INCOME TAX OFFICER, WD-3(1), KOLKATA, KOLKATA vs. ARYANSH FORGING PRIVATE LIMITED, KOLKATA

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ITA 1029/KOL/2024Status: DisposedITAT Kolkata17 January 2025AY 2013-146 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the appeal of the Revenue. The Tribunal noted that the Ld. CIT(A) had considered the submissions and documentary evidence, including broker ledgers and contract notes. The Tribunal's own perusal of the broker ledgers indicated that the total amount of currency futures purchased was Rs. 29,59,78,409/- and sold was Rs. 29,71,63,841/-. The net loss in USE Currency derivatives was calculated as Rs. 11,92,144.02/-. The Tribunal agreed with the Ld. CIT(A) that the AO erred in treating Rs. 29,65,00,718/- as the assessee's loss, as this amount represented the total of each lot traded and was not required to be recorded in the books of accounts. Only the net difference (profit or loss) is to be recorded. The Tribunal found no infirmity in the Ld. CIT(A)'s order, which had appreciated the assessee's submissions and evidence and allowed the appeal.

What were the facts?

The Revenue is in appeal against the order of the Ld. CIT(A) for AY 2013-14. The assessee, Aryansh Forging Pvt. Ltd., initially filed a return declaring income at Rs. 3,36,970/-. The case was reopened, and a notice u/s 148 was issued. The assessee did not file a return in response, nor made submissions to notices u/s 142(1). The AO proposed to disallow transactions amounting to Rs. 29,68,00,718/-. The assessee filed a return under protest, and the AO treated trading transactions in US currency amounting to Rs. 29,65,00,718/- as unexplained income u/s 69A, assessing total income at Rs. 29,68,37,690/-. The Ld. CIT(A) allowed the assessee's appeal, holding that Rs. 29,65,00,718/- was the total traded value, not the loss, and the actual loss was Rs. 11,92,144.02/-.

What were the issues?

1. Whether the Ld. CIT(A) erred in deleting the addition of Rs. 29,65,00,718/- made by the AO, considering the assessee did not furnish substantial documentary evidence or justification for the alleged loss in US currency. Assessee's Contention: The Ld. CIT(A) correctly held that Rs. 29,65,00,718/- was the total trade value and not the loss. The actual loss was Rs. 11,92,144.02/-. The assessee provided party broker ledger, contract notes, and bank statements. The contract notes established Rs. 29,65,000/- as trade value, not loss. The AO misinterpreted the reasons for reopening and made additions based on a wrong interpretation. The audited accounts did not show the claimed loss of Rs. 29,65,00,718/-. The assessee relied on the guidelines of the Institute of Chartered Accountants of India, stating that only the net profit or loss is required to be recorded. Revenue's Contention: The Ld. CIT(A) erred in deleting the addition made by the AO as the assessee failed to provide substantial documentary evidence or justification for the loss of US currency amounting to Rs. 29,65,00,718/-.

Which sections of the Income-tax Act were involved?

Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH: KOLKATA

Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]

ORDER / आदेश Per Pradip Kumar Choubey, JM: This is an appeal preferred by the revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 05.12.2023 for the AY 2013-14.

2.

It appears from the report of the registry that the appeal has been filed after a delay of 94 days. The Department has filed condonation petition. On perusal of the condonation petition, the reason for delay in filing the appeal is genuine and bonafide. The Ld. A.R did not raise any objection in condoning the delay. Keeping in view, the Assessment Year: 2013-14 Aryansh Forging Pvt. Ltd. condonation petition as well as judicial pronouncement that the case should be decided on merit not on technical issue. The delay is hereby condoned.

3.

Brief facts of the case of the assessee are that the assessee M/s Aryansh Forging Pvt. Ltd. filed original return of income declaring total income at Rs. 3,36,970/-. The case of the assessee was reopened, notice u/s 148 was issued. In response to this notice, the assessee did not file return of income for the assessment year under consideration, further notice u/s 142(1) were issued wherein the assessee was requested to submit supporting documents however no submission was made. The AO issued show cause notice in corroborating the draft assessment order in which transaction amount to Rs. 29,68,00,718/- have been disallowed and added to the total income of the assessee and requested to submit the reply. In response to the same, the assessee filed his submission and he has filed return under protest on 13.09.2021. The AO held that there was no valid return and after perusal of the submission furnished by the assessee held that trading transaction on USE currency amounting to Rs. 29,65,00,718/- during FY 2012-13 remained unexplained u/s 69A of the Act and assessed the total income at Rs. 29,68,37,690/-.

4.

The said order has been challenged by the assessee before the Ld. CIT(A) wherein the Ld. CIT(A) has allowed the appeal of assessee by holding that Rs. 29,65,00,718/- is the total of the loss traded by the assessee and not his loss and actual loss is only Rs. 11,92,144.02/-.

Being aggrieved and dissatisfied with the impugned order the department has preferred the instant appeal.

5.

The ld. Counsel appeared on behalf of the department have challenged the impugned order thereby submitting that the Ld. CIT(A) did wrong in deleting the addition made by A.O, as the assessee did not furnish any substantial documentary evidences in this regard and nor filed any justification of the loss of US currency deliberating amount of Rs. 29,65,00,718/-.

Assessment Year: 2013-14 Aryansh Forging Pvt. Ltd.

6.

Contrary to that the Ld. A.R supports the impugned order thereby submitting that there is no illegality in the impugned order as the Ld. CIT(A) after considering the submission of the assessee, documentary evidences and the settled law has held that the actual loss of the assessee was Rs. 11,92,144.02/- and the assessee has filed party broker ledger, contract notes and relevant bank statement in support of the transaction. The Ld. Counsel further submits that contract notes clearly established that there amount of Rs. 29,65,000/- was actually trade value and not the loss amount as allowed by the AO. The Ld. Counsel further challenges the reason stated in the reopening of the cases and submitted that going over the above reason, it is clearly seen that it has been mentioned that the total trade value in the present case was Rs. 29,65,00,718/-. However, the figures of loss have not been mentioned in the above reason. The Ld. Counsel further submits that the AO has mislead the reasons recorded in the present case and making huge addition merely on the basis of wrong interpretation. The Ld. Counsel further submits that the assessee company had provided the audited accounts, in which it has clearly been depicted that the assessee company has not claimed the loss of Rs. 29,65,00,718/- in the profit and loss account.

7.

Upon hearing the submission of the counsel of the respective parties, we have perused the case of the assessee and the order of Ld. CIT(A). Looking over the broker ledger of the assessee, we find that Purchase for us Sold for us The total trade of ledger no 1 is Rs 31499713/- Rs 264478696/- The total trade of ledger no 2 is Rs 31344034/- Rs 265819807/-

8.

We are not aware that as to how the Ld. AO has calculated the figure of Rs.29,65,00,718/- But as per Ledger of the broker, the total amount of currency futures purchased for us is Rs 29, 59 ,78,409/-( lot total) and total amount of currency sold for US was Rs 29, 71 ,63,841/. (Lot total) As per above transaction, the net loss of the Assessment Year: 2013-14 Aryansh Forging Pvt. Ltd. Loss in USE Currency derivatives on 14.03.2013 Rs. 13,46,943.70 Profit in in USE Currency derivatives on 26.03.2013 Rs. 1,54,799.68 Net Loss in USE Currency derivatives Rs. 11,92,144.02 As seen from the above calculation, the loss incurred as per contract notes and broker ledger is Rs. 11,92,144.02 and not Rs. 29,65,00,718/- as alleged by the Ld. A.Ο. Therefore, the Ld. AO has erred in treating the amount of Rs. 29,65 ,00,718/- as loss of the assessee. The said amount is nothing but the total of each lot traded and the same is not required to be recorded in the books of accounts. However, the assessee is required to record the difference of favorable and unfavorable trades i.e. net profit or net loss i.e. Rs.11,92,144.02 (in the present case) as detailed above. In support of our contention, we are enclosing the guidelines given by the Institute of chartered accounts of India. The has enclosed the guidelines given by Institute of Chartered Accounts of India and submitted thus:

As per above guidelines (copy enclosed), the total of favourable and unfavourable differences shall be taken as turnover. Therefore, In the present case, the turnover of the assessee shall be Rs. 11,92,144.02 and additions if any, should have been restricted to Rs. 11,92,144.02 as the amount Rs 29,65,00,718/- is just the total of each lots traded by the assessee company and the same is neither receivable or payable to the assessee. Only, the resulting differences are required to the paid or received and recorded in the books of accounts. Notwithstanding, it is further submitted that in the present case, the assessee had duly submitted the broker ledger, contract notes and relevant bank statements in support of the above transaction and Ld. AO had erred in making the additions merely on the basis of mis interpreting the information available on record.)

9.

The assessee has further submitted that copies of contract notes are also enclosed evidencing the traded entered into by the appellant. From the enclosed contract notes we find that the appellant had traded in the future of currencies. The net loss of the assessee is computed as under :-

Loss in USE Currency derivatives on 14.03.2013 Rs.13.46,943.70 Profit in in USE Currency derivatives on 26.03.2013 Rs. 1,54,799.68 Net Loss in USE Currency derivatives Rs. 11,92,144.02

“6.7 The submission made by the appellant in this regard is that from the reasons recorded and 1st para of the Order, it can be clearly seen that the amount of Rs. 29,65,00,718/- is the total trade value and not the alleged loss. To confirm the same we are enclosing the broker ledger of the assessee from wherein trade wise amount has been mentioned. Purchase for us Sold for us The total trade of ledger no 1 is Rs 31499713/- Rs 264478696/- The total trade of ledger no 2 is Rs 31344034/- Rs 265819807/- We are not aware that as to how the Ld. AO has calculated the figure of Rs.29,65,00,718/- But as per Ledger of the broker, the total amount of currency futures purchased for us is Rs 29, 59 ,78,409/-( lot total) and total amount of currency sold for us was Rs 29, 71 ,63,841/. (Lot total) As per above transaction, the net loss of the assessee is computed as under :- Loss in USE Currency derivatives on 14.03.2013 Rs. 13,46,943.70 Profit in in USE Currency derivatives on 26.03.2013 Rs. 1,54,799.68 Net Loss in USE Currency derivatives Rs. 11,92,144.02 As seen from the above calculation, the loss incurred as per contract notes and broker ledger is Rs. 11,92,144.02 and not Rs. 29,65,00,718/- as alleged by the Ld. A.Ο. Therefore, the Ld. AO has erred in treating the amount of Rs. 29,65 ,00,718/- as loss of the assessee. The said amount is nothing but the total of each lot traded and the same is not required to be recorded in the books of accounts. However, the assessee is required to record the difference of favorable and unfavorable trades i.e. net profit or net loss i.e. Rs.11,92,144.02 (in the present case) as detailed above. 6.8 The contention of the appellant is correct in this respect as Rs. 29,65,00,718/- is the total of the lot traded by the appellant and not his loss, his actual loss is only Rs. 11,92,144.02/-. Furthermore in support of his claim of loss the appellant has filed the broker ledger, contract notes and relevant bank statements on support of the above transaction. The appellant has relied upon the judgment of Hon’ble High Court of Calcutta in the case of Alpine Investments in of 2008 and further CIT Vs Carbo industrial Holdings Ltd [244 ITR 422] also CIT Vs Emerald Commercial Ltd [250 ITR 539]. In view of the above as the appellant has submitted all the relevant details of his transactions and has conclusively proved the genuineness of the loss the Ground is allowed and the addition on this count is deleted.”

11.

Going over the facts of the case as well as the order of Ld. CIT(A), we do not find any infirmity in the assessment order. The Ld. CIT(A) in its order not only discussed the submission that appreciated the same and thereby allowed the appeal of the assessee. We do not find any infirmity in the impugned order. Accordingly, the appeal of the revenue is hereby dismissed.

Sd/- Sd/- (Rajesh Kumar/राजेश कुमार) (Pradip Kumar Choubey /�द�प कुमार चौबे) Accountant Member/लेखा सद�य Judicial Member/�या�यक सद�य Dated: 17th January, 2025 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- ITO, Ward-3(1), Kolkata 2. Respondent – Aryansh Forging Pvt. Ltd., 18, 2nd Floor, R. N. 209, Merlin Chamber, British Indian Street, Esplanade, Kolkata-700069 3. Ld. CIT(A)-NFAC, Delhi 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)

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