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CVM JEWELS PVT LTD Versus INCOME TAX OFFICER - WARD - 1 (1) (3) OR SUCCESSOR IN OFFICE

2016 (8) TMI 273 - GUJARAT HIGH COURT

Reopening of assessment - loss suffered by the assessee on sale of gold and silver - Held that:- In the final order of assessment that the Assessing Officer passed, he made no disallowance on this count. It can thus be seen that entire issue of nature of loss suffered by the assessee on sale of gold and silver was examined at length by the Assessing Officer during the original assessment proceedings. His pointed question was why should such loss not be treated as speculative and disallowed in te .....

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f tax at source as shown by the assessee was in order. Once again in the final order of assessment, Assessing Officer made no disallowance on this count by holding that deduction of tax was deficient. - Sale of gold - Held that:- Coming to the last issue, it is undisputed that the same was never gone into by the Assessing Officer during the assessment proceedings since the Assessing Officer was not conscious that Shri Chudasma to whom the sale of gold was allegedly made was not alive on such .....

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de by the assessee for a sum of ₹ 42.68 lacs to Shri Chudasma Viajysinh Pratapsinh. It was later on found that on the date of sale Shri Chudasma had already expired. However, it is not even the case of the Revenue that the assessee did not offer the sale proceeds of ₹ 42.68 lacs to tax. Obviously, since the assessee claimed that the gold was sold for a sum of ₹ 42.68 lacs, such sum being a revenue receipt would form part of the assessee's total income. Even if there was some cl .....

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1. The petitioner has challenged a notice dated 23.3.2016 issued by the respondent Assessing Officer seeking to reopen the petitioner's assessment for the assessment year 2011-2012. 2. Facts are as under. The petitioner is a company registered under the Companies Act. For the assessment year 2011-2012, the petitioner had filed return of income on 30.8.2011 declaring total income of ₹ 62.46 lacs (rounded off). Such return was taken in scrutiny by the Assessing Officer during which he ra .....

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, it is seen that the assessee has claimed direct expenses of ₹ 1,26,41,190/as MCX Silver rate Difference and also shown direct income of ₹ 1,47,922/as MCX Gold Rate Difference. Thus, the net loss of ₹ 1,24,93,268/on account of MCX rate, difference was claimed by the assessee. 1n the course of assessment proceedings, the assessee was asked why the MCX Loss claimed should not be considered as speculation loss. However, the assessee vide submission dtd. 27.12.2013 stated that it .....

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sessee, the transaction has not been settled by actual delivery, the loss of ₹ 1,24,93,268/is a speculative loss. Moreover, the assessee has settled its MCX contracts otherwise than actual delivery of commodity viz. Gold & Silver by paying margin money only. In view of the provision of section 43(5) of the I.T. Act, the loss of ₹ 1,24,93,268/on MCX transaction has to be treated as speculative loss which has escaped the assessment within meaning of section 14 7 of the I. T. Act. I .....

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uld have been disallowed U/s.40(a)(ia) of the Act. Therefore, the income of ₹ 8,81,018/has escaped assessment within meaning of section 147 of the I. T. Act. During the course of assessment proceedings, it was noticed that assessee has made sales in cash to Shri. Chudasma Vijaysinh Pratapsinh (PAN:ACGPC4776K), the said information was passed on to the 1T0, Ward5( 1)(4), Ahmedabad with whom the purchaser was assessed. The ITO, Ward5( 1)(4), Ahmedabad vide letter No.1TO. WD5(1) (4)/ABD/INF/C .....

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of Rs. I,76,42,286/has escaped assessment for the A.Y. 2011-12 within the meaning of section 14 7 of the I. T. Act. 3. The petitioner raised objections under a letter dated 18.4.2016 against the notice for reopening such assessment. The objections were rejected by an order dated 3.5.2016. 4. Drawing our attention to the reasons recorded by the the Assessing Officer and the materials on record, the counsel for the petitioner submitted that the Assessing Officer had recorded three reasons. With r .....

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s score. Counsel lastly contended that all these issues were examined by the Commissioner in exercise of powers under section 263 of the Act for which a notice was issued on 12.2.2016 in which all these three issues were mentioned. Upon the petitioner making a detailed representation, the Commissioner dropped the revisional proceedings by an order dated 22.3.2016. It would thereafter, not be open for the Assessing Officer to reopen the assessment on these very issues. 5. On the other hand, learn .....

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count of MCX rate difference in sale of gold and silver. According to the Assessing Officer, such loss was speculative loss, therefore, not an allowable loss in terms of section 43(5) of the Act. The second ground was that, as per the Assessing Officer, upon payment of usance charges on silver loan, the assessee had to deduct tax at source at the rate of 10% as per section 194A of the Act since such usage charges are in the nature of interest payment. However, the assessee had deducted tax at 2% .....

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ssment. 7. During the course of assessment proceedings, the Assessing Officer had raised written queries. Under letter dated 7.11.2013, the Assessing Officer called upon the assessee to provide the following details : 8. Copy of ledger a/c with confirmation in respect of MCX Silver Rate Difference. *State whether it is related to speculation business of Bullion Trading. 8. In response to such letter, the assessee under letter dated 25.11.2013 stated as under : 8. Copy Ledger confirmed ledger acc .....

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Under a further letter 23.12.2013, the assessee stated as under : 5. Regarding the issue for considering MCX as speculation loss, we would like to clarify that it is a business loss and not a speculation loss for the reason that the assessee is trading/merchandising in Silver/Gold and the loss so suffered, is on account of safe guarding the raw materials or merchandise traded by him. The assessee has sufficient stock of silver for the year which is also evident from the stock register submitted .....

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ble to the said letter reads as under : During the last hearing on 23/12/2013 in case of the above named assessee, your honour had asked us to show cause as to why the MCX loss should not be considered as speculation loss. In this regards we would like to clarify in furtherance to our earlier submissions that it is a business loss and not a speculation loss for the reason that the assessee is trading/merchandising in Silver/gold and the loss so suffered, is on account of safe guarding the raw ma .....

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s. His pointed question was why should such loss not be treated as speculative and disallowed in terms of section 43(5) of the Act. On the same ground, therefore, it would not be permissible for the Assessing Officer to reopen the assessment which would be based on change of opinion. 13. Likewise, with respect to issue no.2 referred to in the reasons recorded, the Assessing Officer under such letter dated 7.11.2013 had asked the assessee to provide the following information : 3. Explain silver U .....

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ter dated 23.12.2013, the assessee once again conveyed as under : 4. Regarding charging of Usance charge we would like to explain that the value of silver loan taken from different parties as on 01/04/2010 is as under : Name Value as on 01/04/2010 Usance charge @ 1% Choksi Vachhraj Majkanji & Co. 75801536.00 758015.00 Deepak N Dholakia 17746006.00 177460.00 Jugal N Dholakia 16579314.00 165793.00 Hence it can be seen that the usance charge is calculated at 1% on the closing balance of silver .....

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