M/s. Chimanlal Govinddas, V. Income-tax Officer,

ITA 1514/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9205 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 28-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1514/PUN/2014 [ [ / ASSESSMENT YEAR : 2009-10 M/S. CHIMANLAL GOVINDDAS, 9/10 BHAVANI PETH, PUNE 411042. PAN : AAAFC8590M. . / APPELLANT V/S INCOME TAX OFFICER, WARD-5(4), PUNE. . / RESPONDENT / ASSESSEE BY : SHRI M.K. KULKARNI. / REVENUE BY : SHRI SUHAS KULKARNI / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (A)- III, PUNE DT.12.06.2014 FOR A.Y. 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGED IN THE BUS I NESS OF DEA L ING IN ED I BLE O I LS . ASSESSEE FILED THE RETURN OF INCOME FOR A.Y . 2009 - 10 ON 4 . 9.2009 DECLARING TOTAL TAXABLE I NCOME OF RS . N I L AND / DATE OF HEARING : 06.04.2017 / DATE OF PRONOUNCEMENT: 05.07.2017 2 CLAIMING CURRENT YEAR ' S BUSINESS LOSS OF RS 2,29,84,862/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 23 .1 2 . 2011 AND THE TOTAL TAXABLE INCOME WAS DETERMINED AT RS . 24 , 59 , 100/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARR I ED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 12.06.2014 IN (APPEAL NO.PN/CIT(A)-III/WD-5(4),PN/255/2011-12/147) DISMISSED THE APPEA L OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED T H E FOLLOWING EFFECTIVE GROUND . 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN DISMISSING THE APPEAL OF THE APPELLANT- ASSESSEE THEREBY CONFIRMING THE DISALLOWANCE MADE BY THE A. O. OF GROSS LOSS OF RS.2,54,93,958/- THOUGH THE ENTIRE TRANSACTIONS OF THE APPELLANT ASSESSEE ARE CONTROLLED BY STATUTORY PROVISIONS OF ESSENTIAL COMMODITIES ACT, 1955. THE LOSS BE ALLOWED TO THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF LOSS MADE BY THE A.O. EVEN AFTER ACCEPTING THE AUDITED BOOKS OF ACCOUNT AND REJECTION OF CLAIM OF LOSS BY THE A.O. WAS ONLY ON THE BASIS OF 'DOUBT' REGARDING PURCHASE PRICE. THE LD. CIT(A) HELD THE APPELLANT WAS NOT OBLIGED TO SELL THE GOODS BELOW THE RATES FIXED BY THE CONSIGNOR AND TO SUFFER LOSS. THE LD. CIT(A) DECIDED ISSUE ONLY ON INFERENCES. THE DISALLOWANCE OF LOSS BE DELETED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW AND IF S. 3A(I) TO (III) AND CLAUSES (A)&(B) OF ESSENTIAL COMMODITIES ACT, 1955 ARE CONSIDERED IN THEIR PROPER PERSPECTIVE WHICH IS A CENTRAL ENACTMENT WOULD REVEAL THAT THE SALE PRICES ARE FIXED AND CONTROLLED AND THE SELLER IS REQUIRED TO BE PAID AT THOSE REGULATED AND CONTROLLED PRICES ONLY. THE SALES EFFECTED BY THE ASSESSEE AT LESS THAN THE PURCHASE PRICE ARE SO SOLD AT CONTROLLED AND REGULATED PRICES UNDER THE CENTRAL ENACTMENT. THEY CANNOT BE DOUBTED. THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED U/S 145(3) OF THE ACT. THE BOOK RESULTS BE ACCEPTED. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEVY OF INTEREST U/S. 234B, 234C AND 234D IS NOT JUSTIFIED. 5. THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 3 3. BEFORE US , LD.AR SUBMITTED THAT THOUGH VARIOUS GROUNDS HAVE BEEN RAISED BY THE ASSESSEE BUT ALL THE GROUNDS A R E INTER- CONNECTED . 4. DUR I NG THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT DURING THE YEAR ASSESSEE HAD INCURRED NET LOSS OF RS.2.29 CRORES (ROUNDED OFF) AS AGAINST THE PROFIT OF RS.2.27 CRORES (ROUNDED OFF) AND THE LOSS HAD MAINLY ARISEN ON ACCOUNT OF TRADING IN VANASPATI AND REF I NED SUNFLOWER OIL . THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF LOSS . THE SUBMISSIONS OF THE ASSESSEE FOR INCURRING OF LOSS WAS NOT FOUND ACCEPTABLE FOR THE REASONS STATED IN PARA 3 . 8 OF THE ORDER WHICH INTER-ALIA WAS FOR THE REASON THAT THE MAJOR CHUNK OF PURCHASES OF VANASPATI WAS FROM ITS SISTER CONCERN AND SALE WAS AT LOWER RATE TO VAR I OUS OUTS I DE PARTIES, THE RATE AT WHICH THE PURCHASES OF THE SAME PRODUCTS WERE MADE FROM OTHER PARTIES WAS AT A LOWER RATE THAN THE RATE FROM SISTER CONCERNS , THE CONFIRMATION OF FIXING OF RATES AND DELIVERY OF GOODS WAS ON PHONE AND NOT BACKED BY ANY WRITTEN CONFIRMATIONS . AO CONCLUDED THAT SINCE THE ASSESSEE HAS FAILED TO DISCHARGE THE GENUINENESS OF PURCHASES, THE LOSS I NCURRED BY ASSESSEE WAS NOT GENUINE LOSS AND ACCORDINGLY DISALLOWED THE LOSS OF RS.2,54,43 , 958 /-. AGGRIEVED BY THE ORDER OF AO , ASSESSEE CARRIED THE MATTER BEFORE LD CIT(A) WHO CONFIRMED THE ORDER OF AO BY HOLDING AS UNDER : 2.3 THE SUBMISSIONS OF THE APPELLANT ARE CAREFULLY CONSIDERED WITH REFERENCE TO THE FACTS OF THE CASE AND OTHER RELEVANT ASPECTS. THE POINT FOR DETERMINATION IN THE PRESENT CASE IS WHETHER THE LOSS SUSTAINED BY THE APPELLANT IN THE PRECEDING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL AMOUNTING TO RS.2,54,43,958/- IS GENUINE AND INCURRED IN THE ORDINARY COURSE OF THE BUSINESS ACTIVITIES OF THE APPELLANT FIRM. 2.3.1 AS ALREADY STATED HEREINABOVE, THE APPELLANT IS A FIRM DEALING WITH VARIOUS KINDS OF EDIBLE OILS. THE PURCHASES ARE MAINLY EFFECTED FROM A CONCERN, NAMELY, M/S. JAY AGENCIES WHICH IS A SISTER CONCERN 4 OF THE APPELLANT IN WHICH THE APPELLANT HAS SUSTAINED LOSSES. INCIDENTALLY, BOTH THE APPELLANT FIRM AS WELL AS THE SISTER CONCERN, JAY AGENCIES ARE MANAGED BY THE SAME PERSON I.E SHRI JAYANTILAL GUJARATHI, M/S. JAY AGENCIES IS ACTING AS A CONSIGNEE OF M/S. GOOD HEALTH AGRO PVT. LTD AND M/S. RAJASHRI PACKAGERS LTD., HYDERABAD IN RESPECT OF VARIOUS KINDS OF EDIBLE OILS MANUFACTURED/SUPPLIED BY THEM. MOST OF THE SALES OF THE GOODS RECEIVED ON THE CONSIGNMENT BY JAY AGENCIES ARE MADE TO THE APPELLANT. IT IS THE RATES AT WHICH PURCHASES ARE MADE BY THE APPELLANT FROM JAY AGENCIES AND THE RATES AT WHICH SALES WERE MADE BY THE APPELLANT ARE THE CRUX OF THE DISPUTE. THE APPELLANT HAS CLAIMED (AND WHICH IS NOT DENIED BY THE ASSESSING OFFICER) THAT ALL STOCKS RECEIVED FROM JAY AGENCIES ARE DULY INVENTORIED AS PER ECA ACT, 1955; THE ONLY DOUBT RAISED BY THE ASSESSING OFFICER IS REGARDING THE PURCHASE PRICE, WHICH APPEARS TO BE MANIPULATED AND WHICH NEEDS TO BE DECIDED IN THIS APPEAL. IT HAS BEEN FOUND BY THE ASSESSING OFFICER THAT THE SALES WERE EFFECTED BY THE APPELLANT FIRM AT MUCH LOWER RATES THAN THE RATES AT WHICH SUCH GOODS WERE PURCHASED BY IT FROM THE SISTER CONCERN, NAMELY, JAY AGENCIES. ADMITTEDLY, THE PRICES AT WHICH PURCHASES WERE TO BE MADE BY JAY AGENCIES FROM THE CONSIGNORS AND THE PRICE AT WHICH PURCHASES WERE TO BE MADE BY THE APPELLANT FROM JAY AGENCIES WERE BEING FINALIZED BY THE SAME PERSON AND THE BASIS BEING ATTRIBUTED FOR FIXATION OF SUCH PRICES ARE STATED TO BE DRIVEN BY MARKET FORCES. 2.3.2 IN THE ABOVE BACKGROUNDS, THE REASONABLENESS OF THE PURCHASES MADE BY THE APPELLANT FROM JAY AGENCIES NEEDS TO BE EXAMINED, ESPECIALLY GIVEN THE FACT THAT PRICES AT WHICH GOODS WERE TO BE PURCHASED BY BOTH THE CONCERNS ARE DECIDED BY THE SAME PERSON. ADMITTEDLY, MOST OF THE PURCHASES EFFECTED BY THE APPELLANT FROM M/S. JAY AGENCIES ARE ABOVE THE RATES AT WHICH THE GOODS WERE BEING SOLD. AN ANALYSIS OF THE MONTH WISE PURCHASES MADE BY THE APPELLANT FROM M/S JAY AGENCIES AND CORRESPONDING SALES SHOWS THAT THE APPELLANT HAS RESORTED TO PURCHASES AT HIGHER RATES DESPITE SALES MADE AT LOWER RATES, THROUGHOUT THE YEAR AND SUCH INSTANCES ARE NOT JUST CONFINED TO A PARTICULAR PERIOD AS BEING CLAIMED BY THE APPELLANT . FOLLOWING CHART WOULD CLEARLY BRING OUT THE DISPARITIES IN THE PURCHASE AS WELL AS SALE RATES :- MONTH PURCHASES SALES QTY. RATE ( RS.) QTY. RATE(RS.) APRIL, 2008 82770 1001 82209 829 MAY 70695 889 70494 830 JUNE 31821 878 31250 866 JULY 28550 916 28484 851 AUGUST 43780 917 43870 758 SEPTEMBER 11000 818 10787 719 OCTOBER 10600 710 10737 658 NOVEMBER 7200 566 7458 562 DECEMBER 3999 538 3995 572 JANUARY, 2009 7096 567 6937 562 FEBRUARY 6400 567 6310 556 MARCH 7235 559 7046 554 FROM THE ABOVE, IT CAN BE SEEN THAT IN ALL THE MONTHS EXPECT DECEMBER, THE AVERAGE MONTHLY SELLING RATE IS BELOW THE AVERAGE PURCHASES RATE. IN THIS BACKGROUND, THE APPELLANTS AVERMENT THAT THE LOSS IS NOT INCURRED FOR ALL 12 MONTHS BUT ONLY SOME OF THE MONTHS IS NOT CORRECT. A CLOSE LOOK WOULD FURTHER REVEAL THAT DESPITE 5 LOW SELLING PRICE IN A PARTICULAR MONTH, THE APPELLANT HAS MADE PURCHASES AT HIGHER RATES IN THE SUBSEQUENT MONTHS BARRING NOVEMBER, DECEMBER AND JANUARY. THE APPELLANT HAS NOT JUSTIFIED WITH COGENT REASON AS TO WHY PURCHASES WERE MADE AT HIGHER RATES DESPITE LOWER PRICES IN THE PRECEDING MONTHS. FURTHER, IT IS NOT A CASE THAT THERE WERE SUBSTANTIAL OPENING STOCK WHICH WAS PROCURED AT HIGHER PRICES BUT THE SAME HAD TO BE DISPOSED OF AT LOWER PRICES DUE TO STATUTORY OBLIGATIONS UNDER ESSENTIAL COMMODITIES ACT AS BEING CLAIMED OR DUE TO PERISHABLE NATURE OF THE GOODS. THE STOCK STATEMENT ATTACHED WITH THE AUDIT REPORT FURNISHED WITH THE RETURN OF INCOME SHOWS THAT THERE WAS OPENING STOCK OF ONLY 2914 NOS. UNDER THE VANASPATI A/C. SIMILARLY, THE SUMMARY OF GROSS PURCHASES AND SALES OF VANASPATI SHOWS THAT PURCHASES AND SALES WERE ALMOST IN EQUAL TERMS, IN FACT, THE SALES EXCEEDED THE PURCHASES IN MOST OF THE MONTHS, AS UNDER :- MONTH PURCHASES PURCHASES OVER SALES PURCHASES SALES APRIL, 2008 96240 97782 (-) MAY 87606 88206 (-) JUNE 46757 45496 (+) JULY 42089 42548 (-) AUGUST 69275 69882 (-) SEPTEMBER 58655 57590 (-) OCTOBER 62725 63293 (-) NOVEMBER 64466 65556 (-) DECEMBER 59144 59171 (-) JANUARY, 2009 58336 57950 (+) FEBRUARY 50330 48958 (+) MARCH 34660 35123 (-) 2.3.4 IN THE PRESENT CASE, BOTH THE CONCERNS I.E APPELLANT FIRM AND THE SISTER CONCERN ARE MANAGED BY THE SAME PERSON WHO, IN FACT, DECIDES THE PRICE AT WHICH GOODS ARE TO BE PURCHASED BY BOTH THE CONCERNS. INTERESTINGLY, BOTH THE PRICES ARE CLAIMED TO BE ARRIVED AT AFTER DELIBERATING UPON MARKET CONDITIONS. THEN THE QUESTION THAT ARISES IS AS TO WHY THE APPELLANT WAS FORCED TO PURCHASE GOODS AT HIGHER RATES DESPITE LOW SELLING RATES. AS ALREADY NOTED, M/S JAY AGENCIES IS ENTITLED TO RECEIVE COMMISSION OF 1% ON THE SALES PROCEEDS OF GOODS SOLD ON CONSIGNMENT BASIS EVEN IT IS ABLE TO MAKE SALES AT RATES HIGHER THAN THAT FIXED BY THE CONSIGNOR. GIVEN THAT POSITION, IN A SITUATION WHERE THE MARKET COMMAND A MUCH HIGHER PRICES THAN THE PRICE FIXED BY THE CONSIGNOR, THE EXTRA PROCEEDS WOULD GO TO THE KITTY OF THE SUPPLIER AND THE CONSIGNEE HAS TO BE SATISFIED WITH THE 1% COMMISSION. IT CAN BE REASONABLY PRESUMED THAT PRECISELY FOR THIS REASON, THE CONSIGNEE I.E M/S. JAY AGENCIES MAKES SALES TO THE APPELLANT I.E TO ITS SISTER CONCERN AT THE RATES FIXED BY THE CONSIGNOR, WHICH IS BASED ON THE INPUT OF THE CONSIGNEE, SO THAT IN A SITUATION WHERE THE MARKET PRICE IS HIGHER THAN THE PRICE FIXED BY THE CONSIGNOR, THE EXTRA MARGIN EARNED DOES NOT GO BACK TO THE CONSIGNOR. HOWEVER, IN AN UNFAVOURABLE SITUATION I.E WHERE THE MARKER PRICE IS BELOW THE MINIMUM PRICE FIXED BY THE CONSIGNOR, PERHAPS DUE TO THE COMMITMENT GIVEN, THE CONSIGNEE, M/S. JAY AGENCIES WAS NOT IN A POSITION TO EFFECT THE SALES BELOW THE RATES FIXED BY THE CONSIGNOR. HOWEVER, IN SUCH A SITUATION, M/S. JAY AGENCIES STILL DECIDED TO SELL THE GOODS ABOVE THE PREVAILING MARKET RATES TO THE APPELLANT AND THE APPELLANT PURCHASED SUCH GOODS IRRESPECTIVE OF THE FACTS THAT THE DAILY SELLING RATES WERE WELL BELOW 6 THE MARKET RATES. THERE IS NOTHING ON RECORD TO SUGGEST THAT M/S. JAY AGENCIES WAS UNDER ANY OBLIGATION TO COMPULSORILY SELL THE GOODS AT THE MINIMUM PRICE FIXED BY THE CONSIGNER EVEN IF SUCH RATES WERE ABOVE THE MARKET RATE, INSTEAD OF EXERCISING THE OPTION OF RETURNING THE GOODS. THUS, IT WOULD BE CLEAR THAT THE LOSS IS ORIGINALLY SUSTAINED BY M/S. JAY AGENCIES BY PURCHASING GOODS AT RATES HIGHER THAN THE MARKET RATES WHICH WAS THEN PASSED ON TO THE APPELLANT IN THE FORM OF HIGHER PURCHASE PRICE. SIMILARLY, THERE IS NOTHING ON RECORD TO SHOW THAT HOW THE APPELLANT WAS OBLIGED TO PURCHASE THE GOODS AT A HIGHER PRICE WHEN THE DAILY SELLING RATES WERE WELL BELOW THE PURCHASE RATES. FURTHER, AS BROUGHT OUT HEREINABOVE, SUCH INSTANCES IS NOT MERELY CONFINED TO A PARTICULAR PERIOD OF THE YEAR BUT THROUGHOUT THE YEAR AND THE APPELLANT INDULGED IN PURCHASES AT HIGHER RATES DESPITE PREVIOUS LOW SELLING RATES. IT WAS ONLY BECAUSE BOTH THE CONCERNS WERE BEING MANAGED BY THE SAME PERSON, M/S JAY AGENCIES WAS ABLE TO PASS ON THE LOSS SUSTAINED IN THE TRANSACTIONS TO THE APPELLANT. IT WOULD BE CLEAR THAT HAS IT BEEN ANY CONCERN, THEY WOULD NOT HAVE MADE THE PURCHASES AT HIGHER RATES AS THE SAME WERE PURCHASED BY THE APPELLANT. IN FACT, NO INSTANCE HAS BEEN BROUGHT ON RECORD THAT M/S JAY AGENCIES HAD ALSO SOLD THE SAME GOODS AT THE SAME RATE TO ANY OTHER CONCERN. THIS CLEARLY SHOWS THAT THE APPELLANT PURCHASED GOODS AT HIGHER RATES THAN THE PREVAILING MARKET RATES AND THEREFORE, THE EXPENDITURE THEREOF CAN BE SAID TO BE EXCESSIVE AND UNREASONABLE WITHIN THE MEANING OF SEC. 40A(2) (A) OF THE I.T ACT AS THE PURCHASES ARE EFFECTED FROM A SISTER CONCERN. 2.3.5 FROM THE ABOVE, IT TRANSPIRES THAT WHAT WAS BEING DONE WAS MERE MANIPULATION OF PURCHASE AND SALE PRICES WHEREBY THE LOSS SUSTAINED BY M/S. JAY AGENCIES HAVE BEEN TRANSFERRED TO THE APPELLANT BY MAKING THE APPELLANT TO SHOW PURCHASES AT RATES HIGHER THAN THE PREVAILING MARKET RATE. AT THIS JUNCTURE, REFERENCE MAY BE MADE TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ITO VS. CH. ATCHAIAH (218 ITR 239), WHEREIN IT WAS HELD BY THE APEX COURT THAT THE CORRECT PERSON, WHO IS LAWFULLY LIABLE TO BE TAXED WITH RESPECT TO A PARTICULAR INCOME, ALONE SHOULD BE TAXED. ON THE SAME ANALOGY, THE LOSS SUSTAINED ALSO HAS TO BE ASSESSED IN THE CASE OF THE CORRECT PERSON WHO ACTUALLY SUSTAINED IT. IN THE PRESENT CASE, IT HAS BEEN DEMONSTRATED ABOVE THAT THE LOSS HAS ACTUALLY BEEN SUSTAINED BY M/S. JAY AGENCIES IN TRANSACTIONS WITH THE CONSIGNORS WHICH WAS THEN PASSED ON THE APPELLANT BY MAKING IT TO PURCHASE THE GOODS AT HIGHER PRICE IRRESPECTIVE OF THE FACT THAT THE SELLING RATES PREVAILED IN THE MARKET WAS MUCH LOWER THAN SUCH RATES. IT MAY BE NOTED THAT THE APPELLANT HAS NO DIRECT DEALING WITH THE SUPPLIERS I.E M/S. GOOD HEALTH AGRO PVT. LTD. AND M/S RAJASHRI PACKAGERS LTD, HYDERABAD NOR THE APPELLANT WAS UNDER ANY OBLIGATION TO PURCHASE GOODS AT THE RATES FIXED BY THE SAID SUPPLIERS. THE FACT THAT THE PREVAILING MARKET SELLING RATES WERE BELOW THE PURCHASE PRICES CLEARLY INDICATES THAT THE GOODS WERE AVAILABLE IN THE MARKET AT RATES LESS THAN THE RATES AT WHICH GOODS WERE PURCHASED BY THE APPELLANT FROM M/S. JAY AGENCIES. IN FACT, AS POINTED OUT BY THE ASSESSING OFFICER, THE APPELLANT ITSELF HAS PURCHASED SIMILAR GOODS FROM OTHER PARTIES LOCATED WITHIN MAHARASTRA AT LOWER RATES. THOUGH THE APPELLANT CLAIMS THAT SUCH RATES WERE NOT COMPARABLE DUE TO QUALITY AND QUANTITY DIFFERENCE, IT REMAINS A MERE ASSERTION WHICH THE APPELLANT FAILED TO SUBSTANTIATE. 2.3.6 IN THE LIGHT OF THE FOREGOING DISCUSSION, IT EMERGES THAT THE LOSS SHOWN BY THE APPELLANT IS ARTIFICIALLY PASSED ON TO IT AND CANNOT BE SAID TO BE BONA-FIDE AND SUSTAINED IN THE ORDINARY COURSE OF BUSINESS OR ON COMMERCIAL PRINCIPLES, AS UNDERSTOOD IN COMMON PARLANCE. THEREFORE, I AM OF THE VIEW THAT THE ASSESSING OFFICER IS FULLY JUSTIFIED ON FACTS AND IN LAW IN DISALLOWING THE LOSS RETURNED BY 7 THE APPELLANT. ACCORDINGLY, THE DISALLOWANCE MADE IS SUSTAINED. GROUND OF APPEAL NO. 1 & 2 FAIL. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US . 5. BEFORE US, LD AR REITERATED THE SUBM I SSIONS MADE BEFORE LOWER AUTHORITIES AND FURTHER VIDE WRITTEN SUBMITTED AS UNDER : 1) THE APPEAL HAS BEEN FI L ED BEFORE THE HON'BLE TRIBUNAL WITH APPROPRIATE GROUNDS OF APPEAL . THE MAIN ISSUE IS DISALLOWANCE OF GROSS LOSS OF RS. 2,54,93,958/ - SUFFERED BY THE APPELLANT . THE COMMODITY DEALT WITH BY THE ASSESSEE/APPELLANT IS UNDER STRICT CONTRO L OF ESSENTIAL COMMODITIES ACT, 1955. WHEN THE PROVISIONS OF THE ESSENTIA L COMMODITIES ACT, 1955 ARE CONSIDERED IN THEIR PROPER PERSPECTIVE WH I CH IS AN CENTRAL ENACTMENT WOULD REVEAL THAT THE SALE PRICES ARE FIXED AND CONTROLLED AND THE SELLER IS REQUIRED TO BE PAID AT THOSE REGULATED AND CONTROLLED PRICES ONLY. THE SALES EFFECTED BY THE ASSESSEE/APPELLANT ARE AT LESS THAN THE PURCHASE PRICE AND ARE SO SOLD AT CONTROLLED AND REGULATED PRICES UNDER THE SAID CENTRAL ENACTMENT . THEY CANNOT BE DOUBTED. THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED INVOKING THE PROVISIONS OF S. 145(3) OF THE ACT. THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF LOSS EVEN AFTER ACCEPTING THE AUDITED BOOKS OF ACCOUNT AND THE REJECTION OF CLAIM OF LOSS WAS ONLY ON THE BASIS OF DOUBT . 2) THE ASSESSEE'S SUBMISSIONS : THE ASSESSEE IS IN THIS LINE OF BUSINESS SINCE YEARS TO-GETHER AND IS CONDUCTING HIS TRANSACTIONS ON THE SAME LINES AND HAD EARNED PROFITS AND TAXABLE INCOME IN ALL THE YEARS. A) THE ASSESSEE-FIRM IS MAINTAINING QUANTITY STOCK DETAILS THE DETAILS OF PURCHASES AND SALES ON DAY-TO-DAY BASIS. NOT ONLY THIS THE TRANSACTIONS BEING GOVERNED BY THE PROVISIONS OF ESSENTIAL COMMODITIES ACT 1855, SUCH STOCK STATEMENTS ARE REQUIRED TO BE SUBMITTED TO DISTRICT COLLECTOR AND ASSESSEE-FIRM IS MAINTAINING SUCH EVIDENCE WITH IT. B) ACCORDING TO S. 7 OF THE ESSENTIAL COMMODITIES ACT 1855, THE ASSESSEE WAS PREVENTED FROM STORING THE GOODS WITHOUT FIRST ENTERING INTO STOCK REGISTER. IT IS EVIDENT THEREFORE, THAT ALL THE PURCHASES WERE ENTERED INTO STOCK REGISTER WITH FULL DETAILS OF ITS PURCHASES AS TO DETAILS OF PURCHASE BILLS, QUANTITY PURCHASED, FROM WHOM PURCHASED ETC SHOWING DAILY STOCK POSITION. C) THE LAW OBLIGED THE DEALERS IN ESSENTIAL COMMODITIES TO COMPLY THE INFORMATION WITH REGARDS TO STOCK REGISTER TO FURNISH THE SAME TO DIST COLLECTOR AUTHORITIES. UNDER S.6A OF THE SAID ACT THE COLLECTOR CAN CONFISCATE THE COMMODITY FROM THE PERSON CHARGED WITH CONTRAVENTIONS OR VIOLATION OF AN ORDER UNDER SECTION 3. THE CONTRAVENTIONS ARE MADE PUNISHABLE. THERE IS IMMINENT DANGER OF FORFEITURE OF THE SEIZED GOODS ALSO. D) EVEN THE COLLECTOR IS EMPOWERED TO SEIZE THE ESSENTIAL COMMODITY AND CANCEL THE LICENSE AND FORFEIT THE SECURITY 8 DEPOSITS: A PROSECUTION CAN BE LAUNCHED FOR CONTRAVENTION AND VIOLATION. E) THE OBJECT OF THE ACT IS TO ERADICATE A GRAVE SOCIAL EVIL AND TO PROMOTE WELFARE ACTIVITIES. THE LAW PRESCRIBES THE MAXIMUM PUNISHMENT FOR VIOLATIONS. F) SS. 8, 7A, 7 AND 3 OF THE SAID ACT AND THE INTER-STATE TRANSACTIONS ARE MEANT TO CONTROL BLACK MARKETING AND HOARDING OF THE ESSENTIAL COMMODITIES. FOR WHICH THE DEALERS ARE STATUTORILY OBLIGED TO MAINTAIN STOCK REGISTERS AND DETAILS OF PURCHASES AND SALES AS PRESCRIBED . G) THE ASSESSEE HAS MAINTAINED ALL SUCH DETAILS OF STOCKS IN ITS STOCKS REGISTER MAINTAINED WHICH ARE REGULARLY SUBMITTED TO DISTRICT COLLECTOR AUTHORITIES. THERE IS NO REPORTED VIOLATION OR CONTRAVENTION OF ANY OF THE PROVISIONS OF THE SAID LAW. THE SAID REGISTERS ARE VERIFIED BY THE SAID AUTHORITIES UNDER THE LAW. THERE IS NO QUESTION OF ANY STOCKS/DETAILS BEING PROVED NOT GENUINE. H) A.O . SAYS BY APPLYING THE TESTS OF HUMAN PROBABILITY IT IS CLEAR THAT TRANSACTIONS ARE FAR FROM GENUINE BY ANY YARDSHEK IS AN UNFORTUNATE OBSERVATION . IT IS ALSO UNFORTUNATE FOR HIM TO SAY THAT THE LOSS IS ARTIFICIAL AND NOT GENUINE. THE BUSINESS IS CONDUCTED UNDER THE RIGORS OF ESSENTIAL COMMODITIES ACT. NO PRUDENT BUSINESSMAN WOULD OFFER HIMSELF FOR RIGOROUS PUNISHMENT BY CONTRAVENING THE PROVISIONS OF THAT LAW. NO SUCH FINDING IS COMING FROM THOSE AUTHORITIES. I) THE BUSINESS IS ABSOLUTELY CONDUCTED AS REGULARIZED BY THE ESSENTIAL COMMODITIES ACT 1859. AND THERE IS NO QUESTION OF PROVING THE GENUINITY OF THE TRANSACTIONS AS THEY HAVE SO PROVED AND ACCEPTED BY THE CONCERNED AUTHORITIES. J) THERE IS NO INVOCATION OF S . 145(3) AND BOOKS REGULARLY MAINTAINED HAVE NOT BEEN REJECTED. NO SUCH FINDING AVAILABLE IN THE ASSESSMENT ORDER . L) THE LOSS OF RS. 2,45,43,958/- HAS BEEN RECOUPED B WITHDRAWING THE OPENING BALANCE IN BANK ACCOUNT OF RS. 43,68,593.59 WHICH IS REDUCED TO RS. 7,79,431.89 AT THE END OF THE YEAR. THE ENTIRE PROFITS HAVE BEEN CONSUMED IN THE PROCESS OF THE RECOUPMENT OF LOSS. IN VIEW OF THE ABOVE AND IN VIEW OF THE FACT THAT GENUINITY OF THE TRANSACTION HAS BEEN PROVED BEYOND DOUBT THE DISALLOWANCE OF LOSS OF RS. 2,54,43,958/- IS NOT PROPER AND ACCORDING TO LAW. THE SAME BE DELETED. 3) THE APPELLANT SUBMITS THAT THE GOODS OF WHICH THE MANUFACTURE, DISTRIBUTION SALE STOCKING IS GOVERNED BY ESSENTIAL COMMODITIES ACT, 1955 THE MARKET-PLAYERS ARE ABSOLUTELY PROHIBITED TO BUILD-UP THE STOCKS OF SUCH COMMODITIES EVEN FOR A DAY. THE STOCKS MUST BE CLEARED DAY-TO-DAY, MINUTE- TO-MINUTE BASIS. AND MUST BE SO CLEARED AT THE PRICES DECLARED ON THE BEGINNING OF THE DAY. THE AD'S REVISION THAT THE APPELLANT DOING BUSINESS FOR INCURRING LOSS IS NOT CORRECT AS NO AUTHORITY BELOW VERIFIED THE GROUND REALITIES TO SAY THAT OF THE APPELLANT STOPS PURCHASING THE 'VANASPATI' OR ANY OTHER PRODUCT BEING ESSENTIAL COMMODITY WOULD BE DEBARRED FROM CONDUCTING HIS AGE-OLD BUSINESS CARRIED ON BY HIM FOR CONSIDERABLE NUMBER OF YEARS. FOR A SUFFERANCE OF LOSS OF RS. 2,54,43,958/- HE WOULD HAVE COMPLETELY LOST HIS ENTIRE BUSINESS. 9 6. HE THEREFORE SUBMITTED THAT THE LOSS BE ALLOWED . LD DR ON THE OTHER HAND TOOK US THROUGH THE DETA I LED FINDINGS OF LD.CIT(A) AND SUBMITTED THAT LD CIT(A) AFTER EXAMINING THE SUBMISSIONS OF ASSESSEE HAS UPHELD THE ORDER OF AO . HE SUBMITTED THAT THE ORDER OF LD.CIT(A) BE UPHELD . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD . THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO DISALLOWANCE OF LOSS INCURRED DURING THE YEAR . BEFORE US LD.AR HAS INTER-ALIA SUBMITTED THAT THE GOODS IN WHICH THE ASSESSEE DEALS WITH ARE GOVERNED BY ESSENTIAL COMMODITIES ACT 1955 AND THERE I S NO QUESTION OF PROVING THE GENUINENESS OF TRANSACTIONS AS THEY HAVE BEEN PROVED AND ACCEPTED BY THE CONCERNED AUTHORITIES . WE FIND THAT LD.CIT(A) BY A DETAILED AND WELL REASONED ORDER HAS GIVEN A FINDING THAT THE PRICE AT WHICH THE GOODS WERE PURCHASED BY BOTH THE SISTER CONCERNS WERE DECIDED BY THE SAME PERSON. SHE HAS AFTER ANALYSING THE MONTH WISE PURCHASES HAS GIVEN A FINDING THAT ASSESSEE HAD RESORTED TO PURCHASES AT HIGHER RATES DESPITE THE SALES MADE AT LOWER RATE THROUGHOUT THE YEAR AND THE INSTANCES OF PURCHASES AT HIGHER RATES AND SELLING AT LOWER RATE WAS NOT A CASE OF FEW ISOLATED INSTANCES . SHE AFTER MAKING A DETAILED ANALYSIS HAS CONCLUDED THAT THERE WAS MANIPULATION OF PURCHASE AND SALES PRICES WHEREBY THE LOSS SUSTAINED BY JAY AGENCIES (S I STER CONCERN OF THE ASSESSEE) WAS TRANSFERRED TO THE ASSESSEE BY MAKING THE ASSESSEE TO SHOW PURCHASES AT RATES HIGHER THAN THE PREVAILING MARKET RATES, THEREFORE THE LOSS INCURRED BY THE ASSESSEE CANNOT BE SA I D TO BE A BONAFIDE LOSS INCURRED IN THE COURSE OF BUSINESS OR ON COMMERCIAL PRINCIPLES. THE AFORESA I D F I ND I NGS OF LD CIT(A) HAS NOT BEEN CONTROVERTED BY ASSESSEE BY PLACING ANY EVIDENCE ON 10 RECORD . IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THE GROUNDS OF ASSESSEE ARE DISMISSED . 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 5 TH JULY, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 5 TH JULY, 2017. YAMINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. CIT(A)-III, PUNE CIT-III, PUNE. , , / DR, ITAT, A PUNE; [ / GUARD FILE. / BY ORDER , // TRUE COPY / / //TRUE COPY// / SR. PRIVATE SECRETARY , / ITAT, PUNE