Income Tax Appellate Tribunal - Chandigarh
Dcit, C-1, Ludhiana vs M/S Khurana Rolling Mills Pvt. Ltd., ... on 20 December, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, "ए " च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, 'A', CHANDIGARH
ी एन. के. सैनी, उपा य एवं ी संजय गग , या यक सद य
BEFORE SHRI N.K. SAINI, VICE PRE SIDENT &
SHRI SANJAY GARG, JUDICIAL ME MBER
आयकरअपीलसं./ITA No. 667/C H D / 2 0 1 7
नधा रणवष / Assessment Years : 2013-14
M/s Khurana Rolling Mills Vs. The ACIT, Circle-1,
Pvt. Ltd., बनाम Ludhiana
Vill Ram Garh, Chandigarh
Road, Ludhiana
थायीले खासं . / PAN NO: AADCK2182R
अपीलाथ$/ Appellant &'यथ$/ Respondent
&
आयकरअपीलसं./ITA No. 258/C H D / 2 0 1 8
नधा रणवष / Assessment Years : 2013-14
The DCIT, Circle-1, Vs. M/s Khurana Rolling Mills
Ludhiana बनाम Pvt. Ltd.,
Vill Ram Garh, Chandigarh
Road, Ludhiana
थायीले खासं . / PAN NO: AADCK2182R
अपीलाथ$/ Appellant &'यथ$/ Respondent
नधा (रतीक*ओरसे/Assessee by : Sh. Sudhir Sehgal, Advocate
राज वक*ओरसे/ Revenue by : Sh. Arvind Sudershan, Sr.DR
सन
ु वाईक*तार.ख/Date of Hearing : 3.10.2019
उदघोषणाक*तार.ख/Date of Pronouncement : 20.12. 2019
आदे श/ Order
Per Sanjay Garg, Judicial Member:
The captioned appeals, one by the assessee and other by the Revenue have been preferred against the separate orders dated 2 ITA Nos. 667-c-2017 & 258-c-2018- Khurana Rolling Mills Pvt Ltd., Ludhiana 31.03.2017 & 14.12.2017 of the Commissioner of Income Tax (Appeals)-1, Ludhiana hereinafter referred to as CIT(A)].
2. First, we shall deal with the appeal of the assessee it ITA No. 667/Chd/2017 for assessment year 2013-14, wherein, following grounds have been taken by the assessee:-
"1. That the Worthy Commissioner of Income Tax (Appeals) has erred in dismissing the appeal filed by the appellant.
2.a). That the Ld. CIT(A) has erred in confirming the addition of Rs. 1,74,10,040/- made by the Assessing Officer by holding that the Assessing Officer was justified in treating the income at Rs. 1,74,10,040/- declared by the appellant, as unexplained credit u/s 68 of the Income Tax as per para 3.8 of his order.
b). That the Ld. Assessing Officer has erred in not considering that in fact, the income of Rs. 1,74,10,040/- has been declared by the appellant as miscellaneous income in the profit and loss account on account of profit earned from commodity transactions as stated by the Ld. CIT (A) in para 3.6 of his order and not unexplained credit u/s 68 as stated above.
3. That the Ld. CIT(A) has also erred in holding that the Assessing Officer was justified in not allowing the set off of the loss from business, against the so called unexplained income u/s 68 as per para 3.9 of his order.
4. That the Ld. CIT(A) has erred in treating the miscellaneous income declared in the profit and loss account on account of sale and purchase of commodity transactions as unexplained income u/s 68 of the Income Tax Act merely for not producing the brokers before the Assessing Officer.
5. That the Ld. CIT (A) has erred in not considering and ignoring the fact that sufficient evidence has been filed to prove the identity of the brokers by furnishing their PAN, bank account, credit worthiness and genuineness of transaction by furnishing the detailed reply and all the transactions have been made through normal banking channels.3
ITA Nos. 667-c-2017 & 258-c-2018- Khurana Rolling Mills Pvt Ltd., Ludhiana
6. That the Ld. CIT (A) has erred in not considering that the assessee company is a Pvt. Ltd. Company dealing in Iron & Steel and the accounts of the assessee is subject to audit under the companies Act 1956 as well Tax audit u/s 44AB of the Income Tax Act. The Accounts were duly audited by the Chartered Accountant and no adverse findings has been given by the Assessing Officer during the scrutiny assessment u/s 143(3), though, the Assessing Officer called for various details of commodity profit income credited in the books of accounts of the assessee company, no defects have been pointed out in the books of accounts maintained by the appellant.
7. That the CIT(A) has failed to appreciate the fact that all the three ingredients i.e. identity, credit worthiness and genuineness of transaction has been proved by the assessee and, as such, sustaining of addition is not called for.
8. That the addition of Rs. 1,74,10,040/- as above has been upheld against the facts and circumstances of the case.
9. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
3. The sole issue raised by the assessee through above grounds of appeal is relating to the confirmation to the action of the Assessing Officer by the Ld. CIT(A) in treating the income of Rs. 1,74,10,040/- as income from unexplained sources and assessed u/s 68 of the Income Tax Act, 1961 (in short 'the Act') as against the same declared by the assessee as its business income form commodity transactions., In the year under assessment, the assessee company had shown misc. income of Rs. 1,74,10,040/- on account of commodity profit derived from trading in commodities. However, the Assessing Officer held that the assessee could not establish with relevant evidence the 4 ITA Nos. 667-c-2017 & 258-c-2018- Khurana Rolling Mills Pvt Ltd., Ludhiana source of the said income and the genuineness of the activities of the assessee in respect of the aforesaid commodity trading activity. He, therefore, treated the said commodity profit as income of the assessee from unexplained sources and assessed the same u/s 68 of the Act on the ground that the said income is not relating to any definite source. He disallowed the set off of the said income of Rs. 1,74,10,040./- against the current year business losses. He, separately assessed the aforesaid income of Rs. 1,74,10,040/- u/s 68 of the Act and created the impugned tax demand. In appeal, the Ld. CIT(A) confirmed the additions made by the Assessing Officer.
4. Before us, the Ld. Counsel for the assessee has submitted that the assessee had produced before the Assessing Officer all the relevant necessary evidences to show that the assessee had earned income of Rs. 1,74,10,040/- form commodity trading. That the details of the brokers through whom the assessee made transactions of purchase / sales of metal (commodity) were furnished. That there were two brokers through whom the transactions had been done by the assessee namely (i) Shri Kuber Trading Company Ludhiana and (ii) Kashmir Trading Company, and further submitted the copies of the accounts of the said brokers in the assessee's account. The Ld. Counsel for the assessee has submitted 5 ITA Nos. 667-c-2017 & 258-c-2018- Khurana Rolling Mills Pvt Ltd., Ludhiana that to establish the identity of the aforesaid brokers, the assessee furnished the following details:-
"During the relevant year, the commodity profit has been earned through two brokers namely Shree Kuber Trading Company and Krishna Trading Company.
In case of Shree Kuber Trading Co., the assessee company provided the following Details:
1. The firm is owned by Abhindan Sharma as proprietor
2. Broker maintaining bank account with Central bank of India, Madhok Complex, Ferozepur Road, Current Account No. 3165427289
3. Broker maintaining bank account with State bank of India, Ferozepur Gandhi market, Current Account No. 30820570962
4. The broker having office at LSE Building, Feroze Gandhi Market, Ludhiana during the year under consideration and later on shifted to office at 1172, Karnal Gurdial Singh Road, Civil Lines, Ludhiana as provided by the bankers of the brokers (copy of bank account enclosed at page 6 of the paper book)
5. Document provided by the Central bank of India, Madhok Complex, Ferozepur Road, Ludhiana:-
i) Copy of PAN of the Proprietor
ii) Copy of Rent deed
iii) Copy of Voter's Identity Card of the Proprietor
iv) Copy of Driving license of the Proprietor (all enclosed at Page 7 of
the Paper Book)
6. Documents provided by the State bank of India, Stock
Exchange, Feroze Gandhi Market, Ludhiana:-
i) Copy of Bank Account opening Form
6
ITA Nos. 667-c-2017 & 258-c-2018-
Khurana Rolling Mills Pvt Ltd., Ludhiana
ii) Copy of PAN of the Proprietor
iii) Copy of Telephone Bill
Copy of Receipt of Municipal Corporation Ludhiana (all enclosed at Page 8 of the Paper Book) The Ld. AR of the assessee has further submitted that the following details in respect of the transactions were submitted:
i. Copies of Purchase/Sale contract notes showing quantity of metal purchase, quantity of metal sold, brokerage paid to the broker and profit/loss on each transaction (enclosed at Page 2 of the Paper Book) ii. Consolidated trading account of various metals traded by the assessee (enclosed at Page 3 of the Paper Book) iii. Broker wise trading account of various metals (enclosed at Page 4 of the Paper Book) iv. Details of Profit earned transaction wise on purchase/sale of various metals.
v. Confirmed Copies of accounts of the assessee company accounts in the books of the broker (enclosed at Page 5 of the Paper Book)
5. The Ld. AR of the assessee has further submitted that the Assessing Officer treated the income from commodity transactions as deemed income from undisclosed sources u/s 68 of the Act only because the broker did not appear before the Assessing Officer. That, however, the assessee had fully discharged its burden to prove the identity of the brokers and genuineness of the transactions. That even the names and 7 ITA Nos. 667-c-2017 & 258-c-2018- Khurana Rolling Mills Pvt Ltd., Ludhiana other details of the parties with whom the transactions were carried out were also supplied. He, therefore, has submitted that there was no justification on the part of the Assessing Officer to separately assess the income of the assessee from commodity transactions u/s 68 of the Act and not allowing the set off of the same against the business loss of the assessee.
6. The Ld. DR, on the other hand, has relied on the findings of the lower authorities.
7. We have considered the rival contentions. The Ld. AR of the assessee has demonstrated from the records that all the requisite details were submitted to the Assessing Officer to prove the genuineness of the transactions entered into by the assessee in commodity trading activity. In our view, merely because the brokers had not appeared in response to the summons sent by the Assessing Officer that itself cannot be the sole ground to reject the entire evidence produced by the assessee. The assessee not only furnished the names and addresses of the brokers and the other concerned parties but also the other details like their PAN numbers, bank account details and even the trading license, telephone bills and other evidences as detailed above. The assessee has also produced the details of the commodity transactions carried out by the assessee alongwith purchase and sales invoices. 8
ITA Nos. 667-c-2017 & 258-c-2018- Khurana Rolling Mills Pvt Ltd., Ludhiana Under the circumstances, the action of the lower authorities in assessing the income u/s 68 of the Act cannot be held to be justified. Even as per the section 71(1) of the Income Tax Act, losses, from one head can be set off against the income from another head of income. The provisions of section 71(1) are reproduced as below:-
"Set off of loss from one head against income from another.
71. (1) Where in respect of any assessment year the net result of the computation under any head of income, other than "Capital gains", is a loss and the assessee has no income under the head "Capital gains", he shall, subject to the provisions of this Chapter, be entitled to have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head."
However, the case of the Assessing Officer is that the income assessed u/s 68 of the Act would not fall in any head of income as prescribed u/s 14 of the Act, hence, the same would be deemed income and set off of losses against any head of income is not allowable against the said deemed income u/s 68 of the Act. However, the controversy has been settled by the CBDT Circular No. 11 of 2019 dated 19.6.2019, wherein it has been provided that even if the said income is treated as an income assessed u/s 68 of the Act, still the assessee is entitled to set off of the said income against the business loss. The contents of the said CBDT Circular lNo.11/2010 are reproduced as under:- 9
ITA Nos. 667-c-2017 & 258-c-2018- Khurana Rolling Mills Pvt Ltd., Ludhiana "Circular No. 11/2019 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North-Block, New Delhi, dated the 19th of June, 2019 Subject: Clarification regarding non-allowability of set-off of losses against the deemed income under section 115BBE of the Income-tax Act, 1961 prior to assessment-year 2017-18-reg.
With effect from 01.04.2017, sub-section (2) of section 115BBE of the Income-tax Act, 1961 (Act) provides that where total income of an assessee includes any income referred to in section(s) 68/69/69A/69B/69C/69D of the Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provisions of the Act in computing the income referred to in section 115BBE(1) of the Act.
2. In this regard, it has been brought to the notice of the Central Board of Direct Taxes(the Board) that in assessments prior to assessment year 2017-18, while some of the Assessing Officers have allowed set off of losses against the additions made by them under Section(s) 68/69/69A/69B/69C/69D, in some cases, set off of losses against the additions made under Section 115BBE(1) of the Act have not been allowed.
As the amendment inserting the words 'or set off of any loss' is applicable with effect from 1st of April, 2017 and applies from assessment year 2017-18 onwards, conflicting views have been taken by the Assessing Officers in assessments for years prior to assessment year 2017-18. The matter has been referred to the Board so that a consistent approach is adopted by the Assessing Officers while applying provision of section 115BBE in assessments for period prior to the assessment year 2017-18.
3. The Board has examined the matter. The Circular No. 3/2017 of the Board dated 20th January, 2017 which contains Explanatory notes to the provisions of the Finance Act, 2016, at para 46.2, regarding amendment made in section 115BBE(2) of the Act mentions that currently there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE. It also further mentions that the pre-amended provision of section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016.
10
ITA Nos. 667-c-2017 & 258-c-2018- Khurana Rolling Mills Pvt Ltd., Ludhiana
4. Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act till the assessment year 2016-17.
5. The contents of this Circular may be circulated widely for information of all stakeholders and departmental officers. The pending assessments and litigations on this issue may be handled accordingly.
6.Hindi version to follow. Sd/-
RajarajeswawR.) Under Secretary (ITA.II), CBDT"
8. In view of this, there is no merit in the action of the lower authorities in making the impugned additions and not allowing the set off of income from commodity transactions as business losses of the assessee. Accordingly, the impugned order of the CIT(A) is set aside and the additions made by the lower authorities is ordered to be deleted.
The Assessing Officer is further directed to set off the said commodity income of the year against the business loss.
The appeal of the assessee stands allowed.ITA No. 258/Chd/2018 (Revenue's appeal)
9. The Revenue in its appeal in ITA No. 258/Chd/2018 has taken following grounds of appeal:-11
ITA Nos. 667-c-2017 & 258-c-2018- Khurana Rolling Mills Pvt Ltd., Ludhiana
1. Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in law and on fats in deleting the penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961?
2. That the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.
3. That the appellant craves leave to add or amend any ground of appeal before it is finally disposed off.
10. Vide above grounds of appeal, the Revenue is aggrieved against the action of the CIT(A) deleting the penalty levied by the Assessing Officer with respect to the aforesaid addition made by the Assessing Officer u/s 68 of the Act of income commodity transaction. Though the Ld. CIT(A) has already deleted the penalty levied by the Assessing Officer observing that it as not a case of furnishing of inaccurate particulars of income or concealment of particulars of income on the part of the assessee. However, since we have already deleted the additions made by the Assessing Officer, no reason sustains for levy of the impugned penalty, the same is accordingly ordered to be deleted.
In view of this, there is no merit in the appeal of the Revenue and the same is accordingly dismissed.
Order pronounced in the Open Court on 20.12.19.
Sd/- Sd/-
(एन. के. सैनी / N.K. SAINI) (संजय गग / SANJAY GARG)
उपा"य# /Vice President या$यकसद%य/ Judicial Member
12
ITA Nos. 667-c-2017 & 258-c-2018-
Khurana Rolling Mills Pvt Ltd., Ludhiana
Dated : 20.12.2019
"आर.के."
आदे शक*& त3ल4पअ5े4षत/ Copy of the order forwarded to :
1. अपीलाथ$/ The Appellant
2. &'यथ$/ The Respondent
3. आयकरआयु6त/ CIT
4. आयकरआयु6त (अपील)/ The CIT(A)
5. 4वभागीय& त न8ध, आयकरअपील.यआ8धकरण, च:डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायकपंजीकार/ Assistant Registrar