DCIT, CC-II, Ludhiana V. M/s Loil Overseas Foods Ltd., New Delhi

ITA 1300/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5361 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 01-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM MOHAR SINGH
• Keywords: Sham transactions

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1300/CHD/2017 ASSESSMENT YEAR: 2013-14 THE DCIT, VS. M/S LOIL OVERSEAS FOODS LTD., CENTRAL CIRCLE-III, #4128, NAYA BAZAR, NEW DELHI LUDHIANA PAN NO. AAACL7996H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAM MOHAR SINGH RESPONDENT BY : SH. SUDHIR SEHGAL DATE OF HEARING : 03.01.2018 DATE OF PRONOUNCEMENT : 03.01.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 02.06.2017 OF THE COMMISSIONER OF INCOM E TAX (APPEALS), [HEREINAFTER REFERRED TO AS CIT(A)]-5, LUDHIANA. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL:- 1. WHETHER ON FACTS & IN CIRCUMSTANCES OF THE CASE, THE LD, CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.85.19 CR, IGNORING THE FACT THAT THE AO HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT. FURTHER, THE AO HAS BROUGHT ON RECORD THE FACT THAT SHAM TRANSACTIONS OF PURCHASES/SALES WERE ALSO TAKING 2 PLACE ON THE NSEL PLATFORM WITHOUT ACTUAL DELIVERY OF THE GOODS AND ACTUAL PAYMENTS. 2. WHETHER ON FACTS & IN CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.85.19 CR, IGNORING THAT THE ADDITION HAS BEEN BASED ON THE REPORT OF M/S SHARP & TANNA N ASSOCIATES, AUTHORIZED CHARTERED ACCOUNTANT OF NSEL REGARDING RECOVERIES FROM VARIOUS MEMBER S OF NSEL. MOREOVER, THE SAID REPORT IS ALSO PART OF RECOVERY SUIT FILED BY NSEL IN SUIT NO.173 OF 2014 BEFORE THE HON'BLE MUMBAI HIGH COURT WHERE AN AMOUNT OF RS.85.19 CR IS SHOWN AS RECOVERABLE FROM M/S LOIL OVERSEAS FOODS LTD. 2. AT THE OUTSET , LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE FACTS AND ISSUE INVOLVED IN THIS APPEAL ARE SQUAREL Y COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF SISTER CONCERNS OF T HE ASSESSEE M/S LOIL CONTINENTAL FOODS LTD AND M/S LOIL HEALTH FOODS LTD VIDE ORDER DATED 17.4.2017 OF THIS TRIBUNAL PASSED IN ITA NOS. 98 & 99/CHD/2017 FOR ASSESSMENT YEAR 2013-14. THE LD. DR, HOWEVER, HAS O BJECTED TO THE ABOVE CONTENTION STATING THAT THE FACTS ARE NOT ENTIRELY THE SAME IN BOTH THE CASES. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GON E THROUGH THE IMPUGNED ORDER OF THE LOWER AUTHORITIES AS WELL AS THE ORDER OF THE COORDINATE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF SISTER CONCERNS OF THE ASSESSEE IN ITA NOS. 98 & 99/CHD/2017 DATE D 17.4.2017 (SUPRA). 4. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSEE HAS BEEN ENGAGED IN THE TRADING OF FOOD GR AINS AND WAS A MEMBER OF THE NATIONAL SPOT EXCHANGE LIMITED (NSEL), A PLA TFORM WHERE THE 3 PARTIES CAN SALE AND PURCHASE THE FOOD GRAINS BY WA Y OF ACTUAL DELIVERY. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS NOTED THAT THOUGH AS PER THE SETTLEMENT ACCOUNT OF THE AS SESSEE WITH NSEL AN AMOUNT OF RS. 8,25,057/- WAS SHOWN AS DUE TO THE AS SESSEE BY THE NSEL, HOWEVER, AS PER THE REPORT OF AUDITOR M/S SHARP AND TANNAN ASSOCIATES, MUMBAI AN AMOUNT OF RS. 85.19 CORES WAS RECOVERABLE BY THE NSEL FROM THE ASSESSEE M/S LOIL OVERSEAS FOODS LTD. THE ASS ESSING OFFICER FROM THE ABOVE, CONCLUDED THAT THERE WERE CERTAIN SALE AND P URCHASE TRANSACTIONS OUTSIDE THE BOOKS OF ACCOUNT. WHEN ASKED TO EXPLAIN IN THIS RESPECT, THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THA T THERE WERE NO SUCH TRANSACTIONS OUT OF THE BOOKS OF ACCOUNT. THE ASSES SEE DENIED ITS LIABILITY OF ANY AMOUNT PAYABLE TO THE NSEL. HOWEVER, THE ASS ESSING OFFICER DID NOT AGREE WITH THE SAME. HE REJECTED THE BOOKS OF A CCOUNT OF THE ASSESSEE AND MADE THE IMPUGNED ADDITION OF RS. 85.19 CORES I NTO THE INCOME OF THE ASSESSEE AS UNACCOUNTED AND UNDISCLOSED INCOME. 5. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). IN APPEAL B EFORE LD. CIT(A), THE ASSESSEE RELIED UPON THE DECISION OF THE COORDINAT E CHANDIGARH BENCH OF THE TRIBUNAL DATED 17.4.2017 (SUPRA) WHEREIN THE TR IBUNAL AFTER GOING THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE HAS OBSERVED THAT THE ALLEGED REPORT OF M/S SHARP AND TANNAN ASSOCIATES W AS NEITHER CONFRONTED TO THE ASSESSEE NOR ANY VERIFICATION OR CONFRONTATI ON WAS CALLED UPON FROM THE SAID FIRM OF THE CHARTERED ACCOUNTANTS. WHEREAS , THE ASSESSEE HAD PRODUCED A CONFIRMED COPY OF ACCOUNT FROM THE NSEL. EVEN THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO REBUT THE SAID REP ORT. NEITHER EVIDENCE WAS CALLED UPON FROM THE AUDITOR NOR WAS ANY AUTHOR ISED PERSON EXAMINED 4 BY THE ASSESSING OFFICER. EVEN THE TRIBUNAL IN THAT CASE HAD CALLED UPON THE ASSESSING OFFICER TO EXPLAIN IN THIS RESPECT AN D AFTER GOING THROUGH THE RECORD, THE TRIBUNAL OBSERVED THAT EVEN THE ALLEGED TRANSACTIONS WERE PERTAINING TO THE PERIOD FROM 1.8.2013 TO 31.8.2013 WHEREAS THE ASSESSEE IN THAT CASE HAD CEASED TO BE MEMBER OF THE NSEL ON 31.3.2013. THE TRIBUNAL FURTHER OBSERVED THAT ONLY MEMBERS OF THE NSEL WERE PERMITTED TO TRADE THROUGH PLATFORM OF NSEL. THE TRIBUNAL, T HEREFORE, OBSERVED THAT IT DID NOT SEEM PLAUSIBLE THAT THE ASSESSEE HAVING CEASED TO BE A MEMBER ON 31.3.2013, WOULD HAVE MADE THE ALLEGED TRANSACTIONS DURING THE MONTH OF AUGUST 2013. THE LD. CIT(A), AFTER GOING THROUGH THE RECORD AND WHILE RELYING UPON THE ORDER OF THE TRIBUNAL, FACTS AND CIRCUMSTA NCES OF THE CASE IN HAND, FOUND THAT THE ISSUE INVOLVED WAS IDENTICAL TO THAT OF THE SISTER CONCERNS OF THE ASSESSEE NAMELY M/S LOIL CONTINENTAL FOODS LTD AND M/S LOIL HEALTH FOODS LTD. HE, THEREFORE, RELYING UPON THE ORDER O F THE TRIBUNAL DATED 17.4.2017 (SUPRA) DELETED THE IMPUGNED ADDITIONS. 6. BEFORE US, THE LD. DR HAS SUBMITTED THAT IT IS N OT CLEAR FROM THE RECORD THAT THE AMOUNT SHOWN TO BE RECOVERABLE FROM THE ASSESSEE AS PER THE REPORT OF THE M/S SHARP AND TANNON ASSOCIATES W ERE PERTAINING TO THE PERIOD OF AUGUST 2013 OR THAT THE SAME WERE PERTAIN ING TO THE PERIOD PRIOR OF 31.3.2013. HE HAS, THEREFORE, SUBMITTED THAT E VEN CERTAIN OBSERVATIONS WERE MADE BY THE TRIBUNAL THAT THE ACCOUNT OF THE A SSESSEE WITH OTHER PARTIES WITH WHOM THE ALLEGED TRANSACTIONS WERE MAD E, DID NOT SHOW ANY DISCREPANCY. HE HAS SUBMITTED THAT NO SUCH FACT IS ESTABLISHED FROM THE RECORD OF THE CASE IN HAND. HE, THEREFORE, HAS SUBM ITTED THAT IT CANNOT BE SAID THAT THE ENTIRE FACTS OF THIS CARE ARE IDENTIC AL TO THAT OF ITA NOS. 98 & 5 99/CHD/2017 DATED 17.4.2017 (SUPRA). FURTHER, ON M ERITS THE LD. DR HAS RELIED ON THE FINDINGS OF THE ASSESSING OFFICER. 7. THE LD. AR, ON THE OTHER HAND, HAS RELIED ON TH E FINDINGS OF THE COORDINATE BENCH OF THE TRIBUNAL DATED 17.4.2017 (S UPRA) AND HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE ABOVE ORDER OF THE TRIBUNAL. 8. WE FIND THAT IN THE CASE OF SISTER CONCERN OF TH E ASSESSEE, THE TRIBUNAL HAD CALLED UPON THE ASSESSING OFFICER TO P ERSONALLY APPEAR ALONG WITH RECORD AND CERTAIN OBSERVATIONS HAVE BEEN MADE FROM THE RECORD AS TO THE ALLEGED DATE OF TRANSACTION ETC., HOWEVER, T HE MAIN CONTENTION OF THE ASSESSEE THAT NO RELIANCE CAN BE PLACED ON THE REP ORT OF THE AUDITOR WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE TO CONFRONT THE SAME. THAT EXCEPT THE UN-CONFRONTED REPORT OF THE SAID M/S SHARP AND TANNON ASSOCIATES, NO OTHER EVIDENCE WAS AVAILABLE WITH THE ASSESSING OF FICER TO COME TO THE CONCLUSION THAT THE ASSESSEE HAD MADE ANY ALLEGED T RANSACTIONS OUT OF THE BOOKS OF ACCOUNT. EVEN NO AUTHORISED PERSON FROM AL LEGED M/S SHARP AND TANNON ASSOCIATES WAS CALLED UPON AND EXAMINED. THE RE IS NO EVIDENCE ON THE FILE THAT THE ASSESSEE HAS BEEN GIVEN ANY OPPOR TUNITY TO CONFRONT THE SAID REPORT. THE ASSESSING OFFICER HAS ASSUMED ON T HE BASIS OF THE REPORT THAT THE ASSESSEE HAD MADE CERTAIN TRANSACTIONS OUT OF RECORD WITHOUT BRINGING ANY CORROBORATIVE EVIDENCE ON THE FILE. CO ORDINATE BENCH OF THE TRIBUNAL IN ORDER DATED 17.4.2017 (SUPRA) HAS ALSO OBSERVED THAT IT IS NOT EXPLAINED AS TO WHAT MATERIAL WAS COLLECTED BY M/S SHARP AND TANNON ASSOCIATES FOR SHOWING THE RECOVERY OF THE IMPUGNED AMOUNT AGAINST THE ASSESSEE. IT HAS NOT BEEN EXPLAINED AS TO WHAT WAS THE NATURE OF 6 TRANSACTIONS ENTERED BY THE ASSESSEE, WHETHER IT WA S PURCHASES OR LOANS. THE COORDINATE BENCH OF THE TRIBUNAL WHILE RELYING UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KISHANCHAND C HELARAM VS. CIT [1980] 125 ITR 713 (SC) HELD THAT THE IMPUGNED ADD ITIONS WERE UNWARRANTED. THE TRIBUNAL FURTHER OBSERVED THAT NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE BO OKS OF ACCOUNT OF THE ASSESSEE FOR REJECTING THE SAME. THE TRIBUNAL FUR THER OBSERVED THAT IF THE ASSESSING OFFICER WANTED TO MAKE THE IMPUGNED ADDIT IONS AGAINST THE ASSESSEE, THE ASSESSING OFFICER SHOULD HAVE EXAMINE D THE NSEL AND M/S SHARP AND TANNON ASSOCIATES BUT HE FAILED TO DO SO. THAT NEGATIVE ONUS CANNOT BE SHIFTED ON THE ASSESSEE TO PROVE THAT IT HAD NOT MADE ANY TRANSACTIONS OUT OF BOOKS OF ACCOUNT. WE AGREE WIT H THE ABOVE FINDINGS OF THE TRIBUNAL. THE INCOME TAX AUTHORITIES UNDER THE ACT HAVE BEEN ENTRUSTED WITH VIDE POWERS OF INVESTIGATING, SUMMONING THE WI TNESSES AND RECORD FOR THE PURPOSE OF COLLECTING EVIDENCES. THE SOLE BASIS OF ADDITION IN THIS CASE IS ON THE RELIANCE OF THE ASSESSING OFFICER ON THE UNCORROBORATED AND UN- CONFRONTED REPORT OF M/S SHARP AND TANNON ASSOCIATE S TO WHICH ASSESSEE HAS SPECIFICALLY DENIED. EVEN WHEN ASKED TO EXPLAI N, THE LD. DR ALSO COULD NOT EXPLAIN AS TO WHAT IS THE BASE OF IMPUGNE D ADDITION. THOUGH, IN THE REPORT OF THE SHARP AND TANNON ASSOCIATES THE A MOUNT OF RS. 85.19 CRORES HAS BEEN SHOWN TO BE RECOVERABLE FROM THE AS SESSEE, BUT HOW THAT VARY AMOUNT CAN BE ASSESSED TO BE UNEXPLAINED INCOM E OF THE ASSESSEE EVEN WITHOUT POINTING THE NATURE OF TRANSACTIONS OR THE BASIS OF THE IMPUGNED RECOVERABLE AMOUNT. EVEN THE ALLEGED REPORT OF M/S SHARP AND TANNON HAS NOT BEEN PRODUCED BEFORE US. NEITHER ANY EVIDENCE NOR PAPER BOOK HAS 7 BEEN FILED BY THE REVENUE TO SHOW THE BASIS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER. UNDER THESE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION WHILE RELYING UPON THE DECISION OF THE COORDINATE BEACH OF THE TRIBUNAL DATED 17.4.2017 ( SUPRA) IN THE CASE OF SISTER CONCERNS OF THE ASSESSEE. 9. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DR. B.R.R. KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03.01.2018 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR