MARSHAL MULTITRADE PRIVATE LIMITED, MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX 12, MUMBAI

ITA 3758/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5635 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 29-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY SINGH
• Keywords: Principle of natural justice; Assessment record; Set aside
• Section: 143(3); 133(6); 250; 263

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 3758 /MUM/ 201 8 (ASSESSMENT YEAR 20 13 - 1 4 ) M/S. MARSHAL MULTITRADE PVT.LTD. 33, SHREE NAMAN PLAZA BEHIND SHOPPERS STOP KANDIVALI (WEST ) MUMBAI - 400 067. PAN : AADCM0756F V S . PRINCIPAL CIT - 12 AAYAKAR BHAVAN ROOM NO. 109 M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 3759/MUM/2018 (ASSESSMENT YEAR 2013 - 14) M/S. M INARVA TRADELINK PVT.LTD. G - 9, SHOP NO. 12 JESAL PARK BUILDING CHS BHAYANDER MUMBAI - 40 1 105 . PAN : AABCM6255H V S . PRINCIPAL CIT - 12 AAYAKAR BHAVAN ROOM NO. 109 M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI AJAY SINGH DEPARTMENT BY SHRI SANJAY SINGH DATE OF HEARING 14 . 5 . 2 01 9 DATE OF PRONOUNCEMENT 19 . 7 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : THESE ARE APPEALS BY THE ASSESSEES WHICH ARE COMPANIES UNDER THE SAME GROUP, AGAINST RE SPECTIVE ORDER OF LEARNED CIT PASSED UNDER SECTION 263 OF THE I NCOME T AX A CT, FOR A.Y. 201 3 - 14. 2. THE FACTS ARE IDENTICAL AND THE ORDER OF LEARNED CIT IN BOTH THE CASES IS ALSO SIMILAR , HENCE THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE FACTS AND FIGURES FROM ITA NO. 3758/MUM/2018 ARE BE ING RE FERRED . M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 2 3. B RIE F FACTS ARE AS UNDER : - IN THIS CASE, RETURN OF INCOME WAS FILED BY THE ASSESSEE COMPANY ON 24.09.2013 DECLARING TOTAL INCOME AT NIL AND DECLARING CARRY FORWARD OF CURRENT YEAR LOSS OF RS, 9,11,71,698/ - , SUBSEQUENTLY CASE WAS SELECTED FOR SCRUTINY AND SCR UTINY ASSESSMENT U/S 143(3) OF THE IT ACT, 1961 WAS COMPLETED BY THE ACIT 12(3)(2),MUMBAI ON 18.03 . 2016 FOR THE A.Y.2013 - 14 ALLOWING THE LOSS TO BE CARRIED FORWARD AND ACCEPTING THE RETURNED INCOME AS NI L . DURING THE YEAR, THE ASSESSEE COMPANY HAS MAINLY T RADED IN VARIOUS TYPES OF EDIBLE OIL ON HIGH SEAS BASIS. DURING THE A.Y.2013 - 14 THE COMPANY HAS DECLARED BUSINESS LOSS OF RS.9,11,71,698/ - FROM TOTAL TURNOVER OF RS.405,20,20,855/ - . THIS TURNOVER INCLUDES THE HIGH SEAS SALES OF EDIBLE OILS OF RS . 386,03,28 ,219/ - . SERVICE CHARGES RECEIVED OF RS. 4,15,00,649/ - AND INCOME FROM OTHER SOURCES OF RS. L5,01 F 90,987/ - [OTHER RECEIPTS AT RS. 1 ,91,987+CLAINIS & SETTLEMENTS AT RS. 15,00,00,000/ ]. 4. T HE LEARNED COMMISSIONER OF INCOME TAX IN THIS CASE NOTED THAT S CRUTINY OF RECORDS INDICATED THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD PURCHASED CRUDE PALM OIL ON HIGH SEAS OF AN AMOUNT OF RS 4,10,21,70,317/ - AND THE SAME WERE SOLD OUT ON HIGH SEAS AT A CONSIDERATION OF RS 3,86,03,28,219/ - . THESE HIGH SEAS PURCHASE AND SALE TRANSACTIONS WERE EXECUTED ON 16 DIFFERENT OCCASIONS ON BACK TO B ACK BASIS, IT IS IMPORTANT TO NOTE THAT ALL THESE TRANSACTION WERE ENTERED INTO WITHIN A SHORT PERIOD OF ABOUT TWO MONTHS AND EXCEPT TWO TRANSACTIONS, WHERE TOTAL PROFIT OF RS, 6280 / - WAS BOOKED, LOSS ES 'AMOUNTING TO RS. 241842096/ - IN TOTAL WERE BOOKED IN THESE 16 BACK TO BACK TRANSACTIONS. BASED ON THIS FINDING ASSESSEE COMPANY WAS SHOW CAUSED VIDE LETTER DATED 19.03,2018 TO EXPLAIN WHY ASSESSMENT ORDER DA TED 18,03.2016 PASSED BY THE ASSESSING OFFICE FOR A.Y, 2013 - 14 IN IT'S CASE SHOULD NOT BE SET ASIDE AND AO BE DIRECTED TO MAKE FRESH ASSESSMEN T. M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 3 5. T HE LEARNED COMMISSIONER OF INCOME TAX FURTHER REFERRED TO HIS SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE IN BRIEF AS UNDER : - SCRUTINY OF RECORDS REVEALED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, YOU HAD PURCHASED CRUDE PALM. OIL ON HIGH SEAS OF AN AMOUNT O F RS 4,10,21,70,317/ - AND THE SAME WERE SOLD OUT ON HIGH SEAS AT A CONSIDERATION OF RS 3,86,03,28, 2 19. THESE HIGH, SEAS P URCHASE AND SALE TRANSACTIONS W ERE EXECUTED ON 1 6 DIFFERENT OCCASIONS ON BACK TO BACK BASIS. YOU HAD PURCHASED THE COMMODITIES I.E. CRUDE PALM OIL AND SOLD IT IN FULL AT LOWER RATE ON THE SAME DAT E ON ALL THE 1 6 OCCASIONS ON VARIOUS DATES DURING THE PERIOD FROM OCTOBER 2012 TO DECEMBER 2012 OF THE FINANCIAL YEAR 2012 - 13. THE PARTY WISE DETAILS OF PURCHASE AND SATES ALONG WITH NAMES OF THE SELLERS , BUYERS , VESSEL NAME, PORT NAME, QUANTITY PURCHASE & SOLD, PER MT COST OF PURCHASE & SA LE, TOTAL AMOUNT AND FINAL CONSIGNEE OF GOODS ARE TABULATED AS UNDER: S U PPUBRS D ETAL S SR. N O . VESSEL NAME NAME O F THE SELLER CO MMOD ITY NAME DATE OF HIGH SEAS SA L E AGREEMENT QUANTITY RATE PER M.T. TO TAL AMOUNT IN RS. CONSI GNEE (A S PER BILL OF LADING) 1 GLOBAL MERCURY, CHENNAI PART MINERVA T R ADE LINK PV T . LTD . CRUDE PALM OIL 11.10.2012 9674.947 50009.75 483841681 RSIL 2 TIGER SITMER KAKI NADA PORT G ARIMA TRADELINK PVT. LTD. CRUDE PALM O IL 20. 10 . 2612 6780. 467 459L7,7 5 311343789 RSI 3 MV STX HERO RUCHI GL OBA L LIMITED CRUDE PALM OIL 29. L 0. 20 1 2 7059 . 794 44 5 23 314323208 4 ST X JAG U AR, KAND LA PORT NAVA TRADIN G PVT. LTD. CRUDE PALM OIL 1 6. 1 0.20 1 2 1999 . 913 50135 1 0026663 9 RSIL 5 S A N G A WINDS, K AN DLA PORT N AVA TRADING PVT. LTD. CRUDE P A L M O IL 07.12.2012 4000 44742 . 5 1 78970000 6 G LAXY, JNPT PORT RUCHI SOYA INDUSTRIES LTD. R BD PA L OLEIN 24.12.2012 7499.9 1 51157.5 383676646 RSIL 7 BUNGA A LA M AND A K AND L A PORT RUCHI SOYA INDUSTRIES LTD CR UDE PALM OIL 31.10. 2012 2500 48605.75 121514375 RSIL 8 F E CNG HAI JNPT RUCHI SOYA INDUSTRIES LTD CRUDE PA L M OIL 3.11.201 2 51 00 45739 233268900 RSIL 9 YOU S HEN CHENNAI PORT RUCHI SOYA INDUS TRIES LTD. CRUDE PALM O IL 07.11.2012 5500 . 388 47498 26 1257429 RSIL 10 TITAN GLORY, HALDIA PORT AISHWARYA MARKTRADE (INDIA) P. LTD. CRUDE PALM OIL 03.11.2012 4000 46221.25 184885000 - 11 ATLANTIC Q QUEEN , KA KINADA PORT AISHWAR A MARKTRADE (INDIA) PV T LTD CRUDE PALM OIL 12 . 11 . 2012 1000 62337 . 5 62337500 12 TIATAN GLORY HALDIA PORT VISHAL VICTORY QILTECH P V T LTD CRUDE PALM OIL 23 .1 1.201 2 2000 432 46 8 6492000 13 STX HER O KANDLA PORT. RUCHI OFF SHORE MARKET IN G PVT LTD CRUDE PALM OIL 23.11.2O12 13999 . 13 42744 . 5 5 98388078 M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 4 14 ROYAL FLO S CHEN N AI PORT STRIDE MULTITRDAE PVT LT D CRUDE P ALM OIL 30 .1 1.2012 5999. 943 47800 286797291 15 STX INFI NI T Y HAL DIA PORT STRIDE MUL TITRDE PV T LT D CRUDE PALM. OIL 19.12.2012 9555.82 45192 431846617 16 RUN ZB, CHENNAI PORT APL INTERNATIONAL PVT. LTD CRUDE PALM OIL 17.12 . 2012 1502.77 41896. 75 62961179 *RSIL IS RUCHI SOYA INDUSTRIES LIMITED BUYERS DETAILS S R. N O VESSEL NAME NAME OF THE PURCHASER COMMODITY NAME DATE OF HIGH SEAS SALE AGREEMENT QUANTITY RATE PER M.T . TOTAL AMOUNT IN R S. CONS I GNEE (AS PER BILL OF LADING ) 1 GLOBAL MER CURY, CHENNAI P ORT SARATHI TRADING PV T LTD CRU DE PALM OIL 11.10.2012 9674. 947 48320.75 467500695 RSIL 2 TIGER SUMER, KAKINADA PORT RUCHI G L OBA L L IMITED CRUDE PAL M OIL 20 . 10.2012 6780. 467 4372 5 .75 29648 1005 R SIL 3 STX HERO CHENNAI PORT RUCHI SOYA INDUSTRIES LTD CRUDE PALM OIL 2 9 .1 0 .201 2 7059. 794 44523.5 314326738 4 STX JAGUAR K ANDLA PORT SARAT HI TRADING PV T LTD C R U DE PALM OIL 16. 10.2012 1999.913 45233.75 90463665 RSIL 5 SONGA WINDS, KANDLA PORT RUCHI S O YA INDUSTRIES LTD CRUDE PALM OIL 07.12.2012 4000 40743.25 162973000 6 GALAXY, JNPT PORT DYNACOM TRADING PVT LTD CRUDE PALM OIL 24.12.2012 7499.91 50157 376172986 R SIL 7 BUNGA A L AMANDA KAND L A PORT GARIMA T RA DELINKS P VT L TD CRUDE PALM OIL 31. 12.2012 2500 44106.25 110265625 8 FENG H AI, JN P T PORT EMPIRE MULI T TT RADE PVT. LTD CRUDE PALM OIL 03. 11.2012 5100 40740 207774000 R SIL 9 YOU S HE N, CHENNAI PORT AISHWARYA MARKTRAD E (I NDIA) P VT. LTD C R U DE PALM OIL 0 7.11.2012 5500.388 47498.5 261260179 R SIL 10 TITAN GLORY HALDIA PORT KULDEEP OVERSEAS PVT LTD CRUDE P AL M OIL 03.1 1 . 2012 4 000 42120.25 168481000 R SIL 11 ATLANTIC QUEEN K AKIN ADA RUCHI INFRASTRUC T UR E LIMITED CRUDE PALM OIL 15. 12.2012 62337250 RSIL TITAN G LOY , HAIDIA PORT IMPERIAL MARKTRADE ( INDIA) PVT LTD CRUDE PALM OIL 23.11.'201 2 2 000 39279.25 7S558500 13 STX HERO KANDLA PORT VISHAL S O YAMUL PVT. LTD. CRUDE PALM OIL 23.11 . 2012 139999.1 83 40262 553635106 14 ROYAL FLOS CHENNAI PORT RUCHI SOYA IN DUSTRIES LTD CRUDE PALM OIL 30 . 11.2012 5999.943 43774.5 262644505 I5 STX INFINITY, HA LDIA PORT NIR B HAY ENTERPRISE P VT. LTD CRUDE PALM OIL 19.12.3012 95 55 .83 39525 377693786 M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 5 16 RUN Z E CHEN NA I P O RT DYNACO M TRADING PVT. LTD. CRUDE O IL 17. 12. 20 12 1502 .77 39766. 75 59760279 DATE WISE AND CONSIGNMENT WISE LOSSES CLAIMED TO HAVE BEEN INCURRED BY YOU BY EXECUTING BACK TO BACK TRANSACTIONS ON THE SAME DAY ON 16 DIFFERENT OCCASIONS ARE TABULATED AS UNDER : - S R . N O . DATE O F T RADE EXECUTED PURCHASE QUANTITY (IN MT ) BALE QUANTITY (IN MT) PURCHASE PRICE (IN RS.) SALE PRICE (I N RS . ) L O SS BOOKED (IN RS .) 1 11. 10 . 20 1 2 9674 . 947 9674 . 947 483841681 467500695 - 16340986 2 20.10. 2012 6780. 46 7 6780.467 311343789 296481005 - 14362784 3 29.10. 2012 7059. 794 7059. 794 314323208 314326738 3530 4 16. 10.2012 1 999. 913 1999. 913 1 00 266639 90463665 - 980 2974 5 07.12.2012 4000 4000 1 78970000 162973000 - 15997000 6 24. L2 .2012 7499 . 91 7499. 91 38367664 6 3761 72986 - 7503660 7 31 . 10.2012 2 500 2500 12151437 5 110265625 - 11248750 8 03.11 . 2012 5100 5100 233268900 207774000 - 25494900 9 07.11.2012 5500.338 5500.338 261257429 261260179 2750 10 03.11.2012 4000 40 00 184885000 168481000 - 16404000 11 12.11.2012 1000 1000 62337500 62337250 - 250 1 2 23.11.20 12 2 000 2000 86492000 78558500 - 7933500 13 23.11.2012 13999. 13 13999.13 598388078 563635106 - 34752972 14 30.11.2012 5999.943 5999.943 286797291 262644505 - 24152786 15 19. 12.201 2 9555.82 9555. 8 2 431846617 377693786 - 54 152831 16 17. 12.2012 1502.77 1502.77 6261 1 79 59760279 - 3200900 TOTAL LOSS - 2418420 96 FROM THE ABOVE THREE TABLES : IT IS CLEAR THAT THE ASSESSEE COMPANY MADE HIGH SEA PURCHASE OF CRUDE PALM OIL AND SOLD THE SAME CONSIGNMENT WITH MATCHING QUANTITY ON HIGH SEAS ON THE SAME DAY ON BACK TO BA CK TRANSACTION BASIS TO A THIRD PARTY AND IN THE PROCESS INCURRED HUGE LOSSES. IT IS NOTICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE SUBMITTED BILL OF LADING IN RESPECT OF SOME OF THE IMPORTS AND I N ALL SUCH BILLS OF LADING WHERE GOOD ARE CLAIMED TO BE ORIGINATING FROM PORTS IN. INDONESIA AND MALAYSIA, AND THE ULTIMATE CONSIGNEE WAS MENTIONED AS M /S RUCHI SOYA INDUSTRIES LIMITED. IT IS IMPORTANT TO NOTE THAT ALL THESE TRANSACTION WERE ENTERED INTO W ITHIN A SHORT PERIOD OF ABOUT TWO MONTHS AND EXCEPT TWO TRANSACTIONS, WHERE TOTAL PROFIT OF RS. 6280/ - WAS BOOKED, LOSSES AMOUNTING TO RS, 241842096/ - IN TOTAL WERE BOOKED IN THESE 16 BACK TO BACK TRANSACTIONS. MOREOVER, THESE TRANSACTIONS ARE ENTIRELY NON - DELIVERY BASED, THIS UNUSUAL PATTERN OF THE TRADE IS FOUND TO BE M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 6 HIGHLY SUSPICIOUS IN NATURE AND IS APPARENTLY DEVOID OF ANY COMMERCIAL ANGLE, PARTICULARLY WHEN IN ALL THE TRANSACTIONS CONSIGNEE IS THE SAME PARTY I.E. M/S. RUCHI SOYA INDUSTRIES LIMITED AN D TRANSACTIONS ARE MADE IN SHORT SPAN OF TIME WITH HUGE LOSS IN ALMOST A LL TRANSACTIONS. FROM THE RECORDS, IT EMERGES THAT THE ASSESSING OFFICER HAS NOT MADE PROPER INQUIRY INTO THESE SUSPICIOUS TRANSACTIONS TO UNEARTH REAL NATURE OF SUCH TRANSACTIONS AND TO ASCERTAIN REAL SUBSTANCE OF THESE TRANSACTIONS OVER THE FORM. IT IS FURTHER NOTICED THA T DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSES HAD ALSO FURNISHED THE ONE PAGE DOCUMENT LE, HIGH SEA PURCHASE AND SALES CONTRACT (HS CONTRACT) IN SUPPO RT OF THE PURCHASE PRICE AND SALE CONSIDERATION. THESE TRANSACTION CONFIRMATION CONTRACTS IN SUPPORT OF PURCHASE AND SALE OF COMMODITIES INCLUDED THE QUANTITY, RATE OF COMMODITIES, DELIVERY PERIOD AND PL A CE , PAYMENT TERM AND THE SAME WERE SIGNED BY BOTH TH E BUYER AND THE SETTER. THESE CONTRACTS HAVE BEEN SIGNED FROM MID SEPTEMBER 2012 TO OCTOBER 2012 AND ARE FOUND NOT TO BE REGISTERED WITH ANY GOVERNMENT AGENCY/AUTHORITY. HOWEVER, NOTICEABLY THESE SO CALLED CONTRACTS ARE NOT MADE ON ANY L E GAL PAPER AND HAVE NOT BEEN NOTARIZED. MOREOVER, THESE HS CONTRACTS HAVE BEEN PREPARED 15 DAYS IN ADVANCE FROM THE DATE OF HIGH SEAS M.O .U . ENTERED INTO ON THE DATE OF TRANSACTION AND THE PURCHASE PRICE AND SALE PRICE MENTIONED ON THESE MOU IS AS PER H.S. CONTACTS HER E IT IS ALSO TAKEN NOTE OF THAT IN ASSESSEE'S OWN CASE, SIMILAR ISSUE I.E. GENERATION OF LOSS BY WAY OF SERIES OF NON - DELIVERY BASED TRANSACTIONS WAS INVOLVED IN AY, 2 0 14 - 1 5 TOO WHEREIN THE ASSESSES HAD C LAIMED LOSSES OF RS . 8 , 66 ,01, 722/ - IN TOTAL . IN A.Y . 2014 - 15, THE ASSESSING OFFICER INVESTIGATED ISSUE DEEPER AND IT WAS FOUND THAT ALL SUCH HIGH SEA SALE AND PURCHASE TRANSACTIONS WERE NON - DELIVERY BASED AND WERE LAYERED ONES WITH SO CALLED PURCHASER OF THE GOODS SELLING AGAIN THE SAME SET OF GOODS TO OTH ER PARTIES I N HIGH SEAS ONLY AND THEN THIS SECOND LAYER OF PURCHASERS TOO SELLING GOODS TO ANOTHER SET OF PURCHASER ON HIGH SEAS AND SO ON. WHEN THE A.O. TRIED TO DE - LAYER THESE TRANSACTIONS IN A.Y. 2014 - 15 BY WAY OF MAKING INQUIRIES UNDER SECTION 133(6) O F THE IT. ACT FROM THE SELLERS AND PURCHASERS AT DIFFERENT LAYERS, IT WAS FOUND THAT THERE WERE LOT OF SELLERS AND PURCHASERS INVOLVED AT DIFFERENT LAYERS WITH EACH TRANSACTION HAPPENING ON HIGH SEAS ONLY WITHOUT ACTUAL DELIVERY AND BY WAY OF ENDORSEMENT O N BILLS OF LADING. FINAL RECIPIENT OF THE GOODS COULD NOT BE ASCERTAINED DUE TO LARGE NUMBER OF LAYERS INVOLVED. IN THE PROCESS, EACH PARTY IN THE LAYER GOT TO SHOW THE QUANTUM OF SALE AS ITS TURNOVER FOR SAME SET OF GOODS. ALL THESE TRANSACTIONS WERE HELD TO BE MANAGED ON PAPER TRANSACTIONS AND NON - GENUINE TRANSACTIONS RESULTING IN DISALLOWANCE OF LOSS FROM, SUCH TRANSACTIONS BY THE A.O. IN A . Y.2014 - 15. BUT , THE A O HAD NOT MADE REQUISITE INQUIRY IN A.Y. 2013 - 14 TO ASCERTAIN THE TRUE NATURE OF THESE SERIES OF TRANSACTIONS DESPITE HAVING SUFFICIENT GROUND TO EMBARK ON SUCH PATH OF INQUIRY AT THAT TIME .. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE A.O . FOR THE A .Y. 2013 - 14 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE IT, ACT, PARTICULARLY IN LIGHT OF EXPLANATION 2 TO SECTION 263 OF M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 7 THE IT.ACT, 1961 AS THE ASSESSMENT ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE AND LOSS OF RS.24,18, 42, 0 96/ - FORM, HIGH SEAS SA LE AND PURCHASE TRANSACTIONS WAS ALLOWED TO THE ASSESSEE WITHOUT PROPER INQUIRY. THEREFORE, YOU ARE REQUIRED TO SHOW - CAUSE AS TO WHY TO ASS ESS MEN T ORDER DATED 18.03 . 2016 PASSED BY THE ASSESSING OFFICE FOR A. Y . 2013 - 14 IN YOUR CASE SHOULD NOT BE SET ASIDE AND ASSESSING OFFICER BE DIRECTED TO MAKE FRESH ASSESSMENT. 6. LEARNED CIT NOTED THAT ASSESSEES RESPONSE AS UNDER : - 'THE ASSESSMENT ORDER UNDER CONSIDERATION IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE SAME HAS BEEN PAS SED BY THE A.O IN EXERCISE OF HIS QUSI - JUDICIAL POWER VESTED IN HIM WITH DUE APPLICATION, OF MIND IN ACCORDANCE WITH LAW IN COMPLIANCE TO THE PRINCIPLES OF NATURAL JUSTICE. FURTHER THE ISSUE UNDER REVISION HAS BEEN DULY EXAMINED BY THE A O (THOUGH NOT DISCU SSED IN THE ASSESSMENT ORDER) AS MENTIONED HERE UNDER: THE ASSESSES COMPANY SUBMITS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSES S EE COMPANY HAS ADMITTEDLY FILED THE PARTY WISE DETAILS WITH THEIR COMPLETE ADDRESS IN RESPECT OF PURCHASE AND SALE WHICH WAS THOROUGHLY VERIFIED BY THE ASSESSING OFFICER WITH THE BILLS AND VOUCHERS. FURTHER, SEVERAL COMMUNICATIONS WERE ADDRESSED BY THE ASSESSES TO THE ASSESSING OFF ICER, WHERE BY THE INFORMATION D ETAILS AND DOCUMENTS INCLUDING THE COPIES OF LEDGER ACCOUNTS OF THE RESPECTIVE PARTIES CONFIRMING THE T RANSACTIONS SOUGHT FOR, WERE ADVERTED TO AND FILED, FURTHER THE FACT THAT THE ASSESSING OFFICER HAS RAISED THE QUERY REGARDING THE DEALING OF THE ASSESSES WITH THE LIMITED PARTIES, GENUINENESS OF TRANSACT ION OFPURCHA.SE AND SALES FROM TIME TO TIME DEARLY SHOWS THAT THERE WAS DUE APPLICATION OF MIND BY THE ASSESSING OFFICER . FURTHER THE ASSESSING OFFICER TOOK THE SUFFICIENT TIME FOR VERIFICATION OF THE DETAILS FIELD BY THE ASSESSES BEFORE PASSING THE AFORE SAID ORDER AND AS SUCH THE SAME COULD NOT BE LABELED AS PASSED IN HASTE AND HENCE ERRONEOUS. THE AO HAS CROSS VERIFIED THE TRANSACTION OF HI GH SEAS PURCHASE AND SALES BY ISSUE OF NOTICES U/S 133(6) TO THE RESPECTIVE PARTIES AND AS SUCH IT IS INCORRECT TO SAY THAT THE ASSESSING OFFICER HAS NOT MADE PROPER INQUIRY TO UNEARTH REAL NATURE OF SUCH TRANSACTION. 7. H OWEVER THE LEARNED COMMISSIONER OF INCOME TAX WAS NOT CONVINCED. HE OBSERVED THAT ASSESSING OFFICER HAS FAILED TO MAKE ANY ENQUIRY INTO REGARD T O THE ALLOWABILITY OF THE LOSS CLAIMED BY THE ASSESSEE COMPANY ON HIGH SEA BASIS ON SALE AND PURCHASE OF EDIBLE OIL, HE REFERRED TO SEVERAL CASE LAWS AND OBSERVED T HE ASSESSEE COMPANY MADE HIGH SEA PURCHASE OF CRUDE PALM OIL AND SOLD THE SAME CONSIGNMENTS WITH MATCHING QUANTITY ON HIGH SEAS ON THE SAME DAY ON BACK TO BACK TRANSACTION BASIS TO A THIRD PARTY AND IN THE PROCESS M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 8 INCURRED HUGE LOSSES. THAT I T IS NOTICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE SUBMITTED BILL OF CLAIMED TO B E OR IGINATING FROM PORTS IN INDONESIA AND MALAYSIA, AND THE ULTIMATE CONSIGNEE WAS MENTIONED AS M/ S. RUCHI SOYA INDUSTRIES LIMITED. THAT I T IS IMPO R T ANT T O NOTE THAT ALL THESE TRANSACTION, WERE ENTERED INTO WITHIN A SHO R T PERIOD OF ABOUT TWO M ONTHS AND EXCEPT TWO TRANSACTIONS, WHERE TOTAL PROFIT OF RS . 6280/ - WAS BOOKED, LOSSES AMOUNTING TO RS. 241842096/ - IN TOTAL WERE BOOKED IN THESE 16 BACK TO BACK TRANSACTIONS. THAT M OREOVER, THESE TRANSACTIONS A RE ENTIRELY NON - DE LIV ERY BASED . THAT T HIS UNUSU AL PATTERN OF THE TRADE IS FOUND TO BE HIGHLY SUSPICIOUS IN NATUR E AND IS APPARENTLY DEVOID OF ANY COMMERCIAL ANGLE, PARTICULARLY WHEN IN ALL THE TRANSACTIONS CONSIGNEE IS THE SAME PARTY I.E. M/S . RUCH I SOYA INDUSTRIES LIMITED AND TRANSACTIONS ARE MADE IN SHORT SPAN OF TIME WITH HUGE LOSS IN ALMOST ALL TRANSACTIONS. THAT F ROM THE RECORDS, IT EMERGES THAT THE ASSESSING OFFICER HAS NOT MADE PROPER INQUIRY INTO THESE SUSPICIOUS TRANSACTIONS TO UNEARTH REAL NATURE OF SUCH TRANSACTIONS AND TO ASCERTAIN REAL SUBS TANCE OF THESE TRANSACTIONS OVER THE FORM . 8. T HE LEARNED CIT - A ALSO NOTED THE FOLLOWING RESPONSE OF THE ASSESSEE : - ASSESSEE IN ITS RE PLY FURTHER ARGUED THAT IT HAS BEEN MISCONSTRUED THAT ONE PAGE DOCUMENT FILED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS AS HIGH SEAS DOCUMENT WHERE AS IN FACT THE SAME IS A FORWARD CONTRACT. THE HIGH SEAS CONTRACTS WERE ANNEXED TO THE HIGH SEAS PURCHASE AND SALES HILLS. THESE HIGH SEAS CONTRACTS ARE EXECUTED ON RS . 100 / - ADHESIVE STAMP PAPERS. FURTHER ARGUED THAT THE LA W HAS NOT PRESCRIBED THAT THE FORWARD CONTRACTS ARE NOT REQUIRED TO BE MADE ON ANY LEGAL PAPER AND LAW HAS NOT PRESCRIBED ANY PARTICULAR FORMAT,' 9. B UT THE LEARNED COMMISSIONER OF INCOME TAX WAS NOT CONVINCED. H E OBSERVED THAT T HESE ARGUMENTS OF THE ASSE SSEE ARE NOT ACCEPTABLE AS THERE IS NO BASIS GIVEN ANY WHERE FOR TAKING A PARTICULAR VALUE OF PURCHASE PRICE OR SALE PRICE IN THESE CONTRACTS. RECORDS DO NOT REVEAL WHETHER THESE PRICES WERE AS PER PRICES ON SOME COMMODITY EXCHANGE OR IN ACCORDANCE WITH TH E INTERNATIONAL PRICES ON THE DATE OF CONTRACT OR TRANSACTION, AS THE CASE MAY BE. NOTHING IS AVAILABLE ON ASSESSMENT RECORDS REGARDING BASIS OF RATE ADOPTED BY M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 9 THE ASSESSEE IN CONTRACTS ENTERED BY THEM. THE ASSESSING OFFICER DID NOT ASCERTAIN BASIS OF SUC H PRICES AND PROCEEDED TO COMPLETE THE ASSESSMENT BASED ON WHAT THE ASSESSEE COMPANY PRESENTED. SALE AND PURCHASE TRANSACTIONS ENTERED INTO BASED ON THIS CONTRACT GAVE RISE TO LOSSES TO THE ASSESSEE ON REPETITIVE BASIS . THAT T HE ASSESSING OFFICER DID NOT M AKE ANY INQUIRY TO ASCERTAIN BASIS OF SALE AND PURCHASE PRICES IN RESPECT OF HIGH SEAS TRANSACTIONS DESPITE THERE BEING CLAIM OF SUBSTANTIAL LOSS FROM THE SIDE OF THE ASSESSEE IN SUCH TRANSACTIONS. THAT IN ANY CASE OF TRADING, PARTICULARLY THAT INVOLVING H UGE REPETITIVE LOSSES, IT IS IMPORTANT TO FIND OUT THE GENUINENESS OF THE SALE AND PURCHASE PRICES MUTUALLY DECIDED BY THE PARTIES INVOLVED. TH AT TH E A.O. DID NOT MAKE REQUISITE INQUIRY IN THIS REGARD. 10. T HE LEARNED COMMISSIONER OF INCOME TAX CONCLUDED AS UNDER : - THUS, LOOKING TO PECULIAR FACTS OF THE CASE AS DISCUSSED ABOVE, APPARENTLY, HIGH SEA SALE AND PURCHASE TRANSACTIONS CLAIMED TO HAVE BEEN ENTERED INTO BY THE ASSESSEE COMPANY ARE VERY UNUSUAL AND APPARENTLY LACK COMMERCIAL SUBSTANCE, PARTIES INVOLVED IN THESE TRANSACTIONS IN DIFFERENT LAYERS PRI M A - FACIE SEEMS TO HAVE BEEN ACTING IN CONCERT , WITH PREMEDITATED MOTIVES TO CREATE LOSSES IN CERTAIN HANDS AND PROFITS IN CERTAIN OTHER HANDS AND ALSO TO SHOW HIGHER TURNOVER IN THEIR BOOKS WITH SAME SET OF GOODS, APPARENTLY TO MISLEAD BANKS FOR AVAILING LOANS AND/OR INVESTORS. FURTHER, A SCHEME OF SIPHONING OF THE FUNDS OUT OF INDIA CANNOT BE RULED OUT BY INITIATING THE IMPORTS AT HIGHER RATES AND THEN TAKING THE DELIVERY OF GOODS THROUGH A SERIES O F TRANSACTIONS AT LOWER RATES AND CLAIMING LOSSES ON THE WAY AND ADJUSTING THE SAME AGAINST THE PROFITS OR FUTURE PROFITS AS PER WIL L. IN LIGHT OF THESE FACTS THE AO IS DIRECTED TO VERIFY THE ISSUES IN CLUDING THE BASIS ADOPTED TO FIX THE RATES AS PER THE I NTERNATIONAL MARKET, WHICH IS THE PARTY TO WHOM THE GOODS WERE FINALLY DELIVERED AND GENUINENESS OF LOSS CLAIMED. 7. THE A.O. WAS UNABLE TO SEE THIS LARGER PICTURE AND COULD NOT MAKE PROP ER INQUIRY OR VERIFICATIONS ON THESE POINTS. THUS THE ASSESSING OFFI CER HAS NOT APPLIED HIS MIND. HIS ACTIONS OF ALLOWING LOSS OF RS. 241842096/ - CLAIMED ON HIGH SEAS SALES AND PURCHASE OF EDIBLE OILS IS AN ERRONEOUS AC T AND PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, I SET ASIDE THE ORDER PASSED BY THE ASSESSING OF FICER U/S 143(3) OF THE ACT FOR A.Y. 2013 - 14, WHICH HE PASSED ON 18.03.2016 AND DIRECT HIM TO VERIFY GENUINENESS THE LOSS CLAIMED IN LIGHT OF THE POINTS DISCUSSED ABOVE ON HIGH SEAS SALES AND PURCHASE OF EDIBLE OILS. THE ASSESSING OFFICER MUST GIVE AN OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. 11. A GAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE US. M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 10 12. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE CONTENDED THAT ASSESSEE HAS DULY EXPLAINED THE NATURE OF BUSINESS OF THE ASSESSEE AND GIVEN DETAILS OF PURCH A SE AND SALE, BANK BOOK, COPY OF HIGH SEA SALE BILLS, HIGH SEA SALE AGREEMENTS , BILL OF LADING ETC . H ENCE LEARNED COUNSEL OF THE ASSESSEE CLAIMED THAT ASSESSING OFFICER HAS FULLY APPLIED HIS MIND. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT LEARNED CIT HAS NOT GIVEN ANY FINDING HOW THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE FURTHER SUBMITTED THAT ALL QUERY IS RAISED DURING THE ASSESSMENT PROCEEDING BEEN DULY REPLI E D. HE SUBM ITTED THAT ORDER U/S. 263 CANNOT BE MADE FOR ROVING INQUIRY. HE FURTHER PLACED RELIANCE UPON THE SEVERAL CASE LAW S IN SUPPORT OF HIS PROPOSITION . 13. PER CONTRA LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT AS EVIDENT FROM THE ASSESSMENT ORDER, ASSESSING OFFICER HAS NOT AT ALL MADE PROPER ENQUIRIES TO JUSTIFY THE HUGE LOSSES CLAIMED BY THE ASSESSEE . IN THIS REGARD HE SUBMITTED THAT ASSESSEE WAS DULY ASKED TO GIVE T HE DETAIL OF SISTER CONCERN. H E SUBMITTED THAT THE ASSESSEE IN ITS LETTER HAS SUBMI TTED THAT DETAIL OF SISTER CONCERN IS ATTACHED HEREWITH . HOWEVER , THE LEARNED DR SUBMITTED THAT EVEN TODAY ASSESSEE HAS NOT SUBMITTED THE LIST OF SISTER CONCERN. HE SUBMITTED THAT THIS IS VITAL AS THE ASSESSEE HAS DEALT WITH GROUP COMPANIES AND IN LAYERED TRANSACTION SHOWN HUGE BOOK LOSSES. L EARNED DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT ASSESSING OFFICER HAS DULY RAISED THE QUESTION OF ASSESSEE CLAIMING HUGE LOSSES AND ASKED FOR EXPLANATION . H OWEVER HE SUBMITTED THAT NO RESPONSE TO THE SAME HAS BEEN GIVEN BY THE ASSESSEE. HENCE LEARNED COUNSEL FOR THE DEPARTMENT SUBMITTED THAT ASSESSING OFFICER HAS NEITHER MADE PROPER APPLICATION OF MIND NO R MADE PROPER ENQUIRY . HE SU BMITTED THAT HUGE LOSSES WERE CLAIMED BY THE ASSESSEE ON DUBIOUS HIGH SEA SALE S WERE ALLOWED BY THE ASSESSING OFFICER IN A ROUTINE MANNER WITHOUT PROPER ENQUIRY BY APPLICATION O F MIND. THE LEARNED COUNSEL SUBMITTED THAT THE LEARNED CIT IN THE SE CIRCUMSTANCES HAS DIRECTED THE ASSESSING OFFICER TO PROPERLY VERIFY THE TRANSACTIONS. LEA RNED COUNSEL SUBMITTED THAT THERE IS NO M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 11 PREJUDICE CAUSED TO THE ASSESSEE IN THIS REGARD . I N THIS REGARD LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE UPON THE HONOURABLE APEX COURT DECISION IN THE CASE OF DENIEL MERCHANTS P. LTD. & AN OTHER VS. ITO & OTHERS (APPEAL NO. 23976/2015 VIDE ORDER DATED 29.11.2017. 14. WE HAVE HEARD BOTH THE COUNSEL PERUSED THE RECORDS, WE FIND THAT ASSESSEE COMPANY DURING THE YEAR HAS ENGAGED IN HIGH SEA PURCHASE AND SALE TRANSACTION ON 16 DIFFERENT OCCASIONS ON BACK - TO - BA CK BASIS. T HE ORIGINS OF THE GOODS WHERE THE SAME AND ULTIMATE DESTINATION WAS SAME THAT IS RUCHI SOYA LIMITED. THE TRANSACTIONS WERE ENTERED INTO IN A SHORT PERIOD OF 2 MONTHS . E XCEPT FOR 2 TRANSACTIONS WHERE SMALL PROFIT OF RS. 6,280/ - WAS BOOKED, LOSS ES O F RS. 2418 42096 / - WERE BOOKED. ALL THESE TRANSACTIONS ARE ENTIRELY NON - DELIVERY BASED . T HE CONTRACTS FOR THE HIGH SEA SALES WERE ENTERED MID OF SEPTEMBER 2012 TO OCTOBER 2012. T HE CONTRACTS WERE NOT REGISTERED. I N THESE CIRCUMSTANCES IT WAS AMPLY CLEAR THAT THE TRANSACTIONS WERE DUBIOUS IN NATURE AND REQUIRED PROPER EXPLANAT ION . THE FACT THAT THE TRANSACTIONS WERE UNUSUAL THE ULTIMATE CONSIGNEE WAS R UCH I S OYA L TD . WAS GLARING. THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO GIVE DETAILS OF ITS S ISTER CONCERN'S. BUT THE ASSESSEE NEVER GAVE THE DETAILS. THE DETAIL OF SISTER CONCERN WOULD CERTAINLY SHED LIGHT ON THE PARTIES WITH WHOM THE TRANSACTIONS HAVE BEEN ENTERED AS TO WHETHER THEY ARE AT ARMS LENGTH WITH EACH OR NOT. TH E UN U SUAL LOSS HENCE OB VIOUSLY NEEDED EXPLANATION. T HE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE REASON FOR THE UNUSUAL LOSS. THE ASSESSEE NEVER GA VE ANY EXPLANATION. T HE ASSESSING OFFICER WITHOUT ANY APPLICATION OF MIND AND WITHOUT BRINGING ON RECORD THE REPLY OR THE RESULT OF ANY FURTHER ENQUIRY LACONICALLY PASSED THE SUMMARY ASSESSMENT ORDER ALLOWING THE HUGE LOSS. 15. IN THESE CIRCUMSTANCES THE LEARNED COUNSEL OF THE ASSESSEE S CONTENTION THAT ASSESSEE HAS PROVIDED ALL THE NECESSARY DETAILS AND THE ASSESSING OFFICE R HAS APPLIED HIS MIND IS CLEARLY NOT SUSTAINABLE. THE CASE LAWS REFERRED BY THE LD COUNSEL OF THE ASSESSEE ARE NOT APPLICABLE ON THE FACTS OF THE CASE. IN OUR CONSIDERED OPINION ON THE FACTS OF THIS CASE THE DECISION OF HONOURABLE M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 12 SUPREME COURT IN THE CAS E OF DENIEL MERCHANTS P. LTD. AND ANTHER (SUPRA) IS FULLY APPLICABLE. IN T HE SAID CASE HONOURABLE APEX COURT HAS EXPOUNDED THAT IN ALL THESE CASES, WE FIND THAT THE COMMISSIONER OF INCOME TAX HAD PASSED AN ORDER UNDER SECTION 263 OF THE INCOME TAX ACT, 19 61 WITH THE OBSERVATIONS THAT THE ASSESSING OFFICER DID NOT MAKE ANY PROPER INQUIRY WHILE MAKING THE ASSESSMENT AND ACCEPTING THE EXPLANATION OF THE ASSESSEE(S) INSOFAR AS RECEIPT OF SHARE APPLICATION MONEY IS CONCERNED. ON THAT BASIS THE COMMISSIONER OF I NCOME TAX HAD, AFTER SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER, SIMPLY DIRECTED THE ASSESSING OFFICER TO CARRY THOROUGH AND DETAILED INQUIRY. IT IS THIS ORDER WHICH IS UPHELD BY THE HIGH COURT. WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE HIG H COURT. THE SPECIAL LEAVE PETITIONS ARE DISMISSED . 16. WE FIND THAT THE ABOVE CASE LAW IS FULLY APPLICABLE ON THE FACTS OF THIS CASE. RATHER IN THE PRESENT CASE BEFORE US THE ASSESSEE HAS NOT GIVEN THE EXPLANATION FOR THE UN USUAL LOSS DESPITE INQUIRY. IT HAS ALSO NOT GIVEN DETAILS OF SISTER CONCERN. THIS IS VITAL IN VIEW OF THE DUBIOUS NATURE OF LAYERED TRANSACTION. HENCE I N THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT IN OUR CONSIDERED OPINION THERE IS NO INFIRMITY IN THE ORDER OF LEARNED C IT. HENCE, WE UPHOLD THE SAME. THE ORDER APPLIES MUTATIS MUTANDIS TO BOTH THE APPEALS. 17. IN THE RESULT, ASSESSEES APPEALS STAND DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 19 . 7 . 201 9 . SD/ - SD/ - (AMARJIT SINGH) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 19 / 7 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI M/S. MARSHAL MULTITRADE PVT.LTD. M/S. MINARVA TRADELINK PVT.LTD. 13 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI