TaxTMI 
TaxTMI 
2023 (1) TMI 610
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....d on facts in confirming the disallowance of loss of Rs.6,98,85,971/- made by the A.O while making an observation that it is abundantly clear that appellant created artificial transactions in the form of purchase and sale of silver to create fictitious losses. 2. The Ld. CIT(A) has erred in law and on facts while failing to consider the fact that the transactions entered in to with M/s. Harshad Jewellers and Pragati Traders are all genuine and the appellant company has confirmed the said facts in the statement recorded during the course of survey proceedings by the Income tax department. 3. The Ld. CIT(A) has erred in law and on facts while failing to consider the fact that the sales made by M/s. Pragati Traders to the appellant company and purchases made by M/s. Harshad Jewellers from the appellant company during the previous year relevant to Asst. Year 2008-09 have been accepted and held as genuine in both the cases of said parties while rendering the Order u/s,143(3) of the Act. Accordingly, Ld.CIT (A) ought to have treated the purchases and sales of the appellant company as genuine and not bogus/artificial transactions. II. DISALLOWANCE OF INTEREST - RS. 13,20,000/-. ....
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....t of Rs. 6,98,85,971/- only. There was simultaneous survey operation carried out at the premises of Harshadbhai J Soni the proprietor of the M/s Harshad Jewellers. Where Shri Harshadbhai Jashwntlal Soni in the statement recorded under section 133A of the Act admitted that, all the activities of his proprietary concern are performed/managed by director of Assessee Company namely Shri S.J. Bhatt and Shri Suresh Gadhecha. On question by the AO, the assessee submitted that it has entered into an oral forward agreement with the Shri Jahswant Lal Soni being the father of the proprietor Shri Harshadbhai Jashwntlal Soni for supply of silver in the month of February 2008. As per the assessee, it was customary to enter into such kind of agreement to supply the silvers on the future date. Thus, to meet the contractual liability, it purchased silver from Pargati Traders at prevailing price and supplied to M/s Harshad Jewellers which resulted in business loss. As per the assessee, all the transaction were duly recorded in the books of accounts and supported by documentary evidences, the payment and receipt against sales and purchases were carried out through banking channel, due VAT was also pa....
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....iew of the above and after considering the necessary facts, the AO concluded that the impugned loss claimed by the assessee is nothing but a colourable device adopted by it in order to evade the income tax liability. Thus the AO added the sum of Rs. 6,98,85,971/- to the total income of the assessee. 6. Aggrieved assessee preferred an appeal to the learned CIT-A. 7. The assessee before the learned CIT-A submitted that there was no document of incriminating nature was found during the survey operation. The document bearing page-4 of Annexure-B impounded during the course of survey operation represents the regular transactions which were duly recorded in the regular books of accounts. Therefore, the same cannot be termed as bogus transaction as alleged by the AO. All the transactions were duly recorded in the books of accounts which were subject to audit. Therefore, the same cannot be used to draw any inference against the assessee. 7.1 Furthermore, the statement recorded of the proprietor of M/s Harshad Jewellers which was used for the purpose of making the addition in the hands of the assessee was supplied at the fag end of the assessment proceeding i.e. same was supplied along S....
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....8. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 9. The learned AR before us filed a paper books running from pages 1 to 331 and contended that all the transaction representing the sales to M/s Harshad Jewellers and purchases from M/s Pragati Traders were duly recorded in the books of accounts of the respective parties which were also accepted in the assessment framed under section 143(3) of the Act. The learned AR in support of his contention has filed the VAT audit report and the assessment order in the case of M/s Pragati Traders and M/s Harshad Jewellers which are placed on pages 96 to 222 of the paper book. According to the learned AR, when the corresponding transactions of purchase and sales have been admitted in the assessment as genuine, no doubt can be raised on the transactions carried out by the assessee in the books of accounts. 9.1 The learned AR also submitted that there were numerous transactions carried out between the assessee and M/s Harshad Jewellers during the year and the later years but no doubt was raised by the revenue barring the transactions discussed in the assessment order. The learned AR further reiterated the....
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....the money was transferred from the assessee bank to M/s Pargati Traders (supplier of impugned silver) which in turn transferred to M/s Gaytri Trading Co which finally transferred to M/s Harshad Jewellers. Further, M/s Harshad Jewellers transferred the same back to the assessee against the purchase of impugned silver. 11.2 Now we proceed to adjudicate the issue in light of the above stated facts. As far as loose sheet bearing page-4 of Annexure-B is concerned where details of purchases and sales of silver in dispute were recorded, we note that the entries made on the impugned sheet were duly recorded in the books of account of the assessee. Further the impugned sheet was also containing details of sale of silver to the other parties on same dates as shown to M/s Harshad jewelers at similar rates. However, no iota of doubt was raised on other sales made to other parties. We also note that the appellant assessee before the lower authorities have explained that it is customary in its business to enter into agreement on oral/written basis to sale or purchase of silver/gold on future date at agreed price. The assessee claimed that it has contractual obligation to supply the silver to th....
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....ith regard to sales and purchases with the appellant assessee and other parities was asked, he again replied that the transactions were carried out by the director of appellant assessee. In our considered view, the statement of the Shri Harshadbhai J Soni cannot be relied upon for making adverse inference against the present assessee. Firstly, the statement was recorded under section 133A of the Act and it settled position of law by the judgment of Hon'ble Supreme Court in case of CIT vs. S Khader Khan Son reported in 352 ITR 480 that the admission under section 133A of the Act does not carry any evidentiary value. Secondly, the AO of Shri Harshadbhai J Soni has also not relied upon his statement and treated the business of his proprietary concern as an independent assessee and made assessment in his hand only (Harshadbhai J Soni). If the statement of Shri Harshad Soni had been relied upon, then the entire business profit of his proprietary concern would have been assessed in the hands of present assessee or its director who as per the statement of Shri Harshad Soni carrying the out the affairs of M/s Harshad Jewellers on his name. But it is not the case here. 11.4 Further, on per....
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.... & purchases and other transactions between appellant assessee and M/s Harshad Jewellers were accepted as genuine by the AO in the assessment order. We also feel pertinent to highlight that the learned DR before us has not brought any material to suggest that assessment order under section 143(3) dated 29th December 2010 in case of Shri Harshad Soni has been revised under the provisions of the Act. Thus, the sales shown by the assessee has been accepted as genuine purchases by the Revenue authority in the hands of the customer i.e. M/s Harshad Jewellers. Therefore, in our considered opinion, the sales shown by the assessee cannot be doubted. 11.6 Now coming to the fact of circular transaction in bank account. The AO found that there were circular transactions of transferring the money from the account of the assesse to M/s Pargati Traders which in turn transferred to M/s Gaytri Trading Co which finally transferred to M/s Harshad Jewellers. Further, M/s Harshad Jewellers transferred the same back to the assesse bank account. Thus, the fund was rotating among the aforesaid parties. Furthermore, the bank accounts of all the parties were in the same bank namely Bhuj Mercantile Co Oper....
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....gati Traders to the appellant assessee has been duly accepted by the Revenue as genuine transaction. Before us no material brought on record by the learned DR to suggest that the said assessment order has been revised under any provision of the Act where genuineness of such sale has not been accepted. Likewise, the income declared by M/s Gayatri Trading Co who was alleged to be the part of circular transaction was also accepted by the Revenue with minor adjustment in amount of depreciation in the assessment order dated 29-11-2010. 11.9 In view of the above-elaborated discussion and considering the fact that the sale shown by the supplier (M/s Pargati Traaders) of impugned silver to the assessee and purchases shown by the customer (M/s Harshad Jeweller) has been accepted genuine in their respective assessment orders, We hold that the transaction of purchase of sale of silver the by the assessee are genuine transaction and in the process loss incurred by the assessee cannot be disallowed. Hence we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is allowed. 12. The next issue raised b....
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....not given during the year is not relevant since interest on the borrowed funds was paid during the year and the same was claimed as expense. Therefore onus is on the appellant to establish that borrowed funds continue to be used for business purpose only and the same were not diverted to non-business purpose. Appellant only submitted that it was having capital and interest free funds more than interest free loans hence no disallowance be made. I have gone through the balance sheet of the appellant and it is found that appellant has already used its capital and reserves in fixed assets and sundry debtors and as such it was not available for providing interest free advances. Further the credit from sister concerns Aryavart infrastructure private Ltd was also received during the year whereas interest free loans were given in earlier years. Therefore it is clear that interest free funds were not used in providing interest free loans. In view of this, the decision in the case of Reliance utilities Ltd relied upon by the appellant is not applicable to the facts of appellant's case. In absence of appellant's explanation regarding the immediate source of interest free loans given, ....