9911796707
TMI Blog2025 (4) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... its return of income showing total income of Rs. 7,77,040/-. The case was selected for search assessment, notices u/s 143(2) and 142(1) were issued and in response to the same the Ld. A.R submitted documents. The AO after hearing the assessee and going over the documents filed by the assessee decided the four issued against the assessee which are as under: "1. AO observed that the appellant had not shown drawings during the year under consideration whereas he had reported drawings of Rs. 1.6 lakh in AY 2010-11. The AO estimated drawings @ Rs. 5000/- per month and added Rs. 60,000/-. 2. The AO observed that the appellant had set off speculation loss of Rs. 14,03,951/- for the AY 2011-12 against commodity profit of Rs. 21,26,328/- derived from transactions electronically through screen based system which was normal business profit u/s 43(5) of the Act. He disallowed the set off by stating that speculation loss is not eligible to be set off against normal business profit. 3. The AO, further, carried out investigation and found that the appellant didn't carry out the transactions in commodity derivatives in the ICEX platform and therefore it was not a genuine profit to be assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transaction has not been carried out on their platform, being one of the essential ingredients to invoke Section 43(5) of the Act. The Ld. A.R has further submitted that all the transactions were done through banking channels, the assessee has received ledger from broker and relevant contract note for making the transaction, so treated the transaction is bogus merely because the transaction was not confirmed by the exchange is erroneous and bad in law. The Ld. Counsel referred the explanation 2 to Section 43 sub-clause (5) of the Act and submitted that in view of the above section eligible transaction made with recognized association can only be treated as non-speculative transaction, though in the present case the AO has himself confirmed that such transaction has not been carried out on any recognized platform. The Ld. Counsel further submits that there are no rules, regulations and legal terms and condition which states that off market transaction needs to be reported to the exchange. The Ld. AR cited following decisions: i) PCIT vs. M/s BCB Cables and Contractors Pvt. Ltd. passed by the Hon'ble Calcutta High Court. ii) CIT vs. Prudent Finance pvt. Ltd. [2014] taxmann 125 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deemed to be speculative transaction. It is further important to mention here that all the transaction through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of account and offered for taxation. The AO did not find any defects in the evidences submitted by the assessee. It is also important to mention here that AO did not find any material that goes to say that broker of the assessee is involved any suspicious activities. Now going over the cited decision of the assessee, we find that the Hon'ble Gujarat High Court in CIT vs. Prudent Finance Pvt. Ltd. (supra) has held thus: "Business Loss- Allowability Genuineness of loss on off market transactions- Assessee company found to be treated in off market share transactions with its related group of persons as well as with unrelated groups of persons. AO disallowed losses on impugned transactions by simple purchase bills or sales bill ignoring market rates. This done to avoid tax. Moreover, neither any amount was paid nor any shares were transferred in the name of purchasers, only account entries were made. Held: Necessary entries were made in the account books of both sides i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u undivided family. The AO disallowed by upholding that the father did not come under the definition of relatives. The submission of the assessee is that family was HUF and each of HUF family members have a separate legal status so the father should be considered as a relative. In this aspect we have gone through the cited decision filed by the assessee passed in ITAT, Ahmedabad Bench in Gyanchand M. Bardia vs. ITO (supra) and the relevant portion of this order is herein below: "11.1 Further, we find that the decision of the ITAT Chandigarh Bench in the case of Pankil Garg (supra) has dealt with the issue in a totally different perspective, from the standpoint of the different aspects of Hindu Undivided Family and has held that as per the Hindu Law every member of HUF has a pre-existing right in the property of the HUF and any amount given to a member therefore from the HUF property tantamounts to only giving him what actually belonged to him and there is no question therefore of the same being any amount given for no consideration or in the nature of gift, which are covered in the scope of Section 56(2)(vii) of the Act. The relevant findings of the ITAT in the said case are as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with birth of a member in the family and decreases on death of a member in the family. Females go and come into the 'HUF' on marriage. A 'coparcenary' is a narrower body than a joint family and consists of only persons who take by birth an interest in the joint family property and can enforce a partition whenever they like. Though, members of 'HUF' are entitled to be maintained out of the joint family funds, however, the members of the narrower body within 'HUF' called 'Coparcenary' have birth rights in the joint family property. Hindu Law does not recognize an 'HUF' as an entity separate from the members of the family. In an 'HUF', the members collectively own it. The interest and share of the members in the estate of the family is undivided and undetermined. All the members collectively own and enjoy the property without determination of their shares until the same is partitioned. There is community of interest and unity of possession between all the members and upon the death of any of them, the others take by survivorship and not by succession. An 'HUF' though treated as a separate entity for taxation purposes, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt. However, in the case of 'HUF', or to say in the strict sense in case of 'coparcenary', the individual members receive their share on partition. However, during the subsisting coparcenary or to say broadly 'HUF', no member is entitled to receive any definite share out of the income of the 'HUF'. It is left to the prudence and wisdom of the manager who has to manage the affairs of the 'HUF', he may spend the money or property of the 'HUF' in the case of a need of a member, such as on the marriage of a unmarried female member or in case of certain treatment of any disease of the member or in case of educational needs of any children in the 'HUF'. The amount spent may be more than that the member may have gotten on the partition of the 'HUF'. The Karta of the 'HUF', even can gift of the 'HUF' property for pious purpose and even he can contract a debt for the legal necessity and for family purposes and can bind the other members to the extent of their interest in the family property. In the above scenario, the property of the 'HUF' neither cannot be said to belong to a third person nor ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot genuine or not for family good, however, a third person cannot question it. Family income flows into a common pool from which resources are drawn to meet needs of all the members which are regulated by the head of the family. In such circumstances, any amount received by a member of the 'HUF', even out of the capital or estate of the 'HUF' cannot be said to be income of the member exigible to taxation. Since such a member himself has a preexisting right in the property of the 'HUF', hence, it cannot be said to be a gift without consideration by the 'HUF' or by the other members of the 'HUF' to that recipient member. In such circumstances, the provisions of section 56(2)(vii) are not attracted in case an individual member receives any sum either during the subsistence of the 'HUF' for his needs or on partition of the 'HUF' in lieu of his share in the joint family property. However, the converse is not true i. e. to say in case an individual member throws his self-acquired property into common pool of 'HUF'. The 'HUF' or other members of the 'HUF' do not have any pre-existing right in the self- acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case of the assessee is that search was taken at various premises of the Adhunik group of the case, income tax return for AY 2015-16 filed in compliance with the notice by the assessee. The AO after hearing the assessee has decided three issues against the assessee which are as under: "1. AO observed that the appellant had shown drawings of Rs. 31,947/- during the year under consideration whereas he had reported drawings of Rs. 1.6 Lakh in AY 2010-11. The AO estimated drawings @ Rs. 5,000/- per month and added Rs. 28,000/-. 2. The appellant had shown commodity derivative profit of Rs. 3,04,711/-. The AO carried out investigation and found that the appellant did not carry out the transactions in commodity derivatives in the ICEX platform and therefore, it was not a genuine profit to be assessed as business income. The AO forwarded the investigation result to the appellant and sought his explanation but the appellant did not comply. The AO added the amount of Rs. 3,04,711/- u/s 68 of the Act as unexplained cash credit. 3.The AO finally observed that the appellant received a sum of Rs. 17,74,878/- from a trust namely Aakash Sureka Educational Trust created by his mother. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "a) It is a discretionary trust created for the benefit of appellant beneficiary by appellant's mother, being a relative within the meaning of Section 56. b) Without admitting utilization of fund for non-educational purpose, it is contended that even in that circumstance, amount so received by the appellant cannot be assessed u/s 56(2). c) Amount transferred to the appellant beneficiary was already taxed in the hands of trustees and so, there cannot be double taxation (CIT vs. Managing Trustee, Nagore Daraha 57 ITR 321) d) As per Section 161 of the Act, Trust can be assessed in its own name and section 166 provides for assessment of income in the hands of beneficiary (Saran Nayak vs. DCIT [2022] 45 taxmann.com 117 (Karnataka) e) Amount received in pursuance of dissolution of the trust cannot be termed to be an amount received by the beneficiary without consideration to be assessed u/s 56(2) [Ashok C Pratap vs. Addl. CIT, ITA No. 4615/Mum/2011 (ITAT, Mumbai)]" 18. Going over the facts of the case, we find that the deed of trust was made on 11.12.2010 by assessee's mother Sudha Sureka creating a trust namely Aakash Sureka Educational Trust. There were two trustees i.e. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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