M/s. Rajdeep Marketing Pvt. Ltd., Pune V. ITO, Ward 1(1), Solapur

ITA 256/PUN/2013

• Counselvise Citation: 25624514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 28-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VERMA; P L PATHADE
• Assessee Lawyers: S C TIWARI
• Keywords: Business income; Principle of natural justice; Speculation loss; Corroborative evidences; Accommodation entries; Assessment record; Onus to prove; Sham transactions; Revised return
• Section: 43(5); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.256/PN/2013 (A.Y: 2009-10) M/S. RAJDEEP MARKETING PVT. LTD., 202, THE ANCHORAGE, BOAT CLUB ROAD, PUNE 411001 PAN: AACCR5970K APPELLANT VS. ITO, WARD-1(1), SHOLAPUR RESPONDENT APPELLANT BY : SHRI S.C. T IWARI RESPONDENT BY : SMT. M.S . VERMA AND SHRI P.L. PATHADE DATE OF HEARING: 24.04.2014 DATE OF ORDER : 05.05.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(APPEAL)-III, [IN SHOR T CIT(A)] PUNE, DATED 07.12.2012 FOR A.Y. 2009-10 ON THE FOLLOWING GROUNDS. 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE APPELLANT AND IN LAW LD. CIT(A) HAS ERRED IN HO LDING THAT THE ENTIRE TRADING ACTIVITY IN RICE CLAIMED TO HAVE BEEN CARRIED ON BY THE APPELLANT DURING THE YEAR IS 'SHAM' AND EVIDENCE FURNISHED THEREOF IS FABRICATED, SELF- SERVING AND THE LOSS CLAIMED FROM ALLEGED TRADING ACTIVITY IS FICTITIOUS LOSS WITH A VIEW TO SET-OFF THE SAME AGA INST POSITIVE INCOME EARNED BY THE APPELLANT FROM OTHER ACTIVITIES AS TO DEFRAUD THE REVENUE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE APPELLANT AND IN LAW LD. CIT(A) HAS ERRED IN HO LDING THAT EVEN PRESUMING FOR A WHILE THAT THE LOSS CLAIM ED IS 2 GENUINE, THE SAME IS SPECULATION LOSS AND CANNOT BE SET- OFF AGAINST THE OTHER PROFITS OF THE APPELLANT AS L AID DOWN U/S. 73 OF THE ACT. 3. 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE OF THE APPELLANT AND IN LAW ID. CIT(A) HAS ERRED IN NOT DIRECTING THE AO TO ALLOW THE APPELLANT FULL DEDUCT ION OF THE DONATION OF RS.20 LACS MADE BY IT TO THE POLITI CAL PARTY MNS DURING THE YEAR. 4. THAT THE IMPUGNED ORDER BEING CONTRARY TO LAW, EVID ENCE AND FACTS OF THE CASE MAY KINDLY BE SET ASIDE, AMEN DED AND MODIFIED IN THE LIGHT OF THE GROUNDS OF APPEAL ENUMERATED ABOVE AND THE APPELLANT BE GRANTED SUCH RELIEF AS IS CALLED FOR ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE OF THE APPELLANT AND IN L AW. 5. THAT EACH OF THE GROUNDS OF APPEAL ENUMERATED ABOVE IS WITHOUT PREJUDICE TO AND INDEPENDENT OF ONE ANOTHER . 6. THAT THE APPELLANT CRAVES LEAVE TO RESERVE TO HIMSE LF THE RIGHT TO ADD, TO ALTER OR AMEND ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE END OF THE HEARING AND TO P RODUCE SUCH FURTHER EVIDENCE, DOCUMENTS AND PAPERS AS MAY BE NECESSARY. 2. THE ASSESSEE IS STATED TO BE A COMPANY CARRYING OUT VARIOUS BUSINESS ACTIVITIES NAMELY, INSURANCE AGENC Y FOR CHOLA MS GENERAL INSURANCE, CHENNAI, MARKETING OF LIFTS MANUFACTURED BY THYSSENKRUPP ELEVATOR (INDIA) PVT. LTD., NEW DELHI AND TRADING IN COMMODITIES I.E. RICE & NIFTY FUTURE SALES. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, A GROS S REVENUE OF 6,43,91,988/- WAS SHOWN TO HAVE BEEN EARNED FROM I NSURANCE COMMISSION ( 11,36,607/-), COMMISSION ON MARKETING OF LIFT ( 6,28,12,121/-) AND OTHER INCOME OF ( 42,448/-) WHILE LOSS WAS REPORTED FROM OTHER ACTIVITIES (NIFTY FUTURE SALES LOSS OF 2,11,60,817/-, COMMODITY TRADING RICE LOSS OF 3,80,77,164/-). 2.1 ON EXAMINATION OF THE DETAILS OF TRADING ACTIVI TIES CARRIED OUT IN COMMODITIES I.E. RICE FROM WHICH THE ASSESSE E REPORTED TO HAVE BEEN SUSTAINED LOSS OF 3,80,77,164/-, IT WAS NOTED BY THE 3 ASSESSING OFFICER THAT THE ASSESSEE EFFECTED PURCHA SES OF RICE AT A HIGHER RATE (BEING IN THE RANGE OF 5300/- TO 7150/- PER QUINTAL) WHILE THE SALES WERE MADE AT LOWER RATE (R ANGING FROM 3577 TO 5695/-). THE VALUE OF THE TOTAL PURCHASES DURING THE YEAR WERE SHOWN TO BE 14,68,67,267/- AGAINST WHICH TOTAL SALES WERE SHOWN AT 10,87,90,103/-. IN RESPONSE TO THE QUERY WITH REGARD TO THE LOSS, THE ASSESSEE EXPLAINED BEFORE T HE ASSESSING OFFICER THAT THE PURCHASE RATES WERE VERBALLY AGREE D AND SALES WERE EFFECTED AT A PRE-AGREED RATE WHICH WERE LOWER THAN THE PURCHASE RATES, WHICH RESULTED IN LOSSES. THE ASSES SING OFFICER OBSERVED THAT THE PURCHASES AND SALES WERE CARRIED OUT WITH A SMALL GROUP OF TRADERS IN THE SAME AREA. THE NAMES OF THE TRADERS ARE STATED TO BE AS UNDER:- PARTIES FROM WHOM PURCHASES WERE MADE: I) SHIV AGRO INDIA, NAYA BAZAR, NEW DELHI II) MANISH KUMAR SUNIT KUMAR, NAYA BAZAR, NEW DELHI VATS FOODS, NEW DELHI III) SUSHIL KUMAR & SONS, NAYA BAZAR, NEW DELHI IV) JAI AMBE TRADING CO., NAYA BAZAR, NEW DELHI PARTIES TO WHOM SALES WERE MADE: I) ARIHANT SALES CORPORATION, NAYA BAZAR, NEW DELHI II) SINGHAL ENTERPRISES, NAYA BAZAR, NEW DELHI III) SHRI SAI NATH AGRO INDIA, NAYA BAZAR, NEW DELHI IV) PREMCHAND DEEPAKKUMAR, NAYA BAZAR, NEW DELHI V) BAJRANG TRADERS, NAYA BAZAR, NEW DELHI VI) SUNITKUMAR NAVINKUMAR, NAYA BAZAR, NEW DELHI 2.2 FURTHER, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS OF ORDER PLACED FOR PURCHASES, TRANSPORTATION DETAILS ALONG WITH BILLS, DELIVERY CHALLANS, ETC. THE STAND OF THE ASSESSEE HAS BEEN THAT BEFORE THE ASSESSING OFFICER THAT THE 4 ORDERS FOR SALE OF RICE WERE TAKEN BEFORE HAND DEPE NDING UPON THE FUTURE MARKET. IT WAS CLAIMED THAT THE RATE OF COM MODITIES WAS HIGHLY FLUCTUATING AND IN HONOUR OF THE ORDER ALREA DY TAKEN, THE ASSESSEE HAD TO BUY RICE FROM THE MARKET AT THE EXI STING RATE ON THE DATE PRE-AGREED FOR DELIVERY AT THE PRE-DECIDED PRICE. IT WAS ALSO CLAIMED THAT THE TRANSACTIONS WERE CARRIED OUT ON DELIVERY BASIS WHERE THE GOODS REMAINED IN THE GO-DOWN OF TH E SUPPLIER TILL THE TIME THE SAME WAS LIFTED BY THE BUYER AND THEREFORE, THERE WAS NO QUESTION OF DISPATCH, TRANSPORTATION OF GOOD S, ETC. THE ASSESSEE ALSO SOUGHT TO JUSTIFY THE ADJUSTMENT OF L OSS CLAIMED TO BE SUSTAINED IN BUSINESS AGAINST THE INCOME FROM OT HER ACTIVITIES, INTER ALIA, STATING THAT THE ASSESSEE HAS CARRIED O UT TRADING ACTIVITIES AND NOT SPECULATIVE ONE. THE ASSESSING OFFICER DID NOT AGREE WITH THE CONTENTION OF ASSESSEE. SEEKING CLA RIFICATIONS OF THE ASSESSEE THAT THE SALES WERE EFFECTED ON A PRE- AGREED PRICE. THE ASSESSEE WAS CALLED UPON TO FURNISH SALE CONTRA CT RATE AGREEMENT IN SUPPORT OF THE ARRANGEMENT ENTERED INT O WITH THE BUYERS AS ACCORDING TO THE ASSESSING OFFICER, WITHO UT SUCH A VALID AND LEGALLY ENFORCEABLE CONTRACT, THE ASSESSEE WOUL D NOT HAVE SOLD THE GOODS AT LOWER RATE WHICH IT HAD PURCHASED AT A HIGHER RATE. THE ASSESSEE STATED BEFORE THE ASSESSING OFF ICER THAT THERE WERE NO SUCH CONTRACTS. NOTING THAT IN THE ABSENCE OF SUCH AN AGREEMENT, THE ASSESSEE WAS UNDER NO LEGAL OBLIGATI ON TO SUPPLY, GOODS AT RATES LOWER THAN THE MARKET RATES SUSTAINI NG HEAVY LOSS, THE ASSESSING OFFICER INFERRED THAT THE SALES SHOWN TO BE MADE AT LOWER RATES DELIBERATELY IN ORDER TO BOOK LOSSES TO SET OFF THE PROFIT EARNED IN OTHER AREAS. THE ASSESSING OF FICER ALSO OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE SUCH D ETAILS SUPPORTING THE MOVEMENT OF THE GOODS. THE ASSESSI NG OFFICER ALSO NOTED THAT THE CLAIM OF THE ASSESSEE THAT SUCH REQUIREMENTS WERE DONE AWAY BY VIRTUE OF THE TERMS OF AGREEMENT COULD NOT BE GIVEN ANY CREDENCE IN THE ABSENCE OF ANY VALID AGRE EMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE SO-CALLED PURCH ASERS. IN 5 ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTIONS , THE ASSESSING OFFICER ALSO ISSUED LETTERS SEEKING CONFIRMATION OF GENUINENESS OF THE TRANSACTIONS. IN THE FOLLOWING CASES, THE LETT ERS SENT BY THE ASSESSING OFFICER WERE STATED TO BE RETURNED BY THE POSTAL AUTHORITIES CITING REASON THAT THE ADDRESSEE DID NO T EXIST ON THE ADDRESS MENTIONED: SUSHIL KUMAR & SONS (SUPPLIER) SINGHAL ENTERPRISES (BUYER) BAJRANG TRADERS (BUYER) VATS GOODS (SUPPLIER) JAI AMBE TRADERS (SUPPLIER) MANISHKUMAR SUNITKUMAR (SUPPLIER) 2.3 THE ASSESSING OFFICER ALSO DID NOT BELIEVE THE CONFIRMATION ON THE GROUND THAT THE SAME WERE POSTED FROM SOLAPU R. IN A COUPLE OF OTHER CASES, NAMELY, ARIHANT SALES CORPOR ATION, NAYA BAZAAR, NEW DELHI AND PREMCHAND DEEPAK KUMAR, NEW D ELHI, THOUGH THEY HAVE ADMITTED HAVING SOLD RICE TO THE A SSESSEE IN THE CONFIRMATION RECEIVED IN THEIR NAME, THE RELEVA NT RECORDS IN THE BOOKS OF THE ASSESSEE SHOWED THAT THE TRANSACTI ONS WERE IN FACT FOR 'SALES' EFFECTED BY THE ASSESSEE TO THE AB OVE PARTIES AS AGAINST 'PURCHASES' CONFIRMED BY THE SAID PARTIES. IT WAS ALSO NOTED BY THE ASSESSING OFFICER THAT ALL THE CONFIRM ATION RECEIVED IN THE NAME OF THE VARIOUS PARTIES HAD STRIKING SIM ILARITIES IN THEIR FORMAT, CONTENT, STRUCTURE, FONT AND OTHER AT TRIBUTES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS CLEARLY INDICATED THAT THE ASSESSEE TRIED TO FABRICATE EVIDENCE AND WHICH CAST DOUBT ON THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSING OFFICER ALSO STATED THAT THE CONFIRMATION LETTERS FURNISHED BY T HE ASSESSEE ON BEHALF OF OTHER PARTIES TO SUPPORT ITS CASE THAT TH E PURCHASES WERE EFFECTED PURSUANT TO PRE-AGREED TERMS, DID NOT BEAR OTHER VITAL DETAILS LIKE PURCHASE RATE, QUANTITY AND QUAL ITY AGREED, DELIVERY SCHEDULE ETC. AND SOME OF THEM WERE EVEN U NDATED. 6 COUNTERING THE PRE-DECIDED PURCHASE PRICE THEORY, I T WAS ALSO HIGHLIGHTED BY THE ASSESSING OFFICER THAT THE RELEV ANT PURCHASE BILLS CLEARLY SHOWED THAT THE GOODS WERE PURCHASED JUST ONE OR TWO DAYS BEFORE THOSE WERE SOLD BY THE ASSESSEE COM PANY. THE VARIOUS DEFECTS NOTED/OBSERVATIONS MADE BY THE ASSE SSING OFFICER WHICH, ACCORDING TO HIM, PUT THE ENTIRE ARRANGEMENT UNDER A SHADOW, ARE SUMMARIZED BY THE ASSESSING OFFICER AS UNDER:- THE AUDITOR OF THE APPELLANT HAS ALSO REPORTED THA T THE COMPANY WAS NEVER INVOLVED IN ANY TRADING ACTIVITY LIKE TRADING IN RICE; TRADING ACTIVITY STARTED FROM AUGUST 2008 IMMEDIATE LY AFTER RECEIVING COMMISSION INCOME AS THIS LINE OF BUSINES S WAS NOT THERE IN THE PRECEDING YEAR AND THUS, THIS WAS A PRE- PLAN TO AVOID TAXES. THE BILLS PRODUCED IN RESPECT OF PURCHASES AND SALE S DID NOT CONTAIN DETAILS LIKE QUALITY OF RICE BEING PURCHASE D/SOLD BUT SIMPLY MENTIONED 'BASMATI RICE'. AS PER THE ASSESSI NG OFFICER, THERE WERE MANY VARIETIES AND SPECIES OF B ASMATI RICE WHICH CARRIES DIFFERENT PRICE TAG. AS PER THE ASSESSING OFFICER, NON-FURNISHING SUCH DETAILS WAS A DELIBERA TE ATTEMPT ON THE PART OF THE APPELLANT TO PRE-EMPT CO MPARISON OF RATES SHOWN WITH THE THEN PREVAILING MARKET RATE S. THE BILLS FURNISHED SANS THE QUALITY DETAILS HAD NO AUT HENTICITY AND THE SAME COULD BE FABRICATED ONES. ALL THE PURCHASES AND SALES ARE ROUTED THROUGH A SM ALL GROUP OF PERSONS HAVING BUSINESS ADDRESS SITUATED I N THE SAME LOCALITY I.E. NAYA BAZAR, NEW DELHI. THOUGH THE TRANSACTIONS OF PURCHASES AND SALES ARE RECORDED IN THE BOOKS, THERE WAS NO DOCUMENTARY PRO OF OF ITS DELIVERY BY THE SELLER TO BUYER OR ITS STORAGE, TRANSPORTATION ETC. IN ALL THE TRANSACTIONS, THE GOODS WERE SOLD AT RAT ES MUCH LOWER THAN THE PURCHASES. IN CERTAIN CASES, MORE TH AN ONE BILL IS PREPARED FOR SALE TO THE SAME PARTY ON THE SAME DATE AT THE SAME RATE. AS PER THE ASSESSING OFFICER, THO SE ARE ACCOMMODATION ENTRIES TO SHOW PURCHASES AT HIGHER R ATES. DETAILS OF THE TRANSACTIONS ARE ENUMERATED AT PAGES NO.17 TO 20 OF THE ASSESSMENT ORDER. THE APPELLANT COULD NOT FURNISH ANY AGREEMENT ENTER ED INTO IN SUPPORT OF THE SALE AT PRE-DECIDED RATES. IN A F EW CASES 7 WHERE LETTER FROM THE PARTIES CONCERNED WAS PRODUCE D, THE SAME DID NOT CONTAIN DETAILS SUCH AS QUANTITY, QUAL ITY, RATE, EXACT PERIOD OF DELIVERY OF GOODS AND ALSO DID NOT CONTAIN ANY CONSENT GRANTED BY THE APPELLANT TO THE TERMS MENTIONED THEREIN. SCANNED COPY OF SUCH LETTERS REC EIVED IN THE CASE OF A) VATS FOODS B) MANISH KUMAR SUMEET KU MAR C) SUSHILKUMAR & SONS, ARE PLACED AT PAGES NO.22 TO 24 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER FOUND T HAT EVEN THE SIGNATURE CONTAINED IN THE SAID LETTERS DID NOT MATCH WITH THE SIGNATURE CONTAINED IN THE ACCOUNT CONFIRM ATION STATEMENTS CLAIMED TO HAVE BEEN ISSUED BY THE ABOVE PARTIES. COPIES OF STATEMENTS IN THE ABOVE CASES AR E SCANNED AND PUT UP AT PAGES NO.26 TO 28 OF THE ASSE SSMENT ORDER. AS PER THE ASSESSING OFFICER, ALL THESE CLEA RLY INDICATED THAT THERE DID NOT EXIST ANY PRE-DECIDED AGREEMENT TO SUPPLY RICE AS HAD BEEN CLAIMED BY THE APPELLANT AND THE EVIDENCE FURNISHED APPEARED TO BE FAKE AND FABRICAT ED. VERIFICATION OF PURCHASES BILLS OF DIFFERENT PARTIE S INDICATED THAT THERE BEAR SAME HANDWRITING AND MORE OR LESS S IMILAR FORMATTING. SOME OF SUCH BILLS, NAMELY IN THE CASE OF SUSHIL KUMAR & SONS, SHIV AGRO INDIA, MANISH KUMAR SUMIT KUMAR ARE SCANNED AND PLACED AT PAGE NO.30 TO 33 OF THE ASSESSMENT ORDER. AS PER THE ASSESSING OFFICER, THI S CLEARLY INDICATED THAT THE BILLS COULD BE FABRICATED WHICH IN TURN, QUESTIONS THE VERY GENUINENESS OF THE TRANSACTIONS. THE APPELLANT COULD PRODUCE NONE OF THE PARTIES FOR EXAMINATION BY THE ASSESSING OFFICER DESPITE SUMMON S U/S.131 OF THE IT. ACT HAVING BEEN ISSUED. THUS, TH E APPELLANT FAILED TO SUBSTANTIATE THE EXISTENCE OF T HE PARTIES AND THE TRANSACTIONS. 2.4 THE ASSESSING OFFICER HAS ALSO OBSERVED THAT TH E ASSESSEE CHANGED ITS STAND DURING THE COURSE OF THE ASSESSME NT PROCEEDINGS WITH REGARD TO THE TRANSACTIONS IN QUES TION. THE DIRECTOR OF THE ASSESSEE COMPANY WAS CONFRONTED ON THE ISSUE BY THE ASSESSING OFFICER WHILE RECORDING HIS STATEMENT U/S.131 OF THE IT. ACT IN RESPONSE TO WHICH HE REPORTEDLY CLAI MED THAT THE PURCHASES RATES WERE AGREED UPON AT THE TIME OF FIN ALIZATION OF VERBAL CONTRACT WHICH USUALLY TOOK PLACE 2 TO 3 MON THS PRIOR TO THE SALE TRANSACTIONS, THOUGH THE PURCHASE BILLS WE RE RAISED AT THE TIME OF DELIVERY AND NOT AT THE TIME OF PLACING ORDER. IT WAS CLAIMED THAT BY THE TIME SALES TOOK PLACE, THE MARK ET HAD COME 8 DOWN SUBSTANTIALLY LEADING TO LOSSES. THE ASSESSING OFFICER DID NOT AGREE WITH THE PROPOSITIONS PUT FORWARD ON BEHA LF OF ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT NO REASONABLE P ERSON WOULD PURCHASE GOODS AT MUCH HIGHER RATES THAN THE PREVAI LING MARKET RATE AND SELL AT LOWER RATES THEREBY SUSTAINING HEA VY LOSSES, MERELY GOING BY THE VERBAL AGREEMENT WHICH WAS NOT SUPPORTED BY ANY LEGALLY ENFORCEABLE AGREEMENT. 2.5 WITH A VIEW TO ASCERTAIN THE GENUINENESS OF THE PARTIES WITH WHOM THE ASSESSEE CLAIMED TO HAVE ENTERED INTO THE IMPUGNED TRANSACTIONS, A REFERENCE WAS ALSO MADE BY THE ASSE SSING OFFICER TO THE ADDL. DIRECTOR OF INCOME TAX (INV.), NEW DEL HI, THROUGH THE JT. COMMISSIONER OF INCOME TAX, RANGE-1, SOLAPUR. IN RESPONSE, THE ADDL. DIT (INV.), NEW DELHI IS REPORTED TO HAVE INFORMED THAT OUT OF THE ELEVEN PARTIES REFERRED TO BY THE ASSESS ING OFFICER; FOLLOWING SIX PARTIES WERE NOT FOUND TO BE ON THE A DDRESS PROVIDED: 1) M/S.VAT FOODS 2) M/S. JAY AMBEY TRADING CO. 3) M/S. SINGHAL ENTERPRISES 4) SHRI RAJ KUMAR, PROP. OF M/S. MANISHKUMAR & SUNITKURNAR 5) SHRI SUSHIL GOEL, PROP: M/S. SUSHILKUMAR & SONS 6) M/S. BAJRANG TRADERS 2.6 LOCAL ENQUIRES CONDUCTED BY THE CONCERNED ASSES SING OFFICER AT NEW DELHI HAVE REPORTEDLY FAILED TO ESTA BLISH THE IDENTITIES OF THE PARTIES AT THE GIVEN ADDRESSES. I T WAS ALSO STATED THAT NONE OF THE PARTIES RESPONDED TO THE SUMMONS I SSUED BY THE ITO DIRECTLY, BUT FOUR PARTIES FURNISHED A PRELIMIN ARY REPORTS THROUGH MESSENGERS. HOWEVER, IN NONE OF THE CASE, THE PARTIES PERSONALLY ATTENDED BEFORE THE CONCERNED ASSESSING OFFICER. HOWEVER CERTAIN PARTIES REPORTEDLY FURNISHED CERTAI N DETAILS 9 WHICH WERE STATED TO BE NOT IN RESPONSE TO THE SUMM ONS ACTUALLY ISSUED BY THE ITO(INV.), UNIT-V(3), NEW DELHI. 2.7 CITING THE VARIOUS DISCREPANCIES AS DISCUSSED H EREINABOVE, THE ASSESSING OFFICER HELD THAT THE CONCEPT ADVANCE D BY THE ASSESSEE THAT THE SALES WERE EFFECTED ON PRE-DECIDE D RATES AND THE GOODS WERE SOLD ON DELIVERY BASIS ETC. WERE ENTIREL Y VAGUE AND MISLEADING AND WITHOUT ANY SUBSTANCE OR SUPPORTED B Y ANY DOCUMENTARY EVIDENCE AND ACCORDING TO HIM, THE ENTI RE ARRANGEMENT WAS A SHAM OSTENSIBLY INVENTED WITH A P URPOSE TO SET OFF THE PROFIT OF THE ASSESSEE HAD GAINED FROM ITS OTHER BUSINESS. HE FURTHER HELD THAT THE TRANSACTIONS CLA IMED TO HAVE ENTERED INTO WITH THE VARIOUS PARTIES FOUND TO BE N OT GENUINE IN THE LIGHT OF THE ENQUIRIES CONDUCTED BY THE INVESTI GATION WING OF THE DEPARTMENT AT NEW DELHI. THE ASSESSING OFFICER, THUS, HOLDING THAT THE ENTIRE TRADING ACTIVITY IN RICE CL AIMED TO HAVE BEEN DONE BY THE ASSESSEE WAS NOT GENUINE AND THE E VIDENCE FURNISHED THEREOF WERE FABRICATED, THE LOSS CLAIMED OF 3,80,77,164/- FROM THE SAID ACTIVITY WAS DISALLOWED BY THE ASSESSING OFFICER. 2.8 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) CONCLUDE D AS UNDER: 2.3.1 IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS PERFECTLY JUSTIFIED IN HOLDING THAT THE TRANSACTIONS IN QUE STION ARE ONLY ACCOMMODATION ENTRIES AND SHAM TRANSACTIONS ENTERED INTO BY THE APPELLANT IN COLLUSION WITH THE SAID DELHI PARTIES FOR THE PURPOSE OF CREATING AND BOOKI NG FICTITIOUS LOSS ON THE BASIS OF FABRICATED DOCUMENT S IN THE FORM OF PURCHASE INVOICES, SALE BILLS ETC. THE CONC LUSIONS / OBSERVATIONS DRAWN BY THE ASSESSING OFFICER REGARDI NG GENUINENESS OF IMPUGNED TRANSACTIONS ARE NOT BASED ON SUSPICION, CONJECTURES AND SURMISES. THE WELL REASO NED CONCLUSIONS ARE BASED ON THE DETAILED EXAMINATION O F THE CLAIM MADE BY THE ASSESSING OFFICER. 10 2.3.2 TO SUM UP, ON A CAREFUL CONSIDERATION OF ALL THE EVIDENCES PLACED ON RECORD CUMULATIVELY AND SUBMISS IONS OF THE APPELLANT, IT IS AMPLY CLEAR THAT THE ENTIRE TR ADING ACTIVITY IN RICE CLAIMED TO HAVE BEEN CARRIED ON BY THE APPELLANT DURING THE YEAR IS SHAM AND THE EVIDENCE FURNISHED THEREOF WAS FABRICATED, SELF-SERVING AND THE LOSS CLAIMED FROM ALLEGED TRADING ACTIVITY IS FICTITIOUS LOSS. IT IS ONLY COLLUSIVE DEVICE OR ARRANGEMENT FOR CREATING A ND BOOKING FICTITIOUS LOSS IN THE BOOKS OF ACCOUNT OF THE APPELLANT IN CONNIVANCE WITH SAID DELHI PARTIES WIT H A VIEW TO SET OFF THE SAME AGAINST POSITIVE INCOME EA RNED BY THE APPELLANT FROM OTHER ACTIVITIES AND TO DEFRAUD THE REVENUE. IN SUCH CIRCUMSTANCES, THE LOSS CLAIMED O F RS.3,80,77,164/- FROM THE SAID RICE TRADING ACTIVIT Y WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER. ACCORD INGLY, THE DISALLOWANCE OF ALLEGED LOSS 3,80,77,164/- MADE BY THE ASSESSING OFFICER DOES NOT WARRANT ANY INTERFERENCE AND THE SAME IS UPHELD. GROUND OF APPEAL NO. I FAILS. 2.3.3 WITHOUT PREJUDICE TO THE ABOVE FINDING THAT T HE TRANSACTIONS IN QUESTION ARE SHAM TRANSACTIONS AND THE LOSS CLAIMED IS FICTITIOUS LOSS, EVEN PRESUMING FOR A WH ILE THAT THEY ARE GENUINE TRANSACTIONS AS CLAIMED BY THE APP ELLANT, THE LOSSES WERE SPECULATION LOSSES AS THE ALLEGED TRANSACTIONS FOR PURCHASE AND SALE OF A COMMODITY A RE ULTIMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DEL IVERY. AS DISCUSSED HEREINABOVE, THE APPELLANT FAILED TO PROV E WITH ANY EVIDENCE THAT THERE WAS PHYSICAL MOVEMENT OR TR ANSFER OF DELIVERY OF COMMODITY FROM SUPPLIER TO THE APPEL LANT OR FROM THE APPELLANT TO THE BUYER OR FROM THE SUPPLIE R DIRECTLY TO THE BUYER. FOR TAKING OUT THE TRANSACTION FROM T HE AMBIT OF SPECULATIVE TRANSACTION, ACTUAL DELIVERY OF GOOD S WAS ESSENTIAL. AS HELD BY THE ITAT, DELHI, CONSTRUCTIVE OR SYMBOLIC DELIVERY OF GOODS EVEN IF IT WERE ESTABLIS HED WAS OF NO CONSEQUENCE (47 ITD 476). IN THESE CIRCUMSTANCES , THE LOSS CLAIMED CONSTITUTES SPECULATION LOSS AS PER TH E DEFINITION OF SPECULATIVE TRANSACTION PROVIDED UNDE R SEC. 43(5) OF THE INCOME TAX ACT AND THE CASE OF THE APP ELLANT IS NOT COVERED BY ANY OF THE EXCEPTIONS IN THE PROVISO TO THE SECTION. THIS SPECULATION LOSS, EVEN PRESUMING TO B E GENUINE FOR A WHILE, CANNOT BE SET OFF AGAINST THE OTHER PROFITS OF THE APPELLANT AS LAID DOWN UNDER SEC. 73 OF THE INCOME TAX ACT. 3. BEFORE US, IT WAS SUBMITTED ON BEHALF OF ASSESSE E AS UNDER: 1. THE MAIN DISPUTE IN THIS APPEAL, REPRESENTED BY GROUNDS OF APPEAL NO. 1 & 2, IS AGAINST DISALLOWANC E OF THE CLAIM OF THE APPELLANT OF SET-OFF OF LOSS INCURRED FROM TRADING 11 IN RICE. DURING THE YEAR THE APPELLANT INDULGED INT O RICE TRADING AND FOR THAT PURPOSE ENTERED INTO AGREEMENT S TO PURCHASE RICE AT A PRE-DETERMINED RATE FOR DELIVERI ES TO BE EXECUTED AT A FUTURE DATE FROM FOLLOWING PARTIES :- 1. SHIV AGRO INDIA, NAYA BAZAR, NEW DELHI -110006 2. MANISH KUMAR SUMIT KUMAR, NAYA BAZAR, NEW DELHI - 110006 3. VATS FOODS, S. P. MUKHERJEE MARG, NEW DELHI -110006 4. SUSHIL KUMAR & SONS, NAYA BAZAR, NEW DELHI 110006 5. JAI AMBE TRADING CO., NAYA BAZAR, NEW DELHI - 110006 UNFORTUNATELY, THE PRICE OF RICE HAD CONSIDERABLY R EDUCED IN THE INTERVENING PERIOD PRIOR TO THE CONTRACTED DATE OF DELIVERY AND THEREFORE THE APPELLANT DECIDED TO SEL L THE SAME IMMEDIATELY. THUS AS AGAINST THE AGREED PURCHASE CONSIDERATION OF RS.146,867,267/- THE APPELLANT COU LD FETCH ON SALE RS.108,790,103/- ONLY RESULTING INTO TRADIN G LOSS OF RS.38,077,164/-. THE APPELLANT CARRIED OUT ITS SALE OF RICE TO THE FOLLOWING PARTIES:- 1. ARIHANT SALES CORPORATION, NAYA BAZAR, NEW DELHI 110006 2. SINGHAL ENTERPRISES, NAYA BAZAR, NEW DELHI - 110006 3. SHRI SAI NATH AGRO INDIA, NAYA BAZAR, NEW DELHI 110006 4. PREMCHAND DEEPAKKUMAR, NAYA BAZAR, NEW DELHI 110006 5. BAJRANG TRADERS, NAYA BAZAR, NEW DELHI -110006 6. SUMITKUMAR NAVINKUMAR, NAYA BAZAR, NEW DELHI 110006 2. THE APPELLANT SUBMITS THAT THE TRANSACTIONS OF PURCHASE AND SALE HAVE BEEN CARRIED OUT THROUGH BAN KING CHANNELS AND ARE REFLECTED NOT ONLY IN THE BANK ACC OUNT OF THE APPELLANT BUT IN THE BANK ACCOUNT OF CONCERNED PARTIES ALSO HAVING BEEN PAID & RECEIVED ON RTGS TRANSFER. THEREFORE THE AUTHENTICITY OF THE TRANSACTIONS CANN OT BE DOUBTED. FURTHERMORE, THE APPELLANT'S TRANSACTIONS ARE SUPPORTED BY PURCHASE AND SALE BILLS. ALL THESE BIL LS CONTAIN DETAILED NAME AND ADDRESS OF THE PARTY, TIN NO., TE LEPHONE NO. AND IN MOST CASES MOBILE NO. ALSO. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT FURNISHED ALL THESE DOCUMENTS, BANK ACCOUNTS, PAN OF EACH ONE OF THE 11 12 PARTIES AND MUCH MORE AS WOULD BE SEEN FROM THE APPELLANT'S SUBMISSIONS TO LEARNED ASSESSING OFFICE R PLACED IN THE VOLUMINOUS PAPER-BOOK. IN THIS MANNER, THE APPELLANT DISCHARGED HIS BURDEN OF PROOF AND SUBSTA NTIATED HIS CLAIM OF DEDUCTION OF THE LOSS INCURRED BY HIM IN RICE TRADING. BUT THE LEARNED ASSESSING OFFICER INSTEAD DISALLOWED THE APPELLANT'S CLAIM BASED ON SUSPICION , CONJECTURES AND SURMISES AS FOLLOWS:- 1. THERE WAS NO AGREEMENT IN WRITING AS REGARDS THE APPELLANT'S CONTRACT OF SUPPLY OF RICE AT A FUTURE DATE. 2. ACCORDING TO THE ASSESSING OFFICER BECAUSE THERE WAS NO AGREEMENT IN WRITING THE APPELLANT SHOULD HAVE DISREGARDED THE ORAL CONTRACT AND SAVED THE HUGE LOSS. 3. THE APPELLANT HIMSELF DID NOT TAKE DELIVERY OF RICE AND INSTEAD AFTER PURCHASE OF CORRESPONDING QUANTITY OF RICE IT REQUESTED THE SUPPLIERS TO ALLOW THE APPELLANT'S BUYERS TO TAKE PHYSICAL DELIVERY. 4. THE SUPPLIERS OF RICE AND THE BUYERS WERE ALL LOCATED IN NAYA BAZAR, NEW DELHI. 5. THE APPELLANT HIMSELF DID NOT TAKE ANY DELIVERY OF RICE AND THEREFORE COULD NOT PRODUCE THE PARTICULARS OF TRANSPORTATION, STORAGE, FREIGHT BILLS, DELIVERY CHALLANS ETC. 6. ACCORDING TO THE ASSESSING OFFICER THOUGH THERE WAS NOT MUCH DIFFERENCE BETWEEN THE DATE OF PURCHASE AND DATE OF SALE, THERE WAS HUGE DIFFERENCE IN THE RATE AT WHICH RICE WAS PURCHASED AND SOLD. 7. ACCORDING TO THE ASSESSING OFFICER THE APPELLANT'S TRANSACTIONS RESULTED INTO LOSS WHICH IS NOT NORMAL INCIDENCE OF BUSINESS. 8. TRADING IN RICE WAS NOT THERE IN THE PRECEDING YEAR. 9. ACCORDING TO THE ASSESSING OFFICER CONFIRMATION LETTERS RECEIVED FROM THE PARTIES WERE IDENTICALLY WORDED AND APPEARED TO HAVE BEEN TYPED SIMULTANEOUSLY. 13 10. ACCORDING TO THE ASSESSING OFFICER MERE CONFIRMATION LETTERS WERE NOT SUFFICIENT. THERE SHOULD HAVE BEEN AGREEMENT IN WRITING. 11. ACCORDING TO THE ASSESSING OFFICER SOME OF THE PARTIES WHO CONFIRMED THE TRANSACTIONS WITH THE APPELLANT SENT LETTERS TO THE ASSESSING OFFICER BY SPEED POST FROM SOLAPUR POST OFFICE AND NOT NEW DELHI. 12. ACCORDING TO THE ASSESSING OFFICER THERE IS VARIATI ON IN SIGNATURE OF THE SAME PERSON BETWEEN THE BILL AND T HE LETTER OF CONFIRMATION OF TRANSACTION. 13. ACCORDING TO THE ASSESSING OFFICER CERTAIN BILLS OF DIFFERENT PARTIES GOT SAME HANDWRITING. 14. THE BILLS OF SALE AND PURCHASE MENTIONED QUALITY OF RICE AS 'BASMATI' BUT THOSE BILLS DID NOT SPECIFY WHAT T YPE OF BASMATI RICE. 15. THE APPELLANT'S AUTHORISED REPRESENTATIVE STATED ON 18.10.2011 THAT SALES ORDER PRECEDED PURCHASE ORDER WHICH STAND WAS SUBSEQUENTLY MODIFIED AND IT WAS STATED THAT PURCHASE ORDERS PRECEDED SALES ORDER. 16. THE APPELLANT HIMSELF DID NOT PRODUCE ANY PARTY IN SPITE OF NOTICE U/S. 131 SERVED UPON IT. 17. ACCORDING TO THE ASSESSING OFFICER THE LETTERS ISSU ED BY HIM TO SOME OF THE PARTIES FROM WHOM THE APPELLANT PURCHASED OR TO WHOM THE APPELLANT SOLD RICE WERE RECEIVED BACK FROM POSTAL AUTHORITIES WITH THE REMA RK 'NO SUCH FIRM IN THIS NUMBER'. 18. ACCORDING TO THE ASSESSING OFFICER THE ENQUIRY CONDUCTED BY THE INSPECTORS AT NEW DELHI REFLECTED THAT OUT OF ELEVEN PARTIES SIX PARTIES WERE NOT FOUND AT GIVEN ADDRESS. ONLY FOUR PARTIES CONFIRMED THE TRANSAC TIONS THROUGH MESSENGERS BUT NOBODY APPEARED IN PERSON. 19. ACCORDING TO THE ASSESSING OFFICER THE AUDITOR OF T HE APPELLANT COMPANY HAD AGREED THAT THE APPELLANT COMPANY NEVER INVOLVED IN ANY TRADING ACTIVITIES. 3.1 BASED UPON THE ABOVE REASONING LEARNED ASSESSIN G OFFICER HAS GIVEN HIS FINDINGS IN PARA 8.3 OF THE ASSESSMEN T ORDER IN THE FOLLOWING WORDS:- 'CONSIDERING THE FACTS AS REGARDS TO NON-SERVICE OF LETTERS ISSUED TO THE PARTIES IN QUESTION, WHICH IS 14 AUTHENTICATED BY THE POSTAL AUTHORITY AND REALISTIC INFORMATION GATHERED BY THE ITO (INV.), UNIT V(3), NEW DELHI, IT IS CONFIRMED THE TRANSACTIONS ARE NOT GEN UINE AND SO CALLED EVIDENCES PUT FORTH BEFORE ME IS SALE BILLS, PURCHASE BILLS, ACCOUNT EXTRACTS ARE LIABLE TO BE TREATED AS FABRICATED AND I HOLD THAT THE TRANSACTI ONS OF THE ASSESSEE-COMPANY IN TRADING OF RICE ARE NOT GENUINE IN NATURE AND LOSSES ARE BOOKED TO MERGE TH E POSITIVE INCOME AND TO AVOID THE TAX LIABILITY ARIS ES.' 3.2 DURING THE COURSE OF HEARING BEFORE ID. CIT(A) THE APPELLANT MET ALL THE AFORESAID OBJECTIONS AND ARGUMENTS OF I D. ASSESSING OFFICER. REFERENCE IN THIS BEHALF MAYBE MADE TO THE APPELLANT'S WRITTEN SUBMISSIONS DATED 23.10.2012 AND 27.11.2012 PLACED IN THE APPELLANT'S PAPER-BOOK FROM PAGES 185 TO 249. L D. CIT(A) HAS IN THE IMPUGNED ORDER HELD THAT THE LOSS IN QUESTIO N WAS FICTITIOUS LOSS BOOKED TO OFFSET THE POSITIVE INCOM E EARNED BY THE APPELLANT FROM OTHER ACTIVITIES. FOR THIS PROPOSITI ON ID. CIT(A) HAS GIVEN THE FOLLOWING REASONS:- 1. THE APPELLANT WAS NEVER INVOLVED IN RICE TRADING IN THE EARLIER YEARS. 2. THE BILLS PLACED ON RECORD BY THE APPELLANT ONLY MENTIONED 'BASMATI RICE' IN NUMBER OF BAGS. IN THE ABSENCE OF FURTHER DETAILS AS TO WHICH QUALITY OF BASMATI RICE, IT WAS NOT POSSIBLE TO COMPARE THE RATES SHOWN IN THE PURCHASE INVOICES AND SALES BILLS WITH THE THEN PREVAILING MARKET RATES. 3. THERE WAS NO DOCUMENTARY PROOF LIKE DISPATCH NOTES, FREIGHT RECEIPTS, DELIVERY CHALLANS, ETC. FO R STORAGE, TRANSPORTATION, DELIVERY OF GOODS BY SELLERS TO THE APPELLANT OR BY THE APPELLANT TO BUYERS OR BY THE SELLERS DIRECTLY TO THE BUYERS. 4. IN ALL THE CASES THE GOODS WERE SHOWN TO HAVE BEEN SOLD AT RATES MUCH LOWER THAN THE PURCHASE UNLIKE NORMAL TRADING ACTIVITY WHERE THERE WOULD BE PROFIT IN SOME TRANSACTIONS AND LOSS IN OTHER TRANSACTIONS. 5. THE APPELLANT HAD NO PREVIOUS EXPERIENCE, INFRASTRUCTURE AND HOLDING CAPACITY FOR SUCH HUGE QUANTITY OF RICE AND THEREFORE IT WAS 15 INCONCEIVABLE THAT THE APPELLANT ENTERED INTO HUGE TRANSACTIONS ON CREDIT AND AT PREDETERMINED RATES ON THE STRENGTH OF SO CALLED ORAL AGREEMENTS. 6. THE ASSESSING OFFICER DID RECEIVE IN A FEW CASES LETTERS FROM THE PARTIES CONCERNED BUT THE SAME DID NOT CONTAIN DETAILS SUCH AS QUANTITY, QUALITY, RATE, EXACT PERIOD OF DELIVERY OF GOODS AND ALSO DI D NOT CONTAIN ANY CONSENT OF THE APPELLANT TO ANY TERMS AND CONDITIONS. 7. THE ASSESSING OFFICER FOUND THAT EVEN THE SIGNATURES CONTAINED IN THE LETTERS OF PARTIES RECEIVED BY HIM DID NOT MATCH WITH THE SIGNATURE CONTAINED IN THE ACCOUNT CONFIRMATION STATEMENTS. 8. IT WAS NOTICED THAT THE APPELLANT KEPT ON CHANGING HIS STAND DURING THE ASSESSMENT PROCEEDINGS. IT WAS FIRST STATED THAT SALES WERE EFFECTED AT PREDETERMINED PRICES BUT LATER ON IT WAS STATED THAT PURCHASES WERE EFFECTED AT PREDETERMINED PRICES. THERE WAS NO EVIDENCE THAT THERE WERE ANY AGREEMENTS AT PREDETERMINED PRICES. A FEW LETTERS FROM SOME OF THE PARTIES WHICH DID NOT CONTAIN DETAILS SUCH AS QUANTITY, QUALITY, RATE, EXACT PERIOD OF DELIVER Y OF GOODS DID NOT SUFFICE. 9. ALL THE PAYMENTS MADE OR RECEIVED WERE IN THE LAST WEEK OF MARCH. EXCEPT FIRING COPIES OF ACCOUNTS, THE APPELLANT FAILED TO PRODUCE DELIVERY CHALLANS AND TRANSPORTATION RECEIPTS TO PROVE ACTUAL DELIVERY OF GOODS. HENCE, PAYMENTS MADE THROUGH BANKING CHANNELS DID NOT ESTABLISH GENUINENESS OF TRANSACTIONS. 10. LETTERS OF ENQUIRY SENT BY THE ASSESSING OFFICER WERE RECEIVED BACK FROM THE POSTAL AUTHORITIES IN SIX CASES CITING REASON THAT THE ADDRESSEE DID NOT EXIST ON THE ADDRESS MENTIONED, IN THE CASE OF SUSHIL KUMAR & SONS, NEW DELHI, THE CONFIRMATION LETTER PURPORTEDLY SENT BY THE PARTY TO THE ASSESSING OFFICER WAS FOUND TO HAVE BEEN POSTED FROM SOLAPUR. 11. THE CONFIRMATIONS RECEIVED FROM THE PARTIES HAD STRIKING SIMILARITIES IN THEIR FORMAT, CONTENT, STRUCTURE, FONT AND OTHER ATTRIBUTES. 16 12. THE ASSESSING OFFICER ATTEMPTED TO MAKE SPOT ENQUIRIES BY MAKING REFERENCE TO THE ADDL. DIRECTOR OF INCOME-TAX, THE SAME HOWEVER DID NOT YIELD MUCH RESULT AS OUT OF 11 PARTIES 6 WERE NOT FOUND TO BE ON THE ADDRESS PROVIDED. MOREOVER, NONE OF THE PARTIES ATTENDED BEFORE THE ITO (INV.) IN RESPONSE TO THE SUMMONS ISSUED BY HIM NOR FURNISHED DETAILS ASKED FOR. 13. THE ASSESSING OFFICER ASKED THE APPELLANT TO PRODUCE THE PARTIES IN QUESTION FOR EXAMINATION BUT THE APPELLANT FAILED TO DO SO. BASED ON REASONING AS ABOVE-MENTIONED ID. CIT(A) HE LD THAT ON THE FACTS OF THE CASE IT WAS NECESSARY FOR THE APPELLANT TO PRODUCE COGENT EVIDENCE OR THE PARTIES INVOLVED TO DISPEL THE SUSPICION OF THE ASSESSING OFFICER BU T THAT WAS NOT DONE THE ONLY EVIDENCE PRODUCED BY THE APPELLAN T WAS A FEW BILLS AND STEREO-TYPE CONFIRMATIONS WHICH DID N OT ESTABLISH CONCLUSIVELY THAT THE TRANSACTIONS WERE G ENUINE. LD. CIT(A) HELD THAT THE JUDGMENT OF HON'BLE SUPREM E COURT IN THE CASE OF KISHINCHAND CHELLARAM VS. CIT 125 ITR 713 (SC) DID NOT ADVANCE THE CASE OF THE APPELLANT BECAUSE IN THE CASE OF THE APPELLANT ONLY LOCAL INQUIRIES W ERE CONDUCTED BY IT. OFFICES TO ASCERTAIN THE EXISTENCE AND IDENTITY OF THE PARTIES AND NO MATERIAL WAS COLLECT ED BEHIND THE BACK OF THE APPELLANT. 3.3 THE APPELLANT SUBMITS THAT THE INSISTENCE OF AS SESSING OFFICER AND LEARNED CIT(A) UPON THE REQUIREMENT OF WRITTEN AGREEMENTS IS UNJUSTIFIED. IN BUSINESS ORAL CONTRAC TS ARE OFTEN MADE AND EXECUTED. TRANSACTIONS WORTH MILLIONS OF R UPEES TAKE PLACE EVERY DAY BY WORD OF MOUTH. FOR EXAMPLE, IN D IAMOND TRADE GOODS WORTH MILLIONS OF RUPEES ARE HANDLED, EXCHANG E HANDS, KEPT IN POSSESSION FOR SEVERAL DAYS WITHOUT ANY REC ORD IN WRITING MOST OF THE TIME. THERE IS NO PRESCRIPTION IN ANY L AW INCLUDING INCOME-TAX ACT, IN THIS RESPECT AND IT IS LEFT TO T HE PARTIES TO TRANSACT IN THE MANNER THEY DEEM FIT. NOT AN IOTA O F MATERIAL HAS BEEN RELIED UPON BY THE AUTHORITIES BELOW TO SIGNIF Y THAT THERE WAS ANYTHING UNUSUAL ABOUT THE ABSENCE OF WRITTEN A GREEMENT IN THE APPELLANT'S CASE. THE OBSERVATION OF THE ASSESS ING OFFICER THAT 17 THE APPELLANT SHOULD HAVE MERRILY DISHONOURED HIS C OMMITMENT BECAUSE THE CONTRACT WAS ORAL AND NOT IN WRITING IS STARTLING. 3.4 BOTH LEARNED ASSESSING OFFICER AND LEARNED CIT( A) HAVE ARGUED THAT THERE WAS NO RICE TRADING IN EARLIER YE ARS AND THE APPELLANT HAD NO INFRASTRUCTURE TO KEEP HUGE QUANTI TY OF RICE AFTER PURCHASE AND SALE AND THAT GOODS WERE IMMEDIA TELY SOLD. THESE ARGUMENTS SHOW THAT BOTH AUTHORITIES WERE NOT FAMILIAR WITH CONTRACT TRADES IN AGRICULTURAL COMMODITIES. T HE APPELLANT SUBMITS THAT LIKE HIM THERE ARE HUNDREDS OF TRADERS WHO INDULGE IN THE BUSINESS OF PURCHASE AND SALE OF AGRICULTURA L COMMODITIES RELYING UPON THE EASY AVAILABILITY OF REQUIRED LOGI STICS ON PAYMENT OF REQUISITE CHARGES. IT WAS NOT NEEDED THAT THE AP PELLANT SHOULD HAVE FIRST BOUGHT GODOWN, TRUCKS AND SUCH LIKE THIN GS BEFORE TAKING A PLUNGE IN RICE TRADING. THE APPELLANT COUL D HAVE ARRANGED TO TAKE DELIVERY HIMSELF AND KEEP THE GOOD S IN STORAGE, AT CERTAIN COST, AS LONG AS CONSIDERED PRUDENT. T HE APPELLANT SOLD THE GOODS IMMEDIATELY AFTER PURCHASE AS IN HIS VIEW THERE WAS GOING TO BE FURTHER LOSS OTHERWISE IN THE FALLI NG MARKET. AS REGARDS THE OBJECTION THAT THE TRADING IN RICE WAS NOT THERE IN THE PRECEDING YEAR, NOTHING TURNS UPON IT. IF SOMETHI NG HAS NOT BEEN DONE EARLIER THAT DOES NOT PRECLUDE THE BUSINE SSMAN FROM DOING IT LATER. THE FACT OF THE MATTER IS THAT THE STATED QUANTITIES OF RICE WERE INDEED PURCHASED AND WERE INDEED SOLD. IT WOULD HAVE BEEN SENSELESS FOR THE APPELLANT TO TAKE DELIV ERY FIRST AND THEN GIVE IT TO BUYERS WHEN ALL THE PARTIES WERE SI TUATE AT NAYA BAZAR NEW DELHI AND THE APPELLANT AT SOLAPUR. ALL T HE PARTIES WITH WHOM THE APPELLANT TRADED WERE SITUATE AT NAYA BAZAR NEW DELHI BECAUSE THAT IS A BIG MANDI OR MARKET FOR RIC E TRADING. THE OBJECTION OF THE LEARNED ASSESSING OFFICER THAT THE RE WAS NOT MUCH GAP BETWEEN DATE OF PURCHASE AND DATE OF SALE IS AGAIN BASED ON THE ASSESSING OFFICER NOT BEING ABLE TO GR ASP THE FACTUAL MATRIX OF THE APPELLANT'S TRANSACTIONS. AS SUBMITTE D TO LEARNED 18 ASSESSING OFFICER TIME AND AGAIN THERE WERE TWO DAT ES IN RELATION TO THE PURCHASE OF RICE - ONE BEING THE DATE ON WHI CH PURCHASE WAS CONTRACTED AND THE SECOND BEING THE DATE ON WHI CH PURCHASE WAS EXECUTED. THEREFORE THERE IS NO SUBSTANCE IN TH E OBJECTION OF THE ASSESSING OFFICER THAT SUCH HUGE DIFFERENCE IN THE RATE COULD NOT HAVE OCCURRED WITHIN LITTLE TIME DIFFERENCE BET WEEN PURCHASE AND SALE. FOR THIS PURPOSE HE SHOULD HAVE BORNE IN MIND THAT THE CONTRACT HAD BEEN MADE BETWEEN THE APPELLANT AND IT S SUPPLIERS MUCH BEFORE THE EXECUTION OF TRADE. THE APPELLANT F URTHER SUBMITS THAT THE RATES AT WHICH THE PURCHASE AND SA LE WERE MADE ARE SUPPORTED BY THE CERTIFICATE OF MARKET RATES IS SUED BY ALL INDIA RICE EXPORTERS ASSOCIATION AND THAT CERTIFICA TE WAS FURNISHED TO THE ASSESSING OFFICER. AS REGARDS THE OBSERVATIONS OF LEARNED CIT(A) THAT THE APPELLANT COULD NOT HAVE RE ACHED ORAL AGREEMENTS FOR PURCHASE OF HUGE QUANTITY OF RICE, T HE APPELLANT SUBMITS THAT THESE ARE UNILATERAL CONJECTURES OF LE ARNED CIT(A) WITHOUT HAVING BEEN BASED ON ANY MATERIAL AT ALL. 3.5 THE OBJECTIONS OF BOTH THE AUTHORITIES THAT BEC AUSE EVERYONE LOOKS FOR PROFITS THE APPELLANT'S TRANSACTIONS SHOU LD NOT HAVE RESULTED INTO LOSS ARE SURPRISING. THEY ARE CORRECT THAT EVERYONE LOOKS FOR PROFIT BUT NOT SO IN THEIR ASSUMPTION THA T EVERYONE MUST SUCCEED IN MAKING PROFIT. SOME PARTIES FAIL AND MAK E LOSS IN SPITE OF THEIR BEST INTENTION. EQUALLY MINDLESS IS THE STATEMENT OF THE ASSESSING OFFICER THAT THE APPELLANT'S AUDITOR HAD AGREED THAT THE APPELLANT DID NOT INDULGE IN RICE TRADING. MERE LY BECAUSE ONE COLUMN IN THE PRESCRIBED FORMAT WAS BLANK SUCH INFE RENCE COULD NOT BE DRAWN WHEN THE SAME AUDITOR HAS SIGNED THE A NNUAL ACCOUNTS AND GIVEN THE CERTIFICATE OF THE CORRECTNE SS AND COMPLETENESS OF BOOKS OF ACCOUNT. 3.6 AS REGARDS THE ARGUMENTS OF BOTH AUTHORITIES TH AT CONFIRMATION LETTERS RECEIVED FROM THE PARTIES WERE IDENTICALLY WORDED AND APPEARED TO HAVE BEEN TYPED ON THE SAME PRINTING 19 MACHINE ETC. THE APPELLANT STATES AND SUBMITS THAT HE WAS NEVER SUPPLIED WITH ANY MATERIAL WHATSOEVER RELIED UPON B Y THE ASSESSING OFFICER. THIS WAS SO IN SPITE OF THE APPE LLANT'S REPEATED REQUESTS DURING THE COURSE OF ASSESSMENT PROCEED INGS. KIND ATTENTION IS INVITED TO THE APPELLANT'S LETTER DATE D 30 TH NOVEMBER 2011 PLACED AT PAGE 15 TO 17 OF THE PAPER-BOOK. TH E APPELLANT IS THEREFORE HANDICAPPED BUT DISAGREES THAT THERE ARE STRIKING SIMILARITIES IN THE FORMAT, CONTENT, STRUCTURE, FON T AND OTHER ATTRIBUTES IN ALL THE PAPERS SENT BY DELHI PARTIES. SECONDLY, THESE DOUBTS WERE BEST PUT TO THE PARTIES IN QUESTION. LE ARNED ASSESSING OFFICER HARDLY DID ANYTHING MEANINGFUL IN THAT REGARD. HOWEVER, IT IS SUBMITTED THAT ALL THE PARTIES WITH WHOM THE APPELLANT ENTERED INTO RICE TRADING ARE SITUATED AT NAYA BAZAR, NEW DELHI. IT IS QUITE POSSIBLE THAT THESE TRADERS MIGHT HAVE INTERACTED BEFORE SENDING REPLIES TO THE ASSESSING OFFICER AND THAT RESULTED INTO CERTAIN SIMILARITIES. AT ANY RATE, NO T MUCH SIGNIFICANCE CAN BE ATTACHED TO SUCH ARGUMENTS UNLE SS IT IS ESTABLISHED THAT THE LETTERS DID NOT EMANATE FROM T HE PURPORTED SIGNATORIES. AS REGARDS THE STATEMENTS AND ARGUME NTS OF LEARNED ASSESSING OFFICER AND CIT(A) REGARDING THE A.OS LETTERS TO SOME OFFICER(S) IN DELHI THE APPELLANT IS IN NO POS ITION TO KNOW OR VERIFY THE ASSERTIONS OF THE ASSESSING OFFICER. THE ENTIRE PROCEEDINGS, IF ANY HAVE BEEN CARRIED OUT BY THE AS SESSING OFFICER BEHIND THE BACK OF THE APPELLANT WORSE STILL, IN SP ITE OF REPEATED REQUESTS DURING THE COURSE OF ASSESSMENT PROCEEDING S LEARNED ASSESSING OFFICER DID NOT CONFRONT THE APPELLANT WI TH ANY MATERIAL. THE APPELLANT SUBMITS THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE APPELLANT HAD SUBMITTED PAN OF EACH ONE OF 11 PARTIES. IT WAS THEREFORE MANDATORY FOR T HE ASSESSING OFFICER TO REFER TO THE ASSESSMENT RECORDS AND THE ASSESSING OFFICERS OF THESE PARTIES. BY ITS LETTER DATED 30 TH NOVEMBER 2011 (PB 15-17) THE APPELLANT REQUESTED THE ASSESSING OF FICER TO DO SO BUT LEARNED ASSESSING OFFICER CHOSE TO IGNORE THAT. INSTEAD THE 20 ASSESSING OFFICER ORDERED THE PARTIES ALL SITUATE I N DELHI AND NOT UNDER ANY CONTROL OR SUPERVISION OF THE APPELLANT B E PRODUCED BEFORE HIM IN SOLAPUR. NO EFFORTS WERE MADE TO ENFO RCE THE ATTENDANCE OF THE PARTIES UPON WHOM ALLEGEDLY NOTIC ES WERE SERVED. THERE IS HARDLY ANY ENQUIRY WORTH CREDIBILI TY AS REGARDS THE PARTIES UPON WHOM ALLEGEDLY NOTICES COULD NOT B E SERVED. THE APPELLANT DOES NOT KNOW EVEN WHETHER ANY PROPER STE PS HAD BEEN TAKEN FOR SERVICE OF SUMMONS UPON SUCH PARTIES. 3.7 BOTH AUTHORITIES HAVE RAISED THE ISSUE THAT THE BILLS DO NOT INDICATE WHAT QUALITY OF BASMATI RICE. THIS SHOWS T HE INTENSITY OF THEIR BIAS. IT IS NOT THE GENERAL MARKET PRACTICE T O MENTION FURTHER SPECIFICATIONS OF RICE BEYOND THE BROAD DESCRIPTION , IF AT ALL, SUCH AS BASMATI, PARMAL, KAMOD, INDRAYANI, PUSA ETC. ANY FURTHER IDENTIFICATION OF QUALITY IS DONE BASED ON SAMPLES AND NOT ON ANY WRITTEN DESCRIPTION. THE OBJECTIONS IN THIS REGARD BY BOTH AUTHORITIES ARE UNREALISTIC, HENCE UNWARRANTED. THE APPELLANT STATES AND SUBMITS THAT THE MENTION OF WORD BASMATI OR RICE IN THE BILLS MEETS THE REQUIREMENT OR EXPECTATION IN R ELATION TO ANY BILL ISSUED IN THE ORDINARY COURSE. BEYOND THIS THE QUALITY WOULD BE DETERMINED ON THE BASIS OF VISUAL INSPECTION OR COOKING AND NOT BY ANY DESCRIPTION ON PAPER. IT IS NOT EXPLAINE D AS TO HOW THE BILLS IN QUESTION THWARTED COMPARISON AND VERIFICAT ION WHEN SUCH DETAILS ARE BY AND LARGE ARE NOT TO BE FOUND IN OTH ER BILLS AS WELL. 3.8 THE APPELLANT SUBMITS THAT THERE IS ONLY ONE IN STANCE WHERE ERRONEOUSLY IT WAS MENTIONED THAT THE APPELLANT HAD ENTERED INTO CONTRACTS TO SALE RICE AT PREDETERMINED SUBSEQUENT DATE. THIS ERROR WAS PROMPTLY CORRECTED. IN ALL OTHER COMMUNIC ATIONS IT HAS BEEN CONSISTENTLY MENTIONED THAT APPELLANT HAD ENTE RED INTO CONTRACTS TO PURCHASE RICE AT PREDETERMINED SUBSEQU ENT DATE. BOTH THE ASSESSING OFFICER AND CIT(A) HAVE VERY UNF AIRLY TRIED TO CAPITALIZE ON THIS ERROR AND LEVELED THE ALLEGATION THAT THE APPELLANT KEEPS ON CHANGING HIS STAND. BOTH OF THEM 21 CONVENIENTLY FORGET THAT THE APPELLANT HAS KEPT REG ULAR BOOKS OF ACCOUNT WHICH ARE DULY AUDITED UNDER SECTION 44AB O F THE ACT AND THAT THE TRANSACTIONS ARE BACKED BY SUPPORTING BILLS AND BANK TRANSFERS OF EQUIVALENT MONEY. WHERE IS THE QU ESTION OF CHANGING STAND FROM TIME TO TIME WHEN THE FACTS ARE CONCLUSIVELY ENCAPSULATED IN CONTEMPORANEOUS DOCUMENTATION? 3.9 AS REGARDS THE ISSUE OF SUMMONS TO THE PARTIES AND SO CALLED EFFORTS MADE IN DELHI THE APPELLANT SUBMITS THAT THE ENTIRE PROCEEDINGS HAVE BEEN, IF AT ALL, ENACTED BEHIND TH E BACK OF THE APPELLANT AND AT NO STAGE THE APPELLANT HAS BEEN CO NFRONTED WITH ANY MATERIAL OR EVIDENCE IN THAT RESPECT. THE APPEL LANT HAS BEEN KEPT IN DARK ALL ALONG BEYOND ONE-SIDED NARRATION I N THE ASSESSMENT ORDER. THE APPELLANT STATES AND SUBMITS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT HAD REQUEST ED LEARNED ASSESSING OFFICER TO INFORM IT AND FURNISH IT WITH THE MATERIAL, IF ANY, GATHERED BY HIM SO THAT PROPER REPLY MAY BE GI VEN TO HIM. BUT HE SIMPLY IGNORED THE APPELLANT'S REQUEST AND T HEREFORE NO RELIANCE CAN BE PLACED ON THE MATERIAL GATHERED, IF ANY. THE APPELLANT SUBMITS THAT IT HAD DISCHARGED THE INITIA L ONUS TO STATE FACTS WITH SUPPORTING EVIDENCE AND IT WAS FOR THE A SSESSING OFFICER TO CARRY OUT PROPER SERVICE OF NOTICES AND SUMMONS ON THE PARTIES. 3.10 THE APPELLANT STATES AND SUBMITS THAT FROM T HE DETAILED DISCUSSION IN THE FOREGOING PARAGRAPHS IT WOULD BE SEEN THAT BOTH THE AUTHORITIES HAVE GROSSLY MISDIRECTED THEMSELVES ON THE FACTS OF THE CASE. THE ASSESSING OFFICER ALLEGES THAT THE PARTIES WITH WHOM THE APPELLANT HAD CARRIED OUT PURCHASE AND SAL E OF RICE DID NOT EXIST AFTER OVERLOOKING AND IGNORING THE ESSENT IAL FACTS SUCH A. ALL THE 11 PARTIES HAVE ISSUED THEIR BILLS OR VOUCHERS WHICH CONTAIN DETAILED ADDRESS, TIN NO., TELEPHONE NO. AND IN MOST CASES MOBILE NO. ALSO. 22 B. ALL PAYMENTS HAVE BEEN MADE OR RECEIVED THROUGH RTGS AND THUS TRANSACTIONS ARE FROM BANK ACCOUNT TO BANK ACCOUNT. C. EACH OF 11 PARTIES HAVE PAN THAT WERE FURNISHED TO ASSESSING OFFICER D. NOTICES AND SUMMONS WERE INDEED SERVED UPON AND RESPONDED TO BY MANY PARTIES. ON THESE FACTS THE FINDING THAT THE PARTIES DID NOT EXIST AND THAT THE DOCUMENTS RELIED UPON BY THE APPELLANT ARE FABRICATED IS ENTIRELY UNSUSTAINABLE. THUS THE VERY BASIS ON WHICH THE ASSESSING OFFICER HAS DISALLOWED THE DEDU CTION OF LOSS IS CONTRARY TO THE FACTS OF THE CASE. LEARNED CIT(A) ALSO HAS SEVERELY MISDIRECTED HIMSELF ON THE FACTS OF TH E APPELLANT'S CASE. HE ALLEGES THAT THERE WERE STRANG E FEATURES IN BANK ACCOUNTS WHEREAS NONE HAS BEEN POINTED OUT IN THE ASSESSMENT ORDER OR IMPUGNED ORDER OF LEARNED CIT(A ). THE FACT OF THE MATTER IS THAT BOTH AUTHORITIES SHUNNED THE POWERFUL EVIDENCE OF BANK TRANSFERS AS THEY HAD NO ANSWER THERETO. CIT(A) FINDS BASELESS DEFECTS IN THE BILLS CONTRARY TO THE GENERAL PRACTICE IN THE TRADE. HE BELITTLES TH E LETTERS OF CONFIRMATION AS THEY WERE NOT DRAFTED AS LEGAL DOCU MENTS. BOTH AUTHORITIES HAVE SEVERELY COMMENTED UPON THE APPELLANT NOT PRODUCING DELIVERY CHALLANS WHEREAS T IME AND AGAIN THEY WERE TOLD THAT DELIVERY OF RICE WAS TAKE N AND GIVEN BY WAY OF THE REQUEST MADE TO THE SUPPLIERS T O DELIVER DIRECTLY TO THE APPELLANT'S BUYERS; THAT ALL THE PA RTIES WERE LOCATED AT NAYA BAZAR DELHI; THERE WAS NO QUESTION OF THE APPELLANT FIRST TAKING DELIVERY IN SOLAPUR AND THEN RESEND IT TO NAYA BAZAR DELHI AND THAT SUCH DOCUMENTATION IF ANY WOULD BE AVAILABLE WITH THE PARTIES IN DELHI AND NO T THE APPELLANT. ABOVE ALL, NEITHER THE ASSESSING OFFICER NOR CIT(A) HAVE MADE ANY ATTEMPT TO MAKE CROSS-VERIFICATION WI TH REFERENCE TO THE ACCOUNTS AND ASSESSMENT RECORDS OF THE PARTIES. THERE IS LAME REFERENCE TO SO CALLED LETTE R TO ADIT (INV.) DELHI FOR WHICH IT IS ALLEGED HE SENT HIS IN SPECTOR. ALL THIS, IF AT ALL, WAS CARRIED OUT BEHIND THE BACK OF THE APPELLANT AND WITHOUT FURNISHING ANY MATERIAL TO TH E APPELLANT. IN SPITE OF REPEATED REQUESTS NOT AN IOT A OF SUCH MATERIAL WAS FURNISHED TO THE APPELLANT. THE FACT O F THE MATTER IS THAT THERE IS NOT EVEN A REMOTE DENIAL FR OM ANY OF THE PARTIES. 3.11 BOTH AUTHORITIES HAVE GRIEVOUSLY MISDIRECTED THEMSELVES IN LAW ALSO. THEY HAVE MADE WRONGFUL ASSUMPTION IN LAW THAT THE APPELLANT WAS REQUIRED TO PROVE THE GE NUINENESS OF 23 THE TRANSACTIONS BEYOND ANY SHADOW OF THEIR SUSPICI ON AND IF THAT REQUIRED PRODUCTION OF 11 PARTIES IN SOLAPUR T HE APPELLANT OUGHT TO HAVE DONE THAT. THE IMPUGNED ORDER IS CATE GORICAL, 'IT IS ALL THE MORE NECESSARY FOR THE APPELLANT TO PRODUCE COGENT EVIDENCE OR THE PARTIES INVOLVED TO DISPEL THE SUSP ICION OF THE ASSESSING OFFICER AND TO SHOW THAT THE IMPUGNED TRA NSACTIONS ARE GENUINE. THE ONLY EVIDENCE PRODUCED BY THE APPE LLANT IS A FEW BILLS AND STEREOTYPE CONFIRMATIONS, WHICH AS DISCUS SED HEREINABOVE DO NOT ESTABLISH CONCLUSIVELY THAT THE TRANSACTIONS ARE GENUINE AND THE APPELLANT HAS ACTUALLY CARRIED OUT SUCH ACTIVITY IN RICE TRADING.' IN OTHER WORDS THE LAW P ROPOUNDED BY CIT(A) IS THAT THERE IS DUTY CAST UPON THE TAXPAYER TO DISPEL ALL SUSPICIONS OF THE ASSESSING OFFICER AND DO WHATEVER IT TAKES; THAT IT IS OPEN TO THE ASSESSING OFFICER TO LEAVE OUT TH E COGENT EVIDENCE FURNISHED BY THE ASSESSEE IF THE SAME DOES NOT FALL IN LINE OF THE OBJECTIVE OF DISALLOWANCE AND THAT EVEN THEN THERE IS DUTY OF THE ASSESSEE TO PROVE ITS TRANSACTIONS CONCLUSIVELY. TH US ACCORDING TO CIT(A) THEIR SUSPICION IS ENOUGH AND THE APPELLANT MUST RULE OUT THE SUSPICION CONCLUSIVELY. THE APPELLANT STATES AN D SUBMITS THAT THIS IS NOT THE LAW OF THE LAND. LAW IS THAT THE AP PARENT STATE IS REAL AND THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. IF IT IS REVENUE WHICH CLAIMS THAT THE APPARENT IS NOT THE REAL THE ONUS IS ON REVENUE . REFERENCE IN THIS RESPECT IS INVITED TO CIT V. U. M. SHAH 90 ITR 396 (BOM); CIT V. DAULAT RAM RAWATMULL 87 ITR 349 (SC); CIT V. BED I & CO. PVT. LTD. 230 ITR 580 (SC) AND A HOST OF OTHER CASES WHE RE THIS DICTUM HAS BEEN APPLIED. THIS BURDEN OF PROOF IS ON EROUS AND IT CANNOT BE DISCHARGED BY SUSPICION. SUSPICION HOWSOE VER STRONG CANNOT TAKE PLACE OF EVIDENCE - MEHTA FARIKH & CO. V. CIT 30 ITR 181 (SC); UMACHARAN SHAW & BROS V. CIT 37 ITR 271 ( SC); LALCHAND BHAGAT AMBICA RAM V. CIT 37 ITR 288 (SC); SONA ELECTRIC CO. V. CIT 152 ITR 507 (DEL); SUKHDAYAL RA MBILAS V. CIT 24 136 ITR 414 (BOM); R. Y. DURLABHJI V. CIT 211 ITR 1 78 (RAJ.); CIT V. BEDI & CO. PVT. LTD 230 ITR 580 (SC) ETC. 3.12 THE MAJOR PART OF THE ASSESSMENT AND CIT(A) O RDER IS BASED ON FAULT FINDING WITH THE REPLY RECEIVED FROM PARTIES AND THE SO CALLED SIGNATURE VARIATIONS ETC. NONE OF THI S MATERIAL CONSTITUTES EVIDENCE OR MATERIAL TO REFUTE THE APPE LLANT'S TRANSACTIONS THAT ARE WELL SUPPORTED BY DOCUME NTARY AND EXTERNAL EVIDENCE. NONE OF THESE DOUBTS WERE PUT TO THE PARTIES WHO WROTE THOSE LETTERS AND WHO ISSUED THOSE BILLS. APART FROM ISSUANCE OF SUMMONS NO STEPS WERE TAKEN TO ENFORCE THE ATTENDANCE OF THE PARTIES. ON THE TOP OF IT BOTH AU THORITIES HAVE DECIDED AGAINST THE APPELLANT BECAUSE THE APPELLANT DID NOT PRODUCE THESE PARTIES FOR EXAMINATION BY THE ASSESS ING OFFICER AT SOLAPUR. IN THESE CIRCUMSTANCES THE AUTHORITIES CAN NOT UNILATERALLY RAISE SOME QUESTIONS AND THEN THEMSELV ES ANSWER AGAINST THE APPELLANT. THE ASSESSEE CANNOT BE FAULT ED, NOR CAN ANY ADVERSE INFERENCE BE DRAWN AGAINST THE APPELLAN T IF THE PARTIES DID NOT APPEAR IN RESPONSE TO THE SUMMONS I SSUED - NATHU RAM PREMCHAND V. CIT 49 ITR 561 (ALL.); CIT V . ORISSA CORPORATION (P) LTD. 159 ITR 78 (SC); CIT V. U. M. SHAH 90 ITR 396 (BOM) ETC. 3.13 AS THE MATTER STANDS, BOTH THE ASSESSMENT ORD ER AND IMPUGNED ORDER OF LEARNED CIT(A) ARE BASED ON NO MA TERIAL AGAINST THE APPELLANT. AFTER LEAVING OUT MATERIAL E VIDENCE FURNISHED BY THE APPELLANT THE ASSESSING OFFICER ST ATES THAT HE CARRIED OUT SOME ENQUIRY. EVEN THIS SO CALLED ENQUI RY HAS NOT BROUGHT OUT ANY MATERIAL OR EVIDENCE AGAINST THE AP PELLANT. THE ENTIRE ASSESSMENT ORDER IS STREWN WITH SUSPICION, C ONJECTURES AND SURMISES. SUCH AN ASSESSMENT IS LEGALLY UNSUSTA INABLE. RELIANCE IN THIS BEHALF IS PLACED ON NAGULAKONDA VE NKATA SUBBA RAO 31 ITR 781 (AP); KISHINCHAND CHELLARAM V. CIT 1 25 ITR 713 25 (SC); CIT V. BIJU PATNAIK 190 ITR 396 (ORI); SUNITA SINGHAL V. ADI 220 ITR 605 (DEL) AND A HOST OF OTHER CASES. 3.14 THE APPELLANT STATES AND SUBMITS THAT MOST OF THE CASE LAW ENUMERATED IN THE FOREGOING PARAGRAPHS HAVE ARI SEN UNDER THE PROVISIONS OF S. 68, 69, 69A ETC. WHICH ARE SPE CIAL RULES OF EVIDENCE FOR THE PURPOSE OF I. T. ACT AND BY LEGAL FICTION ADDITIONAL BURDEN OF PROOF IS CAST UPON THE ASSESSEE. IN THE CASE OF THE APPELLANT TRANSACTIONS ARE OF PURCH ASES AND SALES MADE IN THE COURSE OF TRADING. THESE TRANSACTIONS A RE NOT COVERED BY THE PROVISIONS OF S. 68, 69, 69A TO 69D. THERE I S NO SPECIAL OR ADDITIONAL BURDEN OF PROOF CAST UPON THE APPELLANT. HENCE, THE CASE OF THE APPELLANT IS FAR STRONGER THAN THE CASE LAW RELIED UPON IN THE FOREGOING PARAGRAPHS. 3.15 LEARNED CIT(A) HAS RAISED A NEW ISSUE IN PARA 2.3.3 OF THE IMPUGNED ORDER THAT IN ANY CASE THE LOSS INCURR ED BY THE APPELLANT BEING SPECULATION LOSS CANNOT BE SET OFF AGAINST THE APPELLANT'S INCOME FROM SOURCES OTHER THAN SPECUL ATION. FOR THIS PURPOSE HE ALLEGES THAT IN THE CASE OF THE APP ELLANT THE TRANSACTIONS FOR PURCHASE AND SALE OF COMMODITY ARE ULTIMATELY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. IN THE S AME VEIN HE ARGUES, RELYING UPON ITAT DECISION IN THE CASE OF B ISHWANATH TRADERS AND INVESTORS CO. LTD. V. DCIT 47 ITD 476 ( DEL) THAT CONSTRUCTIVE OR SYMBOLIC DELIVERY OF GOODS IS OF NO CONSEQUENCE. THAT DECISION HAS BEEN BASED ON THE PECULIAR FACTS AND CIRCUMSTANCES OF THAT CASE AND BY VIRTUE OF DISTING UISHED FACTS OF THE APPELLANT IS IN FAVOUR OF THE APPELLANT. HON'BI E DELHI BENCH HAS DECIDED THE CASE AGAINST THE ASSESSEE BEFORE TH EM IN THE FOLLOWING WORDS:- 'CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CA SE, WE ARE OF THE VIEW THAT ASSESSEE HAS FAILED TO ESTA BLISH THAT THE GOODS HAD IN FACT BEEN PURCHASED BY IT FRO M OTHERS AND THAT THE FIVE PARTIES HAD ACTED MERELY A S ITS 26 INTERMEDIARIES. SINCE ASSESSEE HAS NOT TAKEN OR GIV EN THE ACTUAL DELIVERY OF GOODS AND SINCE THE TRANSACT IONS BETWEEN THE ASSESSEE AND THE FIVE PARTIES HAD BEEN SETTLED OTHER THAN BY WAY OF ACTUAL DELIVERY OF GOO DS, THE SAME, IN OUR VIEW, WERE SPECULATIVE TRANSACTION S WITHIN THE MEANING OF S. 43(5). WE, THEREFORE, UPHO LD THE FINDING OF THE REVENUE AUTHORITIES THAT THE LOS S SUFFERED BY THE ASSESSEE IS A SPECULATIVE LOSS AND NOT A BUSINESS LOSS.' IN THAT CASE THE ASSESSING OFFICER FOUND THAT THERE WAS NO EVIDENCE THAT GOODS WERE ACTUALLY ACQUIRED AND SUBSEQUENTLY SOLD TO OTHERS BY THE PARTIES NAMED BY THE APPELLANT. IN THE CASE OF THE APPELLANT THE PURCHAS E AND SALES HAVE BEEN INDEPENDENTLY MADE BY THE APPELLANT HIMSELF AND THERE IS COMPLETE DOCUMENTATION AND CONFIRMATION OF THE TRANSACTIONS. AS ALL THE PARTIE S WERE SITUATE AT NAYA BAZAR ONLY, AT THE REQUEST OF THE A PPELLANT GOODS WERE ACTUALLY DELIVERED TO THE APPELLANT'S BU YERS AND THAT CLEARLY AMOUNTED TO DELIVERY TAKEN BY THE APPE LLANT, THE SUPPLIER PARTIES OTHERWISE HAVING NO TRANSACTIO N OR CONNECTION WITH THE BUYING PARTIES. IN THIS MANNER THE APPELLANT HAS TAKEN AND GIVEN DELIVERY OF GOODS AND CORRESPONDINGLY MADE SEPARATELY FULL PAYMENT TO THE SUPPLIERS AND RECEIVED FULL PAYMENT FROM THE BUYERS . THE FACTS OF THE CASE OF THE APPELLANT ARE VASTLY DIFFE RENT FROM THAT OF THE ASSESSEE IN THE DECISION RELIED UPON BY LEARNED CIT(A). IN THE CASE OF THE APPELLANT NEITHER THE CO NTRACT OF PURCHASE NOR THE CONTRACT OF SALE HAS BEEN SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. THERE IS NO SETTLEMENT BAS ED ON DIFFERENCE IN PRICE PAYABLE AND RECEIVABLE. THE LOS S CLAIMED IS DIFFERENCE BETWEEN THE PURCHASE CONSIDERATION PA ID AND SALE CONSIDERATION RECEIVED. 18. IN VIEW OF THE DISCUSSION IN THE FOREGOING PARA GRAPHS THE APPELLANT STATES AND SUBMITS THAT THERE IS NO FORCE IN THE REASONS GIVEN BY THE ASSESSING OFFICER FOR DISALLOW ING THE LOSS CLAIMED BY THE APPELLANT OR BY CIT(A) FOR SUST AINING THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER. THE APPELLANT THEREFORE PRAYS THAT ITS GROUNDS OF APPEA L 1 & 2 BE ALLOWED AND THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE APPELLANT THE DEDUCTION OF THE LOSS CLAIMED BY THE APPELLANT. 4. IN THIS BACKGROUND, THE LEARNED AUTHORIZED REPRE SENTATIVE SUBMITTED THAT THE ORDER OF AUTHORITIES BELOW BE SE T ASIDE AND THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE ASSESSEE S DEDUCTION OF LOSS AS CLAIMED BY HIM. ON THE OTHER HAND, LEARNED 27 DEPARTMENTAL REPRESENTATIVE HAS STRONGLY SUPPORTED THE ORDER OF CIT(A) THE ORDER OF AUTHORITIES BELOW. WITH REGARD TO SET OFF OF LOSSES BEING NO GENUINE AND THE LEARNED DEPARTMENTA L REPRESENTATIVE DREW OUR ATTENTION TO THE VARIOUS PA RTS OF AUTHORITIES BELOW TO JUSTIFY THEIR ORDER. 5. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS HELD THAT THE PARTIES FROM WHOM THE ASSESSEE PURCHASED RICE AND P ARTIES TO WHOM THE ASSESSEE SOLD THE RICE DID NOT EXISTS, THE REFORE, BOTH PURCHASES AND SALES ARE BOGUS. THE ASSESSING OFFIC ER HAS BASED HIS FINDING ON ASSERTION THAT NOTICES ISSUED BY HIM IN RESPECT OF 6 OUT OF 11 PARTIES WERE RETURNED UNDELIVERED BY POST AL AUTHORITIES AND SIMILARLY, THE NOTICES COULD NOT BE SERVED ON T HOSE 6 PARTIES BY THE CONCERNED ITO, NEW DELHI AS WELL. THE ASSES SING OFFICER OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE DELHI BUSINESSMEN FOR EXAMINATION BY THE ASSESSING OFFICER AT SOLAPUR . THE STAND OF THE ASSESSEE HAS BEEN THAT THESE FINDINGS OF ASSESS ING OFFICER WERE NOT JUSTIFIED THAT THE REASON OF THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ITS FINDING IN RELATION TO 5 PARTIES O N WHOM THE NOTICES WERE SERVED ON BOTH OCCASIONS. THE STAND OF THE AS SESSEE HAS BEEN THAT IN SPITE OF WRITTEN REQUESTS DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DID N OT FURNISH THE ASSESSEE ANY SO CALLED MATERIAL OF NON-SERVICE OF 6 PARTIES. AS REGARDS NON-PRODUCTION OF THE PARTIES BY THE ASS ESSEE BEFORE THE ASSESSING OFFICER, NO ADVERSE INFERENCE COULD B E DRAWN THAT THE PARTIES DO NOT EXIST BECAUSE (I) THE ASSESSING OFFICER EXCEEDED HIS POWERS IN CALLIN G UPON THE ASSESSEE TO DO SO IN VIOLATION OF PROVISIO NS OF SECTION 131 OF THE ACT AND (II) THE ASSESSING OFFICER MUST HAVE APPRECIATED THAT TH OSE DELHI PARTIES WOULD NOT ATTEND AT SOLAPUR MERELY AT THE REQUEST OF THE ASSESSEE BECAUSE THEY WERE UNDER NO OBLIGATION TO DO SO. 28 THE CIT(A) AT PAGE 24 OF ITS ORDER HAD APPRECIATED THAT THERE WAS NO ADVERSE INFERENCE AGAINST THE ASSESSEE FOR N ON-SERVICE OF NOTICE ON 6 PARTIES. THE STAND OF THE ASSESSEE HAS BEEN THAT THE OBSERVATION OF LOWER AUTHORITIES WAS NOT JUSTIFIED WITH REGARD TO NON-EXISTENCE OF PARTIES BECAUSE (I) TRANSACTIONS OF ASSESSEE ARE FROM BANK ACCOUNT TO BANK THROUGH RTGS TRANSFER. THERE WERE 11 BANK ACCOUNTS OF PARTIES AT DELHI DULY REFLECTED IN BANK STATEMENTS OF ASSESSEE, (II) THE BILLS ISSUED BY THE ASSESSEE PARTIES MENTIONED THEIR TELEPHONE NUMBERS IN MOST CASES MOBILE NUMBERS ALSO, (III) TIN NUMBERS ARE MENTIONED IN EVERY BILL AND (IV) EACH OF THE PARTIES IS ASSESSED TO INCOME-TAX AND H AVE PERMANENT ACCOUNT NUMBERS WHICH HAVE BEEN FURNISHED TO THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. 5.1 ACCORDING TO THE LEARNED AUTHORIZED REPRESENTAT IVE THAT THE OBSERVATIONS MADE BY THE ASSESSING OFFICER ON SUSPI CION, CONJECTURES AND SURMISES. THERE IS NO CONSIDERATIO N OF VITAL AND CLINCHING EVIDENCES FILED BY THE ASSESSEE. IN THE ENTIRE ASSESSMENT ORDER THERE IS NOT EVEN A WORD ABOUT THE FACT THAT THE ASSESSEES TRANSACTIONS ARE FROM HIS BANK ACCOUNT T O 11 BANK ACCOUNTS OF DIFFERENT TRADERS SITUATED IN DELHI. T HERE IS NO FOLLOW UP TO THE INFORMATION ABOUT PAN AND TIN OF THE PART IES, WHICH IS NOT JUSTIFIED. 5.2 APART FROM THE ALLEGED NON-SERVICE OF NOTICES O N SOME OF THE PARTIES AS A RESULT OF SOME EXERCISE STATED TO HAVE BEEN CARRIED OUT BEHIND THE BACK OF THE ASSESSEE AND THE SAME CO ULD NOT BE USED AGAINST THE ASSESSEE WHILE THE SAME HAS NOT BE EN CORROBORATED BY CLINCHING EVIDENCE. BOTH THE AUTHO RITIES BELOW HAVE RAISED DOUBT ABOUT THE TRANSACTIONS WHICH THEY DID NOT PUT 29 TO THE ASSESSEE OR PARTIES WITH WHOM THE ASSESSEE H AS TRANSACTED. THE VARIOUS QUESTIONS WHICH ARE BASIS FOR ORDER BY AUTHORITIES BELOW HAVE NOT BEEN CONFRONTED TO THE A SSESSEE. FOR EXAMPLE :- A) IN ABSENCE OF ANY CONTRACT IN WRITING, THE ASSESSE E COMPANY WAS NOT UNDER OBLIGATION TO HONOUR THE CONTRACTS AND MAKE LOSSES. THIS SHOWS THAT THE ASSESSING OFFICER HAS SCANT KNOWLEDGE OF COMMERCIAL PRACTICE. B) FOR ANY TRANSACTION TO BE HELD ON 'DELIVERY BASIS' THERE HAS TO BE QUANTITY INWARD PHYSICALLY TO ITS STORAGE , ITS TRANSPORTATION THROUGH LORRIES, MAINTAINING DELIVER Y DETAILS, FREIGHT BILLS, DELIVERY CHALLANS, DISPATCH NOTES. THESE ARGUMENTS HAVE BEEN RAISED WHILE THE ASSESSIN G OFFICER KNEW ALL THE TIME THAT THE DELIVERY WAS G IVEN BY THE APPELLANT'S SUPPLIERS ON THE INSTRUCTIONS OF THE APPELLANT TO THE APPELLANT'S BUYERS ALL SITUATED AT NAYA BAZAR, DELHI. C) THE APPELLANT FAILED TO PRODUCE ANY AGREEMENTS IN ABSENCE OF WHICH THERE CANNOT BE INFERRED PRE-AGREE D RATES. HOW COULD ANY AGREEMENT BE PRODUCED WHEN THE AGREEMENTS WERE ORAL, IN ACCORDANCE WITH MARKET PRACTICE? D) A LETTER FROM SUSHILKUMAR & SONS, DELHI AND FROM MANISHKUMAR SUSHILKUMAR & SONS, DELHI WERE POSTED FROM SOLAPUR. THESE STATEMENTS NEED FACTUAL VERIFICATION IN LIGHT OF MERIT OF CASE. E) CONFIRMATION LETTER OF ARIHANT SALES CORPORATION, N AYA BAZAR, NEW DELHI STATED THAT THE APPELLANT PURCHASE D RICE FROM HIM WHEREAS AS PER THE APPELLANT RICE WAS SOLD TO AND NOT PURCHASED FROM ARIHANT SALES CORPORATION. WITHOUT SEEKING ANY CLARIFICATION FROM ARIHANT SALES CORPORATION THE ASSESSING OFFICER CAN NOT DRAW ADVERSE INFERENCE AGAINST THE APPELLANT FROM WHAT SEEMS TO BE MERELY AN INADVERTENT ERROR. F) ON PERUSAL OF CONFIRMATION LETTERS OF ARIHANT SALE S CORPORATION, PREMCHAND DEEPAKKUMAR AND SAINATH AGRO INDIA IT APPEARED THAT THESE CONFIRMATIONS W ERE COMMONLY DRAFTED AND PRINTED. THESE OBSERVATION S OF ID. ASSESSING OFFICER AND CIT(A) ARE ON THEIR OW N 30 WITHOUT SEEKING ANY EXPLANATION FROM THE PARTIES CONCERNED AND IGNORING THAT THESE WERE DIRECT CORRESPONDENCE BETWEEN ASSESSING OFFICER AND PARTIE S WITHOUT APPELLANT BEING TOLD ABOUT IT. G) THE LETTERS RECEIVED FROM THE PARTIES DO NOT GIVE PURCHASE RATE, QUANTITY AND QUALITY AGREED, DELIVER Y SCHEDULE ETC. HOW THIS CAN BE HELD OUT AGAINST THE APPELLANT? H) THE PURCHASE BILLS SHOWED THAT PURCHASES HAVE BEEN MADE JUST ONE OR TWO DAYS BEFORE THOSE WERE SOLD AN D NOT WELL IN ADVANCE AS EXPLAINED BY THE APPELLANT. THIS WAS EXPLAINED TIME AND AGAIN. THE FACT OF THE MATTE R IS THAT PURCHASE BILLS WERE ISSUED NOT ON THE DATE OF CONTRACT BUT ON THE DATE OF DELIVERY. THE APPELLANT IMMEDIATELY SOLD GOODS WHEN THE APPOINTED DATE OF DELIVERY ARRIVED BECAUSE THE MARKET HAD HEAVILY COM E DOWN. THE CHART OF DATES OF PURCHASE AND DATES OF S ALE GIVEN BY THE ASSESSING OFFICER AT PAGES 17 TO 20 OF THE ASSESSMENT ORDER PROVE THE APPELLANT'S CASE; OTHERW ISE THERE IS NO WHICH WAY THAT SUCH HUGE DIFFERENCE WOU LD ARISE. I) AS MENTIONED IN PARA 3 THE AUDITOR OF THE ASSESSEE COMPANY HAS ALSO AGREED THAT THE COMPANY NEVER INVOLVED IN ANY TRADING ACTIVITIES LIKE TRADING IN RICE. THIS IS PATENTLY PERVERSE STATEMENT. IN THE SAME PA RA 3 THE ASSESSING OFFICER HIMSELF OBSERVES THAT SALE BI LLS, PURCHASE BILLS OF RICE WERE FURNISHED. THE AUDITORS HAVE SIGNED THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT WHICH ARE BASED ON THE APPELLANT'S TRANSACTIONS IN RICE DURING THE YEAR. J) THE BILLS OF SALES AND PURCHASE NOWHERE MENTION THE QUALITY OR SPECIE OF RICE. BILLS OR INVOICES WITHOU T QUALITY OR TYPE ARE ACTUALLY NO BILLS. ASSESSING OF FICER OR CIT(A) DO NOT RELY ON ANY MATERIAL TO INDICATE T HAT IT WAS MANDATORY TO MENTION QUALITY OF RICE IN THE BIL LS. THE APPELLANT STATED AND SUBMITTED THAT THESE BILLS ARE ISSUED IN ORDINARY COURSE AS PER THE MARKET PRACTIC E AT NAYA BAZAR, DELHI AT THE RELEVANT TIME. K) NOT A SINGLE PARTY WAS PRODUCED IN-SPITE OF REQUISI TION. THE ASSESSING OFFICER'S REQUISITION IS ILLEGAL. U/S 131 THE PERSONAL ATTENDANCE OF A PERSON HAS TO BE ENFOR CED BY THE ASSESSING OFFICER HIMSELF AND NO ADVERSE 31 INFERENCE CAN BE DRAWN IF THE ASSESSEE DOES NOT PRODUCE ANY PARTY FOR EXAMINATION BY HIM. L) THE APPELLANT MODIFIED ITS STAND AS TO WHETHER SALE S WERE CONTRACTED IN ADVANCE OR PURCHASES WERE CONTRACTED IN ADVANCE. THERE WAS AN ERROR ONLY ONCE IN THE LETTER OF CA THAT WAS PROMPTLY CORRECTED. OTHER WISE THERE HAS BEEN THE CONSISTENT STAND OF THE APPELLAN T THAT IT HAD CONTRACTED PURCHASES WELL IN ADVANCE AN D LATER ON THE GOODS THUS PURCHASED WERE SOLD AT LOSS . 5.3 FROM THE ABOVE, IT MAY BE INFERRED THAT EVEN TH E AUTHORITIES BELOW HAVE NOT BEEN CONFRONTED, THE MATERIAL RELIED BY THEM FOR REJECTING THE CLAIM OF THE ASSESSEE WHICH IS NOT JU STIFIED. IT AMOUNTS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTI CE. WE FIND THAT THE ASSESSING OFFICER HAS POWER U/S.131 OF THE ACT FOR ENFORCING THE ATTENDANCE OF THE PERSON WHO COULD NOT BE PRODU CED BEFORE THE ASSESSING OFFICER ON BEHALF OF ASSESSEE. IN SU CH A SITUATION, NO ADVERSE INFERENCE SHOULD BE DRAWN IF THE ASSESSE E DOES NOT PRODUCE ANY PARTY FOR EXAMINATION. THE ASSESSING O FFICER HAS MAINLY BASED HIS FINDING ON ASSERTION THAT THE NOTI CES WERE ISSUED BY HIM IN RESPECT OF 6 OUT OF 11 PARTIES WER E RETURN UN- DELIVERED BY POSTAL AUTHORITIES. SIMILARLY, NOTICE S COULD NOT BE SERVED ON 6 PARTIES BY THE CONCERNED ITO, NEW DELHI AS WELL. AS STATED ABOVE, THE STAND OF THE ASSESSEE HAS BEEN TH AT IN SPITE OF WRITTEN REQUESTS DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DID NOT FURNISH THE ASSESSEE ANY MATERIAL OF NON-SERVICE OF 6 PARTIES. IN SUCH SITUATION, NO AD VERSE INFERENCE COULD BE DRAWN THAT PARTIES IN QUESTION DO NOT EXIS TS BECAUSE THE ASSESSING OFFICER HAS OPTION FOR CALLING THE ATTEND ANCE OF PARTIES UNDER THE PROVISIONS OF SECTION 131 OF THE ACT. TH E OBSERVATION OF AUTHORITIES BELOW WAS PREMATURE WITH REGARD TO THEI R FINDING OF NON-EXISTENCE OF THE ABOVE PARTIES BECAUSE THE TRAN SACTION OF ASSESSEE WAS THROUGH BANKING CHANNEL. THE DETAILS OF ALL PARTIES INCLUDING TELEPHONE, PAN, TIN NUMBER WERE AVAILABLE ON RECORD. IN VIEW OF ABOVE AND IN THE INTEREST OF JUSTICE, WE SET ASIDE THE 32 ORDER OF CIT(A) AND RESTORE THE MATTER TO THE ASSES SING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AS PER FACT AN D LAW AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSE E. SINCE WE ARE RESTORING THE MATTER ON BROAD PROPORTION OF VIO LATION OF PRINCIPLES OF NATURAL JUSTICE, WE ARE REFRAINING FR OM COMMENTING ON THE MERIT OF THE ISSUE AT HAND. AS A RESULT, TH IS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 6. THE NEXT ISSUE IS WITH REGARD TO ALLOWABILITY OF DONATION OF 19,94,790/- OUT OF 20,00,000/- MADE TO MNS (A POLITICAL PARTY) BY THE ASSESSEE. THE RELEVANT FACTS IN THIS REGARD ARE THAT THE RETURN OF INCOME WAS FILED ON 26.09.2009 DECLARING TOTAL INCOME OF 75,910/- WHICH WAS SUBSEQUENTLY REVISED, WHEREIN T HE TOTAL INCOME WAS SHOWN AT NIL, TO CLAIM DEDUCTION UNDER C HAPTER VIA ON ACCOUNT OF DONATION PAID TO A POLITICAL PARTY, N AMELY, MAHARASHTRA NAVNIRMAN SENA. IT WAS NOTED BY THE ASS ESSING OFFICER THAT IN THE REVISED COMPUTATION FILED IN TH E COURSE OF THE ASSESSMENT PROCEEDINGS, THE GROSS TOTAL INCOME OF T HE ASSESSEE STATED TO BE 20,75,908/- FROM WHICH DEDUCTION FOR AN AMOUNT OF 20,00,000/- WAS CLAIMED UNDER CHAPTER VIA, THOUGH I N THE REVISED RETURN FILED, SUCH DEDUCTION WAS CLAIMED TO THE EXTENT OF GROSS TOTAL INCOME OF 75,908/- DECLARED THEREIN. THE ASSESSING OFFICER FURTHER FOUND THAT DEDUCTION OF 20,00,000/- WAS CLAIMED IN THE BOOKS OF ACCOUNTS UNDER THE MAJOR HE AD 'ESTABLISHMENT EXPENSES' UNDER THE NOMENCLATURE 'DO NATION TO POLITICAL PARTY' AS REVENUE EXPENSES. HOWEVER, THE ASSESSING OFFICER HELD THAT DONATIONS TO POLITICAL PARTIES AR E ADMISSIBLE AS DEDUCTION U/S.80GGB SUBJECT TO THE PROVISIONS OF SE C.293A OF THE COMPANIES ACT, 1956 R.W.S. 349 & 350 WHICH REST RICT THE QUANTUM OF SUCH DEDUCTION EQUAL TO 5% OF THE 'AVERA GE PROFITS' OF THREE IMMEDIATELY PRECEDING FINANCIAL YEARS OF A CO MPANY. ACCORDINGLY, THE DEDUCTION ALLOWABLE IN RESPECT OF DONATIONS 33 MADE TO MAHARASHTRA NAVNIRMAN SENA BY THE ASSESSEE WAS WORKED OUT BY THE ASSESSING OFFICER AS UNDER:- PROFITS OF THE APPELLANT IN THE IMMEDIATE PRECEDIN G THREE YEARS : 31/3/2006 : RS.NIL 31/3/2007 : RS.57,689/- 31/3/2008 : RS.2,55,170/- THE PROFIT FOR IMMEDIATELY PRECEDING YEARS : RS.3,12,859/- AVERAGE PROFIT FOR THE LAST THREE FINANCE YEARS : RS.1,04,286/- 5% OF AVERAGE PROFIT : RS.5,214/- ACCORDINGLY, THE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80GGB IN RESPECT OF DONATION MADE WAS RESTRICTE D TO 5,214/- AS AGAINST CLAIMED BY THE ASSESSEE AT 20,00,000/- AND THE REMAINING AMOUNT OF 19,94,790/- WAS DISALLOWED. THE CIT(A) HAS CONFIRMED THE SAME BY OBSERVING AS UNDER : 3.3 THE SUBMISSIONS OF THE APPELLANT ARE CAREFULLY CONSIDERED WITH REFERENCE TO THE RELEVANT PROVISION S OF SEC.80GGB AND SEC.293A OF THE COMPANIES ACT, 1956. EXPLANATION TO SEC.80GGB PROVIDES THAT FOR THE PURP OSE OF THE SECTION, THE WORD 'CONTRIBUTE' WITH ITS GRAMMAT ICAL VARIATION HAS THE MEANING ASSIGNED TO IT UNDER SECT ION 293A OF THE COMPANIES ACT. TO DECIDE THE ISSUE, IT IS NE CESSARY TO EXAMINE THE PROVISIONS OF SEC.293A OF THE CO MPANIES ACT, 1956, WHICH IS EXTRACTED AS UNDER: - 293A. PROHIBITIONS AND RESTRICTIONS REGARDING POLI TICAL CONTRIBUTIONS POLITICAL CONTRIBUTIONS 293A. PROHIBITIONS AND RESTRICTIONS REGARDING POLIT ICAL CONTRIBUTIONS (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT:- (A) NO GOVERNMENT COMPANY; AND 34 (B) NO OTHER COMPANY WHICH HAS BEEN IN EXISTENCE FOR LE SS THAN THREE FINANCIAL YEARS, SHALL CONTRIBUTE ANY AM OUNT OR AMOUNTS, DIRECTLY OR INDIRECTLY,- (I) TO ANY POLITICAL PARTY; OR (II) FOR ANY POLITICAL PURPOSE TO ANY PERSON. (2) A COMPANY, NOT BEING A COMPANY REFERRED TO IN C LAUSE (A) OR CLAUSE (B) OF SUB SECTION (I), MAY CONTRIBUT E ANY AMOUNT OR AMOUNTS, DIRECTLY OR INDIRECTLY,- (A) TO ANY POLITICAL PARTY; OR (B) FOR ANY POLITICAL PURPOSE TO ANY PERSON: PROVIDED THAT THE AMOUNT OR, AS THE CASE MAY BE, TH E AGGREGATE OF THE AMOUNTS WHICH MAY BE SO CONTRIBUTE D BY A COMPANY IN ANY FINANCIAL YEAR SHALL NOT EXCEED FIVE PER CENT OF ITS AVERAGE NET PROFITS DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 349 AND 350 DURING THE THREE IMMEDIATELY PRECEDING FINANCIAL YEARS: PROVIDED FURTHER THAT NO SUCH CONTRIBUTION SHALL BE MADE BY A COMPANY UNLESS A RESOLUTION AUTHORISING THE MAKIN G OF SUCH CONTRIBUTION IS PASSED AT A MEETING OF THE BOA RD OF DIRECTORS AND SUCH RESOLUTION SHALL, SUBJECT TO THE OTHER PROVISIONS OF THIS SECTION, BE DEEMED TO BE JUSTIFI CATION IN LAW FOR THE MAKING AND THE ACCEPTANCE OF THE CONTRI BUTION AUTHORISED BY IT. EXPLANATION.-WHERE A PORTION OF A FINANCIAL YEAR OF THE COMPANY FALLS BEFORE THE COMMENCEMENT OF THE COMPAN IES (AMENDMENT) ACT, 1985, AND A PORTION FALLS AFTER SU CH COMMENCEMENT, THE LATTER PORTION SHALL BE DEEMED TO BE A FINANCIAL YEAR WITHIN THE MEANING AND FOR THE PURPO SES, OF THIS SUB-SECTION. (3) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROV ISIONS OF SUB-SECTIONS (1) AND (2)- (A) A DONATION OR SUBSCRIPTION OR PAYMENT CAUSED TO BE GIVEN BY A COMPANY ON ITS BEHALF OR ON ITS ACCOUNT TO A PERSON WHO, TO ITS KNOWLEDGE, IS CARRYING ON ANY AC TIVITY WHICH, AT THE LIME AT WHICH SUCH DONATION OR SUBSCR IPTION OR PAYMENT WAS GIVEN OR MADE, CAN REASONABLY BE REG ARDED AS LIKELY TO EFFECT PUBLIC SUPPORT FOR A POLITICAL PARTY SHALL ALSO BE DEEMED TO BE CONTRIBUTION OF THE AMOUNT OF SUCH NATION, SUBSCRIPTION OR PAYMENT TO SUCH PERSON FOR A POLITICAL PURPOSE; (B) THE AMOUNT OF EXPENDITURE INCURRED, DIRECTLY OR INDIRECTLY 35 (II) WHERE SUCH PUBLICATION IS . (4) EVERY COMPANY SHALL DISCLOSE IN ITS PROFIT AND LOSS ACCOUNT ANY AMOUNT OR AMOUNTS CONTRIBUTED BY IT TO ANY POLITICAL PARTY OR FOR ANY POLITICAL PURPOSE TO ANY PERSON DURING THE FINANCIAL YEAR TO WHICH THAT ACCOUNT REL ATES, GIVING PARTICULARS OF THE TOTAL AMOUNT CONTRIBUTED AND THE NAME OF THE PARTY OR PERSON TO WHICH OR TO WHOM SUC H AMOUNT HAS BEEN CONTRIBUTED. (5) IF A COMPANY MAKES ANY CONTRIBUTION IN CONTRAVENTIO N OF THE PROVISIONS OF THIS SECTION .. 3.3.1 THE HEADING OF SECTION 293A OF THE COMPANIES ACT ITSELF CLEARLY INDICATES THAT THE SECTION HAS BEEN INTRODUCED TO RESTRICT THE SCOPE OF CONTRIBUTIONS THAT CAN BE MADE TO POLITICAL PARTIES. AS, PER PROVISO TO THE SAID SECT ION, IN CASE OF A COMPANY WHICH HAS BEEN IN EXISTENCE FOR NOT LE SS THAN THREE FINANCIAL YEARS, THE AGGREGATE OF THE CONTRIB UTION MADE, DIRECTLY OR INDIRECTLY IN ANY FINANCIAL YEAR SHALL NOT EXCEED FIVE PER CENT OF ITS AVERAGE NET PROFITS DET ERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 349 AND 350 DURING THE THREE IMMEDIATELY PRECEDING FINANCIAL YE ARS. THUS, THE WORD 'CONTRIBUTE' OR ITS GRAMMATICAL VARI ATION USED IN THE SECTION DENOTES THE AMOUNT WHICH A COMP ANY CAN LEGALLY CONTRIBUTE TO A POLITICAL PARTY OR TRAD E UNION. CONSEQUENTLY, THE EXPLANATION TO SEC.80GGB IS INTEN DED TO RESTRICT THE QUANTUM OF SUCH CONTRIBUTION ELIGIBLE FOR DEDUCTION ONLY TO THE EXTENT THAT IS ADMISSIBLE UND ER SEC.293A OF THE COMPANIES ACT. THEREFORE, THE CONTE NTION OF THE APPELLANT THAT THE EXPLANATION PROVIDED TO THE SAID SECTION WHICH REFERS TO SECTION 293A OF THE COMPANI ES ACT, 1956 IS LIMITED TO THE GRAMMATICAL MEANING OF THE W ORD USED IN THE BODY OF THE SECTION 'CONTRIBUTE' AND IN NO WAY DEFINES THE ADMISSIBILITY OF DEDUCTION WITH REFEREN CE TO QUANTUM OF THE CONTRIBUTION HAS NO MERIT. ACCORDING LY, THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE ADMISSIBLE DEDUCTION U/S.80GGB TO THE EXTENT OF 5% OF THE AVERAGE PROFIT OF THE APPELLANT FOR THE THREE IMMEDIATELY P RECEDING THREE YEARS IS HELD TO BE IN ACCORDANCE WITH THE LA W AND THE SAME IS, THEREFORE, UPHELD. GROUND OF APPEAL NO.2 A LSO FAILS. 6.1 BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIV E HAS SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTI FIED IN NOT ALLOWING THE DEDUCTION OF 20,00,000/- MADE BY THE ASSESSEE TO 36 THE POLITICAL PARTY DURING THE YEAR, ACCORDINGLY, T HE SAME SHOULD BE ALLOWED. ON THE OTHER HAND, THE LEARNED DEPARTM ENTAL REPRESENTATIVE HAS STRONGLY OPPOSED THE SAME AND SU PPORTED THE ORDER OF AUTHORITIES BELOW ON THE ISSUE. 6.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT WITH REFERENCE TO THE RELEVANT PROVISIONS OF SECTION 80GGB AND SECTION 293A OF THE COMPANIES ACT , 1956, THE EXPLANATION TO SECTION 80GGB PROVIDES THAT FOR THE PURPOSE OF SECTION, THE WORD CONTRIBUTE WITH ITS GRAMMATICA L VARIATION HAS THE MEANING ASSIGNED TO IT U/S.293A OF THE COMPANIE S ACT. THE HEADING OF SECTION 293A OF THE COMPANIES ACT CLEARL Y INDICATES THAT THE SECTION HAS BEEN INTRODUCED TO RESTRICT TH E SCOPE OF CONTRIBUTIONS THAT CAN BE MADE TO POLITICAL PARTIES . AS, PER PROVISO TO THE SAID SECTION, IN CASE OF A COMPANY W HICH HAS BEEN IN EXISTENCE FOR NOT LESS THAN THREE FINANCIAL YEAR S, THE AGGREGATE OF THE CONTRIBUTION MADE, DIRECTLY OR INDIRECTLY IN ANY FINANCIAL YEAR SHALL NOT EXCEED FIVE PER CENT OF ITS AVERAGE NET PROFITS DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SEC TIONS 349 AND 350 DURING THE THREE IMMEDIATELY PRECEDING FINANCIA L YEARS. THUS, THE WORD 'CONTRIBUTE' OR ITS GRAMMATICAL VARI ATION USED IN THE SECTION DENOTES THE AMOUNT WHICH A COMPANY CAN LEGALLY CONTRIBUTE TO A POLITICAL PARTY OR TRADE UNION. CON SEQUENTLY, THE EXPLANATION TO SEC.80GGB WAS INTENDED TO RESTRICT T HE QUANTUM OF SUCH CONTRIBUTION ELIGIBLE FOR DEDUCTION ONLY TO THE EXTENT THAT IS ADMISSIBLE UNDER SEC.293A OF THE COMPANIES ACT. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE EXPLANATION PROVIDED TO THE SAID SECTION WHICH REFERS TO SECTION 293A OF TH E COMPANIES ACT, 1956 WAS LIMITED TO THE GRAMMATICAL MEANING OF THE WORD USED IN THE BODY OF THE SECTION 'CONTRIBUTE' AND IN NO WAY DEFINES THE ADMISSIBILITY OF DEDUCTION WITH REFERENCE TO QU ANTUM OF THE CONTRIBUTION HAS NO MERIT. ACCORDINGLY, THE ASSESSI NG OFFICER WAS JUSTIFIED IN RESTRICTING THE ADMISSIBLE DEDUCTION U /S.80GGB TO 37 THE EXTENT OF 5% OF THE AVERAGE PROFIT OF THE ASSESSEE FOR THE THREE IMMEDIATELY PRECEDING THREE YEARS. WE UPHOLD THE S AME. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 5 TH OF MAY, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 5 TH MAY, 2014 GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A)-III, PUNE 4) THE CIT-III, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE