SHRI SANJAY AGARWAL, JAIPUR V. INCOME TAX OFFICER, WARD-3-3, JAIPUR

ITA 351/JPR/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3291 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 14-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RUNI PAL ACIT A
• Assessee Lawyers: NIKHILESH KATARIA
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence; Speculation loss; Corroborative evidences
• Section: 271(1)(c); 142(1); 143(2); 13; 145(3); 22; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 351/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 SHRI SANJAY AGARWAL S/O SHRI NIRMAL AGARWAL PROP. M/S BHAGWATI FOOD & SPICES, D-1, II FLOOR, CHANDPOLE ANAJ MANDI, JAIPUR. CUKE VS. THE ITO, WARD-3(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AIEPA 0587 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI NIKHILESH KATARIA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. RUNI PAL (ACIT) A LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 09/12/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 01/03/2021 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER OF LD. CIT(A)-I, JAIPUR DATED 16.02.2018 PERTAINING TO ASS ESSMENT YEAR 2012-13 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL:- 1. THE ASSESSMENT ORDER PASSED U/S 144 IS BAD IN L AW AS WELL AS ON FACTS OF THE PRESENT CASE AS THE SAME IS FRAMED WITHOUT PROPER SERVICE OF NOTICES U/S 142(1) & 142(2)/144 AND HENC E, THE SAME MAY PLEASE BE QUASHED. 2. THE LD. AO ERRED IN LAW AS WELL AS ON THE FACTS OF THE PRESENT CASE IN NOT PROVIDING OPPORTUNITY OF BEING HEARD AN D PASSING THE ORDER EX PARTE. ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 2 3. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FA CTS OF THE PRESENT CASE IN IGNORING THE REMAND REPORT RECEIVED FROM AO . 4. THE LD. AO ERRED IN LAW AS WELL AS ON THE FACTS OF THE PRESENT CASE IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSE SSEE AND APPLYING A GP RATE OF 0.69% AS AGAINST 0.38% DECLAR ED BY THE ASSESSEE AND THE LD. CIT(A) ERRED IN CONFIRMING THE SAME. 5. RS. 49,56,217/- THE LD. AO ERRED IN LAW AS WELL AS ON THE FACTS OF THE PRESENT CASE IN MAKING TRADING ADDITION WITH OUT PROPER APPRECIATION OF FACTS ON RECORD AND THE LD. CIT(A) ERRED IN SUSTAINING THE SAME. 2. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE ASSESSEE DIDNT WANT TO PRESS THE GROUND NOS. 1 & 2. FURTHER, APPLICATION FOR RAISING ADDITIONAL GROUND OF APPEAL WAS WITHDRAWN. HENCE, THESE TWO GROUNDS ARE DISMISSED AS NOT PRESS ED AND ADDITIONAL GROUNDS ARE DISMISSED AS WITHDRAWN AT THE ADMISSION STAGE. 3. DURING THE COURSE OF HEARING, THE LD A/R SUBMITT ED THAT THE ASSESSEE DERIVES INCOME FROM TRADING IN VARIOUS COM MODITIES AND HE HAS FILED THE RETURN OF THE INCOME ON 04-09-2012 DECLAR ING AN INCOME OF RS.14,07,110/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE NOTICE U/S 143(2) WAS SENT ON 08-08-2013. HOWEVER, THE SAME CO ULD NOT BE SERVED AS THE ASSESSEE WAS NOT FOUND AVAILABLE AT THE GIVE N ADDRESS. THEREFORE THE SAME WAS SERVED BY AFFIXTURE ON 13-09-2013. FOR THE SIMILAR REASON, THE LATER NOTICES ALSO COULD NOT BE SERVED AND THE LAST SUCH NOTICE WAS SERVED THROUGH AFFIXTURE ON 11-03-2015. ON ACCOUNT OF NON-APPEARANCE OF THE ASSESSEE, THE AO PROCEEDED TO MAKE EX-PARTE ASSESSMENT AND ACCORDINGLY, HE HAS ESTIMATED G.P. RATE OF 0.69% ON DECLARED SALES OF RS.1,57,35,47,863/- WHICH GAVE GROSS PROFIT OF RS.1 ,08,57,480/-. THE ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 3 ASSESSEE DECLARED GROSS PROFIT OF RS. 59,01,264/- A ND AS SUCH AN ADDITION OF RS. 49,56,217/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. IN THE FIRST APPEAL, THE ASSESSEE SUBMITTED COMPLETE DOCUM ENTS AND RECORDS BEFORE THE LD. CIT(A) AND THE SAME WERE ACCEPTED AS ADDITIONAL EVIDENCE. IN REMAND PROCEEDINGS, THE LD. AO HAS ACC EPTED THE TRADING RESULTS OF THE ASSESSEE BUT THE LD. CIT(A) REJECTED THE REMAND REPORT AND WENT ON TO SUSTAIN THE ORIGINAL TRADING ADDITION. N OW THE ASSESSEE HAS FILED THIS APPEAL. 4. IN THE AFORESAID FACTUAL BACKGROUND, THE LD. AR SUBMITTED THAT THERE HAS BEEN A VALID AND BONAFIDE REASON FOR NON APPEARANCE BEFORE THE AO IN ASSESSMENT PROCEEDINGS. A DETAILED EXPLAN ATION HAS BEEN MADE BEFORE THE LD. CIT(A) AS WELL AS BEFORE THE AO IN REMAND PROCEEDINGS AND THE LD. CIT(A) HAS DULY ACCEPTED TH E REASONS AND ADMITTED ALL THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE. THE RELEVANT PARA OF LD. CIT(A) AT PAGE 8 PARA (III) RE ADS AS UNDER:- III) DURING THE APPELLATE PROCEEDINGS, THE APPELLAN T HAS FILED A NUMBER OF DOCUMENTS AS ADDITIONAL EVIDENCES UNDER R ULE 46A OF THE IT RULES, WHICH WERE FORWARDED TO THE AO FOR ITS CO MMENTS AND FOR MAKING NECESSARY ENQUIRIES THEREOF. THESE ADDITIONA L EVIDENCES WERE ADMITTED AS THE ASSESSMENT ORDER WAS PASSED U/ S 144 OF THE ACT, SINCE NO COMPLIANCE WAS MADE BY THE APPELLANT, DURING THE ASSESSMENT PROCEEDINGS, BEFORE THE AO, ON ACCOUNT O F CHANGE OF ITS EARLIER ADDRESS AND IN THE INTEREST OF NATURAL JUSTICE. THE AO HAS SUBMITTED ITS REMAND REPORT AS UNDER: ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 4 THEREFORE, THERE BEING BONA FIDE REASON FOR NON-APP EARANCE BEFORE THE AO IN ORIGINAL ASSESSMENT PROCEEDING, NO ADVERSE IN TERFERENCE TO BE CALLED FOR. IN ANY CASE, IN THE REMAND PROCEEDINGS, ALL THE DIRECTIONS WERE FULLY COMPLIED WITH, WHILE SUBMITTING ALL THE DESIRED INFORMATION AND DOCUMENTS. 5. IT WAS FURTHER SUBMITTED THAT THE TRADING RESULT S ARE FULLY ACCEPTED BY THE AO IN THE REMAND REPORT. THE REMAND REPORT SUBMITTED BY THE AO IS APPEARING AT PAGE 10 OF THE LD. CIT(A) ORDER AND THE RELEVANT EXTRACT OF THE SAME READ AS UNDER:- IN CONNECTION WITH THE REMAND REPORT, AN OPPORTUNI TY WAS PROVIDED TO THE ASSESSEE VIDE LETTER NO. 1695 DATES ON 27.01.2017 TO SUBMIT ALL SUPPORTING DOCUMENTS/EVIDENCES FOR VERIFICATION WHI CH COULD JUSTIFY HIS CLAIM BY FIXING ON 06.02.2017. IN RESPONSE TO THE SAME, THE A/R OF THE ASSESSEE HAS SUBMITTED THE REP LY ON 28.02.2017. I HAVE CAREFULLY GONE THROUGH THE SUBMI SSION OF THE LD. A/R OF THE ASSESSEE AND FOUND SATISFACTORY. ALL SUPPORTING EVIDENCES/DOCUMENTS I.E. COPY OF RENT RECEIPT, SUPP ORTING CHANGE OF ADDRESS, COPY OF ITR ALONG WITH COMPUTATION OF T OTAL INCOME, COPY OF TAX AUDIT REPORT ALONG WITH BALANCE SHEET A ND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON DATED 31.03.2012 , COPY OF SPEED POST DELIVERY DETAILS, SALE AND PURCHASE BILL S, CONFIRMATIONS, QUANTITATIVE DETAILS, COPIES OF VAT RETURNS, LEDGER ACCOUNTS OF COMMODITIES ETC. HAVE BEEN PRODUCED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE, I WANT TO DRAW YOUR KIND ATTE NTION THAT THE THEN ASSESSING OFFICER WAS NOT JUSTIFIED TO MAKE AN ADDITION ON ACCOUNT OF TRADING ADDITION OF RS.49,56,217/-. ALL NOTICES WAS ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 5 DISPATCHED AT THE ADDRESS OF B-2, NEW GRAIN MANDI, CHAND POLE, JAIPUR INSTEAD OF- DI, IIND FLOOR, CHAND POLE ANAJ MANDI, JAIPUR AND THAT THE ADDRESS WAS WRONG AND DUE TO THIS ASSE SSEE COULD NOT GET NOTICES. ON PERUSAL OF ASSESSMENT ORDER, TH ERE IS NO SPECIFIC REASON MENTIONED IN THE ASSESSMENT ORDER T O TAKE THE RATE OF G.P AT 0.69% OF GROSS RECEIPT WHEREAS, THE ASSES SEE HAS SHOWN G.P. RATE OF 0.38 %. THE SALE OF ASSESSEE HAS SUBST ANTIALLY INCREASED DURING THE YEAR AND HENCE NOT COMPARABLE. HOWEVER, THE TRADING RESULTS OF THE ASSESSEE ARE DULY SUPPOR TED WITH DOCUMENTARY EVIDENCES AS DISCUSSED ABOVE. COMMODITY TRADING LOSS AND CARDAMOM TRADING LOSS ARE ALSO FULLY SUPPO RTED WITH DOCUMENTARY PROOFS AND THE SAME WERE ACCEPTED IN TH E ORIGINAL ASSESSMENT PROCEEDINGS ALSO AND HENCE REQUIRE NO IN TERFERENCE . 6. IT WAS SUBMITTED THAT THE LD. CIT(A) IN AN INCOR RECT AND UNJUSTIFIED MANNER HAS REJECTED THE REMAND REPORT: THE LD. CIT( A) DEALT WITH THE REMAND REPORT OF THE AO AT CLAUSE (V) AT PAGE 12. T HE SAME READS AS UNDER:- V) IN ITS REMAND REPORT, THE AO HAS ACCEPTED THE SUBMISSIONS OF THE APPELLANT AS MADE DURING THE REMAND PROCEEDINGS . HOWEVER, IT APPEARS THAT THE AO HAS NOT EXAMINED THE MATTER IN THE CORRECT PERSPECTIVE AND THE DOCUMENTS FILED BY THE APPELLAN T AS ADDITIONAL EVIDENCES WERE NOT ANALYZED PROPERLY AND THUS, THE REMAND REPORT OF THE AO IS TO BE IGNORED AND NO COGNIZANCE COULD BE GIVEN TO IT. THEREFORE, IN VIEW OF THE TOTALITY OF FACTS AND CIR CUMSTANCES OF THE ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 6 CASE, IT IS HELD THAT THE AO WAS JUSTIFIED IN REJEC TING THE BOOKS OF ACCOUNT OF THE APPELLANT U/S 145(3) OF THE ACT. 7. IT WAS SUBMITTED THAT THE LD. CIT(A) ONLY MADE P ASSING REMARK THAT THE ADDITIONAL EVIDENCES WERE NOT ANALYZED PRO PERLY. HOWEVER, THE FACT REMAINS THAT THE LD. CIT(A) HAS NOT POINTED EV EN A SINGLE DEFECT IN THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE. THERE IS NO IOTA OF EVIDENCE OR FACT PUT ON RECORD BY THE LD. CIT(A) TO SUPPORT HIS CONCLUSION THAT THE EVIDENCES WERE NOT ANALYZED PROPERLY. IN F ACT THE LD. AO ANALYZED THE COMPLETE DETAILS AND DISCUSSED IN REMA ND REPORT AND REMARK BY THE LD. CIT(A) IS A LOOSE AND PASSING REM ARK WITHOUT ANY SUPPORTING EVIDENCE. NO SPECIFIC DIRECTION BY THE L D. CIT(A) TO THE LD. AO: 8. IT WAS SUBMITTED THAT THE ORDER OF LD. CIT(A) MA KES IT AMPLY CLEAR THAT THE LD. CIT(A) JUST SENT THE ADDITIONAL EVIDEN CES SUBMITTED BY THE ASSESSEE TO THE AO FOR EXAMINATION AND THERE IS NOT HING ON RECORD TO SUGGEST THAT THE ADDITIONAL EVIDENCES WERE TO BE AN ALYZED IN ANY PARTICULAR MANNER. FURTHER THERE IS NO OTHER SPECIF IC DIRECTION FOR THE AO. IN THESE CIRCUMSTANCES, IT IS COMPLETELY UNJUSTIFIE D ON THE PART OF THE LD. CIT(A) TO CONCLUDE THAT THE LD. AO FAILED TO MAKE P ROPER ANALYSIS OF THE ADDITIONAL EVIDENCES WHEREAS THE FACT IS THAT THE R EMAND REPORT OF THE AO IS FULLY SUPPORTED BY EVIDENCES SUBMITTED BY THE ASSESSEE. 9. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) KEP T COMPLETE SILENT BEFORE PASSING OF ORDER. IT IS NOTABLE THAT AFTER RECEIVING OF REMAND REPORT OF THE LD. AO, THE LD. CIT(A) HAS KEPT COMPL ETE SILENCE ON THE SAME. THE LD. CIT(A) HAS NOT COMMUNICATED ANYTHING TO THE LD. AO TO ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 7 MAKE ANY FURTHER ENQUIRY NOR POINTED OUT SPECIFIC D EFECT IN THE REMAND REPORT OF THE AO. 10. IT WAS FURTHER SUBMITTED THAT NO SPECIFIC DEFEC T POINTED OUT BY THE LD. CIT(A). AS SUBMITTED ABOVE, THE LD. CIT(A) HAS NOT POINTED OUT ANY DEFECT WHATSOEVER IN THE DETAILS AND EVIDENCES SUBM ITTED BEFORE HIM IN SUPPORT OF TRADING RESULTS DECLARED BY THE ASSESSEE . FURTHER, THE LD. CIT(A) DULY ACCEPTED THE CONFIRMATIONS OF DEBTORS A ND CREDITORS SUBMITTED BEFORE HIM AND ALSO FAILED TO POINT OUT A NY DEFECT IN THE SALES AND PURCHASES BILLS PLACED BEFORE HIM. THE LD. CIT( A) HAS ABSOLUTELY NOTHING TO SAY ACCEPTED LOOSELY SAYING THAT THE AO DID NOT MAKE REQUISITE ENQUIRY AND EVEN THEN IT WAS NOT STATED W HAT FURTHER ENQUIRY THE AO WAS SUPPOSED TO MAKE. 11. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) PU T HIMSELF IN THE SHOES OF THE AO BY REJECTING HIS REMAND REPORT AND IN THESE CIRCUMSTANCES, IT WAS INCUMBENT UPON HIM TO MAKE FU RTHER ENQUIRY IF IT WAS OF THE VIEW THAT THE REMAND REPORT OF THE AO WA S DEFICIENT. BUT THE LD. CIT(A) HAS NOT MADE A SINGLE INDEPENDENT ENQUIR Y EVEN THOUGH IT HAS SUMMARILY REJECTED THE REMAND REPORT OF THE AO. 12. IT WAS SUBMITTED THAT AS ALREADY POINTED OUT TH AT THERE WAS ABSOLUTELY NOTHING WITH THE LD. CIT(A) TO SUGGEST T HAT THERE REMAINED ANY DISCREPANCY IN THE TRADING RESULTS DISCLOSED BY THE ASSESSEE WHICH WAS FULLY SUPPORTED WITH THE DOCUMENTARY EVIDENCES ON RECORD AND IN CONTRAST, THE REMAND REPORT OF THE AO WAS FULLY SUP PORTED WITH REASONS AND BASIS AS WOULD APPEAR FROM THE REMAND REPORT. T HEREFORE, IN THESE CIRCUMSTANCES, A SUMMARY REJECTION OF THE REMAND RE PORT WAS UNCALLED FOR. IN THESE FACTS AND CIRCUMSTANCES, THE LD. CIT( A) WAS COMPLETELY ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 8 UNJUSTIFIED IN REJECTING THE REMAND REPORT SUBMITTE D BY THE LD. AO AND HENCE, TRADING ADDITION HAS TO BE COMPLETELY DELETE D WHILE ACCEPTING THE REMAND REPORT SUBMITTED BY THE LD. AO. 13. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS MAINTAINED COMPLETE BOOKS OF ACCOUNTS OF THE ASSESSEE INCLUDIN G CASH BOOK, JOURNAL, LEDGER, PURCHASES AND SALES BOOK AND THE SAME WERE DULY AUDITED AND THE COMPLETE AUDIT REPORT WAS DULY AVAILABLE WITH T HE DEPARTMENT AS THE SAME WERE FILED ONLINE. THE SAME WERE AGAIN SUBMITT ED DURING THE COURSE OF APPELLATE PROCEEDINGS. THERE IS A SPECIFI C OBSERVATION OF THE AUDITOR AT CLAUSE 9(B) REGARDING THE BOOKS OF ACCOU NTS. FURTHER THE AUDITOR HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED AND AS SUCH IT IS INCORRECT OBSERVATION OF THE LD. CIT(A) THAT NO BOOKS OF ACCOUNTS WERE MAINTAINED. 14. IT WAS FURTHER SUBMITTED THAT PRECEDING YEAR RE SULTS ARE NOT COMPARABLE WITH YEAR UNDER CONSIDERATION. IT WAS S UBMITTED THAT THE AY 2012-13 WAS AN EXCEPTIONAL YEAR IN SO FAR AS THE TU RNOVER DURING THE YEAR WAS EXTRAORDINARILY HIGH AS COMPARED TO PRECED ING YEARS. THE COMPARATIVE TRADING RESULTS AS APPEARING AT PAGE 7 OF THE ASSESSMENT ORDER WOULD SHOW THE FOLLOWING TURNOVER IN THREE YE ARS: A.Y. TURNOVER G.P. RATE AY 2010-11 RS.7832925 11.69% AY 2011-12 RS. 11671818 11.15% AY 2012-13 RS. 1573547863 0.38% ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 9 THUS IT CAN BE SEEN THAT THERE HAS BEEN EXTRAORDINA RY JUMP IN THE TURNOVER OF THE ASSESSEE AND IT HAS INCREASED ALMOS T 130 TIMES DURING THE YEAR UNDER CONSIDERATION. THUS THE TRADING RESU LTS OF THE ASSESSEE IS NOT AT ALL COMPARABLE FROM THE PRECEDING YEAR AND T HE RESULTS ARE TO BE SEEN SPECIFICALLY WITH REGARD TO CIRCUMSTANCES PREV AILING DURING THE YEAR. 15. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS MAINTAINED COMPLETE BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED AND FURTHER DAY TO DAY QUANTITATIVE DETAILS HAVE ALSO BEEN MAINTAINED AND THEREFORE, THE TRADING RESULTS ARE TO BE ACCEPTED. HOWEVER STILL, THE FALL IN G.P. RATE CAN VERY WELL BE EXPLAINED AND RATHER APPARENT FROM THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. IT WAS MAINLY DUE TO FA LL IN PRICES OF CARDAMOM WHICH SIGNIFICANTLY CONTRIBUTED TO THE FAL L IN G.P. RATE. AS WOULD BE APPARENT FROM THE CARDAMOM ACCOUNT PLACED AT PB 302-317, THE COMPARATIVE PRICES WERE AS FOLLOWS: DATE RS. (OPENING/CLOSING BALANCE RATE) 01.04.2011 RS. 1106.54 (OPENING BALANCE RATE) 01.07.2011 RS. 630/- 31.03.2012 RS. 553.02 (CLOSING BALANCE RATE) THUS THERE HAS BEEN CONSISTENT FALL IN THE PRICES O F THE CARDAMOM WHICH HAS SIGNIFICANTLY CONTRIBUTED TO THE FALL IN OVERAL L G.P. RATE AND IN FACT THE ENTIRE STOCK OF THE ASSESSEE CAME AT HALF OF THE PR ICES AS AT THE START OF THE YEAR THE RATE OF CARDAMOM WAS RS.1106 PER QTLS. WHICH BECAME RS.553 AT THE END OF THE YEAR. THIS ITSELF CLEARLY EXPLAINS THE FALL IN G.P. RATE AND IN ANY CASE, THE COMPLETE BOOKS OF ACCOUNT S ARE FULLY SUPPORTED WITH BILLS, VOUCHERS AND EVIDENCES. ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 10 16. IT WAS FURTHER SUBMITTED ASSESSEE HAS MAINTAINE D THE COMPLETE DAY TO DAY QUANTITATIVE DETAILS OF ALL THE GOODS TR ADED BY IT. EVEN THE QUANTITATIVE DETAILS ARE PART OF THE AUDITED FINANC IAL STATEMENTS AND THE SAME IS APPEARING AT PB 30. COMPLETE DETAILS INCLUD ING SALES AND PURCHASES LEDGER, BILLS AND VOUCHERS SUBMITTED. WE MAY ALSO SUBMIT THAT THE ASSESSEE HAS SUBMITTED THE COMPLETE EVIDEN CES IN SUPPORT OF ITS TRADING RESULTS. SOME OF SUCH EVIDENCES ARE AS UNDE R: AUDITED INVENTORY SUMMARY PB 30 SALE LEDGERS VAT PB 117-143 PURCHASES LEDGERS VAT PB 144-155 ALL THE ABOVE LEDGERS ARE FULLY RECONCILED WITH THE FINANCIAL STATEMENTS DAY TO DAY INVENTORY LEDGERS CARDAMOM PB 302-317 JAIFAL PB 318 BLACK PAPER PB 319 GUAR PB 320-323 ALL THE ABOVE DAY TO DAY QUANTITATIVE DETAILS ARE D ULY RECONCILED WITH THE AUDITED FINANCIAL STATEMENTS AND QUANTITATIVE DETAI LS TAKEN BY THE AUDITORS. 17. IT WAS FURTHER SUBMITTED IN EACH OF THE COMMODI TY LEDGER AS APPEARING ABOVE, THE CLOSING STOCK IS PROPERLY VALU ED AND THE SAME HAS BEEN ADOPTED BY THE ASSESSEE. THE AUDITORS HAVE NOT POINTED OUT ANY ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 11 DEFECT IN THE CALCULATION OF CLOSING STOCK NOR ANY OF THE LOWER AUTHORITIES RAISED ANY QUESTION ON VALUATION OF CLOSING STOCK. THEREFORE, THERE REMAINED NO REASON FOR REJECTING THE TRADING RESULT S OF THE ASSESSEE. 18. IT WAS ALSO SUBMITTED THAT THE COMPLETE BILLS A ND VOUCHERS IN SUPPORT OF THE TRANSACTIONS DISCLOSED IN THE FINANC IAL STATEMENTS. WE HAVE PLACED COPIES OF THE BILLS AND TRANSPORTATION DETAILS OF THE PURCHASES MADE BY THE ASSESSEE AND THE SAME ARE PLA CED AT PB 155- 301. WE MAY ALSO SUBMIT THAT THE ASSESSEE WAS REGUL ARLY FILING THE VAT RETURNS AND BEING ASSESSED WITH THE SALES TAX DEPAR TMENT. WE HAVE PLACED THE COPIES OF QUARTERLY VAT RETURNS WHICH AR E PLACED AT PB 329- 360 AND THE ANNUAL RETURN IS PLACED AT PB 324-328. THE COMPLETE TURNOVER IS FULLY RECONCILED WITH THE BOOKS OF ACCO UNTS OF THE ASSESSEE AS WELL AS THE FINANCIAL STATEMENT. WE MAY SUBMIT THAT THE ASSESSEE HAS SUBMITTED THE CONFIRMATIONS FROM VARIOUS PARTIES IN CLUDING DEBTORS AND CREDITORS WHICH WERE APPEARING IN THE BALANCE SHEET OF THE ASSESSEE. IT IS NOTABLE THAT ALL SUCH BALANCES AS APPEARING IN T HE BALANCE SHEET OF THE ASSESSEE HAVE BEEN FULLY ACCEPTED BY THE LD. CIT(A) WITHOUT RAISING ANY QUESTION. THEREFORE, IT WAS COMPLETE UNFAIR ON THE PART OF THE LD. CIT(A) NOT TO ACCEPT THE TRADING RESULTS OF THE ASSESSEE. 19. IT WAS SUBMITTED THAT THE LD. CIT(A) HAS DISCUS SED THE ISSUE OF COMMODITY TRADING LOSS OF RS. 15,13,132/- AS WELL A S CARDAMOM TRADING LOSS OF RS. 21,83,559. IN THIS REGARD, IT WAS SUBMI TTED THAT THE LD. CIT(A) HAS DULY ACCEPTED THE TRANSACTION AS WOULD APPEAR F ROM THE FOLLOWING PARA OF THE CIT(A) ORDER AT PAGE 16 OF ITS ORDER XIII) IN VIEW OF THE ABOVE DISCUSSION, IT IS CRYSTAL CLEA R THAT THE LOSS AMOUNTING TO RS.15,13,132/- AND RS.21,83,559/- CLAI MED BY THE ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 12 APPELLANT ON ACCOUNT OF COMMODITY TRADING LOSS AN D CARDAMOM SQUARE OFF TRADE LOSS RESPECTIVELY IN ITS PROFIT A ND LOSS ACCOUNT IS NOTHING BUT A SPECULATIVE LOSS, WHICH CANNOT BE ALL OWED TO BE SET OFF AGAINST NON-SPECULATIVE INCOME. EVEN, THE APPEL LANT HAS FAILED TO PROVE THE GENUINENESS OF SUCH LOSSES. IT IS CLEAR FROM THE ABOVE THAT THE LD. CIT(A) WAS FULLY SATISFIED WITH THE GENUINENESS OF THE TRANSACTION ITSELF THOUGH IT WAS STATED TO BE SPECULATION LOSS. IN ANY CASE THERE IS NO EVIDENCE OTHERWISE ON RECORD FOR NOT ACCEPTING SUCH LOSS CLAIMED BY THE ASSESSEE . THEREFORE, THERE IS NO REASON TO TAKE ANY ADVERSE INFERENCE ON THE TRAD ING RESULTS OF THE ASSESSEE FOR THE REASON OF THESE LOSSES. 20. IT WAS ALSO SUBMITTED THAT THESE LOSSES ARE NOT PART OF THE TRADING RESULTS AS WOULD APPEAR FROM THE PERUSAL OF THE AUD ITED TRADING ACCOUNT OF THE ASSESSEE WHICH IS PLACED AT PB 32 WHERE IT C AN BE SEEN THAT THIS HAVE BEEN SHOWN SEPARATELY IN THE PROFIT AND LOSS A CCOUNT. EVEN THEN NO SEPARATE ADDITION IS MADE ON THIS ACCOUNT THEREBY A CCEPTING THE SAME. 21. IT WAS SUBMITTED THAT THE TRANSACTIONS RELATED TO THE TRADING LOSS CLAIMED IN THE PROFIT AND LOSS ACCOUNT WERE NOT OF SPECULATIVE NATURE AND RATHER THESE WERE PURCHASES AND SALES TRANSACTIONS WITH DELIVERY OF GOODS. IT IS SUBMITTED THAT THE PARTIES TO WHOM THE SE PAYMENTS HAVE BEEN MADE TOWARDS THESE TRANSACTIONS HAVE ACTED AS AGENT OF THE ASSESSEE. THESE TRANSACTIONS OF PURCHASES AND SALES WERE CARRIED OUT BY THOSE PARTIES ON CLEAR INSTRUCTIONS OF THE ASSESSEE . THE ASSESSEE IS A TRADER IN GOODS AND INITIALLY MADE PURCHASES OF GOO DS THROUGH THESE PARTIES WITH THE EXPECTATION OF RISE IN PRICES AND GOT STOCKED SAME WITH ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 13 THE AGENT ITSELF. BUT IN CONTRAST THE PRICES HAVE F ALLEN AS DISCUSSED EARLIER AND ALSO APPARENT FROM THE CARDAMOM ACCOUNT AND THEREFORE, THE ASSESSEE WAS FORCED TO SALE AS THERE WERE NOT SUFFI CIENT FUNDS WITH THE ASSESSEE TO MAKE PAYMENT TO HIS AGENT. ACCORDINGLY, LOSS ON THESE TRANSACTIONS HAS BEEN BOOKED BY THE ASSESSEE AS A D IFFERENCE BETWEEN SALES AND PURCHASES PRICE. WE MAY SUBMIT THAT THE C OMPLETE TRANSACTIONS OF THIS TRADE WAS THROUGH BANKING CHAN NELS ONLY AND EVEN NONE OF THE LOWER AUTHORITIES HAS QUESTIONED THE GE NUINENESS OF THE TRANSACTION. NO ADVERSE EVIDENCE ON RECORD. IT IS SUBMITTED THAT THE TRANSACTION IS FULLY CONFIRMED BY THE RESPECTIVE PA RTIES AND THE CONFIRMATIONS AND THE DETAILS OF COMPLETE TRANSACTI ONS ARE PLACED FROM PB 11-15. IT IS NOTABLE THAT THE LD. CIT(A) HAS NOT HING TO SAY ON THESE CONFIRMATIONS AND FURTHER NO FURTHER ENQUIRY WAS MA DE BY THE LD. CIT(A) TO SUGGEST THAT THESE CONFIRMATIONS WERE NOT CORREC T. IN ANY CASE, THE CONFIRMATIONS WERE FULLY SUPPORTED WITH THE DOCUMEN TARY EVIDENCES ON RECORD AND THEREFORE THE SAME HAS TO BE ACCEPTED. I T WAS ACCORDINGLY SUBMITTED THAT TRADING ADDITIONS SO SUSTAINED BY TH E LD CIT(A) BE DELETED. 22. PER CONTRA, THE LD. DR RELIED UPON THE ORDER AN D FINDINGS OF LD. CIT(A) WHICH READS AS UNDER:- (III) DURING THE APPELLATE PROCEEDINGS, THE APPELL ANT HAS FILED A NUMBER OF DOCUMENTS AS ADDITIONAL EVIDENCES UNDER RULE 46A OF THE IT RULES, WHICH WERE FORWARDED TO THE AO FOR ITS COMMENTS AND FOR MAKING NECESSARY ENQUIRIES THEREOF . THESE ADDITIONAL EVIDENCES WERE ADMITTED AS THE ASSESSMEN T ORDER WAS PASSED U/S 144 OF THE ACT, SINCE NO COMPLIANCE WAS MADE BY THE APPELLANT, DURING THE ASSESSMENT PROCEE DINGS, BEFORE THE AO, ON ACCOUNT OF CHANGE OF ITS EARLIER ADDRESS AND ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 14 IN THE INTEREST OF NATURAL JUSTICE. THE AO HAS SUBM ITTED ITS REMAND REPORT AS UNDER: REMAND REPORT 'IN THIS CONNECTION, IT IS SUBMITTED THAT AN ASSESS MENT ORDER WAS PASSED ON 30.03.2015 IN THE CASE OF SH. SANJAY AGAR WAL, D-1, ILND FLOOR, CHANDPOLE ANAL MANDI, JAIPUR, FOR A.Y. 2012- 13 U/S 144 OF THE I.T. ACT, 1961 THE FOLLOWING ADDITIONS WERE MADE IN THE ASSESSMENT ORDER:- 1 ADDITION WAS MADE OF RS. 49,56,217/ ON ACCOUNT OF TRADING ADDITION BY TAKING G.P. AT THE RATE OF 0.69% ON GRO SS RECEIPT OF RS. 1,57,35,47,863/- WHILE, THE ASSESSEE HAS ALREADY SH OWN G.P AT THE RATE OF 0.38% ON GROSS RECEIPT, WHICH COMES TO RS. 59,01,264/-. PENALTY PROCEEDINGS U/S 271(1)(C) WAS INITIATED BY THE A.O. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS CLAIMED AS UNDER:- 'I, SANJAY AGARWAL S/O SHRI NIRMAL AGARWAL AGED 45 YEARS, RESIDENT OF D-1, LIND FLOOR, CHANDPOLE ANAJ MANDI, JAIPUR DO HEREBY SOLEMNLY IS AS UNDER. THAT, THE TRADING ADDITION OF RS. 49,56,217/- WAS M ADE WHILE FRAMING EX-PARTE ASSESSMENT DUE TO NON APPEARANCE B EFORE THE LD. ASSESSING OFFICER AS THE NOTICE SENT REMAINED U NRESERVED AT THE PLACE OF ASSESSEE WHICH WAS B-2, NEW GRAIN MAND I, CHANDPOLE BAZAR, JAIPUR. THAT, THE ADDRESS WITH THE LD. ASSESSING OFFICER WA S RENTED AND I HAVE LEFT THE PLACE IN THE EARLY 2013 ITSELF AND MY NEW ADDRESS IS D- 1, IIND FLOOR, ANAJ MANDI, CHANDPOLE, JAIPUR A COPY OF RENT RECEIPT DATED 30.06.2013 OF NEW PREMISES IS ENCLOSE D FOR YOUR KIND PERUSAL. ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 15 THAT, I HAVE NOT RECEIVED ANY NOTICE FOR A.Y. 2012- 13 ISSUED BY THE LD. ASSESSING OFFICER WHICH IS ALSO CLEAR FROM THE FACT THAT EVEN THE FIRST NOTICE WAS SERVED THROUGH AFFIXTURE. THAT, I WAS INFORMED BY MY AUTHORIZED REPRESENTATIV E TO IMMEDIATELY SUBMIT SOME DETAILS WHICH I HAVE SUBMIT TED THROUGH SPEED POST THE COPIES OF WHICH ARE ENCLOSED HEREWITH. THAT, THERE WAS NO MALA FIDE INTENTION BEHIND NOT A TTENDING THE ASSESSMENT PROCEEDINGS AND IT WAS ONLY DUE TO GENUI NE REASON OF CHANGE OF RESIDENCE. IN CONNECTION WITH REMAND REPORT, AN OPPORTUNITY WA S PROVIDED TO THE ASSESSEE VIDE LETTER NO. 1695 DATED ON 27.01 .2017 TO SUBMIT ALL SUPPORTING DOCUMENTS/EVIDENCES FOR VERIF ICATION WHICH COULD JUSTIFY HIS CLAIM BY FIXING ON 06.02.20 17. IN RESPONSE TO THE SAME, THE AIR OF THE ASSESSEE HAS S UBMITTED THE REPLY ON 28.02.2017. I HAVE CAREFULLY GONE THR OUGH THE SUBMISSION OF THE AIR OF THE ASSESSEE AND FOUND SAT ISFACTORY. ALL SUPPORTING EVIDENCES/DOCUMENTS I.E. COPY OF REN T RECEIPT, SUPPORTING CHANGE OF ADDRESS, COPY OF ITR ALONG WIT H COMPUTATION OF TOTAL INCOME, COPY OF TAX AUDIT REPO RT ALONG WITH BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR THE YEA R ENDED ON DATED 31.03.2012, COPY OF SPEED POST DELIVERY DETAI LS, SALE & PURCHASE BILLS, CONFIRMATIONS, QUANTITATIVE DETAILS , COPIES OF VAT RETURNS, LEDGER ACCOUNTS OF COMMODITIES ETC. HAVE B EEN PRODUCED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDE RATION. IN VIEW OF THE ABOVE, I WANT TO DRAW YOUR KIND ATTE NTION THAT THE THEN ASSESSING OFFICER WAS NOT JUSTIFIED TO MAK E AN ADDITION ON ACCOUNT OF TRADING ADDITION OF RS. 49,56,217/-. ALL NOTICES WAS DISPATCHED AT THE ADDRESS OF B-2, NEW GRAIN MAN DI, CHANDPOLE, JAIPUR INSTEAD OF D-1, ILND FLOOR, CHAND POLE ANAJ MANDI, JAIPUR AND THAT THE ADDRESS WAS WRONG AND DU E TO THIS ASSESSEE COULD NOT GET NOTICES. ON PERUSAL OF ASSES SMENT ORDER, THERE IS NO SPECIFIC REASON MENTIONED IN THE ASSESS MENT ORDER TO TAKE THE RATE OF G.P. AT 0.69% OF GROSS RECEIPT WHE REAS, THE ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 16 ASSESSEE HAS SHOWN G.P. RATE OF 0.38%. THE SALE OF ASSESSEE HAS SUBSTANTIALLY INCREASED DURING THE YEAR AND HEN CE NOT COMPARABLE. HOWEVER, THE TRADING RESULTS OF THE ASS ESSEE ARE DULY SUPPORTED WITH DOCUMENTARY EVIDENCES AS DISCUS SED ABOVE. COMMODITY TRADING LOSS AND CARDAMOM TRADING LOSS AR E ALSO FULLY SUPPORTED WITH DOCUMENTARY PROOFS AND THE SAM E WERE ACCEPTED IN THE ORIGINAL ASSESSMENT PROCEEDINGS ALS O AND HENCE REQUIRE NO INTERFERENCE.' (IV) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER, REMAND REPORT OF THE AO AND THE M ATERIAL PLACED ON RECORD. IT IS AN ADMITTED FACT THAT NO CO MPLIANCE WAS MADE BY THE APPELLANT BEFORE THE AO DURING THE ASSE SSMENT PROCEEDINGS AND THUS THERE IS NO QUESTION OF VERIFI CATION OF TRADING ACCOUNT OF THE APPELLANT. IN FACT, DURING THE APPEL LATE PROCEEDINGS, IT WAS SUBMITTED BY THE APPELLANT THAT ITS BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION HAVE BEEN MISPLACED, THERE FORE, THE TRADING RESULTS OF THE APPELLANT COULD NOT BE VERIF IED, EVEN DURING THE APPELLATE PROCEEDINGS. (V) IN ITS REMAND REPORT, THE AO HAS ACCEPTED THE SUBMISSIONS OF THE APPELLANT AS MADE DURING THE REM AND PROCEEDINGS. HOWEVER, IT APPEARS THAT THE AO HAS NO T EXAMINED THE MATTER IN THE CORRECT PERSPECTIVE AND THE DOCUMENTS FILED BY THE APPELLANT AS ADDITIONAL EVID ENCES WERE NOT ANALYZED PROPERLY AND THUS, THE REMAND REP ORT OF THE AO IS TO BE IGNORED AND NO COGNIZANCE COULD BE GIVEN TO IT, THEREFORE, IN VIEW OF THE TOTALITY OF FACTS AND CIR CUMSTANCES OF THE CASE, IT IS HELD THAT THE AO WAS JUSTIFIED I N REJECTING THE BOOKS OF ACCOUNT OF THE APPELLANT U/S 145(3) OF THE ACT. (VI) IT MAY BE MENTIONED THAT THE DURING THE YEAR U NDER CONSIDERATION, THE TURNOVER OF THE APPELLANT WAS AB NORMALLY HIGH IN COMPARISON TO THE EARLIER YEARS AS STATED ON PAG E 3 OF THE ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 17 ASSESSMENT ORDER. IT IS PERTINENT TO MENTION HERE T HAT FOR AY 2010-11 AND 2011-12, THE TURNOVER WAS TO THE TUNE OF RS. 78.32 LOC AND RS. 116.71 LAC RESPECTIVELY, WHEREAS FOR TH E YEAR UNDER CONSIDERATION, IT WAS RS. 157.35 CRORE. IN THE AY 2 010-11 AND 2011-12, THE APPELLANT HAS DECLARED GP RATE OF 11.6 9 % AND 11.15 % RESPECTIVELY, WHEREAS FOR THE YEAR UNDER CO NSIDERATION, IT WAS ONLY 0.38%. THE AO AFTER TAKING INTO ACCOUNT VARIOUS DISCREPANCIES AS STATED ON PAGE NO. 4 OF THE ASSESS MENT ORDER INCLUDING LOSS OF RS, 15,13,132/- AND RS. 21,83,559 /- HAS APPLIED GP RATE OF 0.69% AND HAS MADE TRADING ADDITION OF R S. 49,56,217/-. (VII) IT IS TO BE NOTED THAT THE APPELLANT HAS DEBI TED A SURE OF RS. 15,13,132/- AND RS. 21,83,559/- ON ACCOUNT OF 'COMMODITY TRADING LOSS' AND 'CARDAMOM SQUARE OFF L OSS TRADE' RESPECTIVELY IN ITS PROFIT AND LOSS ACCOUNT. THE AP PELLANT HAS FILED A COPY OF ACCOUNT OF M/S VENKATESH SPICES WHE REIN LOSS OF RS. 15,08,175/- WAS SHOWN IN RESPECT OF 'CARDAMOM T RADE'. IT IS NOTED THAT THROUGH DEBIT NOTES, AMOUNTS OF RS. 11,2 5,000/- AND RS. 57,50,000/- WERE DEBITED IN THE ACCOUNT OF THE APPELLANT ON 05.04.2011 AND 17.04.2011 FOR PURCHASE OF 1000 KGS AND 5000 KGS. OF CARDAMOM RESPECTIVELY. IT IS FURTHER NOTED THAT VIDE CREDIT NOTES, AMOUNTS OF RS. 43,47,775/- AND RS. 9, 99,050/- WERE CREDITED ON 24.05.2011 AND 08.08.2011 FOR SQUARE OF F OF 5000 KGS. AND 1000 KGS. OF CARDAMOM RESPECTIVELY AND IN THE PROCESS A LOSS OF RS. 15,08,175/- WAS CLAIMED BY THE APPELL ANT IN ITS PROFIT AND LOSS ACCOUNT. IT IS PERTINENT TO MENTION HERE THAT EXCEPT FILING THE CONFIRMED COPY OF ACCOUNT, NO OTH ER DOCUMENT WAS FILED RELATING TO PURCHASE AND SALE OF 6000 (10 00+ 5000) KGS. OF CARDAMOM. IT IS NOTED THAT THE APPELLANT HA S ALSO CLAIMED A LOSS OF RS. 6,75,384/-FROM GUHAN TRADERS BUT NO D OCUMENTARY EVIDENCE WAS FILED BY IT. IT MAY BE MENTIONED THAT THIS AMOUNT OF RS. 6,75,384/- IS A PART OF LOSS OF RS. 21,83,559/- ON ACCOUNT OF CARDAMOM SQUARE OFF TRADE. ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 18 (VIII) REGARDING THE LOSS OF RS. 15,13,132/-, THE A PPELLANT HAS FILED COPIES OF A CERTIFICATE FROM S. SANASIRAJ AND CREDIT NOTE AND DEBIT NOTE THEREOF. IT IS NOTED FROM THE DEBIT NOTE ISSUED BY S. SANASIRAJ THAT 5000 KGS. OF CARDAMOM WERE PURCHASED ON 07.04.20111 FOR A SUM OF RS. 54,50,000/-. IT MAY BE MENTIONED THAT IN THE SAID DEBIT NOTE, IT WAS STATED THAT 'TH E ABOVE CARDAMOM HAVE BEEN STOCKED WITH US AT YOUR RISK. VA T/ CST WILL BE PAID BY YOU AT THE TIME OF DELIVERY'. FURTHER, I T IS NOTED FROM THE CREDIT NOTE ISSUED BY S. SANASIRAJ THAT 5000 KG S. OF CARDAMOM WAS SOLD / SQUARE OFF FOR A SUM OF RS. 39, 37,500/-. (IX) IN VIEW OF THESE FACTS, VIDE ORDER SHEET ENTRY DATED 26.07.2017, THE APPELLANT WAS REQUIRED TO FURNISH THE FOLLOWING INFORMATION: BILLS IN RESPECT OF LOSS CLAIMED IN PROFIT AND LOSS ACCOUNT EVIDENCE REGARDING TAKING AND GIVING OF DELIVERY OF GOODS IN RESPECT OF ABOVE TRANSACTION WHETHER THESE PURCHASES / SALES WERE ROUTED THROUGH STOCK REGISTER, IF ANY, MAINTAINED BY IT. IF YES, WHY SEP ARATE ENTRIES WERE MADE IN THE PROFIT AND LOSS ACCOUNT AN D WHY THE SAME WERE NOT ROUTED THROUGH THE TRADING ACCOUN T. (X) VIDE ITS REPLY DATE NIL, FILED IN THIS OFFICE D URING THE COURSE OF APPELLATE PROCEEDINGS ON 04.09.2017, IT W AS SUBMITTED BY THE APPELLANT THAT: 'PLEAS' REFER TO FURTHER QUERIES RAISED BY YOUR GOO DSELF ON THE ABOVE ISSUE. IN THIS REGARD, WE BAG TO SUBMIT AS UNDER: 1.1 NATURE OF TRANSACTIONS: WE MAY AGAIN REITERATE THAT THE TRANSACTIONS RELATED TO THE TRADING LOSS CLAIMED IN THE PROFIT AND LOSS ACCOUNT WERE NOT OF SPECULATIVE NATURE AND RAT HER THESE WERE PURCHASES AND SALES TRANSACTIONS WITH DELIVERY OF G OODS. IT IS SUBMITTED THAT THE PARTIES TO WHOM THESE PAYMENTS H AVE BEEN MADE TOWARDS THESE TRANSACTIONS HAVE ACTED AS AGENT OF THE ASSESSEE. THESE TRANSACTIONS OF PURCHASES AND SALES WERE CARRIED ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 19 OUT BY THOSE PARTIES ON CLEAR INSTRUCTIONS OF THE A SSESSEE. THE ASSESSEE IS A TRADER IN GOODS AND INITIALLY MADE PU RCHASES OF GOODS THROUGH THESE PARTIES WITH THE EXPECTATION OF RISE IN PRICES AND GOT STOCKED SAME WITH THE AGENT ITSELF BUT IN C ONTRAST THE PRICES HAVE FALLEN AND THEREFORE, THE ASSESSEE WAS FORCED TO SALE AS THERE WERE NOT SUFFICIENT FUNDS WITH THE ASSESSE E TO MAKE PAYMENT TO HIS AGENT. ACCORDINGLY, LOSS ON THESE TR ANSACTIONS HAS BEEN BOOKED BY THE ASSESSEE AS A DIFFERENCE BETWEEN SALES AND PURCHASES PRICE. 1.2 SALE AND PURCHASES TRANSACTIONS WITH DELIVERY W E HAVE ALREADY SUBMITTED THE CONFIRMED COPY OF ACCOUNT FRO M VENKATESH SPICES AND ALSO DEBIT & CREDIT NOTE AND CONFIRMATIO N FROM S SANSIRRAJ (PB. 29-32). IT IS ABUNDANTLY CLEAR FROM THE PERUSAL OF THE COMMUNICATION THAT THEY HAVE MADE TRANSACTIONS ON BEHALF OF THE ASSESSEE ACTING AS AN AGENT AND THE RELATION SHIP WITH THE ASSESSEE REMAINED AS PRINCIPAL TO AGENT. THE ENTIRE TRANSACTIONS WORE DELIVERY TRANSACTIONS ENTERED ON INSTRUCTIONS OF THE ASSESSEE AND AS SUCH THE ASSESSEE WAS BOUND BY THE TRADE ENTERED INTO BY THEM AND ACCORDINGLY RIGHTLY TREATE D THE SAME AS SALES AND PURCHASES TRANSACTIONS. 1.3 NO TRANSPORTATION TAKEN PLACE: WE MAY ALSO SUB MIT THAT IN THE ABOVE CASES, THERE WAS NO TRANSPORTATION OF THE GOODS TO THE ASSESSEE AND IT WAS ONLY THE CASE WHERE THESE A GENTS PURCHASED GOODS ON OUR BEHALF, STOCKED THEM AND THE REAFTER SOLD THE GOODS ON INSTRUCTION OF THE ASSESSEE. TRAN SPORTING OF GOODS IN OTHER STATES TO THE PLACE OF THE ASSESSEE WOULD HAVE BEEN VERY COSTLY AND AS SUCH THE GOODS WERE KEPT WI TH THESE AGENTS ONLY. 1.4 SALE & PURCHASES MADE BY AGENT NOT REQUIRED TO BE PART OF TURNOVER: WE MAY ALSO SUBMIT THAT AS THE TRANSACTIO NS HAVE BEEN BOOKED ON NET BASIS THE SAME WERE NOT REQUIRED TO B E ADDED IN THE RESPECTIVE AMOUNTS OF SALES AND PURCHASES. IT I S FURTHER SUBMITTED THAT AS THE AGENT OF THE ASSESSEE MADE TH ESE SALES AND PURCHASES, WHATEVER LIABILITY WAS THERE IN THIS REGARD IS ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 20 DISCHARGED BY THOSE PARTIES ONLY AND THE ASSESSEE I S NOTHING TO DO WITH THE SAME. HAVING ADDED THE RESPECTIVE AMOUN T IN THE SALES AND PURCHASES ACCOUNT OF THE ASSESSEE WOULD N OT HAVE MADE ANY DIFFERENCE. 1.5 VERY COMMON BUSINESS PRACTICE: WE MAY SUBMIT TH AT THIS IS A VERY COMMON BUSINESS PRACTICE IN THE COMMODITY BU SINESS WHERE PURCHASES AND SALES ARE MADE BY THE AGENTS ON BEHALF OF THE TRADERS AND THE DIFFERENCE ARE SETTLED IF ULTIM ATELY THE PERSON IS UNABLE TO LIFT THE GOODS FROM THE AGENT. 1.6 LD, ITO ALREADY ACCEPTED TRANSACTIONS IN ASSESS MENT PROCEEDINGS ITSELF WE MAY ALSO SUBMIT THAT THE ID. ITO HAS ALREADY ACCEPTED THE TRANSACTION IN ASSESSMENT PROC EEDINGS ITSELF IN AS MUCH AS THE COMPLETE SUPPORTING PAPERS WERE SENT TO IT AND THE SAME WERE DELIVERED TO HIM BEFORE PAS SING OF THE ORDER THEREFORE, NO ADVERSE INFERENCE IS OTHERWISE CALLED FOR. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LOSS SHOWN BY THE ASSESSEE MAY PLEASE BE ACCEPTED IN TOTALITY AND OBLIGE ' (XI) IT IS EVIDENT FROM THE ABOVE THAT REPLY TO THE SPECIFIC QUERIES RAISED BY ORDER SHEET ENTRY DATED 26.07.201 7 WAS GIVEN IN A ROUNDABOUT WAY, WHICH ESTABLISH THAT NO DELIVE RY OF GOODS WAS TAKEN AT THE TIME OF PURCHASE AND NO DELIVERY W AS GIVEN AT THE TIME OF SALE. IT IS EVIDENT THAT THESE TRANSACT IONS DO NOT FORM PART OF THE TRADING ACCOUNT OF THE APPELLANT A S THESE WERE NOT INCLUDED IN THE PURCHASE AND SALE DECLARED BY T HE APPELLANT IN ITS TRADING ACCOUNT. (XII) IN ITS SUBMISSION, IT WAS STATED BY THE APPEL LANT THAT THESE PERSONS WERE ACTING AS AGENTS OF THE APPELLAN T AND THESE TRANSACTIONS WERE UNDERTAKEN ON BEHALF OF THE APPELLANT AND THE TRANSACTIONS MADE BY THE AGENTS, WERE NOT REQUIRED TO BE A PART OF THE TURNOVER. THESE SU BMISSIONS ARE OF NO HELP TO THE APPELLANT AS THE APPELLANT HA S NOT FILED ANY DOCUMENT WHICH MAY REVEAL THAT FROM WHOM THE SO ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 21 CALLED AGENTS HAVE PURCHASED THE GOODS AND TO WHOM THESE GOODS WERE SOLD BY THESE SO CALLED AGENTS. THE APPE LLANT HAS NOT PLACED ON RECORD ANY ACCOUNTING STANDARDS ACCORDING TO WHICH THE SALES AND PURCHASES MADE BY THE AGENTS DO NOT FORM PART OF THE TURNOVER OF THE PRIN CIPAL. AS STATED EARLIER, NO DOCUMENT WAS FILED IN RESPONSE T O LOSS OF RS, 6,75,3841- FROM GUHAN TRADERS. (XIII) IN VIEW OF THE ABOVE DISCUSSION, IT IS CRYST AL CLEAR THAT THE LOSS AMOUNTING TO RS. 15,13132/- AND RS. 21,83,559/ - CLAIMED BY THE APPELLANT ON ACCOUNT OF 'COMMODITY TRADING LOSS ' AND 'CARDAMOM SQUARE OFF TRADE LOSS' RESPECTIVELY IN IT S PROFIT AND LOSS ACCOUNT IS NOTHING BUT A SPECULATIVE LOSS, WHICH CANNOT BE ALLOWED TO BE SET OFF AGAINST NON-SPECULA TIVE INCOME. EVEN, THE APPELLANT HAS FAILED TO PROVE THE GENUINENESS OF SUCH LOSSES. (XIV) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION AN D LOOKING TO THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE C ASE, IT IS HELD THAT THE AO WAS JUSTIFIED IN MAKING TRADING AD DITION OF RS. 49,56,217/- TO THE INCOME OF THE APPELLANT. IT IS CLARIFIED HERE THAT NO SEPARATE ADDITION IS REQUIRE D TO BE MADE ON ACCOUNT OF ABOVE DISCUSSED LOSS OF RS. 36,9 6,691/- (21,83,559 + 15,13,132), CLAIMED BY THE APPELLANT I N ITS PROFIT AND LOSS ACCOUNT, AS THIS AMOUNT IS BEING CO NSIDERED TO BE COVERED UNDER THE TRADING ADDITION OF RS. 49, 56,217/- MADE BY THE AO. 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE AO HAS REJEC TED THE BOOKS OF ACCOUNTS AND HAS ESTIMATED G.P. RATE OF 0.69% ON DE CLARED TURNOVER AS AGAINST G.P RATE OF 0.38% DECLARED BY THE ASSESSEE AND MADE A TRADING ADDITION OF RS. 49,56,217/- IN THE HANDS OF THE ASS ESSEE. THE AO HAS STATED THAT WHEN THE BOOKS OF ACCOUNTS ARE REJECTED , IT IS DUTY OF THE AO ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 22 TO DEDUCE TRUE AND FAIR INCOME OF THE ASSESSEE AND IT IS OPEN TO HIM TO TAKE A HIGHER PERCENTAGE CONSISTENT WITH THE STATE OF TRADE IN THE LOCALITY OR WITH ANY SPECIAL CIRCUMSTANCES OF THE ASSESSEE W HICH WARRANTS HIGHER RATE OF PROFITS. THEREAFTER, HE HAS REFERRED TO TH E DISCREPANCIES NOTICED IN THE BOOKS OF ACCOUNTS AND STATED THAT THE ASSESS EE HAS FAILED TO GIVE EVIDENCE REGARDING PAYMENT OF DUTIES AND TAXES AMOU NTING TO RS 5,45,677/- AND LOSS CLAIMED IN THE PROFIT/LOSS A CCOUNT AMOUNTING TO RS 36,96,691/- AND THEREAFTER WENT AHEAD AND MAKE A N ADDITION OF RS 49,56,217/- LARGELY REPRESENTING THE AFORESAID T WO FIGURES WHICH REMAIN UNVERIFIED. TO OUR MIND, THE ADDITION SO MAD E IS NEITHER REFLECTIVE OF STATE OF TRADE IN THE LOCALITY NOR DEMONSTRATE A NY SPECIAL CIRCUMSTANCES OF THE ASSESSEE RATHER THE ADDITIONS HAVE BEEN MADE BASIS THE DISCREPANCIES FOUND IN THE BOOKS OF ACCOUNTS WH ICH ARE MORE IN THE NATURE OF UNVERIFIED PAYMENT OF TAXES AND CLAIM OF LOSSES. ONCE THE BOOKS OF ACCOUNTS ARE REJECTED, THE AO HAS TO ESTIM ATE THE PROFITS BASED ON HIS BEST JUDGMENT AND EITHER THE PAST YEAR RESUL TS OR COMPARATIVE PROFITS DECLARED IN SIMILAR LINE OF TRADE IN COMMOD ITIES COULD BE A GUIDING FACTOR. REGARDING PAST YEAR RESULTS, IT IS AN ADMI TTED POSITION OF REVENUE THAT PAST YEAR RESULTS CANNOT BE MADE A GUIDING FAC TOR AND THE ASSESSEE HAS ALSO CONTENDED THAT GIVEN THE EXCEPTIONAL CIRCU MSTANCES WHERE THE TURNOVER HAS INCREASED BY ALMOST 130 TIMES, THE PAS T YEAR RESULTS ARE NOT REFLECTIVE OF STATE OF AFFAIRS OF CURRENT YEAR. TH ERE IS NOTHING ON RECORD IN TERMS OF COMPARATIVE PROFITS DECLARED IN SIMILAR LI NE OF TRADE IN COMMODITIES. FURTHER, THE ASSESSEE HAS EXPLAINED T HE SUBSTANTIAL FALL IN G.P RATE DUE TO FALL IN PRICES OF CARDAMOM WHERE TH E PRICES HAVE REDUCED BY ALMOST HALF THE RATE AT THE END OF THE YEAR AS C OMPARED TO BEGINNING OF THE YEAR. THEREFORE, WE FIND THAT THERE IS NO R ATIONAL BASIS FOR ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 23 ESTIMATING THE GROSS PROFIT RATE BY THE AO EVEN WHE RE THE BOOKS OF ACCOUNTS ARE REJECTED. IN FACT, IN THE REMAND REPO RT SUBMITTED TO THE LD CIT(A), THE AO HAS ADMITTED THAT THERE IS NO SPECIF IC REASON MENTIONED IN THE ASSESSMENT ORDER TO ESTIMATE THE GROSS PROFI T RATE OF 0.69% AS AGAINST DECLARED GROSS PROFIT RATE OF 0.38%. FURTH ER, THE AO HAS ACKNOWLEDGED THE FACT THAT TURNOVER HAS INCREASED S UBSTANTIALLY DURING THE YEAR AND THE TRADING RESULTS ARE DULY SUPPORTED WITH DOCUMENTARY EVIDENCES. REGARDING COMMODITY AND CARDAMOM TRADIN G LOSSES OF RS 36,96,691/-, THE LD CIT(A) HAS ALSO RECORDED A F INDING THAT THESE ARE SPECULATIVE LOSSES AND ARE NOT PART OF TRADING ACCO UNT OF THE ASSESSEE AND THUS, DOESNT EFFECT THE TRADING RESULTS SO DEC LARED BY THE ASSESSEE. IN THE RESULTS, THE TRADING ADDITIONS SO MADE BY TH E AO AND CONFIRMED BY THE LD CIT(A) IS HEREBY DIRECTED TO BE DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/03/2021. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 01/03/2021. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SANJAY AGARWAL, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-3(3), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) ITA NO. 351/JP/2019 SHRI SANJAY AGARWAL VS. ITO 24 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 351/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR