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Facts
The Revenue appealed against the order of the CIT(A) which deleted an addition of Rs. 1,04,90,377/- made by the AO on account of commodity trading loss. The AO disallowed the loss, considering it to be a contrived loss booked through synchronized trading to evade tax.
Held
The Tribunal held that the transactions, characterized by rapid buy-sell within the same day leading to losses, appeared manipulative and were not genuine business transactions. The CIT(A) failed to appreciate the substance of the transactions and granted relief based on the form of transactions conducted on the NMCE platform.
Key Issues
Whether the commodity trading losses incurred through synchronized trading are genuine business losses or contrived losses aimed at tax evasion.
Sections Cited
250, 143(3), 147, 148, 115JB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PATNA BENCH AT KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
order
: 24-June-2025 ORDER
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the Revenue is against the order of the Commissioner of Income Tax (Appeals)-1, Patna [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2011-12 dated 13.08.2020, which has “On analysis of commodity trade ledger received from the National Multi- Commodity Exchange of India Ltd., Ahmedabad (NMCE) it transpired that the counter party of the assessee company of each intraday sale and purchase are the same. The transaction of purchase and subsequent sale or vice versa were executed by the assessee company in fraction of minute or second which leads to invariable loss. Putting in simple words, the assessee company makes buying of commodity from a party on a given day and execute sale of such commodity on the same day to the same party deliberately at lower price to achieve intended commodity loss. The full squaring off transaction during a day invariably with a loss is a clear cut indicator of synchronized trading which is very much found in the assessee’s case. On sample basis, trade ledger of some of the party is given hereunder which explicitly establish the above findings. (Subh Commodity) ARIHANT SHARECOM PRIVATE LIMITED Multiple SS Product Name Trade Time B_S Qty Price Value Factor Gap SACK FUTURES 30/03/2011 01:30:14 PM BUY 25 3429.50 125 10717187.50 2 SACK FUTURES 30/03/2011 01:30:16 PM BUY 25 3429.50 125 10717187.50 4 SACK FUTURES 30/03/201101:32:49 PM BUY 50 3429.50 125 21434375.00 30 SACK FUTURES 30/03/2011 01:32:51 PM BUY 50 3429.50 125 21434375.00 17 RAW JUTE FUTURES 24/03/201112:16:00 PM BUY 25 3407.60 100 8519000.00 22 RAW JUTE FUTURES 24/03/2011 12:16:09 PM BUY 25 3407.60 100 8519000.00 29 RAW JUTE FUTURES 24/03/201112:16:11 PM BUY 25 3407.60 100 8519000.00 30 SACK FUTURES 30/03/201101:21:54 PM SELL 25 3378.60 125 10558125.00 16 SACK FUTURES 30/03/2011 01:21:54 PM SELL 25 3378.60 125 10558125.00 12 SACK FUTURES 30/03/2011 01:35:54 PM SELL 25 3378.50 125 10557812.50 2 SACK FUTURES 30/03/201101:35:55 PM SELL 25 3378.50 125 10557812.50 3 SACK FUTURES 30/03/201101:36:06 PM SELL 25 3378.50 125 10557812.50 5 SACK FUTURES 30/03/201101:36:14 PM SELL 25 3378.50 125 10557812.50 8 RAW JUTE FUTURES 24/03/2011 12:20:05 PM SELL 1 3390.60 100 339060.00 5 RAW JUTE FUTURES 24/03/201112:20:34 PM SELL 1 3373.80 100 337380.00 2 RAW JUTE FUTURES 24/03/201112:20:57 PM SELL 1 3356.90 100 335690.00 2 RAW JUTE FUTURES 24/03/201112:22:10 PM SELL 25 3340.40 100 8351000.00 12 RAW JUTE FUTURES 24/03/201112:22:12 PM SELL 25 3340.40 100 8351000.00 13 RAW JUTE FUTURES 24/03/2011 12:22:14 PM SELL 22 3340.40 100 7348880.00 9 Multiple SS Product Name Trade Time B_S Qty Price Value Factor Gap COPPER FUTURES 03/02/2011 06:03:00 PM SELL 3 452.50 1000 1357500.00 4 COPPER FUTURES 03/02/2011 06:03:22 PM BUY 1 457.00 1000 457000.00 1 COPPER FUTURES 03/02/2011 06:03:44 PM BUY 1 461.55 1000 461550.00 0 COPPER FUTURES 03/02/2011 06:04:30 PM BUY 1 463.85 1000 463850.00 4 ANUSUYA AJITSARIA Multiple SS Product Name Trade Time B_S Qty Price Value Factor Gap ALUMINIUM 5 TON 01/02/2011 05:32:09 PM BUY 6 115.75 5000 3472500.00 6 FUTURES ALUMINIUM 5 TON 01/02/2011 05:33:11 PM BUY 3 115.75 5000 1736250.00 7 FUTURES ALUMINIUM 5 TON 01/02/2011 05:35:02 PM SELL 9 112.95 5000 5082750.00 4 FUTURES MRIDULA AGRAWALA Multiple SS Product Name Trade Time B_S Qty Price Value Factor Gap COPPER FUTURES 29/01/201111:40:56 AM BUY 15 451.05 1000 6765750.00 6 COPPER FUTURES 29/01/2011 11:41:54 AM SELL 15 437.85 1000 6567750.00 8 (Marina Commodity) TULSHYAN METALS PRIVATE LIMITED Multiple SS Product Name Trade Time B_S Qty Price Value Factor Gap NICKEL FUTURES 16/03/201101:22:50 PM BUY 1 113.75 5000 568750.00 0 NICKEL FUTURES 16/03/2011 01:23:01 PM BUY 1 114.30 5000 571500.00 0 NICKEL FUTURES 16/03/2011 01:23:06 PM BUY 1 114.85 5000 574250.00 0 NICKEL FUTURES 16/03/201101:23:45 PM BUY 1 115.40 5000 577000.00 0 NICKEL FUTURES 16/03/201101:23:57 PM BUY 5 115.45 5000 2886250.00 0 NICKEL FUTURES 16/03/201101:24:12 PM BUY 5 115.45 5000 2886250.00 3 NICKEL FUTURES 16/03/201101:25:50 PM BUY 10 115.45 5000 5772500.00 6 NICKEL FUTURES 16/03/201101:28:12 PM BUY 12 115.45 5000 6927000.00 9 NICKEL FUTURES 16/03/2011 01:28:23 PM BUY 12 115.45 5000 6927000.00 7 ZINC FUTURES 21/03/2011 03:59:29 PM BUY 12 115.45 5000 6927000.00 4 ZINC FUTURES 21/03/201103:59:40 PM BUY 12 115.45 5000 6927000.00 2 ZINC FUTURES 21/03/2011 04:04:10 PM BUY 1 113.75 5000 568750.00 0 ZINC FUTURES 21/03/201104:04:30 PM BUY 1 114.30 5000 571500.00 0 ZINC FUTURES 21/03/2011 04:05:56 PM BUY 1 114.85 5000 574250.00 0 ZINC FUTURES 21/03/2011 04:06:09 PM BUY 1 115.40 5000 577000.00 0 ZINC FUTURES 21/03/2011 04:06:55 PM BUY 8 115.45 5000 4618000.00 6 NICKEL FUTURES 16/03/2011 01:17:26 PM SELL 1 113.20 5000 566000.00 3 NICKEL FUTURES 16/03/2011 01:17:29 PM SELL 23 113.20 5000 13018000.00 4 NICKEL FUTURES 16/03/2011 01:28:33 PM SELL 1 114.85 5000 574250.00 0 NICKEL FUTURES 16/03/201101:28:41 PM SELL 1 114.25 5000 571250.00 0 ZINC FUTURES 21/03/2011 03:57:32 PM SELL 1 113.65 5000 568250.00 0 ZINC FUTURES 21/03/2011 03:58:50 PM SELL 10 113.20 5000 5660000.00 2 ZINC FUTURES 21/03/201103:59:16 PM SELL 11 113.20 5000 6226000.00 13 ZINC FUTURES 21/03/2011 03:59:55 PM SELL 5 113.20 5000 2830000.00 1 ZINC FUTURES 21/03/201104:00:15 PM SELL 5 113.20 5000 2830000.00 1 ZINC FUTURES 21/03/201104:01:03 PM SELL 5 113.20 5000 2830000.00 1 ZINC FUTURES 21/03/2011 04:02:17 PM SELL 5 113.20 5000 2830000.00 2 ZINC FUTURES 21/03/2011 04:02:35 PM SELL 4 113.20 5000 2264000.00 1 ZINC FUTURES 21/03/201104:03:06 PM SELL 12 113.20 5000 6792000.00 9 SAKET SINGHAL B_S Qty Price Multiple SS Product Name Trade Time Value Factor Gap NICKEL FUTURES 16/03/201101:14:27 PM BUY 3 1184.70 250 888525.00 0 NICKEL FUTURES 16/03/201101:14:36 PM SELL 3 1149.80 250 862350.00 1 SHRESTHA BENEFICIARY TRUST Multiple SS Product Name Trade Time B_S Qty Price Value Factor Gap NICKEL FUTURES 16/03/201101:17:04 PM SELL 17 1149.80 250 4886650.00 0 NICKEL FUTURES 16/03/201101:17:13 PM BUY 17 1184.70 250 5034975.00 0 RASHI MAHESHWARI Multiple SS Product Name Trade Time B_S Qty Price Value Factor Gap NICKEL FUTURES 16/03/201101:10:20 PM BUY 2 1184.70 250 592350.00 0 NICKEL FUTURES 16/03/2011 01:10:57 PM BUY 1 1158.40 250 289600.00 0 NICKEL FUTURES 16/03/2011 01:11:04 PM BUY 8 1184.70 250 2369400.00 0 NICKEL FUTURES 16/03/2011 01:10:37 PM SELL 2 1149.80 250 574900.00 0 NICKEL FUTURES 16/03/2011 01:10:50 PM SELL 8 1149.80 250 2299600.00 0 NICKEL FUTURES 16/03/2011 01:10:54 PM SELL 1 1149.80 250 287450.00 0 5.2. The assessee was confronted with the above findings which emerged from the information received from the NMCE, Ahmedabad. Copy of ledger account of few such counter parties were provided to the assessee as per the following details:
s. Product Date Broker Counter Party Counter Party Broker No. 21/03/2011 Marina Commotrade 01 Zinc Futures Lalit Kumar & Rajesh Kumar Nature Dealcomm Pvt. Ltd Pvt. Ltd. 02 Aluminium 5 Ton 15/03/2011 Marina Commotrade Zaliog Commodities Pvt. Tulshyan Metals Pvt. Ltd. Futures Pvt. Ltd. Ltd. 03 Raw Jute 24/03/2011 Subh Commodities Pvt. Subh Metals, Unit of Sarda Shaharsh Comm Futures Ltd. Melcast Pvt.Ltd Services Pvt Ltd 04 Rape/Mustard 28/03/2011 Subh Commodities Pvt. SAHAL COMMODITIES HEMANT KUMAR AGARWAL Ltd. PVT LTD “I have examined the contention put forward by the assessee. The findings of contrived losses booked by the assessee misusing NMCE platform is based on documents such as trade ledger received from the NMCE which explicitly incorporate all details of execution of trade orders by the assesses. The assessee was specifically confronted with the manner he adopted to book fictitious losses for setting off genuine profit and therefore indulged in synchronized commodity trading. The findings of contrived losses has been derived on a comprehensive analysis of commodity trade ledger of the assessee with reference to kind of commodity, date and time of order and value of sale purchase as well as counterparty clients which the assessee has not controverted with any supporting documents in his reply submitted to this office. The assessee did not offer any reply on the specifics details of transactions appearing in the trade ledger. The sample of trade transaction in the case of some of the parties has been reproduced in the foregoing Para of the order which reveals that the counter party of each intraday sale and purchase are the same. The transaction of purchase and subsequent sale or vice versa executed by the assessee company in fraction of minute or second which leads to invariable loss. The commodity selected for trading are usually illiquid items free from the volatility of the market and is easy for price manipulation which provided scope to the assessee to carry out sale and purchase at its sweet will and to achieve objective of booking loss misusing the NMCE platform. The assessee company makes buying of commodity from a party on a given day and execute sale of such commodity on the same day to the same party deliberately at a lower price to achieve intended commodity trade loss. The full squaring off transaction during a day invariably with loss which a prudent businessman would never do is an established indicator of synchronized trading which is very must existed in
Therefore, considering the totality of facts and circumstances of the case and going by the preponderance of probability, Ground nos. 1 and 2 are allowed in favour of the revenue as the transactions are colourable in nature and have been apparently carried out to incur losses through contrived/manipulative transactions. The learned CIT appeal has failed to appreciate the substance of the transactions and has granted relief merely on the form of them without realising that the transactions carried out on the NMCE platform do not per se become genuine merely because they have been carried out on that platform. Thus, the order of the Ld. CIT(A) is set aside and the order of the Ld. AO is hereby confirmed.