KAMALA PRASAD KAJARIA HUF,KOLKATA vs. ITO, WARD - 35(3), KOLKATA , KOLKATA

order : May 24, 2018 ORDER This appeal filed by the assessee is directed against the order of Ld. CIT (Appeals) – 10, Kolkata dated 14.06.2017 and the solitary issue involved therein relates to the disallowance of assessee’s claim for loss of Rs. 5,17,141/- incurred in the dealing in currency derivatives.

3. In this context, it is pertinent to mention here that a search & seizure operation was conducted by DDIT(Inv.), Kolkata on 22.03.2013 . During the course of search operation statement of Shri Sachet Saraf, Director of Marigold Vanijya Pvt. Ltd. was recorded u/s 132(4) of the IT Act, 1961. In the said statement recorded under oath, Shri Saraf categorically statement that he has provided profit/loss in currency derivative through Marigold Vanijya Pvt. Ltd. as per the requirement of the clients. These are not the actual profit/losses. In reply to another question he stated that the difference amount the case of loss entries was received by him through cheque and he returned the cash after deducting his commission to those persons who have taken loss.

5. From the above stated fact, it is clear that there was manipulation in trading by the broker (Marigold Vanijya Pvt. Ltd) due to specific. reasons and they did not ask for money prior to. the trading or after the trading before the settlement of contract, which simply justifies the statement of Shri Sachet Saraf, recorded under oath during the course of Search & Seizure operation.

Assessment Year: 2012-13 Kamla Prasad Kajaria (HUF) to your authorised representative Mr.Mukesh Patawari through e-mail ID- mkpatawari@gmail.com on 06.02.2015. However, hard copy of the reply including details of· transactions is also enclosed with this letter for your clarification. On verification of details of transactions it is seen that total sales figure is Rs. 15,19,22,392/~ and total buy figure is Rs. 15,19,23,880/- resulting into loss of Rs. 1488 whereas you have claimed a loss of Rs. 5,17,141/- from trading in exchange.

The explanation offered by the assessee was not found acceptable by the A.O. According to him, there was failure on the part of the assessee to establish its claim of loss incurred in dealing in currency derivatives with documentary evidence. He noted that Shri Sachet Saraf, the Director of Marigold Vanijya Pvt. Ltd. himself had stated on oath that his company was indulging in providing loss in currency derivatives as per the requirement of the clients and such loss was Assessment Year: 2012-13 Kamla Prasad Kajaria (HUF) not the actual loss. The A.O., therefore, held that the assessee in collusion with broker Marigold Vanijya Pvt. Ltd. had created the bogus loss of Rs. 5,17,141/- in trading in currency derivatives and accordingly the same was disallowed by him in the assessment completed under section 143(3) vide an order dated 26.02.2015. On appeal, the Ld. CIT(A) confirmed the said disallowance made by the A.O. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

4. I have heard the arguments of both the sides and also perused the relevant material on record. It is observed that the claim of the assessee for the impugned loss incurred in trading in derivatives was disallowed by the authorities below mainly on the ground that the assessee had not given any margin money to the broker before the relevant transactions and in his statement, the Director of the broker company had admitted that his company was indulging in providing bogus loss in currency derivatives as per the requirement of the clients. At the time of hearing before the Tribunal, the learned DR has laid emphasis on these two aspects in support of the revenue’s case. However, as contended by the learned counsel for the assessee by relying on the decision of Hon’ble Bombay High Court in the case of Bonanja Commodities Brokers Pvt. Ltd. vs Mrs. Roshanara Bhinder (arbitration petition 195 of 2015 dated 16.04.2015), the collection of margin money as per the by-laws of MCX Stock Exchange Ltd. is only discretionary in nature and the transactions entered into by the clients without payment of margin money cannot be considered as illegal. As further contended by the learned counsel for the assessee, there is nothing in the statement of Shri Sachit Saraf, Director of the Assessment Year: 2012-13 Kamla Prasad Kajaria (HUF) broker company nor anything has been brought on record by the A.O. to show that the transactions entered into by the assessee company through the said broker were bogus. As matter of fact, a perusal of the order of the A.O. shows that enquiry was directly made by him from MCX Stock Exchange Ltd. by issuing the notice u/s 133(6) of the Act in order to verify the transactions entered into by the assessee through M/s. Marigold Vanijya Pvt. Ltd. and in reply to the said notice, MCX Stock Exchange Ltd. had not only confirmed the transactions but had also furnished the required information along with a CD containing details of all transactions made by the assessee during the year under consideration through broker Marigold Vanijya Pvt. Ltd. As found by the A.O. on verification of the said details, total transactions involving sales of Rs. 15,19,22,392/- and purchases of Rs. 15,19,23,880/- were made by the assessee resulting into a loss of Rs. 1,488/-. This relevant evidence confirming the genuineness of the transactions made by the assessee on MCX Stock Exchange Ltd. was brushed aside by the A.O. on the ground that loss shown therein was Rs. 1,488/- whereas the assessee had claimed a loss of Rs. 5,17,141/-. As submitted on behalf of the assessee before the Assessing Officer as well as before us, expenditure was incurred by the assessee relating to the said transactions on account of brokerage, service tax and other charges levied by the broker aggregating to Rs. 5,15,653/- and accordingly the total loss as claimed by the assessee was to the tune of Rs. 5,17,141/-. As pointed out by the learned counsel for the assessee, this additional expenditure incurred by the assessee on account of brokerage, service tax and other charges was duly supported by the documentary evidence in the form of relevant bills issued by the broker and there was no reason whatsoever given by the A.O. for not Assessment Year: 2012-13 Kamla Prasad Kajaria (HUF) accepting this explanation of the assessee. Keeping in view all these facts and circumstances of the case, I am of the view that the genuineness of the transactions made by the assessee on MCX Stock Exchange Ltd. through broker Marigold Vanijya Pvt. Ltd. was duly established and the action of the authorities below in disallowing the claim of the assessee for the resultant loss in dealing in currency derivatives is not tenable. I, therefore, delete the said disallowance and allow the appeal of the assessee.