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TMI Blog2024 (1) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the AO allowing the loss claimed by the assessee on this issue is not erroneous in so far as it is not prejudicial to the interest of the revenue. We further note that the ld. Pr.CIT has observed that the AO has treated the loss u/s. 43(5)(d) and has allowed the loss. Even if the assessee s case falls under any of the provisions of (a) or (d) of section 43(5), it is not speculative loss. AO was justified in allowing the loss claimed by the assessee. Hence the order passed by the AO is not erroneous and prejudicial to the interest of the revenue. The case law relied by the ld. AR in the case of Jayesh Raichand Shah [ 2013 (1) TMI 598 - GUJARAT HIGH COURT] and CIT v. Sri Vasavai Gold Bullion (P) Ltd [ 2018 (4) TMI 802 - MADRAS HIGH COURT] supports the case of the assessee. On the other issues of loss from rate deference and interest on partners capital also, the ld. Pr.CIT has directed the AO to examine these issues without giving any finding and merely directing the AO for examination of these issues is not sufficient. We note that the assessee had submitted reply to the ld. Pr.CIT, However, the ld. Pr.CIT instead of examining that it is prejudicial to the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccasion to exercise jurisdiction under Section 263 of the Act. 6. The learned Commissioner ought to have appreciated the fact that the appellant had furnished all the details as required by the Assessing Officer in the course of assessment proceedings u/s. 143(3) of the Act and thereby the AO was satisfied with the claim of the appellant and therefore the revision initiated under section 263 of the act was uncalled for. 7. The Ld. Commissioner erred in holding that the order now passed was made without making proper enquiries or verification which should have been made and hence the assessment order passed was not only erroneous but also prejudicial to the interest of revenue. 8. The learned Commissioner erred in setting aside the order passed U/S 143(3) of the Act dated 20.12.2016 and directing the AO to de-novo consider the provisions of clause (a) of sub section (5) of Section 43 of the Act. 9. The Learned PR.CIT erred in holding that the transactions on MCX have been entered for the purpose of hedging its stock in trade in the form of gold and silver bullion which attracted clause (a) of subsection (5) of section 43 of the Act. 10. For these and other grounds tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and examined by this office. In this case, an Order u/s 143(3) of the Income-tax Act, 1961 has been passed by the ACIT, Circle 5(2)(1), Bengaluru on 20.12.2016. On examination of the assessment order and the documents available in the assessment folder, it is seen that the Order passed u/s 143(3) of the Act is erroneous in so far as it is prejudicial to the interest of the revenue on account of the following facts i) The return of income for the AY 2014-15 in your case was selected for scrutiny under the heading Limited Scrutiny . One of the reasons for selection of scrutiny was Large value commodity exchange transaction . In this regard, following details were furnished during the course of assessment proceedings. a) MCX Client Ledger b) MCX Settlement Ledger Further to this, one Ledger Account in the books of M/s. Multi Commodity Exchange India Ltd. has a/so been furnished. Again on 15.12.2016, separate ledger for profits from MCX and loss from MCX has been furnished. Regarding the allowability of such loss, reliance has been placed upon Section 43(5)(d) of the IT Act, 1961. Further, it has been submitted that as per Notification No.46/2009, dated 22.05.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief without enquiring into the claim properly. Under such circumstances, I consider the assessment order to be erroneous in so far as it is prejudicial to the interest of revenue. Hence, you are requested to show cause as to why the assessment order should not be cancelled and a fresh assessment is directed to be done. 6. In response to the show cause notice, the assessee replied as under:- 1. I am a bullion dealer how deal in gold and silver bars. My normal course is buying from recognized big dealers. In normal course of business, we buy in bulk quantity from banks and sell to customer in small quantities. So we require to hedge our commodity in MCX and when customer buys from me I have to buy back from MCX so where is the speculation. If I have incurred loss in MCX. I would have profited in my normal business activities and vice-versa. Trading in derivatives is trading in Index. Option swaps and warrants options. We done not deal or neither MCX deals in options or index and I have enclosed few judgement. Kindly Consider my request. 2. Towards our second question, my partner on 21st have introduced 1075000.00 [Ten Lakh Seventy Five thousand] has extra capital. So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submitted that assessee is in the business of gold and silver bullion and traded through MCX for hedging its stock for reducing the loss. Therefore the loss arising through MCX transaction is not a speculative transaction as per clause (a) of section 43(5). Therefore, assessee is eligible to set off loss against other income. He further submitted that the Pr.CIT has to give finding on the issue raised by him and merely directing the AO for de novo assessment is not sufficient. He also submitted that no findings were given by the Pr.CIT on the other issues. The ld AR further submitted that the case was selected for limited scrutiny which was examined by the AO during the assessment proceedings in detail which is clear from the order of the AO. The Pr.CIT cannot travel beyond the scope of limited scrutiny. Therefore, the ld Pr.CIT is not justified in exercising power u/s. 263 of the Act. He relied on the following judgments:- i) PCCIT v. Shark Mines and Minerals (P) Ltd. [2023] 151 taxmann.com 71 (Orissa) ii) Jayesh Raichand Shah v. ACIT, [2013] 29 taxmann.com 151 (Guj) iii) CIT v. Sri Vasavai Gold Bullion (P) Ltd. [2018] 92 taxmann.com 290 (Mad) 9. The ld. DR reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the submissions of the assessee as observed by the ld. Pr.CIT the AO accepted that it was not a speculative loss and allowed loss claimed by the assessee from hedging its stock through MCX transactions. We note from the show cause notice of the ld. Pr.CIT, during the course of assessment proceedings the assessee had filed the documents i.e., MCX Client Leder, MCX Settlement Ledger, Ledger account in the books of M/s. Multi Commodity Exchange India Ltd. and separate ledger for profits and loss from MCX and the AO allowed the loss of Rs. 3,10,97,497.94. During the revision proceedings before the ld. Pr.CIT, the assessee submitted that the transactions were done through MCX for hedging the trading loss in the normal course of business. The ld. Pr.CIT has observed that the MCX transaction of the assessee falls under clause (a) of section 43(5) which was not examined by the AO. Section 43(5) of the Act reads as follows:- ( 5 ) speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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