TaxTMI 
TaxTMI 
TaxTMI 
2021 (8) TMI 455
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....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 holding that the appellant shelved out 40% more on the purchase of rice to esca....
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.... 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 the conclusion that the transactions were not genuine and in order to show the loss from Rice trading activity, i....
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....icer 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 assessee has been that the observation of lower authorities was not justified with regard to non-existence of parties because (i) transactions of as....
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.... 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 explanation from the parties concerned and ignoring that these were direct correspondence between Assessing Officer and parties without appellant being told about it. g) The letters received from the parties do not....
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....ed 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 Assessing Officer did not furnish the assessee any material of non-service of 6 parties. In such situation, no adverse inference could be drawn that parties in question do not exists because the Assessing Officer has option for calling the attendance of parties under the provisions of s....
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....ubmitted 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 already written to the Assessing Officer in response to the enquiries directly made by the Assessing Officer. 6. The Assessing Officer rejected the submissions of the assessee and by relying on the findings in original assessment as well as findings of the learned CIT(A) in first appellate proc....
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....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 Act." iii) On the basis of details available on record, a test check was made in respect of the purchase bill of M/s Manishkumar Sumitkumar and it is seen that the assessee has made purchases for Rs. 41,75,050/- on 04.03.2009 of 760 Metric Tons i.e. Rs. 5,500/- per Metric Tone and the sale made by the assessee to M/s.Sumitkum....
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....n 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 notices were booked at the same counter of a post office at the same time, further strengthens the premises that the assessee, in order to maintain its stand that it has made the transactions with said entities, which actually were not, is trying to fabricate the things to suit its contentions. Its worth to draw reference to the findings of the AO in the original orde....
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....ts 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 the assessee company. Penalty proceedings u/s.271(1)(c) of the Income- tax Act, 1961 is separately initiated for furnishing inaccurate particulars of income and concealment of income." 7. Aggrieved with the above order, the assessee preferred appeal before the learned CIT(A) and filed additional evidences. The learned CIT(A) remanded the matter to the Assessing Officer and based on the remand report and subm....
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....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. 3.1.16 As perused from the above table, approx. purchase price of the appellant in October 2009 and November 2009 is around Rs. 6500/- Per Metric Tonne (PMT) whereas the sale price was around Rs. 5900/- PMT whereas purchase price is around Rs. 7500 PMT in December 2009 and sale price is around Rs. 4500 PMT. It is evident that the appellant has kept the purchase price at around 40% higher of the sale price. 3.1.17 Further, it is seen that the sale price taken by the appellant is as per the market price prevalent in market. Therefore, the factual analysis above leaves a very high scope of suspicion and manipulat....
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....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, the Assessing Officer wanted to further verify the genuineness of the transaction and hence issued a communication only on 09.03.2016 to the ADIT (Inv.), New Delhi. He highlighted the important date of events for completion of the assessment under section 143(3) r/w section 254 of the Act. For the sake brevity, the relevant chart is reproduced below:- Date Event 05.05.2014 ITAT order 2nd innings 14.01.2015 Issue of notice under section 143(2) 25.01.2016 Transfer of charge to A.O. at Mumbai 25.01.2016 Issue of notice under section 142(1) - asking for addresses of purchase and sale parties 10.02.2016 Reply of assessee 11.02.2016 Issue of notices under section 133(6) Dates requi....
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....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 Officer and they are not traceable, therefore, the transactions are sham. With regard to submission on lapse of time, he submitted that the Assessing Officer has to go by the rules and provisions of the Act. Without prejudice to the above submission, he submitted that the issue may be remitted back to the Assessing Officer for verification of the addresses based on the new submissions made by the assessee. 13. In rejoinder, the learned A.R. submitted that the ADIT (Inv.), New Delhi, was entrusted with the task and it was not informed to the assessee and submitted that all these transactions were routed through banking channels only and if the tax authorities were serious, they could have collected the present address from the bank since the assessee has supplied all the information r....
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....s 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 way. The assessee has led go of the profit to the extent of Rs. 380,77,164/-, which literally goes out of the business. Will any prudent businessman will indulge in such transactions without their being any benefit. We presume that maximum what they will do in this kind of transaction is that they will book the loss as per the above method and they will make sure that at least 90% to 95% of the loss booked, if at all planned, will come back to them by other means or the parties involved are their relatives or business associates. In the given case, the tax authorities have not brought on record that the parties involved are relatives or business associates of the assessee. Neither they brought on record any evidence to prove that assessee has received back the funds or any benefit from the p....
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....w 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 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 holding that the appellant shelved out 40% more on the purchase of rice to escape the burden of tax. 5) That the impugned order being contrary to law, evidence and facts of the case may kindly be set aside, amended and modified in the light of the grounds of appeal enumerated above and the appellant be gran....