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TMI Blog2022 (8) TMI 1540X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the issue of Coordination charges to the tune of Rs. 51,00,000/-? We have heard Mr. Tilak Mitra, learned standing counsel for the appellant/revenue and Mr. Ranjeet Kumar Murarka, learned senior counsel, assisted by Mr. Vivek Murarka, learned Advocate for the respondent/assessee. The revenue has suggested the above substantial question of law in a composite form. The question involves three issues, namely, (i) loss on derivative to the tune of Rs. 3,19,76,907/-; (ii) loss in shares and securities to the tune of Rs. 37,95,659; and (iii) coordination charges to the tune of Rs. 51,00,000/- In order to answer the substantial question of law, we proceed to deal with the three issues in seriatim. The assessee filed its return of income on 15th November, 2007 disclosing a total income of Rs. 10,58,28,346/-. The case was processed under Section 143(1) of the Act and, subsequently, the case was selected for scrutiny. Notices were issued under Section 143(2) and Section 142(1) of the Act. In response to such notices, the assessee's authorised representative appeared before the Assessing Officer. With regard to the first issue, namely, the loss on derivative, the assessee claimed the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus, considering the normal human behaviour and applying the test of probabilities, the Assessing Officer came to the conclusion that the entire transaction is sham leading to a bogus loss. After taking note of decisions of the Hon'ble Supreme Court, the Assessing Officer held that the transactions with the said stock broker during the year under consideration are nothing but a make-believe affair and arranged one in collusion with the assessee resulting in tax evasion. Ultimately, it was held that the bonafides and genuineness of the transactions have not been satisfactorily and properly proved by the assessee and they have not discharged the onus cast upon them. Further, the transactions are not bonafide commercial transactions but are sham, bogus, collusive and an artificial arrangement. In the light of the same, the entire amount of Rs. 3,19,76,907/- was disallowed. Aggrieved by the same, the assessee preferred appeal before the Commissioner of Income tax (Appeals)-XXXVI, Kolkata [CIT(A)]. Though at the first blush it appears that the order passed by the CIT(A) is a well reasoned and elaborate order, on a closure scrutiny we find that substantial part of the order is verba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the stock broker was also involved but he has proceeded to examine the conduct of the assessee by applying the test of probabilities and after taking note of the modus adopted has held the transactions to be sham and the loss to be a bogus loss. Thus, if the CIT(A) has to set aside such a finding, there should have been some semblance of discussion on the said aspect. The CIT(A) states that the Assessing Officer has not brought any evidence to establish that the loss booked by the appellant as alleged was received back by the appellant in some other forms subsequently. It is not clear as to on what basis such an observation was made by the CIT(A). It was not the allegation that moneys came back to the assessee in some other form. Therefore, we are of the view that the CIT(A) was not justified in stating that the Assessing Officer was not justified in disallowing the loss. Ultimately, the CIT(A) deleted the addition. Aggrieved by the same, the revenue filed appeal before the Tribunal. Once again we face the same problem of going through the order passed by the Tribunal giving it an impression as if it is a detailed and reasoned order as we find that substantial portions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue relating to derivative loss and those findings will also be equally applicable to the issue relating to the loss in shares and securities. Aggrieved by such order of the Assessing Officer, appeal was preferred to the CIT(A). The finding recorded by the CIT(A) is in paragraph 5.2 of the order. The CIT(A) states that the Assessing Officer upon verification of the transactions treated the loss as speculative loss as the transactions were intra-day and no delivery of shares were taken place. Further, the CIT(A) records that the assessee has admitted the said findings that the loss was speculative in nature. Therefore, the CIT(A) affirms the order passed by the Assessing Officer that the loss from share transactions of Rs. 37,95,659/- is taken as speculative loss. However, whether the revenue preferred appeal before the Tribunal on the said issue, it appears that appeal was preferred because the revenue was of the opinion that the CIT(A0 has treated the transaction not to be bogus. However, on reading of paragraph 5.2 of the order, passed by the CIT(A), we find that no such finding recorded except to confirm the finding of the assessing officer that it is a speculative l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises. Therefore, in absence of any evidence regarding rendering of service, the expenditure claimed was disallowed. Apart from that the assessing officer also pointed out that the same cannot be allowed under Section 40A(ia) of the Act. Aggrieved by such finding, the assessee preferred appeal before the CIT(A), before whom the assessee is stated to have produced certain documents and other evidence. A remand report was called for from the assessing officer on such documents who, on considering the same, stated that the charges claimed by the assessee are bogus. He further stated that a letter dated 16th August, 2010 was sent to M/s. Onkar Management Pvt. Ltd. to verify the authenticity of the agreement submitted for the first time before the CIT(A) and the letter was returned by the postal authorities as 'unserved'. It appears that the authorised representative filed a letter dated 10 th September, 2010 giving a complete postal address of M/s. Onkar Management Pvt. Ltd. and a letter was issued to the said company to confirm the said document and reply was received confirming the payment of coordination charges. Further, the assessing officer stated that a letter dated 17th August, ..... 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