TMI Blog2017 (9) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... on on it by law, that the Tribunal concluded that the assessee's version deserves to be accepted - Decided against the revenue. Addition u/s 69C/68 - addition pertains to cash transported by road from branches outside Ahmedabad - Held that:- As far as the cash transported from Ahmedabad is concerned, it accepted the plea of the assessee and found that there were no contrary materials to conclude that the sum of ₹ 1,90,56,727/, that related to the transport of cash from Ahmedabad to Kandla, cannot be brought in a few hours. That distance of 250 kms. was found to be reachable.- Decided in favour of assessee. Addition u/s 68 on account of the settlement of liabilities of 3 debtors - Held that:- The sum, as above, was finally received by the assessee from M/s. Joshi Bullion Gems and Jewelry Pvt. Limited (JBGJPL) headed by one Mr. Jayesh Desai. The sum was not directly received from the three parties who owed the money to the assessee. That is because the assessee and the said M/s. JBGJPL had entered into an assignment agreement. It is in these circumstances that the Tribunal extensively referred to all the three debtors and their debts, how they were settled and how the 3r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and has also paid interest on other loans and advances. The funds position has also been noted and with relevant details. It is in these circumstances that the nexus was held to be established. No substantial question of law. Forward contract loss - speculation loss or not - trading of gold and bullion - Held that:- The Tribunal then terms the findings of fact as consistent with the legal provisions and the materials on record to conclude that the impugned loss amounts to hedging loss and constitutes business loss. The Commissioner of Income Tax (Appeals) has rightly examined this matter from this angle and by applying such legal principle. Whether the loss amounts to hedging loss or is a speculation loss has been examined by the Commissioner and in all details. Once there is such an exercise carried out to grant benefit of Section 43(5) of the IT Act to the assessee, then, the above grounds arising from the Revenue's Appeal are also not substantial questions of law - Decided against the revenue. - Income Tax Appeal No. 45 of 2015 - - - Dated:- 22-8-2017 - S. C. Dharmadhikari And Smt. Vibha Kankanwadi, JJ. Mr. Nirmal C. Mohanty for the Appellant Mr. Precy Pardiw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Tribunal has not upheld that conclusion and concurrently recorded. In doing so, the Tribunal has committed several errors of law apparent on the face of the record, the Tribunal's order may not be perverse with regard to every question and proposed by the Revenue, but if the same are inferences and purely legal on the factual position emerging from record, then, such inferences, raise substantial questions of law. 7. Relying upon the judgment of the Hon'ble Supreme Court in the case of Premier Breweries Ltd. Vs Commissioner of IncomeTax, reported in [2015] 372 ITR 180 (SC), Mr. Mohanty would submit that we should admit this Appeal. 8. On the other hand, Mr. Pardiwala, learned Senior Counsel appearing on behalf of the respondent assessee, supports the order of the Tribunal and which he contends, does not uphold the arguments of the assessee in their entirety. The assessee has not brought any appeal against such part of the order where the Tribunal has not accepted its version in entirety. In considering the rival versions and purely on facts, the Tribunal has recorded conclusions consistent with the material placed on record. There is neither perversity, nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n nature and therefore, dismissed as such. The rest of the grounds were taken up for adjudication. 14. One of which was deduction under Section 10A. Ground Nos. 3, 4.1 and 4.2 of the memo of appeal before the Tribunal revolve around this issue. 15. The assessee argued that it obtained export orders from Dubai for manufacture and export of medallions. Accordingly, it manufactured gold medallions from gold bars at Special Economic Zone (SEZ) at Surat in Gujarat and exported it to various parties at Dubai. The Revenue doubted this by pointing out the circumstances, particularly in relation to electricity consumption. 16. As far as the question and stated to be substantial question of law proposed in this memo of appeal is concerned, that is confined to the argument of the Revenue that no manufacturing activity for manufacture of gold medallions was carried out in the SEZ unit. Mr. Mohanty would submit that these doubtful circumstances would denote that the Revenue was right that the assessee did not or could not have manufactured this big a quantity of medallions and as evident from the export orders, and thereafter dispatched the same to the exporters in Dubai. 17. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and impossible that such an enormous manufacturing order can be fulfilled and on the strength of the machinery engaged at site. Further, that machinery was engaged for very few days. Shortly, there is something which the assessee has not revealed. Else, this would not be a sustainable claim. 22. The Tribunal in recording its conclusions in paragraph 12, found that the prominent issue was assessee's ability to earn exempt income of ₹ 6.43 crores with manufacturing activity of two days at SEZ, Surat. Consumption of minimum units of electricity and non claiming of labour charges involving M/s. S.L. Industries would demonstrate that this is an unsustainable, doubtful and suspicious claim, was the pleading of the Revenue. The Tribunal found that the books of account support that the requirement of the assessee is 8.2 units per 8 hours. The consumption is only around 130 units, which is reported in the electricity meters. The total units consumed in the month of September, 2008 (943 units) and in the month of October, 2008 (870 units) explain the consumption of electricity. It is, therefore, clear that the Revenue could have produced such materials which would indicate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FO method, the Tribunal has found that the conclusion of the Commissioner of Income Tax (Appeals) does not call for any interference. It has only rejected the argument of the Revenue that the assessee has not manufactured the medallions. The Tribunal ultimately sent the matter back to the Assessing Officer so as to ensure compliance with Subsection (4) of Section 10A of the IT Act. The Tribunal found that in respect of the profits attributable to the export of 109 kgs of gold medallions, the same needs to be disallowed for want of discharge of onus by the assessee. It is to clarify that this part of disallowance is in no way connected to the alleged absence/doubting of manufacturing activity of making of medallions, that the matter was sent back to the Assessing Officer. 27. We do not think that this exercise either raises substantial questions of law. All the more, when the Revenue's version has been substantially accepted. 28. The Tribunal has, in paragraph 15 of the order under Appeal, balanced the rights and equities. In issuing a direction to the Assessing Officer, the Tribunal has not exhibited any lack of awareness or knowledge of legal provisions or the interpreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the availability of cash in the books of account of both, the branches and the Head Office. In relation to the addition of ₹ 2.33 crores, the Tribunal concluded that the documents filed before it are not adequate to hold that the assessee has discharged the onus successfully. It is not an easy task to cover the distance between Mumbai and Coimbatore in a day's time. In such circumstances, there is adequate cash balance in the books of the branches and the cash payments are actually made towards the customs duty. Though there is adequate cash balance in the books of the branches and the cash payments were actually made towards customs duty, it is a plea which will have to be substantiated by the assessee, the onus would be entirely on the assessee. The Tribunal, in paragraph 24 of the order under Appeal, therefore, maintained the findings of the Assessing Officer and the Commissioner of Income Tax (Appeals) insofar as the first segment, namely, cash of ₹ 2.33 crores emanating from the branches. As far as the cash transported from Ahmedabad is concerned, it accepted the plea of the assessee and found that there were no contrary materials to conclude that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income Tax (Appeals) are not sustainable and therefore, ground No.6 of the assessee's Appeal was accepted and allowed. 37. In doing so, the Tribunal analyzed the 'scheme of assignment'. The Tribunal had already held that the bipartite agreement is valid considering the provisions of Section 130 of the Transfer of Property Act. It is in these circumstances that the Tribunal allowed the incidental claims. The Tribunal has then considered the addition of the Assessing Officer with regard to the sum of ₹ 1,26,94,987/. The Revenue's representative conceded to reconsideration of this issue, and that is how the matter was sent back to the Assessing Officer. 38. We do not think that as far as that aspect is concerned, the question that is proposed by the Revenue as question No.4E can be termed as a substantial question of law. We do not see how the order of remand, in the given facts and circumstances, could be the subject matter of the present Appeal. 39. Then, the Tribunal considered the addition of ₹ 9,43,68,687/in respect of the stock sold by the assessee on 24th October, 2008. 40. In relation to that, the Tribunal rendered its finding at r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4F at page 19 of the paper book and proposed as a substantial question of law. 45. There as well, at running page 71 of the paper book, the Assessing Officer has considered the said issue. The Assessing Officer concluded that the amount of ₹ 1,87,555/has to be disallowed and added back to the total income of the assessee. The Revenue contested this claim as well, but the Tribunal, at running page 259 of the paper book in paragraph 67, directed that the issue of commission payment to bank, as well as the genuineness of this payment, needs to be readjudicated and the matter was sent back. We do not see how question No.4E can, therefore, be termed as a substantial question of law. 46. Then comes the disallowance of loss of ₹ 49,73,46,618/in diamond trade business. 47. There as well, the Tribunal found that detailed submissions have been made. The Assessing Officer, as also the Commissioner of Income Tax (Appeals) may have examined this matter, but the Tribunal, in considering ground No.9 pertaining to this disallowance and raised by the assessee, noted that the study of the transaction revealed that the real intention of the assessee was to earn interest arbitrage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to confirming disallowance of ₹ 57,56,233/under Section 40A(2) out of the interest payments made to M/s. RSBL Commodities P. Ltd., a sister concern of the assessee. This issue was also referred to the special auditors. A showcause notice was issued by the Assessing officer and a reply was filed by the assessee on 4th August, 2012 contesting the findings in the report. The addition was made by the Assessing Officer on not being satisfied with the explanation of the assessee and which came to be confirmed by the First Appellate Authority. 51. The Tribunal, in noting the contentions of the assessee, found that the assessee's counsel restricted the payment of interest to two parties, M/s. Venkatesh Associates P. Ltd. and the sister concern RSBL. Insofar as the nexus is concerned, the Tribunal found that the assessee paid interest @ 4% to M/s. Venkatesh Associates P. Ltd., whereas the rate of interest paid to the sister concern is 6% to 7% which is on the higher side. This differentiation clearly attracts the provision of Section 40A(2)(b). It is in these circumstances that the Tribunal found that it would be justified in taking a rational and commonsense approach. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable to the facts and circumstances of the present case, then, we do not see how this question can be proposed as a substantial question of law. The Tribunal has noted the rival contentions. The Tribunal has found that the assessee received interest free loans and advances and has also paid interest on other loans and advances. The funds position has also been noted and with relevant details. It is in these circumstances that the nexus was held to be established. 53. Then, with regard to the forward contract loss of ₹ 7,96,32,697/that was the subject mater of ground No.3 of the Revenue's appeal. The Assessing Officer picked up only one transaction involving M/s. Rajmal Lakhichand and Amrish L Jain. The genuineness of these transactions and the allowability of the loss was referred by the Revenue to the special auditors. The special auditors found that the assessee made profits almost equal to that of losses incurred as expenditure, and therefore, the intent of the assessee in entering in the said transactions is not clear. It is in this context that the Assessing Officer issued a showcause notice seeking explanation of the assessee in matters of the reasonableness and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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