THE ITO 8(3)-1, MUMBAI V. M/S. SUDHIR INVESTMENTS & FINANACE PVT. LTD, MUMBAI

ITA 4013/MUM/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2657 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 01-12-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 24-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L K AGARWAL

Judgement Text

INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI. R.K. GUPTA (J.M.) AND SHRI. B. RAMAKOT AIAH (A.M.) ITA NO.4013/MUM/07 ASSESSMENT YEAR: 2002-2003 THE I.T.O.8(3)-2, ROOM NO.21, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S. SUCHIR INVESTMENT & FINANCE PVT. LTD. SHIV ASHISH, ANDHERI KURLA ROAD, MUMBAI 400 072. PAN : AAACS5821N (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE. DEPARTMENT BY : SHRI. L.K. AGARWAL. O R D E R PER R.K. GUPTA, J.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-XXIX, MUMBAI RELATES TO A.Y.2002-2003. 2. DEPARTMENT IS OBJECTING IN DELETING THE DISALLOW ANCE OF RS.15,00,480/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF TRADING LOSS ON FABRICS. 3. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THERE WAS NO OPENING AND CLOSING STOCK OF GOODS PUR CHASED. THERE WAS SALE OF RS.1,25,04,285/- AGAINST PURCHASE OF RS.1,40,04, 765/-. THE ASSESSING OFFICER NOTICED THAT PURCHASES WERE MADE ON HIGHER RATES WHEREAS SALES WERE MADE ON LOWER RATE WHICH RESULTED INTO TRADIN G LOSS OF RS.15,00,480/-. THE ASSESSING OFFICER FURTHER NOTICED THAT THERE WA S DIVIDEND RECEIPT AND INTEREST RECEIPT OF RS.11,28,923/- AND RS.16,59,065 /- RESPECTIVELY. DIVIDEND INCOME WAS EXEMPTED U/S.10(33). THEREFORE , ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SET OFF LOSS AGAINST INTE REST INCOME. THE ASSESSING OFFICER FURTHER NOTICED THAT SIMILAR METHOD WAS ADO PTED IN A.Y.2001-02 AND ITA NO.4013/MUM/07 A.Y.: 2002-2003 2 A.Y.2003-04. THE ASSESSING OFFICER FURTHER NOTICE D THAT THERE WAS NO EXPENSES DEBITED TO P & L A/C. WHICH BEEN REQUIRED FOR CARRYING OUT SUCH TRADING ACTIVITY. 4. IN VIEW OF THE FACTS AND CIRCUMSTANCES, ASSESSEE WAS ASKED FOR FILING DETAILS OF PURCHASE AND SALES. THE ASSESSING OFFIC ER NOTICED THAT THE ASSESSEE HAD MADE PURCHASES FROM ONE PARTY I.E. M/S . RESURGENT IMPEX PVT. LTD. AND ENTIRE PURCHASED GOODS HAVE BEEN SOLD TO M /S. LINIENT TRADING PVT. LTD. THE ASSESSING OFFICER FURTHER NOTICED THAT P URCHASE PAYMENT MADE BY ASSESSEE ONLY AFTER THE AMOUNT HAS BEEN RECEIVED FR OM M/S. LINIENT TRADING PVT. LTD. TO WHOM THE GOODS WERE SOLD. IT WAS ALSO NOTICED THAT PURCHASE RATES WERE IN RANGE OF RS.81 TO RS.89 PER METERS WH EREAS SALES MADE RANGING FROM RS.71 TO RS.79 PER METERS. THEREFORE ASSESSING OFFICER VIEWED THAT LOSS INCURRED BY ASSESSEE IS NOT GENUINE WHICH IS CREDITED JUST TO SET OFF AGAINST INTEREST INCOME. DETAILED SUBMISSIONS WERE SUBMITTED BEFORE THE LEARNED CIT (A). IT WAS SUBMITTED THAT THE PURCHAS E PRICE AND SALES PRICE HAVE MADE THROUGH A/C. PAYEE CHEQUE. PARTIES ARE N OT RELATED TO THE ASSESSEE DIRECTLY OR INDIRECTLY. THEREFORE THE LO SS INCURRED DURING THE TRADING ACTIVITIES IS GENUINE LOSS. THE COMPLETE D ETAILS IN RESPECT OF PURCHASE AND SALES WERE ALSO FILED BEFORE THE LEARN ED CIT (A). RELIANCE WAS PLACED ON VARIOUS CASE LAWS AND DETAILED WRITTEN SU BMISSIONS WERE FILED. 5. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE RELEVANT MATERIAL ON RECORD THE LEARNED CIT (A) FOUND THAT THE LOSS I NCURRED BY ASSESSEE WAS GENUINE LOSS. AS PURCHASES AND SALES HAVE BEEN M ADE TO DIFFERENT PARTIES NOT RELATED TO THE ASSESSEE. PAYMENTS HAVE BEEN M ADE THROUGH PROPER BANKING CHANNELS. IT WAS ALSO FOUND THAT ASSESSIN G OFFICER HAD SUMMONED PARTIES INVOLVED AND MADE HIS ENQUIRIES BUT HE COUL D NOT FIND OUT ANY DISCREPANCY AND THEREFORE CIT (A) VIEWED THAT IMPUG NED ADDITION MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. ACCORDING LY, HE ALLOWED THE ISSUE IN FAVOUR OF ASSESSEE. NOW THE DEPARTMENT IS APPEARIN G BEFORE THE TRIBUNAL. THE LEARNED D.R. PLACED RELIANCE ON ORDER OF THE AS SESSING OFFICER. NONE ITA NO.4013/MUM/07 A.Y.: 2002-2003 3 APPEAR ON BEHALF OF THE ASSESSEE. THE APPEAL IS D ISPOSED OFF AFTER CONSIDERING THE ORDER OF THE ASSESSING OFFICER AND THE LEARNED CIT (A). 6. AFTER CONSIDERING THE ORDER OF THE ASSESSING OFF ICER AND THE LEARNED CIT (A), WE FIND NO INFIRMITY IN THE ORDER OF THE L EARNED CIT (A). THE LEARNED CIT (A) HAS ASCERTAINED THE FACTUAL POSITION THAT P URCHASE AND SALES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. FINDING S OF THE LEARNED CIT (A) RECORDED IN PARA 4.3 ARE AS UNDER: 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMI SSIONS MADE BY THE APPELLANT AND OBSERVATION OF THE ASSESS ING OFFICER. THIS GROUND RELATES TO DISALLOWANCE OF LO SS AMOUNTING TO RS.15,00,480/-. THE FACTS INVOLVED IN THIS ISSU E HAVE ALREADY BEEN NOTED. ASSESSING OFFICER DISALLOWED T HE AMOUNT BECAUSE THE APPELLANT HAD INCURRED LOSS ON SIMILAR KIND OF TRANSACTION IN EARLIER ASSESSMENT YEAR AS WELL AS I N SUBSEQUENT ASSESSMENT YEAR. THE ASSESSING OFFICER HAD DOUBTED THE GENUINENESS OF THE TRADING ACTIVITY IN VIEW OF THE FACT THAT ALL THE PURCHASES WERE MADE FROM ONE PART Y AND ALL THE SALES WERE MADE TO ONE PARTY ONLY. NOT ONLY TH AT THE PURCHASES AND SALES WERE MADE WITHIN SIX MONTHS. F URTHER, THERE WAS NO OPENING STOCK AND CLOSING STOCK. IT M EANT THAT THE PURCHASE WERE MADE AT HIGHER RATE AND SALES WER E MADE AT LOWER RATE AND BY THIS WAY TRADING LOSS WAS ACQUIRE D WHICH WAS SET OFF AGAINST DIVIDEND INCOME. THE APPELLAN T ON THE OTHER HAND SUBMITTED THAT ALL THE SALES AND PURCHAS ES WERE MADE THROUGH A/C. PAYEE CHEQUE, THE TRANSACTION WAS ACTUALLY UNDERTAKEN AND MERELY BECAUSE LOSS HAS BEEN INCURRE D THE SAME CANNOT BE DISALLOWED. IT HAS ALSO BEEN STATE D BEFORE ME THAT ASSESSING OFFICER HAD SUMMONED THE PARTIES FRO M WHOM SALES AND PURCHASES WERE MADE WHO CONFIRMED THE TRANSACTION. IT WAS ALSO STATED THAT ASSESSING OFF ICER HAD NOT FOUND ANY DISCREPANCY DURING THE COURSE OF INVESTIG ATION. THE ASSESSING OFFICER HAS HOWEVER, NOT REFERRED TO THES E FACTS. HE HAS STATED IN THE ASSESSMENT ORDER THAT THE TRANSAC TION GIVES RISE TO SUSPICION THAT WHETHER ASSESSEE IS REALLY I N TRADING OF FABRIC OR THIS IS JUST A PAPER WORK. IN MY CONSIDE RED OPINION THE SUSPICION OF THE ASSESSING OFFICER WAS BONAFIDE BUT THESE SUSPICION CANNOT SUBSTITUTE FOR EVIDENCE AS TO WARR ANT DISALLOWANCE. THERE IS NO DISPUTE THAT THE PAYMENT WAS MADE FOR PURCHASE THROUGH A/C. PAYEE CHEQUE AND THE PAYM ENT WAS ALSO RECEIVED THROUGH A/C. PAYEE CHEQUE. FOR DISAL LOWING A TRANSACTION WHICH WAS ACTUALLY UNDERTAKEN THE ASSES SING OFFICER SHOULD HAVE BROUGHT PROPER EVIDENCE ON RECO RD. IT HAS BEEN STATED BY APPELLANT THAT ASSESSING OFFICER HAD SUMMONED PARTIES INVOLVED AND MADE HIS INQUIRIES BUT HE COUL D NOT FIND ANY DISCREPANCY AND THEREFORE HE IGNORED THESE FACT S AND DID NOT MENTION IN THE ASSESSMENT ORDER. NO COMMENT CA N BE MADE ABOUT THIS AS THE ASSESSING OFFICER HAS NOT ME NTIONED ITA NO.4013/MUM/07 A.Y.: 2002-2003 4 THIS IN ASSESSMENT ORDER. APPARENTLY, THERE IS NO EVIDENCE TO SUGGEST THAT THESE TRANSACTIONS DID NOT TAKE PLACE. IT IS ALSO UNDISPUTED THAT THIS LOSS HAS REDUCED TAXABLE INCOM E. BUT, THIS FACT IN ITSELF IS NOT SUFFICIENT TO DISALLOW T HE CLAIM. THERE IS NOTHING TO SUGGEST THAT THE QUANTUM OF LOSS INCURRE D IN THIS TRANSACTION HAS COME BACK TO APPELLANT IN ANY MANNE R. THIS IS IMPORTANT BECAUSE THE AMOUNT OF LOSS IS GREATER THA N SAVING IN TAX AMOUNT. IN THE ABSENCE OF PROPER EVIDENCE TO S HOW THAT THESE TRANSACTIONS WERE NOT UNDERTAKEN AND THESE WE RE MERE PAPER TRANSACTION, THE DISALLOWANCE CANNOT BE JUSTI FIED. ACCORDINGLY, THIS GROUND IS ALSO UPHELD. 7. NEITHER THE ABOVE FINDINGS COULD BE CONTROVERTED NOR ANY OTHER MATERIAL WAS BROUGHT ON RECORD TO ESTABLISH OTHERWI SE. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE DETA ILED REASONING GIVEN BY THE LEARNED CIT (A), WE CONFIRM HIS ORDER. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED. ORDER PRONOUNCED ON THIS 3 RD DAY OF DECEMBER, 2009. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (R.K. GUPTA) JUDICIAL MEMBER MUMBAI, DATED 3 RD DECEMBER, 2009. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XXIX, MUMB AI 4. COMMISSIONER OF INCOME TAX, CITY-XXIX, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH J, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.4013/MUM/07 A.Y.: 2002-2003 5 DATE INITIALS 1. DRAFT DICTATED ON 1-12-09 PS 2. DRAFT PLACED BEFORE AUTHOR 2-12-09 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON 03-12-09 PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER