TaxTMI 
TaxTMI 
2021 (8) TMI 983
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....0/- made by the Assessing Officer as alleged non genuine losses. 3. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of losses of Rs. 3,25,74,320/- made by the Assessing Officer as alleged non genuine losses and not allowing set off of the same against other business income of Rs. 2,32,20,878/- shown in the audited trading account of the appellant. 4. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of interest expenses of Rs. 14,51,773/-. 5. The appellant craves leave to add, alter, amend or modify any of the grounds of appeal on or before the date of hearing of appeal. 3. The 1st interconnected issue raised by the assessee in ground no. 1 to 3 is that the learned CIT (A) erred in confirming the disallowance of loss for Rs. 3,25,74,320/- after rejecting the book of accounts by treating the loss claimed by it as bogus in nature. 4. The facts in brief are that the assessee in the present case is an individual and engaged in the business of trading of Gold Bars & Ornaments, silver and diamond under the name of style of M/s Adinath Impex. The assessee is also a shareholde....
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....rmore, the GP has also improved in comparison to previous year but the AO without specifying any explicit shortcoming or defect in the books rejected the book of accounts. 6.1 With regard to the cash deposited in the bank, the assessee submitted that during the year its total turnover is of Rs. 320 crores out which cash sale is of Rs. 4.1 crores only which is very insignificant. Further most of cash sale were made to random customer through counter and such customers mostly are reluctant to disclose their identity. Therefore, their address or contacts details were not mentioned on bills. 6.2 Likewise, the AO's observation that cash book and bank books are not in conformity is vogue and factually incorrect for the reason that cash and bank are containing different nature of transaction. Hence the same can never be matched except cash deposit or cash withdrawal from bank. Therefore, the rejection of books on the above ground is not justified. 6.3 The assessee with regard to concessional sale to related parties submitted that the AO identified three parties to whom sale were made allegedly at lower rate than rate prevailing in the market. At the first instance this observatio....
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....making reliance on the order of his predecessor for the assessment year 2009-10. For this purpose, the relevant finding of the learned CIT (A) is extracted as under: It is pertinent to mention here that in the A.Y. 2009-10, where the AO has made the similar addition on identical facts which were confirmed by the CIT(A) vide his order dated 20.02.2013. The relevant portion of the order of the CIT(A) is as under: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Since the disallowance of loss made by the AO was held to be justified in the appellate proceedings for A.Y. 2009-10 and the issue identically involved in the appeal under consideration and hence the disallowance made by the AO is justified and the same is confirmed. Thus, the grounds raised by the appellant are dismissed. 10.1 In view of the above, we hold that the facts of the case for the year under consideration are identical to the facts of the case for the assessment year 2009- 10. Admittedly, the addition for the assessment year 2009-10 has been deleted by this ITAT in the own case of the assessee in ITA No. 1420/Ahd/2013 vide order dated 25-01-2017. The relevant finding of t....
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....nt proceedings and before the first appellate authority assessee had submitted that primarily all the impugned 15 transactions have been entered into in the normal course of business, no objection has been raised with regard to the purchases made and transactions entered with the other parties during the year and no anomaly has been found in the ITA No. 1420/Ahd/2013 Asst. Year 2009-10 15 books of account and assessee has shown a better GP. Assessee took an additional plea by submitting that it has received huge interest free advances from ACPL and if an interest rate of 15% is presumed then also an approximate interest cost of Rs. 48,04,106/- would have been borne by the assessee. With this additional plea assessee submitted that there has been no loss of revenue because on one hand there has been loss in the sale transaction and on the other hand interest has not been paid on the advance/credit received from ACPL. This additional plea was taken up by ld. CIT(A) in deciding against the assessee by observing that if the rate of interest is taken at 18% and it is applied on the credit balance lying with the assessee received from ACPL then approximately notional interest will work o....
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....questioned the genuineness of sale @ Rs. 1306 per gm., but has not raised any objection with regard to purchases made at Rs. 1305 per gm. on the very same day. Similarly on 20.3.2009 the alleged sale transaction to ACPL of gold bar is at Rs. 1306 per gm. and on the very same day ITA No. 1420/Ahd/2013 Asst. Year 2009-10 17 there is a purchase of Rs. 1305 per gm from Harshad Jewellers vide its bill No.205 dated 20.3.2009. These facts in itself proves the volatility of gold/silver market and also shows the genuineness of the business transaction entered by the assessee which remains disproved even by the Revenue. At this juncture we would like to go through the judicial precedence adjudicating such type of issues. 13. We observe that Hon. Jurisdictional High Court in the case of Marghabhai Kishabhai Patel & Co. vs. CIT (supra) while adjudicating the issue relating to purchase of tobacco from its partners at higher price than average price paid to outside parties and held that the Tribunal was not justified in disallowing a part of actual price of tobacco paid by assessee -firm when it was not shown that the transaction was not bona fide or one or to be sham one or price paid ....
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....well accepted principle of law that an assessee can so arrange his affairs as to minimise his tax burden. Hence, if the assessee in this case has arranged its affairs in such a manner as to reduce its tax liability by start ing a subsidiary company and transferring ks shares to that subsidiary company and thus forgoing pan of its own profits and at the same time enabling its subsidiary to earn some profits, such a course is not impermissible under law." In view of this legal position and particularly in view of the decision of this High Court in Commissioner- of Income-tax v. Keshavlai Ckandula! [1966] 5^_JTR_12() (Guj), unless it has been shown that the transaction in question was a sham one or unless the value shown was not the value in the books of accounts or unless it was not a bona fide transaction, it is not op en to the taxing authorities to disregard the figures of the transactions shown in the books of account of the firm. The case before the Madras High Court in Sri Ramalinga Choodambikai Mills Ltd. v. Commissioner of Income-tax [1955] 28 ITR 952 (Mad) and before this High Court in Commissioner of Income-tax v. Keshavlai Chandulal [1966] 59_ITR^12P (Guj.) was directly co....
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....time and striking an average of the price of all tobacco purchased during the entire season irrespective of qualities and irrespective of the fluctuations in the market rates, was a very unscientific method followed by the department in arriving at its conclusion but in any event he had no right to depart from the prices shown in the books of account unless he found the transaction not to be a bona fide one or to be a sham one or unless he found that the prices paid were not what was shown in the books of account and since none of these three conclusions had been reached by him. he had no right to depart from the books of account of the assessee-firm, In view of these conclusions we hold that the Tribunal was not justified in disallowing a part of the actual price of tobacco paid to the partners and question No. (1) must, therefore, be answered in the negative, that is, in favour of the assessee and against the revenue. In view of our conclusion it is really not necessary to answer question No. (2) but in any event it appears that the conclusion reached by the Tribunal that the partners and their relatives were paid higher price was erroneous in law as the Tribunal has not compared....
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....ion actually received by the assessee was more than what was disclosed or declared by him. The relationship between the parties has been established. The desire to defeat the claims of the revenue has also been established but that fact that for this the assessee had stated a false fact in the document is not established. What appears from the Tribunal's order was that the real and main object was to safeguard these shares from being taken over by the Government in settlement of tax dues, and also that the buyer and seller were indirectly connected with each other. 15. The first proviso to section 12B(2) provides 'full value of the consideration for which the sale, exchange, relinquishment or transfer is made1 to be taken as the basis for the computation of the capital gains. Therefore, unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for computation of capital gains. The onus is on the revenue - the inferences might be drawn in certain cases but to come to a conclusion that a particular higher amount was in feet received must be based on such material from which such an irresistible conclusion follo....
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....ing a subsidiary company and transferring its shares to that subsidiary company and thus forgoing part of its own profits and at the same time enabling its subsidiary to earn some profits, such a course was not impermissible under law. 16. We also observe that Hon. Jurisdictional High Court in the case of CIT vs. Amitbhai Gunvantbhai (supra) has held as under :- The Tribunal had overlooked one important fact, namely, that the entries in the books of account of 'G ', (HUF) were not challenged by the department as a device or as a cloak to evade the tax. Nowhere on the record the department challenged that the entries did not reflect the real transaction between the parties. In the absence of any such challenge, according to the assessee, it was not open to the Tribunal to come to the conclusion that the money was not received by 'G' in his capacity of HUF but was received by him in his capacity as the guardian of the assessee. The basic principle is the same in the law relating to income-tax as well as in civil law, namely, that if there is no challenge to the transaction represented by the entries or to the genuineness of the entries, then....
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....tries made in the books are not genuine nor any other adverse material has been placed on record to show that the impugned loss was false and assessee has received more consideration than the actual transaction of sale. Further even in the independent enquiries conducted on the alleged three parties it ended up without giving any iota of evidence against the assessee as the same have nowhere been highlighted in the assessment order. 18. We are, therefore, of the view that the action of ld. Assessing Officer was erroneous as he has selected only few transactions on which only loss has incurred without giving cognizance to the fact that assessee has gained in other transactions with the impugned parties which are very well evidenced with the independent itemwise transaction details forming part of the books of account of assessee placed at pages 35 to 45 of the paper book. Ld. Assessing Officer also failed to point out any mistake in the alleged transactions except mentioning that the loss has been incurred. Ld. Assessing Officer completely failed to appreciate that every assessee has his own style of doing business and more specifically in the kind of business assessee is e....
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..... 14,51,773/- and added to the total income of the assessee. 13. Aggrieved assessee preferred an appeal to the learned CIT (A) who has also confirmed the order of the AO by observing as under: 5.4. The appellant has mainly contended that the total interest free advance available to the appellant is much more and the AO has completely overlooked this fact while making disallowance of interest. The appellant has relied upon decisions in the case of Reghuveer Synthetics Ltd. 354 ITR 222 (Guj.) and Reliance Utilities & Power Ltd. 330 ITR 340 (Bombay). 5.5. In the judgment of Reliance Utilities & Power Ltd., it is held that if there is interest free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. This decision is based on finding of fact by the Tribunal that there were sufficient interest free funds available in that case. The real enquiry is whether there are interest free funds available on the asset side and in the absence of sufficient proof of available interest free funds no such presumption can be drawn. A....