2019 (7) TMI 669 - HC - Income Tax

Rectification application u/s 254 - ITAT failed to appreciate the assessee s contention with respect to the contracts which it claimed were not forward contracts by virtue of proviso clauses (a) (b) to Section 43 (5) of the Act - HELD THAT - The contention was declined on the ground that no correlation between the forward contract transactions of gold and corresponding purchases and export of jewellery was established to satisfy the requirements of law. This Court is of the opinion that the assessee s contention has some merit - the earlier portion of the main impugned order specifically noticed the compilation of documents produced during the proceedings which contained specific contracts and the transactions which the Revenue alleged were speculative. In these circumstances given that the Revenue s appeal has been remitted the ITAT s approach in our opinion was not correct. Accordingly the assessee s question with respect to the verification of the transactions and the correlation with specific contracts shall be examined having regard to the assessee s contentions as well

Summary

Issues:
1. Application for rectification under Section 254(2) of the Income Tax Act
2. Appeal against the final order of the ITAT dated 27.04.2018

Analysis:
1. The petitioner's writ petition challenged the common order declining its application for rectification under Section 254(2) of the Income Tax Act. The appeal ITA No.430/2019 was also directed against the final order of the ITAT dated 27.04.2018. The Court noted that the assessee sought relief as the ITAT failed to appreciate the contention regarding contracts claimed not to be forward contracts under proviso clauses (a) & (b) to Section 43(5) of the Act. The Court observed that there was no correlation between the forward contract transactions of gold and corresponding purchases and export of jewellery to satisfy legal requirements. The Court found merit in the assessee's contention based on the compilation of documents produced during the proceedings, which contained specific contracts and transactions alleged to be speculative by the Revenue.

2. The Court opined that the ITAT's approach was incorrect as the Revenue's appeal had been remitted. Therefore, the Court decided to examine the assessee's question regarding the verification of transactions and correlation with specific contracts in line with the assessee's contentions. Consequently, ITA 430/2019 and W.P. (C) 4468/2019 were partly allowed. The Court set aside the ITAT's impugned order, directing a reexamination of the transactions in light of the assessee's contentions to ensure proper consideration and evaluation.