2015 (10) TMI 588 - AT - Income Tax

Disallowance of loss suffered in NCDEX transaction - Held that - It is undisputed that NCDEX terminal was not a recognized stock exchange as per Rule 6DDB r.w.s. 43(5)(d) of the Income Tax Act, 1961 at the relevant time. Ld. CIT(A) treated the loss as speculative we find no valid reason to deviate from the same. In the interest of judicial discipline, we respectfully follow the same and uphold ld. CIT(A) order. - Decided against assessee. Penalty u/s 271(1)(b) - non-compliance of notices dated 29-07-2009 and 27-08-2009 - assessee contended that he was confined to bed on account of his illness on these dates - Held that - The assessee gave satisfactory reply expressing his inability to attend the proceedings due to illness which has not been controverted. The assessment in question has been framed u/s 143(3) of the Act. Thus in the entirety of the facts and circumstances of the case, we hold that this is not a fit case for imposition of penalty of ₹ 10,000/- which is deleted. - Decided against Revenue.

Summary

Issues:
1. Disallowance of loss in NCDEX transaction as speculative.
2. Imposition of penalty under Section 271(1)(b) of the Income Tax Act, 1961.

Issue 1: Disallowance of loss in NCDEX transaction as speculative:

The assessee filed an appeal against the disallowance of a loss of &8377; 5,31,132 arising from NCDEX transactions for the assessment year 2008-09. The Assessing Officer disallowed the loss as the transactions made through NCDEX terminal were not verified. The assessee contended that the transactions were made through a firm running a NCDEX terminal and were regular business transactions. The CIT(A) called for a remand report to verify if NCDEX was a recognized stock exchange. The CIT(A) disallowed the loss as speculative based on the ITAT Jaipur Bench judgment in a similar case. The assessee argued that the Finance Act, 2013 introduced Section 43(5)(e) to exclude eligible transactions in commodity derivatives from being speculative. The assessee cited case laws and argued for the retrospective application of the amendment. The ITAT upheld the CIT(A) order, considering NCDEX terminal not recognized and following the precedent set by the ITAT Jaipur Bench.

Issue 2: Imposition of penalty under Section 271(1)(b) of the Income Tax Act, 1961:

The assessee appealed against the penalty of &8377; 10,000 imposed for non-compliance of notices due to illness. The assessee contended that the illness prevented attendance, and compliance was later made leading to the assessment under Section 143(3) of the Act. The AO and CIT(A) upheld the penalty. The assessee reiterated the illness as a sufficient cause for non-attendance. The ITAT considered the facts and circumstances, noting the satisfactory explanation for non-attendance due to illness. The ITAT held that there was no intention to avoid notices and that the penalty was unjustified. Consequently, the penalty of &8377; 10,000 was deleted, and the appeal was allowed.

In conclusion, the ITAT dismissed the appeal regarding the disallowance of the loss in NCDEX transactions as speculative and upheld the penalty imposition in the case of non-compliance of notices due to illness. The detailed analysis of both issues reflects the legal arguments presented, the relevant provisions of the Income Tax Act, and the reasoning behind the ITAT's decisions.