Shri Hemant Hasmukhbhai Shah, Ahmedabad V. The ACIT., Circle-7,

ITA 1699/AHD/2004

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0345 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-10-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 21-05-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Unexplained cash credit; Business income; Carry forward of business losses; Additional evidence; Question of law; Speculation loss; Onus to prove; Speculative transactions; Set aside
• Section: 142(1); 43(5); 143(2); 192; 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING: 9/10/2009 DRAFTED ON: 12/10/ 2009 ITA NO.1699/AHD/2004 ASSESSMENT YEAR : 2000-2001 SHRI HEMANT HASMUKHLAL SHAH PROP. H.K.TRADING CORPORATION, B-404, SUFLAM CO. OP. HSG. SOC. LTD. OPP.NAVRANGPURA POST OFFICE, NARANPURA, AHMEDABAD. VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-7, AHMEDABAD. (APPELLANT) .. (RESPONDENT) ITA NO.1968/AHD/2004 ASSESSMENT YEAR : 2000-2001 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-7, AHMEDABAD. VS. SHRI HEMANT HASMUKHLAL SHAH PROP. H.K.TRADING CORPORATION, B-404, SUFLAM CO. OP. HSG. SOC. LTD. OPP.NAVRANGPURA POST OFFICE, NARANPURA, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI DHIREN SHAH RESPONDENT BY: SHRI SHELLEY JINDAL CIT D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE LD.CIT(APPEALS)- XIII, AHMEDABAD DATED 31.03.2004. 2. GROUND NO.1 IN ASSESSEES APPEAL RELATES TO THAT LOSS OF RS.4,92,36,264/- IN THE PROFIT AND LOSS ACCOUNT MAY BE TREATED AS GE NUINE LOSS AND ALLOWED TO BE CARRIED FORWARD. GROUND NO.1 OF THE REVENUES APPEA L RELATES TO THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LA W AND FACTS IN DIRECTING THE LEARNED ASSESSING OFFICER TO TREAT THE LOSS OF RS.4 ,92,36,264/- CLAIMED BY THE ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 2 - ASSESSEE BE TAKEN AS NIL INSTEAD OF THE NET PROFIT OF RS.28,99,470/- WORKED OUT BY THE LEARNED ASSESSING OFFICER ESTIMATING THE GRO SS PROFIT @ 10%. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER APPEAL THE ASSESSEE HAS DONE BUSINESS OF TRADING IN KIRANA AND CHEMICALS. IN THE RETURN FILED, THE ASSESSEE HAS SHOWN LOSS OF RS. 4,92,25,2 86/- FOR THE YEAR UNDER APPEAL. THE ASSESSING OFFICER ISSUED NOTICE U/S. 143(2) AND 142(1) OF THE INCOME TAX ACT, FIXING THE HEARING ON VARIOUS DATES MENTIONED IN THE ASSESSMENT ORDER, BUT THE ASSESSEE FAILED TO MAKE COMPLIANCE TO THE SAME AND THEREFORE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 144 OF THE I. T. ACT, BY REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND RECASTING THE TRADI NG ACCOUNT AND ESTIMATING G.P. AT 10% OF THE TOTAL SALES OF RS. 11,87,29,077/- AND ARRIVING AT NET PROFIT OF RS.28,99,470/-. 4. IN APPEAL BEFORE THE LD. CIT (A), THE ASSESSEE S UBMITTED THAT ESTIMATION OF G.P. AT 10% BY THE ASSESSING OFFICER WAS MERELY ON SURMISES AND CONJECTURES BY BRUSHING ASIDE THE VARIOUS FACTS AVAILABLE ON RE CORD. DURING THE YEAR ASSESSEE HAS SHOWN OPENING STOCK OF RS.37,40,967/- AND PURCH ASES AT RS. 111,14,75,497/- AND CORRESPONDING SALES OF RS.108,04,70,975/- AND C LOSING STOCK OF RS. 8,12,609/- AND GROSS PROFIT OF RS.1,14,89,728/-. T HE ASSESSING OFFICER FAILED TO ISSUE ANY SPECIFIC SHOW-CAUSE NOTICE OF HIS INTENTI ON TO ESTIMATE GROSS PROFIT AT 10% OF TOTAL SALES OF RS. 108,04,70,975/-. FURTHER , IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY COM PARATIVE ANALYSIS TO SUBSTANTIATE THE GROSS PROFIT ESTIMATED BY HIM. IN ABSENCE OF THE SAME GROSS PROFIT ESTIMATED BY THE ASSESSING OFFICER IN THE KIND OF B USINESS OF THE ASSESSEE WAS MERELY A GUESS WORK AND NOT SUSTAINABLE UNDER THE I NCOME TAX ACT. FURTHER, WHILE ESTIMATING THE GROSS PROFIT AT 10% OF THE SAL ES, THE ASSESSING OFFICER HAS FAILED TO BRING ANY MATERIAL ON RECORD TO SHOW THAT PURCHASES SHOWN BY THE ASSESSEE ARE NOT GENUINE OR ON A HIGHER SIDE. THE A SSESSING OFFICER HAS ALSO NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE WITH REGARD TO ESTIMATION OF GROSS PROFIT @ 10% AND MERELY ON SURMISES AND CONJECTURES AND PR ESUMPTION HAS ESTIMATED THE GROSS PROFIT @ 10%. IT WAS ARGUED THAT ONCE THE ASSESSING OFFICER HAS TAKEN ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 3 - INTO CONSIDERATION THE SALES MENTIONED IN THE TRADI NG ACCOUNT OF THE ASSESSEE, HE OUGHT TO HAVE TAKEN INTO CONSIDERATION THE PURCHASE ALSO. FOR THIS CONTENTION THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS :- (I) YAGGINA VEERARAGHAVULU AND MAVULETI SOMARAJU & CO. VS. CIT (1966) 528 ITR LXII. (A.P.) WHEREIN IT HAS BEEN HELD THAT : IF AFTER REJECTING THE ASSESSEES ACCOUNTS AN ESTI MATE OF THE TURNOVER AND GROSS PROFIT OF THE ASSESSEE IN A BUSINESS IS FIXED TO THE DETRIMENT OF THE ASSESSEE, HE IS ENTITLED TO KNOW THE BASIS AND ALSO TO AN OPPORTUNITY UNDER SECTION 23(2) OF THE INCOME-TAX ACT TO REBUT THE SA ME. OTHERWISE THE ASSESSMENT ORDER WILL BE CAPRICIOUS AND ARBITRARY. THIS IS SO EVEN IF ACCOUNT BOOKS ARE REJECTED AS NOT RELIABLE. WHILE C OMPUTING GROSS PROFITS, ITEMS WHICH DO NOT AFFECT THE COST OF GOODS MUST BE EXCLUDED AND IT IS NOT PERMISSIBLE FOR THE INCOME-TAX OFFICER TO ALLOW A P ART AND DISALLOW THE REST IF, IN LAW, HE CANNOT TAKE ANY OF THESE ITEMS INTO CONSIDERATION. ITEMS WHICH ARE ALLOWED AS DEDUCTIONS, WHILE COMPUTING GR OSS PROFIT IN OTHER COMPARABLE CASES, MUST ALSO BE EQUALLY AND CONSISTE NTLY ALLOWED AS DEDUCTIONS IN COMPUTING THE PROFITS OF THE ASSESSEE , WHEN A BEST JUDGMENT ASSESSMENT IS MADE. (II). S. SARABHAIAH SETTY & SONS VS. CIT (1967) 175 ITR LXIV.(A.P.) WHEREIN IT HAS BEEN HELD THAT : WHERE AN INCOME-TAX OFFICER REJECTS THE ACCOUNTS O F THE ASSESSEE AND MAKES AN ESTIMATE OF PROFITS, HE MUST STATE THE BAS IS ON WHICH THE ESTIMATE IS MADE AND GIVE AN OPPORTUNITY TO THE ASSESSEE TO REBUT THAT BASIS. (III). ITO. VS. MANGALAM CHEMICALS (2000) REPORTED IN 69 TTJ 685 (PAT), WHEREIN IT HAS BEEN HELD THAT : THE A.O. HAS NOT MADE OUT A STRONG CASE FOR REJECT ION OF BOOKS OF ACCOUNT. IT IS TO BE NOTED THAT THE ASSESSEE HAS MA INTAINED PROPER BOOKS OF ACCOUNT WHICH HAVE BEEN DULY AUDITED AND THE AUD ITORS HAVE NOT POINTED OUT ANY DEFECT. NO DOUBT, THE A.O. HAS POI NTED OUT THAT SOME OF THE PAYMENTS WERE NOT ON PROPER VOUCHERS. BUT HE H AS NOT DOUBTED THE GENUINENESS OF THE PAYMENT. THE GENUINENESS OF THE INTERNAL VOUCHERS CANNOT LIGHTLY BE DISBELIEVED. TO DISBELIEVE THE I NTERNAL VOUCHER THE REVENUE HAS TO BRING EVIDENCE IN REBUTTAL BUT THAT HAS NOT BEEN DONE. IF THE A.O. HAD ANY DOUBT ABOUT THE PURCHASES AND PAYM ENTS THEREOF, HE COULD HAVE INQUIRED THE MATTER FROM THE PERSONS FRO M WHOM THE ASSESSEE HAD PURCHASED USED LUBRICANT. IT IS TO BE FURTHER NOTED THAT THE ASSESSEE HAD MAINTAINED STOCK REGISTER WHICH WAS PRODUCED BE FORE THE A.O. AND THAT IS WHY HE EVEN MENTIONED THE STOCK POSITION O N THE CLOSE OF THE ACCOUNTING PERIOD. THE ADDITION OF RS.92,418 IS UN JUSTIFIED. IT IS TO BE NOTED THAT MERE FALL IN G.P. WILL NOT NECESSARILY U SHER FOR ADDITION ON AD HOC BASIS BY REJECTING THE BOOKS OF ACCOUNT. SO R EGARD BEING HAD THE ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 4 - ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE THERE I S NO MERIT IN THE CASE OF THE REVENUE. CONCLUSION - ASSESSEE HAVING MAINTAINED PROPER BOOK S OF ACCOUNT WHICH HAVE BEEN DULY AUDITED AND A.O. HAVING NOT DOUBTED THE GENUINENESS OF PAYMENTS, MERE FALL IN G.P. RATE IS NO GROUND FOR R EJECTING ACCOUNTS AND MAKING ADDITION ON AD HOC BASIS. (IV). CIT VS. MAHARAJA SHREE UMED MILLS LTD. (1991) 192 ITR 565 (RAJASTHAN HIGH COURT) WHEREIN IT HAS BEEN HELD THAT : (I) THAT THE QUESTION OF EXCESS CLAIM UNDER THE HE AD GRATUITY HAD TO BE REFERRED AS IT WAS REQUIRED TO BE EXAMINED WHETHER THE DEDUCTION CLAIMED FELL WITHIN SECTION 40A(7) OF THE INCOME-TAX ACT, 1 961 : (II) THAT THE TRIBUNAL WAS JUSTIFIED IN HOLDING TH AT SINCE THE BOOKS OF ACCOUNT HAD NOT BEEN REJECTED, THE MERE FACT THAT T HERE HAD BEEN A FALL IN THE GROSS PROFIT RATE WOULD NOT LEAD TO THE INFEREN CE THAT THE EXPENDITURE HAD BEEN INFLATED. NO QUESTION OF LAW AROSE FORM TH E ORDER OF TRIBUNAL (V). ST. TERESAS OIL MILLS VS. STATE OF KERALA (19 69) 76 ITR 365 (KERALA HIGH COURT) WHEREIN IT HAS BEEN HELD THAT , ACCOUNTS REGULARLY MAINTAINED IN THE COURSE OF BUS INESS HAVE TO BE TAKEN AS CORRECT UNLESS THERE ARE STRONG AND SUFFIC IENT REASONS TO INDICATE THAT THEY ARE UNRELIABLE. THE DEPARTMENT HAS TO PR OVE SATISFACTORILY THAT THE ACCOUNT BOOKS ARE UNRELIABLE, INCORRECT OR INCO MPLETE BEFORE IT CAN REJECT THE ACCOUNTS. REJECTION OF ACCOUNTS SHOULD NOT BE DONE LIGHT- HEARTEDLY. THOUGH IT MAY NOT BE POSSIBLE TO LAY DO WN THE EXACT CIRCUMSTANCES IN WHICH THE ACCOUNTS SHOULD BE REJEC TED AS UNRELIABLE OR INCORRECT, THE ACCOUNTS MAY BE REJECTED AS UNRELIAB LE IF IMPORTANT TRANSACTIONS ARE OMITTED THEREFROM OR IF PROPER PAR TICULARS AND VOUCHERS ARE NOT FORTHCOMING OR IF THEY DO NOT INCLUDE ENTRI ES TO A PARTICULAR CLASS OF BUSINESS. THE ASSESSEE SHOULD BE GIVEN REASONAB LE OPPORTUNITY FOR OFFERING EXPLANATIONS REGARDING THE DEFECTS IN THE ACCOUNTS AND, ON HIS FAILURE TO SATISFACTORILY EXPLAINING THE DEFECTS, T HE DEPARTMENT WOULD BE JUSTIFIED IN REJECTING THE ACCOUNTS. THE REJECTION OF ACCOUNTS AND ASSESSMENT TO THE BEST OF JUDGMENT ARE TWO DISTINC T AND SEPARATE PROCESSES. THE MERE FACT THAT THERE WAS WIDE DISPARITY IN THE CONSUMPTION OF ELECTRICITY WOULD NOT JUSTIFY THE REJECTION OF THE ACCOUNTS WITHOUT ANY OTHER SUPPORTING CIRCUMSTANCES, BECAUSE SUCH VARIA TION COULD BE DUE TO VARIOUS FACTORS OUTSIDE THE CONTROL OF THE ASSESSEE . 5. FURTHER, THE ASSESSEE ALSO ARGUED THAT THE ASS ESSING OFFICER ERRED IN LAW AND ON FACTS IN ESTIMATING THE GROSS PROFIT BY TAKING D IVERSION STAND IN THE ASSESSMENT ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 5 - ORDER. THE ASSESSING OFFICER HAS OBSERVED THAT IN T HE PROFIT AND LOSS ACCOUNT FILED WITH THE RETURN OF INCOME, ASSESSEE HAS DEBITED RAT E DIFFERENCE OF RS.1,98,23,401/-, THIS DIFFERENCE IS IN RESPECT OF BULK IMPORT PALMOLEIN WHICH WAS SOLD TO GODREJ FOODS LTD. AND MADHUKANT EXPORT LTD. ON SETTLEMENT WITHOUT TAKING DELIVERY OF GOODS. ON SETTLEMENT OF THE TRA NSACTION, DELIVERY WAS TAKEN BY THESE CONCERNS AND THE ASSESSEE PAID RATE DIFFERENC E OF RS.1,98,23,401/- TO THEM AND THIS LOSS SUFFERED ON IMPORT OF PALMOLEIN WAS D EBITED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT AS RATE DIFFERENCE. BECAUSE DELIVERY OF GOODS WAS NOT TAKEN BY THE ASSESSEE, THIS RATE DIFFERENCE WAS NOT ALLOWABLE AS PER PROVISION OF SECTION 43(5) OF THE INCOME TAX ACT, 1961 AND IS TR EATED AS SPECULATION LOSS INSTEAD OF TRADING LOSS AND THEREFORE, THE SAME IS NOT ALLOWED TO BE CARRIED FORWARD. IN THE ASSESSMENT ORDER ITSELF. ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE FACT THAT ALONG WITH T HE RETURN OF INCOME ASSESSEE HAS ALSO FILED THE AUDITED ACCOUNTS AS WELL AS TAX AUDI T REPORT IN FORM 3CB AND 3CD SHOWING THE COMPLETE QUANTITY DETAILS. THE ASSESSIN G OFFICER HAS WRONGLY IN ABSENCE OF ANY DEFECTS IN THE BOOKS OF ACCOUNTS EST IMATED THE GROSS PROFIT @ 10%. IN VIEW OF THE ABOVE FACTS, IT WAS SUBMITTED THAT THE NET PROFIT CALCULATED BY THE ASSESSING OFFICER TAKING INTO ACCOUNT THE G.P R ATE @ 10% OF TOTAL SALES IS WHOLLY UNJUSTIFIED AND BAD IN LAW. 6. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSIO N OF THE ASSESSEE HELD AS UNDER: 3.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE AND ALSO THE OBSERVATIONS OF THE LEARNED ASSESSING OFFICER IN ASSESSMENT ORDER. IN RESPECT OF FIRST GROUND OF APPEAL, I FIND THAT ON 23.01.2002 THE APPELLANT HAD FURNISHED BEFORE THE LEARNED ASSESSING OFFICER VARIOUS DETAILS LIKE COMP ARATIVE CHARGE OF GROSS PROFIT AND NET PROFIT FOR CURRENT YEAR AND EA RLIER TWO YEARS, HAD FURNISHED PARTICULARS OF SALES, PURCHASES, AND STOC K AND MONTH WISE SALES AND PURCHASES, QUANTITY DETAILS IN RESPECT OF OPENI NG STOCK AND CLOSING STOCK, DETAILS OF INTEREST ACCOUNT, BROKERAGE, BANK CHARGES, RATE DIFFERENCE EXPENSES, L/C CHARGES, DETAILS OF UNSECU RED LOANS WITH ADDRESSES AND PANS, DETAILS OF COMMISSION ACCOUNT, DETAILS OF DEBTORS AND CREDITORS WITH THEIR ADDRESSES, COPIES OF ACCOU NTS OF CLASSIC CO-OP. BANK LTD. PUNJAB NATIONAL BANK AND MADHUPURA MERC. CO.OP. BANK WHICH HAD BEEN COMPLIED BY THE LEARNED AUTHORISED R EPRESENTATIVE IN PAPER BOOK AT PAGES 23 TO 102. FROM THE PERUSAL OF THE ASSESSMENT ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 6 - RECORDS AVAILABLE WITH THE LEARNED ASSESSING OFFICE R, I HAVE FOUND THAT THE SAID DETAILS HAD BEEN FILED BEFORE THE LEARNED ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS. HOWEVER, AS THE APP ELLANT HAD NOT PRODUCED BOOKS OF ACCOUNTS BEFORE THE LEARNED ASSES SING OFFICER, THE LEARNED ASSESSING OFFICER HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 145(2) OF THE INCOME TAX ACT, AND ESTIMATED THE G.P . EVEN THOUGH THE LEARNED ASSESSING OFFICER MAY BE JUSTIFIED IN ESTIM ATING THE GROSS PROFIT AS NO BOOKS OF ACCOUNTS WERE PRODUCED BEFORE HIM, H E SHOULD NOT HAVE ESTIMATED THE GROSS PROFIT AT AN ARBITRARY RATE. TH E JUDICIAL PRONOUNCEMENT IN RESPECT OF EX-PARTE ASSESSMENTS C LEARLY HOLD THAT THE LEARNED ASSESSING OFFICER SHOULD COMPUTE THE INCOME ON REASONABLE BASIS. IT HAS BEEN HELD BY ITAT DELHI BENCH IN THE CASE OF ITO VS. JITENDRA MEHRA REPORTED IN 53 ITD 396 (DEL.) THAT W HERE AN EX-PARTE ASSESSMENT HAS TO BE MADE, IT HAS TO BE REASONABLY BASED ON MATERIALS AVAILABLE ON RECORD, IT CANNOT BE ARBITRARY, CAPRIC IOUS. EX-PARTE ASSESSMENT MUST CONFORM TO THE RULES OF JUSTICE, EQ UITY AND GOOD CONSCIENCE. AS REGARDS THE ESTIMATE OF G.P. MADE BY THE LEARNED ASSESSING OFFICER, IT IS FOUND THAT THE RATE OF GRO SS PROFIT ESTIMATED BY THE ASSESSING OFFICER IS NOT BASED ON COMPARABLE CASE IN THE SIMILAR TRADE AND EVEN IN THE CASE OF THE APPELLANT THERE WAS GRO SS LOSS IN A.Y. 1999- 2000 AND THERE WAS GROSS PROFIT OF 5% IN A.Y. 1998- 99 AND THERE WAS NET LOSS IN A.Y. 1999-2000 AND NET PROFIT RATE WAS 0.3% IN A.Y. 1998-1999. I ALSO FIND THAT THE ASSESSING OFFICER HAS NOT ISSUED ANY SHOW CAUSE NOTICE BEFORE ESTIMATING GROSS PROFIT @ 10%. EVEN THE ITEM S TRADED IN THE IMMEDIATELY PRECEDING YEAR ARE NOT THE SAME AS TRAD ED DURING THE YEAR IN APPEAL, THEREFORE THE LEARNED AUTHORISED REPRESENTA TIVE OF THE ASSESSEE HAS CONTENDED THAT THE TRADING RESULT OF THE LAST Y EAR CANNOT BE TAKEN AS GUIDELINE FOR ESTIMATING THE GROSS PROFIT OF THIS Y EAR. 3.5 THE ASSESSEE HAS GOT PURCHASE BILLS AND SALES B ILLS AND ALSO COMPLETE BOOKS OF ACCOUNT WHICH WERE PRODUCED AT TH E TIME OF APPEAL HEARING. A LETTER WRITTEN TO THE LEARNED ASSESSING OFFICER ON 10.03.2004 ASKING THE LEARNED ASSESSING OFFICER TO VERIFY THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND TO GIVE COMMENTS ON BOOKS RESULTS OF THE ASSESSEE BY 17.03.2004, AT THE SAME TIME THE AUTHORISED REPRESE NTATIVE WAS REQUESTED TO PRODUCE THE BOOKS OF ACCOUNTS AND VOUC HERS BEFORE THE LEARNED ASSESSING OFFICER. SUBSEQUENTLY, THE LEARNE D ASSESSING OFFICER WAS ASKED TO GIVE HIS REPORT BY 29.03.2004. A REPOR T DATED 29.03.2004 HAS BEEN RECEIVED FROM THE LEARNED ASSESSING OFFICE R IN WHICH COMMENTS HAVE BEEN GIVEN BY THE LEARNED ASSESSING OFFICER ON THE GENUINENESS OF THE CASH CREDITS WHICH ARE DISCUSSED LATER IN THE R ELEVANT PARA I.E. PARA 5.2 OF THIS ORDER. THE SUMMARY OF PURCHASE BILLS AN D SALES BILLS HAD ALSO BEEN FILED BY THE ASSESSEE BEFORE THE LEARNED ASSES SING OFFICER, BUT THE LEARNED ASSESSING OFFICER HAS NOT INQUIRED INTO THE PURCHASES BEFORE REJECTING THE BOOK RESULTS. IN RESPECT OF THE PURCH ASE AND SALE TRANSACTIONS MADE BY THE ASSESSEE, IT IS FOUND THAT NEARLY 50% OF THE PURCHASES AND SALES HAVE BEEN MADE ON THE SAME DAY FROM AND TO SISTER ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 7 - CONCERNS AND ON THE TOTAL TURNOVER OF RS.43.60 CROR ES AND PURCHASES OF RS.43.55 CRORES THE FREIGHT CHARGES SHOWN BY THE AS SESSEE ARE OF RS.4,966/- AND COLD STORAGE EXPENSES ARE OF RS.23,4 00/- ONLY. THUS, IT IS CLEAR THAT ACTUAL DELIVERY OF GOODS HAS NOT TAKEN P LACE AND PURCHASE AND SALE CONSIDERATION HAVE ALSO NOT PASSED ON PURCHASE AND SALE TRANSACTIONS ENTERED WITH THE SISTER CONCERNS AND O NLY JOURNAL HAVE BEEN PASSED IN THE ACCOUNTS OF THE SISTER CONCERNS FOR P URCHASES AND SALES. THEREFORE, THE TRANSACTIONS OF PURCHASE AND SALES E NTERED INTO BY THE ASSESSEE WITH THE SISTER CONCERNS ARE FOUND TO BE O NLY PAPER TRANSACTIONS WHERE NO GOODS HAVE BEEN EXCHANGED. THE SALES MADE TO OUTSIDE PARTIES ARE IN RESPECT OF GUNNY BAGS OF RS.6,88,750/- TURME RIC OF RS.10,14,300/-, SOYABIN OIL OF RS.1,10,09,434/-, LAB OF RS.11,98,70 2/- TEA OF RS.45,44,854/- AND RBD PALMOLEIN OF RS.21,48,39,882 /-, THUS TOTAL SALES TO OUTSIDE PARTIES ARE OF RS.23,32,95,922/-, TOTAL PURCHASES FROM OUTSIDE PARTIES ARE OF RS.22,48,65,035/-, OPENING STOCK IS OF RS.6,30,258/- AND CLOSING STOCK IS OF RS.16,25,217/-. OUT OF THE ABOV E SALES THE SALE OF SOYABIN OIL AND SALES OF RBD PALMOLEIN HAVE BEEN EX CLUDED BY THE LEARNED ASSESSING OFFICER FROM THE SALES FOR ESTIMA TION OF GROSS PROFIT. EVEN OTHERWISE, IN BOTH THE ITEMS I.E. SOYABIN OIL AND PALMOLEIN THE ASSESSEE HAS INCURRED GROSS LOSS AS PER THE DETAILS FILED IN PAGE 34 OF THE PAPER BOOK. FURTHER, IT IS FOUND THAT SALES OF CHIL LIES TO THE TUNE OF RS.3,26,37,517/- AND SALES OF AMBLI OF RS.1,54,63,3 33/- AND SALE OF GOLD OF RS.5,01,64,000/- AND CHILLY SEEDS OF RS.18,02,50 0/- HAVE BEEN MADE TO THE SISTER CONCERNS, THE CORRESPONDING PURCHASES HA VE BEEN MADE FROM SISTER CONCERNS OF THE ASSESSEE. THE SALES OF THE A BOVE ITEMS I.E. CHILLIES, AMBLI, GOLD AND CHILLY SEEDS AND CORRESPONDING PURC HASES MADE WITH SISTER CONCERNS ARE EXCLUDED FOR COMPUTATION OF G.P . BY ASSUMING THAT EITHER NO TRANSACTIONS HAVE TAKEN PLACE WITH THE SI STER CONCERNS OR THAT THE SAME HAVE TAKEN PLACE ON NO PROFIT NO LOSS BASI S. EVEN OTHERWISE AS PER PAGE 34 OF THE PAPER BOOK THERE IS GROSS LOSS I N RESPECT OF CHILLIES, AMBILI AND GOLD AND THERE IS NET PROFIT OF ONLY RS. 35,000/- IN RESPECT OF CHILLY SEEDS. IN CASE OF TURMERIC OUT OF TURNOVER O F RS.1,22,29,420/- SALES TO OUTSIDERS ARE ONLY OF RS.10,14,300/- AND THE BAL ANCE SALES ARE TO THE SISTER CONCERNS. IN THE OVERALL SALES OF TURMERIC THERE IS GROSS LOSS OF RS.3,34,377/- BUT IF THE PURCHASES AND SALES TO THE OUTSIDERS ONLY ARE CONSIDERED THERE IS A GROSS PROFIT OF RS.1,19,153/- WHICH IS CONSIDERED AS GROSS PROFIT IN THE HANDS OF THE ASSESSEE AS CALCUL ATED BELOW. IF THE PURCHASES AND SALES TO THE OUTSIDERS ONLY ARE CONSI DERED FOR COMPUTATION OF G.P., THE GROSS PROFIT WORKS OUT AS UNDER: ITEMS PURCHASES (RS.) SALES(RS.) GUNNY BAGS 6,30,258/- 6,88,750/- TURMERIC 8,95,147/- 10,14,300/- LAB 11,93,655/- 11,98,702/- TEA 38,34,164/- 45,44,854/- TOTAL 65,53,224/- 74,44,606/- GROSS PROFIT 8,93,382/- ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 8 - IN ADDITION TO THE ABOVE GROSS PROFIT, THE ASSESSEE HAS OTHER INCOME OF RS.8,38,513/- CONSISTING OF COMMISSION AND DIVIDEND WHICH MAKES TOTAL OF RS.17,31,895/-. THE ASSESSEE HAS CLAIMED EXPENSES T O THE TUNE OF RS.98,11,943/- EXCLUDING THE RATE DIFFERENCE WHICH HAD BEEN ALLOWED BY THE ASSESSING OFFICER AND IF THESE EXPENSES ARE ALL OWED THEN THE NET LOSS OF THE ASSESSEE COMES TO RS.80,80,048/-. THIS NET L OSS ARISES BECAUSE OF THE MAJOR EXPENSES OF INTEREST OF RS.83,87,818/- AN D L.C. CHARGES OF RS.8,39,909/-. HOWEVER, IN ABSENCE OF EVIDENCES AND VOUCHERS FOR EXPENSES, THE LOSS ARRIVED AT RS.80,80,048/- IS IGN ORED AND THE LOSS IS DIRECTED TO BE TAKEN AS NIL. THUS, THE LOSS CLAIMED BY THE ASSESSEE OF RS.4,92,36,264/- IS DIRECTED TO BE TAKEN AS NIL AND THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER OF NET PROFIT OF RS.2 8,99,470/- IS ALSO DIRECTED TO BE DELETED. 7. GROUND NO.2 OF ASSESSEES APPEAL RELATES TO DISA LLOWANCE OF RATE DIFFERENCE OF RS.1,98,23,401/- AS BUSINESS LOSS. 8. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS CLAIMED RATE DIFFERENCE IN RESPECT OF BULK IMPORT OF PALMOLEIN WHICH WAS SO LD TO GODREJ FOODS LTD. AND MADHUKANT EXPORT LTD. ON SETTLEMENT WITHOUT TAKING DELIVERY OF GOODS. ON SETTLEMENT OF THESE TRANSACTIONS, DELIVERY WAS TAKE N BY THESE CONCERNS AND THE ASSESSEE PAID RATE DIFFERENCE OF RS.1,98,23,401/- T O THEM AND THE LOSS SUFFERED ON IMPORT OF PALMOLEIN WAS DEBITED BY THE ASSESSEE AS RATE DIFFERENCE. BECAUSE DELIVERY OF THE GOODS WAS NOT TAKEN BY THE ASSESSEE , THE RATE DIFFERENCE WAS HELD AS NOT ALLOWABLE AS PER THE PROVISIONS OF SECTION 4 3(5) OF THE INCOME TAX ACT, 1961 AND THE SAME WAS TREATED AS SPECULATION LOSS A ND WAS NOT ALLOWED TO BE CARRIED FORWARD. 9. BEFORE THE CIT(A) LEARNED AUTHORISED REPRESENTAT IVE OF THE ASSESSEE HAS SUBMITTED THAT THE LEARNED ASSESSING OFFICER HA S ERRED IN LAW AND ON FACTS WHILE CONSIDERING THE TRADING LOSS INCURRED BY THE ASSESSEES PROPRIETARY CONCERNS FROM HEDGING AGAINST IMPORT OF RBD PALMOLEIN OIL TO FIX FUTURE RISK AND ENTERED INTO FORWARD CONTRACT WHICH IS AS PER THE COMMODITY TRADE PRACTICE AND APMC REGULATIONS. THUS, THE EXPENSES OF RATE DIFFERENCE ARE TRULY IN THE NATURE OF BUSINESS REVENUE EXPENSES AND ARE ALLOWABLE AND THE LEARNED ASSESSING OFFICER WHILE MISINTERPRETING THE SAME AS SPECULATION BUSI NESS HAS WRONGLY DISALLOWED AS PER THE PROVISIONS OF SECTION 43(5). IRRESPECTIVE OF THE ABOVE FACTS, ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 9 - IT WAS SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS ALSO ERRED IN NOT ALLOWING THE ASSESSEE TO CARRY FORWARD THE SPECULAT ION LOSS MERELY ON THE OBSERVATION THAT IN ABSENCE OF DETAILS, SPECULATION LOSS IS NOT ALLOWED TO BE CARRIED FORWARD. IN THIS REGARD, THE ASSESSEE WOULD LIKE TO SUBMIT THAT IN FACT IT IS NOT A SPECULATIVE TRADE. THE ASSESSEE HAS IMPORTED THE RBD PALMOLEIN OIL AND IN THIS TRADE IT IS CUSTOMARY TO SETTLE BUSINESS IN TH IS STYLE. IN THIS TYPE OF BUSINESS, AS PER COMMODITY TRADE PRACTICES AND APMC REGULATIO NS FORWARD CONTRACTS ARE ALLOWED TO HEDGE AGAINST IMPORT COST AS WELL AS TO FIX FUTURE RISK AND ONE CAN ENTER INTO FORWARD CONTRACT AND ON THE DATE OF DELI VERY IF THE MARKET RATES ARE LOW/HIGH THEN THE BUYER HAS THE OPTION TO TAKE DEL IVERY OR TO SETTLE THE CONTRACT BY ADJUSTING THE PRICE DIFFERENCE. IT IS GENERALLY ADVISABLE TO SETTLE THE ACCOUNT WHEN PRICES ARE FALLING BECAUSE IF ONE TAKES DELIVE RY OF GOODS, ADDITIONAL COSTS ARE ADDED TO IT AND THERE ARE CHANGES OF FURTHER P RICE REDUCTION AND WOULD LEAD TO FURTHER LOSS WHICH OTHERWISE WOULD BE ALLOWABLE TO THE ASSESSEE FIRM. THUS, THE ASSESSEE FIRM TO AVOID HUGE LOSS AND ALSO TO REDUCE THE LOSS, HAD ENTERED INTO SUCH TRANSACTION. IT WAS SUBMITTED THAT THE LEARNED ASSE SSING OFFICER HAS FAILED TO CONSIDER THE BUSINESS ACTIVITY OF THE ASSESSEE AND HAS TREATED THE BUSINESS LOSS AS SPECULATION LOSS WHICH IS WHOLLY UNJUSTIFIED AND BA D IN LAW. IT WAS ALSO POINTED OUT THAT WHILE DEALING AND INVOKING THE PROVISIONS OF SECTION 43(5), THE LEARNED ASSESSING OFFICER HAS FAILED TO CONSIDER THE EXCEPT IONS TO TRANSACTIONS WHICH SHOULD BE CONSIDERED AS SPECULATIVE TRANSACTIONS. AS PER THE CLAUSE (A) TO (C) OF PROVISO TO SECTION 43(5) ACCORDING TO WHICH CERT AIN TRANSACTIONS SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. THUS, IT IS TO BE SUBMITTED THAT AS PER CLAUSE (A) OF PROVISO TO SECTION 43(5), IT REFERS T O A HEDGING IN RESPECT OF RAW MATERIALS OR MERCHANDISE ENTERED BY A PERSON TO GUA RD AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATION. ACCORDINGLY, THE TRANSACTION OF HEDGING AGAINST IMPORT OF RBD PALMOLEIN OIL TO FIX FUTURE RISK AND ENTERED INTO F ORWARD CONTRACT WHICH IS AS PER THE COMMODITY TRADE PRACTICE AND APMC REGULATION F ALL UNDER THE EXCEPTION CATEGORY AS PER CLAUSE (A) OF PROVISO TO SECTION 43 (5) AND ACCORDINGLY WITH NO STRETCH OF IMAGINATION, THE SAME COULD NOT BE CONSI DERED AS SPECULATIVE TRANSACTIONS OR A SPECULATION LOSS. THE LEARNED AUT HORISED REPRESENTATIVE ALSO ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 10 - RELIED UPON THE FOLLOWING DECISIONS IN SUPPORT OF H IS CONTENTION FOR ALLOWING THE CARRY FORWARD OF BUSINESS LOSSES. I) CIT VS. KULU VALLEY TRANSPORT CO. PVT. LTD. (1970) 77 ITR 518(SC) II) CIT VS. K.C.BEZBARUA, (1992)195 ITR ITR 321 (GAUHAT I) III) CIT VS. ORISSA METAL INDUSTRIES PVT. LTD. 196 ITR 8 03 (ORISSA) IV) KAREEMSONS PVT. LTD VS. CIT (1992) 198 ITR 543 (KAR .) 10. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE FURTHER SUBMITTED BEFORE THE CIT(A) THAT THE OBSERVATIONS OF THE LEAR NED ASSESSING OFFICER THAT THE DIFFERENCE IS IN RESPECT OF BULK IMPORT OF PALMOLEI N WHICH WAS SOLD TO GODREJ FOODS LTD AND MADHUKANT EXPORT LTD. IS ACTUALLY INC ORRECT BECAUSE THE ASSESSEE HAS ACTUALLY PURCHASES RBD PALMOLEIN OIL FROM THE A FORESAID CONCERNS. FROM THE ABOVE FACTS IT WAS POINTED OUT THAT THE LEARNED ASS ESSING OFFICER WITHOUT LOOKING TO THE DETAILS OF THE ASSESSEE AS WELL AS FACTS OF THE CASE HAS MERELY ON SURMISES AND CONJECTURES HAS COME TO THE CONCLUSION THAT THE RE IS DIFFERENCE IN IMPORT OF PALMOLEIN ON SETTLEMENT WITHOUT TAKING DELIVERY OF GOODS. IN VIEW OF THE ABOVE FACTS, THE ADDITION MADE BY THE LEARNED ASSESSING O FFICER WAS CLAIMED TO HAVE BEEN MADE ON WRONG PRESUMPTIONS AND FAR AWAY FROM T HE FACTUAL ASPECT OF THE CASE OF THE ASSESSEE. ACCORDINGLY, IT WAS ARGUED TH AT THE CLAIM OF RATE DIFFERENCE OF RS.1,98,23,401/- IS REQUIRED TO BE ALLOWED. 11. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS HELD AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF TH E LEARNED AUTHORISED REPRESENTATIVE AND ALSO THE OBSERVATIONS OF THE LEA RNED ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE CLAIM OF THE A SSESSEE REGARDING RATE DIFFERENCE IS REJECTED AS I FIND THAT THERE HAS BEE N NO ACTUAL DELIVERY OF GOODS AND THE ASSESSEE HAS NOT SUBSTANTIATED HIS CL AIM WITH PROPER EVIDENCE. HENCE, IN MY VIEW THE LEARNED ASSESSING O FFICER HAS RIGHTLY TREATED THE SAME AS SPECULATION LOSS AND HAS NOT AL LOWED THE SAME TO BE CARRIED FORWARD. THE LEARNED ASSESSING OFFICERS FI NDING IS THEREFORE, CONFIRMED AND THIS GROUND IS DISMISSED. 12. BEFORE US LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE CONSOLIDATED ORDER OF THE TRIBUNAL DATED 30.06. 2009 IN ASSESSEES OWN CASE IN ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 11 - ITA NO.437/AHD/2005, ITA NO.488/AHD/2005 AND ITA NO . 1166/AHD/2007 FOR ASSESSMENT YEARS 2001-2002 AND SUBMITTED THAT F OLLOWING THE SAME, THE ISSUES UNDER CONSIDERATION SHOULD BE RESTORED BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AS P ER DIRECTION CONTAINED IN THAT ORDER. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO AG REED TO THE SUBMISSIONS MADE BY THE LEARNED AUTHORISED REPRESENTATIVE OF TH E ASSESSEE. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE FILED ITS RETURN OF INCOME DISCLOSING TOTAL LOSS OF RS.4,92,36,264/- AS THE ASSESSEE COULD NOT PRODUCE ITS BOOKS OF ACCOUNTS DU RING THE COURSE OF THE HEARING, THE LEARNED ASSESSING OFFICER REJECTED THE BOOK RESULT AND ESTIMATED GROSS PROFIT @ 10% OF ITS TURNOVER AND AFTER ALLOWI NG DEDUCTION FOR EXPENSES EXCEPT THE RATE DIFFERENCE OF RS.1,98,23,401/- ARRI VED AT THE TOTAL INCOME OF RS.28,99,470/- . IN APPEAL THE ASSESSEE PRODUCED IT S BOOKS OF ACCOUNTS BEFORE THE CIT(A). THE CIT(A) AFTER CALLING FOR A REMAND R EPORT FROM THE LEARNED ASSESSING OFFICER ESTIMATED GROSS PROFIT OF THE ASS ESSEE AT RS.NIL. IN RESPECT OF EXPENSES OF RS.98,11,943/- THE CIT(A) OBSERVED THAT THE MAIN ELEMENT OF EXPENSES CONSISTED OF LC CHARGES AND INTEREST IN RE SPECT OF WHICH VOUCHERS WERE NOT AVAILABLE AND THEREFORE HE RESTRICTED THE EXPEN SES TO THE AMOUNT OF THE GROSS PROFIT. IN RESPECT OF RATE DIFFERENCE OF RS.1,98,23 ,401/- THE AO VIEWED THAT THE SAME WAS SPECULATIVE LOSS WITHIN THE MEANING OF SEC TION 43(5) OF THE ACT AND THEREFORE DISALLOWED THE SAME WHICH WAS CONFIRMED B Y THE CIT(A). BEFORE US BOTH THE PARTIES HAVE ADMITTED THAT THE ISSUE WAS E XACTLY THE SAME WHICH WAS THE ISSUE BEFORE THE TRIBUNAL IN THE CASE OF THE ASSESS EE FOR THE ASSESSMENT YEAR 2001-02. IT WAS SUBMITTED THAT THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2001-02 RESTORED THE MATTER BACK TO THE FILE OF THE AO WITH THE DIRECTION TO REFRAME THE ASSESSMENT AFRESH AFTER EX AMINING THE BOOKS OF ACCOUNTS AND VOUCHERS TO BE PRODUCED BY THE ASSESSE E. THEREFORE, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSMENT OF TH E YEAR UNDER CONSIDERATION ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 12 - SHOULD ALSO BE RESTORED TO THE FILE OF THE AO WITH THE SIMILAR DIRECTION. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT RAISED ANY OBJECTION IN RESPECT OF THE ABOVE PRAYER MADE BY THE ASSESSEE. WE FIND THAT MAJOR PART OF THE EXPENSES WERE DISALLOWED FOR WANT OF VOUCHERS BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WITHOUT EXAMINING THE GENUINENESS OF T HE EXPENDITURE. IN VIEW OF THE ABOVE IN OUR CONSIDERED OPINION, IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THE MATTER BACK TO THE FILE OF LEARNED ASSESSING OF FICER FOR ADJUDICATION AFRESH AFTER TAKING INTO CONSIDERATION ALL THE RELEVANT FA CTS AND AFTER PROPER VERIFICATION OF THE BOOKS OF ACCOUNT AND OTHER SUPPORTING MATERI ALS PRODUCED BY THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO PRODUCE ITS BOOKS OF ACCOUNT AND ALL OTHER MATERIALS, IT WISHES TO RELY UPON IN SUPPORT OF ITS RETURN OF INCOME AS AND WHEN ASKED BY THE LEARNED ASSESSING OFFICER. FURTHER IN RESPECT OF EXCHANGE LOSS OF RS.1,98,23,401/-, WE FIND THAT THE RELEVANT FACTS O F THE CASE AS FOUND BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ARE THA T THE ASSESSEE MADE BULK IMPORT OF PALMOLEIN WHICH WAS SOLD TO GODREJ FOODS LTD. AND MADHUKANT EXPORT LTD. ON SETTLEMENT WITHOUT TAKING DELIVERY O F GOODS. ON SETTLEMENT OF THESE TRANSACTIONS, DELIVERY WAS TAKEN BY THESE CON CERNS AND THE ASSESSEE PAID RATE DIFFERENCE OF RS.1,98,23,401/- TO THEM AND THE LOSS SUFFERED ON IMPORT OF PALMOLEIN WAS DEBITED BY THE ASSESSEE AS RATE DIFFE RENCE. BECAUSE DELIVERY OF THE GOODS WAS NOT TAKEN BY THE ASSESSEE, THE RATE DIFFE RENCE WAS HELD AS NOT ALLOWABLE AS PER PROVISION OF SECTION 43(5) OF THE INCOME TAX ACT, 1961 AND THE SAME WAS TREATED AS SPECULATION LOSS AND WAS NOT AL LOWED TO BE CARRIED FORWARD. WE FIND THAT NO REASON WAS GIVEN BY THE LEARNED COM MISSIONER OF INCOME TAX(APPEALS) FOR NOT ALLOWING CARRY FORWARD OF THE LOSS OF RS. 1,98,23,401/- WHICH WAS SPECULATIVE LOSS IN HIS OPINION. FURTHER, WE FIND THAT IN THE INSTANT CASE THE ASSESSEE PURCHASED PALMOLEIN FROM A PARTY AND S OLD IT TO TWO OTHER PARTIES. THUS, THE TRANSACTION OF PURCHASE AND SALES WERE SE TTLED BY THE ACTUAL DELIVERY OF THE PALMOLEIN AS THE DELIVERY OF THE PALMOLEIN WAS TAKEN FROM THE PERSONS FROM WHOM THE ASSESSEE PURCHASED THE PALMOLEIN AND DELIV ERY OF PALMOLIVE WAS RECEIVED BY THE PERSONS TO WHOM THE ASSESSEE SOLD T HE PALMOLEIN. IT IS NOT A CASE WHERE THE TRANSACTION OF PURCHASE WAS CANCELLED OR TRANSACTION OF SALE WAS CANCELLED AND NO ACTUAL DELIVERY WAS TAKEN EITHER B Y THE ASSESSEE OR ITS AGENT. IN ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 13 - THE INSTANT CASE, DELIVERY WAS TAKEN FROM THE SELLE R BY THE PERSON WHO PURCHASED FROM THE ASSESSEE. THUS, DELIVERY WAS INVOLVED IF N OT DIRECTLY BY THE ASSESSEE BUT BY ITS AGENT, WHICH CAN BE CONSTRUED AS CONSTRUCTIV E DELIVERY ON BEHALF OF THE ASSESSEE. WE THEREFORE, ARE OF THE CONSIDERED OPINI ON THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN TREATING THE ABOVE LOSS AS SP ECULATIVE LOSS BY INVOKING THE PROVISIONS OF SECTION 43(5) OF THE ACT. AS WE HAVE ALREADY SET ASIDE THE ENTIRE ISSUE TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH ADJUDICATION IN OUR CONSIDERED VIEW, IT WILL BE JUST AND FAIR TO SET AS IDE THIS ISSUE ALSO BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH ADJUDICA TION AFTER PROPER VERIFICATION OF THE FACTS OF THE CASE. WE THEREFORE, SET ASIDE B OTH THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR ADJUDICATION AFRE SH AS PER LAW AFTER ALLOWING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS , BOTH THE GROUNDS OF APPEAL OF THE ASSESSEE AND THE GROUND OF APPEAL OF THE REVENU E ALL ARE ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE REVENUES APPEAL, GROUND NOS.3 AND 4 ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELE TING ADDITION MADE UNDER SECTION 68 OF THE ACT BY THE LEARNED ASSESSING OFFI CER ON ACCOUNT OF RS.1,95,00,000/- OF M/S. MAHARASHTRA STEEL TRADERS AND RS.17,29,600/- OF M/S. SAAN DEVELOPERS. 16. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNE D ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS RECEIVED UNSECURED LOANS OF RS.1,95,00,000/- OF M/S.MAHARASHTRA STEEL TRADERS AND RS.17,29,600/- OF M/S.SAAN DEVELOPERS FOR WHICH NO CONFIRMATION LETTERS ARE FILED AND SO GENU INENESS OF LOANS, CAPACITY OF THE PERSONS TO ADVANCE THE LOAN CANNOT BE ACCEPTED AND MADE THE ADDITION OF THE ABOVE AMOUNTS UNDER SECTION 68 OF THE ACT. 17. IN APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), ASSESSEE SUBMITTED THAT VIDE LETTER DATED 23.01.200 2 DETAILS OF UNSECURED LOANS, PERMANENT ACCOUNT NUMBER AND ADDRESSES OF THE LOAN CREDITORS WERE SUBMITTED BEFORE THE LEARNED ASSESSING OFFICER WHO WITHOUT CO NSIDERING THE DETAILS PROVIDED BY THE ASSESSEE MADE ARBITRARY ADDITION TR EATING THE AMOUNT AS ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 14 - UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT . IT WAS FURTHER SUBMITTED THAT THE LEARNED ASSESSING OFFICER DID NOT CARRY OUT ANY SEPARATE INQUIRY FOR DOUBTING THE GENUINENESS OF THE PARTIES AND GETTING THE CLAR IFICATION FOR HIS PRESUMPTIONS. THE ASSESSEE SUBMITTED XEROX COPIES OF CHEQUES AS P ROOF OF PAYMENT IN CASE OF MAHARASHTRA STEEL TRADER FOR ASSESSMENT YEAR 2000-0 1. THE ASSESSEE ALSO SUBMITTED ORIGINAL CONFIRMATION OF M/S.SAAN DEVELOP ERS BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE ASSESSEE R EQUESTED THAT THE ADDITIONAL EVIDENCES PRODUCED BEFORE LEARNED COMMIS SIONER OF INCOME TAX(APPEALS), THE ADMITTED UNDER RULE 46A AS THE AS SESSMENT WAS MADE UNDER SECTION 144 BY THE LEARNED ASSESSING OFFICER AND TH E SAME COULD NOT BE FILED AT THE TIME OF ASSESSMENT PROCEEDING. 18. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CALLED FOR A REMAND REP ORT FORM THE LEARNED ASSESSING OFFICER. THE LEARNED ASSESSING OFFICER SU BMITTED HIS REPORT VIDE LETTER DATED 29.03.2004, WHEREIN HE STATED THAT THE ASSESS EE FAILED TO FILE THE RETURN OF INCOME AND COPY OF BALANCE SHEET OF M/S. MAHARASHTR A STEEL TRADERS. THE ASSESSEE FILED COPIES OF CHEQUES RECEIVED FROM THE PARTIES AND HIS COPY OF ACCOUNT. HENCE, ASSESSEE HAS FAILED TO DISCHARGE HI S BURDEN TO PROVE HIS CASH CREDIT FROM M/S. MAHARASHTRA STEEL TRADERS. THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) FURTHER OBSERVED THE ASSESSEE HAS SUBMITTED XEROX COPY OF CHEQUE AS PROOF OF ADVANCE OF CREDIT BY M/S. MAHAR ASHTRA STEEL TRADERS. THUS, IDENTITY OF THE CREDITOR HAS BEEN ESTABLISHED AS TR ANSACTION HAS BEEN MADE BY CHEQUE PAN HAS BEEN FILED BY THE ASSESSEE. THEREFOR E, THE SAID CREDIT IS ACCEPTED AS GENUINE. WITH REGARD TO THE CREDIT FROM M/S. SAA N DEVELOPERS, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED THAT T HE BOOKS OF ACCOUNTS WERE CALLED FOR AND EXAMINED. IT IS FOUND THAT THE SAID PARTY HAS TAKEN TERM LOAN OF RS.90 LACS FROM CHAROTAR NAGRIK SAHAKARI BANK AND B ANK ADVANCE A SUM OF RS.17,29,600/- TO THE ASSESSEE AND THE PARTY HAS GI VEN PAN AND CONFIRMATION LETTER. ON INQUIRY FROM ADDITIONAL CIT, RAGE-9, AH MEDABAD, IT IS FOUND THAT M/S. SAAN DEVELOPERS HAS FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2000-01 ON 12.11.2001 AND THE ADVANCE TO THE ASSESSEE OF RS .17,29,600/- HAS BEEN SHOWN ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 15 - AS LOANS AND ADVANCES. HENCE, HE DELETED THE ADDITI ON MADE BY THE LEARNED ASSESSING OFFICER. 19. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITT ED THAT THE ASSESSEE FILED ADDITIONAL EVIDENCES BEFORE THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) AND THEREFORE, THE MATTER SHOULD BE RE STORED BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR VERIFICATION. 20. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS). 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE CLAIMED TO HAVE RECEIVED LOAN OF RS.1.95 CRORES FRO M M/S. MAHARASHTRA STEEL TRADERS AND LOAN OF RS.17,29,600/- FROM M/S. SAAN D EVELOPERS WHICH WERE ADDED BACK TO THE INCOME OF THE ASSESSEE BY THE LEA RNED ASSESSING OFFICER AS UNEXPLAINED CASH CREDIT. ON APPEAL, THE LEARNED COM MISSIONER OF INCOME TAX(APPEALS) DELETED THE ABOVE ADDITION. IN RESPECT OF M/S. SAAN DEVELOPERS FROM WHOM THE ASSESSEE CLAIMED TO HAVE RECEIVED LOA N OF RS.17,29,600/-, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) VERIFIE D THE BOOKS OF ACCOUNT OF M/S. SAAN DEVLOPERS AND FOUND THAT THE LOAN WAS ADV ANCED TO THE ASSESSEE OUT OF TERM LOAN TAKEN BY THE SAID CONCERN FROM BANK. THE ADDITIONAL CIT, RANGE -9, AHMEDABAD, WITH WHOM THE SAID M/S. SAAN DEVELOPERS WAS ASSESSED TO TAX ALSO CONFIRMED THAT M/S. SAAN DEVELOPERS FILED ITS RETUR N OF INCOME OF THE ASSESSMENT YEAR 2000-01 ON 12.11.2001 AND HAS DISCLOSED THEREI N ABOUT THE ADVANCE GIVEN TO THE ASSESSEE. ON THE ABOVE FACTS, WE FIND NO GOO D REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) DELETING THE ADDITION OF RS. 17,29,600/-. IN RESPECT OF THE OTHE R LOAN OF RS.1.95 CRORES WHICH WAS CLAIMED BY THE ASSESSEE TO HAVE BEEN RECEIVED F ROM M/S. MAHARASHTRA STEEL TRADERS, WE FIND THAT THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) DELETED THE ADDITION MERELY ON THE BASIS OF COPY OF CHEQUES ISSUED BY THE SAID CONCERN AND A COPY OF PAN CARD OF THE SAID CONCERN. WE FIND THAT NO INQUIRY ABOUT THE ITA NO.1699 & 1968/AHD/2004 SHRI HEMANT HASMUKHLAL SHAH ASST.YEAR -2000-01 - 16 - NATURE OF TRANSACTION REPRESENTED BY THE CHEQUE WAS MADE BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BEFORE ACCEPTIN G IT AS A LOAN TO THE ASSESSEE. AS WE HAVE ALREADY SET ASIDE CERTAIN ISS UES FOR THIS YEAR BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR ADJUDICATION A FRESH, IN OUR CONSIDERED OPINION, IT SHALL BE IN THE INTEREST OF THE JUSTICE TO SET ASIDE THIS PART OF THE GROUND OF APPEAL ALSO BACK TO THE FILE OF THE LEARNED ASSE SSING OFFICER FOR ADJUDICATION AFRESH AFTER PROPER VERIFICATION FROM THE ALLEGED C REDITORS. NEEDLESS TO MENTION THAT PROPER OPPORTUNITY OF HEARING SHALL BE ALLOWED TO THE ASSESSEE BEFORE ADJUDICATING THE ISSUE AFRESH. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES AND THAT OF THE REVENUE IS PARTLY ALLOWED FOR STATI STICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 09/10/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 09/10/2009 PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIII, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD