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TMI Blog2014 (1) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is directed against the order of the Ld. CIT(A)-38, Mumbai dt. 17.1.2011 pertaining to A.Y. 2006-07. 2. The assessee has raised 3 substantive grounds of appeal with sub grounds. The sum and substance of the grievance is that the Ld CIT(A) erred in confirming the addition to the extent of Rs. 2,53,33,000/- made by the AO to the income of the assessee by way of disallowing losses incurred in trading in Commodities Futures treating the transactions as not genuine. 3. The assessee is a trader and speculator in shares, securities, derivatives and commodities Futures following mercantile system of accounting. For the year under consideration, the return was filed u/s. 139(1) on 23.10.2006 declaring income at Rs. 39,95,520/-. A search action u/s. 132 of the I.T. Act was conducted in Commodity Market Group of cases on 19.6.2007. During the course of search proceedings, the Revenue authorities found data pertaining to trade modifications and client code changes of the brokers. These datas were collected from M/s. Multi Commodity Exchange India Ltd. (MCX) and M/s. National Commodity Exchange of India (NCDEX) in commodity trade. Subsequent to these search operations, survey proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire loss of Rs. 2,88,55,000/- as bogus and added the same to the total income of the assessee. 4. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A). Before the Ld. CIT(A), the assessee strongly contended that during the year under consideration, the assessee engaged in trading of Commodities Futures in Gold and High Density Polyethylene (HDPE) through M/s. Riddi Siddhi Bullions Ltd (RSBL) who is an authorized broker of MCX. It was explained that the prices of commodities can change on a weekly or even daily basis. If the price goes up, the buyer of the futures contract makes money and if the price goes down, the seller makes money. The assessee further explained the circumstances in which the partner Shri Kapil Shah agreed to offer a sum of Rs. 35.22 lakhs as an additional income. The assessee explained that the amounts so offered were shown in the revised return of income. All the details of the transactions with the MCX along with copy of contract note, bill of transaction and bank statements were filed. It was further explained that all the transactions were carried out in the regular course of business in the recognized exchange through authorized broke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... code. It is the say of the Ld. Counsel that if for some reason certain transactions have been offered for taxation would not ipso facto make the entire transaction a colourable device. The Ld. Counsel relied upon the decision of the Hon'ble Supreme Court in the case of State of Kerala Vs C. Velukutty 60 ITR 239 wherein it has been held that if certain additions are made on account of secret book maintained by the head office resulting into a reassessment by adding 135% of the turnover would not automatically mean that the branch profit should also be increased by the same percentage because the discovery of secret account in the head office did not necessarily follow that a corresponding set of secret accounts will maintain in the branch office. The Ld. Counsel concluded that the entire transactions are supported by proper contract notes, bills and bank statements and the Revenue authorities have not brought any cogent material evidences on record to disbelief these transactions except merely by surmises and conjectures, the addition deserves to be deleted. 6. The Ld. Departmental Representative strongly supporting the findings of the lower authorities submitted that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explain them fully and substantiate these transactions. In order to buy peace, avoid litigation and penalties, I offer the sum of Rs. 35.22 lakhs as additional income for A.Y. 2006-07." 8. The Revenue authorities have taken a leaf out of the answer to question No. 10 and have come to the conclusion that the entire loss is outcome of a colourable device. However, at the same time, the Revenue authorities have completely ignored the answer to question No. 9 wherein the partner has categorically denied of having made any request for any change in client code. The Revenue authorities cannot blow hot and cold in the same breath. If they believe to answer one question, they must also believe to answer another question in the same statement. Even if for the sake of argument one accepts that these transactions are colourable device than also one cannot ignore the fact that the assessee has paid a margin money of Rs. 2.90 crores to RSBL which is evident from the statement of accounts of RSBL exhibited at page-52 of the paper book which has been adjusted against the losses of the assessee. The allegation that the assessee has entered into this line of business only in the month of March t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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