ANIRUDDHA BOSE,J. - (1.) The main point on which the Revenue presses this appeal is whether speculation loss arising from commodity trading to the Assessee in off market transactions would be added to its income or not for the assessment year 2009-10. The sum involved in such speculation loss is Rs. 2,26,96,157/-. The Assessing Officer found claim for deduction under that head impermissible. He held:- "From the return it has been found that the assessee has claimed loss in commodity trading of Rs. 2,26,96,157/-. On enquiry, the stock exchange NMCE (National Multi Commodity Exchange) reported that the transactions were not done in the name of this party and the broker through which the assessee said to have done the trading has been expelled by the NMCE after the broker Vatika Merchants(P) Ltd. ws found to had involved in issuing forged and fraudulent contract notes. In reply to the show cause that why it should not be treated as bogus, it has been submitted that "...As all these transactions are off market transactions, the same may not have passed through the commodity exchange. But that does not make these transactions bogus. We have produced all the purchase and sale contacts before you to prove the genuineness of the said transactions... ." From the above submission it is clear that the transactions made were off market transactions and had not been informed to the Stock Exchange. Considering the above facts the transactions has been considered the assessee has furnished wrong particulars of income which amounts to concealment of income. The assessee has claimed it as speculation loss to be carried forward. So, the assessee has concealed income and furnished wrong particulars of income. For the above reasons penalty proceedings under section 271(1)(c), Explanation-4 of the IT Act' 1961 has been initiated. Further, the assessee has earned Long Term Capital Gain of Rs. 2,56,76,147/- which has not been passed through the Profit and Loss A/c but directly taken to capital reserve. This resulted in undervaluation of book profit under section 115JB. So, the same has been considered for the purpose of computation of Book Profit under section 115JB."
(2.) On that basis the Assessing Officer recomputed the income of the Assessee adding the said sum. The Commissioner of Income Tax (Appeals) confirmed this order and his order contained the following finding of fact:- "12. The facts which emerge from the above discussion and summarised in nutshell are as follows:- A) The appellant has incurred loss of Rs. 2,26,96,157/- in commodity trading in off market transactions. B) On enquiry the Commodity Exchange i.e. National Multi Commodity Exchange (NMCE) reported that transactions were recorded in the name of the appellant i.e. M/s.BLB Cables and Conductors Pvt. Ltd. C) The broker i.e. M/s. Vatika Merchants(P) Ltd. was also expelled by the NMCE since the broker was found indulging in issuing fraudulent contract notes. D) The information "whether the appellant has ever entered into commodities trading in the last or next three years, if yes, result thereof. Does the Director in individual capacity or otherwise ever entered into commodity exchange prior or later to these transactions" was given during appellate proceedings in spite of number of opportunities. E) The original Books of Accounts, stock register, commodity trading register etc. were produced for verification and necessary inquiry into the commodity trading during the appellate proceedings. F) The appellant was asked to produce the authorisation given to the director/employee for doing commodity trading and copy of Board Resolution giving such authorisation even during appellate proceedings which was produced in spite of number of opportunities. G) The appellant did furnish the information who did the commodity trade transactions i.e. whether it was a director or employee, what was the experience of the said persons in the commodity trading and whether the said Director/employee has entered in these kind of transactions in individual capacity or otherwise ever. H) The appellant has produced any documents showing that the fluctuation of silver and other commodities has been so much rapid during the day that every time he bought and sold it resulted into a loss and there was never gain on any day. I) All the commodity transactions resulted into loss to the appellant. J) The appellant has a long term capital gain of Rs. 2,56,76,147/- which was taxable under section 115JB and the commodity loss, if allowed was to be set off against such a gain and resulting into non-payment of taxes as filed in the return. K) The appellant did enter the long term capital gain of Rs. 2,56,78,147/- in the Profit and Loss account to be prepared as per the Companies Act, 1956 and has directly taken it to the capital reserve in violation of the accounting standards and legal requirements of section 115JB and the companies Act, 1956. L) The appellant knows that very few returns are selected for scrutiny assessments. M) The non submission of information and avoiding verification by writing that it had already filed written submissions with enclosures at the time of first hearing and thereafter and that no further papers or clarification need be filed by it. Further, asking to decide the appeal on the basis of submissions already filed by submitting a letter in dak"
(3.) In the appeal filed by the assessee, the Tribunal, however, held that there is no bar in undertaking off market transactions in commodities under the law. On the aspect of proving such transactions, the Tribunal opined that the Assessing Officer was duty bound to accept the profit shown in the Profit and Loss Account of the Assessee relying on the following authorities:- (i) Apollo Tyres Ltd. v. Commissioner of Income Tax 255 ITR 273(SC); (ii) Malayala Manorama Co. Ltd. v. Commissioner of Income Tax 300 ITR 251(SC); (iii) DCIT-Circle-10(1) v. Dune Leasing and Finance Ltd. 126 ITD 255 (Del.);