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Income Tax Appellate Tribunal, JODHPUR BENCH,
Before: SHRI SANDEEP GOSAIN & SHRI MANOJ KUMAR AGGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH, JODHPUR BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER ITA No. 482/JODH/2018 (Assessment Year: 2012-13) A.C.I.T. Vs. M/s Manoj Kumar Vipin Kumar, Central Circle, 118, New Dhan Mandi, Bikaner. Bikaner. PAN No. AARFM 0027 E
Revenue by Shri A.S. Yadav, JCIT DR Assessee by Shri P.C. Parwal, CA Date of Hearing 05.11.2020 Date of Pronouncement 01/02/2021
O R D E R PER BENCH The present appeal has been filed by the Revenue against the order of the ld. CIT(A)-4, Jaipur dated 29/08/2018 for the A.Y. 2012-13, wherein the Revenue has raised following grounds of appeal:
“1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 2,43,59,629/- made by the AO on account of bogus business transaction with M/s Swift Tieup Pvt. Ltd. 2. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in stating that the assessee had given the details of storage of commodity and delivery of balance of commodity contrary to the fact that during the course of assessment proceedings statement u/s 131 was recorded of Sh.
2 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. Vipin Kumar, one of the partners of firm in which he was unable to give any satisfactory evidence and mode of transaction being carried out. 3. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in treating M/s Swift Tieup Pvt. Ltd. as genuine entity whereas during the course of assessment proceedings it was found that the sum of Rs. 75 lakhs received by the assesee was layered through various Kolkata bases paper/bogus companies before reaching to M/s Swift Tieup Pvt. Ltd.. Moreover, M/s Swift Tieup Pvt. Ltd. was not found functioning on given address. 4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 11,75,857/- made by the AO on account of disallowance of NCDEX/MCX loss.” 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
The brief facts of the case are that the the assessee is a partnership firm engaged in the business of trading in grains in his own account and also on Adat (commission). It also carried out hedging transaction in commodities in NCDEX/MCX. It filed the return of income declaring total income of Rs.79,98,920/- on 14.09.2012. During the year under consideration, it purchased 3048.30 quintals of gwar from various parties on account of M/s Swift Tie Up Pvt. Ltd., 2, Sir Hariram Goenka Street, 1st Floor, Kolkata on Adat. These purchases were made between 04.12.2011 to 30.12.2011. Out of these goods, 811.80 quintals were sold on its account on
3 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. 13.02.2012 and the remaining goods were delivered to the party between 20.02.2012 to 23.02.2012. The assesse charged rent, interest, brokerage and Adat of Rs. 5,86,612/- on this transaction and after receiving Rs. 75 lakhs due from the party by RTGS, delivered the remaining goods to it. The AO observed that as per the report of the Investigation Wing of Income Tax Department, Kolkata, various companies are engaged in providing accommodation entries and they are not doing any business activities. One Shri Devesh Upadhyaya, a known entry operator of Kolkata, admitted that he is managing various paper/bogus/shell companies. It is found that huge cash is deposited in M/s Jagadamba Trading, a proprietary concern of Narendra Nath Das who is not filing the income tax return. Out of that amount, Rs. 75 lakhs is received in the bank account of assessee through 15 companies in a period of 5 days. He therefore, based on the statement of Shri Devesh Upadhyaya and after recording the statement of Shri Vipin Kumar, partner of assessee firm, as reproduced at pages 11-13 of the order, held that transaction with M/s Swift Tie Up Pvt. Ltd., Kolkata is not genuine. The specific observation of the AO is at pages 14 & 15 of the order. The AO further extracted the report of SEBI at pages 16 to 24 of his order with reference to the irregularities in the Public Issue of Shares of Tijaria Poly Pipes Ltd. and Bhartiya Global Infomedia Ltd. dated 16.03.2013 and 08.08.2014 respectively where SEBI has restrained M/s Swift Tie Up Pvt.
4 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. Ltd. for dealing directly/indirectly in the shares & securities for 5 years to emphasize that M/s Swift Tie Up Pvt. Ltd. is engaged in providing accommodation entries. On the basis of above observations, AO at pages 24 & 25 at Para 15 of his order concluded that assessee purchased 3048.30 quintals of Gwar for Rs. 1,66,80,794/-. Out of it, 811.80 quintals is sold on 13.02.2012 to M/s Kundan Lal Om Prakash for Rs.97,29,423/- and the value of remaining Gwar of 2236.50 quintals by taking the market rate at Rs.14,000/- per quintal amounts to Rs. 3,13,11,000/- and thus, assessee has earned net profit of Rs. 2,43,59,629/- (97,29,423 + 3,13,11,000 - 1,66,80,794). He relied upon the decision of Hon’ble Supreme Court in case of CIT vs. Durga Prasad More 82 ITR 540, Sumati Dayal vs. CIT 214 ITR 801, Mc. Dowells’ & Co. Ltd. vs. CTO 154 ITR 158 and the decision of Hon’ble Delhi / P&H High Court in case of CIT vs. Nova Promoters 18 Taxmann.com 217, CIT vs. Youth Construction Pvt. Ltd. 357 ITR 97 and Somnath Mani vs. CIT 306 ITR 414 to conclude that transaction with M/s Swift Tie Up Pvt. Ltd. is bogus and thus, made addition of Rs. 2,43,59,629/- to the income of assessee.
Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering submissions as well as material placed before him, given part relief to the assessee. Against the
5 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. said order of the ld. CIT(A), the Revenue has preferred present appeal before the ITAT.
Grounds No. 1 and 2 of the appeal are interrelated and interlinked and relate to challenging the order of the ld. CIT(A) in deleting the addition of Rs. 2,43,59,629/- on account of bogus business transaction with M/s Swift Tieup Pvt. Ltd..
The ld DR has relied on the order of the A.O. and submitted that the ld. CIT(A) has erred in deleting the addition made by the A.O. on account of bogus business transaction. He has further submitted that the ld. CIT(A) has also erred in stating that the assessee had given the details of storage of commodity and delivery of balance of commodity contrary to the fact that during the course of assessment proceedings statement u/s 131 was recorded of Sh. Vipin Kumar, one of the partners of firm in which he was unable to give any satisfactory evidence and mode of transaction being carried out.
On the contrary, the ld AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and has also relied upon the written submissions filed before the ITAT and the contents of the same are reproduced below:
6 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. 1. At the outset it is submitted that purchase of Gwar of 3048.30 quintals at Rs. 1,66,80,794/- and sale of Gwar for 811.80 quintals for Rs. 97,29,423/- is not disputed by the AO. These purchases and sales are on account of M/s Swift Tie Up Pvt. Ltd. on Adat basis for which it has charged rent, interest, brokerage and Adat of Rs.5,86,612/- from the party and included in its income. This income is also accepted and assessed by the AO. The transaction of Gwar carried out on behalf of M/s Swift Tie Up Pvt. Ltd. is further evidenced from the following documents:
i) Confirmation of M/s Swift Tie Up Pvt. Ltd. (PB 27) where they accepted the transaction and provided the PAN.
ii) Copy of bank statement of M/s Swift Tie Up Pvt. Ltd. (PB 28) from where they made payment of Rs.75 lakhs to the assessee on account of the amount due to them.
iii) Copy of income tax return of M/s Swift Tie Up Pvt. Ltd. for AY 2012-13 filed on 27.09.2012 (PB 29) and copy of financial accounts of the company (PB 30-44) from which it can be noted that it has declared revenue from operations at Rs. 39.14 crores (PB 36) which includes income from commodity market at Rs. 2.64 crores .
iv) Statement of Shri Vipin Kumar, partner of assessee firm, recorded on 22.12.2016 wherein reply to question nos. 9, 10, 12, 17 to 26, reproduced at pages 11-13 of the order, he has explained the entire transaction and how Shri Kamal Agrawal, Director of M/s Swift Tie Up Pvt. Ltd. has contacted him for purchase of Gwar, where the same was stored and how it is delivered to the representative of the Company.
7 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. 2. The AO has considered the transaction as bogus only on the basis of the report of Investigation Wing, Kolkata, statement of Shri Devesh Upadhyaya and the report of SEBI. In this connection, following facts are required to be considered:-
i) Shri Devesh Upadhyaya has nowhere stated that M/s Swift Tie Up Pvt. Ltd. is a non-genuine company or he has any link with this company.
ii) Neither Shri Devesh Upadhyaya nor any of the Directors of 15 Companies referred by the AO, have any interest directly / indirectly either as a shareholder or as Director or in any other manner whatsoever with M/s Swift Tie Up Pvt. Ltd. This fact is explained to the AO vide letter dated 19.12.2016 (PB 58-62) supported by the Certificate of Chartered Secretary (PB 63-64). This fact is not denied by the AO.
iii) Only because the Investigation Wing has drawn certain flow chart where from the bank account of Jagadamba Trading certain amount is transferred to Peacock Vintrade Pvt. Ltd. from where funds were transferred to various companies and finally an amount of Rs. 90 lakhs was transferred by Chitravali Barter Pvt. Ltd. to M/s Swift Tie Up Pvt. Ltd. on 13.02.2012, out of which it paid Rs. 75 lakhs to the assessee against the transaction which it had entered with the assessee, it cannot be assumed that the source of this amount is the amount deposited in the bank account of Jagdamba Trading, more particularly when there is no match of the amount flowing from the account of Jagadamba Trading to the account of M/s Swift Tie Up Pvt. Ltd. and then to the assessee.
iv) The copy of the report of Investigation Wing, Kolkata is not provided to the assessee and therefore, it is not ascertainable that on what basis the
8 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. various allegations have been made against the assessee in respect of the its transaction with M/s Swift Tie Up Pvt. Ltd.
v) The AO has not provided any opportunity to cross examine Shri Devesh Upadhyaya even when specifically requested vide letter dated 19.12.2016 (PB 58-62) nor provided the report of the Investigation Wing, Kolkata as to whether they have implicated the assessee in their report. Hence, only on the basis of such report, the genuine transaction of the assessee cannot be considered bogus.
vi) The assessee has given complete name, address and PAN of M/s Swift Tie Up Pvt. Ltd. However, the AO has not conducted any enquiry from it to verify the genuineness of the transaction.
vii) In the statement, Shri Vipin Kumar, partner of the assessee firm, has explained complete details of the transaction. He explained how he came into contact with Shri Kamal Agrawal, Director of M/s Swift Tie Up Pvt. Ltd. He also confirmed that the goods were delivered to the representative of M/s Swift Tie Up Pvt. Ltd. but how the company took these goods is of no concern of the assessee. The vouchers for delivery of goods were provided to the AO and therefore, only on assumptions and presumptions, the transaction cannot be held non-genuine.
viii) The report of SEBI where the name of M/s Swift Tie Up Pvt. Ltd. has been implicated in connection with the public issue has no relevance to the transaction under consideration. Further, even the SEBI vide its order dated 28.08.2014 (PB 65-66) has lifted the ban on M/s Swift Tie Up Pvt. Ltd. for selling the shares with the condition that sale proceeds of
9 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. the shares be deposited with SEBI in an interest bearing account. This proves that M/s Swift Tie Up Pvt. Ltd. is a genuine company.
It is a settled law that the transaction recorded in the books of accounts in the regular course of business is to be accepted as true and correct unless there is a strong evidence to rebut the same and the burden to proof that the transaction is not genuine is on the person who alleges so. This burden has to be discharged strictly by bringing on record legal evidence and not only by hearsay, suspicion, surmises and conjectures. In the present case, existence of M/s Swift Tie Up Pvt. Ltd. is not disputed. It has filed the return of income for AY 2012-13, confirmed the transaction, made payment by cheque, income of Rs.5,86,612 earned from this transaction by the assessee is declared in the return & assessed by the AO and therefore, without bringing any adverse evidence on record, simply on assumptions and presumptions, transaction with M/s Swift Tie Up Pvt. Ltd. cannot be considered as bogus. The various case laws relied by the AO are distinguishable on facts in as much as they are in relation to share capital and not in respect of amount received by the assessee against the purchase of goods on Adat. The burden to proof that a transaction is collusive/sham is on the person who alleges so and such burden has to be discharged by furnishing positive evidence and not on hypothetical assessment of the real motive of the assessee. In this connection decision of the Hon’ble Supreme Court in case of UOI Vs. Azadi Bachao Andolan 263 ITR 706 and Vodafone International Holdings B.V. Vs. UOI 341 ITR 1 may be referred which have distinguished the decision of McDowells & Co. vs. CTO 154 ITR 148.
It is submitted that the determination of income of Rs. 2,43,59,629/- made by the AO is hypothetical by assuming that assessee has sold 2236.50 quintals of Gwar on 13.02.2012 @ Rs. 14,000/- per quintal. There is no basis
10 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. how the rate of Rs. 14,000/- per quintal has been adopted when on this date itself, the assessee has sold Gwar to Kundan Lal Mohan Lal @ 11,985/- per quintal which is also admitted by the AO at para 14, page 24 of the order. Further there is no basis for the assumption that this quantity of Gwar is sold by the assessee ignoring that the same is delivered by the assessee to M/s Swift Tie Up Pvt. Ltd. after receiving the amount of Rs. 75 lakhs in full and final settlement of his account. The delivery of goods to M/s Swift Tie Up Pvt. Ltd. is evidenced by the delivery challan duly signed by the representative of the company. In fact assessee has kept 2,499 bags of Gwar in the warehouse of National Collateral Management Services Limited (NCMSL) between 07.12.2011 to 12.12.2011 and against the warehouse receipt it has taken advance from Punjab National Bank. NCMSL has kept these good in the warehouse of Rangoli Ceramics through Atul Agrocom India Pvt. Ltd. Punjab National Bank released these goods to the assessee vide letter dated 07.02.2012 (PB 70) and thereafter assessee was given the delivery form on 18.02.2012 by Atul Agrocom India Pvt. Ltd. for 2,499 bags having 2,477.90 quintals (PB 71). Out of these goods delivery was given to M/s Swift Tie Up Pvt. Ltd. between 20.02.2012 to 24.02.2012 of 2,229.60 quintals (PB 73- 76). Further, when the assessee has himself offered income of Rs. 5,86,612/- on this transaction which is accepted by the AO, then the AO again cannot consider the same as the own transaction of the assessee so as to presume hypothetical profit and make addition for the same.
In view of above, order of Ld. CIT(A) be upheld by dismissing the ground of department.
We have heard the ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us
11 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. and we have also gone through the orders passed by the revenue authorities. From perusal of the record, we found that the ld. CIT(A) has deleted the additions so made by the A.O. by observing as under:
“7. I have considered the facts of the case, gone through the assessment order and the submission of the appellant. The AO made the addition of ₹ 2,43,59,629/- on account of alleged profit earned on transaction of gwar purchased/sale by presuming that appellant sold the Gwar in the market instead of sale/transfer to M/s Swift Tie Up Private Limited.
It is seen that purchase of Gwar of 3048.30 quintals at ₹1,66,80,794/- and sale of Gwar for 811.80 quintals for ₹97,29,423/- is not disputed by the AO. These purchases and sales are on account of M/s Swift Tie Up Pvt. Ltd. on Adat basis for which it has charged rent, interest, brokerage and Adat of ₹5,86,612/- from the party and included in its income. This income is also accepted and assessed by the AO. The transaction of Gwar carried out on behalf of M/s Swift Tie Up Pvt. Ltd. is further evidenced from confirmation, bank statement and income tax return of M/s Swift Tie Up Pvt. Ltd., copy of bank statement of M/s Swift Tie Up Pvt. Ltd. Further statement of Shri Vipin Kumar, partner of appellant firm, recorded on 22.12.2016 wherein reply to question nos. 9, 10, 12, 17 to 26, reproduced at pages 11-13 of the order, he has explained the entire transaction and how Shri Kamal Agarwal, Director of M/s Swift Tie Up Pvt. Ltd. has contacted him for purchase of Gwar, where the same was stored and how it is delivered to the representative of the Company. All these evidences proves that the transaction were
12 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. carried out by the appellant on behalf of M/s Swift Tie Up Private Limited.
7.2 The AO has considered the transaction as bogus only on the basis of the report of Investigation Wing, Kolkata, statement of Shri Devesh Upadhyaya and the report of SEBI. However on perusal of the facts I found that Shri Devesh Upadhyaya has nowhere stated that M/s Swift Tie Up Pvt. Ltd. is a non-genuine company or he has any link with this company. Neither Shri Devesh Upadhyaya nor any of the Directors of 15 Companies referred by the AO, have any interest directly / indirectly either as a shareholder or as Director or in any other manner whatsoever with M/s Swift Tie Up Pvt. Ltd. This fact is explained to the AO also vide letter dated 19.12.2016 supported by the Certificate of Chartered Secretary. Only because the Investigation Wing has drawn certain flow chart where from the bank account of Jagadamba Trading certain amount is transferred to Peacock Vintrade Pvt. Ltd. from where funds were transferred to various companies and finally an amount of ₹ 90 Lakhs was transferred by Chitravali Barter Pvt. Ltd. to M/s Swift Tie Up Pvt. Ltd. on 13.02.2012, out of which it paid ₹ 75 Lakhs to the appellant against the transaction which it had entered with the appellant, it cannot be assumed that the source of this amount is the amount deposited in the bank account of Jagdamba Trading, more particularly when there is no match of the amount flowing from the account of Jagadamba Trading to the account of M/s Swift Tie Up Pvt. Ltd. and then to the appellant. As against this the appellant has given complete name, address and PAN of M/s Swift Tie Up Pvt. Ltd. The AO has not found any adverse evidence against the same. Further in the statement, Shri Vipin
13 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. Kumar, partner of the appellant firm, has explained complete details of the transaction. How the company took these goods is of no concern of the appellant. The vouchers for delivery of goods were provided to the AO and therefore, only on assumptions and presumptions, the transaction cannot be held non-genuine. The report of SEBI where the name of M/s Swift Tie Up Pvt. Ltd. has been implicated in connection with the public issue has no relevance to the transaction under consideration. Even the SEBI vide its order dated 28.8.2014 has lifted the ban on M/s Swift Tie Up Pvt. Ltd. for selling the shares with the condition that sale proceeds of the shares be deposited with SEBI in an interest bearing account. This proves that M/s Swift Tie Up Pvt. Ltd. is a genuine company.
7.3 It is further seen that the determination of income of ₹2,43,59,629/- made by the AO is hypothetical by assuming that appellant has sold 2236.50 quintals of Gwar on 13.2.2012 @ ₹14,000/- per quintal. There is no basis how the rate of ₹14,000/-per quintal has been adopted when on this date itself, the appellant has sold Gwar to Kundan Lal Mohan Lal @ ₹11,985/- per quintal which is also admitted by the AO at Para 14, page 24 of the order. Further, there is no basis for the assumption that this quantity of Gwar is sold by the appellant ignoring that the same is delivered by the appellant to M/s Swift Tie Up Pvt. Ltd. after receiving the amount of ₹75 Lakhs in full and final settlement of his account. The delivery of goods to M/s Swift Tie Up Pvt. Ltd. is evidenced by the delivery challan duly signed by the representative of the company. In fact, appellant has kept 2,499 bags of Gwar in the warehouse of National Collateral Management Services Limited (NCMSL) between 7.12.2011 to 12.12.2011 and against the
14 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. warehouse receipt it has taken advance from Punjab National Bank. NCMSL has kept these good in the warehouse of Rangoli Ceramics through Atul Agrocom India Pvt. Ltd. Punjab National Bank released these goods to the appellant vide letter dated 7.2.2012 and thereafter, the appellant was given the delivery form on 18.2.2012 by Atul Agrocom India Pvt. Ltd. for 2,499 bags having 2,477.90 quintals. Out of these goods, the delivery was given to M/s Swift Tie Up Pvt. Ltd. between 20.2.2012 to 24.2.2012 of 2,229.60 quintals. Further, when the appellant has himself offered income of ₹5,86,612/- by way of rent, interest, brokerage and adat on this transaction which is accepted by the AO, then the AO again cannot consider the same as the own transaction of the appellant so as to presume hypothetical profit and make addition for the same.
7.4 Considering all these facts I find that the addition of ₹2,43,59,629/- made by the AO is only on presumption. No evidence was brought by the AO to establish that the appellant has sold these goods out of the books to other parties. The AO has also not controverted the various evidences filed. Therefore only on surmises, the addition made by the AO can't be sustained, hence the same is deleted. Appellant's Ground No. 2 to 2.3 is allowed.”
From perusal of the record, we noticed that the purchase of Gwar of 3048.30 quintals at Rs. 1,66,80,794/- and sale of Gwar for 811.80 quintals for Rs. 97,29,423/- was not disputed by the AO. These purchases and sales are on account of M/s Swift Tie Up Pvt. Ltd. on Adat basis for which it has charged rent, interest, brokerage and Adat of Rs.5,86,612/- from the party
15 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. and included in its income. This income is also accepted and assessed by the AO. The AO has considered the transaction as bogus only on the basis of the report of Investigation Wing, Kolkata, statement of Shri Devesh Upadhyaya and the report of SEBI.
We also observe that the transaction recorded in the books of accounts in the regular course of business is to be accepted as true and correct unless there is a strong evidence to rebut the same and the burden to proof that the transaction is not genuine is on the person who alleges so. This burden has to be discharged strictly by bringing on record legal evidence and not only by hearsay, suspicion, surmises and conjectures. In the present case, existence of M/s Swift Tie Up Pvt. Ltd. is not disputed. It has filed the return of income for AY 2012-13, confirmed the transaction, made payment by cheque, income of Rs.5,86,612 earned from this transaction by the assessee is declared in the return & assessed by the AO and therefore, without bringing any adverse evidence on record, simply on assumptions and presumptions, transaction with M/s Swift Tie Up Pvt. Ltd. cannot be considered as bogus. The various case laws relied by the AO are distinguishable on facts inasmuch as they are in relation to share capital and not in respect of amount received by the assessee against the purchase of goods on Adat. The burden to proof that a transaction is collusive/sham is
16 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. on the person who alleges so and such burden has to be discharged by furnishing positive evidence and not on hypothetical assessment of the real motive of the assessee. In this connection decision of the Hon’ble Supreme Court in case of UOI Vs. Azadi Bachao Andolan 263 ITR 706 and Vodafone International Holdings B.V. Vs. UOI 341 ITR 1 may be referred which have distinguished the decision of McDowells & Co. vs. CTO 154 ITR 148.
We also observe that the determination of income of Rs. 2,43,59,629/- made by the AO is hypothetical by assuming that assessee has sold 2236.50 quintals of Gwar on 13.02.2012 @ Rs. 14,000/- per quintal. There is no basis how the rate of Rs. 14,000/- per quintal has been adopted when on this date itself, the assessee has sold Gwar to Kundan Lal Mohan Lal @ 11,985/- per quintal which is also admitted by the AO at para 14, page 24 of the order. Further there is no basis for the assumption that this quantity of Gwar is sold by the assessee ignoring that the same is delivered by the assessee to M/s Swift Tie Up Pvt. Ltd. after receiving the amount of Rs. 75 lakhs in full and final settlement of his account. The delivery of goods to M/s Swift Tie Up Pvt. Ltd. is evidenced by the delivery challan duly signed by the representative of the company. In fact, assessee has kept 2,499 bags of Gwar in the warehouse of National Collateral
17 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. Management Services Limited (NCMSL) between 07.12.2011 to 12.12.2011 and against the warehouse receipt it has taken advance from Punjab National Bank. NCMSL has kept these good in the warehouse of Rangoli Ceramics through Atul Agrocom India Pvt. Ltd. Punjab National Bank released these goods to the assessee vide letter dated 07.02.2012, which is at page No. 70 of the Paper book and thereafter assessee was given the delivery form on 18.02.2012 by Atul Agrocom India Pvt. Ltd. for 2,499 bags having 2,477.90 quintals which is at page No. 71 of the Paper book. Out of these goods, delivery was given to M/s Swift Tie Up Pvt. Ltd. between 20.02.2012 to 24.02.2012 of 2,229.60 quintals which is at page No. 73-76 of the Paper book. Further, when the assessee has himself offered income of Rs. 5,86,612/- on this transaction which is accepted by the AO, then the AO again cannot consider the same as the own transaction of the assessee so as to presume hypothetical profit and make addition for the same. Considering the totality of facts and circumstances of the case and the decisions of the Hon’ble Courts, we do not find any reason to interfere in the order of the ld. CIT(A) qua this issue. Accordingly, we uphold the same.
Ground No. 3 of the appeal relates to challenging the order of ld. CIT(A) in treating M/s Swift Tie Up Pvt. Ltd. as genuine entity whereas during the course of assessment proceedings it was found that the sum of
18 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. Rs.75 lacs received by the assessee was layered through various Kolkata bases paper/ bogus companies before reaching to M/s Swift Tie Up Pvt. Ltd. Moreover M/s Swift Tie Up Pvt. Ltd. was not found functioning on given address.
At the outset, the ld. DR has vehemently relied on the order of the A.O.
On the contrary, the ld AR of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and has further submitted that the assessee has business relationship with M/s Swift Tie Up Pvt. Ltd. The amount of Rs. 75 lakhs is received by the assessee against the purchase of Gwar made on its behalf on which Adat, rent, interest, brokerage, etc. is charged and accepted by the AO. The payment of Rs. 75 lakhs made by M/s Swift Tie Up Pvt. Ltd. is confirmed by them. Its identity, genuineness of the transaction and the creditworthiness is established from the various documentary evidences filed by the assessee.
We have considered the rival submissions and perused the material available on record. From perusal of the record, we noticed that the ld. CIT(A) has had deleted the addition by observing as under:
19 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. “10. I have considered the facts of the case, gone through the assessment order and the submission of the appellant. IN ground No. 2 supra, I have already held that the transaction with M/s Swift Tie Up Pvt. Ltd. are genuine. The receipt of ₹ 75 Lakhs is duly supported by the evidences and is against the purchase of Gwar made on its behalf on which Adat, rent, interest, brokerage, etc. is charged and accepted by the AO. The payment of ₹ 75 Lakhs made by M/s Swift Tie Up Pvt. Ltd. is confirmed by them. Its identity, genuineness of the transaction and the creditworthiness is established from the various documentary evidences filed by the appellant. Accordingly, the addition of Rs. 75₹ Lakhs made by the AO u/s 68 is deleted.”
As we have already discussed this issue in detail in foregoing paragraphs of this order, therefore, in that eventuality, we do not find any reason to interfere in the order of the ld. CIT(A) qua this issue. Accordingly, we uphold the same.
Ground No. 4 of the appeal relates to challenging the order of the ld. CIT(A) in deleting the addition of Rs.11,75,857/- made by the AO on account of disallowance of NCDEX/ MCX loss.
At the outset, the ld. DR has vehemently relied on the order of the A.O.
On the contrary, the ld AR of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and has further submitted
20 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. that the AO has not properly understood the reply of assessee. In the reply assessee has stated that it has not carried out any transaction in shares and therefore, there is no question of providing the Demat account or declaring income from dividend / STCG / LTCG. In fact, the loss of Rs. 11,75,857/- incurred by the assessee is on hedging of the commodity in NCDEX/MCX on the basis of the stock of various commodities held by it. The hedging loss is not considered as a speculative loss in view of clause (a) of Section 43(5) which provides that a contract in respect of merchandise entered into by a person in course of his merchanting business to guard against loss through future price fluctuations in respect of its contracts for the actual delivery of merchandise sold by him shall not be considered as a speculative loss. He relied on the decision in the case of Pankaj Oil Mills vs. CIT 115 ITR 824. The ld AR has further submitted that in the present case AO has reopened the assessment by issue of notice u/s 148. However, the addition made by the AO is diverse with the reasons recorded for reopening and thus, the notice issued u/s 148 is illegal & bad in law. However, the Ld. CIT(A) has not adjudicated upon the ground of assessee as to the legality of notice issued u/s 148 in view of the decision given by him on merit. Therefore, even on the issue of reopening of assessment, the order passed by AO is not sustainable in view of the submission made before Ld. CIT(A).
21 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. 18. We have heard the ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. From perusal of the record, we found that the ld. CIT(A) has deleted the additions so made by the A.O. by observing as under:
“13. I have considered the facts of the case, gone through the assessment order and the submission of the appellant. It is seen that the loss of ₹11,75,857/- incurred by the appellant is on hedging of the commodity in NCDEX/MCX on the basis of the stock of various commodities held by it. The hedging loss is not considered as a speculative loss in view of clause (a) of Section 43(5) which provides that a contract in respect of merchandise entered into by a person in course of his merchanting business to guard against loss through future price fluctuations in respect of its contracts for the actual delivery of merchandise sold by him shall not be considered as a speculative loss. The Gujarat High Court in case of Pankaj Oil Mills vs. CIT 115 ITR 824 held that hedging contract can be both for purchase and sale. In order to have a valid hedging contract, the total quantity of the hedged commodity should not exceed the total stock of merchandise in hand and there should be an existing forward contract of sale by actual delivery. The appellant has entered into transaction in MCX/NCDEX for actual delivery of goods in future to guard against the loss in respect of quantity of goods lying in the stock. Therefore, these transactions are hedging
22 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. transaction and the loss incurred is not a speculative loss in terms of clause (2) to Section 43(5). The AO has wrongly referred to insertion of clause (e) to Section 43(5) effective from AY 2014-15 whereas the claim of the appellant falls in Section clause (a) to Section 43(5). Considering these facts, the claim of disallowance of loss made by the AO is deleted.” From perusal of the record, we observe that the AO on perusal of audit report observed that the assesse in its trading account has claimed loss of Rs. 11,75,857/- on account of hedging in NCDEX/MCX. He vide letter dated 23.11.2016 required the assessee to furnish the details of Demat Account/commodity trading account/ mutual fund account, certified statement of the broker/depositary/NSDL/CDSL/MCX/NCDEX, LTCG/STCG on such transactions, etc. The assessee vide letter dated 28.11.2016 explained that it does not have a demat account as it has not carried any share trading business and has not earned any dividend or LTCG/STCG. The AO observed that even though the assessee has claimed loss on account of trading in NCDEX/MCX, the assessee in its reply has negated the same. Any future hedging in commodity trading is treated as speculative transaction as per section 43(5) of the Income Tax Act. Section 43(5)(e) has been inserted w.e.f. 01.04.2014. Thus, it is clear that for AY 2012-13, hedging in commodity trading is treated as a speculative transaction. The Ld. CIT(A) held that assessee has claimed the loss under clause (a) of section 43(5)
23 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. and not in terms of clause (e) to section 43(5). The loss is a hedging loss as it is on the basis of the stock of various commodities held by it. The ld AR has relied on the decision of Hon’ble Gujarat High Court in case of Pankaj Oil Mills Vs. CIT 115 ITR 824 wherein the Hon’ble High Court has held
“that hedging contract can be both for purchase and sale. In order to have a valid hedging contract, the total quantity of the hedged commodity should not exceed the total stock of merchandise in hand and there should be an existing forward contract of sale by actual delivery. The assessee has entered into transaction in MCX/NCDEX for actual delivery of goods in future to guard against the loss in respect of quantity of goods lying in the stock. Therefore, these transactions are hedging transaction and the loss incurred is not a speculative loss in terms of clause (2) to Section 43(5). The AO has wrongly referred to insertion of clause (e) to Section 43(5) effective from AY 2014-15 whereas the claim of the assessee falls in Section clause(a) to Section 43(5)”. In view of the above facts and circumstances of the case and after considering the decision of the Hon’ble Gujarat High Court, we do not find any reason to interfere in the order of the ld. CIT(A) qua this issue. Accordingly, we uphold the same.
In the result, this appeal of the Revenue is dismissed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962 by placing the details on the notice board.
Sd/- Sd/-
24 ITA 482/Jodh/2018 ACIT Vs M/s Manoj Kumar Vipin Kumar. (MANOJ KUMAR AGGARWAL) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : Jodhpur Dated 01/02/2021 *Ranjan Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT (A) 5. The DR 6. Guard File Assistant Registrar Jodhpur Bench