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TMI Blog2023 (9) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... t by it. It could not be expected to give explanation for the transactions not carried out by it, merely because some information had already been received by the Ld. AO from the Investigation Wing, Kolkata. We also find that the Ld. AO in the original scrutiny assessment proceedings had examined the entire transactions of commodity/derivatives trading during the course of original assessment proceedings itself which is evident from notice u/s 142(1) - Thus as sufficient enquiries were already made by the Ld. AO on the impugned transactions mentioned in the reasons. Hence, it also tantamount to change of opinion on the part of the Ld. AO for initiating the reassessment proceedings u/s 147 of the Act. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had determined this speculation los at Rs. 80,41,538/- and adjusted the same with speculation profit of Rs. 24,03,330/- and net speculation loss of Rs. 56,38,208/- was arrived which was carried forward to next year. Apart from this, the Ld. AO made disallowance u/s 14A of the Act in the sum of Rs. 9,91,240/- in the original assessment completed u/s 143(3) of the Act. 4. Subsequently, based on information received from the Investigation Wing, Kolkata, according to which certain entities were identified to be involved in facilitating bogus loss or profit to other real beneficiaries based on Forward Marketing Commission (FMC) report that members of National Multi Commodity Exchange (NMCE) were found to be involved in creating artificial volume and suspected evasion of Income Tax, the AO initiated reassessment proceeding u/s 147 of the Act alleging that the assessee company is one of the beneficiary of accommodation entries obtained by allegedly routing through the NMCE and has earned contrived profit of Rs. 1,79,21,950/-. In the opinion of the Ld. AO, this profit is nothing but accommodation entries obtained through alleged sub- brokers namely M/s. Advent Commodities Pvt. Ltd., A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit and loss in the form of commodity are mainly generated through the trading at approved Commodity Exchanges. For this two membership are required in one membership losses are generated and the other membership profits are generated. This is done through trading in commodities like lead, zinc etc. The parties who require profit give us cash and we bring this cash through bank in the account of membership in which tosses are to be generated and the same is given as margin to the exchange and when the trade is completed the next day exchange make payment in the account of profit taking membership and from there we give cheques or RTGS or NE FT to the parties who gave us the cash. In the case of commodity loss the party given in the account of membership and we give them cash in return after deducting out commission which we receive from the parties who taken commodity profit. When we get parties who want loss generated and profit generated simultaneously, cash from profit taking party is routed to loss taking party and here there is no involvement of cash deposit in the bank. The cash which is taken from parties are routed through various individual/proprietorship accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to furnish the following information:- 1. Detailed note in respect of all sources of income during the period relevant to A.Y. 2010-11. 2. Copy of audited balance sheet including P&L account, all the schedules and audit report in Form 3CD for A. Y. 2010-11. 3. Please inform whether you have made any transactions 'National Multi Commodity Exchange 'during the period relevant to A.Y. 2010- 11. 4. If yes, in response to question no. 3 above please give details of the resultant profit / loss arising through such transactions. 5. Please provide copy of account of such brokers sub brokers/ parties through/with whom transactions were made on 'National Multi Commodity Exchange' during the period relevant to A.Y. 2010-11. 7. The assessee company filed its reply vide letter, dated 29.03.2017 wherein it has informed that during the period relevant to A.Y. 2010-11 made transactions through/with 'National Multi Commodity Exchange' and has earned profit of Rs. 1,78,32,070/- from trading of commodity derivatives transactions during this period. It has filed copy of account of M/s R.K. Commodities Pvt. Ltd. through/with whom transactions were made during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee proceeded to make addition u/s 68 of the Act in respect of profit derived from derivative transactions in the sum of Rs. 1,79,21,950/- by treating it as accommodation entries. This action of the Ld. AO was upheld by the Ld. CIT(A). 6. It would be pertinent to understand the chronology of events that had occurred before the initiation of reassessment proceedings in this case. After obtaining the information from the Kolkata Investigation Wing, the Ld. AO issued notice u/s 133(6) of the Act dated 28/03/2017 calling for the following details, enclosed in page 13 of the Paper Book, which is reproduced as under: "1. Detailed note in respect of all sources of income during the period relevant to A.Y. 2010-11. 2. Copy of audited balance sheet including P&L account, all the schedules and audit report in Form 3CD for A.Y. 2010-11. 3. Please inform whether you have made any transactions through/with 'National Multi Commodity Exchange' during the period the period relevant to A.Y. 2010-11. 4. If yes, in response to question no.3 above please give details of the resultant profit/loss arising though such transactions. 5. Please provide copy of account of all such brokers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31/03/2017 has been issued by the AO. We find that the assessee had categorically stated before the Ld. AO that its broker is M/s. R.K. Commodities Pvt. Ltd. through whom the entire transactions of derivatives were carried out by the assessee. It had categorically stated in the objections to the reasons recorded also that the assessee had not transacted with any of the Sub-brokers mentioned in the reasons. It was also categorically stated that even the assessee's broker i.e., M/s R.K. Commodities Pvt. Ltd. had not made any transaction with those Sub-brokers mentioned in the reasons. The assessee had also stated that the transactions carried by it in derivatives through its broker M/s R.K. Commodities Pvt. Ltd., the assessee had earned a profit of Rs. 1,78,32,070.79 during the year and the same had duly been reflected in Income Tax Return already filed by it. Hence, there was no additional profit earned by the assessee in the sum of Rs. 1,79,21,950/- from derivatives as alleged by the Ld. AO in the reasons and that both are one and the same, as the figure reflected by the assessee is exclusive of service tax and brokerage and the figure mentioned in the reasons is inclusive of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in response to notice u/s 133(6) of the Act on 29.03.2017 wherein it had furnished the entire details of transactions in derivatives carried out through its broker M/s R.K. Commodities Pvt. Ltd. The ld. AO only concludes that the assessee had denied having any transactions in derivatives with the sub-brokers and directly without any live link and without any cogent reason, the Ld. AO concludes that based on the information from investigation wing, he has reason to believe that income of the assessee has escaped assessment. This is a classic case for initiating reassessment proceedings based on vague information received from Investigation Wing, Kolkata without making even the preliminary examination on the content of the information. 10. In the instant case, we find that assessment originally has been completed for AY 2010-11 u/s 143(3) of the Act on 26.02.2013. The notice u/s 148 of the Act is issued on 31.03.2017. Hence, the notice u/s 148 of the Act is issued beyond four years from the end of the relevant assessment year. Hence, the proviso u/s 147 of the Act would come into operation. We find that the ld. AO in the reasons has made a very general observation in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward to the next year. These facts which are staring, goes to prove that sufficient enquiries were already made by the Ld. AO on the impugned transactions mentioned in the reasons. Hence, it also tantamount to change of opinion on the part of the Ld. AO for initiating the reassessment proceedings u/s 147 of the Act. 12. To sum up, (a) the reassessment proceedings are initiated based on vague information received from Investigation Wing, Kolkata which only gives reasons to suspect and not reason to believe; (b) the profit from commodity transactions in the sum of Rs. 1,79,21,950/- had already been offered by the assessee in the original return itself; (c) the assessee had carried out transactions through its broker M/s R.K. Commodities Pvt. Ltd. only and had not carried any transactions with the Sub-brokers mentioned in the reasons recorded. No contrary evidences have been brought on record by the Revenue in this regard either in the reasons recorded, or during the course of assessment proceedings or during the course of arguments before us ; (d) the reassessment, if sustained, would only lead to double addition in the hands of the assessee. 12.1. Hence, there cannot be rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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