M/s India Finance Limited, Kolkata V. DCIT, Cen. Cir-VIII, Kolkata, Kolkata

ITA 49/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1651 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 22-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 10-01-2014
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Reassessment proceedings
• Section: 143(3); 194C; 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, KOLKATA (BENCH C) BEFORE SHRI A. T VARKEY, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 ORDER PER M. BALAGANESH , AM 1. THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), CENTRAL-I, KOLKATA VIDE APPEAL NO. 45/CC-VIII/CIT(A) C-I/13-14 DATED 2.9.2013. ASSESSMENT WAS FRAMED BY DCIT, CENTRAL CIRCLE VIII, KOLKATA U/S 143(3) / 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR A.Y 2008-09 VIDE HIS ORDER DATED 19.3.2013. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF LOSS ON ACCOUNT OF TRADING IN COTTON M/S INDIA FINANCE LTD. [PAN : AAACI55527M] -VS- D.C.I.T, CC - VIII, KOLKATA (APPELLANT) (RESPONDENT) FOR THE APPELLANT SHRI MANOJ KATARUKA, ADVOCATE FOR THE RESPONDENT SHRI GOULEN HANGSHING, CIT, DR DATE OF HEARING 22.05.2017 DATE OF PRONOUNCEMENT 02.06.2017 2 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. KNITTED FABRICS IN THE SUM OF RS. 13,61,62,256/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS IN EXISTENCE FOR THE LAST THREE DECADES AND IS A LISTED COMPANY AND THE SHARES ARE QUOTED ON STOCK EXCHANGE. IT IS A NON-BANKING FINANCE COMPANY (NBFC) REGISTERED WITH RESERVE BANK OF INDIA (RBI). THE ASSESSEE EXPLAINED BEFORE THE LD AO THAT IT DEALS IN SHARES AND SECURITIES, COTTON KNITTED FABRICS AND TYRES AND TUBES. THE ASSESSEE ENGAGED IN THE TRADING OF COTTON KNITTED FABRICS AND INCURRED TRADING LOSS OF RS. 13,61,62,256/- WHICH WAS DISALLOWED BY THE LD AO ON THE PRETEXT THAT THE SAME HAS BEEN SELF CREATED BY THE ASSESSEE BY INDULGING WITH TRANSACTIONS WITH CONTROLLED ENTITIES WHO ARE ITS RELATED CONCERNS HAVING COMMON DIRECTORSHIP OR OTHER INTERESTS. THE LD AO IN THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAD PURCHASED FROM FIVE PARTIES NAMELY 1) M/S CORAL ENVIRONMENTS PVT LTD ; 2) M/S VISAGE EQUIPMENTS PVT LTD ; 3) M/S SPR TEXTILES PVT LTD ; 4) M/S SURYAMANI FINANCING PVT LTD AND 5) M/S ZIPCO INDUSTRIAL FINANCE PVT LTD TOTALING TO RS 84,71,96,960/-. THE SALES WERE MADE TO THREE PARTIES NAMELY 1) M/S GIRISH COMMERCIAL PVT LTD ; 2) M/S CORAL ENVIRONMENTS PVT LTD AND 3) M/S VISAGE EQUIPMENTS PVT LTD TOTALING TO RS 71,10,34,704/- . THE ASSESSEE PURCHASED AND SOLD COTTON KNITTED FABRIC FROM THE ABOVE MENTIONED PARTIES AT A LOSS. IN THIS MANNER, THE ASSESSEE INCURRED LOSS OF RS. 13,61,62,256/- IN COTTON KNITTED FABRIC TRADING. 3.1. THE LD AO MADE ENQUIRIES FROM ALL THE AFORESAID PARTIES WHO IN TURN FURNISHED INFORMATION IN RESPECT OF TRANSACTIONS WITH THE ASSESSEE DURING THE FINANCIAL YEAR 2007-08. ALL THE PARTIES FILED DETAILS OF TRANSACTIONS WITH THE ASSESSEE ALONG WITH THE LEDGER COPY OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNTS, COPIES OF INCOME TAX RETURNS, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, DETAILS OF NAME AND ADDRESS OF THE PERSONS FROM WHOM GOODS SOLD TO THE ASSESSEE WERE PURCHASED AND NAMES AND 3 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. ADDRESSES OF THE PERSONS TO WHOM GOODS WERE SOLD WHICH WERE PURCHASED FROM THE ASSESSEE. M/S GIRSIH COMMERCIAL PVT LTD INFORMED THAT THE GOODS PURCHASED FROM THE ASSESSEE WERE SOLD TO M/S CORAL ENVIRONMENTS PVT LTD. M/S CORAL ENVIRONMENTS PVT LTD SUBMITTED THAT THE GOODS PURCHASED / SOLD FROM / TO THE ASSESSEE WERE SOLD / PURCHASED TO / FROM M/S GODAWARI ELECTRO CONTRACTORS PVT LTD. M/S VISAGE EQUIPMENTS PVT LTD INFORMED THAT THE GOODS PURCHASED / SOLD FROM / TO THE ASSESSEE WERE SOLD / PURCHASED TO / FROM M/S VAISHALI HOUSING PROJECTS PVT LTD, M/S SUKARAM MARKETING LTD , M/S SURYAMANI FINANCING PVT LTD AND M/S ZIPCO INDUSTRIAL FINANCE PVT LTD. M/S SPR TEXTILES PVT LTD INFORMED THAT THE GOODS SOLD TO THE ASSESSEE WERE PURCHASED FROM M/S CORAL ENVIRONMENTS PVT LTD. M/S ZIPCO INDUSTRIAL FINANCE PVT LTD INFORMED THAT THE GOODS SOLD TO THE ASSESSEE WERE PURCHASED FROM M/S CORAL ENVIRONMENT PVT LTD. THE LD AO OPINED THAT IT IS APPARENT THAT THESE TRANSACTIONS ARE NOT NORMAL BUSINESS TRANSACTIONS, BUT CAMOUFLAGED AS TRADING IN COTTON KNITTED FABRICS TO FACILITATE THE ASSESSEE TO CREATE BOGUS LOSS SO THAT THE REAL INCOME FROM INTEREST CAN BE SET OFF. 3.2. THE LD AO OBSERVED THAT FROM THE LEDGERS IN THE BOOKS OF M/S CORAL ENVIRONMENTS PVT LTD AND M/S VISAGE EQUIPMENTS PVT LTD , IT REVEALED THAT ASSESSEE HAD PURCHASED COTTON KNITTED FABRICS AT HIGHER PRICE FROM M/S CORAL ENVIRONMENTS PVT LTD AND SOLD AT LOWER PRICE TO M/S VISAGE EQUIPMENTS PVT LTD. SOME EXAMPLES OF THOSE TRANSACTIONS ARE AS FOLLOWS:- RANGE OF DATE QUANTITY (IN KG) PURCHASE RATE PER KG (IN RS.) SALES RATE PER KG. (IN RS.) 02-04-2007 TO 14-04-2007 250655 320/- 265/- 16-04-2007 TO 193461 315/- 258/- TO 260/- 4 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. 25-04-2007 26-04-2007 TO 05-05-2007 224920 310/- 254/- TO 258/- 3.2.1. SIMILARLY, FROM THE LEDGER IN THE BOOKS OF M/S CORAL ENVIRONMENTS PVT LTD AND M/S VISAGE EQUIPMENTS PVT LTD, IT REVEALED THAT ASSESSEE PURCHASED COTTON KNITTED FABRICS AT HIGHER PRICE FROM M/S VISAGE EQUIPMENTS PVT LTD AND SOLD AT LOWER PRICE TO M/S CORAL ENVIRONMENTS PVT LTD. SOME EXAMPLES OF THOSE TRANSACTIONS ARE AS FOLLOWS:- RANGE OF DATE QUANTITY (IN KG) PURCHASE RATE PER KG (IN RS.) SALES RATE PER KG. (IN RS.) 24-07-2007 TO 04-08-2007 287530 236/- TO 242/- 198/- TO 201/- 3.2.2. THE LD AO FURTHER OBSERVED FROM THE DETAILS FILED THAT ASSESSEE HAD ALSO TRADED DYED COTTON KNITTED FABRICS DURING THE YEAR UNDER APPEAL. THE ASSESSEE PURCHASED GOODS ON 9.1.2008 FROM M/S ZIPCO INDUSTRIAL FINANCE PVT LTD AT RS 25,16,170/- AND THE SAME WAS SOLD ON 17.1.2008 TO M/S CORAL ENVIRONMENTS PVT LTD FOR RS 24,19,000/- THEREBY INCURRING A LOSS OF RS 97,170/- WITHIN A SPAN OF ONE WEEK. 3.2.3. A CHART SHOWING MOVEMENT OF GOODS ON THE BASIS OF INFORMATION SUBMITTED BY VARIOUS PARTIES WERE DRAWN BY THE LD AO AS BELOW:- GODAWARI CORAL ZIPCO INDIA FINANCE (ASSESSEE) VISAGE VAISHALI SPR CORAL GODAWARI 5 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. 3.3. FROM ALL THESE FACTS, THE LD AO OBSERVED THAT THERE WAS NO MOVEMENT OF GOODS BUT ONLY PAPERS HAVE BEEN MANUFACTURED AND THERE WAS NO GOD-OWN TO STORE THE ALLEGED GOODS IN THE POSSESSION OF THE ASSESSEE. THE LD AO ALSO OBSERVED THAT THE ASSESSEE HAD PAID ONLY RS 1,59,352/- AS FREIGHT, COOLIE AND CARTAGE EXPENSES WHICH IS NOT ALL COMMENSURATE WITH THE VOLUME OF TRADING ACTIVITIES CARRIED OUT BY THE ASSESSEE. MOREOVER, THE ASSESSEE DID NOT PRODUCE ANY CHALLANS, VEHICLE NUMBER FOR CARRIAGE OF ALLEGED GOODS. NO OPENING OR CLOSING STOCK OF GOODS WERE FOUND IN THE PROFIT AND LOSS ACCOUNT OVER THE YEARS. FOR THIS, THE ASSESSEE TOOK A DIFFERENT PLEA THAT IN NUMBER OF CASES, THE TRANSPORTATION ARRANGEMENTS HAD BEEN MADE BY THE SELLER OR BUYER AS PER THE ARRANGEMENT AND UNDERSTANDING AND THE RELEVANT CHARGES WERE INCLUDED IN THE PRICE OF GOODS. HOWEVER, HE FOUND THAT THE COPY OF INVOICE CUM CHALLAN DOES NOT SPEAK SO. BASED ON THIS, THE LD AO OBSERVED THAT IT IS APPARENT THAT THERE IS NO ACTUAL MOVEMENT OF GOODS BUT ONLY PAPERS IN THE FORM OF PURCHASE AND SALE INVOICES WERE MANUFACTURED. 3.4. THE LD CIT(A) AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE AND THE FINDINGS GIVEN BY THE LD AO IN HIS ORDER, UPHELD THE ORDER OF THE LD AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ACTION OF THE LD. CIT(A) TO CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER OF THE LOSS ON ACCOUNT OF TRADING IN COTTON KNITTED FABRICS OF RS. 1361 62256/- IS CONTRARY TO THE MATERIAL EVIDENCES ON RECORD AND THE ADDITION MADE IS UNJUSTIFIABLE AND UNLAWFUL. 4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ACTION OF THE LD. CIT(A) TO CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.136162256/- ON ACCOUNT OF BUSINESS LOSS IS WITHOUT CONSIDERING THE SUBMISSIONS MADE AND THE MATERIAL EVIDENCES ON RECORD AND THE ADDITION MADE IS BAD IN LAW. 5) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ACTION OF THE LD. CIT(A) TO CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER OF 6 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. RS.136162256/- ON ACCOUNT OF BUSINESS LOSS IS BY RELYING UPON FACTS MADE BY THE ASSESSING OFFICER, NEGATED BY THE ASSESSEE WITH EVIDENCES AND THEREFORE THE ADDITION CONFIRMED BY THE LD. CIT(A) IS ARBITRARY, EXCESSIVE AND UNLAWFUL. 6) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ACTION OF THE LD. CIT(A) TO RELY UPON THE DECISION OF THE ITAT KOLKATA BENCH IN THE CASE OF SMT. INDIRA JALAN TO CONFIRM THE ADDITION OF RS.L36162256/- MADE BY THE ASSESSING OFFICER IS UNJUSTIFIED AND BAD IN LAW. 3.5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND FROM THE FACTS AND CIRCUMSTANCES THAT THE ASSESSEE COMPANY HAS BEEN MANAGING ITS TRADING ACTIVITY IN SUCH A MANNER THAT LOSS INCURRED IN TRADING IS ALMOST EQUAL TO ITS INTEREST INCOME. WHEN THE INTEREST INCOME IN ASST YEAR 2008-09 COMPARED TO ASST YEAR 2007-08 HAD INCREASED, ITS LOSS IN TRADING ACTIVITY HAD ALSO INCREASED. SIMILARLY WHEN THE INTEREST INCOME IN ASST YEAR 2009-10 COMPARED TO ASST YEAR 2008-09 HAD DECREASED, ITS LOSS IN TRADING ACTIVITY HAD ALSO DECREASED. THE FOLLOWING CHART WOULD DEPICT THE FACTS OF THE CASE IN A BETTER FASHION:- FINANCIAL YEAR TRADING LOSS (RS) INTEREST INCOME (RS) 2006-07 3,17,02,725 3,20,51,560 2007-08 13,61,62,256 13,29,13,163 2008-09 12,46,51,755 12,38,51,442 HENCE IT IS VERY CLEAR THAT THE ASSESSEE COMPANY HAD MANAGED ITS TRANSACTIONS IN SUCH A WAY THAT ITS INTEREST INCOME COULD BE SET OFF WITH THE LOSS AND THERE WOULD BE NO TAX LIABILITY ON ITS INTEREST INCOME. 3.6. WE FIND THAT THIS ISSUE IS NO LONGER RES INTEGRA IN VIEW OF THE FACT THAT THIS TRIBUNAL HAD AN OCCASION TO DISCUSS THE VERY SAME ISSUE IN ASSESSEES OWN CASE FOR 7 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. THE ASST YEAR 2009-10 IN ITA NO. 678/KOL/2013 DATED 13.7.2016 WHEREIN IT WAS HELD AS UNDER:- 3.6. WE FIND FROM THE MINISCULE PORTION OF THE TRANSPORTATION CHARGES INCURRED IN THE SUM OF RS. 1,63,825/- THROUGH MATADOR VANS WHICH ARE SUPPORTED ONLY BY SELF MADE VOUCHERS BUT NOT WITH ANY EVIDENCES , AND IN ALL THE CASES, THE PAYMENTS MADE WERE WITHIN THE STATUTORY LIMITS PRESCRIBED FOR DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT, AND APPLYING THE TEST OF HUMAN PROBABILITIES , IT COULD BE SAFELY CONCLUDED THAT THERE WAS NO MOVEMENT OF GOODS FOR ALLEGED PURCHASE AND SALE OF GOODS. IT WAS ALSO CONTENDED THAT THE TRANSPORTATION IS LOADED IN THE PURCHASE AND SALE BILLS. WE FIND THAT NO SUPPORTING BILLS WERE PRODUCED TO SUPPORT THIS ARGUMENT. THE ASSESSEE HAD ONLY TRIED TO CREATE DOCUMENTS IN THE FORM OF PURCHASE AND SALE INVOICES. WE DONT FIND FORCE IN THE ARGUMENT OF THE LD AR THAT THE TAX DEDUCTIONS TO THE TUNE OF RS 7.02 LACS AND RS. 6.22 LACS IN THE FINANCIAL YEARS ENDED 31.3.2008 AND 31.3.2009 WOULD HAVE EASILY TAKEN CARE OF PROFITS TO THE TUNE OF ABOUT RS 20 LACS AND THERE WAS NO NECESSITY TO BOOK A BOGUS LOSS EQUAL TO INTEREST INCOME. IT WAS CONTENDED THAT THE TRADER DOES BUSINESS WITH A VIEW TO EARN PROFIT AND SOMETIMES THERE IS PROFIT AND SOMETIMES THERE IS LOSS. ACCORDINGLY IT WAS CONTENDED THAT IT WOULD BE ABSURD AND RIDICULOUS TO SAY THAT THE LOSS IS EQUAL TO THE SUM OF INTEREST RECEIVED. WE FIND THAT THE ASSESSEE HAD CONSISTENTLY INCURRED LOSSES IN THE IMMEDIATELY PRECEDING TWO YEARS IN THE TRADING OF COTTON KNITTED FABRICS. THE ASSESSEE SHOULD HAVE STOPPED THIS BUSINESS ACTIVITY THE MOMENT IT STARTED INCURRING HUGE LOSSES IN THE FIRST YEAR. THE LD AR WAS NOT ABLE TO ADDUCE PROPER REASONING FOR CONTINUATION OF THE SAME BUSINESS INCURRING LOSSES IN THE SECOND YEAR AND THIRD YEAR. IT WOULD BE RELEVANT TO UNDERSTAND THE FOLLOWING FACTS AT THIS JUNCTURE:- 'AS MENTIONED IN THIS OFFICE LETTER DATED 20.12.11, THAT THE GOODS, WHICH WERE ORIGINATED FROM M/SGODWARI ELECTRO CONTRACTORS PVT. LTD AGAIN RETURNED BACK TO IT AFTER CHANGING HANDS AMONG M/S CORAL ENVIRONMENTS PVT. LTD, M/S INDIA FINANCE LTD, M/S. VISAGE EQUIPMENTS PVT. LTD. AND M/SVAISHALI HOUSING PROJECTS PVT. LTD. NAMES OF DIRECTORS AND SHAREHOLDERS OF THESE COMPANIES WERE DOWNLOADED FROM THE ROC SITE. FROM THE DOCUMENTS DOWNLOADED, THE FOLLOWING CRUCIAL INFORMATION HAS BEEN GATHERED. I) MR.PARTHOMAJUMDAR, WHO IS A DIRECTOR OF THE ASSESSEE CORAL 8 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. ENVIRONMENTS PVT. LTD AND M/S. GODWARI _ ELECTRO CONTRACTOR PVT. LTD AND HIS ADDRESS HAS BEEN GIVEN AS 9, EZRA STREET, KOLKATA - 700001, WHERE OFFICE OF M/S CORAL ENVIRONMENTS PVT. LTD IS SITUATED. II) MR . SOVANS E NGUPTA , WHO IS ONE OF THE DIRECTORS OF M/S CORAL ENVIRONM E N TS PV T . L TD I S ALSO THE DIRECTOR OF M/S VISAGE EQUIPMENTS AND M/S VAISHALI HOUSING PROJ ECT S P V T . L TD . III) MR . RAMKRISHNA DAS , WHO IS A DIRECTOR OF M/S GODWARI ELE C TR O CONTRA CTOR P VT . LTD IS ALSO A DIR EC TOR OF TH E ASSESSEE-COMPAN Y . IV) M/S M I LL E R TRA D ERS PVT . LTD . IS A COMMO N S H A R EHOLDE R O F M / S VAISHALI HO USING P ROJECTS PVT . LTD , G O DW ARI EL EC T RO CONT R A C TO R AND M/S VI SAG E E Q U IPMENT AND CORAL ENVIRONMENTS . V) M/S MAYANK SERVI CE S PVT . LTD IS A C OMMON SHAREHOLDER OF M/S CORAL EN VIR O NME N TS , M/S . VAISHALI HOUS I NG PROJECTS PVT . LTD AND M/S GODWARI ELEC T RO CONTRA C TO R . VI) M/SSHEETAL E X PORTS LTD IS A COMMON SHAREHOLDER OF M/S CORAL E NVI R ONM E N TS PVT . LTD AND M/S VISAGE EQUIPM E NTS PVT . L T D . VII) M/S TULIP MA C HIN ER I E S PV T . LTD IS A C OMMON SHAR E HOLD ER OF M/S V ISAGE E Q U IPME N TS AND M/S VA I SHAL I H O US ING PROJ E CTS PVT . LTD . VIII) M/S CO R AL EN V I R ONM E N T P V T . LTD , M /I V I S AG E EQU I PM EN T PV T . LT D , M/SVAISHALI HOUSING PROJ E C T S P V T . L T D . A ND M/SGODWARI ELECTRO CONTRA CT ORS PVT . LT D. HAVE BAN K ACCOUNT WITH COMMON BANK I . E . KOTAK MAHINDRA BANK , RAJENDRANAGAR BRAN C H , N EW D E L HI . IX) M/S . C OR AL EN VI RONM E NTS AND M/S VAISH A L I HOUS I NG PROJECT S P VT . L TD H AVE SA M E OFFICE AT 9 , E ZRA S T REET , K O LK A TA . . . ' X) FROM THE ABOVE DETAILS, IT IS VERY CLEAR THAT ALL FIVE COMPANIES INCLUDING THE ASSESSEE COMPANY BELONG TO ONE GROUP. 3.7. THE LD AO OBSERVED THAT THERE WAS A CIRCUIT OF COMPANIES AND THE GOODS WERE TRANSFERRED FROM ONE TO ANOTHER WITHOUT ACTUAL MOVEMENT OF GOODS THEREON. IT WOULD BE PERTINENT TO NOTE THAT THE LOSS IS SELF CREATED AND IT HAD NOT OCCURRED NATURALLY TO THE ASSESSEE. ALL THE TRANSACTIONS OF PURCHASE OF GOODS BEING MADE AT HIGHER PRICE IS MADE FROM THE GROUP 9 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. COMPANY HAVING COMMON SHAREHOLDER / DIRECTORSHIP AND SOLD TO A GROUP COMPANY HAVING COMMON SHAREHOLDER / DIRECTORSHIP AT A LESSER PRICE THEREBY INCURRING LOSS. ALL THE ENTITIES INVOLVED IN THE PURCHASE AND SALE OF GOODS ARE GROUP COMPANIES HAVING COMMON SHAREHOLDERS AND COMMON DIRECTORSHIP AND THIS FACT IS NOT DISPUTED BY THE ASSESSEE. THE LD AO HAD OBSERVED THAT GOODS SOLD TO ASSESSEE BY CORAL ENVIRONMENTS WERE PURCHASED FROM GODAWARI ELECTRO CONTRACTORS PVT LTD AND GOODS PURCHASED FROM ASSESSEE WERE SOLD TO GODAWARI ELECTRO CONTRACTORS PVT LTD. SIMILARLY GOODS SOLD TO ASSESSEE BY VISAGE EQUIPMENTS WERE PURCHASED FROM VAISHALI HOLDING PROJECTS LTD AND GOODS PURCHASED FROM ASSESSEE WERE SOLD TO VAISHALI HOLDING PROJECTS LTD. ALL THESE TRANSACTIONS WITH THESE ENTITIES BY THE ASSESSEE HAD RESULTED ONLY IN A LOSS. THOUGH IT IS WELL SETTLED THAT THE BUSINESSMAN KNOWS HIS INTEREST BEST, IN THE PRESENT CIRCUMSTANCES, THE INTEREST OF THE BUSINESSMAN DOES NOT SEEM TO COME TO LIGHT AT ALL, IN VIEW OF PERIODIC LOSSES ON THE CIRCUITOUS ROUTE CHOSEN BY THE ASSESSEE FOR ENGAGING IN THE TRANSACTIONS OF INCURRING LOSSES AND PROFITS WERE SHIFTED TO ITS GROUP CONCERNS. HENCE ON ONE HAND THE LOSS IS GETTING ADJUSTED WITH INTEREST INCOME IN THE HANDS OF THE ASSESSEE IN THE YEAR UNDER APPEAL AND IN THE IMMEDIATELY PRECEDING TWO ASSESSMENT YEARS, AND ON THE OTHER HAND, THE PROFTS WERE SHIFTED TO ANOTHER GROUP CONCERN THROUGH A CIRCUITUOUS ROUTE. IN THIS CIRCUIT, THE ASSESSEE WAS ONE OF THE COMPANY AND BENEFITTED BY BOOKING LOSS AND NOT PAYING TAX ON THE INTEREST INCOME. EVEN IN THE PRECEDING TWO ASSESSMENT YEARS, SIMILAR LOSSES WERE BOOKED BY THE ASSESSEE FOR SETTING OFF AGAINST THE INTEREST INCOME. ONE CRUCIAL FACTOR WHICH COULD NOT BE BELIEVED IN THE ASSESSEES CASE IS AS TO WHY THE ASSESSEE REPEATEDLY PURCHASED THE GOODS AT A HIGHER RATE AND IMMEDIATELY SOLD AT A LOWER RATE. THE ASSESSEE HAD NOT CHOSEN TO KEEP THE CLOSING STOCK OF GOODS TO WAIT FOR THE BETTER MARKETING CONDITIONS. BUT INSTEAD IT CHOSE TO IMMEDIATELY SELL THE GOODS AT A LOWER PRICE CLEARLY KNOWING THAT IT WOULD ONLY INCUR A LOSS. SINCE THERE WAS NO REAL CASH LOSS FOR THE ASSESSEE AS THE ASSESSEES LOSS BECOMES THE PROFIT OF ANOTHER ENTITY IN THE SAME GROUP, THE MONIES REMAIN IN THE SAME GROUP OF THE ASSESSEE. HAVING TRANSACTIONS WITH THE SAME TWO COMPANIES AND REGULARLY BOOKING ONLY LOSSES THEREON IS BEYOND HUMAN PERCEPTION. THE ASSESSEES VERSION THAT THE ASSESSEE HAD TRANSACTED THE TRANSACTIONS AT THE PREVAILING MARKET PRICES IS BEYOND THE TEST OF HUMAN PROBABILITIES. 3.8. IT WOULD BE RELEVANT TO ADDRESS THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST YEAR 2007-08, WHEREIN THIS TRIBUNAL IN ITA 10 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. NO. 252/KOL/2012 DATED 11.12.2014 HAD QUASHED THE REVISIONARY JURISDICTION INVOKED U/S 263 BY THE LD CIT FOR PROBING THE VERY SAME ISSUE IN ASST YEAR 2007-08. THIS TRIBUNAL HAD HELD THAT THE VERY SAME ISSUE HAD BEEN DULY ENQUIRED AND EXAMINED BY THE LD AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS FOR THE ASST YEAR 2007-08 AND THOUGH THE SAME IS NOT WRITTEN IN THE ASSESSMENT ORDER ELABORATELY, IT DOES NOT AMOUNT TO LACK OF ENQUIRY ON THE PART OF THE LD AO. MOREOVER, FOR THE ASST YEAR 2007-08, THE LD CIT HAD ALSO NOT MADE ANY PRIMA FACIE ENQUIRY TO COME TO A CONCLUSION THAT THE ORDER PASSED BY THE LD AO AS ERRONEOUS IN SOFARAS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. INSTEAD, THE LD CIT ONLY HAD STATED THAT THE ASSESSEE VERY LIKELY HAD TRIED TO REDUCE ITS INCOME BY BOOKING FICTITIOUS LOSS AND THAT NON-VERIFICATION APPEARED TO BE HIGHLY SUSPICIOUS. THIS TRIBUNAL HELD THAT THE REVISIONARY POWERS U/S 263 OF THE ACT CANNOT BE INVOKED ON MERE PRESUMPTIONS AND SURMISES NOR ON SUSPICION. BASED ON THESE FINDINGS, THE TRIBUNAL QUASHED THE SECTION 263 ORDER OF THE LD CIT FOR THE ASST YEAR 2007-08. WE FIND THAT THE LD AR PLACED HEAVY RELIANCE ON THE SAID ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE. BUT FROM THE ABOVE , IT COULD BE SEEN THAT THIS TRIBUNAL HAD NOT QUASHED THE REVISIONARY JURISDICTION U/S 263 OF THE ACT BY ADJUDICATING THE TRANSACTIONS OF LOSS INCURRED ON TRADING IN COTTON KNITTED FABRICS ON MERITS OF THE CASE AS WAS DONE BY THE LD AO IN THE ASST YEAR UNDER APPEAL BEFORE US. WE FIND THAT THIS TRIBUNAL HAD QUASHED THE REVISIONARY PROCEEDINGS ON TECHNICAL GROUNDS THAT THE SAME CANNOT BE INVOKED MERELY ON PRESUMPTIONS AND SUSPICION. HENCE WE HOLD THAT THE TRIBUNAL ORDER FOR ASST YEAR 2007-08 DOES NOT SUPPORT THE CASE OF THE ASSESSEE ON MERITS OF THE ISSUE FOR THE ASST YEAR 2009-10. 3.9. THE LD AR ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS:- DIAGONOSTICSVS CIT &ANR REPORTED IN (2011) 334 ITR 111 (CAL) ADDL CIT VSBAHRI BROTHERS (P) LTD REPORTED IN (1985) 154 ITR 244 (PAT) NEMI CHAND KOTHARI VS CIT &ANR REPORTED IN (2003) 264 ITR 254 (GAU) ITO VS SRI KALINDUTTA IN ITA NO. 1055/KOL/2013 DATED 10.6.2016 (KOLKATA TRIBUNAL) DCIT VSSUNITAKHEMKA IN ITA NOS. 714 TO 718 /KOL/2011 DATED 28.10.2015 (KOLKATA TRIBUNAL) 11 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. WE FIND THAT IN ALL THE AFORESAID DECISIONS, IT WAS ONLY HELD THAT ONCE THE ASSESSEE HAD DISCLOSED THE IDENTITY OF THE PARTIES AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND TRANSACTIONS WERE PROPERLY DOCUMENTED, NO ADVERSE INFERENCES COULD BE DRAWN AGAINST THE ASSESSEE. IN THESE CASES, THE TRANSACTIONS WERE CARRIED OUT WITH NON-RELATED ENTITIES. BUT THE MOST EXCRUCIATING FACTOR IN THE INSTANT CASE BEFORE US WHICH COMES AS A DISTINCTION IS THAT, THE ASSESSEE HAD CARRIED OUT PURCHASE AND SALE TRANSACTIONS WITH THE PARTIES WHO BELONG TO THE SAME GROUP AND IT IS VERY EASY TO PREVAIL UPON THOSE PARTIES FOR CONFIRMING THE TRANSACTIONS BEFORE THE LD AO. MOREOVER, THE CIRCUITUOUS ROUTE OF TRANSACTIONS CARRIED OUT BY THE ASSESSEE IN THE INSTANT CASE DID NOT PREVAIL IN THE CASE LAWS RELIED UPON BY THE LD AR. HENCE THE SAME ARE FACTUALLY DISTINGUISHABLE AND CANNOT BE APPLIED TO THE INSTANT CASE. WE FIND THAT IN THE INSTANT CASE, THE LD AO HAD MADE EXTENSIVE ENQUIRIES BY BRINGING ON RECORD THE PRICE DIFFERENCES AT VARIOUS PERIODS AT WHICH THE ASSESSEE HAD TRANSACTED THE PURCHASE AND SALE OF GOODS WITH A MALA FIDE INTENT TO BOOK THE LOSS BY TRANSACTING WITH ITS GROUP CONCERNS. HENCE THE CASE LAWS RELIED UPON BY THE LD AR ARE FACTUALLY DISTINGUISHABLE WITH THE FACTS OF THE INSTANT CASE. 3.10. WE ALSO FIND THAT THE RELIANCE PLACED BY THE LD AO ON THE CO-ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF SMTINDRAJALANVS ITO IN ITA NO. 2177/KOL/2009 FOR ASST YEAR 2005-06 DATED 13.4.2010 IS VERY WELL FOUNDED. IN THE SAID CASE, THE ASSESSEE IN THE BUSINESS OF TRADING IN SUITING AND SHIRTINGS, MADE PURCHASES TO THE TUNE OF RS. 37,42,000/- AND CLAIMED TO HAVE SOLD AT RS. 24,86,121/- THEREBY INCURRING TRADING LOSS OF RS. 12,55,879/- AND AFTER CLAIMING CERTAIN EXPENSES, THE ASSESSEE DECLARED LOSS FROM BUSINESS AT RS. 13,56,841/-. THE LD AR VEHEMENTLY ARGUED BY DISTINGUISHING THIS TRIBUNAL DECISION IN THE CASE OF INDRAJALANVS ITO SUPRA BY ARGUING THAT, FIRSTLY THE BUSINESS WAS CARRIED ON IN THAT CASE ONLY FOR FEW DAYS AND TOTALLY CONSISTED OF ONLY PURCHASES AND SALES ON SIX OCCASIONS. IN THE INSTANT CASE BEFORE US, THE TRANSACTIONS WERE CARRIED OUT THROUGHOUT THE YEAR. SECONDLY, THERE WAS A CLEAR CUT FINDING IN THAT CASE THAT THE PURCHASE TRANSACTIONS WERE MADE BY SMTINDRAJALAN WITH NON ENTITIES, WHEREAS IN THE INSTANT CASE BEFORE US, THE LD AO HAD EVEN MADE ENQUIRIES WITH THE PARTIES WITH WHOM ASSESSEE HAD TRANSACTED. THIRDLY, THE LD AO IN THAT CASE HAD ESTABLISHED THAT THE PAYMENTS MADE BY THE ASSESSEE TO ASHOK SAROGI & SONS , ONE OF THE PARTIES FROM WHOM THE ASSESSEE STATED TO HAVE PURCHASED MATERIALS AND THE SAID FIRM TRANSFERRED TO THE ACCOUNT OF KAPOORCHAND 12 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. PUGLIA AND THE ENTIRE AMOUNT WAS WITHDRAWN IN CASH FROM THE ACCOUNT. NO SUCH EVIDENCE IN THE INSTANT CASE HAVE BEEN BROUGHT ON RECORD BY THE LD AO. FOURTHLY, THERE WAS A COMMON INTRODUCER FOR ALL THE PARTIES FOR OPENING THE BANK ACCOUNT WITH FEDERAL BANK, BHAWANIPUR BRANCH, WHO WAS THE REAL OPERATOR AND UNDER WHOSE INSTRUCTIONS, CHEQUES WERE ISSUED AND DEPOSITED IN THE BANK ACCOUNT TO GIVE THE COLOR OF GENUINITY IN THE TRANSACTIONS. WE FIND THAT THE LD AR HAD ONLY TRIED TO DISTINGUISH THE APPLICABILITY OF THIS TRIBUNAL DECISION TO THE FACTS OF THE INSTANT CASE ON FLIMSY GROUNDS. WE FIND THAT IN THE CASE OF SMTINDRAJALANVS ITO SUPRA, THE LD AO OBSERVED THAT THERE WAS NO CLAIM OF COST OF TRANSPORTATION, LOADING AND UNLOADING CHARGES EVIDENCING THE MOVEMENT OF GOODS FOR PURCHASE AND SALE TRANSACTIONS. IN THE INSTANT CASE, THE ASSESSEE HAD DEBITED A MEAGER SUM OF RS. 1,63,825/- (THAT TOO WITH SELF MADE VOUCHERS NOT SUPPORTED BY FREIGHT BILLS) WHICH IS NOT AT ALL COMMENSURATE WITH THE VOLUME OF BUSINESS TRANSACTIONS CARRIED OUT BY THE ASSESSEE. IT IS VERY UNLIKELY THAT THE ASSESSEE WHO HAD TRANSACTED MORE THAN RS 100 CRORES WOULD HAVE INCURRED ONLY A PALTRY SUM OF RS. 1,63,825/- TOWARDS TRANSPORTATION CHARGES AND THAT TOO BY USING MATADOR VANS WHICH IS THE MODE OF TRANSPORTATION AS CLAIMED BY THE ASSESSEE. IT IS VERY UNLIKELY THAT ALL THE PAYMENTS FOR TRANSPORTATION CHARGES WERE BELOW THE PRESCRIBED TAX DEDUCTION LIMITS AS PER SECTION 194C OF THE ACT. THE ASSESSEE THOUGH CLAIMED THAT THE TRANSPORTATION CHARGES WERE LOADED IN THE PURCHASE AND SALES BILLS ITSELF, BUT THE EVIDENCES IN THIS REGARD PROVED THE CONTRARY. THE LD AR ALSO ARGUED THAT THE ASSESSEE HAD TAKEN A PREMISES ON RENT USED FOR STORAGE OF GOODS. BUT ON VERIFICATION CARRIED OUT BY THE INSPECTOR OF INCOME TAX , THE ASSESSEE WAS ONLY OCCUPYING A SMALL SPACE BETWEEN THE STAIRS OF FIRST FLOOR AND SECOND FLOOR OF THE BUILDING , WHEREIN, ONLY ONE TABLE COULD BE OCCUPIED. THE SURVEY TEAM COULD NOT FIND THE BOOKS OF ACCOUNTS DURING THE SURVEY AND IT WAS STATED THAT THE BUILDING IN WHICH OFFICE OF THE ASSESSEE WAS SITUATED WAS TO BE RENOVATED AND HENCE THE ASSESSEE HAD TAKEN AWAY ITS BOOKS OF ACCOUNT TO THE PREMISES OF M/S DADAR PROPERTIES & FINANCE PVT LTD AT SARAT BOSE ROAD, KOLKATA. BUT THE SURVEY TEAM FOUND THAT THIS FACT TO BE UNTRUE AS MR.ANILPANDEY, AN EMPLOYEE OF THE ASSESSEE, STATED THAT HE WAS THERE ONLY TO RECEIVE LETTERS OF THE ASSESSEE AND TO ATTEND TELEPHONE CALLS. THE LD ITO TDS ALSO DID NOT FIND ANY RENOVATION WORK BEING DONE IN THAT OFFICE. THOUGH THE ASSESSEE HAD SUBMITTED RENT RECEIPT IN RESPECT OF GODOWN AT 6 TH FLOOR, 2/7, SARAT BOSE ROAD, KOLKATA, NO SUCH OFFICE COULD BE LOCATED IN THE NAME OF THE ASSESSEE AT 6 TH FLOOR BY THE DEPARTMENT ON PERSONAL VERIFICATION. THESE FACTS CLEARLY PROVE THAT THERE WAS NO SPACE AVAILABLE FOR STORING GOODS AS CLAIMED BY THE ASSESSEE. THE LD AO AND LD CITA HAD GIVEN A CATEGORICAL FINDING THAT THE GOODS WERE 13 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. ORIGINATED FROM GODAWARI ELECTRO CONTRACTORS PVT LTD AND AGAIN RETURNED BACK TO IT AFTER CHANGING HANDS AMONGST CORAL ENVIRONMENT PVT LTD, INDIA FINANCE LTD , VISAGE EQUIPMENTS PVT LTD AND VAISHALI HOUSING PVT LTD. THE DIRECTORS AND SHAREHOLDERS OF VARIOUS COMPANIES WERE CONNECTED WITH EACH OTHER IN ONE OR OTHER MANNER AS PER THE INFORMATION GATHERED FROM THE ROC WEBSITE WHICH IS ALSO REPRODUCED IN PARA 13 OF THE ASSESSMENT ORDER. FROM THE SAME, IT COULD BE SAFELY CONCLUDED THAT THAT ALL THE ENTITIES INCLUDING THE ASSESSEE BELONGED TO ONE GROUP. WE ALSO FIND THAT THE INTER CONNECTION BETWEEN ALL THE PARTIES WERE ALSO NOT DISPUTED BY THE ASSESSEE. 3.11. WE HOLD THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRADING LOSS CLAIMED BY THE ASSESSEE IS NOT A GENUINE TRADING LOSS AND THE ENTIRE TRANSACTIONS HAVE BEEN CARRIED OUT IN A CIRCUITUOUS ROUTE AMONG THE GROUP CONCERNS BY DOING PAPER WORK IN THE FORM OF PURCHASE AND SALES INVOICES ONLY TO GIVE THE COLOUR OF GENUINITY. WE HOLD THAT THE ASSESSEE HAD ADOPTED MERELY A COLOURABLE DEVICE WITH AN INTENT TO EVADE PAYMENT OF TAXES. WE FIND THAT THE DECISION RENDERED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SMTINDRAJALANVS ITO SUPRA IS SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CASE BEFORE US AND RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE AND UPHOLD THE ORDERS OF THE LOWER AUTHORITIES. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 3.7. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST YEAR 2009-10 UNDER SIMILAR CIRCUMSTANCES, WE DECIDE THE GROUNDS 3 TO 6 RAISED BY THE ASSESSEE IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. ASSESSEE HAD ALSO QUESTIONED THE VALIDITY OF THE REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT VIDE GROUNDS 1 & 2 AS BELOW:- 14 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. 1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ACTION OF THE LEARNED CIYT (A) TO CONFIRM THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER U/S 147 OF THE INCOME TAX ACT IS BAD IN LAW. 2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ACTION OF THE ASSESSING OFFICER TO ISSUE NOTICE U/S 148 WITHOUT FRAMING AN INDEPENDENT BELIEF IS CONTRARY TO THE SETTLE PRINCIPLES OF LAW AND THE REOPENING MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT (A) IS BAD IN LAW. 4.2. THE LD AR ARGUED THAT THE RETURN OF INCOME FOR THE ASST YEAR 2008-09 WAS FILED ON 28.8.2008 DISCLOSING TOTAL INCOME OF RS 4,99,188/- AND THE SAME WAS PROCESSED U/S 143(1) OF THE ACT ON 17.11.2009. LATER BASED ON THE REPORT OF THE ITO WARD 58(1) TDS CIRCLE, CALCUTTA AND ALSO BASED ON THE ORDER OF THE LD CIT U/S 263 OF THE ACT FOR THE ASST YEAR 2007-08, THE ASSESSMENT WAS REOPENED FOR THE ASST YEAR 2008-09. THE ASSESSEE STATED THAT THE RETURN ALREADY FILED MAY BE TREATED AS A RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT AND SOUGHT FOR REASONS RECORDED FOR REOPENING THE ASSESSMENT. THE REASONS RECORDED WERE DULY FURNISHED BY THE LD AO TO THE ASSESSEE VIDE LETTER DATED 12.7.2012. THE FOLLOWING SEQUENCE OF EVENTS WOULD EXPLAIN THE ISSUE BETTER:- 29.4.2010 APPLICATION MADE BY THE ASSESSEE FOR GRANT OF LOWER DEDUCTION OF TDS 29.4.2010 SURVEY CONDUCTED BY TDS WING OF IT DEPARTMENT 29.4.2010 TO 16.8.2010 REPORT OF THE CIT, TDS FORWARDED TO THE REGULAR CIT, CENTRAL HAVING JURISDICTION OVER THE CASE OF THE ASSESSEE COMPANY STATING THAT THE DEALS IN COTTON KNITTED FABRICS AND THE RESULTANT LOSS IS FICTITIOUS 17.8.2010 / 18.8.2010 15 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. INTIMATION OF REVISION PROCEEDINGS U/S 263 OF THE ACT FOR THE ASST YEAR 2007-08 FOR WHICH SHOW CAUSE NOTICE WAS ISSUED BY THE LD CIT, CENTRAL I, KOLKATA VIDE LETTER REF. NO. CIT-I/KOL/TECH/AAACI5527M/263/10-11/3738 DATED 17/18.08.2010 20.9.2010 NOTICE U/S 143(2) OF THE ACT FOR THE ASST YEAR 2009-10 WAS SERVED ON THE ASSESSEE FIXING THE HEARING ON 27.9.2010 2.8.2011 NOTICE U/S 148 OF THE ACT ISSUED FOR THE ASST YEAR 2008-09 21.11.2011 ORDER U/S 263 OF THE ACT BY THE LD CIT CENTRAL I KOLKATA SETTING ASIDE THE ORDER U/S 143(3) DATED 11.5.2009 FOR THE ASST YEAR 2007-08 AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4.3. THE LD AR STATED THAT THE REPORT OF THE CIT TDS AND THE ORDER OF THE CIT CENTRAL I U/S 263 AND COUPLED WITH INFORMATION AND INSTRUCTIONS FROM TIME TO TIME FROM THE SUPERIOR OFFICERS, KOLKATA HAVE ALREADY COLOURED AND CLOUDED THE VISION OF THE LD AO AND THEREFORE THE LD AO HAS BEEN OBSERVING THE VARIOUS MATERIALS PRODUCED BEFORE HIM AND FILED WITH HIM WITH JAUNDICED EYES. HE ARGUED THAT AS A QUASI JUDICIAL AUTHORITY, THE LD AO IS REQUESTED TO FUNCTION INDEPENDENTLY AND WITH A FAIR MIND COUPLED WITH OBJECTIVITY. HE ACCORDINGLY OBJECTED TO THE NON- APPLICATION OF MIND BY THE LD AO INDEPENDENTLY AND ARGUED THAT THE REOPENING ITSELF IS BAD IN LAW. IN RESPONSE TO THIS, THE LD DR VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND ARGUED THAT THE INFORMATION OBTAINED REGARDING THE MODUS OPERANDI OF THE ASSESSEES TRANSACTION IN COTTON KNITTED FABRICS WHICH GOT 16 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. EXPOSED PURSUANT TO TDS SURVEY , DEFINITELY CONSTITUTES AN INFORMATION WITHIN THE MEANING OF SECTION 147 OF THE ACT AND THE REVENUE IS WELL WITHIN ITS PERMISSIBLE LIMITS, ENTITLED TO TAKE RECOURSE TO NECESSARY LEGAL ACTION IN THE FORM OF ISSUANCE OF NOTICE U/S 148 OR U/S 263 OF THE ACT, AS THE CASE MAY BE. 4.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LD AR FAIRLY STATED BEFORE US THAT THE COMPLIANCE TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS LTD REPORTED IN 259 ITR 19 (SC) HAS BEEN DULY MADE IN THE INSTANT CASE BY BOTH ASSESSEE AS WELL AS BY THE LD AO AND HENCE THERE IS NO GRIEVANCE ON THAT COUNT. HIS ONLY GRIEVANCE WAS THAT THE REOPENING OF ASSESSMENT CANNOT BE MADE BASED ON THE FINDINGS GIVEN IN THE REPORT OF CIT TDS DURING TDS SURVEY PROCEEDINGS. IN THIS REGARD, WE FIND THAT THE TDS WING OF THE IT DEPARTMENT CONDUCTED SURVEY AND DURING THE COURSE OF SAID PROCEEDINGS, UNDERSTOOD THE ENTIRE MODUS OPERANDI OF THE ASSESSEES DEALINGS IN THE TRADING OF COTTON KNITTED FABRICS AND DREW ADVERSE INFERENCE ABOUT THE SAME BY STATING THAT THE LOSS INCURRED ON SUCH TRANSACTIONS IS PURELY FICTITIOUS AND THE DOCUMENTS PREPARED IN THAT REGARD IN THE FORM OF PURCHASE AND SALE INVOICES WERE PURELY MANUFACTURED AND THE ASSESSEE DOES NOT EVEN HAVE ANY PREMISES FOR STORAGE OF THE COTTON KNITTED FABRICS AND THE BUSINESS ADDRESS SHOWN THEREON IS A SIMPLE SPACE BETWEEN THE STAIRS OF FIRST AND SECOND FLOOR, WHEREIN A SMALL TABLE ALONE COULD BE OCCUPIED. IN FACT THE PERSON IN CHARGE OF THE SAID PREMISES SHRI A PANDEY, WHO WAS SEATED IN THE SAID SMALL OFFICE SPACE ALSO STATED BEFORE THE TDS WING THAT HE HAD BEEN PLACED THERE ONLY TO ATTEND TO PHONE CALLS AND RECEIVE CORRESPONDENCES. VIEWED FROM THIS FACTUAL MATRIX OF THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE, WE HOLD THAT THE INFORMATION / REPORT FURNISHED BY THE CIT TDS TO THE JURISDICTIONAL ADMINISTRATIVE CIT OF THE ASSESSEE ABOUT THE MANNER IN WHICH LOSS WAS SELF CREATED BY THE ASSESSEE IN DEALING IN COTTON KNITTED FABRICS, DEFINITELY WOULD CONSTITUTE INFORMATION, WARRANTING REOPENING OF ASSESSMENT U/S 147 OF THE 17 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. ACT. BASED ON THE INFORMATION RECEIVED FROM THE TDS WING, THE LD AO HAVING JURISDICTION OVER THE ASSESSEE, DULY RECORDED THE DETAILED REASONS FOR REOPENING THE ASSESSMENT WHICH ARE ENCLOSED IN PAGES 15 & 16 OF THE PAPER BOOK. THE SAME ARE NOT REPRODUCED HEREIN FOR THE SAKE OF BREVITY. WE FIND FROM THE REASONS RECORDED BY THE LD AO, THERE WAS A LIVE LINK WITH FORMATION OF BELIEF THAT INCOME IN THE HANDS OF THE ASSESSEE HAD DULY ESCAPED ASSESSMENT BY WAY OF ALLEGED TRADING LOSS OF COTTON KNITTED FABRICS. HENCE WE ARE NOT INCLINED TO ACCEPT THE ARGUMENTS OF THE LD AR ON THE VALIDITY OF ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. HENCE WE HOLD THAT THE ASSESSMENT HAS BEEN VALIDLY REOPENED IN THE INSTANT CASE FOR THE ASST YEAR 2008-09. ACCORDINGLY, THE GROUNDS 1 & 2 RAISED BY THE ASSESSEE ARE DISMISSED. 5. THE GROUNDS 7 TO 9 RAISED BY THE ASSESSEE ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 02.06.2017. SD/- SD/- [A. T. VARKEY] [M. BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 02.06.2017 {RS SPS} COPY OF THE ORDER FORWARDED TO: 1. APPELLANT/ASSESSEE M/S INDIA FINANCE LTD., 5, RUSSEL STREET (1 ST FLOOR), KOLKATA 700 071. 2. REVENUE/RESPONDENT- DCIT, CENTRAL CIRCLE - VIII, KOLKATA 3. CIT(A)- KOLKATA 18 I.T.A. NO.49/KOL/2014 ASSESSMENT YEAR 2008-09 M/S INDIA FINANCE LTD. 4. CIT , KOLKATA 5. CIT(DR), KOLKATABENCHES, KOLKATA TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE, DDO, KOLKATA BENCHES, KOLKATA.