TMI Blog2019 (2) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... modity loss as speculative loss - Held that:- As decided in M/S VARSHA CORPORATION LTD. VERSUS DCIT (OSD) -9 (1) , MUMBAI [2015 (6) TMI 124 - ITAT MUMBAI] for the assessment year 2009-10 wherein the Co-ordinate Bench of the Tribunal has held that the loss to be speculative in nature and not business loss. Purchases of scrap as bogus purchases - Held that:- If the purchases were bogus then how the assessee had made corresponding sales which have not been disturbed by the AO and therefore stood accepted. However the fact remains that the appellant has not furnished the copies of invoices and complete names/addresses of the suppliers and corroborative evidence for transportation of the material. Accordingly to plug possible leakage of revenue and meet ends of justice, a token disallowance of ₹ 2,50,000/- is sustained. Accordingly direct the AO to restrict the addition to ₹ 2,50,000/- on this account instead of ₹ 40,61,348/- made by him. This ground of appeal is partly allowed. - ITA No.1485/PUN/2016 - - - Dated:- 4-2-2019 - Shri R.S. Syal, VP And Shri Partha Sarathi Chaudhury, JM For the Assessee : None For the Revenue : Shri Sudhendu Das ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases of scrap. iv) ₹ 17,54,623/- on account of disallowance of interest. 4. Aggrieved with the assessment order, the assessee preferred appeal before the Ld. CIT(A). With regard to ground No.1, during the First Appellate Proceedings, the Ld. AR of the assessee submitted that Assessing Officer added an amount of ₹ 49,29,010/- being the cash deposited in the Cosmos Bank and Jalna Merchant Co-operative Bank as income from undisclosed sources u/s.69 of the Income Tax Act, 1961 (hereinafter referred to as the Act ). He has further argued that the cash had been deposited out of cash sales of ₹ 69,02,253/- during the year under consideration. After considering the submissions of the assessee, the Ld. CIT(Appeals) confirmed the addition of ₹ 49,29,010/- made by the Assessing Officer by observing as under: 5. I have duly considered the submissions of the appellant. The appellant is engaged in the business of trading in steel products including scrap. He had filed his return of income for A.Y 2011-12 declaring nil income. The case was selected for scrutiny under CASS and notice U/s.143(2) dated 09.08.2012 was issued and duly served on the appellant on 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls including circumstantial evidences for the transactions justifying his receipts/expenses and various claims. Therefore, the assessment was completed ex-parte based on the sound footings and evidences available. In view of this position, the additional evidences now adduced by the assessee deserved to be rejected. At the outset, the AO has raised objections against admission of these additional evidences submitted by the appellant in the light of Sub-rule 4 of Rule 46A of the Income-tax Rules, 1962 during the appellate proceedings. Since these additional evidences are related and have close nexus with the issue under consideration, these are being admitted under Sub-Rule 4 of Rule 46A for proper adjudication of the appeal and the AO was also provided an opportunity to examine these additional evidences and submit remand report. In the case of CIT Vs. K. Ravindranathan Nair (131 Taxman 743), it was held by Hon'ble Kerala High Court that on a consideration of the provisions of rule 46A, particularly sub-rule (4) thereof and the provisions of section 250(1) conferring power on the Commissioner (Appeals), it was clear that in spite of the provision of rule 46A(l), the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to accept the arguments of the appellant. In spite of reasonable opportunity being provided to the appellant during the appellate proceedings, he has failed to avail himself of that for the reasons best known to him. I have also examined the copies of invoices submitted by the counsel of the appellant during the course of appellate proceedings. The appellant has claimed to have made cash sales of ₹ 69,02,253/- during the year under reference. In the copies of invoices so furnished, names of the buyers are not legible. Moreover their addresses are also incomplete. Even the bill number is not legible. Had the original sale bills been submitted before the AO, he could have made the requisite enquiries. Further the relevant entries in the cash book could have been subjected to verification. However the appellant has deliberately not submitted the relevant documents before the AO and also failed to appear before him. In these facts circumstances, the genuineness of cash sales has not been established by the appellant. The power of framing assessment rests with the Assessing Officer who has to make assessment on the basis of material produced before him and after hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in confirming the addition made by the AO. The addition of ₹ 49,29,010/- is sustained and this ground of appeal is dismissed. 5. On perusal of the findings of the Ld. CIT(Appeals) with regard to the ground No.1 in the grounds of appeal before us, we find that entire facts and circumstances have been analyzed and reasoned decision has been given by the Ld. CIT(Appeals). We do not find any infirmity in the order of Ld. CIT(Appeals). At the same time, the assessee is not vigilant before us to controvert the findings of the Assessing Officer and Ld. CIT(Appeals). In view of the above facts and circumstances, we are of the considered view that the order of the Ld. CIT(A) on this issue is fair and reasonable and it does not call for any interference and the same is thereby, upheld. Accordingly, ground No.1 raised in appeal by the assessee is dismissed. 6. With regard to ground No.2, it is noticed that the Assessing Officer made addition of ₹ 16,25,942/- on account of disallowance of commodity loss as speculative loss. 7. During First Appellate proceedings, the Ld. AR of the assessee submitted that The Assessing Officer had treated the commodity loss as spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odity loss of ₹ 16,25,942/- as speculative in nature on examination of the relevant bills/contract notes of M/s.Adinath Commodities furnished by the assessee during the course of assessment proceedings. On careful examination of these bills/contract notes, it is seen that future trading was done on NCDX MCX in copper, silver steel without taking any delivery. It is not in dispute that the assessee was not dealing in these commodities. It is seen that the appellant had incurred speculative losses of ₹ 16,25,942/- which have been set off against the business profits in the computation of income. The counsel of the appellant has merely called these transactions as business transactions , however same is not acceptable. In the present case, the transactions done by the assessee relate to financial year 2010- 11. For these transactions, there were no provisions in the statute to give the benefit to the assessee in respect of transactions of commodities, which were ultimately settled otherwise then by actual delivery or transfer of the commodity as per Section 43(5) of the Act. This view is also fortified by the decision of Hon'ble Mumbai ITAT in the case of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us purchases amounting to ₹ 40,61,348/- made by the Assessing Officer. 10. During First Appellate Proceedings, the Ld. AR of the assessee submitted that the AO had made addition of ₹ 40,61,348/- on account of unexplained purchases. The total scrap purchases as per books of accounts were at ₹ 54,78,795/- and the assessee had paid all the amounts to the creditors through banking channels. The balance amount payable was only in respect of M/s.Bhagyalaxmi Rolling Mill Pvt. Ltd. Jalna for ₹ 16,13,231/- The Assessing Officer however had stated in his order that as per office records, an amount of ₹ 40,61,348/- was pertaining to purchase of scrap but it could not be quantified from the Bank account extract whether the payment towards these purchase were routed through banking channel or not. But the fact was that all the payments had been made through banking channels. The copy of ledger extract of purchases of scrap and ledger extract of all the suppliers were also submitted which were self explanatory. The bank statement was also submitted. It was argued that all the payments were made through RTGS mostly. Since assessment was made u/s.144 of the Act, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the material. Accordingly to plug possible leakage of revenue and meet ends of justice, a token disallowance of ₹ 2,50,000/- is sustained. I accordingly direct the AO to restrict the addition to ₹ 2,50,000/- on this account instead of ₹ 40,61,348/- made by him. This ground of appeal is partly allowed. In view of the above facts and circumstances, we find that the Ld. CIT(A) has rightly restricted the addition to the extent of ₹ 2,50,000/- and the same is thereby, upheld. Accordingly, ground No.3 raised in appeal by the assessee is dismissed. 11. With regard to ground No.4, the facts relate to this issue are that during the assessment proceedings, the Assessing Officer, on verification of profit and loss account, found that a substantial interest at ₹ 17,54,623/- is debited and there are nominal sundry debtors and creditors. Considering the total turnover, the Assessing Officer came to the conclusion that there is no application funds for the purpose of business and hence the interest of ₹ 17,54,623/- is disallowed and added to the total income of the assessee has diverted the funds for non business purpose. 12. During the First Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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