RAMPURIA INDUSTRIES & INVESTMENTS LTD., ,KOLKATA vs. DCIT, CIRCLE - 7(2), KOLKATA , KOLKATA

The assessee’s twin substantive grounds raised in the instant appeal challenge correctness of validity of the impugned reopening followed by disallowance of losses of Rs.26,68,128/- derived from currency derivative transactions as bogus in the course of re-assessment as affirmed in the lower appellate proceedings.

Learned Departmental Representative vehemently contended during the course of hearing that both the lower authorities have rightly reopened the assessment as per Shri Saraf’s search statement admitting to have provided bogus accommodation entries of currency derivative loss to the assessee. We find that the instant issue on merits is no more res integra as the tribunal’s coordinate bench’s order in ACIT vs. M/s. Tirupati Awas P. Ltd. dated 28.03.2018 has decided the same against the Revenue as under:

The assessee challenged the above order of AO before the CIT-A and contended that the said transaction was online through MCX Stock Exchange by its broker, M/s. Marigold Vanijya Pvt. Ltd, is a registered member of MCX Stock Exchange Limited. The claim of loss was duly reflected in the audited financial statement as well as in the return of income by applying the provisions of section 43(5)(d) of the Act. The assessee company is registered with the said broker and complied with all KYC norms. The assessee has been allotted client (code) no. CK0105 for trading purpose in currency derivatives in the segment of exchange. The MCX Stock Exchange is a notified/listed stock exchange under the Income Tax Act. The assessee has been issued valid contract notes in respect of on line trade, wherein, order number, trade number, trade time etc. are properly mentioned as prescribed by concerned authorities/stock exchange. The assessee made the payments to above said registered/listed broker for the said transaction by way of account payee cheques. The assessee submitted all the details relating to contract notes and ledger copies of assessee in the books of said broker. Apart from above, the assessee also submitted an affidavit of Mr. Sachet Saraf, director of M/s. Marigold Vanijya Pvt. Ltd admitting that all the foreign currency transactions done by assessee are boanfide, genuine and Rampuria Industries & Investments Ltd.

The CIT-A considering the above submissions of assessee was satisfied that the assessee submitted all the required details in support of its transaction/claim. The CIT-A held that the AO did not place on record any cogent and factual or palpable material/evidence in support of his view and therefore, deleted the said addition made by the AO by observing as under:- 4.2 I have considered the submission of the AR of the appellant as well as the case laws referred to in his submission. I find that the appellant has incurred loss of Rs. 43,90,251/- on account of dealing in foreign exchange derivatives. The assessment in the instant case was reopened by the AO based on information received by the AO of Marigold Vanijya (P) Ltd. Mr. Shri Sachet Saraft, one of the Directors of Marigold Vanijya (P) Ltd during the course of search & seizure operation u/s. 132 of the Act, had deposed before the concerned DDIT that the company was engaged in the business of providing accommodation of losses and profits to the beneficiaries as and when desired. The appellant in the instant case being an alleged beneficiary was issued notice u/s. 148 of the Act. In course of the reassessment proceedings, the appellant furnished all the requisite documents in support of transactions entered into by it in respect of foreign exchange derivatives. On this score, I find that no enquiry, whatsoever, has been conducted by the AO with either the broker or the MCX Stock Exchange to verify the genuineness of the transactions entered into by the appellant. No convincing material, except for the statement of Mr. Sachet Saraf, has been relied upon by the AO in making the impugned addition. It has been brought to my notice that even the statement of Mr. Sachet Saraf was retracted at a later point of time (supra). This fact has not been controverted by the AO in any manner. It is trite law that additions cannot be made, based merely on the statement of a third party, in the absence of any corroborative material evidence. There must be cogent and palpable material evidence material evidences on record for any justifiable action in the matter. I find that the AO has not done justice in the matter in this respect for which the impugned addition cannot stand the test of appeal. I find that the appellant has discharged its initial onus by furnishing all the requisite details in respect of foreign exchange loss incurred by it. It is not the case of the AO that the appellant has failed to furnish documentary evidences in support of the said foreign currency loss. Thus, considering the entire facts and circumstances of the issue at hand in the backdrop of the various case laws cited in the submission supra and in the absence of any cogent finding or corroborative materials brought on record by the AO to substantiate his stand in subverting the submission of the appellant on the impugned matter at the assessment stage. I do not find any merit in the action of the AO in making the impugned disallowance of Rs.43,90,251/- as unexplained loss with regard to the said transactions. In view of the foregoing, I find that the addition made on this count is not sustainable at the appellate stage which is now directed to be deleted. The AO is directed accordingly.”

Before us the ld. DR submits that the assessee failed to produce any evidence gathered by the AO in re-assessment proceedings. MCX Stock Exchange did not furnish full details in respect of said transaction of assessee in response to notice issued u/s. 133(6) of the Act. Thus the AO has rightly added the said amount to the total income of assessee. The CIT-A basing on submissions of assessee has given relief to assessee without calling remand report of AO in admitting additional evidence. Thus, the CIT-A has erred in accepting wrong contention of assessee. He also violated the provisions of Rule 46A in admitting the same. The CIT-A has also failed to give an opportunity to AO for verification of the details as submitted by the assessee. In view of above, he prayed to allow the grounds of appeal

We adopt the above extracted reasoning mutatis mutandis to hold that the impugned disallowance of bogus currency derivative loss does not deserve to be upheld. The same is directed to be deleted. The assessee succeeds in its instant latter substantive ground.

Mr. Agarwal is fair enough in not pressing for assessee’s former legal ground (supra).