TaxTMI 
TaxTMI 
2023 (8) TMI 1731
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....e. 2. Briefly stated, the assessee e-filed return of income on 29.09.2015 declaring total loss of Rs. 25,50,57,463/-. The return of income filed by the assessee was selected for scrutiny and statutory notices u/s under Income-tax Act, 1961(in short 'the Act') were served upon the assessee. The assessment was completed on 21.12.2017 after disallowing the loss of Rs. 26,88,98,500/- on the ground same being not genuine and also being speculative loss,therefore the assessee not eligible for set off against non- speculation business income. On further appeal, the Ld. CIT(A) also upheld the disallowance of loss. 3. At the outset, we may like to mention that despite notifying neither anyone attended on behalf of the assessee nor any request for adjournment was filed. On perusal of the record, we find that the case has been adjourned from 21.06.2022 onward on the request of the Ld. Counsel of the assessee on many occasions. Lastly on 15.06.2023, the hearing of the case has been adjourned to 22.08.2023 on the request of the Ld. Counsel of the assessee. In the circumstances, we are of the opinion that the assessee is not interested in prosecuting the appeal and therefore appeal....
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....t rate on the expiry date of the contractual period and in the process incurred the impugned loss. 6.3.2 I find that the AO has discussed the issue in detail as to why the transactions as above could not be held as genuine transactions. The AO has noted that the numbers given to the contracts were illogical and not in sequence. The assessee failed to explain and produce earlier contracts bearing numbers before the numbers given to the aforesaid contracts. There were no brokers involved in the said transactions. It was apparent from the contract that it involved only the parties concerned and no 3" party was involved in any manner from which any verification could have been made as to the genuineness of these transactions. BOL is a sister concern of the assessee, since, shareholders of the assessee and BOL are from same family. The AO has noted that all the above contracts were invariably settled at loss. The debit notes were printed on the letterhead of AMPL and BOL without any ratification numbers on them. On perusal of the said debit notes and contract notes, it was evident that even the reference contract numbers mentioned in debit notes were different. 6.3.3 T....
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....ny loss of revenue as a result of these transactions and denying the loss to the assessee would amount to double taxation. The assessee further submitted that there was no requirement in law that such transactions should only happen at a recognized stock exchange and with involvement of brokers. As regard the observation of the AO that no advance was given, the assessee submitted that since the parties were well acquainted with each other, no advance was given at the beginning of the contract. The assessee submitted that the contract could be a written one or an oral one, it may be on plain paper and may not be registered. That per se does not render such contract as void. It only renders such agreements unenforceable in a court of law in case of breach of terms of the agreement. The terms and conditions in the contract were very specific clearly mentioning the commodity, the quality specifications, the quantity to be supplied, the manner of packing, the delivery and its location, the contracted price, payment terms as well as other terms and conditions. As per the purchase contract, physical delivery and payment was to be completed within 60 days from date of contract, however, th....
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....ubstance as brought out in the impugned assessment order. 6.3.8 It is most important to note that despite of the transactions having value of more than Rs. 100 crores and the same resulting in a loss of Rs. 26.88 crores to the assessee, there was absolutely no monetary transactions involved. Not a single paisa was given as advance at the beginning of the contract, neither any payments were made even to party settle the contracts. The transactions were settled through journal entries only. Hence, there could have been no possibilities of any verification as to the payments involved, as there was absolutely no money trail. 6.3.9 There was no delivery of goods. The assessee had not even partly delivered the goods as per the terms of the contracts and, hence, there was no third-party involvement such as transporters etc. The transactions had admittedly not been carried out through any Commodity Stock exchange and it did not even involve any broker between the parties concerned. 6.3.10 The assessee is in the business of purchase and sell of shares. Trading in Coriander is not its regular business. The assessee failed to adduce any evidence to establish that it....
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....tantial income in sale of shares which had been adjusted with this loss claimed to have happened in the commodity transactions. It is also evident from the submission of the assessee itself that BOL had offered only Rs. 1.83 crore as profit and had the contract settlement of Rs. 18 crore not available to the said concern it would had a business loss of Rs. 16.16 crores. Hence, it is evident that the substantial component of the contract settlement amount was adjusted with loss the said company had in other transactions and therefore, BOL has hardly paid any lax on the benefit arising from the impugned transactions. Similarly, AMPL had offered business income of Rs. 10,11,3471/- only and apparently this company had also adjusted the amount claimed to have been received out of settlement of contract with loss arising out of other business transactions. 6.3.13 In fact, this apparently was a classic case of manipulation where affairs were arranged in the manner that the assessee, who had substantial profit on account of sale of shares had adjusted the loss arising out of the impugned transactions avoiding the responsibility to pay legitimate tax on income arising from sale of ....
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.... 6.3.16 The Hon'ble Delhi High Court in PB Finance Ltd. v. Shri Shital Prasad Jain [1983] 54 Comp. Cas. 66 has held that the doctrine of piercing the corporate veil wherever necessary might be invoked by the Curt in the interest of justice to prevent the corporate entity from being used as an instrument of fraud and the fundamental principle of corporate personality itself might be disregarded having regard to the exigencies of the situation and for the ends of justice. If the economic realities of a transaction between the appellant and others are arranged and the exigency of the circumstances surrounding it reveal that the transaction has been entered only to defraud the revenue causing injustice to it, the authorities should look behind the real purpose of the transaction and deal with the consequence of the transaction in a manner with which it should have been dealt with otherwise. 6.3.17 Hence, after a detailed analysis of the facts with the materials available on record in the case of the assessee and on further examination of the nature and circumstances of the contract, it could only be concluded that the modus operandi adopted by the assessee was for evasio....
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....odity in which it does not deal in its normal course of business. The assessee had failed to discharge this onus to establish that the loss happened in normal course of business and it was not a manufactured transaction with a motive to incur loss on paper to set off its profit from dealing in shares. 6.3.21 In the case of Shri Charan Singh vs. Chandra Bhan Singh (AIR 1988 SC 6370), the Hon'ble Supreme Court have clarified that the burden of proof lies on the party who substantially asserts the affirmative of the issue and not upon the party who denies it. It has been further held that the party cannot, on failure to establish a prima facie case, take advantage of the weakness of his adversary's case. The party must succeed by the strength of his own right and the clearness of his own proof. He cannot be heard to say that it was too difficult or virtually impossible to prove the matter in question. In the case under consideration, since it is the assessee who had made the claim that it had a genuine loss in transactions which had no involvement of any third parties, all the facts were especially within it's knowledge. Section 102 of Indian Evidence Act makes it....
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....ble High Court, the Assessing Officer is to apply the test of human probabilities for deciding genuineness or otherwise of a particular transaction. Mere leading of the evidence that the transaction was genuine, cannot be conclusive. Any such evidence is required to be assessed by the Assessing Officer in a reasonable way. Genuineness of the transaction can be rejected in case the assessee leads evidence which is not trustworthy, and the department does not lead any evidence on such an issue. 6.3.25 In the landmark judgement, in the case of McDowell &: Co. Ltd. (1985) 154 ITR 148 (SC)], the Hon'ble Supreme Court have observed as under: "Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges." 6.3.26 Needless to say that every person is entitled to so arrange his affairs as to avoid taxation but the arrangement must be real and genuine and not a sham or m....
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....er, in this context may be relied upon in which it is stated that the each and every matter has to be considered in the light of human probabilities. Any reasonable person considering the surrounding circumstances in the case and applying the test of human probabilities will conclude that the assessee arranged these losses by manufacturing transactions out of bogus forward contracts to minimize its tax liability which is otherwise payable by the assessee company legitimately and the claim of the assessee regarding losses in commodity trading is not genuine although in paper it appears so. Decision of Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More 82 IT 540, also referred to earlier, may also be relied upon in which their lordship has observed that " If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled t....