The ACIT Central Circel-1(3), Ahmedabad V. Anmol Tradeline Pvt. Ltd., Ahmedabad

ITA 454/AHD/2020

AI Insights

The case involves the ACIT, Central Circle-1(3), Ahmedabad as the appellant and Anmol Tradeline Pvt. Ltd. as the respondent. The dispute arose from the assessment order under section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2010-11, where the Assessing Officer made several disallowances including trading losses and additions under section 68. The CIT(A) deleted these additions, which led to the Revenue's appeal to the Tribunal. The Tribunal upheld the CIT(A)'s decision, finding that the Assessing Officer had not substantiated his disallowances with adequate evidence and had not properly confronted the assessee with the material used against them.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114100 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-04-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 14-09-2020
• Other Referred Cases: CIT v. Sham Lal (1981) 127 ITR 816 (P&H), Ponkunnam Traders v. Addl. ITO (1972) 83 ITR 508 (Ker), Ganeshdas Kaluram v. CIT (1951) 19 ITR 102 (Ori), Gunda Subbayya v. CIT (1939) 7 ITR 21 (Mad) (FB), CIT v. Khemchand Ramdas (1940) 8 ITR 159 (Sind), Chiranji Lal Steel Rolling Mills v. CIT (1972) 84 ITR 222 (P&H), Jadunandan Sahu Deokizanram v. CIT (1948) 16 ITR 175 (Pat), Gaunda Subbayya v. CIT (1939) 7 ITR 21 (Mad), Kamlesh Jhaveri v. ITO, Marghabhai Kishabhai Patel & Co. V CIT (1977) 108 ITR 54 (Guj), CIT v Keshavlal Chandulal (1966) 59 ITR 120 (Guj), CIT v Shivkami Co. (P) Ltd. (1986) 159 ITR 71 (SC), CIT v AmitbhaiGunvantbhai (1981) 129 ITR 573 (Guj), CIT v Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC), CIT v Ayachi Chandrashekhar Narshangji (2014) 221 taxmann 146 (Guj)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; TDS; Set aside
• Section: 68; 143(3); 133(6); 205; 208; 13; 153; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The ACIT, Central Circle-1(3), Ahmedabad (Appellant) Vs Anmol Tradeline Pvt. Ltd., 2, Dipawali Centre, Opp. Old High Court, Income Tax, Ashram Road, Ahmedabad PAN: AADCA4837D (Respondent) Assessee Represented: Shri Aseem L. Thakkar, A.R. Revenue Represented: Shri Atul Pandey, Sr. D.R. Date of hearing : 05-04-2023 Date of pronouncement : 28-06-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Revenue as against the appellate order dated 09.07.2020 passed by the Commissioner of Income Tax (Appeals)-5, Ahmedabad arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2010-11. 2. The brief facts of the case is that the assessee is Private Limited Company engaged in trading of Gold, Gold Jewellery, Diamonds ITA No. 454/Ahd/2020 Assessment Year 2010-11 I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 2 and other Commodities. For the Assessment Year 2010-11, the assessee filed its Return of Income on 24-09-2010 declaring total income of Rs.3,03,370/-. The return was taken up for scrutiny assessment and the Assessing Officer made the following disallowances: i. Disallowance of trading loss: (a) Cut & Polished diamonds Rs. 75,77,155/- (b) 0.995 Gold Kg. Bar Rs. 12,00,380/- (c) 22 carat Gold Ornaments Rs. 15,29,577/- ii. Addition u/s. 68 of I.T. Act Rs. 2,90,00,000/- iii. Disallowance of interest expenses Rs. 13,11,396/- 3. Aggrieved against the Assessment Order, the assessee filed an appeal before Commissioner of Income Tax (Appeals)-5, Ahmedabad. During the appellate proceedings, the assessee filed additional documents invoking Rule 46A of the I.T. Rules. The Ld. CIT(A) called for a Remand Report from the Assessing Officer and entertained the additional documents. After getting rejoinder from the assessee, the Ld CIT[A] deleted the additions made by the Assessing Officer observing as follows: “... 4.5 It is also worthwhile to note that from the perusal of the account of cut and polished diamonds placed on page 132 to 135 of the PB there are various instances where the purchases have been affected at lower rate and have been immediately sold on the same date or immediately succeeding dates at a higher date. For instance purchases have been made at the rate of varying at Rs.14857.07 to Rs. 24650 per carat on 18.04.2009 to 22.05.2009 and sold at varying rates of Rs.18,800/- to Rs.24,975/- per carat from 08.05.2009 to 01.07.2009. Similarly, purchases varying at the rate from Rs.9,500 to Rs.25,230/- per carat had been made from 07.09.2009 to 17.09.2009 and sold at Rs.22,000/- to Rs.24,000/- per carat from 26.09.2009 to 12.10.2009. It is also worthwhile to note these are instances furnished on sample basis and had the allegation of the AO been correct the appellant would not have declared trading profit as has been done in the case of the appellant. The declaration of trading profit by itself indicates that there are various other transactions which have yielded income to the appellant company which have been completely ignored while drawing adverse inferences against the appellant company. Such action of the AO cannot be approved I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 3 whereby transactions are viewed selectively and adverse inferences are drawn accordingly. Further, the various invoices support the purchase and sale of cut and polished diamonds and appearing on pg.5 of the assessment order have not been disproved which proves the contention of the appellant that there was a high volatility. Similarly, in case of the disallowance on account of trading of 0.995 KG gold bar the same has come to be made on the ground that the sale rate on a particular date was Rs.1520/- per gm and the prevailing market rate on the same date was not less than Rs.1590/- per gm. It is a settled proposition of law that if you intend to rely upon any information the basis of such information has to be clearly disclosed in the assessment order. Apart from that, such information has to be confronted to the appellant during the course of assessment proceedings. After giving an opportunity to the appellant to rebut such allegation only can any conclusion be drawn? I have examined the assessment order and in fact find that the AO has failed miserably in this task of providing the basis as to how the rate of Rs.1,590/- on a particular day has been derived. Where this primary onus cast upon the AO has not been discharged, the question of confronting such details and obtaining the rebuttal would never arise. It therefore appears that the AO has not confronted any evidence or other material collected behind the back of the appellant and used against him while drawing adverse inferences. It was held in CIT v. Sham Lal (1981) 127 ITR 816 (P&H) that the revenue is not entitled to place reliance on the material which was brought on the record at the back of the assessee. The assessee is, entitled to rebut the material placed before him if he so chooses. Any material placed on the record without notice to the assessee cannot be relied upon by the revenue. Thus, only those materials which have been collected at the back of the assessee and in respect of which opportunity to rebut the same has been granted to the assessee that revenue can rely. To put it differently, it seems now well settled that it is open to the assessing officer to take into account other materials that may come to his knowledge apart from the accounts submitted by the assessee. Undoubtedly principles of natural justice require that the assessee should be given an opportunity to rebut any inference that may be drawn against him from such other materials. Though for that purpose the assessing officer is not bound to disclose the actual source of information he should indicate to the assessee that he intended to use the additional material against him and give him an opportunity to have his say regarding it. This view is also canvassed in the following decisions: i. Ponkunnam Traders v. Addl. ITO (1972) 83 ITR 508 (Ker), ii. Ganeshdas Kaluram v. CIT (1951) 19 ITR 102 (Ori), iii. Gunda Subbayya v. CIT (1939) 7 ITR 21 (Mad) (FB), iv. CIT v. Khemchand Ramdas (1940) 8 ITR 159 (Sind) v. Chiranji Lal Steel Rolling Mills v. CIT (1972) 84 ITR 222 (P&H), vi. Jadunandan Sahu Deokizanram v. CIT (1948) 16 ITR 175 (Pat) I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 4 and vii. Gaunda Subbayya v. CIT (1939) 7 ITR 21 (Mad)]. Even in the case of disallowing of losses in respect of 22 carat gold ornaments the AO has stated that even as per FIFO or LIFO method of valuation the closing stock would be valued at the rate of Rs.1700/- & Rs.1750-1800/- respectively. However, the AO has completely ignored the fact that the assessee has valued 22 carats gold jewellry at the rate of Rs.1,725/- per gram. (Refer pg.136 of the PB). Therefore, it is apparent that the AO has merely on doubts and suspicions without verifying the records and without examining the contentions and submissions made during the course of assessment proceedings in a predetermined manner disallowed the loss on selected trading transactions. 4.6 In the decision of Kamlesh Jhaveri filed by the appellant the Hon. ITAT has referred various other decisions while dealing with the issue where the transaction in question is not treated as sham however, the financial and tax impact has been adversely viewed. 4.7 In view of the fact that the AO has selectively identified certain transactions and disallowed the losses occasioned or incorrectly applied closing rates for valuing inventories or not furnishing the information collected behind the back of the assessee and using the same against him the additions by itself cannot be confirmed. The books of accounts are audited and all evidences and other material called for has been furnished during the course of assessment proceedings. No defect or other shortcomings have been pointed in the books of accounts. In fact, the books of accounts have not even been rejected by the AO. The genuineness of the transactions have not been doubted by bringing any material or other evidence on record. Selecting transactions and disregarding the loss arising therefrom is not permissible when the genuineness of the transaction has not been disproved. In view of the above factual matrix and the various judicial pronouncements (supra), the addition is hereby directed to be deleted. Ground No.2 is accordingly allowed. 3.1. The Ld CIT[A] deleted the additions made under section 68 of Rs.2.9 crores after considering various information and passed a detailed order observing as follows: “... 4.9 The AO has stated that the verification of the Balance Sheet revealed that the appellant had accepted unsecured loans of Rs.5,51,78,862/- during the year under consideration. The appellant was directed to furnish the details of the unsecured loans in the specified format. The appellant was also directed to furnish copy of Ledger accounts for the new loans accepted during the year along with confirmation and other evidences to prove the identity, creditworthiness and genuineness of the transactions. As per the AO, in spite of providing sufficient I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 5 opportunities the appellant could only furnish the name and address of the parties along with the PAN was also copy of accounts from their books. The AO has also stated that notice u/s 133(6) of the Act had been issued to various parties to furnish the bank statements and explain the source of funds at the request of the appellant. It has been stated that in the case of Ganesh Plantations Ltd, the letter was unserved and had been returned with the comment "does not exist. In case of other parties no reply had been received. This fact was also intimated to the appellant vide order sheet entry dated 11/03/2013. The AO has also referred to the submissions dated 18/03/2013 filed by the appellant wherein it was submitted that whatever evidences as were available with the appellant had been duly filed. With regards non-compliance to the letter issued u/s 133(6) of the Act, the same having been effectively served established the existence of the party. It was also stated that the appellant had no legal power or authority to ensure the compliance/attendance of the depositors. The deposits had also been returned in the subsequent year was the major reason why the appellant was handicapped from obtaining the necessary information at that relevant point of time. However, the appellant had during the appellant proceedings collected further information which had been furnished by way of additional evidences under rule 46A of the IT rules, 1962. The additional evidences had been duly admitted and sent to the AO for his comments. The remand report of the AO was received which was supplied to the AR of the appellant for his counter comments. The AR of the appellant has also furnished the counter comments which are taken into consideration while adjudicating the issue. 4.10. The depositor wise details furnished during assessment & remand proceedings stage are discussed as under: Sr. No. Name of Depositor Amount Remarks 1 Ganesh Plantations Ltd. 20000000 & Interest 961644 The appellant had furnished confirmation letter with PAN, copy of accounts, acknowledgement of the return of income and bank statement on pg.140 to 145 of the PB. Further TDS has been duly deducted on the interest payments made. The entire loan has been returned in the previous year relevant to A.Y.2012-13 and the copies of account are placed on pg.2 & 3 of the PB accompanying the counter comments dated 23.07.2018 to the remand report. 2 Gulabben H. Doshi 1500000 & Interest 87255 Copy of account with confirmation, contra account with PAN, address and bank statement had been furnished on pg.146 to 148 of the PB. Further she had complied with the letter issued u/s 133(6) by filing the details vide letter dated 13.06.2013. The copy of the same is placed on pg.151 of the PB wherein she I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 6 had categorically intimated that return of income had not been filed on account of income not exceeding taxable limit. In the remand report the AO has intimated l the bank statement placed on page 153 to 155 does not contain the name of the Bank or the account number and therefore the same is not verifiable. He has also pointed out that there was a discrepancy of Rs.2,00,000/- in the account as appearing in the Balance Sheet. All these doubts have been duly addressed and the appellant in the course of remand proceedings has furnished the bank statement indicating the name of the depositor and bank account number along with the copy of the PAN card which establishes the bank account pertained to the depositor. As regards discrepancy of Rs.2,00,000/- it was clarified that the aforesaid amount had been erroneously debited in the account of her husband Shri Hasmukh Doshi. Further in the subsequent years the accounts were rectified and the copy of the rectified account had also been placed on record. The schedule of "loans and advances" had indicating the repayment to the depositor debited in the account of her husband is placed on page 16 of PB dated 23.07.2018. The copy of the bank statement and the accounts for the subsequent years have been placed on page 4 to 9 of the PB accompanying the counter comments to the remand report. The loan has been repaid in the previous year relevant to A.Y.2012-13. The copy of the same is placed on page 8 of the PB dated 23/07/2018. 3 Alpesh H. Shah 1000000 The copy of the contra account with confirmation, acknowledgement of the return of income for A.Y.2010-11 with computation of income, profit and loss account, balance sheet, copy of driving licence, copy of account with confirmation and bank statement have been placed on page 158 to 174 of the PB. Further the amount has been returned in the subsequent years and the copies of the same have been placed on page 10 to 12 of the PB accompanying the counter comments dated 23/07/2018. I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 7 4 Prajay M. Bhansali 500000 The copy of account with confirmation, PAN, copy of passport, copy of bank statement, acknowledgement of return of income for A.Y.2010-11 have been placed on page 176 to 183 of the PB. Further, the loans have been returned in the subsequent year. Copies of accounts of the subsequent years have been placed on page 13 to 17 of the PB accompanying the counter comments to the remand report dated 23/07/2018. The amount in question has been returned in the previous year relevant to A.Y.2013-14. 5 Pratimaben H. Thakkar 50,00,000 & Interest 262497 The copy of account with confirmation, PAN, address, Phone No. with copy of bank statement have been placed on page 184 to 187 of the PB. Further, on page 188 of the PB letter had also been written by the appellant company to the depositor requesting for the copy of the acknowledgement of the return of income. However, the depositor did not make available the copy of the acknowledgement of the return of income and this fact was also intimated to the AO and a request was made to undertake direct verification at his end since the depositor was not cooperating. However, the PAN details had been furnished and direct verification could have been made by the AO from the computer systems itself. Further, the loans have been returned in the subsequent year. Copies of accounts of the subsequent years have been placed on page 18 to 26 of the PB accompanying the counter comments to the remand report dated 23/07/2018. The amount in question has been returned in the previous year relevant to A.Y.2018-19. Further, interest had been paid to the depositor and TDS was also deducted on such payments made. 6 Pragnesh H. Shah 1000000 The copy of account with confirmation, PAN, copy of bank statement, acknowledgement of return of income for A.Y.2010-11, copy of driving license have been placed on page 189 to 205 of the PB. Further, the loans have been returned in the subsequent year. Copies of accounts of the subsequent years have been placed on page 27 to 30 of the PB accompanying the counter comments to the remand report dated 23/07/2018. The amount in question has been returned in the previous year relevant to A.Y.2013-14. I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 8 4.10 Therefore, from the above discussion it would be apparent that the appellant had furnished all evidences which establish the identity, genuineness and creditworthiness of the cash creditor. Cogent and reliable evidences including confirmation, pan, and acknowledgement of the return of income and bank statements have also been furnished. Details of the TDs deducted on interest payments made have also been furnished. All these loans have been returned in the subsequent years and the copies of accounts have been placed on record in support of the above fact. It is an established principle of law that where evidences including bank statements, IT particulars, confirmations etc. have been furnished the onus on the appellant stand discharged. If the AO has any doubts with regards the evidences furnished necessary verification or enquiry can be conducted at his end. However, he cannot simply brush aside the evidences furnished by the appellant and treat the cash credits as unexplained. He has to bring some material on record on the basis of which it can be determined that the cash credits are not genuine. Rejection of evidences by themselves cannot be the reason for treating the cash credits as non- genuine. ... .... ... ... 4.12 I agree with the contentions made by the AR of the appellant that they have furnished all credible evidences in support of the cash credits taken which establish the identity, creditworthiness and genuineness of the transactions. The burden cast upon the appellant therefore stands duly discharged. The AO has not brought any material or other evidence on record by which the creditworthiness or genuineness of the cash credit can be challenged. Further, the loans in question have been returned in the subsequent years and such repayments have also been accepted. Under such circumstances I hold that the cash credits are genuine and the addition is accordingly directed to be deleted. Ground No.4 is accordingly allowed.” 4. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in holding that trading loss of Rs.1,03.07.112/- (Rs.75,77,155/- on Cut and Polished Diamonds, Rs. 12,00,380/- on 0.995 Gold KG Bar and Rs. 15,29,577/- on 22 Carat Gold Ornament) incurred by assessee are genuine and thus deleting the said additions/disallowances made in the assessment order. 1.1 The Ld. CIT(A) erred in not considering the fact that the assessee did not incur loss on stocks held for substantial period of time but claimed to have incurred losses on sales effected by the I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 9 goods purchased on the same day, having transactions with related concerns. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition u/s 68 of the Act of Rs.2,90,00,000/- by holding that unsecured loans taken by assessee were genuine, without appreciating the fact that assessee could not establish the identity & creditworthiness of lenders. 2.1. The Ld. CIT(A) erred in not considering the fact that the assessee failed to prove the genuineness of the transactions made by those persons with the assessee with supporting proof. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.13,11,396/- by holding that interest expenses incurred by assessee on unsecured loans were genuine. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 5. The Ld. Sr.D.R. Shri Atul Pandey appearing for the Revenue supported the order passed by the Assessing Officer and pleaded the Ld. CIT(A) erred in deleting the trading loss of Rs.1.03 crores which was made by the Assessing Officer after verification of various facts. Similarly, the Ld.CIT(A) erred in deleting the unsecured loans of Rs. 2.9 crores and also deleted the interest paid thereon of Rs.13,11,396/-. Thus the Ld. D.R. pleaded that the assessment order passed by the A.O. is to be restored and allow the Revenue appeal. 6. Per contra, the Ld. A.R. Shri Aseem L. Thakkar appearing for the assessee submitted that the loss of Rs.75,77,155/- on sale of loose diamonds, the Ld A.O. has ignored the profit on sale of loose diamonds by the assessee. He drawn our attention to the detailed I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 10 date wise profit transactions statement given at Page Nos. 126 to 134 of the Paper Book. Thus the Assessing Officer has not doubted the profit transactions on sale of loose diamonds. However he only question the loss occurred on sale of loose diamonds. Further the Assessing Officer failed to note that the transactions were done through normal banking channels even in the case of losses. Thus the AO has not made any inquiries in support of the allegation that the loss are not genuine, the A.O. do not find discrepancy in the quantity of diamonds as reflecting in the books of accounts. Thus the Ld. Counsel relying upon Co-ordinate Bench of this Tribunal decision in the case of Khandwala Gems Trading Corporation Vs. ACIT 54 TTJ (Jaipur) 479 wherein it was held that no adverse inference can be drawn, where quality records were not maintained when there is no discrepancy in the quantifying tally which was pointed out by the A.O. 6.1. Regarding loss on sale of 0.995 kg. gold bar. The Ld. Counsel submitted that the AO has not brought on record any evidence to establish the market rate being Rs. 1590/- per gram. The AO also failed to consider that the trading were done with identifiable parties through normal banking channels and not to related parties. Therefore the A.O. not correct in denying the loss of Rs. 12,00,380/- on sale of gold bar. 6.2. On the loss of 22 ct. Gold ornaments. The assessee applied Rs. 1725/- per gram and not 1580/- per gram as alleged by the A.O. It is evident from Page No. 137 of the Paper Book wherein the last invoice raised by the assessee revealing that the rate at 1725/- per I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 11 gram. The Ld. Counsel in this connection relied upon Co-ordinate Bench decision in the case of Kamlesh Zaveri in ITA No. 1420/Ahd/2013 wherein the loss claimed by the assessee were deleted by the Hon’ble Tribunal. 7. Regarding unsecured loans and addition u/s. 68 of Rs. 2.9 crores, during the appellate proceedings, the assessee filed additional evidences under Rule 46A about the details of unsecured loans. The Ld. CIT(A) called for a Remand Report from the A.O. and after getting the rejoinder from the assessee and taking note that the loss were being repaid during the next Financial Year and interest is also paid with appropriate TDS which is available at Page Nos. 265 to 294 of the Paper Book. Therefore the Ld CIT[A] deleted the additions following Hon’ble Jurisdictional High Court judgements in the case of CIT Vs. Ranchod Jivabhai Nakhva (2012) 208 taxmann 35 (Guj.) and CIT Vs. Ayachi Chandrashekhar Narshangji (2014) 221 taxmann 146 (Guj.) Further the Ld. CIT(A) deleted the above additions after verification of the PAN, Copy of the contra account, Acknowledgement of Return of Income, Bank Statements of the depositors. Thus pleaded that the deletion made by the Ld. CIT(A) does not require any interference and requested to uphold the same by dismissing the above Revenue appeal. 8. We have given our thoughtful consideration and perused the materials available on record including the Paper Book and case laws relied by the assessee. We found that the Ld. CIT(A) has passed a very detailed appellate order after considering the facts of the case and materials placed by the assessee after calling for I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 12 Remand Report from the Assessing Officer. In our considered view, the A.O. was pre-determined to make disallowance based on illogical assumption that in case of retail business no loss can be occurred, when purchases were been made in bulk and sales were been made in retail, on different dates and occasions. It is seen in the case of Cut and Polished Diamonds, purchases have been made at the rate of varying at Rs. 14857.07 to Rs. 24650 per carat between the periods 18-04-2009 to 22-05-2009. The assessee sold Cut and Polished Diamonds at varying rates of Rs. 18,800/- to 24,975/- per carat from 08-05-2009 to 01-07-2009. The assessee had shown profit on sale of Cut and Polished Diamonds as well as the trading losses. The A.O. accepted the profit shown by the assessee, but doubted and disallowed the losses claimed by the assessee, which in our considered view is not judicious. The assessee furnished copies of the bills carrying the purchasers name, address and other details. However the A.O. has not made verification of the above details and disallowed the loss of Rs. 75,77,155/- on Cut and Polished Diamonds on the ground that qualitative details were not furnished by the assessee. The Co- ordinate Bench of this Tribunal in the case of Khandwala Gems Trading Corporation Vs. ACIT (ITAT-JP) reported in [1995] 14 CCH 197 has considered identical issue and held as follows: “It is indeed very difficult to appreciate the contention of the Department that the absence of qualitywise details cast an aspersion on the trading results declared by the assessee, particularly when no discrepancy in the quantitative tally has been pointed out. A discrepancy in the quantitative tally maintained by the assessee in this case would have certainly entitled the AO to conclude that there is suppression of sales. In certain businesses, absence of quality-wise details may also lead one to the conclusion of suppressed sales, say, in the case of ball bearings where the sales value will depend on the make of the ball bearing. In case of precious I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 13 stones also, the sales value will undoubtedly differ from quality to quality, but in such cases, each stone is of different quality and its value is so subjective that it may be valued differently by different valuers. Hence, in such cases, unless there is strong evidence to hold otherwise, the sales as shown have to be accepted when quantitatively there is no discrepancy. As regards non-production of parties, it is not a sufficient ground to draw an adverse inference, particularly when the addresses given by the assessee tallied with those available with the bankers of those parties and with the sales-tax authorities. It would be too much to expect the assessee to do anything more in case of its customers. With regard to AO's contention that sales to these three parties have been made at lower prices, it is a mere statement of opinion by the AO not supported by any direct or indirect evidence. The AO's observations regarding the entries in the bank account of the three parties do give rise to curiosity and should prompt the AO to probe further. But if the probe leads to nowhere, the unsatiated curiosity merely remains as a suspicion which is no ground to make any addition. The addition made on this count is deleted.” 8.1. Further it is not in dispute that the sales made by the assessee were through banking channels. Thus the Assessing Officer cannot disallow the claim of loss, when the Assessing officer has not pointed out any specific defect or short comings on the trading transactions. The Ld. D.R. appearing for the Revenue could not place on record any contra view against the findings of the Ld. CIT(A). Thus the ground raised by the Revenue is devoid of merits and the same is liable to be rejected. 9. With regard to the loss on sale of Gold bar, the Assessing Officer held that the sale rate on a particular date was Rs. 1520/- per gram whereas market rate was Rs. 1590 per gram. However it is seen from the assessment order, the market rate of Rs. 1590/- arrived by the A.O. were not supported by any credible evidence. Inquiries conducted by the A.O. by summoning purchasers by issuing notice u/s. 133(6) of the Act also has not given any untoward inferences. The Assessing Officer has also not confronted the market price at 1590/- with any evidences to the assessee but I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 14 however adopted this figure and disallowed Rs. 12,00,380/- on sale of Gold bar. 9.1. The Hon’ble Punjab and Haryana High Court in the case of CIT Vs. Sham Lal [1981] 127 ITR 816 held that the Revenue is not entitled to place reliance on the material which was brought on record behind back of the assessee. Any material placed on record without notice to the assessee cannot be relied upon by the Revenue. The Ld. CIT(A) has followed this decision of the High court and relying upon various other High Courts judgments and thereby deleted the additions, which does not require any interference especially when the Ld. D.R. could not place before the appellate authorities, the market value as adopted by the Assessing Officer. Thus the ground raised by the Revenue is devoid of merits and the same is liable to be dismissed. 10. Similar is the disallowance made by the Assessing Officer on the losses in respect of 22 carat Gold Ornaments sold by the assessee. The A.O. has not made out a case that the sales are to the related persons only. Here also, the A.O. merely on doubts and suspicions made the disallowance, which in our considered view is not correct in law. The above findings of our is supported by the Co-ordinate Bench of this Tribunal decision dated 25-01-2017 in ITA No. 1420/Ahd/2013 in the case of Kamlesh Jhaveri Vs. ITO, wherein after considering the various judgments of the Hon’ble High Courts held that the losses claimed by the assessee are genuine and cannot be termed as colourable with the intention to evasion of tax. I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 15 Marghabhai Kishabhai Patel & Co. V CIT (1977) 108 ITR 54 (Guj.) Section 145 of the Income-tax Act, 1961 - Method of Accounting - Estimation of profits - Assessment years 1962-63 to 1965-66 Assessee firm was found to have purchased tobacco from its partners at higher price than average price paid to outside parties - ITO, thus, added back certain amount on ground that purchase price of tobacco was wrongly inflated - Tribunal affirmed decision of ITO - Whether unless it was shown that transaction was not bona fide one or to be a sham or price paid was not what was shown in books of account, it was not open to revenue to disregard figures of transactions shown in books of account of assessee-firm - Held, yes - Whether, therefore, Tribunal was not justified in disallowing a part of actual price of tobacco paid by assessee-firm - Held, yes CIT v Keshavlal Chandulal (1966) 59 ITR 120 (Guj.) Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income-tax Act, 1922] - Method of accounting - Rejection of accounts - Assessment year 1960-61 - Whether taxing authority have no right to substitute market price in place of price or value agreed to between parties to transaction, unless transaction has been shown to be sham one or value shown was not value in books of account Held, yes - Assessee firm whose main business was purchase of plots of land, construction of buildings thereon and sale of buildings decided to discontinue its business and to distribute among its partners certain unsold shops at book value - ITO rejected book value of shops fixed by assessee and estimated real value of shops on basis of sales previously effected by assessee and made addition to its income - Whether distribution of assets amongst partners by assessee-firm amounted to a business transaction - Held, yes - Whether, therefore, shops which were taken over by partners at time of discontinuance of firm's business should be valued at book figure and not at their market price - Held, yes CIT v Shivkami Co. (P) Ltd. (1986) 159 ITR 71 (SC) First proviso to section 136(2) of the Indian Income-tax Act, 1922 [corresponding section 52 of the Income-tax Act, 1961] - Capital gains - Transfer in case of understatement of consideration - With a view to sequestering the shares held by assesses in a company from clutches of Government, it sold them at a price much lower than their market value and in fact incurred a loss - Revenue could not prove that consideration was understated - Whether first I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 16 proviso to section 12B(2) was applicable to assessee's case - Held, no CIT v Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC) Section 28(1) of the Income-tax Act, 1961 [Corresponding to section 10(1) of the Indian Income-tax Act, 1922] Business income Chargeable as Assessment year 1947-48 Assessee-company floated a subsidiary company and transferred to that various shares held by it- In turn subsidiary company transferred to assessee its shares - ITO valued shares transferred by assessee at market rate and held that assessee deemed to have made profits as book value of these shares was less than its market value-AAC held that transaction between assessee and its subsidiary company was bona fide transaction; that it might be that assessee had transferred its valuable shares at cost price to its subsidiary in order to so arrange its affairs as to reduce its tax burden and, therefore, unless ITO on basis of material before him was able to come to conclusion that assessee had really made profits in transaction, it was not permissible for him to add back to assessee's return any fictional income. Whether order of AAC was in accordance with law - Held, yes CIT v AmitbhaiGunvantbhai (1981) 129 ITR 573 (Guj.) The Tribunal had overlooked one important fact, namely, that the entries in the books of account of 'G'. (HUF) were not challenged by the department as a device or as a cloak to evade the tax Nowhere on the record the department challenged that the entries did not reflect the real transaction between the parties. In the absence of any such challenge, according to the assessee, it was not open to the Tribunal to come to the conclusion that the money was not received by 'G' in his capacity of HUF but was received by him in his capacity as the guardian of the assessee. The basic principle is the same in the law relating to income-tax as well as in civil law, namely, that if there is no challenge to the transaction represented by the entries or to the genuineness of the entries, then it is not open to the other side-in the instant case the revenue-to contend that what is shown by the entries is not the real state of affairs. No attempt was made by the department to show that, in fact, though the entries were made in the books of account of the HUF, the moneys were received or passed on to Amitbhai or that the moneys were received by G in his capacity as the guardian of the assessee. Under these circumstances, the department not having challenged the genuineness of the entries in the books of account of G. (HUF) and there being no other material on the record on which it could be said that the moneys were received by G in his capacity as guardian of minor, there was no evidence before the I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 17 Tribunal to come to the conclusion as it did at the end of its order by way of inference that the amount in question did reach the representative assessee in his capacity as guardian of assessee. The entries which were the only evidence on record showed that the amount was received by G in his capacity as karta of the HUF but beyond that there was no other evidence The Tribunal without any evidence on the record had drawn the inference that the amount in question did reach the representative assessee in his capacity as guardian of the assessee To say that G was representative assessee or that the amount did reach the representative assessee in his capacity as guardian of the assessee, was not correct so far as the record of the instant was concerned. The inference drawn by the Tribunal that the amount having come to G's hands must be considered to have reached his hands in his capacity as guardian of assessee was not warranted by the evidence on record and was contrary to whatever evidence that had been led on behalf of the assessee and this -evidence had not been challenged on behalf of the revenue. In view the earlier order of the High Court in view of the fact that he only question that he Tribunal had to consider was whether, the amount had in fact reached the assessee, or not, the Tribunal should have concentrated its attention on the question in the light of the contentions taken up by the revenue and in the light of the evidence led before it. It was not open to the Tribunal in law to draw the inference when the entries in the books of account of G, (HUF) were not challenged as a device or as a cloak to evade tax. Under these circumstances, the Tribunal's conclusion that the money had in fact reached the hands of the natural guardian of assessee and, hence, the assessment, was not based on any evidence on record. 10.1. Thus the disallowances made by the Assessing Officer on claim of losses are devoid of merits and the same are liable to be deleted and order of the Ld. CIT(A) is hereby confirmed. 11. The next addition namely unsecured loans of Rs. 2.9 crores and interest payment thereon are considered by the Ld. CIT(A) in detail. During the remand proceedings and the detailed discussion of each creditor in a tabulator form is already extracted at Page Nos. 5 to 7 of this order. I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 18 11.1. The Ld. D.R. appearing for the Revenue could not produce before us any contra findings arrived by the Ld. CIT(A). The Ld. D.R. could not deny the TDS on the interest paid by the assessee to the creditors. Further the above unsecured loans have been repaid in the subsequent assessment years and copies of the contra accounts placed at Page Nos. 2 to 13 of the Paper Book which is also not disputed by the Ld. D.R. 11.2. In such circumstances, the Hon’ble Jurisdictional High Court in the case of CIT Vs. Ranchhod Jivabhai Nakhva (2012) 208 Taxman 35 (Guj.) held that "Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under section 68 was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. [Para 15]. Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, the Assessing Officer does not follow the principle laid down under section 68. [Para 16] If on verification, it was found that those lenders did not disclose in their income tax return the transaction or that they had not disclosed the aforesaid amount, the Assessing Officer could call for further explanation from the assessee to prove the genuineness of the transaction or creditworthiness of the same. However, without verifying such fact from the income tax return of the creditors, the action taken by the Assessing Officer in examining the lenders of the assessee was a wrong approach. Moreover, those lenders have made inconsistent statements as pointed out by the Commissioner (Appeals) and in such circumstances, both the Commissioner (Appeals) and the Tribunal, were justified in setting aside the addition as the Assessing Officer, without taking step for verification of the income tax return of the creditors, took unnecessary steps of further examining those creditors. If the Assessing Officers of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the Assessing Officer in question has no justification to disbelieve the transactions reflected in the account of the creditors. In other words, the Assessing Officer had no authority to dispute the correctness of assessments of the creditors of the assessee when a co-ordinate Assessing Officer is satisfied with the transaction.[Para 17] I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 19 Thus, the Tribunal rightly set aside the addition made by the Assessing Officer, based on erroneous approach by wrongly shifting the burden again upon the assessee without verifying the income tax returns of the creditors. The position, however, would have been different if those creditors were not income tax assessee's or if they had not disclosed those transactions in their income tax returns or if such returns were not accepted by their Assessing Officer [Para 18] There was no merit in the appeal and same was to be dismissed. [Para 19] As per the above referred decision where the confirmation and PAN numbers have been furnished the onus on the appellant stands discharged. On obtaining the same the AO of the assessee would be required to forward the details to the AO of the creditors. This is the exercise which has to be mandatorily followed where the confirmation and PAN numbers have been given. In case the AO's of the creditors report otherwise then necessary action has to be taken in the case of the assessee and not otherwise. It is worthwhile to note that the appellant has furnished all documentary evidences which establish the identity, genuineness and creditworthiness of the transaction. No adverse report of the AO's of the cash creditors is on record. Nothing untoward has been reported on any of these accounts other than raising doubts on the ground that interest has not been paid to certain depositors etc. However, these shortcomings are not fatal so as to treat the cash credits as unexplained. 11.3. Similarly in the case of CIT v Ayachi Chandrashekhar Narsangji (2014) 221 Taxman 146 (Guj.) it was held that "Section 68, read with section 143, of the Income-tax Act, 1961- Cash credit [Loans] - Assessment year 2006-07 - Assessing Officer framed assessment under section 143(3) wherein he made addition of Rs. 1.45 crore under section 68 on ground that loan taken from one 'IA' was not explained satisfactorily - On appeal, Commissioner (Appeals) was satisfied with respect to genuineness of transaction and creditworthiness of '1A' and, therefore, deleted addition - It was found that total loan of Rs. 1.60 crore was advanced to assessee, out of which Rs. 15 lakh was repaid - Therefore, an amount of Rs 1.45 crore remained outstanding to be paid to 'IA' - Balance loan amount was repaid by assessee in immediately next financial year - Whether when Department had accepted same, addition made by Assessing Officer was to be deleted-Held, yes [Para 6] [In favour of assessee] AO is right in saying that the names of few creditors are not found in Audit report (form 3CD). However, circumstantial evidences such as balance sheet & repayments can't be ignored. Appellant candidly admitted human error during remand proceedings which claimed to have happened because of repayments which happened before audit report was signed. The same was actually outstanding on 31st March. The additions have been made on the basis of Balance sheet on record. The explanation filed by assessee is logical viz-a-viz facts on record. The AR of the appellant has demonstrated that all the loans have been repaid in the subsequent years. Where the repayments of the loans have been accepted, in light of the above referred decision the cash credits cannot be treated as non-genuine.” 11.4 Respectfully following the above judicial precedents, we do not find any infirmity in the order passed by Ld. CIT(A), therefore the I.T.A No. 454/Ahd/2020 A.Y. 2010-11 Page No ACIT Vs. Anmol Tradeline Pvt. Ltd. 20 same does not require any interference and the additions made u/s. 68 of Rs. 2.9 crores and consequential interest expenses of Rs. 13,11,396/- are hereby deleted. 12. In the result, the appeal filed by the Revenue is hereby dismissed. Order pronounced in the open court on 28-06-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 28/06/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद