2022 (7) TMI 594 - AT - Income Tax

Unascertained liability - assessee could not establish the justification with evidence nature of liability - CIT-A deleted the addition - HELD THAT - Assessee has placed the copy of a cheque of Rs. 1,51,00,000/- in favour of the MD of Army Welfare Housing Organisation. There is communication on record that there was a dispute in regard to HT line in land sold by the assessee to AWHO. It can be observed that Ld. AO has not doubted this possible liability but considered it to be unascertained. The matter of fact is that instead of Rs. 75,58,000/- provision made the assessee ended making a payment of Rs. 1,51,00,000/- for this disputed liability after settlement. Considering the evidences before it Ld. CIT(A) had found the findings of ld. AO based on surmises or suspicion alone and same require no interference. The ground no 1 is disallowed. Addition on account of loss claimed in trading in foreign exchange - assessee could not establish the genuineness thereof with evidence without giving any appropriate facts - CIT-A deleted the addition - HELD THAT - As finding of Ld AO that these investment were beyond ordinary business of Company is not correct. Further the time stamped contract notes of the authorized brokers operating through recognized stock exchange alongwith unique client code substantiate the claim of assessee that the transactions were genuine and ld. CIT(A) has rightly considered the same. Merely by introducing the rule of human prudence that no person would continue to make loss on day to day basis the documents reflecting the transactions cannot be alleged to be sham. No ground of interference is made out. The ground no 2 is disallowed.

Summary

Issues:
1. Addition of Rs. 75,58,000 as unascertained liability.
2. Addition of Rs. 4,82,15,440 as loss claimed in trading in foreign exchange.

Analysis:

Issue 1: Addition of Rs. 75,58,000 as unascertained liability
The case involved an appeal by the Revenue against the First Appellate order for the assessment year 2012-13. The Assessing Officer (AO) disallowed an amount of Rs. 75,58,000 claimed by the assessee under "Compensation due to Rate difference" as an unascertained liability. The AO believed the provision should have been created in the balance sheet and disallowed the amount due to non-payment after 3 years. The CIT(A) deleted this addition. The Revenue contended that the assessee failed to establish the justification and nature of the liability. The Tribunal observed that the payment of Rs. 1,51,00,000 was made after settlement, indicating the liability was not unascertained. The Tribunal upheld the CIT(A)'s decision, stating the AO's findings were based on suspicion and surmises.

Issue 2: Addition of Rs. 4,82,15,440 as loss claimed in trading in foreign exchange
The AO disallowed an amount of Rs. 4,82,15,440 booked as "Loss in Currency F & O" as part of revenue from operations, considering it beyond the ordinary course of business. The CIT(A) deleted this addition. The Revenue argued that the losses in foreign exchange trading were not genuine. The Tribunal noted the company's MOA allowed for such investments as part of its business. The documents provided, including contract notes and client codes, supported the genuineness of the transactions. The Tribunal found no grounds to interfere with the CIT(A)'s decision, stating that the transactions were not sham. Consequently, all grounds were determined against the Revenue, and the appeal was dismissed.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete both additions, emphasizing the genuineness of the liabilities and transactions claimed by the assessee. The appeal by the Revenue was dismissed on 30th June 2022.