AI Drafter 
TaxTMI 
TaxTMI 
2021 (8) TMI 455
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....n ITA no.7970/Mum./2019, for assessment year 2009-10. ITA no.7970/Mum./2019 Assessment Year : 2009-10 The present appeal has been filed by the assessee on the following grounds of appeal:- "1) That on the facts and in the circumstances of the case of the appellant and in law ld. CIT(A) has erred in holding that the loss booked by the appellant is not genuine and is not eligible to be set off against the income from other heads. 2) That, without prejudice to the generality of ground of appeal no.1 above, on the facts and in the circumstances of the case of the appellant and in law ld. CIT(A) has erred in placing upon the appellant the burden to produce the parties before Assessing Officer. 3) That, without prejudice to the generality of ground of appeal no.1 above, on the facts and in the circumstances of the case of the appellant and in law Id. CIT(A) has erred in holding that the Appellant did not discharge the primary onus to prove the identity of the parties. 4) That, without prejudice to the generality of ground of appeal no.1 above, on the facts and in the circumstances of the case of the appellant and in law ld. CIT(A) has erred in ho....
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....rading in commodities were started from August 2008 immediately after receiving the commission income as this line of business was not there in the preceding year and it was preplanned to avoid taxes. He observed that the prices charged by the assessee to its customers are much less than the purchase price and without there being any mention of quality but the bills of sales and purchases which contain the quantity rate and weight et cetera. He also observed that all the purchases and sales are routed through a small group of persons having business situated in Naya Bazaar, New Delhi. All the purchases and sales are recorded in the books without documentary proof of its delivery, transportation et cetera. He observed that all the purchases are at higher rates and sales at lower rates which is against the normal commercial transactions. In order to verify the genuineness of the transaction, the Assessing Officer issued notices to all the parties and it is returned un-served. Further, the Assessing Officer referred the matter to ADIT (Inv.), New Delhi, based on their report that only five parties responded to the enquiries and balance were not traceable. Accordingly, he came to th....
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....examination by the Assessing Officer at Solapur. The stand of the assessee has been that these findings of Assessing Officer were not justified that the reason of the Assessing Officer was not justified in its finding in relation to 5 parties on whom the notices were served on both occasions. The stand of the assessee has been that in spite of written requests during the course of assessment proceedings, the Assessing Officer did not furnish the assessee any so called material of non-service of 6 parties. As regards non-production of the parties by the assessee before the Assessing Officer, no adverse inference could be drawn that the parties do not exist because (i) the Assessing Officer exceeded his powers in calling upon the assessee to do so in violation of provisions of section 131 of the Act and (ii) the Assessing Officer must have appreciated that those Delhi parties would not attend at Solapur merely at the request of the assessee because they were under no obligation to do so. The CIT(A) at page 24 of its order had appreciated that there was no adverse inference against the assessee for non-service of notice on 6 parties. The stand of the assesse....
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....Appellant to the Appellant's buyers all situated at Naya Bazar, Delhi. c) The Appellant failed to produce any agreements in absence of which there cannot be inferred pre-agreed rates. How could any agreement be produced when the agreements were oral, in accordance with market practice? d) A letter from Sushilkumar & Sons, Delhi and from Manishkumar Sushilkumar & Sons, Delhi were posted from Solapur. These statements need factual verification in light of merit of case. e) Confirmation letter of Arihant Sales Corporation, Naya Bazar, New Delhi stated that the Appellant purchased rice from him whereas as per the Appellant rice was sold to and not purchased from Arihant Sales Corporation. Without seeking any clarification from Arihant Sales Corporation the Assessing Officer cannot draw adverse inference against the Appellant from what seems to be merely an inadvertent error. f) On perusal of confirmation letters of Arihant Sales Corporation, Premchand Deepakkumar and Sainath Agro India it appeared that these confirmations were commonly drafted and printed. These observations of Id. Assessing Officer and CIT(A) are on their own without seeking any....
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.... error only once in the letter of CA that was promptly corrected. Otherwise there has been the consistent stand of the Appellant that it had contracted purchases well in advance and later on the goods thus purchased were sold at loss. 5.3 From the above, it may be inferred that even the authorities below have not been confronted, the material relied by them for rejecting the claim of the assessee which is not justified. It amounts in violation of principles of natural justice. We find that the Assessing Officer has power u/s.131 of the Act for enforcing the attendance of the person who could not be produced before the Assessing Officer on behalf of assessee. In such a situation, no adverse inference should be drawn if the assessee does not produce any party for examination. The Assessing Officer has mainly based his finding on assertion that the notices were issued by him in respect of 6 out of 11 parties were return undelivered by postal authorities. Similarly, notices could not be served on 6 parties by the concerned ITO, New Delhi as well. As stated above, the stand of the assessee has been that in spite of written requests during the assessment proceedings, the Assessi....
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....genuineness of the transaction, the Assessing Officer issued a commission on 09.03.2016 to the ADIT (Inv), Unit-VI(2), New Delhi, for verification of the purchase and sale parties situated at the above said addresses provided by the assessee. In response, the ADIT (Inv.), New Delhi, submitted the verification report along with inspectors report. As per the above report, the inspectors were able to trace three parties and eight parties were not traceable. Based on the above enquiry report, the Assessing Officer issued show cause letter to the assessee on 23.03.2016 along with the above report, asking the assessee to explain as to why the transactions of purchase and sales should not be treated as bogus and in response the assessee submitted that the relevant point of time all the parties were carrying on the business at the address given. There may be some changes and variations due to lapse of eight years. Further, it is submitted that on enquiries made with the parties, it was learnt from the parties that many of them were served summons beyond the stipulated time to act wherein the compliance time was already over. Further, it was stated that many of the parties have alread....
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....resuming for a while that they are genuine transactions as claimed by the appellant, the losses were speculation losses as the alleged transactions for purchase and sale of a commodity are ultimatelyl settled otherwise than by the 'actual delivery. As discussed hereinabove, the appellant failed to prove with any evidence that there was physical movement or transfer or delivery of commodity from' supplier to the appellant or from the appellant to the buyer or from the supplier directly to the buyer. For taking out the transaction from the ambit of speculative transaction, actual delivery of goods was essential. As held by the ITAT,. Delhi, constructive or symbolic delivery of goods even if it were established was of no consequence (47 ITD 476). In these circumstances, the loss claimed constitutes speculation loss as per the definition of speculative transaction provided under sec 43(5)of the Income-tax Act and the case of the appellant is not covered by any of the exceptions in the proviso to the section. This speculation loss, even presuming to be genuine for a while, cannot be set off against the other profits of the appellant as laid down under sec 73 of the Income-tax Ac....
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....t clearly show that none of the parties exist at the addresses -provided. by the Assessee, but surprisingly, the notices issued at the addresses provided by the assessee, where the parties were actually not available, have been served and promptly complied with. vi) Even after confronting with the factual position by providing the copy of Investigation Report, the assessee still maintains that the transactions were actually made by it with said parties It is not known how the assessee could conduct business with the parties, which didn't exist at the addresses provided by it. vii) Further, it is pertinent to mention that the replies have been sent through speed post booked at Counter No.2 of Chandni Chowk Post Office on 01.03.2016 at 2:40 p.m and in the case of Baj rant Traders, Sainath Agro and Sumeet Kumar Naveen Kumar, the replies were sent by speed post booked from Delhi GPO at 6.24 p.m. As at the first instance the existence of the parties is in quandary, the circumstances that the notices issued at the addresses where the parties were found to be not existing and subsequent prompt compliance to said notices clubbed with the fact that the replies to the n....
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....eady to accept the facts This shows the rigid determination of the assessee to make a false claim right, without appreciating all the facts narrated above. 15. In the light of the above, it is clear that the assessee again failed to utilize the opportunity granted to it to prove that the transactions were actually made by it by producing proper evidences. The assessee has even not expressed its intention of discharging its onus, but has simply stated that all the evidences have already been filed, without appreciating the facts of the case. The assessee, in the present proceedings has also failed to justify as to why the sales were effected at a lower rate than the purchase rate. The assessee has not furnished any agreements entered by it with the above parties for the purchase and sale of rice. Considering all the above, it is held that the transactions of purchase & sale of rice are sham transactions and the loss booked is bogus and the same cannot be allowed to be set off against the profits/income from other heads. Accordingly, I hereby disallow entire loss shown by the assessee of Rs. 3,80,77, 164 as bogus and the same is hereby added to the total income of t....
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....900 16.12.2009 9. Giri raj jee Enterprises 4800 06.12.2009 10. Giri raj jee Enterprises 4600 16.12.2009 11. Premchand Deepak Kumar 4600 07.12.2009 12. Premchand Deepak Kumar 4900 04.12.2009 13. Sumitkumar NAVEEN Kumar 6500 05.10.2009 14. Sumitkumar NAVEEN Kumar 6500 12.10.2009 3.1.14 Now, the issue before hand is to find whether these prices are genuine or not. To controvert the same, there cannot be more reliable resource document than that of website of Government of India. As per website of Government of India, htpps://data.gov.in, I came across rates of Basmati Rice existent at that time. The same can be accessed through the following links:- https://data.gov.in/resources/veriety-wise-daily-market-prices-data-rice-2009 For F.Y. 2009-10 Price of rice in October - December 2009. 3.1.15 On a perusal of the above table, I find that the maximum prices of basmati rice across various states in India have been ranging from Rs. 1500 to 5710 PMT during October 2009 to December 2009. Therefore, the factual analysis above leaves a very high scope of manipulating the purchase prices. ....
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....is trading the rice at a very lower rate. In today's world, when 8% is considered a very good profit, shelving 40% more (147% of 4900 + approx 7200) on the same rice is either foolishness or a very intelligent to escape the burden of tax." 8. Further, the learned CIT(A) rejected the contentions of the assessee on submission of PAN, certificate of incorporation, etc., of the parties, whether it is enough to discharge the primary onus of the assessee by relying on various case law including the decision of the Hon'ble Supreme Court in Sumati Dayal and Durga Prasad More. Aggrieved with the above order, the assessee is in appeal before us. 9. Before us, the learned A.R. briefly explained the facts of the case and submitted that this is the second round of appeal in litigation and subsequent to remitting the issue back to the file of the Assessing Officer by the Tribunal, Pune Bench, the Assessing Officer issued the show cause notice under section 133(6) of the Act to all the relevant parties from New Delhi, involved in the transactions with the assessee. All the parties confirmed to the Assessing Officer that they made transactions with the assessee. After their confirmation,....
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....dditions made by the Assessing Officer. He brought to our notice the decision of the Hon'ble Supreme Court in CIT v/s Orissa Corporation Pvt. Ltd. [1986] 159 ITR 78 (SC), and inviting our attention to Para-3 of the above order submitted that the facts are similar to the case of the assessee and that the conclusion in the above case is important. He submitted that in the given case, the Assessing Officer and ADIT (Inv.) did empty formalities merely to complete the assessment. Further he relied on the following cases:- i) CIT V/s U K Shah (1973) 90 ITR 396. (Bom. HC) iii) CIT v/s Dwarkadhish Investment Pvt. Ltd. [2010] 330 ITR 298 (Del.) 11. With regard to lapse of time, he submitted that the Assessing Officer has verified the transaction only after lapse of eight years of the transaction and in that process he relied on S. Hastimal v/s CIT, [1963] 49 ITR 273 (Mad.), H.R. Mehta v/s ACIT, [2016] 387 ITR 561 (Bom). 12. On the other hand, the learned D.R. heavily relied on the order of learned CIT(A) and submitted that the learned CIT(A) has discussed the facts and conclusion in detail. He submitted that the parties were never presented before the Assessing O....
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....sessment rather than actually addressing or investigating the real issues. After considering the submissions of the parties, we note that the assessee was dealing in Rice contracts in the area Naya Bazaar, Delhi, which functions as mandi/local market and there are chances of movement of buyers and sellers over the period. In the given case, the tax authorities have verified the existence of parties after eight years of transactions. The Courts have held that after lapse of reasonable time, the findings after lapse of such reasonable time is not trustable and chances of migration is proved. In the given case, the investigation is carried out after lapse of eight years, which is after lapse of considerable time. 15. When we considered the present issue under dispute, the Revenue authorities allege that the assessee is carrying on three types of transactions and in order to avoid tax on the huge income earned by the assessee in the insurance division and elevator division, the assessee had indulged in the trading of Rice transactions in order to book the fictitious losses to avoid the tax. When we look at the above proposition, what benefit the assessee might have gained by this....
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....essee has given all the relevant details of all the parties along with the confirmations still the Revenue doubts the identity and genuineness then it is they who has to prove that the assessee has indulged in the activities to avoid tax. In the given case, the Revenue has not brought any material in support of their belief and applied assumptions merely on verification of address aspect of identification. Therefore, we are inclined to allow the grounds raised by the assessee and delete the addition made by the Assessing Officer. 16. In the result, assessee's appeal is allowed. ITA no.7969/Mum./2019 Assessment Year : 2010-11 17. The assessee has filed the present appeal on the following grounds of appeal:- 1) That on the facts and in the circumstances of the case of the appellant and in law Id. CIT(A) has erred in holding that the loss booked by the appellant is not genuine and is not eligible to be set off against the income from other heads. 2) That, without prejudice to the generality of ground of appeal no. 1 above, on the facts and in the circumstances of the case of the appellant and in law Id. CIT(A) has erred in placing upon the appellant the b....