TMI Blog2018 (12) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions could be set off against the income assessed by the A.O under Sec. 68 - Adjustment as per Sec.115BBE - Held that:- Sec.115BBE was brought on the statute by the Finance Act, 2012 with effect from 01.04.2013. On a perusal of the said statutory provision, as was then so available on the statute and was applicable to the case of the assessee for the year under consideration i.e A.Y. 2013-14, no restriction was placed as regards set off of losses against the income referred to in Sec.68, 69, 69A, 69B, 69C and 69D. Rather, the legislature in all its wisdom by amending Sec. 115BBE vide Finance Act, 2016 w.e.f 01.04.2017 had only w.e.f A.Y. 2017-18 placed a restriction on set off of losses, in addition to raising of any claim of expenditure and allowance against such income. The fact that the aforesaid amendment of Sec. 115BBE by the Finance Act, 2016, w.e.f 01.04.2017 is prospective in nature can safely be gathered from a perusal of the CBDT Circular No. 3/2017, dated 20.01.2017. In the backdrop of our aforesaid observations, it can safely be gathered that there was no embargo to claim set off of losses in the year under consideration i.e A.Y. 2013-14. We thus in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the Multi Commodity Exchange has denied the transaction of ₹ 5,73,96,307/-. 2. On the facts and circumstances of the case and in Law, the CIT(A) erred in al lowing the set of f of losses against the addi tions made by the AO towards unexplained cash credit u/s. 68 of the I.T Act by applying the newly amended section 115BBE of the I.T Act. 3. On the facts and circumstances of the case and in law, the CIT(A) erred in ig n o r in g th e d e c is io n of th e Ho n ble Gujarat High Court in the case of Fakir Mohammed Haji Hasan vs. CIT (2001) 247 ITR 290 and the decision in the case of M/s. Kerala Sponge Iron Ltd. vs. CIT ( ITA No. 195/2014) by the Kerala High Court. 4. The appellant prays that the order of the CIT(A) on the grounds be set aside and confirm the order of the AO. 5. The appel lant craves leave to add, amend or al ter al l or any of the grounds of appeal. 2. Briefly stated, the assessee company which is engaged in share trading activities in various stock exchanges including F O, commodities share trading and currency trading had filed its return of income for A.Y. 2013-14 on 25.09.2013, declaring total income of ₹ 6,28,890/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O in order to verify the genuineness of the claim of the assessee issued summons under Sec. 131 to the Director of M/s Kaynet Commodities Pvt. Ltd. and recorded his statement under oath. Shri Mukesh Shah, Director of M/s Kaynet Commodities Pvt. Ltd. in his statement admitted before the A.O that his company had not made any off market transactions with other clients. In the backdrop of the aforesaid facts, the A.O held a conviction that the commodity gains of ₹ 5,73,96,307/- claimed by the assessee were in the nature of artificially engineered gains that were created by the assessee with the purpose to set off the same against the loss incurred in F O transactions. In order to support his aforesaid conviction, it was observed by the A.O that all the purchase and sale transactions were merely carried out by the assessee on a plain piece of paper. Further, it was noticed by him that there was no movement of actual funds and only a journal entry was passed on 28.12.2012 and 05.01.2013 amounting to ₹ 1,00,00,000/- and ₹ 1,42,00,000/-, respectively, in the ledger of M/s Kaynet Commodities Pvt. Ltd. On the basis of the aforesaid deliberations, the A.O being of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69, 69A, 69B, 69Cand 69D was made available on the statute by the legislature on the basis of amendment to Sec.115BBE by the Finance Act, 2016 only with effect from 01.04.2017. In order to fortify his aforesaid view the CIT(A) took support of the CBDT circular No. 3/2017, dated 20.01.2017 which explained the amendment on the basis of which Sec. 115BBE was prospectively amended by the Finance Act, 2016 with effect from A.Y. 2017-18. In the backdrop of his aforesaid deliberations the CIT(A) vacated the characterization by the A.O of the profit shown by the assessee from commodities trading business of ₹ 5,73,96,307/-, as an unexplained cash credit under Sec.68 of the Act. Apart therefrom, the CIT(A) vacated the observation of the A.O that the set off of loss of ₹ 5,56,42,339/- suffered by the assessee in F O transactions was not permissible against the income of ₹ 5,73,96,307/- that was assessed by him as an unexplained cash credit under Sec.68 in the hands of the assessee. On the basis of his aforesaid observations the CIT(A) partly allowed the appeal of the assessee. 6. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss suffered by the assessee from F O transactions against the income that was allegedly assessed by the A.O under Sec. 68 of the Act. 8. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that the revenue by preferring the present appeal has sought our indulgence on two issues viz. (i) that as to whether the CIT(A) is right in law and facts of the case in concluding that the profits from the commodities transaction claimed by the assessee could not be assessed as an unexplained cash credit under Sec.68 of the Act; and (ii) that as to whether the CIT(A) has rightly concluded that the loss suffered by the assessee from F O transactions could validly be set off against the income assessed in the hands of the assessee under Sec. 68 of the Act. 9. We shall first advert to the observations of the CIT(A) that the profit from commodities trading business of ₹ 5,73,96,307/- could not have been held as an unexplained cash credit under Sec.68 of the Act. Insofar the application of Sec.68 is concerned, the same comes into play where the assessee fails to explain the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was open for him to have made further enquiries, which we find has not been done by him. On the basis of our aforesaid observations, we are of the considered view that as the assessee has duly substantiated that it had earned a profit of ₹ 5,73,96,307/- from commodities transactions, therefore, the same in our understanding cannot be held as an unexplained cash credit under Sec.68. The Ground of appeal No. 1 raised by the revenue is dismissed. 10. We shall now advert to the observation of the CIT(A) that the loss suffered by the assessee from F O transactions could be set off against the income of ₹ 5,73,96,307/- assessed by the A.O under Sec. 68 of the Act. We find that Sec.115BBE was brought on the statute by the Finance Act, 2012 with effect from 01.04.2013. On a perusal of the said statutory provision, as was then so available on the statute and was applicable to the case of the assessee for the year under consideration i.e A.Y. 2013-14, no restriction was placed as regards set off of losses against the income referred to in Sec.68, 69, 69A, 69B, 69C and 69D. Rather, the legislature in all its wisdom by amending Sec. 115BBE vide Finance Act, 2016 w.e.f 01. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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