/TRD/2013/065 dated July 31, 2013, NSEL has suspended & postponed the settlement of all one day forward contract & accordingly you have to receive around Rs.12,560,551.81 as on 31-03-2021 from NSEL after adjusting all transaction cost”. This shows that though the assessee made the payment for the purchase of Paddy but could not take the delivery as a sum of Rs.1.25 crore is still due from NSEL as per the above statement. On one hand, the assessee did not receive the delivery despite making payment for the purchase price, on the other, the AO computed profit from the presumed sale. We fail to appreciate that when the goods were not received in the first instance, where is the question of presuming the corresponding sale and then working out the profit therefrom. We, therefore, order to delete the addition.
The only other ground in this appeal is against the confirmation of disallowance of expenses at Rs.8,94,760/- out of total expenses incurred at Rs.11,18,451/-. Following his view for the preceding year, the AO made disallowance of expenses at 80%.
Facts being identical to the immediately preceding year 2013-14, following the reasoning given above, we restrict the disallowance to 20% of expenses instead of 80% made by the AO.
In the result, both the appeals are partly allowed. Order pronounced in the Open Court on 12th July, 2023.
Sd/- Sd/- (S.S.VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 12th July, 2023 Satish आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The Respondent; 2.
The DRP-3, Mumbai-1, DRP-3, Mumbai-2, DRP-3, Mumbai-3 िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “C” / DR 4. ‘C’, ITAT, Pune गाड� फाईल / Guard file 5. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
Date 1. Draft dictated on 12-07-2023 Sr.PS 2. Draft placed before author 12-07-2023 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *