M/S. SHREYA CREDIT & CAPITAL P. LTD., MUMBAI V. DCIT, CEMTRAL CIRCLE7(2), MUMBAI

ITA 1644/MUM/2020

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The case involves M/s Shreyans Credit and Capital P. Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals) confirming the disallowance of a business loss claimed by the assessee. The loss was attributed to transactions in commodity trading, specifically forward contracts for the sale of coriander, which the assessee failed to deliver. The Assessing Officer disallowed the loss, categorizing it as speculative and non-genuine, a decision upheld by the CIT(A) and later by the Tribunal. The Tribunal's decision was based on findings that the transactions lacked genuine commercial substance and were primarily aimed at tax evasion.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123405 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 29-06-2020
• Other Referred Cases: Juggilal Kamlapat v. CIT, PB Finance Ltd. v. Shri Shital Prasad Jain, McDowell & Co. Ltd. v. CIT, Vodafone International holding BV v. Union of India, Azadi Bachao Andolan v. CIT, Som Nath Maini v. CIT, Durga Prasad More v. CIT, Sumati Dayal v. CIT
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Transactions in derivatives; Speculation loss; Sham transactions; Bogus
• Section: 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 1644/MUM/2020 Assessment Year: 2015-16 M/s Shreyans Credit and Capital P. Ltd., 113/114, Bajaj Bhavan, Nariman Point, Mumbai-400021. Vs. DCIT, Central Circle-7(2), Room No. 655, Aayakar Bhavan, M.K. Road, Mumbai-400020. PAN No. AAMCS 7878 M Appellant Respondent Assessee by : None Revenue by : Mr. Sanjeev Kashyap, CIT-DR Date of Hearing : 08/03/2023 Date of pronouncement : 31/03/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 12.03.2020 passed by the Ld. Commissioner of Income-tax (Appeals)-49, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2015-16, raising following grounds: 1. On the facts and in the circumstances*of the case and in law the Ld. CIT(A) erred in confirming the AO's action of disallowing the business loss of Rs.15,30;00,000/ 01.30109 the same as not genuine. 2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the AO's action of holding the business loss of Rs. 15,30,00,000/ allowing the business income. 2. Briefly stated, facts of the case are that the assessee filed its return of income on 30.09.2015 declaring total income of Rs.16,61,970/-. The return of income filed by the assessee was selected for scrutiny and in the assessment 143(3) of the Act, wherein, the claim of loss of Rs.15,30,00,000/ transaction in commodit firstly, on the ground of speculation loss not allowed to be adjusted against business loss. 3. On further appeal, the Ld. CIT(A) upheld the finding of the Ld. Assessing Officer, observing as under: “6.3. I have carefully considered the facts of the case, the findings of the Ld.AO and the submis 6.3.1 During the year under reference, the assessee entered into 4 different contracts with M/s. Arabesque Mercantile Pvt. Ltd (AMPL) for sale of coriander (Badami Whole Dhaniya). The details of the forward purchase contracts entered between BOL and the appellant are as under : Contract No. Date AMPL/Agri/SCCL/013/50 25.02.2015 AMPL/Agri/SCCL/013/52 26.02.2015 AMPL/Agri/SCCL/013/53 27.02.2015 AMPL/Agri/SCCL/013/54 27.02.2015 M/s Shreyans Credit and Capital Ltd. Rs.15,30;00,000/- on contract settlement by 01.30109 the same as not genuine. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the AO's action of holding the business loss of Rs. 15,30,00,000/- 'as speculative loss and thereby, not allowing the set-off against the non-speculative business income. Briefly stated, facts of the case are that the assessee filed its return of income on 30.09.2015 declaring total income of . The return of income filed by the assessee was selected for scrutiny and in the assessment was completed , wherein, the Assessing Officer disallowed the claim of loss of Rs.15,30,00,000/- on account of commodities without physical delivery of goods, , on the ground of non-genuine loss, secondly s not allowed to be adjusted against business loss. On further appeal, the Ld. CIT(A) upheld the finding of the Ld. observing as under: 6.3. I have carefully considered the facts of the case, the findings of the Ld.AO and the submissions of the assessee. 6.3.1 During the year under reference, the assessee entered into 4 different contracts with M/s. Arabesque Mercantile Pvt. Ltd (AMPL) for sale of coriander (Badami Whole Dhaniya). The details of the forward purchase contracts between BOL and the appellant are as under : Date Rate (Rs.)/MT Quantity (MT) Contract Period 25.02.2015 71,800 3,500 30 days 26.02.2015 70,620 3,500 30 days 27.02.2015 68,800 5,000 30 days 27.02.2015 68,600 4,000 30 days M/s Shreyans Credit and Capital Ltd. 2 ITA No. 1644/M/2020 on contract settlement by holding On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the AO's action of holding the business loss of Rs. 'as speculative loss and thereby, not speculative Briefly stated, facts of the case are that the assessee filed its return of income on 30.09.2015 declaring total income of . The return of income filed by the assessee was was completed u/s Assessing Officer disallowed the on account of forward ies without physical delivery of goods, secondly, it was a s not allowed to be adjusted against business loss. On further appeal, the Ld. CIT(A) upheld the finding of the Ld. 6.3. I have carefully considered the facts of the case, the sions of the assessee. 6.3.1 During the year under reference, the assessee entered into 4 different contracts with M/s. Arabesque Mercantile Pvt. Ltd (AMPL) for sale of coriander (Badami Whole Dhaniya). The details of the forward purchase contracts between BOL and the appellant are as under :- Contract Period Amount Rs. 30 days 25,13,00,000 30 days 24,71,70,000 30 days 34,40,00,000 30 days 27,44,00,000 Total The total contract value was Rs. 111.68 crores. The claim of the assessee was that the increased over the contractual period of 30 days and therefore, the assessee could not deliver the commodity to the buyer on the expiry day of the contractual period. The assessee was therefore forced to buy back the commodity from the said buyer at the prevailing market rate on the expiry date of the contractual period. 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 t 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. involved only the parties concerned and no 3rd 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 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. The AO has noted that the assessee is in the business of purchase and sale of shares. During the year under shares worth Rs. 37,86,55,233/ approximately Rs. 17,80.49.137/ had a profit of about Rs. 20 crores in dealing in shares, which was adjusted with the loss in the impugned commodity trading. 6.3.3 The AO has made a very important observation that there was absolutely no monetary transaction during the whole process as no advance was given neither any payment was made for the settlement of the contract value. The transactions of cont against the sale of coriander during the same financial year M/s Shreyans Credit and Capital Ltd. 8,300 The total contract value was Rs. 111.68 crores. The claim of the assessee was that the prices of coriander sharply increased over the contractual period of 30 days and therefore, the assessee could not deliver the commodity to the buyer on the expiry day of the contractual period. The assessee was therefore forced to buy back the commodity rom the said buyer at the prevailing market rate on the expiry date of the contractual period. 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 3rd 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 erusal of the said debit notes and contract notes. it was evident that even the reference contract numbers mentioned in debit notes were different. The AO has noted that the assessee is in the business of purchase and sale of shares. During the year under reference the assessee has sold shares worth Rs. 37,86,55,233/- the cost of which was approximately Rs. 17,80.49.137/-. As such the assessee had a profit of about Rs. 20 crores in dealing in shares, which was adjusted with the loss in the impugned y trading. 6.3.3 The AO has made a very important observation that there was absolutely no monetary transaction during the whole process as no advance was given neither any payment was made for the settlement of the contract value. The transactions of contract settlement were adjusted against the sale of coriander during the same financial year M/s Shreyans Credit and Capital Ltd. 3 ITA No. 1644/M/2020 111,68,70,000 The total contract value was Rs. 111.68 crores. The claim of prices of coriander sharply increased over the contractual period of 30 days and therefore, the assessee could not deliver the commodity to the buyer on the expiry day of the contractual period. The assessee was therefore forced to buy back the commodity rom the said buyer at the prevailing market rate on the 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 he 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 It was apparent from the contract that it involved only the parties concerned and no 3rd party was involved in any manner from which any verification could have been made as to the genuineness of these transactions. , 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 erusal of the said debit notes and contract notes. it was evident that even the reference contract numbers mentioned in debit notes were different. The AO has noted that the assessee is in the business of purchase and sale of shares. reference the assessee has sold the cost of which was . As such the assessee had a profit of about Rs. 20 crores in dealing in shares, which was adjusted with the loss in the impugned 6.3.3 The AO has made a very important observation that there was absolutely no monetary transaction during the whole process as no advance was given neither any payment was made for the settlement of the contract value. ract settlement were adjusted against the sale of coriander during the same financial year and only the journal entries were passed on the last day of the financial year. The AO observed that the whole of the transaction was bogus and manipulated to take t loss on account of contract settlement which was ultimately adjusted against the huge profit on sale of shares. The assessee had profit on sale of shares which was adjusted against the impugned loss in commodity trading. The amount payable on contracts were adjusted against the sale bills of coriander sold to AMPL 6.3.4 The AO further noted that the contract settlement transaction was neither carried out at any of the recognized Commodity Stock in the said transactions. The documents purporting to be agreements were not stamped neither were registered with any Government agency and, hence, the rights and obligations arising out of the said contracts were notenforceable in any Court of law, which was highly improbable in view of the fact that the transaction value was substantially high. He further noted that the transactions were between parties which were known to each other and had existing business relat probability of manipulation and adjustment in making a transaction in a manner which could be beneficial to either of the parties in the matters of tax evasion. 6.3.5 Per contra the assessee made a detailed submission claiming that the transaction were genuine and it has resulted in a loss because of the fact that the assessee failed to deliver the commodity as per the contract because of the fact that there was sharp increase in the prices of coriander over the contractual p that the other party involved in the contract that is AMPL had paid tax on the income arising out of the said transactions and therefore there has not been any loss of revenue as a result of these transactions and den 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 M/s Shreyans Credit and Capital Ltd. and only the journal entries were passed on the last day of the financial year. The AO observed that the whole of the transaction was bogus and manipulated to take t loss on account of contract settlement which was ultimately adjusted against the huge profit on sale of shares. The assessee had profit on sale of shares which was adjusted against the impugned loss in commodity trading. The amount account of loss as a result of settlement of the contracts were adjusted against the sale bills of coriander sold to AMPL 6.3.4 The AO further noted that the contract settlement transaction was neither carried out at any of the recognized Commodity Stock Exchange neither any broker was involved in the said transactions. The documents purporting to be agreements were not stamped neither were registered with any Government agency and, hence, the rights and obligations arising out of the said contracts were otenforceable in any Court of law, which was highly improbable in view of the fact that the transaction value was substantially high. He further noted that the transactions were between parties which were known to each other and had existing business relations which further supports the probability of manipulation and adjustment in making a transaction in a manner which could be beneficial to either of the parties in the matters of tax evasion. 6.3.5 Per contra the assessee made a detailed submission ng that the transaction were genuine and it has resulted in a loss because of the fact that the assessee failed to deliver the commodity as per the contract because of the fact that there was sharp increase in the prices of coriander over the contractual period of 30 days. The assessee claimed that the other party involved in the contract that is AMPL had paid tax on the income arising out of the said transactions and therefore there has not been any 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 vation of the AO that no advance was given, the assessee submitted that since the parties were well M/s Shreyans Credit and Capital Ltd. 4 ITA No. 1644/M/2020 and only the journal entries were passed on the last day of the financial year. The AO observed that the whole of the transaction was bogus and manipulated to take the fictitious loss on account of contract settlement which was ultimately adjusted against the huge profit on sale of shares. The assessee had profit on sale of shares which was adjusted against the impugned loss in commodity trading. The amount account of loss as a result of settlement of the contracts were adjusted against the sale bills of coriander 6.3.4 The AO further noted that the contract settlement transaction was neither carried out at any of the recognized Exchange neither any broker was involved in the said transactions. The documents purporting to be agreements were not stamped neither were registered with any Government agency and, hence, the rights and obligations arising out of the said contracts were otenforceable in any Court of law, which was highly improbable in view of the fact that the transaction value was substantially high. He further noted that the transactions were between parties which were known to each other and ions which further supports the probability of manipulation and adjustment in making a transaction in a manner which could be beneficial to either of 6.3.5 Per contra the assessee made a detailed submission ng that the transaction were genuine and it has resulted in a loss because of the fact that the assessee failed to deliver the commodity as per the contract because of the fact that there was sharp increase in the prices of coriander eriod of 30 days. The assessee claimed that the other party involved in the contract that is AMPL had paid tax on the income arising out of the said transactions and therefore there has not been any loss of revenue as a ying 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 vation 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 ora 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. The delivery location, the contacted price, payment terms as well as other terms and conditions. As per t and payment was to be completed within 30 days from date of contract however the delivery could not be made as the assessee failed to honour the contract because of sharp price in the is correct of coriander, the comm contract. It was further submitted that the AO has formed his opinion and belief without proper appreciation of the submissions of the assessee. It was further claimed that the transactions were genuine and it resulted in a genuine lo to the assessee which was allowable as adjustment with the business income of the assessee. 6.3.6 The assessee is in the business of purchasing and selling of shares. During the year it had substantial profit in the business of purchase and sell of shar incoriander is not the regular business of the assessee. During the year the assessee has claimed to have entered into Forward Purchase Contracts for sale of Coriander to AMPL. The assessee claimed that it failed to honour the contract because the contract period of 30 days and it was left with no option but to purchase the commodity from the buyers itself. Apparently, no payments were made neither any goods were supplied to any of the parties in resp transactions 6.3.7 In its detailed submissions, the assessee has hugely emphasized on form of the contracts to substantiate it's claim that the contracts were genuine business transactions. The assessee explained that the terms of contract had all the necessary details of the transactions such as quantity of the goods, terms of delivery etc. Such details are, M/s Shreyans Credit and Capital Ltd. 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 act were very specific clearly mentioning the commodity, the quality specifications, the quantity to be supplied, the manner of packing, the delivery. The delivery location, the contacted price, payment terms as well as other terms and conditions. As per the purchase contract physical delivery and payment was to be completed within 30 days from date of contract however the delivery could not be made as the assessee failed to honour the contract because of sharp price in the is correct of coriander, the commodity involved in the contract. It was further submitted that the AO has formed his opinion and belief without proper appreciation of the submissions of the assessee. It was further claimed that the transactions were genuine and it resulted in a genuine lo to the assessee which was allowable as adjustment with the business income of the assessee. 6.3.6 The assessee is in the business of purchasing and selling of shares. During the year it had substantial profit in the business of purchase and sell of shares. Dealing incoriander is not the regular business of the assessee. During the year the assessee has claimed to have entered into Forward Purchase Contracts for sale of Coriander to AMPL. The assessee claimed that it failed to honour the contract because of sharp increase in price of Coriander over the contract period of 30 days and it was left with no option but to purchase the commodity from the buyers itself. Apparently, no payments were made neither any goods were supplied to any of the parties in respect of the said transactions 6.3.7 In its detailed submissions, the assessee has hugely emphasized on form of the contracts to substantiate it's claim that the contracts were genuine business transactions. The assessee explained that the terms of contract were specific, it had all the necessary details of the transactions such as quantity of the goods, terms of delivery etc. Such details are, M/s Shreyans Credit and Capital Ltd. 5 ITA No. 1644/M/2020 acquainted with each other, no advance was given at the beginning of the contract. The assessee submitted that the l 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 act were very specific clearly mentioning the commodity, the quality specifications, the quantity to be supplied, the manner of packing, the delivery. The delivery location, the contacted price, payment terms as well as other terms and he purchase contract physical delivery and payment was to be completed within 30 days from date of contract however the delivery could not be made as the assessee failed to honour the contract because of sharp price odity involved in the contract. It was further submitted that the AO has formed his opinion and belief without proper appreciation of the submissions of the assessee. It was further claimed that the transactions were genuine and it resulted in a genuine loss to the assessee which was allowable as adjustment with the 6.3.6 The assessee is in the business of purchasing and selling of shares. During the year it had substantial profit in es. Dealing incoriander is not the regular business of the assessee. During the year the assessee has claimed to have entered into Forward Purchase Contracts for sale of Coriander to AMPL. The assessee claimed that it failed to honour the of sharp increase in price of Coriander over the contract period of 30 days and it was left with no option but to purchase the commodity from the buyers itself. Apparently, no payments were made neither any goods were ect of the said 6.3.7 In its detailed submissions, the assessee has hugely emphasized on form of the contracts to substantiate it's claim that the contracts were genuine business transactions. The were specific, it had all the necessary details of the transactions such as quantity of the goods, terms of delivery etc. Such details are, however, not in dispute. Even if someone enters into a contract with a motive which is other than what has been stated in the contract, the necessary details would be well taken care of in order to give the contract shape of a valid contract. The crux of the matter is that in the given facts and circumstances of the case, can these transactions be held as genuine busine parties with only motive of having income from such business transactions. I find that there are multiple reasons to believe that the submissions of the assessee failed to explain the substance of the transact transaction while over contracts as the assessee had difficulties in answering the questions which raised serious doubts about the substance as brought out in the impugned assessment order. 6.3.8 It is transactions having value of more than Rs. 111 crores and the same resulting in a loss of Rs. 15.30 crores to the assessee, there was absolutely no monetary transactions involved. Not a single paisa was given as a beginning of the contract, neither any payments were made even to partly 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 such as transporters etc. The tran not beencarried 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 re The assessee failed to adduce any evidence to establish that it had previously also entered into such Forward Contracts. The assessee apparently had no or little experience in dealing in coriander. The assessee failed to explain that in such circumstances, why it entered into such an uncertain M/s Shreyans Credit and Capital Ltd. however, not in dispute. Even if someone enters into a contract with a motive which is other than what has been ed in the contract, the necessary details would be well taken care of in order to give the contract shape of a valid The crux of the matter is that in the given facts and circumstances of the case, can these transactions be held as genuine business transactions entered into by the respective parties with only motive of having income from such business transactions. I find that there are multiple reasons to believe that the submissions of the assessee failed to explain the substance of the transaction as a pure business transaction while over-emphasizing on the form of the contracts as the assessee had difficulties in answering the questions which raised serious doubts about the substance 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. 111 crores and the same resulting in a loss of Rs. 15.30 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 partly 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 volved, 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 beencarried out through any Commodity Stock exchange and it did not even involve any broker between the parties 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 had previously also entered into such Forward Contracts. The assessee apparently had no or little experience in dealing in coriander. The assessee failed to explain that in h circumstances, why it entered into such an uncertain M/s Shreyans Credit and Capital Ltd. 6 ITA No. 1644/M/2020 however, not in dispute. Even if someone enters into a contract with a motive which is other than what has been ed in the contract, the necessary details would be well taken care of in order to give the contract shape of a valid The crux of the matter is that in the given facts and circumstances of the case, can these transactions be held as ss transactions entered into by the respective parties with only motive of having income from such business transactions. I find that there are multiple reasons to believe that the submissions of the assessee failed to ion as a pure business emphasizing on the form of the contracts as the assessee had difficulties in answering the questions which raised serious doubts about the substance as brought out in the impugned assessment order. most important to note that despite of the transactions having value of more than Rs. 111 crores and the same resulting in a loss of Rs. 15.30 crores to the assessee, there was absolutely no monetary transactions dvance at the beginning of the contract, neither any payments were made even to partly 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 6.3.9 There was no delivery of goods. The assessee had not even partly delivered the goods as per the terms of the party involvement sactions had admittedly not beencarried out through any Commodity Stock exchange and it did not even involve any broker between the parties 6.3.10 The assessee is in the business of purchase and sell gular business. The assessee failed to adduce any evidence to establish that it had previously also entered into such Forward Contracts. The assessee apparently had no or little experience in dealing in coriander. The assessee failed to explain that in h circumstances, why it entered into such an uncertain forward contract having huge monetary considerations which it failed to honour by even partially supplying the said commodity. The sole explanation provided by the assessee for cancelling the contract from the said parties (although only on paper) was that the assessee failed to deliver the commodity for the reason that the price of the same had raised sharply over the period of contract. The assessee could not, however, ex assessee failed to deliver the goods even partly when the prices were increasing and why the complete transactions had happened by way of buying the commodities from the same parties to meet the terms of contract. 6.3.11 It is a fact that the any Recognized Stock Exchange neither it involved any 3rd party as broker. It was also not a legal contract which could be enforceable in any Court of law. The claim of the assessee is that there is no bar in having contra or in having an oral contract. I agree with the view of the assessee that there is no bar in having a contract in this manner, but there could be no denying to the facts that in such circumstances, the onus on the assessee to establi the genuineness of transaction is greater as compared to the circumstances where the contract is more formal and entered into in a legally enforceable manner. However, as the assessee itself has accepted that these contracts are not enforceable in any c that why the assessee or the other parties decided to enter into contracts of such a high monetary value, breach of which could not have been challenged in any court of law. To say merelv that the parties were known not justify or explain the motive behind having such non formal contracts. 6.3.12 I have also considered the submission of the assessee that the transactions have not resulted in any loss of revenue to the exchequer. However, it is found that this claim of the assessee is incorrect in the given facts of the case. It is evident that the assessee had substantial income in sale of shares which had been adjusted with this loss claimedto have happened in the commodity transactions. It is also evident from the submission of the assessee itself that AMPL had offered business income of Rs M/s Shreyans Credit and Capital Ltd. forward contract having huge monetary considerations which it failed to honour by even partially supplying the said commodity. The sole explanation provided by the assessee for cancelling the contract and buying back the commodity from the said parties (although only on paper) was that the assessee failed to deliver the commodity for the reason that the price of the same had raised sharply over the period of contract. The assessee could not, however, explain why the assessee failed to deliver the goods even partly when the prices were increasing and why the complete transactions had happened by way of buying the commodities from the same parties to meet the terms of contract. 6.3.11 It is a fact that the transactions had not happened on any Recognized Stock Exchange neither it involved any 3rd party as broker. It was also not a legal contract which could be enforceable in any Court of law. The claim of the assessee is that there is no bar in having contract note on plain paper or in having an oral contract. I agree with the view of the assessee that there is no bar in having a contract in this manner, but there could be no denying to the facts that in such circumstances, the onus on the assessee to establi the genuineness of transaction is greater as compared to the circumstances where the contract is more formal and entered into in a legally enforceable manner. However, as the assessee itself has accepted that these contracts are not enforceable in any court of law, there was a need to explain that why the assessee or the other parties decided to enter into contracts of such a high monetary value, breach of which could not have been challenged in any court of law. To say merelv that the parties were known to each other does not justify or explain the motive behind having such non formal contracts. 6.3.12 I have also considered the submission of the assessee that the transactions have not resulted in any loss of revenue to the exchequer. However, it is found that this claim of the assessee is incorrect in the given facts of the case. It is at the assessee had substantial income in sale of shares which had been adjusted with this loss claimedto have happened in the commodity transactions. It is also evident from the submission of the assessee itself that AMPL had offered business income of Rs. 10, 11,347/ M/s Shreyans Credit and Capital Ltd. 7 ITA No. 1644/M/2020 forward contract having huge monetary considerations which it failed to honour by even partially supplying the said commodity. The sole explanation provided by the assessee and buying back the commodity from the said parties (although only on paper) was that the assessee failed to deliver the commodity for the reason that the price of the same had raised sharply over the period of plain why the assessee failed to deliver the goods even partly when the prices were increasing and why the complete transactions had happened by way of buying the commodities from the transactions had not happened on any Recognized Stock Exchange neither it involved any 3rd party as broker. It was also not a legal contract which could be enforceable in any Court of law. The claim of the assessee ct note on plain paper or in having an oral contract. I agree with the view of the assessee that there is no bar in having a contract in this manner, but there could be no denying to the facts that in such circumstances, the onus on the assessee to establish the genuineness of transaction is greater as compared to the circumstances where the contract is more formal and entered into in a legally enforceable manner. However, as the assessee itself has accepted that these contracts are not ourt of law, there was a need to explain that why the assessee or the other parties decided to enter into contracts of such a high monetary value, breach of which could not have been challenged in any court of law. To to each other does not justify or explain the motive behind having such non- 6.3.12 I have also considered the submission of the assessee that the transactions have not resulted in any loss of revenue to the exchequer. However, it is found that this claim of the assessee is incorrect in the given facts of the case. It is at the assessee had substantial income in sale of shares which had been adjusted with this loss claimedto have happened in the commodity transactions. It is also evident from the submission of the assessee itself that AMPL . 10, 11,347/- 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. 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 involved with the assessee naming AMPL could adjust their business losses with the income from the impugned transactions and as a result of which even they did not require to pay the due amount of tax on the income arising out of the said 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 shares, whereas, the other party involved with the assessee naming AMPL could adjust its business losses with the income from the impugned transactions an they did not require to pay the due amount of tax on the income arising out of the said transactions. 6.3.14 I have also taken note of the fact that an another concern naming M/S Vision Millenium Exports Pvt. Ltd. (VMEPL) has al mercantile Pvt Ltd(AMPL), the party with whom the assessee has entered into contract with. On perusal of the details of the contract it is found that VMEPL had entered into two contracts with AMPL during the sam 2014-15 for sale of same commodity being coriander (Badami Whole Dhaniya). Further, another concern naming Betul Oil Ltd (BOL) has also entered into similar contracts with the said VMEPL for sale of Badami Whole Dhaniya. The total value of the transactions were Rs. 111.68 crore. In the similar manner, the said VMEPL had failed to supply the goods to AMPL and BOL within the contract period of 60 days and had purchased the goods on paper from AMPL and BOL only to honour the contract and M/s Shreyans Credit and Capital Ltd. 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. 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 shares, whereas, the other party involved with the assessee naming AMPL could adjust their business losses with the income from the impugned transactions and as a result of which even they did not require to pay the due amount of tax on the income arising out of the said 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 mpugned transactions avoiding the responsibility to pay legitimate tax on income arising from sale of shares, whereas, the other party involved with the assessee naming AMPL could adjust its business losses with the income from the impugned transactions and as a result of which even they did not require to pay the due amount of tax on the income arising out of the said transactions. 6.3.14 I have also taken note of the fact that an another concern naming M/S Vision Millenium Exports Pvt. Ltd. (VMEPL) has also entered into contracts with M/S Arabesque mercantile Pvt Ltd(AMPL), the party with whom the assessee has entered into contract with. On perusal of the details of the contract it is found that VMEPL had entered into two contracts with AMPL during the same financial year ie FY 15 for sale of same commodity being coriander (Badami Whole Dhaniya). Further, another concern naming Betul Oil Ltd (BOL) has also entered into similar contracts with the said VMEPL for sale of Badami Whole Dhaniya. The lue of the transactions were Rs. 111.68 crore. In the similar manner, the said VMEPL had failed to supply the goods to AMPL and BOL within the contract period of 60 days and had purchased the goods on paper from AMPL and BOL only to honour the contract and in the process incurred M/s Shreyans Credit and Capital Ltd. 8 ITA No. 1644/M/2020 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. 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 shares, whereas, the other party involved with the assessee naming AMPL could adjust their business losses with the income from the impugned transactions and as a result of which even they did not require to pay the due amount of tax on the income arising 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 mpugned transactions avoiding the responsibility to pay legitimate tax on income arising from sale of shares, whereas, the other party involved with the assessee naming AMPL could adjust its business losses with the income from d as a result of which even they did not require to pay the due amount of tax on the 6.3.14 I have also taken note of the fact that an another concern naming M/S Vision Millenium Exports Pvt. Ltd. so entered into contracts with M/S Arabesque mercantile Pvt Ltd(AMPL), the party with whom the assessee has entered into contract with. On perusal of the details of the contract it is found that VMEPL had entered into two e financial year ie FY 15 for sale of same commodity being coriander (Badami Whole Dhaniya). Further, another concern naming Betul Oil Ltd (BOL) has also entered into similar contracts with the said VMEPL for sale of Badami Whole Dhaniya. The lue of the transactions were Rs. 111.68 crore. In the similar manner, the said VMEPL had failed to supply the goods to AMPL and BOL within the contract period of 60 days and had purchased the goods on paper from AMPL and in the process incurred loss of Rs. 26.88 crore. In this regard, besides the fact that the transactions in this case also happened in similar manner resulting in loss to VMEPL, what is most important to note that the assessee had entered into contract wit in the month ofFebruary 2015 for supply of Badami whole Dhaniya, whereas VMEPL had entered into contract with AMPL and BOL in May 2014 for supply of same commodity, in both these cases reasons provided by the respective assessees for not supplying t were that prices of coriander sharply increased over the contractual period of 30 days and 60 days respectively and, therefore, the commodity could not be delivered to the respective buyers. Needless to say, that there are too many between the two set of transactions to pass the test of preponderance of probability. 6.3.15 The Hon'ble Supreme Court in the case of JuggilalKamlapat v. CIT [1969] 73 IT 702 has held that the income entitled to pierce reality of the transaction and that in exceptional cases the Court can lift the veil of corporate entity and to pay regard to the economic realities behind the legal façade. Similarly, the Assessing Officer has if it is used for tax evasion or to circumvent tax obligation or to perpetuate fraud. 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 doctri 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 transactio defraud the revenue causing injustice to it, the authorities M/s Shreyans Credit and Capital Ltd. loss of Rs. 26.88 crore. In this regard, besides the fact that the transactions in this case also happened in similar manner resulting in loss to VMEPL, what is most important to note that the assessee had entered into contract wit in the month ofFebruary 2015 for supply of Badami whole Dhaniya, whereas VMEPL had entered into contract with AMPL and BOL in May 2014 for supply of same commodity, in both these cases reasons provided by the respective assessees for not supplying the goods were same which were that prices of coriander sharply increased over the contractual period of 30 days and 60 days respectively and, therefore, the commodity could not be delivered to the respective buyers. Needless to say, that there are too many of coincidences between the two set of transactions to pass the test of preponderance of probability. 6.3.15 The Hon'ble Supreme Court in the case of JuggilalKamlapat v. CIT [1969] 73 IT 702 has held that the income-tax authorities are entitled to pierce the veil of corporate entity and look at the reality of the transaction and that in exceptional cases the Court can lift the veil of corporate entity and to pay regard to the economic realities behind the legal façade. Similarly, the Assessing Officer has power to disregard the corporate entity if it is used for tax evasion or to circumvent tax obligation or to perpetuate fraud. 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 doctri 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 sregarded 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 M/s Shreyans Credit and Capital Ltd. 9 ITA No. 1644/M/2020 loss of Rs. 26.88 crore. In this regard, besides the fact that the transactions in this case also happened in similar manner resulting in loss to VMEPL, what is most important to note that the assessee had entered into contract with AMPL in the month ofFebruary 2015 for supply of Badami whole Dhaniya, whereas VMEPL had entered into contract with AMPL and BOL in May 2014 for supply of same commodity, in both these cases reasons provided by the respective he goods were same which were that prices of coriander sharply increased over the contractual period of 30 days and 60 days respectively and, therefore, the commodity could not be delivered to the of coincidences between the two set of transactions to pass the test of 6.3.15 The Hon'ble Supreme Court in the case of tax authorities are the veil of corporate entity and look at the reality of the transaction and that in exceptional cases the Court can lift the veil of corporate entity and to pay regard to the economic realities behind the legal façade. Similarly, the power to disregard the corporate entity if it is used for tax evasion or to circumvent tax obligation or 6.3.16 The Hon'ble Delhi High Court in PB Finance Ltd. v. [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 sregarded 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 n 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 through a non commodity transactions. 6.3.18 The claim of the assessee that the rise of price of coriander could be verified from the market reports is of no consequence as placed on paper post facto the period it actually refers to for the sole motive to take undue benefit of the rise in price of the said commodity in creating a bogus loss on paper. 6.3.19 The transactions showi transaction, which had been set off with profit in purchasing and selling of shares, were sham transactions. It is a case of bogus loss obtained through colourable device for avoidance of tax. I find that the Id.A, who after detailed e discussion and going beyond the said documents has established that the contracts were a mere mask to hide the real nature of transactions. As discussed in the preceding paragraphs, I find that the findings of the Assessing Officer are also based on strong surrounding circumstances, preponderance of probability and human conduct in the light of detailed analysis of the facts including the manner in which the contracts were entered into and finally executed. 6.3.20 The insistence of the assess leading to loss in commodity trading are supported by documents such as contracts, sale and purchase invoices, journal entries etc. cannot be accepted in view of the fact and circumstances of the case brought on record after proper examination of the material facts and after taking into account the substance behind the vail of form of the impugned transactions. M/s Shreyans Credit and Capital Ltd. 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 evasion of tax through a non-genuine transaction in the form of loss in commodity transactions. 6.3.18 The claim of the assessee that the rise of price of coriander could be verified from the market reports is of no consequence as it is evident that the said contracts had been placed on paper post facto the period it actually refers to for the sole motive to take undue benefit of the rise in price of the said commodity in creating a bogus loss on paper. 6.3.19 The transactions showing loss in commodity transaction, which had been set off with profit in purchasing and selling of shares, were sham transactions. It is a case of bogus loss obtained through colourable device for avoidance I find that the Id.A, who after detailed examination and discussion and going beyond the said documents has established that the contracts were a mere mask to hide the real nature of transactions. As discussed in the preceding paragraphs, I find that the findings of the Assessing Officer based on strong surrounding circumstances, preponderance of probability and human conduct in the light of detailed analysis of the facts including the manner in which the contracts were entered into and finally executed. 6.3.20 The insistence of the assessee that the transactions leading to loss in commodity trading are supported by documents such as contracts, sale and purchase invoices, journal entries etc. cannot be accepted in view of the fact and circumstances of the case brought on record after proper examination of the material facts and after taking into account the substance behind the vail of form of the impugned transactions. M/s Shreyans Credit and Capital Ltd. 10 ITA No. 1644/M/2020 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 by the assessee was for evasion of tax genuine transaction in the form of loss in 6.3.18 The claim of the assessee that the rise of price of coriander could be verified from the market reports is of no it is evident that the said contracts had been placed on paper post facto the period it actually refers to for the sole motive to take undue benefit of the rise in price of the said commodity in creating a bogus loss on paper. ng loss in commodity transaction, which had been set off with profit in purchasing and selling of shares, were sham transactions. It is a case of bogus loss obtained through colourable device for avoidance xamination and discussion and going beyond the said documents has established that the contracts were a mere mask to hide the real nature of transactions. As discussed in the preceding paragraphs, I find that the findings of the Assessing Officer based on strong surrounding circumstances, preponderance of probability and human conduct in the light of detailed analysis of the facts including the manner in which the contracts were entered into and finally executed. ee that the transactions leading to loss in commodity trading are supported by documents such as contracts, sale and purchase invoices, journal entries etc. cannot be accepted in view of the fact and circumstances of the case brought on record after proper examination of the material facts and after taking into account the substance behind the vail of form of the A genuine transaction must be proved to be genuine in all respect. The onus was on the assessee to prove that the transaction leading to claim of loss in commodity trade was distinctly genuine transaction and not bogus, premeditated transaction arranged with a view to evade taxes. The onus was on the assessee to establish the substance of the transactions which had absolutely and had no transfer of goods as well and was not even found to be honoured partially. I find that the whole paraphernalia of the claimed genuine transactions is only on paper. The onus was on the assessee to prove that it has had genui transactions as it was the assessee who has made a claim that it was engaged in genuine contract to supply coriander a commodity in which it does not deal in its normal course of business. The assessee had failed to discharge this o 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 impossibl 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 knowledg Evidence Act makes it clear that initial onus is on person who substantially asserts a claim. In the present case, it is seen that the assessee has failed to discharge its burden of proof and the Assessing Officer, on the other han brought in sufficient evidences to prove that the claim of the assessee was incorrect. M/s Shreyans Credit and Capital Ltd. A genuine transaction must be proved to be genuine in all respect. The onus was on the assessee to prove that the on leading to claim of loss in commodity trade was distinctly genuine transaction and not bogus, premeditated transaction arranged with a view to evade taxes. The onus was on the assessee to establish the substance of the transactions which had absolutely no payments involved and had no transfer of goods as well and was not even found to be honoured partially. I find that the whole paraphernalia of the claimed genuine transactions is only on paper. The onus was on the assessee to prove that it has had genuine loss in the impugned transactions as it was the assessee who has made a claim that it was engaged in genuine contract to supply coriander a commodity in which it does not deal in its normal course of business. The assessee had failed to discharge this o 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 6.3.21 In the case of Shri Charan Singh vs. Chandra Bhan (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 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 clear that initial onus is on person who substantially asserts a claim. In the present case, it is seen that the assessee has failed to discharge its burden of proof and the Assessing Officer, on the other han brought in sufficient evidences to prove that the claim of the assessee was incorrect. M/s Shreyans Credit and Capital Ltd. 11 ITA No. 1644/M/2020 A genuine transaction must be proved to be genuine in all respect. The onus was on the assessee to prove that the on leading to claim of loss in commodity trade was distinctly genuine transaction and not bogus, premeditated transaction arranged with a view to evade taxes. The onus was on the assessee to establish the substance of the no payments involved and had no transfer of goods as well and was not even I find that the whole paraphernalia of the claimed genuine transactions is only on paper. The onus was on the assessee ne loss in the impugned transactions as it was the assessee who has made a claim that it was engaged in genuine contract to supply coriander a commodity 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 6.3.21 In the case of Shri Charan Singh vs. Chandra Bhan 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 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 e 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 e. Section 102 of Indian Evidence Act makes it clear that initial onus is on person who substantially asserts a claim. In the present case, it is seen that the assessee has failed to discharge its burden of proof and the Assessing Officer, on the other hand, has brought in sufficient evidences to prove that the claim of the 6.3.22 On the issue of circumstantial evidence and in the matters related to the discharge of onus of proof and the relevance of surrounding circumstances of the Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More [(1972) 82 ITR540], have observed as under: "..that though an appellant's statement must be considered real until it was shown that there were reasons to believe that the appellant wa relied on self party to establish the transfer of those recitals, the taxing authorities were entitled to look into the surrounding circumstances to find out the rea has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human probability. Human minds may differ as to the reliability of piece of evidence, but, in the sphere, the decision of the final fact finding authority is made conclusive by law." 6.3.23 The above ratio as laid down by the Hon'ble Supreme Court has been reiterated Court in the case of Sumati Dayal vs. CIT (214 ITR 801), which acknowledges that what is apparent may not be real and test of human probabilities has to be applied to understand if the apparent is real and if the transactio to withstand the test of human probabilities it has to be taken as an in evidences suggest otherwise. 6.3.24 In this regard, it is also pertinent to refer to the decision of the Hon'ble Punjab and Haryana Hig the case of Som Nath Maini v. CIT [2008] 306 ITR 414 (Puni. & Har.), confirming the order of the Tribunal, the Hon'ble High Court held that the burden of proving that income is subject to tax is on the revenue but, on the facts, to show that the transaction is genuine, burden is primarily on the assessee. As per the Hon'ble High Court, the Assessing M/s Shreyans Credit and Capital Ltd. 6.3.22 On the issue of circumstantial evidence and in the matters related to the discharge of onus of proof and the relevance of surrounding circumstances of the Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More [(1972) 82 ITR540], have observed as under: "..that though an appellant's statement must be considered real until it was shown that there were reasons to believe that the appellant was not the real, in a case where the party relied on self-sewing recitals in the documents, it was for the party to establish the transfer of those recitals, the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human bility. Human minds may differ as to the reliability of piece of evidence, but, in the sphere, the decision of the final fact finding authority is made conclusive by law." 6.3.23 The above ratio as laid down by the Hon'ble Supreme Court has been reiterated and applied by the Hon'ble Apex Court in the case of Sumati Dayal vs. CIT (214 ITR 801), which acknowledges that what is apparent may not be real and test of human probabilities has to be applied to understand if the apparent is real and if the transactio to withstand the test of human probabilities it has to be taken as an in-genuine transaction even if documentary evidences suggest otherwise. 6.3.24 In this regard, it is also pertinent to refer to the decision of the Hon'ble Punjab and Haryana Hig the case of Som Nath Maini v. CIT [2008] 306 ITR 414 (Puni. & Har.), confirming the order of the Tribunal, the Hon'ble High Court held that the burden of proving that income is subject to tax is on the revenue but, on the facts, to show transaction is genuine, burden is primarily on the assessee. As per the Hon'ble High Court, the Assessing M/s Shreyans Credit and Capital Ltd. 12 ITA No. 1644/M/2020 6.3.22 On the issue of circumstantial evidence and in the matters related to the discharge of onus of proof and the relevance of surrounding circumstances of the case, the Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad "..that though an appellant's statement must be considered real until it was shown that there were reasons to believe s not the real, in a case where the party sewing recitals in the documents, it was for the party to establish the transfer of those recitals, the taxing authorities were entitled to look into the surrounding lity of such recitals. Science has not yet invented any instrument to test the reliability of Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human bility. Human minds may differ as to the reliability of piece of evidence, but, in the sphere, the decision of the final 6.3.23 The above ratio as laid down by the Hon'ble Supreme and applied by the Hon'ble Apex Court in the case of Sumati Dayal vs. CIT (214 ITR 801), which acknowledges that what is apparent may not be real and test of human probabilities has to be applied to understand if the apparent is real and if the transaction fails to withstand the test of human probabilities it has to be genuine transaction even if documentary 6.3.24 In this regard, it is also pertinent to refer to the decision of the Hon'ble Punjab and Haryana High Court in the case of Som Nath Maini v. CIT [2008] 306 ITR 414 (Puni. & Har.), confirming the order of the Tribunal, the Hon'ble High Court held that the burden of proving that income is subject to tax is on the revenue but, on the facts, to show transaction is genuine, burden is primarily on the assessee. As per the Hon'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 t 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, a 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 met 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 no this regard, it is reiterated that the view expressed by the Hon'ble Supreme Court in the case of McDowell & Co. Ltd Vs. CIT (1985) 154 IT 148 was upheld once again in the case of Vodafone International holding BV v. Union of I taxman.com 202 by Hon'ble Supreme Court clearing the doubts about the perceived overruling effect of decision of Hon'ble Supreme Court in the case of Azadi BachaoAndolan 263 ITR 706 over the findings in the case of McDowell & Co. Ltd.(supra). 6.3.27 In this regard, it is most pertinent to note that an inference about the genuineness of apparent Commodity Trade Loss transactions, which had not been carried through any Stock exchange and which does not even involve any third party who could testify th the transactions has to be drawn on the basis of the surrounding circumstances and having regard to the conduct M/s Shreyans Credit and Capital Ltd. 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, a 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 "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 make believe. In this regard, it is reiterated that the view expressed by the Hon'ble Supreme Court in the case of McDowell & Co. Ltd Vs. CIT (1985) 154 IT 148 was upheld once again in the case of Vodafone International holding BV v. Union of I taxman.com 202 by Hon'ble Supreme Court clearing the doubts about the perceived overruling effect of decision of Hon'ble Supreme Court in the case of Azadi BachaoAndolan 263 ITR 706 over the findings in the case of McDowell & Co. 7 In this regard, it is most pertinent to note that an inference about the genuineness of apparent Commodity Trade Loss transactions, which had not been carried through any Stock exchange and which does not even involve any third party who could testify the genuineness or otherwise of the transactions has to be drawn on the basis of the surrounding circumstances and having regard to the conduct M/s Shreyans Credit and Capital Ltd. 13 ITA No. 1644/M/2020 Officer is to apply the test of human probabilities for deciding genuineness or otherwise of a particular transaction. hat 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 148 (SC)], the Hon'ble Supreme Court have observed as "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 hods. 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 t a sham or make believe. In this regard, it is reiterated that the view expressed by the Hon'ble Supreme Court in the case of McDowell & Co. Ltd Vs. CIT (1985) 154 IT 148 was upheld once again in the case of Vodafone International holding BV v. Union of India 17 taxman.com 202 by Hon'ble Supreme Court clearing the doubts about the perceived overruling effect of decision of Hon'ble Supreme Court in the case of Azadi BachaoAndolan 263 ITR 706 over the findings in the case of McDowell & Co. 7 In this regard, it is most pertinent to note that an inference about the genuineness of apparent Commodity Trade Loss transactions, which had not been carried through any Stock exchange and which does not even involve any e genuineness or otherwise of the transactions has to be drawn on the basis of the surrounding circumstances and having regard to the conduct of the assessee in making payments, delivering the goods as well as other material available on the record. 6.3.28 In the given facts and circumstances of the case as discussed previously and in the light of guidance available from the judicial pronouncements referred to above, I am of the considered view that documents submitted as evidences to prove the genuineness themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case, as it is revealed that the assessee entered into the forward contracts of the said commodity trading with the sole motive to incur loss to set off with the income arising out of purchase and sale of shares. I further find that the contracts entered into by the assessee with the said two parties were sham transaction entered into for the purpose of evading tax. I note that the landmark decision of the Hon'ble Supreme Court in the case of McDowell and Company Limited, 154 IT 148 is squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the any 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 dubious methods. 6.3.29 Observation of Hon'ble Supreme Court in the cas CIT vs Sumati Dayal 214 ITR 801 (SC), as referred to earlier, 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 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 earlie 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 M/s Shreyans Credit and Capital Ltd. of the assessee in making payments, delivering the goods as well as other material available on the record. In the given facts and circumstances of the case as discussed previously and in the light of guidance available from the judicial pronouncements referred to above, I am of the considered view that documents submitted as evidences to prove the genuineness of the said transactions are themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case, as it is revealed that the assessee entered into the forward contracts of the said commodity trading with the sole motive to incur loss to set off with the income arising out of purchase and sale of shares. I further find that the contracts entered into by the assessee with the said two parties were sham transaction entered into for the evading tax. I note that the landmark decision of the Hon'ble Supreme Court in the case of McDowell and Company Limited, 154 IT 148 is squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the framework of the law and any 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 dubious methods. 6.3.29 Observation of Hon'ble Supreme Court in the cas CIT vs Sumati Dayal 214 ITR 801 (SC), as referred to earlier, 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 unding 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 earlie 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 M/s Shreyans Credit and Capital Ltd. 14 ITA No. 1644/M/2020 of the assessee in making payments, delivering the goods as In the given facts and circumstances of the case as discussed previously and in the light of guidance available from the judicial pronouncements referred to above, I am of the considered view that documents submitted as evidences of the said transactions are themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case, as it is revealed that the assessee entered into the forward contracts of the said commodity trading with the sole motive to incur loss to set off with the income arising out of purchase and sale of shares. I further find that the contracts entered into by the assessee with the said two parties were sham transaction entered into for the evading tax. I note that the landmark decision of the Hon'ble Supreme Court in the case of McDowell and Company Limited, 154 IT 148 is squarely applicable in this case wherein it has been held that tax planning may be framework of the law and any 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 dubious methods. 6.3.29 Observation of Hon'ble Supreme Court in the case of ITR 801 (SC), as referred to earlier, 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 unding 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 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 to look into surroundi of the recitals made in those documents." 6.3.30 On appreciation of the facts and surrounding circumstances, the irresistible conclusion in this case is that the meticulous paper work by theassessee in entering into the said contracts and making transactions apparently as per the terms of the said contracts gets exposed in the light of the glaring facts and surrounding circumstances and that the contracts entered into by the assessee were nothing but smokescreen to c garb of sale of commodity which was not real and assessee has failed to dispel all the quarries raised by the AO to establish that the transaction in question was real and not beyond human probabilities. 6.3.31 Hence, I find it only proper to hold that in the given facts and circumstances of the case and in consideration of the surrounding circumstances and applying the test of human probabilities, it has rightly been concluded by the Id.AO that the forward contrac assessee and the transactions claimed to have happened as per the said contracts for sale of coriander resulting into loss to the assessee were sham transactions which could not be held as genuine. The findings of the Id.A are accord upheld. The ground No. 1 is dismissed. 4. At the outset, we may like to mention that despite notifying neither anyone attended on behalf of the assessee nor any request for adjustment was filed. In the circumstances, we opinion that assessee is not interested in prosecuting the appeal and therefore, same was M/s Shreyans Credit and Capital Ltd. executed in his favour then the door will be left wide open to 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 to look into surrounding circumstances to find out the reality of the recitals made in those documents." 6.3.30 On appreciation of the facts and surrounding circumstances, the irresistible conclusion in this case is that the meticulous paper work by theassessee in entering into the said contracts and making transactions apparently as per the terms of the said contracts gets exposed in the light of the glaring facts and surrounding circumstances and that the contracts entered into by the assessee were nothing but smokescreen to carry out bogus transactions of loss in the garb of sale of commodity which was not real and assessee has failed to dispel all the quarries raised by the AO to establish that the transaction in question was real and not beyond human probabilities. nce, I find it only proper to hold that in the given facts and circumstances of the case and in consideration of the surrounding circumstances and applying the test of human probabilities, it has rightly been concluded by the Id.AO that the forward contracts entered into by the assessee and the transactions claimed to have happened as per the said contracts for sale of coriander resulting into loss to the assessee were sham transactions which could not be held as genuine. The findings of the Id.A are accord upheld. The ground No. 1 is dismissed.” At the outset, we may like to mention that despite notifying neither anyone attended on behalf of the assessee nor any request for adjustment was filed. In the circumstances, we ssee is not interested in prosecuting the appeal and therefore, same was heard ex-parte qua the assessee. M/s Shreyans Credit and Capital Ltd. 15 ITA No. 1644/M/2020 executed in his favour then the door will be left wide open to 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 ng circumstances to find out the reality 6.3.30 On appreciation of the facts and surrounding circumstances, the irresistible conclusion in this case is that the meticulous paper work by theassessee in entering into the said contracts and making transactions apparently as per the terms of the said contracts gets exposed in the light of the glaring facts and surrounding circumstances and that the contracts entered into by the assessee were nothing but arry out bogus transactions of loss in the garb of sale of commodity which was not real and assessee has failed to dispel all the quarries raised by the AO to establish that the transaction in question was real and not nce, I find it only proper to hold that in the given facts and circumstances of the case and in consideration of the surrounding circumstances and applying the test of human probabilities, it has rightly been concluded by the ts entered into by the assessee and the transactions claimed to have happened as per the said contracts for sale of coriander resulting into loss to the assessee were sham transactions which could not be held as genuine. The findings of the Id.A are accordingly At the outset, we may like to mention that despite notifying neither anyone attended on behalf of the assessee nor any request for adjustment was filed. In the circumstances, we were of the ssee is not interested in prosecuting the appeal parte qua the assessee. 5. We have heard submission of the Ld. Departmental Representative (DR) and perused the relevant material on record. Before us, no submission controvert or rebut the finding of the Ld. CIT(A) on the issue dispute. In the facts of the case, the Ld. CIT(A) has discussion, upheld the non as character of the transa find any infirmity in the the assessee are accordingly dismissed. 6. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open Court Sd/- (ABY T VARKEY JUDICIAL MEMBER Mumbai; Dated: 31/03/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// M/s Shreyans Credit and Capital Ltd. We have heard submission of the Ld. Departmental Representative (DR) and perused the relevant material on record. Before us, no submissions have been filed by the assessee to controvert or rebut the finding of the Ld. CIT(A) on the issue dispute. In the facts of the case, the Ld. CIT(A) has upheld the non-genuineness of the transaction as character of the transaction as speculative in nature. W find any infirmity in the finding of ld. CIT(A). The grounds raised by the assessee are accordingly dismissed. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open Court on 31/03/2023. sd/- ABY T VARKEY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai M/s Shreyans Credit and Capital Ltd. 16 ITA No. 1644/M/2020 We have heard submission of the Ld. Departmental Representative (DR) and perused the relevant material on record. een filed by the assessee to controvert or rebut the finding of the Ld. CIT(A) on the issue-in- dispute. In the facts of the case, the Ld. CIT(A) has after detailed genuineness of the transaction as well ction as speculative in nature. We do not . The grounds raised by In the result, the appeal filed by the assessee is dismissed. /03/2023. - OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai