TaxTMI 
TaxTMI 
2017 (6) TMI 641
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....stock exchange. It is a non-banking finance company (NBFC) registered with Reserve Bank of India (RBI). The assessee explained before the ld AO that it deals in shares and securities, cotton knitted fabrics and tyres and tubes. The assessee engaged in the trading of cotton knitted fabrics and incurred trading loss of Rs. 13,61,62,256/- which was disallowed by the ld AO on the pretext that the same has been self created by the assessee by indulging with transactions with controlled entities who are its related concerns having common directorship or other interests. The ld AO in the course of assessment proceedings observed that assessee had purchased from five parties namely 1) M/s Coral Environments Pvt Ltd ; 2) M/s Visage Equipments Pvt Ltd ; 3) M/s SPR Textiles Pvt Ltd ; 4) M/s Suryamani Financing Pvt Ltd and 5) M/s Zipco Industrial Finance Pvt Ltd totaling to Rs. 84,71,96,960/-. The sales were made to three parties namely 1) M/s Girish Commercial Pvt Ltd ; 2) M/s Coral Environments Pvt Ltd and 3) M/s Visage Equipments Pvt Ltd totaling to Rs. 71,10,34,704/-. The assessee purchased and sold cotton knitted fabric from the above mentioned parties at a loss. In this manner, the as....
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....ilarly, from the ledger in the books of M/s Coral Environments Pvt Ltd and M/s Visage Equipments Pvt Ltd, it revealed that assessee purchased cotton knitted fabrics at higher price from M/s Visage Equipments Pvt Ltd and sold at lower price to M/s Coral Environments Pvt Ltd. Some examples of those transactions are as follows:- Range of date Quantity (in kg) Purchase rate per Kg (in Rs.) Sales rate per kg. (in Rs.) 24-07-2007 to 04-08-2007 287530 236/- to 242/- 198/- to 201/- 3.2.2. The ld AO further observed from the details filed that assessee had also traded dyed cotton knitted fabrics during the year under appeal. The assessee purchased goods on 9.1.2008 from M/s Zipco Industrial Finance Pvt Ltd at Rs. 25,16,170/- and the same was sold on 17.1.2008 to M/s Coral Environments Pvt Ltd for Rs. 24,19,000/- thereby incurring a loss of Rs. 97,170/- within a span of one week. 3.2.3. A chart showing movement of goods on the basis of information submitted by various parties were drawn by the ld AO as below:- Godawari - Coral - Zipco - India Finance (Assessee) - Visage - Vaishali - SPR - Coral - Godawari 3.3. From all these facts, the ld AO obse....
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.... of the Ld. CIT(A) to rely upon the decision of the ITAT Kolkata Bench in the case of Smt. Indira Jalan to confirm the addition of Rs.l36162256/- made by the Assessing Officer is unjustified and bad in law. 3.5. We have heard the rival submissions. We find from the facts and circumstances that the assessee company has been managing its trading activity in such a manner that loss incurred in trading is almost equal to its interest income. When the interest income in Asst Year 2008-09 compared to Asst Year 2007-08 had increased, its loss in trading activity had also increased. Similarly when the interest income in Asst Year 2009-10 compared to Asst Year 2008-09 had decreased, its loss in trading activity had also decreased. The following chart would depict the facts of the case in a better fashion:- Financial Year Trading Loss (Rs) Interest Income (Rs) 2006-07 3,17,02,725 3,20,51,560 2007-08 13,61,62,256 13,29,13,163 2008-09 12,46,51,755 12,38,51,442 Hence it is very clear that the assessee company had managed its transactions in such a way that its interest income could be set off with the loss and there would be no tax liability o....
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....and M/sVaishali Housing Projects Pvt. Ltd. Names of directors and shareholders of these companies were downloaded from the ROC Site. From the documents downloaded, the following crucial information has been gathered. i) Mr.ParthoMajumdar, who is a director of the assessee Coral Environments Pvt. Ltd and M/s. Godwari _ Electro Contractor Pvt. Ltd and his address has been given as 9, Ezra Street, Kolkata - 700001, where office of M/s Coral Environments Pvt. Ltd is situated. ii) Mr.SovanSengupta, who is one of the directors of M/s Coral Environments Pvt.Ltdis also the director of M/s Visage Equipments and M/s Vaishali Housing Projects Pvt.Ltd. iii) Mr.RamkrishnaDas, who is a director of M/s Godwari Electro Contractor Pvt.Ltdis also a director of the assessee-company. iv) M/s Miller Traders Pvt.Ltd. is a common shareholder of M/s VaishaliHousing Projects Pvt.Ltd, GodwariElectro Contractor and M/s Visage Equipment and Coral Environments. v) M/s Mayank Services Pvt.Ltd is a common shareholder of M/s Coral Environments, M/s. Vaishali Housing Projects Pvt.Ltd and M/s Godwari Electro Contractor. vi) M/sSheetal Exports Ltd is a common sha....
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....iately preceding two assessment years, and on the other hand, the profts were shifted to another group concern through a circuituous route. In this circuit, the assessee was one of the company and benefitted by booking loss and not paying tax on the interest income. Even in the preceding two assessment years, similar losses were booked by the assessee for setting off against the interest income. One crucial factor which could not be believed in the assessee's case is as to why the assessee repeatedly purchased the goods at a higher rate and immediately sold at a lower rate. The assessee had not chosen to keep the closing stock of goods to wait for the better marketing conditions. But instead it chose to immediately sell the goods at a lower price clearly knowing that it would only incur a loss. Since there was no real cash loss for the assessee as the assessee's loss becomes the profit of another entity in the same group, the monies remain in the same group of the assessee. Having transactions with the same two companies and regularly booking only losses thereon is beyond human perception. The assessee's version that the assessee had transacted the transactions at the prev....
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....in ITA NO. 1055/Kol/2013 dated 10.6.2016 (Kolkata Tribunal) DCIT vsSunitaKhemka in ITA Nos. 714 to 718 /Kol/2011 dated 28.10.2015 (Kolkata Tribunal) We find that in all the aforesaid decisions, it was only held that once the assessee had disclosed the identity of the parties and payments were made by account payee cheques and transactions were properly documented, no adverse inferences could be drawn against the assessee. In these cases, the transactions were carried out with non-related entities. But the most excruciating factor in the instant case before us which comes as a distinction is that, the assessee had carried out purchase and sale transactions with the parties who belong to the same group and it is very easy to prevail upon those parties for confirming the transactions before the ld AO. Moreover, the circuituous route of transactions carried out by the assessee in the instant case did not prevail in the case laws relied upon by the ld AR. Hence the same are factually distinguishable and cannot be applied to the instant case. We find that in the instant case, the ld AO had made extensive enquiries by bringing on record the price differences at various p....
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....oading charges evidencing the movement of goods for purchase and sale transactions. In the instant case, the assessee had debited a meager sum of Rs. 1,63,825/- (that too with self made vouchers not supported by freight bills) which is not at all commensurate with the volume of business transactions carried out by the assessee. It is very unlikely that the assessee who had transacted more than Rs. 100 crores would have incurred only a paltry sum of Rs. 1,63,825/- towards transportation charges and that too by using matador vans which is the mode of transportation as claimed by the assessee. It is very unlikely that all the payments for transportation charges were below the prescribed tax deduction limits as per section 194C of the Act. The assessee though claimed that the transportation charges were loaded in the purchase and sales bills itself, but the evidences in this regard proved the contrary. The ld AR also argued that the assessee had taken a premises on rent used for storage of goods. But on verification carried out by the Inspector of Income Tax, the assessee was only occupying a small space between the stairs of first floor and second floor of the building, wherein, only ....
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....the assessee and uphold the orders of the lower authorities. 4. In the result, the appeal of the assessee is dismissed. 3.7. Respectfully following the aforesaid decision of this tribunal in assessee's own case for the Asst Year 2009-10 under similar circumstances, we decide the Grounds 3 to 6 raised by the assessee in favour of the revenue and against the assessee. 4. The next issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the reassessment proceedings u/s 147 of the Act in the facts and circumstances of the case. 4.1. Assessee had also questioned the validity of the reassessment proceedings u/s 147 of the Act vide Grounds 1 & 2 as below:- 1) "That on the facts and in the circumstances of the case the action of the Learned CIYT (A) to confirm the assessment framed by the Assessing Officer u/s 147 of the Income Tax Act is bad in law. 2) That on the facts and in the circumstances of the case the action of the Assessing Officer to issue notice u/s 148 without framing an independent belief is contrary to the settle principles of law and the reopening made by the Assessing Officer and confirmed by the learne....
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....to the nonapplication of mind by the ld AO independently and argued that the reopening itself is bad in law. In response to this, the ld DR vehemently relied on the orders of the lower authorities and argued that the information obtained regarding the modus operandi of the assessee's transaction in cotton knitted fabrics which got exposed pursuant to TDS survey, definitely constitutes an information within the meaning of section 147 of the Act and the revenue is well within its permissible limits, entitled to take recourse to necessary legal action in the form of issuance of notice u/s 148 or u/s 263 of the Act, as the case may be. 4.4. We have heard the rival submissions and perused the materials available on record. The ld AR fairly stated before us that the compliance to the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts Ltd reported in 259 ITR 19 (SC) has been duly made in the instant case by both assessee as well as by the ld AO and hence there is no grievance on that count. His only grievance was that the reopening of assessment cannot be made based on the findings given in the report of CIT TDS during TDS survey proceedings. In this regard, we find t....