S. NARENDRAKUMAR & CO.,MUMBAI vs. PR. CIT. CIRCLE- 27, MUMBAI, MUMBAI

The grounds of appeal read as under :

Brief facts of the case are that in the above case, the assessee had filed return of income for A.Y. 2015-16 on 28.09.2015 declaring total income of Rs.46,38,53,870/-. The assessment was completed u/s. 143(3) of the I.T.Act,1961 on 27.12.2017 at an assessed income of Rs.56,81,76,120/-. On perusal of the return of income, profit and loss account and other details, learned CIT observed that during the year assessee had claimed loss of Rs. 1,28,39,534/- in commodity derivatives. That assessee had submitted only name of the broker and statement of transactions. That as per section 43(5)(e) of the I. T. Act, transaction shall not be deemed to be a speculative transaction if it is carried out in a recognised exchange and which is chargeable to commodities transaction tax. That assessee had not furnished the copy of contract notes relating to the said transaction in commodity derivatives. That in absence of any contract notes it is not ascertainable whether these transactions have been carried out in a recognised exchange as defined in Explanation-2 to section 43(5) of the I.T. Act. That in absence of any evidence suggesting the fulfillment of criteria mentioned in the section 43(5) of the Act, the aforesaid loss of Rs. 1,28,39,534/- incurred in commodity derivatives transactions, cannot be allowed as 'business loss' for the year ended on 31.03.2015. Hence, learned CIT opined that the Assessing Officer has not verified the details gathered during the course of assessment proceedings. Hence, he observed that the aforesaid assessment order passed u/s. 143(3) of the Income-tax Act, 1961 is erroneous in so far as it is prejudicial to the interest of revenue within the meaning of Sec.263 of the Income-tax Act, 1961. Accordingly, notice under section 263 was issued to the assessee.

Assessee responded as under : - Transactions in agricultural commodities are exempt from levy of Commodities Transaction Tax as specified in Chapter II of Finance Bill 2013 and as notified on 19.06.2013. - As per details submitted, all the transactions in commodities derivatives are through Angel Commodities Broking Pvt. Ltd. who are member of both the exchanges i.e. NCDEX and MCX. We are enclosing herewith copies of Certificate of Membership.

However, learned CIT was not satisfied. He referred to following case laws :- • Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), • Bismillah Trading Co. v. Intelligence Officer [2001] 248 ITR 292 (Ker.) • Venkatakrishna Rice Co. Vs. CIT (1987) 163 ITR 129 (Mad) • Smt. Tara Devi Aggarwal Vs. CIT (1973) 88 ITR 323(SC) • Thalibai F. Jain Vs. ITO (1975) 101 ITR 1 (Kar.)

He referred to Explanation 1 below subsection (1) of section 263 and held as under :- “In view of the above and also in light of the facts and circumstances of the case, it is clear that the Assessing officer had allowed loss of Rs.1,28,39,534/-incurred in commodity derivatives transactions as 'business loss' without carrying out proper verification as to whether the assessee had fulfilled the criteria mentioned in the section 43(5) of the Act or not. Hence, on the facts & circumstances of the case, allowing of aforesaid "business loss' without proper verification has rendered the assessment order erroneous in so far as it is prejudicial to the interests of the revenue. Therefore, it is held that the order dated 27.12.2017 passed u/s. 143(3) of the Income-tax Act, 1961 is erroneous in so far as it is prejudicial to the interests of the revenue within the meaning of Sec. 263 of the Income-tax Act, 1961 and, as the Assessing Officer failed to conduct proper inquiries, investigation and examination, the assessment order is set aside to the Assessing Officer with the direction to pass a fresh assessment order considering the issues raised in the notice u/s 263, in accordance with law and after affording an opportunity of being heard to the assessee. The order

Against the above order assessee is in appeal before us.

We have heard both the parties and perused the records. We find that on the issue of loss on commodity derivation amounting to Rs. 1,28,39,534/- learned CIT was of the opinion that the Assessing Officer has not made any inquiry and has allowed the assessee’s claim hence, the assessment order is erroneous in so far as it is prejudicial to the interest of the Revenue. We note that in the assessment order there is no discussion whatsoever on the subject. However, it is the submission of the assessee that the Assessing Officer has made the inquiry and assessee had submitted sample contract notes and upon satisfaction the Assessing Officer has allowed the claim. Learned Counsel of the assessee further submits that due submissions were given to the learned CIT. That though learned CIT has reproduced the submission he has not at all addressed the submission. We note that the assessee has given the following submission before learned CIT, who has reproduced the same in his order :- 1) The assessee received notice u/s 263 of the I.T.Act-1961 on 28.11.2019 and submitted reply dated 11.12.2019 with supporting details. We are enclosing herewith copies of the said letter with details for your honour's ready reference. 2) The assessee again received notice u/s 263 on 15.01.2019 giving one more opportunity to furnish explanation along with details on or before 24.01 2020.

We note that learned CIT in his order after reproducing the submission has not at all referred or considered those submission, leave alone reject them. He has only referred to case laws and provisions of law and his powers to pass revision order. No case law or provision of Act mandate the learned CIT to not even consider the submission and pass a non-speaking order. Hence, in the interest of justice, we remit the issue to the file of learned CIT. Learned CIT shall give his finding on the assessee’s submission and thereafter pass the order in accordance with law. Needless to add assessee should be granted adequate opportunity of being heard.

In the result, assessee’s appeal is allowed for statistical purposes.