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Income Tax Appellate Tribunal, JAIPUR BENCH ’SMC’, JAIPUR
Before: SHRI SHRI VIJAY PAL RAOvk;dj vihy la-@ITA No. 864/JP/2019
This appeal by the assessee is directed against the order dated 28.01.2019 of ld. CIT (Appeals)-2, Jaipur for the assessment year 2010-11. The assessee has raised the following grounds of appeal :-
“ 1. The ld. CIT (Appeals) has erred in not considering the savings/income earned of Rs. 1,57,370/- sourced towards loss incurred in commodity trade of Rs. 1,53,430/- during the AY 2010-11 and confirmed the additions made by the AO solely on the basis of surmises. The factual position that the case was opened on the basis of AIR information and proceedings u/s 147 were initiated, but due to assessee’s illiteracy in taxation and not attending case properly is also one of the main reasons of such adverse order.
2. The appellant craves to add, amend, alter any other grounds or grounds of appeal at the time of hearing of appeal.
None has appeared on behalf of the assessee when this appeal was called for hearing. However, the assessee has filed the written submissions. Accordingly the appeal of the assessee was taken up for hearing and adjudication ex parte.
The AO has reopened the assessment by issuing notice under section 148 of the Act on 30th March, 2017 on the ground that the assessee received commission income which was not offered to tax. In the assessment order passed under section 147/144 of the Act, the AO made the addition on account of unexplained investment in the business done on the MCX as well as the commission income total amounting to Rs. 3,08,800/-. The assessee challenged the action of the AO before the ld. CIT (A) and submitted that when there was a loss of Rs. 1,51,430/- in respect of the transactions carried out on the MCX and at the same time the assessee has received commission income of Rs. 1,57,370/-, then the said loss incurred by the assessee is sourced from the commission income of the assessee. The ld. CIT (A) did not accept this contention of the assessee and confirmed the addition made by the AO.
In the written submissions, the assessee has submitted as under :
“ The fact that the assessee has made some commodity trades and incurred loss of Rs. 1,51,430/-, which is nowhere disputed. The assessee though was not aware of nature/outcome of income t4ax proceeding, had during his visit informally on 28.12.2017 has informed that he has approximately earned commission income of Rs. 96,000/-. The AO himself considering his reply and information available with him has taken commission income of Rs. 1,57,370/-. During appellate proceedings, order being passed by ld. CIT (A) pending linkage of source without giving any opportunity. The assessee sought details from the ld. AO vide letter dated 12.06.2019 in respect of loss of commodity trade has also not been made available so far. However, as explained by the assessee on the basis of information and bank statement possessed with him and trade being undertaken since Aug’2009, the commodity loss of Rs. 1,51,430/- is sourced through Rs. 1,00,000/- realized in bank on 27th Aug 2009 towards commission income of Rs. 96,000/- & Rs. 4,000/- out of pocket exp. and balance through cash out of savings and small loans being deposit in bank a/c evidencing from the copy of bank extracts annexed herewith.
Further, the ld. AO while making addition has taken the income “0” instead of taking the figure of loss in commodity trade, as assessed by him as apparent from the order and this is resulting into excess addition of Rs. 1,51,430/-, which also required to rectify.”
On the other hand, the ld. D/R has relied upon the orders of the authorities below.
I have heard the ld. D/R and considered the written submissions filed by the assessee. It is pertinent to note that the AO has carried out the investigation and verification by calling the information from MCX and as per the statement received from the MCX, it was found that the assessee has incurred a loss of Rs. 1,51,430/- in respect of the transactions carried out by the assessee through MCX. Further as per the ITS details available with the AO, it was noticed that the assessee was in receipt of commission income from M/s. Agarwal Commodities and Bonanza Commodity Brokers Pvt. Ltd. of Rs. 61,370/- and commission income from ICICI Securities of Rs. 96,000/- total amounting to Rs. 1,57,370/-. The AO made the addition of both these amounts – one on account of unexplained investment in the commodity and another on account of commission income. The ld. CIT (A) has confirmed this addition on the ground that the assessee has failed to establish the direct nexus between the commission income and the loss incurred. Once the AO himself has verified the fact and found that the assessee has received the commission income on one hand and there is a loss in the commodity transactions through MCX, then both stand explained being the income on account of commission is an explained source for the loss incurred by the assessee in the transactions on MCX. Accordingly the said fact which the AO himself has brought on record cannot be ignored while assessing the income of the assessee. Accordingly, when the loss incurred by the assessee in the commodity exchange and which is in the nature of speculative, then the same is eligible for setting off against the commission income. The addition made by the AO is accordingly deleted.
In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 29/10/2019.