2015 (4) TMI 828 - HC - Income Tax

Addition on account of hedging loss treated as speculation loss - ITAT deleted part addition accepting additional evidence - Held that - As before the learned CIT(A) the assessee filed the monthly purchase and sale quantity of gold on actual basis and purchase and sale quantity of gold in MCX in Excel sheet, which was carved out from the bills issued by MCX during the year and which were already before the Assessing Officer and, therefore, it cannot be said that as such the learned CIT(A) admitted the additional evidence for which opportunity was required to be given to the Assessing Officer as per Rule 46(A)(3) of the Rules. Under the circumstances, the learned ITAT has rightly observed that there is no breach of Rule 46(A)(3) of the Rules as alleged by the revenue. Thus it cannot be said that the learned ITAT has committed any error in dismissing the appeal preferred by the revenue and confirming the order passed by the learned CIT(A) restricting the additions made by the Assessing Officer on account of hedging loss treating it as speculation loss to ₹ 1,01,417/- instead of ₹ 1,06,65,670/-. No substantial question of law arises. - Decided against revenue.

Summary

Issues:
1. Whether the Appellate Tribunal erred in restricting the addition made by the Assessing Officer on account of hedging loss?
2. Whether the Appellate Tribunal erred in admitting additional evidence without giving a reasonable opportunity to the Assessing Officer?

Analysis:

Issue 1:
The case involved an assessee, a partnership firm dealing in gold, silver, and bullion, engaged in MCX trading and trading on NCDEX Exchange. The Assessing Officer treated the MCX trading difference as speculative, leading to a disallowance. The assessee contended it was a hedging transaction, not speculative. The CIT(A) accepted the transactions as hedging and deleted the disallowance. The revenue appealed to the ITAT, challenging the CIT(A)'s decision on the grounds of restricting the addition made by the Assessing Officer. The ITAT dismissed the appeal, stating that all materials considered by the CIT(A) were already produced before the Assessing Officer. The ITAT upheld the CIT(A)'s decision, restricting the addition to a lesser amount. The revenue further appealed to the High Court, which upheld the ITAT's decision, concluding that no error was committed in dismissing the appeal and confirming the CIT(A)'s order.

Issue 2:
The revenue contended that the CIT(A) admitted additional evidence without giving the Assessing Officer a fair opportunity, violating Rule 46(A)(3) of the Income Tax Rules. However, the High Court noted that the CIT(A) had already scrutinized complete books of accounts and daily transactions before making the decision. The High Court found that the evidence submitted to the CIT(A) was already before the Assessing Officer and thus did not constitute a violation of Rule 46(A)(3). Consequently, the High Court held that no breach of the rules occurred, and the ITAT's decision to dismiss the appeal was justified. The High Court dismissed the Tax Appeal, concluding that no substantial question of law arose.

In summary, the High Court upheld the decisions of the lower authorities, confirming that the transactions were hedging, not speculative, and that the CIT(A) did not violate any rules in admitting evidence. The Tax Appeal was dismissed, and no interference by the Court was deemed necessary.