ACIT-9(3)(2), MUMBAI vs. GLOBAL JEWELLERY PYT LTD., MUMBAI

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ITA 2657/MUM/2016Status: DisposedITAT Mumbai16 November 2017AY 2012-134 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted the assessee's failure to provide time-stamped contract notes for gold trading. Consequently, the order of the CIT(A) was set aside, and the matter was restored to the AO for fresh assessment.

What were the facts?

The assessee company filed a revised return declaring a loss, but the AO disallowed a significant portion as speculation loss. The CIT(A) held that gold transactions were derivatives covered by a proviso to Section 43(5), thus not speculative.

What were the issues?

Whether gold transactions qualify as speculative transactions, and if the assessee provided sufficient documentation to support its claim of hedging against price fluctuation risk.

Which sections of the Income-tax Act were involved?

Section 43(5),Section 143(3)

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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI

Before: SHRI D.T. GARASIA & SHRI N.K. PRADHAN

For Respondent: DR Assessee by : None
Hearing: 29/08/2017Pronounced: 16/11/2017

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the Revenue. The relevant assessment year is 2012-13. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-16, Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).

2.

We find from the record that there was no compliance either by the assessee or its authorized representative to the notice issued by the Registry fixing the case for hearing on 29.11.2016, 23.01.2017, 14.03.2017, 18.05.2017, 24.05.2017, 04.07.2017 and 24.07.2017. 3.

M/s Global Jewellery The ground raised by the Revenue in this appeal is against the order of the Ld. CIT(A) holding that gold is a derivative and the transactions are carried out through recognized stock exchange and the case of the assessee is covered by proviso (d) to section 43(5) of the Act. It is the contention of the Revenue that the Ld. CIT(A) erred in law as well as in facts in overlooking the factual observation by the AO in the assessment order that the hedging cover in several individual days exceed the stock of the assessee by nearly ten times and thus the contention of the assessee that this trading has been done only to hedge against price fluctuation risk is untenable, since the hedging cover should commensurate with the stock-in-trade of the assessee. Also it is stated by the Revenue that the Ld. CIT(A) erred in law as well as in facts in holding that said transactions were ‘eligible transactions’ as per Explanation 1 to clause (d) of 45(3); not appreciating that relevant time-stamped contract notes pertaining to gold trading were not submitted by the assessee and that a prerequisite to qualify as an ‘eligible transaction’, as per said Explanation is that the transaction must be supported by a time-stamped contract note issued by that broker/sub-broker.

4. Briefly stated the facts of the case are that the assessee-company filed its return of income for the AY 2012-12 on 30.09.2012 declaring total income of Rs.1,51,980/-. A revised return of income was filed on 10.12.2012 declaring loss of Rs.72,28,935/-. The Assessing Officer (AO) made an assessment u/s 143(3) on 28.02.2015 assessing the income at Rs.21,39,100/- after making disallowance of speculation loss of Rs.92,96,787/-.

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