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2019 (1) TMI 583 - AT - Income TaxDisallowance of loss claimed on account of derivative trading - Held that:- We note that the assessee has carried out the derivative transactions through the USEI which has approval from the SEBI in the year 2010 onwards and this Exchange has been recognized by CBDT vide notification no. 12/2011 dated 25.02.2011. Assessee carried out currency derivative transaction in USEI which is a currency derivative arm of the Bombay Stock Exchange. The USEI is promoted by BSI and other 21 PSU banks and it deals only in currency derivative and interest swap options. AO erred in finding that the assessee was not regular trader in the derivative market because the AO himself during the course of search has found that assessee is actively engaged in derivative trading and ₹ 4,02,02,600/- was assessed to tax from the derivative trading for AY 2013-14 (previous assessment year) . When the assessee claimed the loss in this assessment year the AO has taken an about-turn and did not accept the same, which action of the AO cannot be countenanced. We note that the AO’s allegation that the SEBI has suspended the broker through whom the assessee had transacted the derivative business is not correct. AO has not given a copy of the broker’s statement/adverse material to the assessee, so the statement of the broker which is adverse against the assessee cannot be relied upon by the AO for drawing adverse inference against the assessee. Hon’ble Supreme Court in the case of Kishanchand Chellaram Vs. CIT (1980 (9) TMI 3 - SUPREME COURT) held that any information gathered by the AO without confronting the same to the assessee did not have any evidentiary value and cannot be used for the purpose of assessment or other proceedings. Assessee’s plea to the AO to cross examine the so called broker whose statement was recorded by the AO was also not done by the AO which omission also makes the order of AO bad in the eyes of law. AO’s action for taxing the derivative income for AY 2013-14 and not accepting the loss for AY 2014-15 cannot be countenanced and, therefore, we do not find any infirmity in the order of the Ld. CIT(A) directing deletion of the addition made on this count and, therefore, the revenue’s ground of appeal is dismissed. Addition made on account of section 14A read with Rule 8D - Held that:- Since the assessee has not received any exempt income the disallowance u/s. 14A read with Rule 8D of the Rules was not warranted as held in CIT Vs. Cheminvest Ltd. (2015 (9) TMI 238 - DELHI HIGH COURT), wherein it has held that sec. 14A envisages that there should be actual receipt of income which is not includible in total income and the said section will not apply where there is no exempt income received or receivable during the relevant year - decided against revenue
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