Ita/448/2015 Of Sham Sunder Khanna v. Commissioner Of Income Tax

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Sham Sunder Khanna ITA No.448 of 2015 (O&M)Date of decision: February 24, 2016 .....- Appe Commissioner of Income Tax, Aayakar Bhawan, Rishi Nagar,Ludhiana, Punjab.| ....mesponden CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’ BLE MRS. JUSTICE RAJ RAHUL GARG 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not?YES3. Whether the judgment should be reported 1n the Digest? Present:Mr. Rajiv Sharma, Advocate withMr. Gagandeep Singh, Advocate for the appellant. Ajay Kumar Mittal,J, inThis appeal has been preferred by the appellant-assessee undersection 260A of the Income Tax Act, 1961 (in short, “the Act’) against theorder dated 6.7.2015, Annexure A.6 passed by the Income Tax AppellateTribunal, Division Bench, Chandigarh (in short, “the Tribunal’) in ITANo.1177/CHD/2013 for the assessment year 2006-07, claiming followingsubstantial questions of law:- *“A. Whether under the facts and circumstances of the case, thITAT is not justified in confirming the part of commodity lossot=a4,20,824/- out ofa7,16,617/- (Annexure A.7) arisingfrom genuine and regular dealings all through account payeecheques (Annexure A.8) and for which contract notes/differencein bills produced with registered broker M/s AnandCommodities Trading Services Pvt. Limited (Annexure A.7)whom the Assessing Officer failed to summon as requested bythe appellant that Assessing Officer to summon the said representative under section 131 of the Income Tax Act, 1961which is against trite law that in case on the request of theassessee the Assessing Officer fails to summon the creditors orother concerned person than in that case, no addition can bemade on this basis which is against the law laid down in thejudgment of this Hon'ble High Court 1n the case of ITA No.685of 2008 as decided on 17.2.2009 and as reported in 28 DTR 118(P&H)? B. Whether under the facts and circumstances of the case, theIncome tax Appellate Tribunal and the authorities below arejustified in confirming disallowance of commodity loss on theground that the appellant has not produced any evidenceignoring the account books, complete correspondence with M/sAnand Commodity Services Pvt. Limited a registered broker inthe shape of ledger account, contract details, difference 1n bills,commodity wise, date wise and amount wise (Annexure A.7)and the payments by the appellant and the transactions beingthrough banking channels (Annexure A.8) which 1s perversefindings of fact against sufficient evidences/material producedand on record therein? C. Whether under the facts and circumstances of the case, theorder passed by Income Tax Appellate Tribunal, and theauthorities below confirming the impugned additions withoutadhering to various contentions, evidences filed in its trueprospective 1s perverse and illegal? ? A few facts relevant for the decision of the controversy, involved as narrated in the appeal may be noticed. The appellant 1s a stockbroker. He filed return of income for the assessment year 2006-07 declaring income atL19,26,586/-. He is dealing in equity and derivatives trading forhis chents and for himself as proprietor of M/s SMS and Co. Thecommodities trading was done by the appellant through M/s Anand ITA No.448 of 2015 (O&M) C. Whether under the facts and circumstances of the case, theorder passed by Income Tax Appellate Tribunal, and theauthorities below confirming the impugned additions withoutadhering to various contentions, evidences filed in its trueprospective 1s perverse and illegal? ? A few facts relevant for the decision of the controversy, involved as narrated in the appeal may be noticed. The appellant 1s a stockbroker. He filed return of income for the assessment year 2006-07 declaring income atL19,26,586/-. He is dealing in equity and derivatives trading forhis chents and for himself as proprietor of M/s SMS and Co. Thecommodities trading was done by the appellant through M/s Anand ITA No.448 of 2015 (O&M) Commodities Services limited during the assessment year 2006-07 from2.5.2005 to 24.2.2006 and also in various other years. He used to dealthrough other brokers also. The appellant received notice under section 143(2) of the Act in response to which he appeared and submitted reply. Duringthe assessment proceedings, the Assessing Officer raised objectionregarding trading liability amounting to=a3,95,614/- which was later ondeleted by the Tribunal and also regarding commodity loss of =a7,16,617/-incurred by the appellant out of which|=a3,16,697/- was for and on behalf ofhis clhents and which was recovered from them while the balance loss of.44,20,824/- was on account of his own commodity trading loss which wasdisallowed by the Assessing Officer, vide order dated 4.12.2008, AnnexureA.l. Against the said order, the appellant filed appeal before theCommissioner of Income Tax (Appeals) [CIT(A)] which was partly allowedvide order dated 26.2.2009, Anenxure A.2 holding that the addition couldbe made if there was positive evidence to show that such an entry was aningenuine entry and that the same was on account of some ingenuine lossand it was adjustment entry to reduce the profit of business of the appellant,The revenue filed appeal against the order dated 26.2.2009, Annexure A.2,Vide order dated 26.6.2009, Annexure A.3, the Tribunal remanded the issueto the Assessing Officer. During the remand proceedings, contract notesand difference bills which were in possession of the appellant wereproduced before the Assessing Officer. However, the Assessing Officer videorder dated 13.12.2010, Annexure A.4 held that there was no concreteevidence and therefore confirmed its previous order. Aggrieved thereby, theappellant filed appeal before the CIT(A). The appellant filed copies of ITA No.448 of 2015 (O&M) contract note/difference bills alongwith reply dated 21.3.2013. To verify thegenuineness of alleged commodity transactions made by the assessee, aletter dated 3.4.2013 was written by the CIT(A) to the Manager, LSECommodities Trading Services Limited. However, Ludhiana CommoditiesTrading Services Limited in reply dated 8.4.2013 intimated that no client asM/s SMS and Company as a chent of M/s Anand Commodities ServicesLimited in the year 2005-06 was existing. After considering the reply dated30.8.2013, the appellant was directed to present authorized representative ofM/s Anand Commodities Trading Services Pvt. Limited for crossexamination. The appellant requested for summoning of the concernedpersons under section 131 of the Act. However, no action was taken. Theappeal was dismissed vide order dated 11.11.2013, Annexure A.5 holdingthat the appellant failed to lead any evidence in order to prove thegenuineness of the transactions. The appellant filed appeal before theTribunal which was partly allowed vide order dated 6.7.2015, Annexure A.6upholding the addition of|Lv4,20,824/-. Hence the instant appeal by theappellant-assessee. 3]We have heard learned counsel for the appellant-assessee anddo not find any weight in the contentions raised by him. 3]We have heard learned counsel for the appellant-assessee anddo not find any weight in the contentions raised by him. 4 Learned counsel for the appellant-assessee submitted that theAssessing Officer had failed to summon authorised representatives of M/sAnand Commodities Trading Services to prove the genuineness of thetransactions undertaken by the appellant and therefore, the findings againstthe appellant are vitiated. Reliance was placed on judgment of this Court 1nITA No.685 of 2008 decided on 17.2.2009 (Commissioner ofIncome Tax, Faridabad vs. Shri bri} Pal Sharma). 4]From the perusal of the findings recorded by the authoritiesbelow, we find that the onus was upon the assessee to prove the genuinenessof the transactions by producing the relevant evidence and the material onrecord which he failed to do. He was unable to produce the authorisedrepresentatives of M/s Anand Commodities Trading Services as the initialonus was upon him to establish genuineness of the loss. Opportunity wasgiven to the appellant in this regard. The evidence collected from LudhianaStock Exchange and confronted to the assessee proved that the commoditytransaction was not actually carried out but was merely accommodationentries. Further, Ludhiana Commodities Trading Services Limited in replydated 8.4.2013 to the query dated 3.4.2013 by CIT(A) intimated that M/sSMS and Company Prop. Shri Sham Sunder Khanna was not registered as aclient with M/s Anand Commodities Services Limited in the year 2015-16.The assessee-appellant was prima facie required to prove the validity of thetransaction. The assessee having failed to do so, no right accrues in hisfavour on account of non-summoning of the witness under Section 131 ofthe Act by the Assessing Officer. It has been categorically recorded by theTribunal in its order dated 6.7.2015 that the assessee merely producedcopies of notes from M/s Anand Commodity Services that he sufferedgenuine loss. Even the Tribunal while remanding the matter to the AssessingOfficer directed the assessee to produce the requisite material and evidenceto prove the genuineness of the loss in question. The assessee failed toproduce any material. Thus, the authorities were justified in maintaining theaddition of<a4,20,824/-. The relevant findings recorded by the Tribunal ITA No.448 of 2015 (O&M) read thus:- “11. As regards the loss of commodity 1s concerned, theenquiries from Ludhiana Stock Exchange revealed that claim ofloss on account of commodity transaction was not a genuineclaim. The assessee merely produced copy of notes from M/sAnand Commodity Services, would not prove that assesseesuffered genuine loss. The evidences collected from LudhainaStock exchange and confronted to the assessee clearly provedthat the commodity transaction was not actually carried out butwas merely accommodation entries. Earlier the Tribunal, whilerestoring the matter to the file ofAssessing Officer directed theassessee to produce the requisite material and evidence to provethe genuineness of the loss in question. The assessee however,failed to produce any requisite material and evidence beforeAssessing Officer in set aside proceedings to prove thegenuineness of the loss in question. Therefore, authoritiesbelow were justified in maintaining the addition ofL4,20,824/-. This ground of appeal of the assessee 1s accordingly,dismissed.” 6]Learned counsel for the appellant was unable to show anymaterial to controvert the findings recorded by the authorities below. Thejudgment cited by the learned counsel for the appellant-assessee 1n Shribry) Pal Sharma'scase (supra) was based on individual fact situationinvolved therein. Thus, the appellant cannot derive any advantage from thesaid decision. Consequently, no substantial question of law arises and theappeal stands dismissed, (Ajay Kumar Mittal)Judge February 24, 2016 =9&= (Ray Rahul Garg) Judge|