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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM & Hon’ble Shri A. T. Varkey, JM
1 ITA No. 121/Kol/2020 AY 2012-13 Biswanath Poddar आयकर अपील�य अधीकरण, �यायपीठ –“B” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA [Before Hon’ble Shri J.Sudhakar Reddy, AM and Hon’ble Shri A. T. Varkey, JM ITA No. 121/Kol/2020 Assessment Year: 2012-13
A.C.I.T-Cir-49(1), Kolkata Vs BISWANATH PODDAR PAN: AFDPP6841A Appellant Respondent
Date of Hearing (Virtual) 16.09.2020 Date of Pronouncement 24 .09.2020 For the Appellant Smt. Ranu Biswas, Addl. CIT/Ld.DR For the Respondent Shri S.M. Surana, Advocate, Ld. AR
ORDER Shri A. T. Varkey, JM This is an appeal preferred by the revenue against the order of Ld. CIT(A), 11, Kolkata dated 30-08-2019 for the assessment year 2012-13.
The grounds of appeal raised by the revenue are as under:- 1. That in the facts and circumstances of the case, Ld. CIT(A) has erred in holding that as the return was filed within due date, losses incurred during the year are eligible to be carried forward for set off in subsequent years. 2. That in the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 1,88,75,000/- made by the AO on account of unexplained cash credit u/s. 68 of the Income Tax Act, 1961 without examining the creditworthiness of the loan creditor. 3. That in the facts and circumstances of the case, Ld. CIT(A) has erred in directing the AO to allow the Short Term Capital Loss of Rs. 5,70,328/-. 4. That in the facts and circumstances of the case, Ld. CIT(A) in violation of Rule 46A of the Income Tax Rules, 1962,accepted the arguments and fresh evidence in the form of paper book from the assessee without seeking any remand report from the Assessing Officer to give comments.
At the outset, it is noticed that there is delay by 51 days in filing the impugned appeal. After going through the petition for condonation of delay ( 51 days) we are of the opinion that there are reasonable grounds/reasons to justify the delay caused. Therefore, we
2 ITA No. 121/Kol/2020 AY 2012-13 Biswanath Poddar condone the delay and proceed to adjudicate the appeal on merits.
We note that ground no. 4 of revenue is against the action of the Ld. CIT(A) for passing the impugned order in violation of Rule 46 of the Income Tax Rules, 1962 (hereinafter referred to as the ‘Rules’), wherein the Ld. CIT(A) according to Revenue had admitted fresh evidences in the form of paper book from the assessee without seeking any remand report from the AO. When we asked Smt. Ranu Biswas, Addl. CIT/Learned Departmental Representative ( in short, the Ld. DR) to show us what was the additional fresh evidence the assessee submitted before the Ld. CIT(A) for the first time, even though she tried to point out that there was some fresh evidences, but could not succeed since the AO in the assessment order had acknowledged that those documents was produced before him. Since we note that no fresh evidence was adduced for the first time before the Ld. CIT(A) and the Revenue was unable to point out that fresh evidences were adduced at the appellate proceedings, we dismiss this ground of revenue’s appeal
Coming to ground no.1 of revenue, which is against the action of the Ld. CIT(A) in allowing the assessee’s losses incurred during the year as eligible to be carried forwarded and consequently for set off in subsequent years.
Facts in brief are that the AO noted in his order that the assessee has claimed loss on commodity trading totaling to Rs. 53,03,486/- (Rs.45,39,898 + Rs.7,63,588). According to AO this loss was due to the speculation activity of the assessee. The AO noted that the assessee is an individual and not required to gets its (assessee’s ) accounts audited u/s. 44AB of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’). Therefore, according to AO due date of filing of return of income was on 31-07-2012 and since the assessee filed his return u/s. 139(4) of the Act on 26-09-2012, the return was belatedly filed and therefore, the aforesaid speculation loss cannot be allowed to be carried forwarded as claimed in his return. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to allow the same. Aggrieved, the Revenue is before us.
3 ITA No. 121/Kol/2020 AY 2012-13 Biswanath Poddar 7. We have heard both the parties and perused the records. We note that the assessee had filed his return u/s. 139(4) of the Act on 26-09-2012 and claimed the loss to be carried forwarded of Rs.53,03,486/- being business loss which was incurred on account of commodity trading. However, this claim of the assessee was not allowed by the AO on the ground that the assessee is an individual, and since he did not require to get his accounts audited u/s. 44AB of the Act, therefore, due date of filing of return was on 31-07-2012 and since the assessee had filed his return u/s. 139(4) of the Act on 26-09-2012 it was belated return and therefore, the loss claimed on commodity trading of Rs. 45,39,898 and loss on future trading totaling to Rs. 53,03,486/- was on account of speculation activity and, therefore, the loss cannot be allowed to be set off along with saving bank interest of Rs.21,961/-. On appeal, the Ld. CIT(A) based on evidence, found that the assessee indulged in trading of derivatives through M/s. Suvridh Capital Markets Ltd and M/s. India Nivesh Securities Pvt. Ltd, and since both entities were registered brokers on the portal of the NSE (National Stock Exchange) and the transaction happened through Screen Based Trading System, he allowed the claim of assessee. This fact of assessee transacting through registered broker and through screen based trading system on the portal of NSE is a finding of fact recorded by the Ld. CIT(A), which fact is clear at page- 6, para 9 of the impugned order of the Ld. CIT(A), which has not been challenged by the Revenue before us. Therefore, we find that this trading in commodity has been done by the assessee in consonance with the Notification No. 2/2006 [so 89 (E), dated 25-1-2006, which reads as under:- Notification No. 2/2006 [ so 89 ( E ) dated 25-1-2006 In exercise of the powers conferred by clause (ii) in the Explanation to clause of the proviso to clause (5) of section 43 of the Income-tax Act, 1961(43 of 1961) read with sub-rule (4) of rule 6DDB of the Income-tax Rules, 1962, the Central Government here by notifies the following stock exchanges as recognized stock exchanges for the purposes of the said clause with effect from the date of publication of this notification in the Official Gazette, namely:- (1) National Stock Exchange of India, Mumbai (2) Bombay Stock Exchange Limited, Mumbai 2. The Central Government may withdraw recognition granted to the stock exchange any of the conditions prescribed in rule 6DD of the Income-tax Rules, 1962 subject to which the recognition is granted, is violated.
4 ITA No. 121/Kol/2020 AY 2012-13 Biswanath Poddar 3. This notification shall remain in force until the approval granted by the Securities and Exchange Board of India is withdrawn or expires, or this notification is rescinded by the Central Government as provided in sub- rule (5) of rule 6DDB of the Income-tax Rules, 1962.
[ F. No. 142/38/2005-TPL] Explanatory Memorandum in respect of Notification S.O 89 (E) Dated 25th January, 2006.
The said Notification notifies Bombay Stock Exchange Limited, Mumbai and National Stock Exchange of India Limited, Mumbai as recognized Stock Exchanges for the purposes of clause (d) of the proviso to section 43(5) of the Income-tax Act, 1961. An eligible transaction in respect of trading in derivatives carried out on these two Stock Exchanges with effect from 25th January, 2006 shall not be deemed to be speculative transaction. This expression ‘eligible transaction ‘is defined in the Explanation appearing after the proviso to section 43(5) of the Income-tax Act, 1961. This has already been cited in the earlier paragraphs.”
We note that the assessee’s activity/loss is covered in currency and futures and options, which have been carried out/claimed as per proviso/clause (d) to section 43(5) of the Act read with Explanation 1 thereto and the said Notification No. 2/2006 [ so 89( E ), dated 25-1-2006. In such circumstances, we are of the view that the AO erred in assessing/adding all the losses, which the assessee claimed on commodity and derivatives and share derivatives as speculation loss. We note that since the assessee’s case is covered in Explanation 1 to section 43(5)(d) of the Act and assessee’s transaction was an eligible transaction, it cannot be termed as ‘speculative transaction’. Since the Revenue has not challenged the finding of fact on this issue by the Ld. CIT(A) that the commodity have taken place through registered broker on the portal of the NSE through screen based trading system, the finding of fact crystalizes and therefore, as per law the action of Ld. CIT(A) is correct and we find no infirmity in the impugned order of the Ld. CIT(A) in allowing the same as business loss. 9. Coming to the contention of the AO that the assessee has filed his return of income u/s. 139(4) on 26-09-2012, belatedly because the assessee was an individual and his accounts need not be audited u/s. 44AB of the Act and so the assessee had to file his return on 31-07-2012 and not belatedly on 26-09-2012, and therefore, the loss suffered by
5 ITA No. 121/Kol/2020 AY 2012-13 Biswanath Poddar the assessee cannot be allowed to be carried forward in the assessment year 2012-13 i.e under consideration. We note that in this respect the AO misdirected himself and fell in error as rightly noted by the Ld. CIT(A). According to the threshold limit as per section 44AB of the Act in this assessment year was of Rs. 60 lakhs and as per section 44AB of the Act the law enforced for the AY 2012-13 the limit was of Rs. 60 lakhs and it was enhanced to Rs. 1 crore only for the AY 2013-14. According to assessee, the issue of turnover in case of transaction in derivatives for the purpose of section 44AB of the Act has been dealt with by the ICAI in para 5.11(b) of its “Guidance Note on Tax Audit under section 44AB of the Income Tax Act, 1961-Revised 2005 edition” , which has been reproduced by the Ld. CIT(A) in his order at page-9, para 16. According to him, the total favourable and unfavourable differences are to be taken as turnover. After going through the details of derivatives chart, which is evident from P & L account, which show the total of favourable and unfavourable differences exceed Rs. 60 lakhs and therefore, the assessee was required to get his accounts audited u/s 44AB of the Act. Since the return of income was filed on 26-09-2016 claiming losses incurred during the year (AY under consideration), the assessee was eligible to carry forward his losses as business loss. We find no infirmity in the impugned order of the Ld. CIT(A) in adjudicating this issue. Therefore, this ground (no.1) of revenue’s appeal is dismissed. 10. Coming to ground no. 2 of the revenue, which is against the action of the Ld. CIT(A) in deleting the addition of Rs. 1,88,75,000/- made by the AO on account of unexplained cash credit u/s. 68 of the Act. 11. Brief facts as noted by the AO was that since the assessee had shown unsecured loan the AO asked the A/R of the assessee to furnish details of unsecured loan, loan confirmation, purpose of unsecured loan obtained, detail of interest paid on such loan and directed the assessee to prove genuineness of loan. The A/R of the assessee furnished the details of unsecured loan of Rs. 19,81,5000/-. The assessee brought to the notice of AO that loan from Shri G.R Poddar (elder brother of assessee) was to the tune of Rs.1, 88,75,000/- and other loan (Rs.5,00,000/-) was from his son, Sh. Harish Poddar, Rs. 2,00,000/- from his daughter, Mona Poddar and Rs. 2,40,000/- was from his wife, Smt. Santosh Devi Poddar. The AO asked the assessee/AR to produce the details of Shri G.R
6 ITA No. 121/Kol/2020 AY 2012-13 Biswanath Poddar Poddar, elder brother of the assessee. According to the AO, during the assessment proceedings the assessee did not file any supporting documents, which could be verified. According to AO, even though the assessee has said that he received the said amount from his elder brother, Sh. G.R.Poddar, who is settled in Singapore, and he has given money/loan to the assessee for purchase of flat & business, however, the assessee failed to show that he had utilized the said loan for purchase of flat. Therefore, the AO added an amount of Rs. 1,88,75,000/- u/s. 68 of the Act. 12. On appeal, the ld. CIT(A) noted that the assessee had taken the said loan from his elder brother, Shri G.R Poddar, who is settled/resided in Singapore and he maintains an NRE account with UCO Bank, Burra Bazar, Kolkata (A/c No. 1734010000605) and HDFC Bank Ltd, C.R Avenue Branch, Kolkata (A/c No. 1924101000012). The Ld. CIT(A) found that the assessee has proved the identity of Shri G.R. Poddar (Gobnindram Poddar) by filing a copy of his passport as well as confirmation of account, which the AO himself has accepted that the assessee had filed copy of the passport to prove the identity of Sh.G.R Poddar. The Ld. CIT(A) has made a finding of fact that all the loans have been received from the said bank accounts. The Ld. CIT(A) also noted that the assessee had made payments worth of Rs.17,11,888/- to M/s. Emami Realty against purchase of flat, which is included under the head ‘loans and advances of “Rs. 37,49,588/-”. The details of advances as at 31-03-2012 and ledger of M/s. Emami Realty was taken note by the ld. CIT(A). Further the Ld. CIT(A) also took note of the fact that in the next AY 2013-14, the assessee received Rs. 60 lakhs from Sh. G.R Poddar and the AO in the scrutiny proceedings u/s 143(3) of the Act has accepted the identity, creditworthiness and genuineness of the loan transaction with Shri G.R.Poddar. Since the AO himself has accepted the identity, creditworthiness and genuineness of the lender, who is the elder brother of the assessee, who has given loan in the AY 2013-14, it does not stand to logic why the loan for this AY should be disallowed when the very same elder brother/lender of the assessee has given the loan to the assessee. Therefore, the said loan cannot be suspected / doubted. We find no infirmity in the impugned order of the Ld. CIT(A) and therefore, we dismiss this ground no.2 of the revenue’s appeal. 13. Coming to last ground, which is against the action of the Ld. CIT(A) in allowing the
7 ITA No. 121/Kol/2020 AY 2012-13 Biswanath Poddar short term capital loss of Rs. 5,70,328/- 14. According to AO, the assessee has claimed short term capital loss of Rs. 5,70,328. However, since the assessee did not produce any details or contract regarding this issue, according to him the assessee has failed to prove the nature of transaction and therefore, he disallowed the said claim of the assessee. 15. On appeal, the Ld. CIT(A) observed that the assessee had filed complete details of short term loans along with ledgers of the assessee in the books of the broker. The AO did not ask any other details or documents from the assessee and has simply disallowed it. Before the Ld. CIT(A) contract notes being voluminous was filed in CD. The Ld. CIT(A) has found that all the transactions were carried out through the registered broker electronically on the portal of the NSE through Screen Based Trading System and supported by time stamped contract notes. It was brought to the notice of Ld. CIT(A) that the deliveries have been effected through depository accounts and the payment was through banking channels and, therefore, the Ld. CIT(A) found that AO has simply disbelieved the claim even though the assessee had filed the complete details of Short term capital loss along with ledger of assessee in the books of broker. Taking note of the contract notes, the Ld. CIT(A) found that assessee carried out short-term transaction therefore, he directed to allow the claim of the assessee on this ground. We find no infirmity in the action of Ld CIT(A) on this issue. Therefore, this ground of revenue’s appeal is dismissed. 16. In the result, the appeal of revenue is dismissed Order is pronounced in the open court on 24 September 2020
Sd/- Sd/- ( J. Sudhakar Reddy) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 24 September 2020
**PP(Sr.P.S.)
8 ITA No. 121/Kol/2020 AY 2012-13 Biswanath Poddar Copy of the order forwarded to:
Appellant –Income Tax Officer, ACIT, Cir-49(1), Uttrapan Complex, DS-IV, 2nd Fl., Manicktala Civic Centre, Scm-VIIM, Kolkata-700 054. Kolkata-1. 2 Respondent – Shri Biswanath Poddar P-52 Block-B, Bangur Avenue, Lake Town, Kolkata-700 055. 3. CIT(A)-, Kolkata (sent through e-mail)
CIT- , Kolkata. 5. DR, ITAT, Kolkata. (sent through e-mail) By order, /True Copy, Assistant Registrar