ITO 8(2)2, MUMBAI V. KAVITA ORGANICS P. LTD, MUMBAI

ITA 3506/MUM/2011

• Counselvise Citation: 350619914 RSA 2011
• Duration Of Justice: 4 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 02-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINITA J MENON
• Keywords: Rejection of books of accounts; Accommodation entries

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT ME MBER & SANJAY GARG,JUDICIAL MEMBER /.ITA NO.3506/MUM/2011, /ASSESSMENT YEAR-2004-05 INCOME TAX OFFICER-8(2) 2, ROOM NO.212/216A, 2ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS M/S. KAVITA ORGANICS PVT. LTD. 2 ND FLOOR, SHIV ASHISH ANDHERI-KURLA ROAD, SAKINAKA, ANDHERI MUMBAI-400 072. PAN:AACCK 0850 H /ASSESSEE BY :SH. JAYANT BHATT / REVENUE BY :MS. VINITA J. MENON / DATE OF HEARING : 08 - 09 -2015 / DATE OF PRONOUNCEMENT : 11 -09-2015 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 31.12.2010,OF THE CIT(A )-17,MUMBAI THE ASSESSING OFFICER (AO)HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF TRADING LOSS OF RS.13,84,603/- RELATING TO ACCOMMODATION ENTRIES OF PURCHASE & SALE OF FANCY DRESS MATERIALS, WITHOUT APPRECIATI NG THE FACTS OF THE CASE. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A), WHILE DECIDING THE APPEALS FOR ALL THE THREE YEARS, ERRED IN NOT APPRE CIATING THE FACT THAT THE ASSESSEE'S MODUS OPERANDI IS TO SHOW PURCHASE OF DRESS MATERIAL FROM ONE PARTY ON CERTAIN DATES AT A HIGHER RATE AND SELL THE SAME MATERIAL TO ANOTHER PARTY ON CERT AIN DATES AT A LOWER RATE AS EVIDENT FROM THE FOLLOWING: A. Y. PURCHAS ED FROM DATE AMOUNT (RS.) SOLD TO DATE AMOUN T (RS.) LOSS( RS.) 2003- 04 M/S. RAJHANS TRADERS PVT. LTD. NOV.2002 43,58,200 TIGER STONE TRADERS P. LTD. JAN.2003 38,48,075 5,10,125 2004- 05 FAMYCARE LIMITED OCT.2003 1,21,21,635 AMALGAMATED COMMERCIAL TRADERS P. LTD. NOV.200 3 1,07,37,032 13,84,603 2005- 06 TIGER STONE TRADERS P. LIMITED FEB.2005 1,12,31,382 SUPERWAYS ENTERPRISES PVT. LTD. FEB.2005 1,06,20,744 6,11,138 FROM THE ABOVE, IT IS EVIDENT THAT IN AY. 2003-04, THE ASSESSEE SOLD THE MATERIAL TO M/S. TIGER STONE TRADERS PVT. LIMITED AND IN AY. 2005-06, IT P URCHASED MATERIAL FROM M/S. TIGER STONE TRADERS PVT. LIMITED AND IN BOTH INSTANCES, THE ASS ESSEE CREATED LOSSES IN BULK TRANSACTIONS THROUGH THESE, CERTAIN PARTIES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT IN AY. 2004-05, DURING ASSESSMENT PROCEEDINGS, THE A.O. MADE EXTENSIVE AND INTENSIVE ENQUIRIES AND FOUND THAT FAMYCARE LIMITED , FROM WHOM THE APPELLANT IS STATED TO HAVE PURCHASED GOODS AND M/S. AMALGAMATED COMMERCIAL TRA DERS PVT.LTD. TO WHOM GOODS WERE SAID TO HAVE BEEN SOLD, SHOWED THE SAME ADDRESS I.E. 5, D.S. BARBREKAR MARG, NEAR PRABHADEVI TELEPHONE EXCHANGE. M/S. FAMYCARE LIMITED VIDE LET TER DT.16.11.2006 STATED THAT THE ABOVE PREMISES, I.E. 5, D.S. BARBREKAR MARG, NEAR PRABHA DEVI TELEPHONE EXCHANGE, PERTAINS TO ITS GODOWN WHERE THE GOODS WERE STORED. IF THE REGISTE RED OFFICE OF BOTH AMALGAMATED COMMERCIAL KAVITA-3506/11 2 TRADERS PVT. LTD. AND THE GODOWN OF FAMYCARE LIMIT ED. IS LOCATED IN THE SAME PREMISE, THE APPELLANTS CLAIM TO HAVE PURCHASED THE GOODS FROM M/S. FAMYCARE LIMITED. AND SOLD THE SAME TO AMALGAMATED COMMERCIAL TRADERS PVT. LIMITED, IS NOT CONVINCING. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT DURING ASSESSMENT PROCEEDINGS FOR AY. 2004-05, THE AO FOUND THAT THOUGH THE GOODS WERE APPARENTLY TRANSPORTED ON 12 OCCASIONS, THE TRANSPORTER M/S. SURENDRA ROADLINES CORPORATION LIMITED RAISED A SINGLE BILL ON 29.11.2 003. IN NONE OF THE CONSIGNMENT NOTES, FREIGHT CHARGES ARE MENTIONED. THE MODE OF TRANSPORT OF THE GOODS IS NOT FURNISHED BY THE TRANSPORTER. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT IN ALL THE THREE YEARS, AY. 2003- 04, 2004-05 & 2005-06, SUCH TRANSACTIONS ARE SHOWN AS DONE THROUGH M/S.SURENDRA ROADLINES CORPOR ATION LIMITED, WHICH IS NOT TRACEABLE AT THE GIVEN ADDRESS NOR COULD BE IDENTIFIED BY THE AS SESSEE. 6.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT IN AY. 2004-05, AS PER DETAILS FU RNISHED BY THE WITNESS, M/S. FAMYCARE LIMITED. U/S.133(6) OF THE ACT, IT WAS SEEN THAT THIS COMPAN Y IS IN THE BUSINESS OF MANUFACTURING CONTRACEPTIVE PILLS. HOWEVER, THE SAID COMPANY, M/S . FAMYCARE LIMITED, CLAIMS TO HAVE PURCHASED FANCY DRESS MATERIAL FROM ONE GUPTA SYNTH ETICS LIMITED AND SOLD THE SAME TO THE ASSESSEE. M/S. FAMYCARE LIMITED EXPRESSED ITS INABI LITY TO FURNISH THE PURCHASE BILLS, COPY OF LEDGER ACCOUNT OF GUPTA SYNTHETICS LIMITED, WITH DE TAILS OF PAYMENT MADE TO THEM AND BALANCE OUTSTANDING, IF ANY. 7.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT IN AY. 2004-05, THE SAID M/S. FAM YCARE LIMITED HAD ALSO INCURRED LOSS OF RS.43,85,005/- ON THE SAME MATERIALS BY PURCHASING THE SAID MATERIALS FROM GUPTA SYNTHETICS LIMITED FOR RS.1,65,06,640/- AND SELLING THE SAME TO THE APPELLANT FOR RS.1,21,21,635/-. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT IN THE PRESENT AYR. 2005-06, THE ASSESSEE SOLD GOODS TO M/S. SUPERWAYS ENTERPRISES PVT. LIMITED WITHIN A SPAN OF FOUR DAYS AT A LOSS OF RS.6,11,138/-. THE PURCHASER OF THE ASSESSEE'S MATERIALS I.E., M/S. SUPERWAYS ENTERPRI SES PVT.LTD. FAILED TO COMPLY WITH THE REQUISITION U/.S.133(6) OF THE ACT ISSUED BY THE AO. 9.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT NONE OF THE PARTIES WITH WHOM THE APPELLANT HAD DONE TRANSACTIONS OF FANCY SUITING WAS IN THE RELEVANT BUSINESS OF CLOTHING. 10.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE INVOICES FURNISHED BY THE APP ELLANT ARE COMPUTER GENERATED AND DO NOT BEAR THE SALES TAX REGISTRATION NO. 11.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE IMPUGNED LOSSES RESULTED IN S UBSTANTIAL REDUCTION IN TAXABLE INCOME OF THE ASSESSEE. 12.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THOUGH THE PAYMENTS WERE APPARENTLY MADE BY CHEQUE AND CERTAIN PAPERS WERE FURNISHED IN SUPPORT OF THE PURCHASE AN D SALES, THE REASON AS TO WHY THE GOODS HAD TO BE SOLD OUT WITHIN A SHORT SPAN OF TIME AT A LESSER RATE WAS NEVER SUBSTANTIATED BY THE ASSESSEE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF TRADING ,FINANCE AND INVESTMENT,FILED ITS RETURN OF INCOME ON 26.10.2004,DECLARING INCOME OF RS.4.70 LAKHS.COMPLETING THE ASSESSMENT ON 20.12.2006,U/S.143(3)OF THE ACT,THE AO DETERMINED T HE INCOME OF THE ASSESSEE AT RS.18.55 LAKHS. 2. EFFECTIVE GROUND OF APPEAL DEALS WITH DISALLOWANCE OF TRADING LOSS IN FABRICS AMOUNTING TO RS.13.84 LAKHS.DURING THE ASSESSMENT PROCEEDINGS,TH E AO FOUND THAT THE ASSESSEE HAD PURCHASED FANCY DRESS MATERIALS FROM M/S.FAMYCARE L TD.(FL)OF RS.1.21 CRORES,THAT IT HAD KAVITA-3506/11 3 SOLD THE ENTIRE STOCK TO M/S.AMALGAMATED COMMERCIAL TRADERS PVT.LTD.(ACTPL)FOR RS.1.07 CRORES,THAT IT HAD SHOWN LOSS OF RS.13,84,603/-IN T HE RETURN OF INCOME,THAT TRANSPORTATION COST TOWARDS THE PURCHASE WAS PAID BY THE ASSESSEE ,THAT ACTPL HAD PAID TRANSPORTATION COST TOWARDS SALES,THAT SURENDRA ROADLINES CORPORATION(S RC)HAD CHARGED A LUMP SUM OF RS.13,200/- FOR TRANSPORTING THE GOODS,THAT IN THE CONSIGNMENT NOTES FREIGHT CHARGES FOR CARRYING THE BUNDLES WERE NOT MENTIONED,THAT THE TR ANSPORTER HAD NOT FURNISHED MODE OF TRANSPORTING THE GOODS.THE AO ISSUED NOTICES U/S.13 3(6)OF THE ACT TO FL AND ACPTL.BOTH OF THEM FILED DETAILS AS DIRECTED BY THE AO.HOWEVER ,FL EXPRESSED ITS INABILITY TO FURNISH COPY OF PURCHASE BILLS DUE TO DAMAGE OF FILES,PAPERS AND DOCUMENTS IN THE HEAVY RAINS OF 26.07.2005.THE AO CONSIDERING THE ABOVE FACTS HELD THAT SRS DID NOT EXIT,THAT GOODS COULD NOT HAVE BEEN TRANSPORTED BY THE PARTY FROM FL TO T HE GODOWN OF THE ASSESSEE,THAT IT HAD NOT FILED NECESSARY DETAILS, THAT FL AND ACPTL HAD SAME ADDRESSES,THAT PURCHASING THE GOODS FROM FL AND SELLING THE SAME TO ACPTL WAS TO BOOK L OSSES WITHOUT ACTUALLY TRANSFERRING THE GOODS,THAT FL COULD HAVE DIRECTLY SOLD THE GOODS TO ACPTL,THAT FL HAD SOLD FANCY FABRICS TO THE ASSESSEE,THAT THE INVOICE OF THE FABRICS DID NO T CONTAIN COLUMN FOR QUALITY OF FABRICS,THAT FL WAS IN THE BUSINESS OF MANUFACTURING OF CONTRACE PTIVES PILLS,THAT FL HAD CLAIMED TO HAVE PURCHASED THE GOODS FROM GUPTA SYNTHETICS LTD.(GSL) FOR RS.1.65 CRORES,THAT IT HAD SOLD THE GOODS TO THE ASSESSEE FOR RS.1.21 CRORES,THAT FL SU FFERED LOSS OF RS.43.85 LAKHS,THAT SERIES OF LOSSES WERE BOOKED ON ALLEGED PURCHASE AND SALES OF FANCY FABRICS BY THE ASSESSEE AND OTHES.THE AO HAD DEPUTED AN INSPECTOR TO VERIFY THE EXISTENCE OF THE SRC.AS PER THE AO THE INSPECTOR REPORTED THAT NO BUSINESS ACTIVITY WAS BE ING CARRIED OUT FROM THE ADDRESS OF THE TRANSPORTER.FINALLY,HE DISALLOWED THE LOSS CLAIMED BY IT AMOUNTING TO RS.13.84 LAKHS AS STATED EARLIER. 3 .AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HER,THE ASSESSEE AR GUED THAT THE ASSESSEE HAD CARRIED OUT THE ACTIVITIES OF TRADING IN FABRICS,THAT SELLER AN D BUYERS OF THE MERCHANDISE HAD CONFIRMED THE TRANSACTIONS,THAT THE AO HAD NOT REFERRED SAID FACT IN HIS ORDER,THAT IT HAD PAID/RECEIVED ALL THE AMOUNTS PERTAINING TO PURCHASE AND SALE BY A/C.PAYE E CHEQUES,THAT BANK STATEMENTS OF THE ASSESSEE SHOWED ALL THE TRANSACTION,THAT MERELY BEC AUSE THE ASSESSEE HAD SUFFERED LOSS WOULD NOT LEAD TO THE AUTOMATIC CONCLUSION THAT THE ASSES SEE HAD INDULGED IN BOGUS TRANSACTION,THAT THE AO HAD MADE DISALLOWANCE SOLELY ON THE BASIS OF ASSUMPTION/PRESUMPTION OR UNDER CONJECTURES AND SURMISE,THAT AO SHOULD NOT ENTER IN TO THE SHOES OF A BUSINESSMAN.THE ASSESSEE RELIED UPON THE DECISION OF MYSORE SPINNIN G(78ITR4)WALLFORT SHARES & STOCK BROKERS LTD.(96ITD3),THAT THE SALE AND PURCHASE TRA NSACTIONS WERE AT ARMS LENGTH,THAT DURING THE ASSESSMENT PROCEEDINGS THE DETAILS OF TRANSPORT ER WERE FURNISHED BY THE CA OF SRC,THAT PAN OF THE PROPRIETOR OF SRC AND THE NEW ADDRESS OF SRC WAS MADE AVAILABLE TO THE AO,THAT THE BASIS OF THE REPORT OF THE INSPECTOR ABOUT NON OPERATION OF BUSINESS ACTIVITY BY SRS WAS NOT COMMUNICATED TO THE ASSESSEE,THAT CONFIRMATION LETTERS FROM THE SELLER AND PURCHASERS WERE MADE AVAILABLE TO THE AO.THE ASSESSEE RELIED U PON THE CASE OF SUCHIR INVESTMENT AND FINANCE PVT.LTD.(ITA/4013/MUM/07 DATED 21.12.2009) WHEREIN ON SIMILAR FACTS TRADING LOSS CLAIMED BY THE ASSESSEE WAS ALLOWED BY THE TRIBUNAL . AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND T HE ASSESSMENT ORDER,THE FAA HELD THAT THE AO HAD RELIED UPON THE REPORT OF THE INSPECTOR INST EAD OF VERIFYING THE CLAIM MADE BY THE ASSESSEE,THAT IT WAS NOT KNOWN AS TO HOW THE INSPEC TOR CAME TO THE CONCLUSION THAT THE TRANSPORTER NEVER EXISTED ON THE GIVEN ADDRESS,THAT THE AO COULD HAVE VERIFIED THE BANK TRANSACTIONS TO ASCERTAIN AS TO WHETHER THE FUNDS W ERE TRANSFERRED AND AS TO WHETHER THE MONEY HAD COME BACK TO THE ASSESSEE,THAT SUSPICION COULD NOT SUBSTITUTE FOR VERIFICATION REQUIRED TO ASCERTAIN VERACITY OF THE TRANSACTION,T HAT THE AO HAD NOT BEEN ABLE TO ESTABLISH THAT KAVITA-3506/11 4 THE TRANSACTION ENTERED IN TO BY THE ASSESSEE WERE BOGUS.FINALLY,THE FAA DELETED THE DISALLOWANCE MADE BY THE AO. 4 .BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)CONTE NDED THAT THE PAN OF SRC WAS NOT MADE AVAILABLE TO THE AO,THAT SRC WAS NOT FOUND ON THE ADDRESS GIVEN WHEN THE INSPECTOR HAD VISITED THE LOCATION,THAT THE ASSESSEE WAS GIVE N AN OPPORTUNITY TO EXPLAIN ITS STAND AFTER THE INQUIRY WAS MADE BY THE INSPECTOR,THAT THE ASSE SSEE DID NOT PRODUCE SRC OR THE BOOKS OF ACCOUNTS,THAT ONLY CONSOLIDATED BILL WAS PRODUCED,T HAT SUPPLIER OF THE GOODS WERE NOT IN THE BUSINESS OF GARMENTS,THAT THERE WAS NOT ENTRY IN TH E BOOKS OF ACCOUNTS,THAT ADDRESSES OF THE FL AND ACTPL WERE SAME,THAT THE TRANSPORTATION OF G OODS WAS NOT PROVED BY THE ASSESSEE. AUTHORISED REPRESENTATIVE(AR)ARGUED THAT ASSESSEE W AS HAVING GODOWN AT ANDHERI,THAT SALES WERE MADE TO ACTPL FORM ANDHERI,THAT THE FL AND ACT PL WERE DIFFERENT ENTITIES HAVING DIFFERENT POSTAL ADDRESSES, THAT WAREHOUSES OF BOTH THE COMPANIES WERE LOCATED AT DIFFERENT PLACES,THAT ALL THE TRANSACTIONS WERE THROUGH BANKI NG CHANNELS,THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THAT BOTH TH E PARTIES TO THE TRANSACTION I.E. THE BUYERS AND THE SELLERS HAD ADMITTED THE TRANSACTIONS,THAT TRUCK NUMBERS CARRYING THE GOODS ARE DIFFERENT,THAT SRC WAS A BOOKING AGENT,THAT DETAILS ABOUT SRC WAS MADE AVAILABLE TO THE AO.HE REFERRED TO THE PG.NO.13 AND 28 OF THE PAPER BOOK. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD MADE THE DISALLOWANCE AS HE WAS OF THE OPINI ON THAT SRC WAS NOT EXISTING AT THE ADDRESS GIVEN AND THEREFORE TRANSPORTATION OF GOODS HAD NOT TAKEN PLACE.WE FIND THAT THE INSPECTOR HAS NOT EXPLAINED AS TO HOW HE ARRIVED AT THE CONCLUSION THAT SRC WAS NOT AVAILABLE ON GIVEN ADDRESS.THE ASSESSEE HAD PROVIDED THE NEW AND THE OLD ADDRESSES OF THE TRANSPORTER.IT HAD GIVEN THE DETAILS OF THE PAN AND CONFIRMATION OF SRC.IT WAS DUTY OF THE AO TO VERIFY THE TRUTHFULNESS OF THE CLAIM MADE BY THE ASSESSEE.IN THE TRANSPORT BILLS NUMBERS OF THE VEHICLES CARRYING THE GOODS ARE AVAILABLE.EV EN RANDOM CHECKING IN THAT REGARD WAS NOT MADE.THERE WERE CIRCUMSTANCES THAT COULD HAVE RAISE D SUSPICION.BUT,IT IS SAID THAT SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE.THE EVIDENCE PRODUCED BY THE ASSESSEE,LIKE TRANSPORTATION OF GOOD,CONFIRMATION OF THE SELLERS AND PURCHASERS,PAYMENTS THROUGH BANKING CHANNELS,WERE NOT PROPERLY APPRECIATED BY THE AO.IT IS FOUND THAT THE AO HAD NOT MADE ANY INQUIRY WITH THE BANKS.IT IS NOTEWORTHY THAT PURCHA SER AND SELLERS WERE NOT ANY WAY RELATED TO THE ASSESSEE.IN THESE CIRCUMSTANCES,WE AGREE WITH T HE FAA THAT THE AO HAD NOT ESTABLISHED THAT THE TRANSACTIONS WERE NOT GENUINE.WE FIND THAT IN THE CASE OF SUCHIR INVESTMENT AND FINANCE PVT.LTD. (ITA/4013/MUM/07 DATED 3.12.2007)I DENTICAL ISSUE HAD ARISEN AND THE TRIBUNAL HAD DISCUSSED AND DECIDED THE MATTER AS UN DER: 6. AFTER CONSIDERING THE ORDER OF THE ASSESSING OF FICER AND THE LEARNED CIT (A), WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THE L EARNED CIT(A) HAS ASCERTAINED THE FACTUAL POSITION THAT PURCHASE AND SALES HAVE BEEN MADE THR OUGH PROPER BANKING CHANNELS. FINDINGS OF THE LEARNED CIT(A) RECORDED IN PARA 4.3 ARE AS UNDE R: 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMI SSIONS MADE BY THE APPELLANT AND OBSERVATION OF TH E ASSESSING OFFICER. THIS GROUND RELATES TO DISALLOW ANCE OF LOSS AMOUNTING TO RS.15,00,480/-. THE FACTS INVOLVED IN THIS ISSUE HAVE ALREADY BEEN NOTED. ASS ESSING OFFICER DISALLOWED THE AMOUNT BECAUSE THE APPELLANT HAD INCURRED LOSS ON SIMILAR KIND OF TRA NSACTION IN EARLIER ASSESSMENT YEAR AS WELL AS IN T HE SUBSEQUENT ASSESSMENT YEAR. THE ASSESSING OFFICER H AD DOUBTED THE GENUINENESS OF THE TRADING ACTIVITY IN VIEW OF THE FACT THAT ALL THE PURCHASES WERE MADE F ROM ONE PARTY AND ALL THE SALES WERE MADE TO ONE P ARTY ONLY. NOT ONLY THAT THE PURCHASES AND SALES WERE MA DE WITHIN SIX MONTHS. FURTHER THERE WAS NO OPENING STOCK AND CLOSING STOCK. IT MEANT THAT PURCHASE WERE MADE AT HIGHER RATE AND SALES WERE MADE AT LOWER RATE A ND BY THIS WAY LOSS WAS ACQUIRED WHICH WAS SET OFF AGAINS T DIVIDEND INCOME. THE APPELLANT ON THE OTHER HAND SUBMITTED THAT ALL THE SALES AND PURCHASES WERE MAD E THROUGH A/C. PAYEE CHEQUE, THE TRANSACTION WAS AC TUALLY UNDERTAKEN AND MERELY BECAUSE LOSS HAS BEEN INCURRE D THE SAME CANNOT BE DISALLOWED. IT HAS ALSO BEEN S TATED BEFORE ME THAT ASSESSING OFFICER HAD SUMMONED THE P ARTIES FROM WHOM SALES AND PURCHASES WERE MADE WHO KAVITA-3506/11 5 CONFIRMED THE TRANSACTION. IT WAS ALSO STATED THAT ASSESSING OFFICER HAD NOT FOUND ANY DISCREPANCY DUR ING THE COURSE OF INVESTIGATION. THE ASSESSING OFFICER HA S HOWEVER NOT REFERRED TO THESE FACTS. HE HAS STATE D IN THE ASEESSMENT- ORDER THAT THE TRANSACTION GIVES RISE T O SUSPICION THAT WHETHER ASSESSEE IS REALLY IN TRAD ING OF FABRIC, OR THIS IS JUST A PAPER WORK. IN MY CONSIDE RED OPINION THIS SUSPICION OF THE ASSESSING OFFICER WAS BONAFIDE BUT THIS SUSPICION CANNOT SUBSTITUTE EVIDE NCE AS TO WARRANT DISALLOWANCE. THERE IS NO DISPUTE THAT THE PAYMENT WAS MADE FOR PURCHASE THROUGH A/C. PAYEE CH EQUE AND THE PAYMENT WAS ALSO RECEIVED THROUGH A/C . PAYEE CHEQUE. FOR DISALLOWING A TRANSACTION WHICH WAS ACTUALLY UNDERTAKEN THE ASSESSING OFFICER SHOUL D HAVE BROUGHT PROPER EVIDENCE ON RECORD. IT HAS BEEN STATED BY THE APPELLANT THAT ASSESSING OFFICER HAD SUMMONED PARTIES INVOLVED AND MADE HIS INQUIRIES BU T HE COULD NOT FIND ANY DISCREPANCY AND THEREFORE H E IGNORED THESE FACTS AND DID NOT MENTION IN THE ASSE SSMENT ORDER. NO COMMENT CAN BE MADE ABOUT THIS AS THE ASSESSING OFFICER HAS NOT MENTIONED THIS IN ASSESSM ENT ORDER. APPARENTLY THERE IS NO EVIDENCE TO SUGGE ST THAT THESE TRANSACTIONS DID NOT TAKE PLACE. IT IS ALSO U NDISPUTED THAT THESE TRANSACTIONS DID NOT TAKE PLAC E.IT IS ALSO UNDISPUTED THAT THIS LOSS HAS REDUCED TAXABLE INCOM E. BUT THIS FACT IN ITSELF IS NOT SUFFICIENT TO DISA LLOW THE CLAIM. THERE IS NOTHING TO SUGGEST THAT THE QUANTU M OF LOSS INCURRED IN THIS TRANSACTION HAS COME BAC K TO APPELLANT IN ANY MANNER. THIS IS IMPORTANT BECAUSE THE AMOUNT OF LOSS IS GREATER THAN SAVING IN TAX A MOUNT. IN THE ABSENCE OF PROPER EVIDENCE TO SHOW THAT THES E TRANSACTIONS WERE NOT UNDERTAKEN AND THESE WERE M ERE PAPER TRANSACTIONS, THE DISALLOWANCE CANNOT BE JUST IFIED. ACCORDINGLY THIS GROUND IS ALSO UPHELD. 7. NEITHER THE ABOVE FINDINGS COULD BE CONTROVERTED NOR ANY OTHER MATERIAL WAS BROUGHT ON RECORD TO ESTABLISH OTHERWISE. THEREFORE, IN VIE W OF THE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LEARNED CIT (A), WE CONFIRM THE ORDER. FOLLOWING THE ABOVE ORDER AND CONSIDERING THE PECUL IAR FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOE S NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.SO,CONFIRMING THE SAME WE DECIDE EFFECTIV E GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER,2015. 11 ,2015 SD/- SD/- ( / SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 11 .09.2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.