2019 (6) TMI 1250 - AT - Income Tax

Disallowance of loss of trading in commodity exchange - speculation loss or normal business loss - set off against the profits and gains of business u/s 44AD - failure to get account audited u/s 44AB - HELD THAT - Records shows that the assessee has filed the detailed statement of transactions carried out for commodity trading from KARVY Commodities Ltd. There is no finding by both the lower authorities challenging the genuineness of the commodity trading transactions entered during the year and the amount of loss suffered by the assessee. However in the instant case no question has been raised for the genuineness of the trading loss. It is true that it has been disclosed under head income from other source but according to Section 71(1) of the Act assessee is entitled to set off this commodity trading from income under the head Business profession and income from other sources. We accordingly direct the revenue authorities to allow the assessee s claim of commodity trading loss by way of set off to the extent of income under other heads for the year under appeal. Certainly assessee will be allowed to carry forward the loss to the subsequent years. Addition u/s 68 regarding opening cash balance - source of opening cash balance - HELD THAT - Assessee has not provided any details in the shape of balance sheet or statement of affairs for the immediate preceding Assessment Year 2013-14. In the given facts and circumstances of the case it seems that the assessee s claim of having opening cash balance of ₹ 17,92,999/- is baseless and devoid of merit. Further Ld. Counsel for the assessee failed to make any submission which shows that assessee has no credible documentary evidences to support this ground. We therefore have no option left except to dismiss the assessee s Ground.

Summary

Issues:
1. Disallowance of set off of loss from trading in commodity exchange against other heads of income.
2. Addition of unexplained opening cash balance.

Issue 1: Disallowance of set off of loss from trading in commodity exchange against other heads of income:
The appeal pertains to the Assessment Year 2014-15 against the orders of the Ld. Commissioner of Income Tax (Appeals) and the Income Tax Officer. The assessee declared a loss of ?13,86,223 and claimed a set off of loss from commodity trading transactions against other income. The Income Tax Officer disallowed the set off due to belated return filing and lack of audit under section 44AB, leading to an assessed income of ?24,00,226. The Commissioner upheld the disallowance citing lack of proper books of accounts. The Tribunal found the disallowance unjustified as there was no challenge to the genuineness of the trading transactions. The Tribunal directed revenue authorities to allow the set off and carry forward the loss.

Issue 2: Addition of unexplained opening cash balance:
The Income Tax Officer noticed cash deposits in two banks and an unexplained opening cash balance of ?17,92,999. The assessee failed to provide satisfactory explanations despite being asked for evidence. The Commissioner confirmed the addition under section 68 of the Income Tax Act, 1961. The Tribunal noted the lack of documentary evidence supporting the opening cash balance claim. The Tribunal dismissed the appeal as the assessee failed to provide credible evidence, sustaining the addition of ?17,92,999 as unexplained opening cash balance.

In conclusion, the Tribunal partly allowed the assessee's appeal by overturning the disallowance of the set off of loss from commodity trading against other income but upheld the addition of the unexplained opening cash balance.