TaxTMI 
TaxTMI 
2016 (2) TMI 1406
X X X X Extracts X X X X
X X X X Extracts X X X X
....d added Rs. 17,31,200/-. (2). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the claim of the Assessing Officer in treating the sale and purchase transactions with M/s. Sam International as fictitious and added Rs. 1,50,000/-. (3). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the claim of the Assessing Officer in treating the sale and purchase transactions with M/s. M.P.G. Impex Pvt. Ltd. as fictitious and added Rs.21,25,605/-. (4). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the claim of the Assessing Officer in treating the sale and purchase transactions with M/s. R.L. Enterprises as fictitious and added Rs. 18,40,000/-. (5) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the claim of the Assessing Officer in initiating the proceedings under Section 271(1)(c) of the Income Tax Act. (6) The appellant craves leave to add, alter, amend and/ or vary any of the above grounds of appeal/relief claimed at any time before the decisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....should not be treated Assessment Year 2006-07 M/ s. Sanika Agri Impex Put. Ltd. fictitious and disallowed. The assessee company submitted that it brought Mr. R.L. Bhanushali, proprietor of Ravi Dal Industries on 08.11.2008 in the office of the AO but as the AO was not available in the office, the meeting could not take place. The assessee company submitted that the assessee company has furnished confirmation of the account of M/s Ravi Dal Industries and the assessee company could not be held responsible for non appearance of the person to whom summons have been issued relying on the decision of Hon'ble Supreme Court in its favour . The detail of transactions claiming to be purchases and sales of the assessee with M/s. Ravi Dal Industries is summarized as under: - Date of purchase Quantity in bags Purchase Price Date of sale Quantity in bags Sale price Loss 02.01.2006 4000 25,02,000 20.01.2006 4000 19,22,000 5,80,000 03.01.2006 2000 12,51,000 03.01.2006 2000 10,51,000 2,00,000 02.01.2006 7520 48,78,880 31.01.2006 7520 41,67,680 7,11,200 08.03.2006 2880 23,04,720 08.03.2006 2880 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; 21,25,605 iv. The transactions with M/s. R.L. Enterprises - The assessee company has debited an amount of Rs.18,40,000/- on account of "penalty for non lifting of goods". In the course of assessment proceedings assessee produced a debit note of R.L. Enterprises describing the transactions as - "Black Matpe 1000 MT" purchased from you for February shipment settled as below - Purchase Details Date Settled Date Difference 200 MT @ 29410/- 02.01.2006 200 MT @ 29410/- 02.03.2006 2,00,000 200 MT @ 29610/- 04.01.2006 200 MT @ 31610/- 03.03.2006 4,00,000 200 MT @ 30010/- 06.01.2006 200 MT @ 32510/- 06.03.2006 5,00,000 200 MT @ 29910/- 08.01.2006 200 MT @ 32110/- 06.03.2006 4,40,000 200 MT @ 29810/- 12.01.2006 200 MT @ 31310/- 12.03.2006 3,00,000 18,40,000 To verify the transactions with M/s R L Enterprises, AO issued a Commission u/s.131 to DDIT (Inv.), Surat, who vide letter dated 13.12.2008 intimated to the AO that the proprietor of M/s. R.L. Enterprises, Mr. Jagdish Prasad M. Goel did not know any business activ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns with M/s. Ravi Dal Industries and M/s. R.L. Enterprises. All the transactions resulted in losses only and the accounts were settled in March, 2006. The assessee company failed to produce any third party independent evidence's to prove that these transactions were taken place on the dates and time which the assessee company claimed to have made and merely exchanging debit and credit notes between the parties and the assessee company is not reliable and the same cannot be treated as evidence unless corroborated with some independent evidences . The bank statement shows that the payments were made at the fag end of the year or next year. The brokers have not raised any invoice for brokerage nor any brokerage was paid in respect of these transactions . The statement of the brokers recorded is not reliable as the brokers will not go against the traders. The loss of Rs. 18,40,000/- incurred in transaction with R L Enterprises has been debited in Profit and Loss Account by disclosing it as 'Penalty for non lifting of goods'. All the recipients of the profits made out of above mentioned transactions have not made any payment of tax on such amount's of income in their han....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Factory, 121 ITR 196 Bombay), (ii) Juvi Subbaramaiyah & Co. 51 ITR 742, Ragunath Prahaladas, 104 ITR 95]. The AO rejected contentions of the assessee company by holding that these transactions were not entered into to guard against from any future losses on account of fluctuation in the commodity prices and are not hedging transactions within proviso (a) of Section 43(5) of the Act . The transactions have been entered into almost on the same day or within an interval of day or two and all these transactions resulted into losses. The AO held these transactions to be speculative transactions and are not allowed to set off against the normal business income, vide assessment orders dated 15.12.2008 passed u/s 143(3) of the Act. 4. Aggrieved by the assessment order dated 15.12.2008 passed by the AO u/s 143(3) of the Act, the assessee company filed first appeal with the CIT(A). 5. The assessee company submitted that with respect to disallowance of Rs. 17,31,200/- of loss of Ravi Dal Industries, all the details of the transaction were given to the AO and also informed the AO that the said party has shifted to Surat. The assessee company submitted that ledger account and PAN of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....transactions are speculative in nature and are not covered by proviso (a) to Section 43(5) of the Act and hence the additions made by the AO was upheld by the CIT(A) vide orders dated 01.03.2011. 6. Aggrieved by the orders dated 01.03.2011 passed by the CIT(A), the assessee company is in appeal before the Tribunal. The Learned counsel for the assessee company submitted that the sale and purchase transaction are treated as non genuine/fictitious transactions by the AO and CIT(A) has confirmed the same. The AO has also treated these transaction as speculative transactions and disallowed u/s 43(5) of the Act. Ld. Counsel for the assessee company submitted that the assessee company is dealing in pulses and sale turn over amounting to Rs.23.7 cr. and returned income is 3.35 cr .. There are transaction with four parties and there has been losses and AO has disallowed the losses. The parties have confirmed the transactions . The payment for these losses have been made by cheque through banking transactions. The Ld. Counsel submitted that enquiries were made by the Revenue and the main reason for disallowance is losses and the recipient had losses and thus have not paid taxes on these i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s maintained by various government and other statutory /authorities authorities which are regulating transactions in agricultural produce under various legislations and rules regulating the trade in agricultural commodities such as APMC, Forward Contract(Regulation) Act, 1952, State Agricultural Board's, Agricultural Mandi's etc. and proof of payment of any fee, taxes etc to these bodies/authorities as mandated under law to substantiate that these transactions were genuinely entered into by the assessee company at that point of time and the losses, if incurred were genuine losses . Further, the primary onus is on the assessee company to bring on record cogent material to substantiate that these transactions are hedging transactions to safeguard against future losses in contracts based on actual delivery entered into by the assessee company on these commodities by bringing on record cogent material by way of contracts in the agricultural commodities which the assessee company has to execute on actual delivery basis against which these hedging transactions were entered into to guard against losses to be covered by proviso (a) to Section 43(5) of the Act to be taken out of pur....