Navin Kumar Kajaria, Kolkata vs ACIT | ITAT Kolkata 2018

Income Tax Appellate Tribunal, KOLKATA BENCH ‘SMC’, KOLKATA

Before: Shri P.M. Jagtap, AM]

order : May 24, 2018 ORDER This appeal filed by the assessee is directed against the order of Ld. CIT (Appeals) – 10, Kolkata dated 12.06.2017 and the solitary issue involved therein relates to the disallowance of assessee’s claim for loss of Rs. 13,10,688/- incurred in the dealing in currency derivatives.

The assessee in the present case is an individual who which derives income from dealing in Futures and Options & Shares. The return of income for the year under consideration was filed by him on 26.07.2012 declaring a total income of Rs. 22,11,320/-. In the said return, loss of Rs. 13,10,688/- incurred in dealing in currency derivatives was claimed by the assessee. The said loss was claimed to be incurred in the transactions made by the assessee during the year under consideration on MCX Stock Exchange Ltd. through broker M/s.

Assessment Year: 2012-13 Navin Kumar Kajaria Marigold Vanijya Pvt. Ltd. During the course of assessment proceedings, the claim of the assessee for the said loss was examined by the A.O. In this regard he received information from DIT(Inv.), Kolkata that M/s. Marigold Vanijya Pvt. Ltd. was providing bogus loss in dealing in currency derivative as per the requirements of clients. He accordingly issued a show cause letter to the assessee on 05.12.2014.

In reply to the letter of the A.O., the following explanation was offered by the assessee: “It appears from you letter referred to above that M/s. Marigold Vanijya Pvt. Ltd. is engaged in providing entries of bogus loss in currency derivatives. But I am not aware of anything in this matter. I, on bonafide belief approached to the company and made certain transactions from which loss of Rs. 1310687.52 was incurred. All such transactions were duly entered into my books of accounts maintained by me. The relating documents and/or evidences such as copy of general ledger difference bills and contract notes have already been submitted to your goodself during course of earlier hearing and are available on your record which may kindly be perused You will appreciate that contract note issued by Marigold Vanijya Private Ltd. are all time stamped and indicate Trade No. as well for each of the transaction entered. Moreover payments for loss incurred by me for transaction in currency derivatives as per difference bill raised have been settled by issue of accounts payee cheque in favour of Marigold Vanijya Private Ltd. I reiterate that transactions entered into by me with Marigold Vanijya Pvt. Ltd. are all genuine as supported by valid contract notes and therefore loss of Rs. 1310687.52”

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

Assessment Year: 2012-13 Navin Kumar Kajaria 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 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. 13,10,688/- 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 13.03.2015. 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.

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 Director of the broker company in his statement 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 this aspect in support of the revenue’s case. However, as contended by the learned counsel for the assessee, there is nothing in the statement of Shri Sachit Saraf, Director of the 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 Assessment Year: 2012-13 Navin Kumar Kajaria 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. 33,81,68,663/- and purchases of Rs. 33,81,66,145/- were made by the assessee resulting into a profit of Rs. 2,517/-. 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 profit shown therein was Rs. 2,517/- whereas the assessee had claimed a loss of Rs. 13,10,688/-. As submitted on behalf of the assessee before the Ld. CIT(A) 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. 13,13,205/- and accordingly the total loss as claimed by the assessee was to the tune of Rs. 13,10,688/-. 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 Ld. CIT(A) for not 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

Assessment Year: 2012-13 Navin Kumar Kajaria 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.

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 24th May, 2018.

NAVIN KUMAR KAJARIA,KOLKATA vs. ACIT, CIRCLE - 35, KOLKATA , KOLKATA