TMI Blog2016 (3) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... the commodity exchange cannot be the criteria to hold the transaction as bogus - Decided in favour of assessee Speculation loss while computing the income u/s 115JB - Held that:- Having considered the decision of Hon’ble Supreme Court in the case of Apollo Tyres Ltd. (2002 (5) TMI 5 - SUPREME Court), we are of the view that the AO cannot reopen the accounts of a company, which have been audited and certified by the statutory auditor, passed by the members of the company in general body meeting, filed before the ROC, and to which he has not taken any objection under that Act. The impugned amount was not entered in the books as liability and the auditor had made certain remarks only in regard to the impugned amount. No objection has been taken by the registrar to the accounts field before him. Therefore, the book profit has to be taken as per the aforesaid P&L a/c. No adjustment is permissible in the book profit in respect of aforesaid amount under any of the cls. (i) to (vii) of the Explanation to s. 115JB. IN view thereof, it is held that the learned CIT(A) erred in directing the AO to reduce this amount from the book profit. - Decided in favour of assessee - ITA No.1070/Kol /2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... event, the learned Commissioner of Income Tax (Appeal) acted illegally in holding that the said speculation loss of ₹ 22,696157/- cannot form part of the Profit Loss Account and that the same can be added back u/s/. 115JB of the Income Tax Act, 1961 which is not permissible at all in terms of section 115JB(1) and the provisos thereto. 2. Grounds No. 1 to 3 are common therefore they are clubbed together, the common issues raised by assessee in this appeal are that Ld. CIT(A) erred in confirming the order of Assessing Officer for disallowing the speculation loss of ₹2,26,96,157/- arising from purchase and sale of silver and other metals by holding such loss bogus and inadmissible. 2.1 The facts of the case are that assessee is a Private Limited Company and is engaged in the business of granting of loans and dealing in commodities. During the year assessee was engaged in the trading business of commodities in National Multi Commodity Exchange (NMCE for short). Assessee used the services of the broker namely, Vatika Merchant Pvt. Ltd. for the trading in the NMC exchange. The assessee had claimed a loss of ₹ 2,26,96,157/- in the business of trading in commod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR was asked to produce the data regarding the price of the silver to show such a huge fluctuation resulting into the loss of ₹ 2,26,96,157/- to the appellant. The date of each entry in the commodity exchange is recorded on day to day basis or may be at regular interval of times during the day since such transactions are recorded. However, no such supporting data was produced by the AR during the appellate proceedings. 10. It is a simple case of procuring contract notes, making entries in a plain simple register showing purchase and sale incurring commodity loss in every purchase and sale thereof, as complied in the annexure A attached with this order. Similar transactions have been sown by the appellant in Zinc, Nickel, Sack, Gold, etc. The appellant has entered in to 169 transactions of silver out of which complete details were given for 158 transactions and the appellant incurred loss in all such transactions. There is never gain in any commodity transaction. The appellant has entered in to 42, 34, 5 and 3 transactions of ZINC, NICKLE, SACK and GOLD respectively and the appellant has incurred loss in all transactions except two in gold where it was old on same pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities are entitled to pierce the veil of corporate entity and look at the reality of the transaction and that in exceptional cases the Court can lift the veil of corporate entity and to pay regard to the economic realities behind the legal fa ade. Similarly, the Assessing Officer has power to disregard the corporate entity if it is used for tax evasion or to circumvent tax obligation or to perpetuate fraud. 2) The Hon'ble Delhi High Court in PNB Finance Ltd. v. Shri Shital Prasad Jain [1983] 54 Comp. Cas. 66 has held that the doctrine of piercing the corporate veil wherever necessary might be invoked by the Curt in the interest of justice to prevent the corporate entity from being used as an instrument of fraud and the fundamental principle of corporate personality itself might be disregarded having regard to the exigencies of the situation and for the ends of justice. If the economic realities of a transaction between the appellant and others are arranged and the exigency of the circumstances surrounding it reveal that the transaction has been entered only to defraud the revenue causing injustice to it, the authorities should look behind the real purpose of the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the IT return, ledger copy, letter to AO and PAN of the broker in support of his claim which is placed at pages 72 to 75 of the paper book. The ld. AR produced the purchase sale contracts notes which are placed on pages 28 to 69 of the paper book. The purchase and sales registers were also submitted in the form of the paper book which is placed at pages 76 to 87. The Board resolution passed by the company for the transactions in commodity was placed at page 88 of the paper book. On the other hand the ld. DR relied in the order of the lower authorities. 4.1 From the aforesaid discussion we find that the assessee has incurred losses from the off market commodity transactions and the AO held such loss as bogus and inadmissible in the eyes of the law. The same loss was also confirmed by the ld. CIT(A). However we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Profit and Loss Account. Therefore, it is held that the addition of ₹ 36538/- as STT and speculation loss of ₹ 226,96,157/- incurred in commodity transactions have been rightly added while determining the profit as per section 115JB of the Income Tax Act, 1961. These grounds of appeal are accordingly held to be dismissed. Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. 7. We have heard rival parties of both sides and perused the materials available on record. Before us the ld. AR submitted that the AO has no jurisdiction to disregard the net profit shown in the profit loss account of the assessee to the extent provided in the explanation to sub section (2) of section 115JB of the Act. On the other hand the ld. DR relied in the order of the lower authorities. 7.1 We find from the aforesaid discussion that the AO has disallowed the above stated loss while computing the tax liability under the provisions of MAT under section 115 JB of the Act. We find from the orders various court that the AO is duty bound to accept the profit as shown in the profit loss account of the assessee. We are putting our reliance in decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is dismissed. DCIT Circle-10(1) v. Dune Leasing Finance Ltd. 126 ITD 255 (Del), wherein the Tribunal held paragraph No. 3.2 5 (last 3 lines) 3.2 We have considered the facts of the case and rival submissions. Having considered the decision of Hon ble Supreme Court in the case of Apollo Tyres Ltd. (supra), we are of the view that the AO cannot reopen the accounts of a company, which have been audited and certified by the statutory auditor, passed by the members of the company in general body meeting, filed before the ROC, and to which he has not taken any objection under that Act. The impugned amount was not entered in the books as liability and the auditor had made certain remarks only in regard to the impugned amount. No objection has been taken by the registrar to the accounts field before him. Therefore, the book profit has to be taken as per the aforesaid P L a/c. No adjustment is permissible in the book profit in respect of aforesaid amount under any of the cls. (i) to (vii) of the Explanation to s. 115JB. IN view thereof, it is held that the learned CIT(A) erred in directing the AO to reduce this amount from the book profit. Thus, this ground is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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