ORDER
Rathod Kamlesh Jayantbhai, Accountant Member.- By way of present appeal, the assessee challenges the order of Commissioner of Income Tax (Appeal),-01, Mumbai [for short ‘CIT(A)’] passed on 29.05.2025 for Assessment Year 2016-17. The said order of the ld. CIT(A) has arisen because the assessee challenged the order of the assessment dated 13.12.2018 passed under section 143(3) of the Income Tax Act, 1961 [for short Act] by the Income Tax Officer, Ward-02, Beawar [for short AO] before him.
2. In this appeal, the assessee has raised following grounds: –
“1. Confirming the addition of Rs. 31,59,558/- (34,50,071-2,90,513) is bad in law.
2. Applicability of provisions of section 115BBE(1)(a) of Act is bad in law, since no addition made u/s 68 to 69C of Act.
3. Non granting credit of TCS of Rs. 3,14,257/- as per Rule 37BFA in case of liquor business of M/s Dev Karan, Kota, whereas income of such business of Rs. 8,01,917/- included in appellants income.
4. Any other matter with prior permissions of the chair.
3. Succinctly, the fact as culled out from the records is that the assessee has originally filed his E- return of income for the assessment year 2016-17 on 17.10.2016 declaring total income of Rs. 15,20,600/-. There after the assessee has revised his return of income on 28.03.2017 declaring total income of Rs.10,90,570/-. The case was selected for limited scrutiny through CASS and thereby the statutory notices as require were issued to the assessee and were served upon him. The assessee is proprietor of Liquor shops of IMFL & Beer retail shop at Jaipur, Kota. Assessee also received rental income, income from shares trading business and bank interest, during the year under consideration. Selection of the case was for limited scrutiny and following issues were flagged for verification;
| I. | | Whether sales turnover /receipts has been correctly offered for tax. |
| II. | | Whether the investment and income relating to securities transactions are duly disclosed. |
During assessment proceeding ld. AO issued notice as per provision of section 133(6) of the Act Principal Officer, Rajasthan State Beverage Corporation Ltd. Jaipur, Central Depository Services Ltd., Mumbai, National Securities Depository Ltd., National Stock Exchange, Mumbai, Bombay Stock Exchange and SW Capital Pvt. Ltd, Mumbai calling for certain informations.
Based on the record available with ld. AO he noted that the assessee has adopted Mercantile System of accounting as per 3CD Report (Point No.13 a) in previous year also he has adopted mercantile system of accounting. On going through the MTM summary or Global Report for the period 01.04.2015 to 31.03.2016, it was found that the assessee had earned profit of Rs. 34,50,071/-. The total shares buy is of Rs.60,94,81,809/-and sold Rs. 62,33,36,097/-. So there was difference of Rs. 1,38,54,488/-, whereas the assessee had shown sales of Rs.2,90,513/- on which he has shown loss of Rs. 5045/-. To clarify this figure a notice u/s 142(1) was issued to the assessee on 28.09.2018 alongwith a questionnaire for 05.10.2018.
Ld. AO noted that as per Global Report, assessee earned profit of Rs.34,50,071/-but in P&L A/c it was only Rs. 2,90,513/-. On this issue assessee submitted his reply on 16.10.2018 contending that the profit of Rs.2,90,513/- was as per Global Report. He submitted that the said Global Report also contained profit of those shares which were either not transferred for sale as on 31.03.2016 or was in hand. Whereas the Broker’s report took the market value even of those shares and thus the actual profit was Rs.2,90,513/- and not 34,50,071/-. A reconciliation to this effect was placed on record as Annexure A.
On that explanation of the assessee ld. AO noted that the contention of the assessee’s AR is not acceptable that “How it is possible, that those shares which are not in the possession of assessee and he has earned profit or not transferred for sale on 31.03.216 or is in hand and Global Report includes profit of those share also, when assessee is adopting mercantile system of accounting the profit is calculated on the basis of credit or paid whichever is earlier. The reconciliation submitted it is not clear that why Rs.27,48,814/- subtracted. Ld. AO also noted that when assessee is having turnover difference of Rs. 1,38,54,488/- (sale 62,33,36,097- purchase 60,94,81,809) and now as per purchase cost the value of closing balance shares are Rs. 13,21,06,629/-. The difference is STT and other charges and assessee is having 38650 share/derivatives. It means the report submitted by the SW capital and MTM Summary and Global Report are true and correct and near to the result. Therefore, he issued a show cause notice issued to the assessee on 28.11.2018 contending that ;
“In your case assessment of A.Y.2016-17 is pending for limited Scrutiny. Necessary details your have field which have examined and it is found that during the year under consideration you have earned profit of Rs. 34,50,071/- from 1.4.2015 to 31.03.2016. As per Global Report, MTM Summary submitted by you SW Capital. But on perusal of P & L account you have shown gross profit of Rs. 284330/- and after deduction indirect expenses net loss of R.s 5045/-.
Now it is proposed to add Rs. 3159558/- (3450071-290513) in your total income undisclosed profit from share transaction. Your case is fixed for hearing on 30.11.2018
The AR of the assessee submitted his reply on 03.12.2018 the relevant part of the same is reproduce here under:-
“That since it is a case o derivatives and intraday transaction for which the “Settlement day” is fixed after few days and hence any transactions made on stock exchange is to be settled, square up on the set date. Thus the transactions made in the last week of the year end will fall settled in next year. Accordingly the transactions remained unsettled as on year end are also valued at market price as per stock exchange norms and accordingly the global report shown the transaction.”
Accordingly, the global report for the period 01.04.2015 to 31.03.2016 shows a net gain of Rs. 3450071/-which includes the transactions value unsettled also and affecting the profit/loss.
Now with the similar broker SE Capital the global report for the period 30.03.2015 to 31.03.2016 shows a profit of Rs. 387083/-only. This is for the sale transaction but on account of settlement period the quantum of profit loss report keeps changing.
To justify these facts were submitting the copies of few contact notes cum bills for the period where by it can be evidenced that transactions held on closing days of the previous year have a settlement date after 31.03.2015 and than only the profit loss has been credited by the broker. Thus the actual profit / loss as actually as stated by you is not Rs. 34,50,071/- but is actual loss of Rs. 5045/- (Gross Rs. 290513/-expenses for transaction)”.
Ld. AO in the assessment order record that the AR of the assessee stated that the assessee deals in intraday and derivatives transaction. Intraday transactions means transaction of shares which are closed on the same day. Derivatives means the transaction of speculation or delivery based or non delivery based. The assessee deals in delivery based transaction. The transaction reported in para 4.3 are also delivery based transaction. It means these shares/ derivatives were purchased by the assessee a year ago as reported in scan copy page No. 6 to 9 of this order, and he had sold them during the year under consideration. Ld. AR of the assessee submitted that these theses transactions were done on 30.03.2015 and the “settlement day is in the next year, therefore, these shares reported in Global Report of SW Capital and reflect profit of Rs. 34,50,071/-. In support of his claim, he has submitted copies of few contract notes cum bills.
Ld. AO considered the reply of the AR of the assessee and found that it was not tenable, and noted as under:
The assessee is traded on 30.03.2015 or 31.03.2015, and that is the date of trade instead of settlement day. If he doesn’t want to settle the shares in that case there is no trade. It is not acceptable. The date of trade is the date on which assessee/ client place his order to the broker to buy or sale the shares, so that he has earned profit on that date. If broker doesn’t buy share on the date of order placed by assessee/client, who bear the loss, if loss occurred, naturally assessee/ client. Therefore, the date of trade is the date on which order is placed by the assessee/client. In this case assessee/client has placed the order to buy or sale his share in his account on 30.03.2015 or 31.03.2015 and I would like to mention here that the assessee has adopted the Mercantile System of accounting (para 4.1) in which actual trade date is the date of business. Therefore the profit mentioned in the Global Report or MTM summary (Page No.13 to 20 of this order) is the actual profit of the assessee during the year under consideration. Hence the profit declared by the assessee in profit and loss account Rs.2,90,513/- is not his actual profit. The assessee has carned profit of Rs.34,50,071/-, therefore an addition of Rs. 3159558/- (3450071-290513) is added to the total income of the assessee for the year under consideration. As per section 115BBE (1) (a) the income of Rs.31,59,558/- liable for tax @30%. As per sub-section 2 of section 115BBE of the LT. Act, 1961 no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act.
4. Aggrieved by the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos of the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
“Decision: –
Here the main issue relates with the addition of Rs.31,59,558/- (u/s.115BBE(1)(a) of the Act)for share profit. In this regard the submission made by the assessee is not found to be justifiable and viable. Therefore, it is held that the CPC has rightly made above addition of Rs.31,59,558/- (u/s.115BBE(1)(a) of the Act)for share profit. Accordingly, appeal of the assessee stands dismissed.
5. Feeling dissatisfied with the above finding of the ld. CIT(A) on the ground that he had not dealt with the submission of the assessee and evidence placed on record, the assessee preferred the present appeal before this tribunal. To support the grounds raised by the ld. AR of the assessee, he relied upon the following written submission:
| (1) | | Assessment was completed u/sec. 143(3) of Act on 13.12.2018 assessee doing liquor business (IMFL & Beer retail shop). Besides Trading in Share / F & O / Derivatives / Intraday Transactions. |
| (2) | | The A.O. looking to transactions details (MTM Summary) in share market has added Rs. 31,59,558.00 (Rs. 34,50,071.00 – Rs. 2,90,513.00) as share profit & has applied provision of section 115BBE(1)(a) & has charged 30% tax thereon without invoking the provision of section 68,69 etc. |
| | Further when liquor business’s income accepted in assessee’s name than credit for TCS of Rs. 314257.00 should also be granted in terms of Rule 38BFA (Contract granted in Devkaran’s name but run & operated by assessee & income also shown by assessee). |
| (3) | | The case was selected for limited scrutiny with following reasons:- |
| (a) | | Whether sales turnover / receipts has been correctly offered for tax. |
| (b) | | Whether the investment and income relating to securities transactions are duly disclosed. |
| | Notices u/sec. 133(6) of Act were issued to |
| (a) | | M/s RSBCL, Jaipur for liquor trade |
| (c) | | M/s NSDL; National Stock Exchange Mumbai |
| (d) | | BSE & SW Capital (P) Ltd., Mumbai for verification. |
| (4) | | The A.O. based on audit report (Form 3CD) has observed that assessee is following “MERCANTILE SYSTEM OF ACCOUNTING” for last many years. Even in past A.Y. 2015-16 the A.O. has finalized the order u/sec. 143(3) of Act dated 13.11.2017 On same postulates. Copy of order enclosed. |
GROUNDS OF APPEAL
Ground No. 1:- Confirming the addition of Rs. 3159558/- (3450071-290513) is bad in law.
And
Ground No. 2:- Applicability of provisions of section I I5BBE(1)(a) of Act is bad in law, since no addition made u/sec. 68 to 69C of Act. (No Provision Invoked) Applicability of provisions of section I I5BBE(1)(a) of Act is bad in law, since no addition made u/sec. 68 to 69C of Act.
(Both the ground has common in nature hence dealt jointly)
| (1) | | That a per “MTM SUMMARY” (M/s SW Capital Broker) or “GLOBAL REPORT” for the period 01.04.2015 to 31.03.2016 were found; which shows the following figures (For F & O / Intraday / Deriaties Transactions). (Page 19 to 27) |
| (a) | | Share Value Purchased – Rs. 60,94,81,809.00 |
| (b) | | Shares Value Sold – Rs. 62,33,36,097.00 |
| (c) | | Difference (a-b) – Rs. 1,38,54,288.00 |
| (d) | | Profit / Los (As per MTM Report) – Rs. 34,50,071.00 |
| | (This profit / loss also includes those transactions not squared off as on closing of year. Details as per chart enclosed). |
| (e) | | Profit on Not Squared up transaction – Rs. 27,48,814.00 (Page 48) |
| (f) | | Profit on squared up transaction for the year – Rs. 7,01,257.00 |
| (g) | | Total of (e+f) – Rs. 3450071.00 |
| (2) | | Since it is case of “INTRA DAY” / Derivative / F & O transaction so sales / purchase are “MARGINS” earned. So assessee has shown sale of Rs. 290513.00 & after deducting STT / Commission / Brokerage net loss shown is Rs. 5045.00. (Page 4) |
| (3) | | The A.O. / Ld. CIT(A) were intimated that “That since it is a case of derivatives and intraday transaction for which the “Settlement day” is fixed after few days and hence any transactions made on stock exchange is to be settled, square up on the settlement date. Thus the transactions made in the last week of the year end will fall settled in next year (Due date). Accordingly the transactions remained unsettled as on year end are also valued at market price as per stock exchange norms and accordingly the global report show the transaction.” Accordingly, the global report for the period 01.04.2015 to 31.03.2016 shows a net gain of Rs. 3450071/- which includes the transactions value unsettled also and affecting the profit/loss. If these transactions remained “UNSETTLED” are analyzed the final figure would be as per Page 48 as enclosed (Based on MTM summary for the period 01.04.2015 to 31.03.2016 SW capital page 19 to 27) |
| (4) | | Thus the net gain for the year is Rs. 7,01,257.00 (subject to STT & Brokerage Exp.) & not Rs. 34,50,071.00 as taken by A.O. wrongly. After deducting the STT Charges, Broker’s note the Net Income / Loss is same as shown by assessee. |
| (5) | | The Ao’s CIT(A)j were also submitted the copies of few CONTRACT NOTES CUM BILLS of Broker for the period where it was demonstrated that transaction held on closing days of the Previous year have a Settlement Date after 31.03.2016 & than only the Actual Profit / Loss accrued considered as “INCOME” / “LOSS” in next year. Thus Rs. 34,50,071.00 is not actual Earned Profit for the year but includes “REALISED” & “UNREALIZED PROFIT” as per chart enclosed. |
| | Complete details day wise inform of “CONTRACT NOTE CUM BILL” & ledger of shares derivatives traded was submitted to A.O. to justify these facts & it was also made clear that the profit as per Global Report of SW Capital & reflect profit of Rs. 34,50,071/- is not correct & the actual gain is only Rs. 2,90,513/- as per “CONTRACT NOTE CUM BILLS” & it was also requested to A.O. to call the details or verify the facts u/sec. 133(6) of Income Tax Act, 1961 from the respective brokers. |
| (6) | | The A.O. has stated that as per form 3CD (Auditors Report dated 17.10.2016) (Page 8) it has been mentioned “METHOD OF ACCOUNTING -MERCANTIL SYSTEM” but this form 3CD is for “LIQUOR TRADE”. In case of derivatives / f & o trade in shares it is profit / loss earned only when transaction is settled / squared – up or does not remain pending to settle as on closing of the year. |
| | Even in past the Ao’s has followed the same principle for determining the income of trade of derivatives & shares; copy of assessment order u/sec. 143(3) dated 13.11.2017 is as enclosed. (Page 46) |
| | During the year also assessee has followed the same “METHOD OF ACCOUNTING” for the year in case of “DERIVATIVES & F & O SALES / PURCHASES TRANSACTIONS”. |
| | Circular No. 13(102-IT/53, dated 08.09.1954 has defined transactions not treated as “SPECULATIVE TRASNACTIONS”. |
| (a) | | Contracts in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery. |
| | As regards hedging in raw materials, the ITO should not be too particular about the quantities and timing so long as the transactions constitute genuine hedging. Contracts in respect of stocks and shares entered into by a dealer or investor in stocks and shares to guard against loss in his holdings through price fluctuations. Contracts entered into by member of forwards markets and stock exchanges in the course of any transactions in the nature of jobbing or arbitrate to guard against losses which may arise in the ordinary course of their business. |
| (b) | | Contract settled – The expression a contract is periodically or ultimately settled must be construed as the contract is periodically or ultimately determined or concluded or disposed of. The words contract settled used in the definition should not be construed in the narrow sense so as to take in only such cases of settlement before the expiry of the due date for the performance of the contract (Thakurlal Shivprakash Poddar v. CIT 426 (MP). |
| (c) | | Ultimately settled otherwise than by the actual delivery or transfer of the commodity meaning of – The words ultimately settled otherwise than by the actual delivery or transfer of the commodity are very significant and must be given effect to. They can only mean, by implication, that even if at the outset the parties intended the performance or to claim the difference in price, if ultimately the contract is settled otherwise than by actual delivery or transfer of the commodity, it is a speculative transaction (Juvvi Subbaramaiah & Co. v. CIT (1964) 51 ITR 742 (A.P.). |
| (d) | | Futures contracts – Transactions in futures contracts like transactions in stock and shares when settled otherwise than by actual delivery would be speculative transactions u/sec. 43(5), (CIT v. Shri Bharat R. Ruia (HUF) 87 (Bom.)” |
| | Thus when it is a case of “DERIVATIVES” “F & O TRASNACTIONS” on sale / purchase of shares on Bolt; it is Margin (+) or (-) which is important & when settlement of transactions take; place accrued / arise. |
| | Further the A.O. based on information received u/sec. 133(6) of Act duly in reconciliation of evidences filed by assessee has ascertained & verified that source is “Share Trading” and assessee has already disclosed the said source than further addition / alternation in said profit cannot be considered as “Unexplained” u/sec. 115BE(1)(a) which states as under”- |
| | “Tax on total income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D. |
| | 115BBE. (1) Where the total income of an assessee:- |
| (a) | | Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139″. |
| | Thus any such addition / alteration in income cannot be considered u/sec. 115BE(i)(a), NOR AO has considered; He has only explained the provision of act but under which section addition made is not clear nor mentioned and thus the disallowances of expenses and special tax as levied by AO is not justified and we pray for considering such fact. |
| | Ground No. 3:- Non granting credit of TCS of Rs. 314257/- as per Rule 37BFA in case of liquor business of M/s Dev Kishan Samariya, Kota, whereas income of such business of Rs. 801917/- included in appellants income. |
| (1) | | It was intimated to A.O. that “LIQUOR BUSINESS” at Kota since was allotted by Rajasthan State Government (Excise Department) in name of Devkishan (Pan – DMMPK3327P) but since said Devkishan could not run the business & by way of agreement dated 15.12.2015, Agreed to give all rights to operation & benefits to Assessee; the A.O. even considering all such documents have accepted the income of said business in hands of assessee; than it is requested to grant credit of TCS as deducted as per Rule 37BFA of Rs. 314257.00 deducted under pan of “DEVKISHAN” in hands of assessee; which the A.O. & Ld. CIT(A) has not considered. |
| (2) | | In no of decided cases list below the Ld. CIT(A), (ITAT has directed to grant credit of such TCS in name of person who has disclosed “INCOME” are as under:- |
| (a) | | Dinesh Kumar Tak (Self) A.Y. 2013-14 by CIT(A), NFAC, Vide order no. ITBA/APL/S/250/2025-26/1077725928(1), dated 24.06.2025. |
| (b) | | Dinesh Kumar Tak (Self) A.Y. 2012-13, by ITAT, Jaipur Bench Jaipur, Vide order no. 815/JP/2015, dated 19.04.2014 |
| (c) | | M/s Kota Wines, A.Y. 2017-18 by CIT(A), NFAC, Vide order no. ITBA/NFAC/S/250/2023-24/1059184384(1), dated 29.12.2023 |
| (d) | | M/s Chitvan Wines, A.Y. 2021-21 by CIT(A), NFAC, vide order no. ITBA/NFAC/S/250/2023-24/1060247849(1) dated 30.01.2024 |
6. In addition to the above written submission, the ld. AR appearing on behalf of the assessee submitted that
The brief of facts of case are as under:-
| 1. | | In the Stock Market, Derivative is a Financial Contract whose value is “derived” from an Underlying Asset like a Stock, Index, Commodity or Currency derivatives are used by Investors to speculate on the Future Prices movement of an Asset to hedge Against Potential losses or to gain leverage Company types of derivatives include Future Contract Options, Forwards & Swaps. |
| 2. | | That under these Provisions the Steps / Procedure is:- |
| (a) | | Assessee either Purchase or Sale in Advance Certain Scrip / Share on a Rate for settled on a future date. |
| (b) | | Thus it is a Future rate Contract for Sale / Purchase (on a Settled Date by Stock Exchange) |
| (c) | | ON A “SETTLEMENT DATE” the Assessee has to square this transaction for Sale / Purchase. Thus “Settlement Date” may be a Week; A Fortnite etc. depending on Stock Market Conditions. |
| (d) | | Thus the Profit / Loss shall Accrue on a Date of “SETTLEMENT” / Squared up the transaction but not on year end eg. 31st March. |
| (e) | | According as per MTM SUMMARY for 01.04.2015 to 31.03.2016 of SW Capital shows Profit / Loss of Rs. 34,50,071/- as below:- |
| | (Page 27 of 1st Submission) |
| S No. | Particulars | Amount |
| 1 | Profit on Not Squared up transactions | 27,48,814/- |
| 2. | Profit on Squared up transactions for the year | 7,01,257/- |
| Total (1+2) Details page 48 of 1st Submission | 34,50,071/- |
| (f) | | Thus the Trading Profit is Rs. 7,01,257/- for the year & Rs. 27,48,814/- is not the Profit of the year but Profit / Loss is on Account of Market Value of Share; Actual Profit /Loss would accrue only on “SETTLEMENT DATE”, eg. After 31.03.2016 |
| 3. | | The AO has mentioned that Since Assessee has opted for “MERCANTILE METHOD OF ACCOUNTING” As per FORM 3CD u/sec 44AB filed; But Actually it is for “Liquor Trade” & not for “Share Trading” (Page 8 of 1st Submission) |
| 4. | | Separate Records are there for Liquor Trade, Share Trade & Tax Audit has been Conducted only for Liquor Trade |
| 5. | | This System of Accounting has been accepted u/sec 143(3) of Act for Past Asstt. Year (AY 2015-16) order dt. 13.11.17 & share Profit has been taken at Actual Gain / Loss & Not on Derivatives (Page 46 of 1st Submission) |
| 6. | | On these derivatives the Profit / Loss has been shown in the year of Square up transaction eg. AY 2017-18. |
| 7. | | We are enclosing the Following documents :- |
| (a) | | Summary of Stock of derivatives as on 31.03.2016 / 01.04.2015 settled in FY 01.04.2016 to 31.03.2017 & Final Profit / Loss thereon. (Page. 1) (Also Refer Pages 19 to 27 & 42 to 45 of Submission 1st) |
| (b) | | Chart of Gain / Loss of NIL / NO Quantity included in Unsettled transaction for Fy 2015-16 (Page. 2) |
| (c) | | Copy of Asstt. Order u/sec 143(3) of Act dt. 13.11.17 for AY 2015-16 with Computation. (Page 46 to 47 Submission 1st) |
| (d) | | Summary of Gain Calculated on “NOT Squared up transactions” v/s Total Gain (Page 48 – Submission 1st) |
| (e) | | Copy of Income Tax Return, Computation for AY 2017-18 (01.04.2016 to 31.03.2017) where Gain / loss shown on such derivatives. (Page 3 to 5) |
7. To support the contention so raised in the written submission reliance was placed on the following evidence / records :
| Sr.No. | Nature of Documents | Page No. |
| 1. | Audited copy of accounts & computation | 1 to 15 |
| 2. | Copy of agreement dated 15.02.2015 with Devkishan Samariya (Retal Shop Zone no. 5/2 at Kotra | 16 to 17 |
| 3. | Copy of declaration dated 15.02.15 of Dinesh Tak assessee for including the business income of Devkishan in his income for 01.04.15 to 31.03.16 | 18 |
| 4. | SW Capital Global Report 01.04.15 to 31.03.16 (MTM Summary) | 19 to 27 |
| 5. | Settlement wise share transaction details (Brokers note & settlement note wise) | 28 to 41 |
| 6. | SW Capital Global report 01.04.14 to 31.03.15 | 42 to 45 |
| 7. | Copy of assessment order u/sec. 143(3) dated 13.11.17 for A.Y. 2015-16 | 46 |
| 8. | Copy of computation of income 31.03.2015 | 47 |
| 9. | Summary of capital gain for the year | 48 |
| S No. | Particulars | Page |
| 1. | Summary of Stock of derivatives as on 31.03.2015 / 01.04.2015 settled in FY 01.04.2015 to 31.03.2016 & Final Profit / Loss thereon | Page 1 |
| 2. | Chart of Gain / Loss of NIL / NO Quantity included in Unsettled transaction for Fy 2015-16 | Page 2 |
| 3. | Copy of Asstt. Order u/sec 143(3) of Act dt. 13.11.17 for AY 2015-16 with Computation. | Page 46 to 47 Submission 1st dated 07.08.2025 |
| 4. | Summary of Gain Calculated on “NOT Squared up transactions” v/s Total Gain | Page 48 – Submission 1st dated 07.08.2025 |
| 5. | Copy of Income Tax Return, Computation for AY 2017-18 (01.04.2016 to 31.03.2017) where Gain / loss shown on such derivatives | Page 3 to |
8. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee ld. AO misconceived the facts of the business wherein the mercantile system of accounting employed with the derivative and speculative transaction is done and further that the transactions which were pending as on March 2016 could not be valued at Market Price and as such unrealized gain cannot taxed. In support of this contention ld. AR of the assessee filed a chart showing the outstanding and settled subsequently, wherein the loss or profit is duly offered in the subsequent year and therefore, the unrealized gain as on March 2016 cannot be taxed. As regards the TCS credit not given, he submitted the necessary direction be given to allow that credit.
9. The ld DR is heard who relies on the findings of the lower authorities and more particularly has advanced very grounds as stated in the order of the ld. CIT(A). Ld. DR has read before us para 4.1 and 4.3 of the order of the ld. AO and para 5.3 of the order of the ld. CIT(A).
10. We have heard the rival contentions and perused the material placed on record. The assessee vide ground no. 1 challenges the finding of the ld. CIT(A) whereby he sustained the addition of Rs. Rs. 31,59,558/- (34,50,071-2,90,513) being the amount of gain held to have not been offered by the assessee. The brief facts related to the dispute are that ld. AO noted that based on the MTM summary or Global Report for the period 01.04.2015 to 31.03.2016, the assessee earned profit of Rs. 34,50,071/- [page 27 of the paper book] but as against that figure, the assessee had shown profit of Rs. 2,84,330/- plus deduction claimed. Accordingly, profit offered was derived at Rs. 2,90,513/- the said amount disclosed was deducted from Rs. 34,50,071/- and net amount of Rs. 31,59,558/- was added as income of the assessee.
On this aspect of the matter, we note from the chart filed [page 19 to 27] that the alleged profit is on account of the valuation of the unsold scrips in the hands of the assessee and the said gain being not realized being in stock the unrealized gain cannot be taxed in the hands of the assessee. The assessee also filed chart vide submission dated 03.09.2025 that the scripts which are outstanding as loss and the profit loss has already been offered in the subsequent year. In the light of these facts, not disputed before us. We direct the ld. AO to delete the addition of Rs. 31,59,558/- being the gain not realized during the year under consideration, which cannot be taxed under the head capital gain or as income under the head profit and gains of business or profession and as such the ground no. 1 raised by the assessee is allowed. Ground no. 2 for charge of tax as per 115BBE of the Act being consequential in nature does not require any finding. Ground no. 3 thereby the assessee prays to grant the credit of TCS of Rs. 3,14,257/- of his liquor business and the income of the said tax deducted has already been offered. For this ground as there was no finding in the orders of the lower authority, we remit to the ld. AO the issue of credit for decision in accordance with law.
In the result, the appeal of the assessee is Partly allowed.