2015 (6) TMI 637 - AT - Income Tax

Disallowance of speculation loss from trading in gold bullions - CIT(A) deleted disallowance admitting additional evidence - Held that - If a person purchases any item and then sold the same in both situations, there is a physical delivery is taken and given. It is also noted that the parties from whom the dealing in gold was made like Shri Rakesh Patel of Jorss Bullions, Pushpak Bullions and R.S. Bullions were produced before the Assessing Officer, who accepted the transactions as has been discussed even in the assessment order. All the parties confirmed the transaction and none of the parties ever denied about physical delivery. Assessee also produced the records along with challans (delivery note) which clearly shows that the gold was traded. Even the ld. Assessing Officer did not point out any defects in the challans, therefore, the conclusion of the ld. Assessing Officer that there was no physical transaction is without any basis. It is also noted that the assessee paid VAT on the turnover, which is applicable to delivery based trading. The totality of facts clearly indicates that the assessee in fact transacted in gold and bullions in the normal course of business to earn profit. No prudent businessman will intentionally incur losses. Even otherwise, all the payments are through banking channel; therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided against revenue. Disallowance of expenses on account of trading in gold - CIT(A) deleted disallowance - Held that - While deliberating upon ground no.1 and the conclusion drawn in the impugned order, we find that these are normal business expenses, consequently, the stand of the ld. Commissioner of Income Tax (Appeals) is affirmed, more specifically, when there is no basis for making such disallowance and even otherwise, the ad-hoc disallowance, if any, under the facts, is not permissible.- Decided against revenue.

Summary

Issues:
1. Disallowance of speculation loss from trading in gold bullions.
2. Disallowance of expenses related to trading in gold.
3. Violation of Rule 46A of the Income Tax Rules.

Issue 1: Disallowance of Speculation Loss from Trading in Gold Bullions:
The case involved the Revenue's appeal against the deletion of disallowance of Rs. 2,63,53,556 made on speculation loss from trading in gold bullions. The Revenue contended that the intention of the assessee was not to earn profit but to incur losses, citing lack of actual delivery and acceptance of additional evidence without giving the Assessing Officer an opportunity. The tribunal analyzed the facts, noting the Assessing Officer's doubts on the trading activity but acceptance of the transactions as speculative. The tribunal found no evidence to prove the intention to incur losses, highlighting the physical delivery of gold and bullion, supported by records and challans. The tribunal concluded that the transactions were normal business activities aiming to earn profit, not speculative, and allowed the assessee's appeal.

Issue 2: Disallowance of Expenses Related to Trading in Gold:
The second issue involved the disallowance of expenses amounting to Rs. 13,14,839 on the grounds of trading in gold being considered speculative by the Department. The tribunal, after deliberating on the first issue, affirmed that these expenses were normal business expenses. The tribunal found no basis for the disallowance, stating that ad-hoc disallowance was not permissible under the circumstances. Consequently, the tribunal upheld the decision of the Commissioner of Income Tax (Appeals) regarding the expenses related to trading in gold.

Issue 3: Violation of Rule 46A of the Income Tax Rules:
The contention regarding the violation of Rule 46A of the Income Tax Rules was not pressed by the Department during the proceedings. Therefore, the tribunal dismissed this ground as not pressed, indicating no further discussion or analysis was required on this issue.

In conclusion, the tribunal dismissed the Revenue's appeal as lacking merit based on the detailed analysis of the issues related to the disallowance of speculation loss from trading in gold bullions and the disallowance of expenses associated with trading in gold. The tribunal's decision was based on the evidence presented, highlighting the normal business nature of the transactions and expenses, ultimately ruling in favor of the assessee.