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TMI Blog2018 (9) TMI 1902X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of return of income filed. The ground no. 1 of the appeal is accordingly dismissed. Asst Commissioner powers to enhancement - HELD THAT:- In the case of CIT Vs Shapoorji Palloonji [ 1962 (2) TMI 12 - SUPREME COURT] held that although the appellant Asst Commissioner has powers to enhance the assessment, but he has no power to travel beyond the record to enhance assessment of any year by discovering new source of income either in the return made by the assessee or the assessment order passed by the Income-tax Officer. Since the issue of adjustment of losses from futures and options against the business income is arising from the return of income filed by the assessee, in our opinion, it is well within the powers of the Ld. CIT(A) to make additions in view of the finding of the Hon ble Supreme Court in the case of CIT Vs Shapoorji Palloonji Mistry [ 1962 (2) TMI 12 - SUPREME COURT] . Accordingly, the ground 2.1 of the appeal is dismissed. Whether the Explanation in section 73 has an overriding effect on section 43(4) - claim of the assessee is that the activity of trading in futures and options is not a speculative activity in view of the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- was explained as belonging to various persons of the group and balance ₹ 44,50,000/- was seized as unexplained. The assessee was issued notice under section 142(1) of the Act on 10/05/2012 for filing return of income for the year into consideration. In response, the assessee filed a letter intimating that the return of income was filed on 30/09/2011 declaring income of ₹ 26,56,590/-. Subsequently, the assessment proceedings were commenced and notice under section 143(2)/142(1) of the Act were issued. The assessment under section 143(3) of the Act was completed on 28/03/2013 at assessed income of ₹ 84,05,446/- after making certain disallowance/additions. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who partly allowed the appeal of the assessee, however he also enhanced income to the extent of ₹ 74,57,230/-. Aggrieved, the assessee is in appeal before the Tribunal. 3. In ground No. 1, the assessee has challenged the addition of ₹ 44,50,000/- sustained by the Ld. CIT(A). 3.1 The facts qua the issue in dispute are that during the course of search action, a cash of ₹ 58,00,000/- was found from the premise of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d thus making an addition for unaccounted cash of ₹ 44,50,000/- to returned income of the assessee, amounted to duplication of the addition. According to the assessee, the cash seized of ₹ 44.50 lakhs stands duly explained by way of cash sales entered in the books of accounts. In view of the various inconsistencies observed in the claim of the assessee, the Ld. CIT(A) rejected the contention of the assessee and confirmed addition made by the Assessing Officer. 3.4 Before us, the Ld. counsel of the assessee submitted that the assessee has duly recorded cash sales in its books of accounts and thus the source of the cash of ₹ 44.50 lakhs stands explained and thus no addition is warranted in the case of the assessee. He submitted that the action of the Assessing Officer in accepting the cash sales recorded in books of accounts as well as making addition for the unexplained cash amounts to duplication of the addition. According to him, if the explanation of the assessee is not accepted and the cash seized is treated as unexplained, than sales to that extent should be excluded from sales recorded by the assessee in the books of accounts and offered in the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A), the assessee failed to explain the source of the cash during the course of search proceeding. He also observed that statement of Mr. Karan Amin was recorded on 18/08/2011 i.e. almost after 5 months from the date of the search, and thus not much reliable. No purchase of the Sugar, which was claimed as sold, was shown by the assessee and it was claimed that Sugar was received as excess in another purchase transactions. The said claim of the excess sugar was also not found to be justified by the Ld. CIT(A). The Ld. CIT(A) further observed that no name of the buyer has been shown in the cash sale invoice raised by the assessee. The Ld. CIT(A) further observed that the excess sugar claimed to have been received was Raw Cane Sugar whereas the Sugar claimed to have been sold was White Sugar . The relevant finding of the Ld. CIT(A) is reproduced as under: 4.3.5 I have considered the submissions of the AR and perused the assessment order. On the day of search ₹ 58 lacs cash was found at the appellant s premises and when confronted, Mr. Sameer Thukral the main person of the company could not give any details for the source of cash found. The search party h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed that the appellant has made a claim which does not merit serious consideration. The sugar of quantity 132.100 Metric Tonnes, has been claimed to be the one, which was received as excess in the purchase transaction involving Haidergarh Chinni Mills. At para 4.4 below I have enhanced the total income by ₹ 74,57,230/-. While making the said enhancement, I have examined the documents furnished by the appellant in respect of their claim that the loss on importing sugar in Joint Venture with Dhampur Sugar Mills Ltd. was not a speculative loss. It is observed that the appellant has submitted a copy of a synopsis submitted before the AO to claim that the sugar sold in cash (receipts of which were yet to be accounted) represented excess sugar received in their transaction involving High-Sea purchase of sugar from Haidergarh Chinni Mills. I do not find any merit in the submissions. The report of the Dr. Amin Controllers Pvt. Ltd. at page 47 of the paper book, shows that there was excess quantity of sugar, but appellant s share in the same was just 10.576 Metric Tonnes. The relevant table appearing in the said report is reproduced below for ready reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity i.e. almost 13 Truck loads of 10 Tonnes each, has not been mentioned. The same has been claimed to be cash sale that too through one single invoice. 4.3.9 There are many unanswered questions in the whole transaction. Firstly, the excess sugar was supposed to have been received in the first week of August, 2010 whereas the sale of the same is claimed to have taken place at Kandla in the last week of March, 2011. Where was this sugar lying, which godown, at what cost etc is not mentioned. Secondly, the excess sugar received was Raw Cane Sugar and not processed White Sugar as stated in the sale invoice. Still the excess quantity the sold quantity as per bill of 30.03.2011 tally exactly. No wastage on processing. Again the sale is shown on 30.03.2011 as justification for cash found on at the premises 28/03/2011. What is sold as per invoice is White Sugar, while what was procured as excess by the appellant through High-Sea purchase was Raw Cane Sugar and not White Sugar. To convert the Raw Cane Sugar into White Sugar the same is required to be processed and cost is around ₹ 3000 per Metric Tonnes as per the joint venture agreement between appellant and Dhampur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acs is held as an unexplained, the said cash sales cannot be retained as part of the sales of the assessee during the year under consideration. Accordingly, we direct the Assessing Officer to exclude the cash sales of ₹ 44.50 credited in books of account on 30/03/2011 out of the total sales declared by the assessee, for the purpose of return of income filed. The ground no. 1 of the appeal is accordingly dismissed. 4. The ground No. 2.1 and 2.2 of the appeal are in respect of addition of ₹ 74,57,230/- sustained by the Ld. CIT(A). In ground No. 2.1, the assessee has challenged issue of enhancement notice by the Ld. CIT(A). In ground 2.2, the assessee has challenged making addition based on the judgment of the Hon ble Delhi High Court in the case of CIT Vs. DLF Commercial Developers Ltd. 4.1 During the appellate proceedings, the Ld. CIT(A) observed that the assessee accounted loss on sale of derivatives (future and options) of ₹ 1,24,12,622/- and loss of ₹ 2,75,70,895/- on importing Sugar in joint-venture with Dhampur Sugar Mills P. Ltd. According to the Ld. CIT(A) as per the explanation to section 73 of the Act, the assessee company was l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In a very recent judgement of High Court of Madras in Sri Vasavi Gold Bullion (P.) Ltd. v. CIT, [2018] 92 taxmann.com 290 (Madras), it was held that where assessee suffered loss in trading derivatives carried through Multi Commodity Stock Exchange, derivative transactions being separate from trading in shares, provisions of Explanation to section 73 will not be applicable to such transactions and loss incurred by assessee in derivative transactions through recognised stock exchange will have to be set off against other business income as per provisions of Act. 5. Nand Nandan Agrawal v. DCIT, [2018] 169ITD 161 (Agra - Trib.) It was held by ITAT Agra that Where transactions of currency derivatives were conducted through a recognised stock broker, on a recognised stock exchange and they were duly supported by time stamped contract notes, same could not be termed as 'speculative transaction'. 6. Dewa Projects (P.) Ltd. v. ACIT, [2018] 170 ITD 326 (Cochin - Trib.)/[2018] 193 TTJ 755 (Cochin - Trib.):- It was held by ITAT Cochin that as per clause (d) of section 43(5), derivative transaction in shares is not a speculative transaction as defined in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to ascertain who is the person liable to be assessed for the tax. If he seeks to assess an AOP as an assessable entity, the said entity can object to the assessment, inter alia, on the ground that in the circumstances of the case the assessment should be made on the members of the association individually. The ITO may reject its contention and may assess the total income of the association as such and impose the tax on it. Under s. 30 an assessee objecting to the amount of income assessed under s. 23 or the amount of tax determined under the said section or denying his liability to be assessed under the Act can prefer an appeal against the order of the ITO to the AAC. It is said that an order made by the ITO rejecting the plea of an association of persons that the members thereof shall be assessed individually does not fall under one or other of the three heads mentioned above. What is the substance of the objection of the assessee? The assessee denies his liability to be assessed under the Act in the circumstances of the case and pleads that the members of the association shall be assessed only individually. The expression denial of liability'' is comprehensive enough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive phraseology used both in s. 31 and s. 33 of the Act does not countenance the attempt of the Revenue to restrict the powers of the AAC or of the Appellate Tribunal: both of them have power to direct the appropriate authority to assess the members individually instead of the AOP as a unit. 4.7 Further in the case of CIT Vs Shapoorji Palloonji Mistry 44 ITR 891 the Hon ble Supreme Court held that although the appellant Asst Commissioner has powers to enhance the assessment, but he has no power to travel beyond the record to enhance assessment of any year by discovering new source of income either in the return made by the assessee or the assessment order passed by the Income-tax Officer. 4.8 Since the issue of adjustment of losses from futures and options against the business income is arising from the return of income filed by the assessee, in our opinion, it is well within the powers of the Ld. CIT(A) to make additions in view of the finding of the Hon ble Supreme Court in the case of CIT Vs Shapoorji Palloonji Mistry (supra). Accordingly, the ground 2.1 of the appeal is dismissed. 5. On the issue of the merit of the enhancement of income of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schemes, deductions, amounts not deductible, profits chargeable to tax, etc. The assessee is no doubt correct in contending that the only definition of derivatives is to be found in Section 43 (5); yet the Court cannot ignore or overlook that the definition - to the extent it excludes such transactions from the mischief of the expression speculative transactions is confined in its application. Parliamentary intendment that such transactions are also excluded from the mischief of Explanation to Section 73 (4), however, is not borne out. 4.4.9 As regards decision of Hon ble High Court of Bombay relied upon by the AR, it is noted that when these is any decision of jurisdictional High Court on a given issue, the same is a binding precedent and not that of other High Courts. Therefore, respectfully following the decision of Hon ble High Court of Delhi in the case of DLF Commercial Developers (Supra) (2013), the submission of the AR is hereby rejected. 4.4.10 As regards the AR s submission that the appellant has speculative profit of ₹ 49,55,392/-, the same is evident from schedule 15 of the audited accounts. Therefore, the appellant is entitled to adjust curr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the definition to the extent it excludes such transactions from the mischief of the expression speculative transactions is confined in its application. Parliamentary intendment that such transactions are also excluded from the mischief of Explanation to Section 73 (4), however, is not borne out. 5.3 Further, the Hon ble Delhi High Court has held that Explanations to section 73(4) also applies in case of derivative transactions. The relevant finding of the Hon ble High Court is reproduced as under: 11. The stated objective of Section 73- apparent from the tenor of its language is to deny speculative businesses the benefit of carry forward of losses. Explanation to Section 73 (4) has been enacted to clarify beyond any shadow of doubt that share business of certain types or classes of companies are deemed to be speculative. That in another part of the statute, which deals with computation of business income, derivatives are excluded from the definition of speculative transactions, only underlines that such exclusion is limited for the purpose of those provisions or sections. To borrow the Madras High Court's expression, derivatives are assets, who ..... X X X X Extracts X X X X X X X X Extracts X X X X
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