TaxTMI 
TaxTMI 
2020 (6) TMI 27
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.... 4. That the learned CIT(A) has earned in law and on fats in sustaining the disallowance of business laws on the basis that the appellant has failed to produce any evidence to prove that the law of claimed by the appellant was genuine despite the fact that the appellant has furnished all the evidences to establish the genuineness of business transactions of purchase and sale of design fabrics. 5. That the learned Assessing Officer and learned CIT(A) has heard on facts and in law in this regarding the statements of proposed by recorded by CIT(A) himself and thereby violating the well settled principles of natural justice. 6. That the learned CIT(A)has erred in law in sustaining the disallowance of business loss of Rs. 56,53,550/- by alleging that these business transactions are sham transactions for the purpose of evading Tax without any basis or documentary evidence. 7. That the learned AO and the learned CIT(A) has erred in law in disregarding the fact that the Assessing Officer cannot step into the shoes of the Businessman so as to determine how the business is to be conducted [SA builders Limited. (2007) 288 ITR1 (SC)]. 8. That the appel....
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....trading of the design fabric was more profitable. (iv) Initially during the assessment proceedings, the assessee submitted that by the time it received the delivery of design fabrics, the design had gone out of the fashion and he could not find any buyer for the same and, therefore, sold the goods on loss. (v) Subsequently, submitted that the assessee received certain purchase orders of design fabrics from two parties namely M/s Cotton Collection and M/s SathakApparels Private Limited and for supplying the said fabric to these parties, the assessee further placed order of the fabric to 'Shylgo textile'. The samples received from 'Shylgo textile' were forwarded to those two buyers, however the samples were not approved and they cancelled the purchase orders. Due to cancellation of purchase orders by them, the assessee was forced to sell the design fabric at discounted price to the parties viz., (1) India Fashion (2) Say My Choice Inc. (3) Achiever Apparels Pvt. Ltd., and (4) Amit Sales Corporation. The above submission of the assessee was rejected by the Assessing Officer due to following reasons: (i) Both M/s. Cotton Collection and M/s Sarthak apparels....
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..../s Cotton Collection and Sarthak Apparel, the AO found striking similarity in pattern and language. According to the AO, it could not be coincidence and letters must have been written by the one person or under the guidance or instructions of the same person. (viii) The Assessee was asked to produce those three parties vide order sheet entry dated 7/12/2016;16/12/2016 and 26/12/2016 but none were produced by the assessee. The AO also issued summons u/s 131 of the Act on 6/12/2016 to M/s Shylgo Textile and on 8/12/2016 to all the three parties for personal attendance , but no compliance was made. (ix) The inspector of the office of the AO visited the address of M/s cotton Collection but he found ,the address to be of a residential building and no entity was found to be operating from that address. 3.3 It is under above circumstances; the Assessing Officerwas of the view that assessee has created documentary evidence in preplanned manner for creating business loss to offset the shortterm capital gain. According to the Assessing OfficerIncome-tax liability is ascertained on the basis of the material available on record, surrounding circumstances, human co....
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.... evidences. On being asked by the Ld. CIT(A), the assessee produced the main persons of M/s Cotton collection and M/s. Sarthak Apparel before him. Both persons stated that entire transaction were on verbal communication. No documents were placed on record to prove the genuineness of the export order received by M/s Cotton Collection and order received from Vishal Mega Mart by M/s Sarthak apparels. According to the Ld. CIT(A), once the assessee was made aware of the result of the examination of the documents which proved the transaction was not genuine, the onus was on the assessee to prove that he incurred the loss. According to the Ld. CIT(A), in view of the decision of the Hon'ble Supreme Court in the case of Sri Charan Singh Vs Chandra Bhan, AIR 1988 SC 637, the burden of proof lies on the party who substantially assert the affirmative of issue and not upon the party who denies it. The observation of Ld. CIT(A) on the burden of proof of the assessee are reproduced as under: "The appellant's insistence that the transactions are genuine supported by certain documents cannot be accepted in view of the fact and circumstances of the case brought on record by the assessing of....
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....ted that no approval of design before placing his order has been given to the appellant. If the appellant wants to venture into new business that too of customized fabrics for export, the appellant should have at least given a specific design or requirement to the party. Both persons stated that the entire transactions are on verbal communications. No Documents are placed on record to prove the genuineness of the export order received by Cotton Collection & order received by Vishal Mega Mart by Sarthak Apparel Private Ltd. In view of the facts and circumstances borne out of the assessment order and legal precedents as discussed by the AO, I am of the view that transactions leading to business loss by the appellant are sham transaction entered into for the purpose of evading tax. I do not find any infirmity in the order of the AO. These grounds of appeal of the appellant are dismissed." 4. Before us, the assessee filed a paper-book containing pages 1 to 130 and submitted that loss incurred by the assessee is a genuine business loss. 4.1 The Ld. Counsel of the assessee referred to copies of the statement of Sh. Sunil Kumar Balooni, proprietor of M/s Cotton collection and Mr Raj....
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....reme Court in the case of SA builders Ltd vs CIT (2007) 158 Taxman 74(SC) and other decisions in support of the proposition that the Assessing Officer should not seek to conduct business by sitting on the armchair of the businessmen and the businessmen knows best how to do his business. 4.6 The LearnedCounsel also relied on the submission made by the assessee before the Ld. CIT(A). The learnedCounsel also submitted that the Inspector's report with the finding that M/s Cotton collection did not exist at the address, was not provided to the assessee which is in violation of the principle of the natural justice and same cannot be used against the assessee. In support of the contention the LearnedCounsel relied on the decision of the Hon'ble Supreme Court in the case of Andman Timbers Industries Vs CCE Civil Appeal No. 4228 of 2006 in other decisions. 4.7 The learnedCounsel also referred to copy of sales invoices issued by the assessee in respect of the sale of design fabric to 4 parties available on page 56 to 90 of the paper-book and copy of invoices issued by M/s Shyalgo Textile, available on page 91 to 102 of the paper-book. He also referred to copy of ledger accounts of thos....