DCIT, AAYAKAR BHAWAN POORVA. , KOLKATA vs. M/S. DELIGHT SUPPLIERS PVT. LTD, KOLKATA

DCIT, Circle-12(1), Kolkata Vs. Delight Suppliers Pvt. Ltd. 145, Rashbehari Avenue, Sarat Bose Road, Kolkata-700029. (PAN: AABCD8542L) (Appellant) (Respondent) Appearances by: Shri Raman Garg, Addl. CIT, DR appeared for Appellant. Shri Siddharth Agarwal, Advocate appeared for Respondent. Date of concluding the hearing : 17.01.2024 Date of pronouncing the order : 26.02.2024 ORDER

Per Manish Borad, Accountant Member:

2. Ld. CIT(A) erred in deleting the addition of Rs. 1,54,38,794/­ on account of bogus loss on currency derivatives, ignoring the fact that assessee had paid most of the losses incurred to the broker in the next financial year, the delay in Delight Suppliers Pvt. Ltd. the period of settlement raises question about the genuineness of the transactions.

3. Whether the CIT(A) erred in holding the transaction to be genuine only on the basis of the fact that transactions were through bank and carried out at MCX Stock Exchange ignoring the fact these evidences do not make a non­ genuine transaction genuine.

4. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the income under the head capita! gains to the tune of Rs. 15,08,720/­ and allowing the assessee’s claim of safe harbour rule of 5% variation between stamp duty value and sale consideration for the A Y 2012­ 13 under 3 proviso of section 50C of the IT Act, 1961 when the 3 proviso of section 50C of the IT Act, 1961 and explanatory notes to Finance Act, 2018 clearly mentions that the amendment would be effective from 01.04.2019. The appellant craves leave to make any addition, alteration and modification, abrogation etc. of ground or grounds on or before or during the course of hearing of the appeal."

4. On the other hand, the Ld. Counsel for the assessee vehemently argued placing reliance on the order of the Ld. CIT(A) referring to the paper book containing 36 pages filed on 04.08.2023 and also placing reliance on various decisions appearing in the case law paper book contained 26 pages.

Delight Suppliers Pvt. Ltd.

“"3.3 I have carefully considered the facts of the case and submission of the appellant. Assessee has indulged in currency derivative trading at MCX Stock Exchange. All the transactions have been carried out at the MCX Stock Exchange platform and even the AO has in this regard. On the basis of information received from Investigation Wing, AO has concluded that the transactions through M/s. Marigold, Vanijya Pvt. Ltd. were manipulated and not genuine. However, subsequently, the Director of the said company, Sri Sachet Sara] who had given this statement during proceedings u/s.132, had retracted his statement. AO has not carried out any further investigation in this matter although he has pointed out some issues relating to some schedule of payments made by the assessee company to M/s. Marigold Vanijya Pvt. However, these issues are hot sufficient in itself to draw any adverse view regarding the transactions. Assessee has also raised the issue regarding principles of natural Justice and has pointed out that neither the statement of Sri Sachet Saraf was given to the assessee nor opportunity of cross­ examination was provided, despite repetitive requests in this regard. Appellant has also cited a number of decisions of the Kolkata, ITAT which have held the transactions in currency derivatives through M/s. Marigold Vanijya Pvt. Ltd. to be genuine, under the same facts as those of the assessee company. In these decisions, ITAT has observed that additions have been made only on the basis of the statement of Sri Sachet Saraf who has later retracted his statement. There was no corroborative evidence to show that transactions in currency derivative trading were manipulated. Hence, additions have been deleted and transactions with M/s. Marigold Vanijya Pvt. Ltd. have been held to be genuine.

Delight Suppliers Pvt. Ltd. Under the circumstances, as discussed above and respectfully following the decisions of the Hon'ble Kolkata ITAT, as cited by the appellant, AO is directed to delete the addition of Rs.1,54,38,794/­ and to allow the loss claimed by the assessee.”

“4.3 I have carefully considered the facts of the case and submission of the appellant. Valuation report of the OVO has been received after the assessment order was finalised. As per the valuation report, the estimated value of the property as on 31.01.2012 was Rs.12,07,89,700/­­whereas assessee had declared the sale consideration of Rs.11,51,08,600/ as on 31.01.2012. Thus, the difference between the estimated value and the declared value was less than 5% of the declared value. As appellant in its submissions had claimed that safe harbour rule of 5%, as per the 3rd proviso to section SOC, would be applicable in its case in view of several judicial pronouncements, AO was asked to offer his comments on this" issue. Vide letter dated 28.11.2022, AO has submitted that 3rd proviso to section 50C was inserted by Finance Act, 2018 and it Was effective from 01.04.2019. AO has mentioned that there is no provision that this amendment would be applicable retrospectively, i.e. w.e.f 01.04.2003. AO has also drawn our attention to the Explanatory Notes to Finance Act, 2018 which clearly mentions, that the amendment would be effective from 01.04.2019. I have duly considered AO's objections in this regard. But the facts remains that there are several decisions including those of Kolkata ITAT, as mentioned by the appellant in its submissions, which have held the insertion of 3rd proviso to section 50C of the I. T. Act to be declaratory and curative in nature. It is held that this amendment is not a substantive amendment. Rather it is only a procedural amendment. Therefore, even when the statute does not specifically state so, such amendment are in the nature of retrospective amendment and these should be treated as effective from the date when 50C was introduced in the statute, i.e. w.e.f. 01.04.2003. As in the appellant's case, the difference between the estimated value and the declared value does not exceed 5% of the declared value, assessee is entitled for safe harbour rule of 5% as per 3rd proviso to section 50C, as held in various judicial decisions, as mentioned in the preceding paras. Coming to the addition in respect of depreciation, I agree with appellant's submission that once the safe harbour rule of 5% is held to be applicable in appellant's case, no addition could be made by invoking the provisions of section 50C. Consequently, assessee's computation in respect of capital, gains would be acceptable and consequently there will be no occasion to disturb the WDV in respect of buildings. This would also imply that depreciation worked out as per remaining WDV in the depreciation chart would be same as declared by the assessee. Hence, addition in respect of excess claim of depreciation is not sustainable. In view of the above discussion, addition of Rs.15,08,720/­ under the head ‘capital gains’ is deleted.”