MONIKA INDIA, MUMBAI V. ITO WD 12(2)(1), MUMBAI

ITA 2806/MUM/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7668 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-11-2016
• Assessment Year: 1998-1999
• Appeal Filed On: 23-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M K MISHRA
• Assessee Lawyers: SMITHA PAWAR
• Keywords: Business income; Principle of natural justice; Cost of acquisition
• Section: 143(3); 142(1); 205

Judgement Text

MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI JOGINDER SINGH, VICE-PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. : 2627/MUM/2014 (ASSESSMENT YEAR: 1997-98) AND ITA NO. : 2806/MUM/2014 (ASSESSMENT YEAR: 1998-99) MONIKA INDIA 101 KRISHNA CHAMBERS, 59 NEW MARINE LINES, MUMBAI 400 020. .: PAN: AABFM6640H VS ITO, WARD 12(2)(1) ROAD NO. 123-B/E, AAYAKAR BHAVAN, M.K ROAD, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. SMITHA PAWAR, (AR) RESPONDENT BY : SHR I M.K MISHRA (DR) /DATE OF HEARING : 20-12-2018 / DATE OF PRONOUNCEMENT : 09-01-2019 ORDER PER M. BALAGANESH, AM: 1. BOTH THE APPEALS ARE FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-23, MUMBAI, DATED 04.02.2014 FOR THE A.YS 1997-98 AND 1998-99, WHICH IN ITSELF DIRECTED AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER (FOR SHORT THE A.O) U/S. 143(3) R.W.S 254 OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT). 2. SINCE IDENTICAL ISSUE ARE INVOLVED IN THESE TWO APPEALS, THEY ARE TAKEN UP TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE FACTS OF A.Y 1997-98 ARE TAKEN UP FOR ADJUDICATION AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE FOR A.Y 1998-99 ALSO IN VIEW OF IDENTICAL FACTS EXCEPT WITH VARIANCE IN FIGURES. MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 2 3. THE ONLY COMMON ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETHER THE LD. AO WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF ALLEGED TRADING LOSS INCURRED BY THE ASSESSEE ON SALE OF GOODS IN THE SUMS OF RS. 30,57,301/- AND RS. 21,01,089/- FOR THE A.Y 1997-98 AND 1998-99 RESPECTIVELY IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE TRADING OF PULL OVERS/ SYNTHETIC WASTE / SILVER/TOP AND ACRYLIC YARN. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, ON 27.03.2000 COMPUTING TOTAL INCOME RS. 72,20,197/- AS AGAINST RETURNED INCOME OF RS. 48,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A.O HAS OBSERVED THAT THE ASSESSEE HAD INCURRED A LOSS OF RS. 30,57,301/- ON ACCOUNT OF TRADING ACTIVITIES OF THE MATERIAL MENTIONED ABOVE. THE EXPLANATION OF THE ASSESSEE THAT THE HOSIERY MARKET WAS DEPENDING UPON RUSSIAN MARKET AND DUE TO ECONOMIC COLLAPSE OF RUSSIA, THE ASSESSEE WAS FORCED TO SELL MATERIAL IN LOCAL MARKET AND THE LOCAL MARKET TOO WAS BADLY SUFFERED BECAUSE OF THE LACK OF DEMAND ABROAD; HENCE, THE LOSS WAS INCURRED. THE EXPLANATION OF THE ASSESSEE FIRM WAS REJECTED BY THE A.O. THE MATTER WAS REFERRED TO DDIT (INV-III) LUDHIANA WHO AFTER VERIFICATION SUBMITTED THAT THESE WERE ALL ADJUSTMENT ENTRIES. IN VIEW OF THIS, THE A.O HAS CONSIDERED THE LOSS CLAIMED ON ACCOUNT OF TRADING OF SYNTHETIC WASTE PULL OVERS, AS NOT GENUINE AND THE SAME WAS DISALLOWED. THE A.O COMPLETED THE ASSESSMENT ON 27.03.2000 DETERMINING TOTAL INCOME AT RS. 72,20,197/- FOR THE ASST YEAR 1997-98 BY DISALLOWING ASSESSEES CLAIM OF LOSS OF RS. 30,57,301/-. 4.1 BEING AGGRIEVED BY THE SAID ORDER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) VIDE HIS ORDER DATED 29.03.2004 IN APPEAL NO. CIT(A)/12(2)/24/2000-01 DISMISSED THE APPEAL OF THE ASSESSEE. THE LD. CIT(A)-V, MUMBAI, DURING APPELLATE PROCEEDINGS OBSERVED THAT THE A.O HAS DISALLOWED ASSESSEE FIRMS MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 3 TRADING ACTIVITY LOSS OF RS. 30,57,301/- TREATING THE SAME AS PAPER LOSS. THE ASSESSEE HAS NO OPENING STOCK AT THE BEGINNING OF THE YEAR UNDER QUESTION, WHICH MEANS THE ASSESSEE HAD PURCHASED AND SOLD THOSE GOODS ONLY IN THE CURRENT YEAR. THE ASSESSEE HAD PURCHASED GOODS ON 01.01.1997/- BEING SYNTHETIC WASTE FROM M/S. GOPALDAS JAGAT RAM PVT. LTD @ RS. 63.50 PER KG. WHEREAS ON VARIOUS DIFFERENT DATES RIGHT FROM 12.01.1997/- TO 25.01.1997 IT SOLD THE SAME GOODS @ RS. 27/- PER KG. THUS ACCORDING TO THE AO, THE THEORY OF FALLING PRICE WAS JUST AN EYE WASH AND NOTHING ELSE AS IN THE ENTIRE MONTH THE PRICE WERE STEADY AS CAN BE SEEN FROM THE FACTS WHICH WERE GIVEN BY THE AO ON PAGE NO.3 OF THE IMPUGNED ORDER. THE CIT(A) FURTHER OBSERVED THAT THIS FACT WAS MADE KNOWN TO THE ASSESSEE FIRM BUT WITHOUT ANY RESULT, AS THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION IN THIS REGARD AND HAD MERELY EXPRESSED HIS EARLIER STAND TO BE CORRECT. TO FURTHER VERIFY THIS FACT, A SUMMONS U/S 131(1)(D) WAS ISSUED TO THE DDIT (INV-III), LUDHIANA BY THE AO TO SUMMON THE PARTIES TO WHOM THE GOODS WERE SOLD. IN RESPONSE TO THE SAME, THE DDIT (INV-III), LUDHIANA VIDE LETTER DATED 07.03.2000 SUBMITTED THAT THE SAID M/S. GOPALDAS JAGATRAM PURCHASED SYNTHETIC WASTE FROM M/S. CANNON STEEL PVT LTD VIDE INVOICE NO. 67 DATED 31.03..1997 @ 63 PER KG. AND THE ENTIRE LOT WAS SOLD TO M/S MONIKA INDIA ON 01.01.1997 @ 63.50 PER KG. SIMILARLY M/S. APEX WOOLEN MILLS PURCHASED 3,000 KGS AND 1,020 KGS OF ACRYLIC YARN @ RS. 110/- AND RS. 131/- PER KG FROM M/S SCOTTEX INDUSTRIES LTD VIDE INVOICE NO. 934 DATED 20.02.1997 AND INVOICE NO. 934 DATED 01.02.1997 AND 3,000 KGS WAS SOLD TO M/S. MONIKA INDIA. 4.2 BEING AGGRIEVED BY THE SAID ORDER OF CIT(A)-V, MUMBAI, THE ASSESSEE FILED APPEAL BEFORE THE HONBLE TRIBUNAL. THE HONBLE ITAT J BENCH VIDE ORDER IN ITA NO. 3328/M/2004 DATED 27.02.2008 HAS DIRECTED THE A.O TO DECIDE THE ISSUE AFRESH GIVING THE ASSESSEE AN OPPORTUNITY TO REPRESENT HIS CASE. AS PER THE DIRECTIONS OF THE HONBLE TRIBUNAL, A NOTICE DATED 22.08.2008 MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 4 U/S 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE ON 26.08.2008, FIXING THE HEARING ON 08.09.2008. A LETTER DATED 28.11.2008 WAS ISSUED TO THE ASSESSEE, GIVING THE DETAILS OF GOODS PURCHASED AND SOLD, REQUESTING THE ASSESSEE TO SUBMIT THE DETAILS SUCH AS PROOF OF DELIVERY OF THE SO CALLED PURCHASED GOODS LIKE LORRY RECEIPT, LOCAL OCTROI, ETC. FURTHER, IT WAS ALSO ASKED TO PRODUCE THE PARTIES ALONG WITH THE BOOKS OF ACCOUNTS (SALES AND PURCHASES) TO SUBSTANTIATE THE GENUINENESS OF THE TRANSACTION. 5. IN RESPONSE TO THE SAID LETTER THE ASSESSEE FILED REPLY VIDE ITS LETTER DATED 03.12.2008 FILED IN TAPAL ON 04.12.2008 WHICH IS REPRODUCED AS UNDER: WE ARE IN RECEIPT OF YOUR LETTER NO. ITO-12(2)(1)/NOTICE- 142/2008-09 DATED 21/11/2008 AND NOTED THE CONTENTS. ALL DETAILS ARE ALREADY FILED AND IT IS PART OF YOUR ASSESSMENT FILE. MOREOVER ALL POINTS ARE DULY CLARIFIED IN OUR SUBMISSION WITH EVIDENCE IN PAPER BOOK PAGE ARE AS UNDER (I) WRITTEN SUBMISSION CONTAINING, PAGES-5, (II) PARAWISE REPLY TO THE ORDER DATED 29.03.2004 PASSED BY CIT(A), MUMBAI MARKED ANNEXURE-A, CONTAINING TOTAL PAGES 20, (III) COPY OF INVOICE DATED 04.09.2001 OF POLYOLENE FIBRE PVT. LTD, (IV) PAPER BOOK MARKED CERTIFICATE THE COPY OF WHICH WAS GIVEN TO DEPARTMENTAL REPRESENTATIVE. ORDER OF ITAT IS WITH REFERENCE TO PAPER BOOK AND OUR SUBMISSION. PLEASE CONFIRM THAT THE SAID PAPER BOOK & OUR SUBMISSION ARE RECEIVED BY YOU FROM YOUR DEPARTMENTAL REPRESENTATIVE IF NOT KINDLY GET THE SAME OR INFORM US TO PROVIDE YOU AN OTHER SET OF THE SAME. REGARDING REPORT OF DDIT(INV-III), LUDHIANA. PLEASE PROVIDE THE COPY OF SAID REPORT & PRODUCED THE CONCERNED OFFICERS FOR CROSS EXAMINATION SO THAT TRUTH MAY SURFACE. THE REPORT IS INCORRECT AND CONTRARY TO FACTS AS WELL AS WITHOUT ANY DOCUMENTARY EVIDENCE. THE ALLEGATION OF DDIT (INV-III), LUDHIANA IS FALSE & INCORRECT DUE TO CIVL SUIT NO. 623/98/ OF S.P. GOYAL IN HIS PERSONAL CAPACITY IN HONBLE HIGH COURT OF DELHI AT NEW DELHI AGAINST DIT (INV), LUDHIANA. S.P. GOYAL IS ALSO PARTNER OF M/S. MONIKA INDIA. PLEASE ALSO PRODUCE MR. M.R. SINGHALE AS WELL AS THE PARTNER OF PROPRIETOR OF M/S. SURAJ HOSIERY FACTORY & M/S. ANIL ENTERPRISES FOR CROSS EXAMINE TO ENABLE US TO ESTABLISH THE REPORT OF DIT IS IN CORRECT. PLEASE PROVIDE THE COPY OF DOCUMENTS RELIED UPON BY YOU AGAINST OUR TRANSACTION. PLEASE PROVIDE RECORDS OF SEARCH ACTION MENTIONED IN THIS LETTER AGAINST M/S. ANIL ENTERPRISES & M/S. SURAJ HOSIERY FACTORY & PRODUCED SHRI M.R. SINGHAL WHO IS SEARCH ON 21.12.1995 FOR CROSS EXAMINE TO BRING THE TRUE FACTS ON RECORD AND PROVIDE THE MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 5 COPIES OF ORDERS PASSED BY THE DEPARTMENT AGAINST WHICH ACTION 21.12.1995 AS WELL THEIR ASSESSMENT ORDER FOR THE SUBJECT PERIOD 1995-1996 TO 1998-1999. IT IS REQUIREMENT OF PRINCIPAL OF NATURAL JUSTICE THEREFORE CASE HAS BEEN SENT BACK TO YOU BY ITAT. REGARDING YOUR SHOW CAUSE UNDER PARA 2 OF THIS LETTER DATED 28.11.2008 IT MAY BE TREATED AS AN INTERIM REPLY & FINAL REPLY WILL BE FILED AFTER HAVING CROSS EXAMINATION OF THE DDIT (INV-III), LUDHIANA & MR. M.R. SINGHAL. PLEASE ARRANGE TO PRODUCE THESE WITNESS OF DEPARTMENT AT AN EARLY DATE FOR CROSS EXAMINE AT MUMBAI. IN THE MEANWHILE CONFIRM THAT YOU HAVE RECEIVED THE COPY OF OUR SUBMISSION & PAPER BOOK FROM YOUR DEPARTMENTAL REPRESENTATIVE OF ITAT. WE HAVE ALREADY FILED THE ACCOUNT CONFIRMATION OF THE PARTIES WITH YOU. PLEASE SUMMON THE PARTIES WITH THEIR BOOKS OF ACCOUNT & ALLOW US TO CROSS THEM ALSO TO BRING THE FACTS BEFORE YOUR GOODSELF. ALL DETAILS AND CLARIFICATION ARE IN YOUR ASSESSMENT FILES WHICH WERE PROVIDED REGARDING DELIVERY OF GOODS, OCTROI RECEIPT ETC,. THERE IS NO PROVISION UNDER IT ACT THAT ASSESSEE HAS TO PRODUCE THE PARTIES WITH WHOM HE HAS TRANSACTED THE BUSINESS. PLEASE INFORM UNDER WHICH SECTION OF IT ACT YOU HAVE SHIFTED THE ONUS ON US TO PRODUCED PARTIES & THEIR BOOKS OF ACCOUNT WITH WHOM WE HAVE TRANSACTED THE BUSINESS. THE DEPARTMENT HAS SUCH POWER TO SUMMON THE PARTIES & THEIR BOOKS OF ACCOUNT. PLEASE INFORM THE SECTION OF IT ACT UNDER WHICH SUCH LIABILITY IS OF THE ASSESSEE TO PRODUCE THE PARTIES & THEIR BOOKS OF ACCOUNT. WE HAVE PROVIDED YOU THE NAME AND ADDRESS OF PARTIES WITH THEIR PAN AS WELL AS ACCOUNT CONFIRMATION WHICH ARE PART OF YOUR RECORD. PLEASE ALLOW & FIX THE DATE AND TIME TO INSPECT YOUR RELEVANT FILE OF A.Y 1997-98. THE UNDERSIGNED WILL BE AT LUDHIANA ON 08.12.2008 AS PER PRE ENGAGEMENT. MOREOVER THE CONCERNED ACCOUNT ASSISTANT FOR INCOME TAX MATTER HAS FRACTURE IN HER FOOT THEREFORE SHE IS ALSO ON LEAVE UPTO 10 TH DECEMBER 2008. PLEASE FIX ANY FOLLOWING DATES CONVENIENT TO YOU BUT PLEASE ALSO CONFIRM HAVING RECEIVED THE PAPER BOOK & SUBMISSION FILED BY USE BEFORE ITAT. THE ITAT ORDER IS WITH REFERENCE TO OUR SUBMISSION / PAPER BOOK. IF YOU ARE UNABLE TO GET THE COPY OF SUBMISSION FILED BY US BEFORE ITAT THE COPY OF WHICH WAS GIVEN TO DEPARTMENTAL REPRESENTATIVE. WE WILL PROVIDE YOU ANOTHER COPY OF SAID SUBMISSION WITH PAPER BOOK ON HEARING FROM YOU. NO COPY OF STATUTORY NOTICE U/S 142(1) IS DELIVERED TO US WITH THIS LETTER WHICH PLEASE NOTE. DETAILS OF SUITABLE DATES: (I) 24.12.2008 (II) 25.12.2008 (III) 26.12.2008 MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 6 (IV) 29.12.2008 (V) 30.12.2008 (VI) 05.01.2009 (VII) 06.01.2009 (VIII) 09.01.2009 (IX) 12.01.2009 THEREAFTER ANY DATE IN MARCH 2009 BUT KINDLY FIX THE DATE OF HEARING AT AN EARLY DATE IS SO THAT UNDERSIGNED MAY NOT ACCEPT SAID DATE IN OTHER COURTS. IN THIS RESPECT I ALSO DRAW YOUR ATTENTION TO MY LETTER NO. MI/SPG/2008/3692 DATED 31.10.2008 COPY ENCLOSED HEREWITH FOR YOUR IMMEDIATE INFORMATION. MY THIS LETTER IS NEITHER ACKNOWLEDGED BY YOU NOR REPLIED AS PER CITIZEN CHARTER. 6. THE LD. AO OBSERVED THAT THE ASSESSEE HAD SUBMITTED BEFORE THIS TRIBUNAL IN THE ORIGINALLY ROUND OF PROCEEDINGS THAT THEY WERE NOT MADE AWARE OF THE ENQUIRIES CONDUCTED THROUGH DDIT (INV - III), LUDHIANA. THE LD. AO OBSERVED THAT THE SAME WAS MADE AVAILABLE TO THE ASSESSEE VIDE LETTER DATED 07.03.2000 OF DDIT (INV - III), LUDHIANA PURSUANT TO RTI APPLICATION DATED 02.07.2007. THE ASSESSEE WAS GIVEN AN OPPORTUNITY VIDE LETTER DATED 28.11.2008 TO SUBSTANTIATE THE GENUINENESS OF THE TRANSACTIONS CARRIED OUT BY IT. THE ASSESSEE FILED REPLY LETTER DATED 03.12.2008 IN THIS REGARD. 7. THE LD. AO CONCLUDED THAT THE LOSS INCURRED ON ACCOUNT OF ASSESSEES TRADING ACTIVITIES ARE NOT GENUINE FOR THE FOLLOWING REASONS: (A) DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS INCURRED LOSS TO EXTENT OF RS. 30,57,301/- ON ACCOUNT OF TRADING IN SYNTHETIC WASTE/SILVER/TOP AND ACRYLIC YARN. THE SALES WERE EFFECTED AT RS. 28,47,695/- AS AGAINST THE PURCHASE COST OF RS. 59,04,832/-. (B) FURTHER VERIFICATION OF THE FACTS, IT WAS ALSO OBSERVED THAT THE ASSESSEE DID NOT HAVE ANY OPENING AND CLOSING STOCK IN THE YEAR UNDER CONSIDERATION WHICH MEANS THAT THE ASSESSEE HAD PURCHASED AND SOLD THOSE GOODS ONLY IN THE CURRENT YEAR. (C) IT WAS ALSO OBSERVED THAT THE ASSESSEE HAS PURCHASED ON 01.01.1997 SYNTHETIC WASTE FROM M/S GOPALDAS JAGATRAM PVT. LTD @ 63.50 PER KG. WHEREAS ON VARIOUS DIFFERENT DATE RIGHT FROM 12.01.1997 TO 25.01.1997 IT SOLD THE SAME GOODS @ 27/- PER KG. (D) A SUMMONS U/S 131(1)(D) WAS ISSUED TO DDIT (INV-III) LUDHIANA TO SUMMON THE PARTIES TO WHOM THE GOODS WERE SOLD. THE DDIT (INV-III) VIDE HIS LETTER DATED 07.03.2000, REVEALED THAT MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 7 PURCHASE AND SALES ARE ONLY ADJUSTMENT ENTRIES PROVIDED TO THE ASSESSEE BECAUSE MR. SINGHAL WHO APPEARED ON BEHALF OF BOTH THESE CONCERNS WAS ONLY AN ENTRY BROKER AS WAS REVEALED DURING THE SEARCH CONDUCTED ON HIS PREMISES ON 21.12.1995. (E) THE COMPARATIVE FIGURE OF FOUR YEARS BUSINESS TRANSACTION OF THE ASSESSEE IS GIVEN BELOW: ASSESSMENT YEAR DESCRIPTION 1996-97 1997-98 1998-99 1999-2000 PURCHASES 2,02,00,392 59,04,832 99,65,950 1,55,59,359 SALE 1,58,56,649 28,47,695 78,64,861 88,30,985 GROSS LOSS 43,45,978 30,57,301 21,01,089 67,45,192 INCOME FROM INTEREST 89,39,127 22,04,415 25,67,617 THE ABOVE CHAT CLEARLY SHOWS THAT THE ASSESSEE WAS MAKING CONTINUOUS LOSSES IN BUSINESS ACTIVITIES WHICH WAS ULTIMATELY ADJUSTED FROM INCOME FROM OTHER SOURCES ON YEAR TO YEAR BASIS. 7. THE ABOVE MENTIONED FINDINGS CLEARLY INDICATE THAT THE LOSS CLAIMED ON ACCOUNT OF TRADING IN SYNTHETIC WASTE/PULLOVERS IS NOT GENUINE. VIDE LETTER DATED 03.12.2008, THE ASSESSEE HAS NOT BROUGHT ANY NEW EVIDENCE TO SUBSTANTIATE HIS CLAIM OF GENUINE LOSS. THE SENIOR PARTNER OF THE ASSESSEE FIRM VIDE HIS LETTER DATED 03.12.2008 IS ONLY ASKING FOR CROSS EXAMINATION OF DDIT(INV)-III, LUDHIANA WHO SENT REPORT DATED 07.03.2000, TO PRODUCE MR. M.R. SINGHLE, AN ENTRY BROKER AND PARTNER OF M/S. SUNIL HOSIERY AND M/S. ANIL ENTERPRISES FOR CROSS EXAMINATION, ETC. AS PER CONVENIENCE OF THE ASSESSEE WHICH IS NOT POSSIBLE AT THIS STAGE. THUS, DURING THE COURSE OF THIS DE NOVO ASSESSMENT PROCEEDINGS, THE ASSESSEE FIRM HAS NOT PRODUCED ANY CONVINCING EVIDENCE WHICH CAN JUSTIFY THE TRANSACTIONS AS GENUINE. THEREFORE, I AM OF THE OPINION THAT THE ASSESSEE DOES NOT HAVE ANY OTHER EXPLANATION TO OFFER FOR HIS CLAIM. IN VIEW OF THIS, THE TRADING LOSS ON ACCOUNT OF TRADING OF SYNTHETIC WASTE / PULLOVERS IS NOT CONSIDERED AS GENUINE AND HENCE, THE SAME IS DISALLOWED 8. WITH THESE OBSERVATIONS, THE LD. AO DISALLOWED THE LOSS INCURRED ON TRADING TRANSACTION IN THE SUMS OF RS. 30,57,301/- FOR THE A.Y 1997-98 AND RS. 21,01,089/- FOR THE A.Y 1998-99. 9. THE LD. CIT(A) ELABORATELY DISCUSSED THIS ISSUE AND DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: 3.1.7 I HAVE CONSIDERED THE FACT OF THE CASE AND THE SUBMISSIONS MADE BY THE ASSESSEE AT VARIOUS STAGES SINCE THE TIME OF THE ORIGINAL ASSESSMENT. I FIND THAT THE ASSESSEE HAS CLAIMED LOSS OF RS. 30,57,301/- ON ACCOUNT OF TRADING IN GOODS. SUCH LOSS HAS BEEN ADJUSTED AGAINST THE INCOME FROM INTEREST TO ARRIVE AT THE TOTAL MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 8 INCOME. THE ASSESSEE HAS CLAIMED TO HAVE MADE THE FOLLOWING PURCHASES AND SALES DURING THE YEAR: PURCHASES NAME OF THE PARTY ITEM QTY. (KGS) RATE (RS) DATE TOTAL AMOUNT 1.M/S. GOPAL DAS JAGAT RAM PVT LTD., SYNTHETIC WASTE / SILVER TOP 71,247, 100 63.5 0 01.01.97 45,24,190.85 2. APEX WOOLEN ACRYLIC YARN 3000 118 KG 10.03.97 3,54,000 3. CANNON STEEL PVT. LTD. PULLOVER 5278 PCS 205 PCS 29.12.96 10,81,990 59,60,180.85 LESS: REBATE 55,348.20 TOTAL 59,04,832.65 N AME OF THE PARTY ITEM QTY. (KGS) RATE (RS) DATE TOTAL AMOUNT 1. M/S. SURAJ HOSIERY FACTORY PULLOVER 868 PCS 108 PCS 02.01.97 93744.00 2. DO SYN. WASTE /SILVER TOP 5860 KG 27 KG 06.01.97 158220.00 3. DO PULLOVER 949 PCS 100 KG 08.01.97 102492.00 4. M/ S. ANIL ENTERPRISES SYN. WASTE / SILVER TOP 18705 KG 27 KG 12.01.97 505035.00 5. M/S SURAJ HOSIERY FACTORY PULLOVER 1073 PCS 108 PCS 15.01.97 123876.00 6. DO PULLOVER 1147 KG 108 PC 15.01.97 292410.00 7. M/S. ANIL ENTERPRISES SYN. WASTE / SILVER TOP 108 38 KG. 27 KG 17.01.97 292410.00 8. M/S. SURAJ HOSIERY FACTORY DO 11824 KG 27 KG 19.10.97 319248.00 9. DO PULLOVER 1241 PCS 108 PCS 21.01.97 134028.00 10 M/S. ANIL ENTERPRISES SY. WASTE / SILVER TOP 16205 KG 27 KG 23.01.97 437535.00 11 SUIRAJ HOSIERY FACTORY DO 7823.1 00 KGS. 27 KG 25.01.97 211223.00 12 CASH ACRYLIC YARN 1070 KGS 110 KG 26.03.97 126260.00 13 CASH DO 1030 KGS 118 KG 27.03.97 121540.00 14 CASH DO 900 KGS 118 KG 2303.97 106208.00 MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 9 IN THE ORIGINAL ASSESSMENT ORDER U/S 143(3) OF THE ACT, DATED 27.03.2000, THE A.O HAD HELD THAT THE ASSESSEE HAD CREATED ARTIFICIAL LOSS ON ACCOUNT OF ITS TRADING BUSINESS. THE A.O HAD ALSO QUESTIONED THE PRICE AT WHICH THE GOODS WERE CLAIMED TO HAVE BEEN PURCHASED BY THE ASSESSEE AND HAD, IN EFFECT, CONCLUDED THAT THE PRICES AT WHICH THE GOODS WERE CLAIMED TO HAVE BEEN PURCHASED WAS NOT CORRECT, WHEN THE DATE OF PURCHASE OF GOODS WAS CONTEMPORANEOUS TO THE DATE OF SALE. HENCE, IT WAS NOT POSSIBLE THAT THE PURCHASES WERE MADE AT PRICES MUCH HIGHER THAN THE PRICE AT WHICH THE SAME WERE SOLD. THE ASSESSING OFFICER HAD, IN ARRIVING AT HIS DECISION, REFERRED USEFULLY TO THE ENQUIRES CONDUCTED BY THE DDIT(LNV), LUDHIANA. LD.CLT(A) HAD UPHELD THE ORDER OF THE ASSESSING OFFICER OF TREATING THE LOSS OF RS.30,57,3017- CLAIMED BY THE ASSESSEE AS NOT GENUINE. BEFORE THE HON'BLE TRIBUNAL, IT WAS SUBMITTED BY THE ASSESSEE THAT THE PURCHASES MADE FROM M/S. COPAL DASS JAGAT RAM PVT, LTD. WERE ON THE BASIS OF A CONTRACT OF JULY,1995 WHICH WAS MADE @ RS. 63-50 AGA THE PREVAILING MARKET RATE OF RS.70/-. FURTHER, THE ASSESSING OFFICER HAD NOT GIVEN AN OPPORTUNITY TO THE ASSESSES TO VERIFY AS TO ON WHAT BASIS THE LETTER OF DDIT(INV-) WAS ACCEPTED BY THE ASSESSING OFFICER. HENCE, THE ARGUMENT OF THE ASSESSEE WAS THAT THE ASSESSING OFFICER HAD ACTED ON THE BASIS OF AN ENQUIRY CONDUCTED THROUGH HIS INVESTIGATING OFFICER, A COPY OF WHICH WAS NOT GIVEN TO THE ASSESSEE. THIS AMOUNTED TO VIOLATION OF NATURAL JUSTICE. ANOTHER ARGUMENT OF THE ASSESSEE WAS THAT THE MATERIALS WERE PURCHASED BY THE ASSESSEE AT THE RATE CONTRACTED IN JULY,1955 AND, HENCE, THE RATE OF THE MATERIAL PREVALENT IN DECEMBER 1996, JAN.1997 AND MARCH,1997, I.E. AT THE RELEVANT TIME WHEN THE MATERIALS WERE SOLD WAS NOT RELEVANT IN DECIDING THE PURCHASE PRICE OF THE MATERIALS SOLD. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE HON'BLE TRIBUNAL HAD SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH AFTER GIVING THE ASSESSEE AN OPPORTUNITY TO REPRESENT THE CASE. 3,1.8 I FIND THAT ADEQUATE OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSEE IN THE FRESH ASSESSMENT PROCEEDINGS CARRIED OUT IN DEFERENCE TO THE DIRECTIONS GIVEN BY THE HON'BLE TRIBUNAL. THE REPORT OF THE DDLT(LNV) WAS ALSO OBTAINED BY THE ASSESSEE THROUGH AN RTL APPLICATION, HENCE, THE CONTENT OF THE SAME WAS WITHIN THE KNOWLEDGE OF THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS GIVEN BY THE ASSESSEE, THE ASSESSING OFFICER HAS AGAIN MADE THE DISALLOWANCE OF THE LOSS CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE FROM ITS TRADING BUSINESS FOR THE REASONS GIVEN BY HIM IN THE ASSESSMENT ORDER AND INCORPORATED EARLIER IN THIS ORDER. THE ASSESSEE HAD ASKED THE ASSESSING OFFICER FOR CROSS EXAMINATION OF DDLT(LNV}-LLL, LUDHIANA AS WELL AS FOR CROSS-EXAMINATION OF SHRI M.R.SINGHAL SAID TO BE AN ENTRY BROKER AND A PARTNER OF M/S. SUNIL HOSIERY AND M/S. ANIL ENTERPRISES. HOWEVER THE SAME WAS NOT PROVIDED BY THE ASSESSING OFFICER FOR THE REASONS GIVEN BY HIM IN PARA 7 OF THE ASSESSMENT ORDER. 3,1.9 FROM THE ABOVE FACTS, WHAT IS REQUIRED TO BE DECIDED IS AS TO WHETHER THE ASSESSEE HAS BEEN ABLE TO PROVE THAT THE MATERIALS WERE ACTUALLY PURCHASED AT THE PRICES CLAIMED BY IT AND WHETHER THE CLAIM* OF LOSS ON ACCOUNT OF THE TRADING BUSINESS CAN BE HELD TO BE GENUINE. 3.1.10 COMING TO THE FIRST GRIEVANCE OF THE ASSESSEE THAT THE OPPORTUNITY OF CROSS FL EXAMINATION OF CERTAIN PERSONS AS REQUESTED FOR BY IT WAS NOT PROVIDED TO IT, IT DOES NOT MEAN THAT MERELY BECAUSE THE CROSS-EXAMINATION OF THE PERSONS WAS NOT AFFORDED TO THE APPEAL FILED BY THE ASSESSEE SHOULD BE ALLOWED IN ITS FAVOUR. IN THE CASE OF THE ASSESSEE ITSELF FOR THE A-YR.1996-97, THE HON'BLE MUMBAI ITAT, IN ITA NO,3L48/MUM/2Q07 DT,2&*G3.2GMQ HAS HELD AS FOLLOWS :- ..THE RESULT OF NOT TESTING THE STATEMENT OF WITNESSES, PROPOSED TO BE RELIED UPON IN THE ASSESSMENT PROCEEDINGS, BY CROSS EXAMINATION IS THAT IT IS NOT LEGALLY PERMISSIBLE FOR THE INCOME TAX AUTHORITIES TO RELY ON THE STATEMENTS UNTESTED BY CROSS EXAMINATION IN MAKING THE ASSESSMENT. THAT DOES NOT MEAN THAT THE OTHER MATERIAL OR EVIDENCE COLLECTED BY THEM CANNOT BE RELIED UPON BY THEM, NOR DOES IT ABSOLVE THE ASSESSES OF THE MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 10 ONUS PLACED ON HIM TO SUBSTANTIATE THE RETURN FILED BY HIM. IT IS ONLY THAT THE EVIDENCE UNTESTED BY CROSS EXAMINATION SHOULD BE TOTALIY EXCLUDED OR ELIMINATED FROM CONSIDERATION. THE OTHER MATERIAL OR EVIDENCE IN THE COSE WILL HAVE TO BE TAKEN INTO ACCOUNT. THE OTHER MATERIAL WOULD ATSA INCLUDE THE CONDUCT OF THE OSSESSEE, HIS ABILITY OR INABILITY TO DISCHARGE THE ONUS PLACED ON HIM, THE SURROUNDING CIRCUMSTANCES AND THE PROBABILITIES OF THE CASE AND SO ON AND SO FORTH.' 3.1.11 IN THE PRESENT CASE, AS FAR AS THE CROSS-EXAMINATION OF THE DD!T(LNV.) IS CONCERNED, THE SAME 1S NOT REQUIRED SINCE HE HAS MERELY GIVEN HIS OBSERVATIONS ON THE BASIS OF HIS EXAMINATION OF THE ISSUE BEFORE HIM AND SUCH OBSERVATION WAS ONLY GIVEN ON THE REQUEST OF THE ASSESSING OFFICER, SUCH ISSUE WAS REFERRED TO HIM BY THE ASSESSING OFFICER BY ISSUE OF A COMMISSION U/S I31(1)(D) OF THE L.T. ACT WHETHER SUCH FINDINGS ARE TO BE TAKEN COGNIZANCE OF OR NOT IS THE PREROGATIVE OF THE ASSESSING OFFICER. IF THE ASSESSING OFFICER TAKES COGNIZANCE OF SUCH FINDINGS, THE ASSESSEE IS WELL WITHIN HIS RIGHTS TO CHALLENGE SUCH FINDINGS/OBSERVATION BEFORE THE ASSESSING OFFICER. THE ASSESSEE CAN ALSO FILE AN APPEAL AGAINST THE ORDER OF THE AO BEFORE THE APPELLATE AUTHORITIES AGAINST THE ORDER OF THE ASSESSING OFFICER, WHICH IS WHAT THE ASSESSEE HAS DONE. FURTHER, THE ASSESSING OFFICER HAS NOT BASED HIS ASSESSMENT MERELY AND ENTIRELY ON THE REPORT OF THE DDIT(INV.) RATHER, HE HAS EXAMINED THE FACTS AND EVIDENCES BEFORE HIM AND HAS ARRIVED AT HIS OWN INDEPENDENT CONCLUSION REGARDING THE NON-GENUINENESS OF THE LOSS CLAIMED BY THE ASSESSEE. IT IS A DIFFERENT MATTER THAT THE ASSESSING OFFICER MAY HAVE TAKEN NOTE OF THE FINDINGS/OBSERVATION OF THE DDIT(LNV), THE ASSESSEE HAS EVERY RIGHT TO CHALLENGE THE CONCLUSION DRAWN BY THE ASSESSING OFFICER BEFORE THE APPELLATE AUTHORITY, WHICH IS WHAT THE ASSESSING OFFICER HAS DONE. CONSIDERING THE FACTS OFF THE CASE, IN MY OPINION, NO CROSS-EXAMINATION OF THE DDIT(LNV) IS NECESSARY, SINCE HE HAS MERELY ACTED ON THE COMMISSION ISSUED TO HIM BY THE ASSESSING OFFICER. AS FAR AS THE CROSS-EXAMINATION OF SHRI M.R. SINGHAL IS CONCERNED, WHEN NO STATEMENT OF THE SAID PERSON IS RECORDED, QUESTION OF ANY CROSS-EXAMINATION DOES NOT ARISE. IN ANY CASE, NOW THAT IT HAS BEEN STATED THAT NO STATEMENT OF M.R.SINGHAL WAS RECORDED, NO CROSS-EXAMINATION OF THE PERSON CAN BE PROVIDED TO THE ASSESSEE. 3.1.12 AS REGARDS THE CORRECTNESS OF THE ACTION OF THE ASSESSING OFFICER OF DISALLOWING THE CLAIM OF LOSS IN RESPECT OF ITS TRADING ACTIVITIES, FROM THE DETAILS FILED (INCORPORATED IN THE TABLE OF PURCHASES AND SALES REPRODUCED HEREIN ABOVE IN THIS ORDER), IT IS SEEN THAT OTHER THAN THE ABOVE PURCHASES AND SALES EFFECTED TOWARDS THE END OF THE FINANCIAL YEAR RELEVANT TO THE A.YR.1997-98, THE ASSESSEE HAS NOT EFFECTED ANY PURCHASE AND SALES OF ANY GOODS IN THE REMAINING PART OF THE YEAR. THIS IS STRANGE ESPECIALLY WHEN THE ASSESSEE HAS CLAIMED TO BE REGULARLY ENGAGED IN THE TRADING OF SYNTHETIC YARNS, ETC. IT IS ALSO STRANGE THAT A CONCERN WHICH IS ENGAGED IN THE TRADING OF THESE GOODS HAS PURCHASED THE GOODS ONLY ON THREE DAYS IN THE ENTIRE YEAR, ONCE IN DECEMBER 1996, ONCE IN JANUARY 1997 AND THEN AGAIN ONCE IN MARCH,1997 AND HAS MADE SALES ONLY ON A FEW DAYS IN JANUARY, AND ON THREE DAYS IN MARCH OF 1997. THE AMOUNTS REQUIRED TO BE PAID TO THE PARTIES FROM WHOM GOODS ARE CLAIMED TO HAVE BEEN PURCHASED ARE SHOWN AS PAYABLE AT THE END OF THE YEAR WHILE THE PARTIES TO WHOM GOODS ARE SOLD ARE SHOWN AS SUNDRY DEBTORS AT THE END OF THE YEAR. ALTHOUGH IT IS FOR THE ASSESSEE TO DECIDE AS TO HOW IT WOULD LIKE TO CONDUCT ITS BUSINESS AND ON HOW MANY DAYS IN THE YEAR, THE FACTS IN THE CASE CANNOT BE COMPLETELY IGNORED AS IT IS A RELEVANT FACTS FOR DECIDING THE ISSUE CONTESTED IN THE PRESENT PROCEEDINGS. 3.1.13 THE ASSESSES HAS CLAIMED THAT THE GOODS FROM COPAL DAS JAGAT RAM PVT. LTD. (LDH) WERE PURCHASED ON THE BASIS OF A CONTRACT ENTERED INTO IN JULY,1995' AT @ RS.63.5G PER KG. HENCE, THE RATE OF THE MATERIAL AT THE TIME OF SALE IN 1997 F WAS NOT RELEVANT. IT WOULD BE PERTINENT TO NOTE THAT NO WRITTEN CONTRACT FOR THE PURCHASE OF THE GOODS HAS BEEN FURNISHED BY THE ASSESSEE. IT IS ONLY IN THE BILLS FOR PURCHASES THAT FT HAS BEEN MENTIONED THAT THE SALES BY GOPAL DAS JAGAT RAM WAS ON THE BASIS OF CONTRACT OF JULY,1995. HOWEVER, ON WHICH MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 11 DATE IN JULY OF 1995 THE CONTRACT (EVEN IF IT WAS VERBAL) WAS ENTERED INTO IS NOT AVAILABLE. THE TERMS* AND CONDITIONS OF THE CONTRACT ARE ALSO NOT KNOWN. IT IS NOT ONLY UNUSUAL, BUT ALSO HIGHLY UNACCEPTABLE THAT FOR A CONTRACT ENTERED INTO IN JULY OF 1995, THE SALES WOULD ACTUALLY BE EFFECTED ONLY IN THE MONTH OF JANUARY,1997, I.E, MORE THAN ONE AND A HALF YEARS AFTER THE ALLEGED CONTRACT FOR THE SALES OF THE MATERIAL BY GOPAL DAS JAGAT RAM ESPECIALLY WHEN HE ASSESSEE IS NOT ENGAGED IN THE TRADING OF THE MATERIALS IN QUESTION ON A REGULAR BASIS. THE ASSESSEE HAS CLAIMED THAT IT HAS MAINTAINED THE STOCK REGISTER AND THE SAID MATERIALS ARE REFLECTED IN THE STOCK REGISTER. HOWEVER, THIS FACT IN ITSELF WOULD NOT BE OF ANY HELP TO THE ASSESSEE SINCE THE STOCK REGISTER 1S WRITTEN BY THE EMPLOYEES OF THE ASSESSEE THEMSELVES AND THE RECEIPT OF STOCK WOULD DEFINITELY BE MAINTAINED IF THE PURCHASES ARE SHOWN IN THE BOOKS. EVEN ASSUMING THAT THE MATERIALS WERE RECEIVED AND REFLECTED IN THE STOCK REGISTER, IT DOES NOT IN ANY WAY EVIDENCE THE FACT THAT THE MATERIALS WERE ACTUALLY PURCHASED AT THE PRICE STATED IN THE PURCHASE BILLS. EVEN IF IT WERE TO BE HELD THAT THE ASSESSEE HAD PURCHASED THE GOODS IN QUESTION, THE FACTS AND CIRCUMSTANCES CLEARLY SUGGEST THAT WHILE THE MATERIALS MAY HAVE BEEN PURCHASED ON THE JATES REFLECTED IN THE PURCHASE INVOICES, THE PURCHASE PRICE HAS BEEN SHOWN AT A HIGHER PRICE ON THE BASIS OF THE ALLEGED CONTRACT OF JULY,1995 IN ORDER TO CREATE A FALSE LOSS ON THE SALE OF THE MATERIALS, THE AIM BEING TO SET OFF THE LOSS ON ACCOUNT OF THE TRADING AGAINST THE INTEREST INCOME TO EVADE PAYMENT OF THE RIGHTFUL TAXES. IT IS EXTREMELY IMPORTANT TO NOTE THAT M/S. GOPAL DAS JAGAT RAM PURCHASED THE SYNTHETIC WASTE FROM M/S. CANNON STEAL PVT.LTD. VIDE INVOICE NO.67 DT. 31.03,1997 @ RS.63/- PER KG, AND THE ENTIRE LOT WAS SOLD TO M/S. MONIKA INDIA, I.E., THE ASSESSEE @ RS.63.50 PER KG VIDE ITS INVOICE DT. 01.01.1997. THIS SYNTHETIC WAS SOLD BY THE ASSESSEE TO M/S. ANIL ENTERPRISES AND M/S. SURAJ HOSIERY @ RS. 27/- PER KG ON VARIOUS DATES BETWEEN 12.01.1997 TO 25.01.1997. IT IS NOT UNDERSTANDABLE THAT, WHEN THE ASSESSEE SOLD THE SAME GOODS @ RS.27/- PER KG., HOW THE SAME GOODS WERE PURCHASED BY M/S. GOPAL DAS JAGAT RAM @ RS.63 PER KG. FROM M/S CANNON STEEL (P) LTD., A SISTER CONCERN OF BOTH THE ASSESSEE AND' GOPALDAS JAGATRAM IN THE SAME PERIOD AND IN AROUND THE SAME DATES. IF THE SALE PRICE OF THE MATERIAL WAS RS.27/- PER KG., GOPALDAS JAGATRAM COULD NOT HAVE PURCHASED THE SAME @ RS,63 PER KG. IT SHOULD HAVE PURCHASED THE MATERIALS AT THE RATE OF IN AND AROUND ONLY RS.27/- PER KG, EVEN ASSUMING THAT THE CONTRACT FOR SALE OF THE GOODS WAS ENTERED INTO BETWEEN THE SAID CONCERN AND THE ASSESSEE IN THE MONTH OF JULY,1995, NO CONTRACT IN WRITING HAS BEEN ENTERED INTO BETWEEN THE ASSESSEE AND GOPALDAS JAGATRAM AND THE ASSESSEE HAS ALSO NOT FURNISHED ANY EVIDENCE TO SHOW THAT AS PER THE CONTRACT ENTERED INTO IN MY,1995, THE DELIVERY OF THE MATERIALS WAS REQUIRED TO BE EFFECTED ONLY IN 1997. FROM THE EVIDENCE ON RECORD, IT IS CLEAR THAT THE ASSESSEE IS NOT A REGULAR DEALER IN THE MATERIAL IN QUESTION AND HAS MADE SALES ONLY ON A FEW DAYS TOWARDS THE END OF THE YEAR. WHY WOULD A CONCERN, WHICH DOES NOT TRADE IN THE MATERIAL ON REGULAR BASIS AND OF SUBSTANTIAL AMOUNTS, ENTER INTO A CONTRACT FOR THE PURCHASE OF MATERIALS IN JULY, 1995 AND TAKE DELIVERY IN JANUARY F 1997. THIS IS NOT UNDERSTANDABLE AND ONLY SHOWS THAT THE TRANSACTIONS ARE SUSPICIOUS AND NOT CAPABLE OF BEING ACCEPTED. 3.1.14 FROM THE ABOVE, THE ONLY CONCLUSION THAT CAN BE DRAWN IS THAT THE DOCUMENTS RELATING TO THE PURCHASE PRICE OF SYNTHETIC WASTE HAS BEEN CREATED ONLY WITH AN ATTEMPT TO ENSURE THAT THE ASSESSEE CAN CLAIM A LOSS IN ITS TRADING ACTIVITY RELATING TO SYNTHETIC WASTE WHICH COULD BE SET OFF AGAINST THE INTEREST INCOME. 3.1.15 SIMILARLY, THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED PULLOVERS FROM M/S. CANNON STEELS PVT.LTD., A GROUP CONCERN OF THE ASSESSEE FIRM. FOR JUSTIFYING THE PRICE AT WHICH THE PULLOVERS HAVE BEEN PURCHASED, THE ASSESSEE HAS STATED THAT THE CONTRACT FOR THE PURCHASE OF THE PULLOVERS WAS ENTERED INTO IN DECEMBER,1995 @ RS 205 PER PIECE. HOWEVER, THE ASSESSEE HAS NO WRITTEN CONTRACT. ONLY A MENTION OF THE ALLEGED CONTRACT HAS BEEN MADE IN THE SALES MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 12 INVOICE ISSUED BY CANNON STEEL (P) LTD. EVEN IF THE ALLEGED CONTRACT WAS A VERBAL CONTRACT, THE DATE OF THE CONTRACT HAS NOT BEEN SPECIFIED- IT IS AGAIN PERTINENT TO NOTE THAT ALTHOUGH THE ALLEGED CONTRACT WAS ENTERED INTO SOMETIME IN DECEMBER,L995, THE ALLEGED DELIVERY OF GOODS IS CLAIMED TO HAVE BEEN MADE ONLY IN THE MONTH OF DECEMBER, 1996, I.E. 12 LONG MONTHS AFTER THE SAID ALLEGED CONTRACT. THE TERMS AND CONDITIONS OF THE CONTRACT, IF ANY, ENTERED INTO BETWEEN THE TWO CONCERNS ARE . NEITHER AVAILABLE NOR KNOWN. WHY WOULD A CONCERN, WHICH IS DOING ONLY TWO-THREE TRADES IN THE ENTIRE YEAR, ENTER INTO A CONTRACT FOR PURCHASE OF GOODS, ONE YEAR BEFORE ITS ACTUAL DELIVERY AND SALES? THE CONDUCT OF THE ASSESSEE, IF ITS CLAIM WAS TO BE ACCEPTED, DEFIES ANY BUSINESS SENSE AND IS ALSO NOT IN SYNC WITH THE CONDUCT OF A BUSINESSMAN. ANOTHER IMPORTANT POINT TO BE NOTED IS THAT WHILE THE DELIVERY CHALLAN IS CLAIMED TO BE DATED 29.12,1996, THE INVOICE HAS BEEN RAISED ONLY ON THE I LAST DATE OF THE FINANCIAL YEAR, I.E. ON 31.03,1997. WHY THE INVOICE WOULD BE DATED 31.03,1997 WHEN THE DELIVERY CHALLAN IS DATED 79.11.1996, IS NEITHER UNDERSTANDABLE NOR EXPLAINED BY THE ASSESSEE. 3.1.16 FROM THE ABOVE ONCE AGAIN, THE ONLY CONCLUSIONS THAT CAN BE DRAWN IS THAT THE DOCUMENTS RELATING TO THE PURCHASE PRICE OF PULLOVERS HAS BEEN CREATED ONLY WITH AN ATTEMPT TO ENSURE THAT THE ASSESSES CAN CLAIM A LOSS IN ITS TRADING ACTIVITY RELATING TO PULLOVERS. THE ASSSSSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE PRICE AT WHICH IT HAS CLAIMED TO HAVE PURCHASED THE MATERIAL. ALTHOUGH THE AUSESSEE HAS PLACED RELIANCE ON A COPY OF AN INVOICE DT, 04.09,2001 OF M/S. POLYOLE FIBRES LTD. TO SHOW THAT THE PRICE OF THE MATERIALS HAD COME DOWN, SUCH RELIANCE WILL BE OF NO HELP TO THE ASSESSEE BECAUSE THE INVOICE IS OF THE PERIOD 2001 WHILE THE PRESENT APPEAL RELATES TO THE F.Y. 1997- 98. FURTHER, THIS BILL ONLY EVIDENCES THE PRICE OF THE PARTICULAR MATERIAL IN 2001. HOWEVER, IN THE PRESENT CASE, ONE OF THE ISSUES IN DISPUTE IS WHETHER THE PURCHASE PRICE SHOWN BY THE ASSESSEE IS CORRECT AND WHETHER THE CLAIM OF THE ASSESSEE THAT THE DELIVERY OF MATERIALS IN DECEMBER 1996, ETC. WAS ACTUALLY ON THE BASIS OF THE PURCHASE PRICE OF THE MATERIALS CONTRACTED IN JULY AND DECEMBER OF-1995 IS CORRECT OR NOT AND THE CRUX OF THE DISPUTE IS WHETHER THE LOSS CLAIMED BY THE ASSESSEE IS GENUINE OR NOT. IT WILL NOT BE OUT OF PLACE TO NOTE THAT THE ASSESSEE HAS ALSO CLAIMED TO HAVE TRADED IN ACRYLIC YARN WHICH IS SHOWN TO HAVE BEEN PURCHASED IN MARCH,1997 FOR RS.3,54,000/- AND SOLD FOR EXACTLY THE SAME AMOUNT IN MARCH,1997 WITHOUT ANY PROFIT OR LOSS. ALL SALES ARE CASH SALES. HENCE, THERE IS NO FLUCTUATION IN THE PRICE OF THIS MATERIAL. THE FACTS AND CIRCUMSTANCES EVIDENT IN THIS CASE CLEARLY POINT OUT TO TNE FACT THAT EVEN IT THE SALES OR SYNTHETIC WASTE AND PULLOVERS RESPECTIVELY WERE MADE TO M/S. ANIL ENTERPRISES AND M/S. 5URAJ HOSIERY FACTORY, THE PURCHASES WERE MADE JUST AROUND THE TIME THE SALES WERE MADE AT THE PRICES PREVALENT AT THE TIME OF THE SALES OF THE MATERIALS AND NOT AT THE PRICE CLAIMED TO HAVE BEEN SETTLED IN TERMS OF THE ALLEGED CONTRACTS CLAIMED TO HAVE BEEN ENTERED INTO WITH M/S. GOPALDAS JAGATRAM PVT.LTD. IN JULY,1995 ARTD WITH M/S. CANNON STEEL PVT,LTD. IN DECEMBER, 1995. THE 'CLAIM IS MERELY A SELF SERVING CLAIM AND CANNOT BE ACCEPTED. AN IMPORTANT AND PERTINENT POINT THAT CANNOT BE MISSED IS THAT ALL THE THREE CONCERNS I.E. MONIKA INDIA, GOPALDAS JAGATRAM PVT.LTD. AND CANNON STEELS PVTLTD. ARE GROUP CONCERNS AND M/S. ANIL ENTERPRISES AND M/S. SURAJ HOSIERY FACTORY (WHICH IS CONTROLLED BY SHRI ANRL SINGHAL) HAS BEEN THE PRIMARY SEELER OR PURCHASER OF GOODS TO FROM THE ASSESSES OR ITS SISTER CONCERN, M/S. SANJEEV WOOLEN MILLS AND IS THE COMMON THREAD IN THESE YEARS IN WHICH THE ASSESSEE HAS CLAIMED LOSSES ON ACCOUNT OF ITS TRADING ACTIVITIES, 3.1.17 IN THE ASSESSEE'S OWN CASE FOR THE A. Y. 1996-97, THE HON'BLE MUMBAI TRIBUNAL IN ITA NO,3148/MUM/2007 DT-26.03.2010 HAS OBSERVED AS FOLLOWS:- IN CIT (WEST BENGAL II) VS, DURGA PRASAD MORE{L971) 82 !TR 540, IT WAS HELD BY HON'BLE SUPREME COURT THAT THOUGH THE APPARENT STATE OF AFFAIRS MUST BE CONSIDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 13 BELIEVE THAT THE APPARENT WAS NOT THE REAL, THE TAXATION AUTHORITIES WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF SUCH AFFAIRS, IT WAS HELD THAT A TITLE PROBING SHOULD BE DONE TO SHOW THAT THE APPARENT WAS NOT REAL AND THAT THE TOXINS AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINDERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM, IT WAS ALSO HELD THAT THE COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES. THIS RULING WAS REITERATED BY THE HON'BLE SUPREME COURT IN SUMATI DAYAI VS. CIT (1995) 214 ITR 801. THEREFORE, IT IS NOT MERELY A QUESTION OF WHETHER THE ASSESSEE'S CLAIM IS SUPPORTED BY DOCUMENTARY EVIDENCE. IT IS FURTHER NECESSARY, IN A FIT CASE, TO EXAMINE WHETHER THE DOCUMENTARY EVIDENCE ACCORDS WITH THE HUMAN PROBABILITIES AND WHETHER THERE ORE SURROUNDING CIRCUMSTANCES TO SHOW THE NON-GENUINENESS OF THE CLAIM.' 3.1.18 IN THE ABOVE NOTED CASE FOR THE A.YR. 2006-07 ALSO, THE ASSESSEE HAD CLAIMED LOSS IN RESPECT OF ITS TRADING ACTIVITY AND HAD SET OFF THE LOSS AGAINST THE .INTEREST INCOME. THE ASSESSING OFFICER HELD THE LOSS TO BE NON-GENUINE AND DISALLOWED THE SAME. LD.CIT(A) UPHELD THE ORDER OF THE A.O . ON APPEAL BY THE ASSESSES, THE HON'BLE TRIBUNAL UPHELD THE DISALLOWANCE OF LASS CLAIMED BY THE ASSESSEE. THE FACTS AND CIRCUMSTANCES IN THAT CASE WERE ALSO MORE OR LESS SIMILAR TO THE PRESENT CASE. 3.1.19 IN VIEW OF THE AFORESAID REASONS, AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, 1 AM OF THE OPINION THAT IN THE PRESENT CASE THERE ARE SURROUNDING CIRCUMSTANCES TO SHOW THE NOT-GENUINENESS OF THE CLAIM OF LOSS MADE BY THE ASSESSEE* THE ASSESSEE HAS ALSO NOT BEEN ABLE TO SUBSTANTIATE THE GENUINENESS OF THE LOSS CLAIMED. THE CONDUCT OF THE ASSESSEE AND THE TRANSACTIONS CANNOT BE SEEN IN ISOLATION BUT THE SAME ARE ALSO TO BE SEEN IN THE CONTEXT OF ITS* CONDUCT AS WELL AS THE CONDUCT OF ITS SISTER CONCERN* M/S. SANJEEV WOOLEN MILLS OF CLAIMING LOSSES IN THE VARIOUS ASSESSMENT YEARS AND WHICH HAVE BEEN DISCUSSED AND POINTED OUT IN DETAIL IN MY APPELLATE ORDER IN THE CASE OF THE ASSESSEE FOR THE A.YR1993-99. THE FINDINGS IN THE APPELLATE ORDER IN THE CASE OF THE ASSESSEE FOR THE A.YR. 1998-99 ARE ALSO RELEVANT IN DECIDING WHETHER THE CLAIM OF THE ASSESSEE CAN BE HELD TO BE CORRECT OR NOT. FROM THE FACTS DISCUSSED HEREINABOVE AS WELL AS IN VIEW OF MY FINDINGS IN THE APPELLATE ORDER FOR THE A.YR.1998-99, I AM OF THE OPINION THAT THE ASSESSING OFFICER WAS PERFECTLY JUSTIFIED IN DISALLOWING THE LOSS ON THE GROUND THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SAME. THE CLAIM IS ALSO NOT ACCEPTABLE HAVING REGARD TO THE SURROUNDING CIRCUMSTANCES AND IS ALSO CONTRARY TO THE NORMAL COURSE OF HUMAN CONDUCT, CONDUCT AS ALSO OF BUSINESS AND FAILS THE TEST OF HUMAN PROBABILITIES. THE ACTION OF THE ASSESSING OFFICER OF DISALLOWING THE CLAIM OF BUSINESS LOSS IS, THEREFORE, UPHELD. THE GROUND OF APPEAL FILED BY THE ASSESSEE IS DISMISSED. 10. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US FOR BOTH THE YEARS. 11. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE ADJOURNMENT PETITION PREFERRED BY THE ASSESSEE WAS REJECTED BY THE BENCH AS THE ISSUE IS COVERED BY THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y 1996-97 IN ITA NO. 3148/MUM/2007 DATED 26.10.2010, FOR THE SAKE OF CONVENIENCE. MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 14 THE RELEVANT OPERATIVE PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 16. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIVAL SUBMISSIONS. TAKING UP THE FIRST GRIEVANCE OF THE ASSESSEE NAMELY THAT THERE WAS VIOLATION OF THE RULES OF NATURAL JUSTICE AND FAIR PLAY INASMUCH AS THE ASSESSEE WAS NOT AFFORDED ADEQUATE, REAL AND TIMELY OPPORTUNITY OF CROSS EXAMINING THE WITNESSES, WE ARE INCLINED TO UPHOLD THE SAME. THE ENTIRE CORRESPONDENCE BETWEEN THE ASSESSEE AND THE INCOME TAX AUTHORITIES FILED BEFORE US AS ALSO THE OTHER DOCUMENTS AND PAPERS FILED UNMISTAKABLY SHOW THAT THERE WAS NO SERIOUS ATTEMPT TO BRING THE WITNESSES BEFORE THE ASSESSEE SO THAT THEY COULD BE CROSS EXAMINED BY IT. ULTIMATELY AFTER A DELAY OF ALMOST EIGHT YEARS IT TRANSPIRED THAT THE WITNESSES COULD NOT BE PRESENT BEFORE THE ASSESSEE DUE TO VARIOUS REASONS AND THUS THE ASSESSEE WAS DENIED THE OPPORTUNITY OF CROSS EXAMINING THE WITNESSES. IT IS NO DOUBT TRUE THAT THE STATEMENTS WERE GIVEN TO THE ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS BUT THAT BY ITSELF WILL NOT BE SUFFICIENT OR EFFECTIVE OPPORTUNITY AFFORDED TO THE ASSESSEE WHO HAS THE RIGHT TO CROSS EXAMINE THE WITNESSES IF THEIR STATEMENTS ARE TO BE MADE USE OF IN THE ASSESSMENT. IT MAY BE SEEN THAT IN THEIR STATEMENTS THE WITNESSES HAVE STATED THAT THERE WAS NO FALL OR DEPRESSION IN THE RAW WOOL MARKET DURING THE FINANCIAL YEAR 1995-96. THIS IS IN CONTRAST TO THE ASSESSEES CLAIM THAT THERE WAS A DEPRESSION IN THE MARKET FORCING IT TO SELL AT REDUCED PRICES AND THEREBY SUFFERING A LOSS. IN OUR OPINION, IT WOULD HAVE BEEN APPROPRIATE OR EVEN NECESSARY FOR THE INCOME TAX AUTHORITIES TO HAVE TAKEN TIMELY ACTION TO PRODUCE THE WITNESSES FOR BEING CROSS EXAMINED BY THE ASSESSEE IF THEY HAD WANTED TO MAKE USE OF THE CONTENTS OF THE STATEMENTS IN THE ASSESSMENT PROCEEDINGS. THAT NOT HAVING BEEN DONE AND DUE TO THE INORDINATE DELAY IN COMPLYING WITH THE DIRECTIONS OF THE EARLIER CIT(A), BY THE TIME THE ASSESSEE WAS ALLOWED TO CROSS EXAMINE THE WITNESSES, THEY COULD NOT BE PRODUCED ON THE GROUND THAT ONE OF THEM WAS UNWELL AND UNABLE TO APPEAR AND THE TWO OTHERS COULD NOT ATTEND AS ONE OF THEM HAD BEEN ALLEGEDLY MURDERED AND THE OTHER WAS CHARGED WITH THE MURDER AND WAS IN JAIL. WE THEREFORE UPHOLD THE GRIEVANCE OF THE ASSESSEE THAT IT HAS NOT BEEN GIVEN THE TIMELY OPPORTUNITY OF CROSS EXAMINING THE WITNESSES. 17. THAT HOWEVER DOES NOT MEAN THAT THE ENTIRE ASSESSMENT PROCEEDINGS ARE TO BE STRUCK DOWN AS INVALID OR THAT THE DISALLOWANCE OF THE LOSS IS NOT JUSTIFIED. THE RESULT OF NOT TESTING THE STATEMENT OF WITNESSES, PROPOSED TO BE RELIED UPON IN THE ASSESSMENT PROCEEDINGS, BY CROSS EXAMINATION IS THAT IT IS NOT LEGALLY PERMISSIBLE FOR THE INCOME TAX AUTHORITIES TO RELY ON THE STATEMENTS UNTESTED BY CROSS EXAMINATION IN MAKING THE ASSESSMENT. THAT DOES NOT MEAN THAT THE OTHER MATERIAL OR EVIDENCE COLLECTED BY THEM CANNOT BE RELIED UPON BY THEM, NOR DOES IT ABSOLVE THE ASSESSEE OF THE ONUS PLACED ON HIM TO SUBSTANTIATE THE RETURN FILED BY HIM. IT IS ONLY THAT THE EVIDENCE UNTESTED BY CROSS EXAMINATION SHOULD BE TOTALLY EXCLUDED OR ELIMINATED FROM CONSIDERATION. THE OTHER MATERIAL OR EVIDENCE IN THE CASE WILL HAVE TO BE TAKEN INTO ACCOUNT. THE OTHER MATERIAL WOULD ALSO INCLUDE THE CONDUCT OF THE ASSESSEE, HIS ABILITY OR INABILITY TO DISCHARGE THE ONUS PLACED ON HIM, THE SURROUNDING CIRCUMSTANCES AND THE PROBABILITIES OF THE CASE AND SO ON AND SO FORTH. IN THE PRESENT CASE THE ASSESSEE HAS CLAIMED THE LOSS AND IT IS THEREFORE FOR IT TO SUBSTANTIATE THE LOSS. IT HAS NO DOUBT MAINTAINED BOOKS OF ACCOUNT BUT EVEN SO IT IS OPEN TO THE INCOME TAX AUTHORITIES TO EXAMINE THE ENTRIES THEREIN OR THE CLAIM MADE IN THE RETURN OF INCOME AND CALL UPON THE ASSESSEE TO SUBSTANTIATE THEM. IT WAS THEREFORE QUITE IN ORDER FOR THE ASSESSING OFFICER IN THE PRESENT CASE TO HAVE CALLED UPON THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF THE LOSS. MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 15 AFTER EXAMINING THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER FOUND THE CLAIM TO BE UNACCEPTABLE FOR SEVERAL REASONS WHICH WE HAVE ALREADY ADVERTED TO IN THE OPENING PARAGRAPHS OF THIS ORDER. THE ASSESSEE HAD CLAIMED THAT IT PURCHASED RAW WOOL ON 15.3.1996 FOR RS.210/- PER KG. FROM SUVIDHA WOOLLEN MILLS. THE PURCHASE BILLS DID SUPPORT THE CLAIM. HOWEVER, THE CASH SALES EFFECTED BY THE ASSESSEE DISCLOSE THAT ON THE VERY SAME DAY, THE ASSESSEE HAD SOLD RAW WOOL AT RS.127/- PER KG. WHICH WAS FOUND QUITE UNUSUAL, AND RIGHTLY SO. THERE WERE ALSO OTHER SALES AROUND THE SAID DATE FOR RATES SUCH AS RS.127/- PER KG. RS.137/- PER KG. AND RS.165/- PER KG. ALL THESE SALES WERE AT PRICES MUCH BELOW THE PURCHASE PRICE OF RS.210/- PER KG. THE ASSESSEE ITSELF HAD STATED IN ITS LETTER DATED 30.4.1998 (PAGE 2 OF THE ASSESSMENT ORDER) THAT IT HAD PURCHASED RAW WOOL AT RATES VARYING BETWEEN RS.203/- PER KG AND RS.251/- PER KG AND SOLD THE SAME AT RATES VARYING BETWEEN RS.127/- AND RS.143/- PER KG. TO REPEAT, CONSISTENTLY BUYING GOODS AT HIGHER RATE AND SELLING THEM AT MUCH LOWER RATES IS NOT INDICATIVE OF A NORMAL BUSINESS TRANSACTION AND PRIMA FACIE IT HAS TO BE ESTABLISHED BY THE ASSESSEE WITH JUSTIFIABLE REASONS. IT IS IN THIS BACKGROUND THAT WE HAVE TO APPROACH THE CASE OF THE ASSESSEE. IT ATTEMPTED 20 ITA NO.3148/M/07 TO PROVE THE PURCHASE RATE FROM SUVIDHA WOOLLEN MILLS BY SAYING THAT THERE WAS A PRIOR AGREEMENT, ENTERED INTO IN NOVEMBER, 1995, FOR BUYING 12,624 KGS AT RS.210/- PER KG DELIVERY IN DECEMBER AND 1,631 KGS AT RS.210/- PER KG DELIVERY IN MARCH. IT COULD NOT PROVE THE EXISTENCE OF SUCH AN AGREEMENT, EITHER ORAL OR WRITTEN, IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE ASSESSEE STATED BEFORE THE ASSESSING OFFICER THAT MERE PLACING OF AN ORDER WITH TERMS AND CONDITIONS COULD BE SET TO BE AN AGREEMENT. EVEN IF THAT IS SO, THERE IS NO ACCEPTABLE EXPLANATION FROM THE ASSESSEE AS TO WHY IT WENT ON PURCHASING RAW WOOL AT HIGHER RATES ONLY TO BE SOLD, AFTER BEING SEPARATED INTO SMALL LOTS, AT MUCH LOWER RATES. WE ARE UNABLE TO SPELL OUT ANY REASON FOR THE SAME EXCEPT THAT THE ASSESSEE WANTED TO DELIBERATELY INCUR LOSSES IN THE BUSINESS OF RAW WOOL WHICH CAN BE USED TO SET OFF AGAINST THE SUBSTANTIAL INTEREST INCOME OF RS.89,39,127/- AND RS.22,04,415/- IN THE ASSESSMENT YEARS 1997-98 AND 1998-99 RESPECTIVELY. IT IS ALSO QUITE UNUSUAL THAT THE ASSESSEE DID NOT INCUR ANY EXPENDITURE IN SEPARATING THE RAW WOOL INTO SMALLER LOTS OF 60 TO 70 KGS FOR RETAIL CASH SALES. THE EXPLANATION GIVEN BY THE ASSESSEE BEFORE US THAT SUCH EXPENDITURE IS INCURRED BY THE RETAIL PURCHASERS LACKS CONVICTION AND IN ANY CASE IS BEREFT OF PROOF. THE CLAIM THAT THERE WAS A DEPRESSION AND FALL IN THE MARKET RESULTING IN FALL IN THE SALE PRICES IS NOT ONLY NOT SUPPORTED BY ANY EVIDENCE BUT IS ALSO CONTRARY TO THE FACTS. WE ARE UNABLE TO APPRECIATE AS TO HOW THE ASSESSEE WENT ON PURCHASING RAW WOOL AT RATES VARYING BETWEEN RS.203/- AND RS.251/- PER KG, BUT COULD SELL THE SAME ONLY FOR RS.127/- TO RS.143/- PER KG. IT WAS FOR THE ASSESSEE, WITHOUT BEING PROMPTED BY THE ASSESSING OFFICER, TO ADDUCE EVIDENCE WITH REGARD TO EACH AND EVERY TRANSACTION OF PURCHASE AND SALE AND THEIR GENUINENESS IN ORDER TO SUBSTANTIATE THE CLAIM OF LOSS. THIS HAS NOT BEEN DONE BY THE ASSESSEE. THE OTHER UNUSUAL FEATURES IN THIS CASE IS THAT OUT OF THE TOTAL SALES OF RS.1,58,56,649/-, CASH SALES FOR LESS THAN RS.10,000/- ACCOUNT FOR RS.1,10,82,239/- AND THESE ARE NOT SUBJECT TO VERIFICATION. THE ASSESSEES CLAIM IN ITS LETTER DATED 24/26.03.1999 THAT CASH SALES ARE NORMALLY EFFECTED AT CONCESSIONAL PRICES IS NOT BELIEVABLE BECAUSE THE CONCESSION GIVEN BY THE ASSESSEE IS SO HUGE THAT IT DEFIES ANY LOGIC OR REASON. 18. IN CIT (WEST BENGAL II) VS. DURGA PRASAD MORE (1971) 82 ITR 540, IT WAS HELD BY THE SUPREME COURT THAT THOUGH THE APPARENT STATE OF AFFAIRS MUST BE CONSIDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT THE APPARENT WAS NOT THE REAL, THE TAXATION AUTHORITIES WERE ENTITLED TO LOOK INTO THE MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 16 SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF SUCH AFFAIRS. IT WAS HELD THAT A LITTLE PROBING SHOULD BE DONE TO SHOW THAT THE APPARENT WAS NOT REAL AND THAT THE TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. IT WAS ALSO HELD THAT THE COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITIES. THIS RULING WAS REITERATED BY THE SUPREME COURT IN SUMATI DAYAL VS. CIT., (1995) 214 ITR 801. THEREFORE IT IS NOT MERELY A QUESTION OF WHETHER THE ASSESSEES CLAIM IS SUPPORTED BY DOCUMENTARY EVIDENCE; IT IS FURTHER NECESSARY, IN A FIT CASE, TO EXAMINE WHETHER THE DOCUMENTARY EVIDENCE ACCORDS WITH THE HUMAN PROBABILITIES AND WHETHER THERE ARE SURROUNDING CIRCUMSTANCES TO SHOW THE NON- GENUINENESS OF THE CLAIM. APPLYING THESE TESTS, WE FIND THAT IN THE PRESENT CASE THERE ARE SURROUNDING CIRCUMSTANCES TO JUSTIFY THE STAND TAKEN BY THE INCOME TAX AUTHORITIES AND THE ASSESSEES CLAIM WAS ALSO RIGHTLY CONSIDERED AS HAVING FAILED THE TEST OF HUMAN PROBABILITIES AND THE NORMAL COURSE OF HUMAN CONDUCT. 19. FOR THE ABOVE REASONS, WE HOLD THAT THOUGH THE STATEMENTS OF THE THREE WITNESSES BEFORE THE ACIT., LUDHIANA, CANNOT BE RELIED UPON BY THE INCOME TAX AUTHORITIES TO JUSTIFY THE DISALLOWANCE OF THE LOSS, IT WAS PERFECTLY JUSTIFIED FOR THEM TO HAVE DISALLOWED THE LOSS ON THE GROUND THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SAME AND ALSO BECAUSE THE CLAIM WAS NOT ACCEPTABLE HAVING REGARD TO THE SURROUNDING CIRCUMSTANCES AND WAS ALSO CONTRARY TO THE NORMAL COURSE OF HUMAN CONDUCT AND FAILED THE TEST OF HUMAN PROBABILITIES. WE THEREFORE UPHOLD THE DISALLOWANCE OF THE LOSS OF RS.43,45,978/- AND DISMISS THE APPEAL FILED BY THE ASSESSEE WITH NO ORDER AS TO COSTS. 12. RESPECTFULLY FOLLOWING THE SAID DECISION HEREIN FOLLOWING THE JUDICIAL PRECEDENTS HEREIN ABOVE, WE DISMISS THE APPEALS FILED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS. 13. IN THE RESULT BOTH THE APPEALS FILED BY THE ASSESSEE FOR THE A.YS 1997-98 AND 1998-99 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH JANUARY, 2019 SD/- SD/- (JOGINDER SINGH) (M. BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATE: 09 TH JANUARY, 2019. / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT/DRP -11, MUMBAI. 4) THE CIT/DIT CONCERNED , MUMBAI. 5) , , / MONIKA INDIA , MUMBAI. ITA NO. 2627 & 2806/MUM/2016. 17 THE D.R. K BENCH, MUMBAI. 6) [ \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *RAVI KUMAR. PS