DINESH KUMAR AGARWAL,JAIPUR vs. ACIT, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh HkkxpUn] ys[kk lnL; ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 489/JP/2013 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Shri Dinesh Kumar Agarwal The ACIT Vs. 1057, Pano Ka Dariba Circle- 1 , Subhash Chowk, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABHPA 4416 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by: None (Date was noted) jktLo dh vksj ls@ Revenue by: Smt. Poonam Rai, DCIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 16/01/2017 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 19 /01/2017 vkns'k@ ORDER PER BHAGCHAND, AM The assessee has filed an appeal against the order of the ld. CIT(A)I, Jaipur dated 6-02-2013 for the assessment year 2008-09 raising following grounds of appeal. ‘’1. That the ld. CIT(A) has erred in law and fact in upholding AO’s order of invoking the provision of Section 145(3) in spite of fact that regular and proper books of accounts are maintained by the appellant duly audited under facts and circumstances of the case, he ought to have assessed the income as per statement of accounts submitted.

2 ITA No.489/JP/2013 Shri Dinesh Kumar Agarwal vs. ACIT,Circle-1,Jaipur

2.1 None appeared on behalf of the assessee in spite of noting the date

fixed for heaing on 16-01-2017. Consequently the Bench is left with no

alternative but to decide the appeal on merits, ex parte qua the assessee,

after hearing ld. DR and after perusal of the materials available on record.

3.1 Apropos ground No. 1 and 2 of the assessee, the facts as emerges

from the order of the ld. CIT(A) is as under:-

Ground No.1

‘’4.3 I have carefully perused the order of the AO and the submissions of the A.R. It is a fact that purchases from M/s. Century Gems, M/s. Anshu Gems & M/s. Vijay Gems could not be verified and to that extent the assessee failed to discharge its onus of getting the purchases verified. The Hon'ble ITAT Jaipur Bench has consistently held in the case of gems and jewellery traders of Jaipur that un- verifiability of purchases are a sufficient ground for invoking the provisions of Section 145(3). Therefore, the decision of the AO to reject the books of accounts of the assessee by invoking the provisions of Section 145(3) is upheld.’’

3 ITA No.489/JP/2013 Shri Dinesh Kumar Agarwal vs. ACIT,Circle-1,Jaipur Ground No. 2

6.3 I have carefully perused the order of the AO and the submissions of the AR. As per the details noted by the AO on page 9 of her order, it is seen that the appellant sold and purchased shares of ICICI Bank and Reliance Power on the same date resulting in profits. Since the transactions are intra-day they are clearly speculative as per the provisions of section 43(5) which is quoted below for question clarity: “ Speculative transaction” means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips”. The AR of the appellant has not given any reason as to why intra-day transactions are not to be treated as speculative transactions considering that the scrips could not have been delivered on the same date of purchase and sale. The arguments furnished are, therefore, not relevant to the facts of the case of the appellant. It is, therefore, held that the intra-day transactions in scrips were speculative transactions as defined by section 43(5) and so the income from these speculative transactions is required to be taxed as business income under Explanation 2 to section 28. Therefore, the decision of the AO to treat Rs. 11,55,663/- as business income u/s 43(5) is confirmed.

3.2 During the course of hearing, the ld. DR relied on the orders of the

authorities below.

3.3 I have heard the ld. DR and perused the materials available on

record. As regards Ground No. 1 of the assessee, it is noticed that the

assessee firm derived income from manufacturing and trading of gem

4 ITA No.489/JP/2013 Shri Dinesh Kumar Agarwal vs. ACIT,Circle-1,Jaipur stones and jewellery, Capital Gains and other source. It is further noted

that the assessee had shown purchases from M/s. Century Gems, M/s.

Anshu Gems and M/s. Vijay Gems. However, the Investigation Wing of

the Department during search and seizure proceedings in certain cases

found that M/s. Century Gems, M/s. Anshu Gems and M/s. Vijay Gems

were indulging in providing entries like issuing sale bills without actual

delivery of gods. Besides this, the BCTT Wing of the Income-Tax

Department conducted surveys in various cases in the year 2007-08.

During the course of survey, it was found that various persons were

indulging in the practice of issuing bogus bills in the trade of gems and

jewellery and they had admitted in their respective statements recorded

on oath that they were merely issuing bills and no real sale and purchases

were being made by them and thus they were not doing any business

activities and were merely providing accommodation entries. The AO

required the assessee to get these purchases verified by issuing show

cause notice on 25-11-2010 but the assessee failed justify it. Summons

was issued to the above parties but they remained unserved. According to

the AO, the purchases made by the assessee from M/s. Century Gems,

M/s. Anshu Gems and M/s. Vijay Gems were unverifiable. In this

5 ITA No.489/JP/2013 Shri Dinesh Kumar Agarwal vs. ACIT,Circle-1,Jaipur

situation, the AO rejected the books of account of the assessee by

invoking the provisions of Section 145(3) of the Act which has been

sustained by the ld. CIT(A) in first appeal. As regards the Ground No. 2

of the assessee, the ld. CIT(A) noted from the order of the AO that the

assessee had shown Short term capital gain of Rs. 11,55,563/- and the

details of which is noted on page 9 of assessment order as under:-

Name of Opening Qty. Date of Total Qty. sold Co. per Total Date of scrip stock purchase purchase amount share amount purchase ICICI Nil 11200 19-03-08 8571959 11200 - 8991810 19-03-08 Bank Reliance Nil 2000 25-03-08 9522190 2000 - 9697911 25-03-08 power Reliance Nil 42816 18-03-08 14512609 42816 - 15025543 18-03-08 power

It is seen that the above transactions were intra-day in nature and were hit

by provisions of Section 43(5). A show cause notice dated 20-10-2010

was issued to the assessee by the AO as to why the transactions should

not be treated as speculative transactions and income be consequently

treated as business income. The assessee filed by the reply dated 29-11-

2010 but the same was not found to be applicable by the AO as the

provision of the section clearly states that intra-day delivery based

transactions are to be considered as speculative transactions and need to

be taxed at normal rates rather than subsidized rate of tax as applicable on

STCG earned on equity shares. The AO took the support of CBDT

6 ITA No.489/JP/2013 Shri Dinesh Kumar Agarwal vs. ACIT,Circle-1,Jaipur circular Nos. 1857 dated 31-08-1989 and No.04/2007 dated 16-06-2007.

The AO also relied on following case laws to this effect.

(i) Rajputana Textile (Agencies) Ltd. vs. CIT (1961) 42 ITR 743 (SC) (ii) W.L. Knopp vs. CIT 16 ITR 398 (Mad)

(iii) Raja Bahadur Visheshwar Singh vs. CIT 41 ITR 685

(iv) Bharat Development (P) Ltd. vs. CIT (1980) 4 Taxman 58 (Del.)

Conclusively, the AO treated the income of Short term capital gain of Rs.

11,55,563/- as ‘’Income from Business or Profession’’. In first appeal, the

ld. CIT(A) confirmed the action of the AO treating Rs. 11,55,663/- as

business income u/s 43(5) of the Act. Now the assessee is in appeal

before this Bench against the order of the ld. CIT(A) dated 6-02-2013 on

both the issues (supra). It is also noted that during the course of hearing

none appeared on behalf of the assessee on date of hearing fixed for

16-01-2017 in spite of noting the date of hearing. Hence, in view of the

above facts, circumstances of the case and the materials available on

record, I concur with the findings of the ld. CIT(A). Thus the appeal of

the assessee on both the grounds (supra) is dismissed.

7 ITA No.489/JP/2013 Shri Dinesh Kumar Agarwal vs. ACIT,Circle-1,Jaipur 4.0 In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 19 /01/2017.

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