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Tulip Global Private Limited vs. ITO

3. Under the facts and circumstances of the case, the Ld. AO has erred by holding that the transaction with M/s Suruchi Trading is not genuine and CIT(A) has erred by sustaining the same. Finding is perverse, unjustified or illegal. The addition made is excessive, unjustified or illegal.

4. Under the facts and circumstances of the case, the Ld. AO has erred in making addition of Rs. 11,671/- by alleging that commission was paid for acquiring bogus profit and CIT(A) has erred by sustaining the same. The addition made is excessive, unjustified or illegal.

7. Under the facts and circumstances of the case, the Ld. AO has erred by determining total taxable income to be Rs. 14,75,60,373/-. The income determined is excessive, unjustified or illegal.

8. Under the facts and circumstances and in law, Ld. CIT(A) has erred by deciding the appeal Ex-party and furthermore not considering the material available on record."

2. The hearing of this appeal was concluded through video conference in view of the prevailing situation of COVId-19 pandemic. Though the assessee has raised as many as 8 grounds however, at the time of hearing the ld. AR of the assessee has confined his argument only on the issue of validity of reopening of the assessment raised in grounds No. 1 and 2 of the grounds of appeal. The ld. AR has referred to the reasons recorded by the Assessing Officer for reopening of the assessment and submitted that the Assessing officer has reopened the Tulip Global Private Limited vs. ITO assessment without any tangible material to form the belief that income assessable to tax on account of profit on speculative transactions on the commodities exchange has escaped assessment. He has appointed that the Assessing Officer has referred to the information received from the Investigation Wing, Ahmedabad and that too under Section 133A of the Act at the premises of NMCE wherein certain brokers/persons were found to be indulged in providing bogus accommodation entries of speculative profit and loss to the parties as per their need. The ld. AR has further submitted that the Assessing Officer has reopened the assessee on the borrowed satisfaction as the information received from the Principal Director of income tax Investigation Wing, Ahmedabad is the basis of reopening without any independent application of mind. Even the said information as referred by the AO in the reasons recorded does not reveal the involvement of the assessee in such transactions of bogus accommodation entries. He has further pointed out that the Assessing Officer has accepted the fact that the assessee has treated through Prakash Chand Jain and Ratan Lal Somani and therefore, the assessee has not entered into any transaction with the alleged brokers M/s Priyank Commodities, M/s Suruchi Trading and M/s Pioneer Trading which are found by the Department as involved in the activity Tulip Global Private Limited vs. ITO of providing bogus commodity entries for speculative profit and loss. Thus the ld. AR submitted that there is no direct and live linked between the reasons recorded and the formation to belief by the AO that the income assessable to tax on account of speculative commodity entries of Rs. 15,92,300/- has escaped assessment. In support of his contention, he has relied upon a series of decision and submitted that the reopening of assessment is bad in law and liable to be quashed. He has made a specific reference in para 4 and 6 of the assessment order and submitted that the Assessing Officer has accepted the fact that the assessee produce the contract note/bills regarding the transactions of purchase and sale of commodity in the speculative segment. Further, the AO has also accepted the fact that the assessee has not traded directly through these brokers namely M/s Priyank Commodities, M/s Suruchi Trading and M/s Pioneer Trading however, the AO has linked the alleged broker M/s Priyank Commodities, M/s Suruchi Trading and M/s Pioneer Trading as counter party brokers in arranging the affairs of misusing of National Multi commodity exchange plateform. 2.1 The next contention of the ld. AR challenging the validity of reopening is that approval granted by the Pr.CIT U/s 151 of the Act is mechanical and without application of mind. He has referred to the Tulip Global Private Limited vs. ITO approval granted by Pr. CIT as placed at page 5 of the paper book and submitted that the Pr.CIT has just written as yes and sign below that which show that there is no application of mind by the Pr.CIT while granting approval for reopening of the assessment and reasons recorded by the AO. Even the Assessing Officer in the proposal form has mentioned Section 151(2) as relevant Section while seeking approval whereas the case in hand is arising from scrutiny assessment U/s 143(3) of the Act, therefore, the provisions of Section 151(1) are applicable. He has relied upon the decision of this Tribunal dated 06.12.2018 in case of M/s Angel Infrastructure Pvt. Ltd. vs. DCIT in ITA No. 464/JP/2018 and 761/JP/2018.

3. On the other hand, the DR has submitted that the Assessing Officer was having specific information regarding the bogus commodity entries received by the assessee on account of speculative profit. The AO has referred the transactions of the assessee carried out during the year under consideration which was found bogus commodity entries of speculative profit to be set off against speculative loss brought forward by the assessee. Thus, it is clear that by way of this bogus entries of speculative profit the assessee has controverted its uncounted income without paying income tax as speculative loss was adjusted against the Tulip Global Private Limited vs. ITO alleged profit. The Assessing Officer has clearly mentioned in the reasons recorded that the brokers M/s Priyank Commodities, M/s Suruchi Trading and M/s Pioneer Trading are counter party brokers in arranging such affairs of booking speculative profit and loss entries even if the assessee has not directly transacted with these broker and has transacted through its own brokers which does not make any difference about the transactions being bogus commodity entries speculative profit. Therefore, at the time of reopening of the assessment what is require is the formation of belief based on the prima facie reasons that the income assessable to tax has escaped assessment. The ld. DR has further submitted that the assessee has not bothered to appear before the ld. CIT(A) and the appeal was dismissed ex-parte impugned order when there was no attendance despite various opportunities were granted by the ld. CIT(A). Thus, the assessee cannot agitate his issue without raising the same before the ld. CIT(A). The assessee has not even appeared before the ld. CIT(A) hence, the ld. DR submitted that the objection raised by the assessee against the reopening of the assessment are not sustainable and liable to be rejected. The AO has given the correct details of transactions carried out by the assessee hence, the reopening is based on the Assessing Tulip Global Private Limited vs. ITO Officer's own satisfaction and not borrowed satisfaction. As regards the objections regarding the approval granted by the ld. CIT(A) U/s 151 of the Act the ld. DR has submitted that merely because the AO has mentioned Section 151(1) in the proposal form it does not vitiate approval granted by Pr.CIT as it is only typographical mistake and has no bearing on the reasons recorded. The proposal sent by the AO in the prescribed form contains the reasons recorded by the AO which were duly examined by the JCIT as well as Pr. CIT before granting approval. Only after recommendation of JCIT, the Pr.CIT on his satisfaction has granted the approval. Thus, there is no infirmity in the approval granted by ld. Pr.CIT U/s 151 of the Act. The ld. DR has relied upon the order of the Assessing Officer.

3.1 In the rejoinder, the ld. AR of the assessee has submitted that though the appeal of the assessee was dismissed by the ld. CIT(A) vide ex-parte order however, the legal issue raised by the assessee can be raised even for the first time before the appellate authority non appearing on behalf of the assessee before the ld. CIT(A) shall have no bar for raising and arguing this issue before the Tribunal. He has further submitted that what is proposed by the AO in the reopening of the Tulip Global Private Limited vs. ITO assessment treated speculative profit as income from other source and denied the benefit of setting off against speculative loss.