ACIT, Rohtak V. Shri Satya Parkash Aggarwal, Rohtak

ITA 6077/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0240 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 09-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 31-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Keywords: Speculation loss
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI C.L.SETHI, JM AND SHRI BEFORE SHRI C.L.SETHI, JM AND SHRI BEFORE SHRI C.L.SETHI, JM AND SHRI BEFORE SHRI C.L.SETHI, JM AND SHRI K.G.BANSAL K.G.BANSAL K.G.BANSAL K.G.BANSAL, AM , AM , AM , AM ITA NO. ITA NO. ITA NO. ITA NO.6077/DEL/2010 6077/DEL/2010 6077/DEL/2010 6077/DEL/2010 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2007 2007 2007 2007- -- -08 0808 08 ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, ROHTAK CIRCLE, ROHTAK CIRCLE, ROHTAK CIRCLE, ROHTAK CIRCLE, ROHTAK. ROHTAK. ROHTAK. ROHTAK. VS. VS. VS. VS. SHRI SATYA PARKASH AGGARWA SHRI SATYA PARKASH AGGARWA SHRI SATYA PARKASH AGGARWA SHRI SATYA PARKASH AGGARWAL, L,L, L, C/O M/S LUXMIN OIL MILLS, C/O M/S LUXMIN OIL MILLS, C/O M/S LUXMIN OIL MILLS, C/O M/S LUXMIN OIL MILLS, JHAJJAR ROAD, JHAJJAR ROAD, JHAJJAR ROAD, JHAJJAR ROAD, ROHTAK. ROHTAK. ROHTAK. ROHTAK. PAN NO. PAN NO. PAN NO. PAN NO.AALPA5384L. AALPA5384L. AALPA5384L. AALPA5384L. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KISHORE B., DR. RESPONDENT BY : NONE. ORDER ORDER ORDER ORDER PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI, J , J, J , JM : M : M : M : THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 1 8.10.2010 PASSED BY LEARNED CIT(A) PERTAINING TO THE AY 2007- 08. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE IS DI RECTED AGAINST THE CIT(A)S ORDER IN DELETING THE DISALLOWANCE OF BOGUS LOSS OF `7,71,362/- MADE BY THE AO. 3. THE ASSESSEE IN THE PRESENT CASE IS THE SOLE PRO PRIETOR OF M/S S.P.AGGARWAL, M/S R.C. & M/S AD OVERSEAS. IN M/S A D OVERSEAS, BUSINESS OF TRADING IN COMMODITIES ETC. IS DONE AT THE TWO BRANCHES IN DELHI AND MUMBAI. IN THE MUMBAI BRANCH, ON A TURNO VER OF RS.28.41 CRORES, E NET LOSS OF `4,13,0631/- HAS BEEN SHOWN B Y THE ASSESSEE. THE AO WHILE SCRUTINIZING THIS LOSS FOUND THAT THE ASSESSEE SUFFERED LOSS OF `7,77,362/- ON ACCOUNT OF TRADING IN GUAR S EEDS. PURCHASE AND SALE OF GUAR SEEDS WERE MADE THROUGH M/S BANWARI LA L VINOD KUMAR, SHRI GANGA NAGAR (COMMISSION AGENT). THE AO OBTAIN ED INFORMATION U/S 133(6) OF THE IT ACT AND FOUND THAT M/S BANWARI LAL VINOD KUMAR MADE PURCHASES AND SALES ON BEHALF OF THE ASSESSEE FROM THREE SISTER ITA-6077/DEL/2010 2 CONCERNS WHO WERE SHARING THE SAME BUSINESS PREMISE S AND THE TRANSACTIONS OF PURCHASES AND SALES WERE MADE ON TH E VERY SAME DAY AT DIFFERENT RATES WITHOUT TAKING DELIVERY OF THE G OODS. WHEN QUESTION ABOUT THIS, M/S BANWARI LAL VINOD KUMAR REPLIED THA T THE PURCHASES AND SALES WERE MADE ON THE DATE OF CONTRACT (SAUDA MITI) AS WRITTEN ON THE INVOICES ON BEHALF OF THE ASSESSEE. THE AO DID NOT ACCEPT THE EXPLANATION AND OBSERVED THAT THE LOSS CAN AT BEST BE TREATED AS SPECULATIVE LOSS PROVIDED THE ASSESSEE IS ABLE TO P ROVE THE GENUINENESS OF LOSS. THE AO CONCLUDED THAT THE EXP LANATION OFFERED IS A CONCOCTED STORY AND THEREFORE DISALLOWED THE ENTI RE LOSS OF `7,77,362/-. 4. ON AN APPEAL, CIT(A) DELETED THE ADDITION BUT HE LD THAT THE LOSS IS TO BE TREATED TO BE OF SPECULATIVE IN NATURE AND DI RECTED THE AO TO SET OFF THE SAME AS PER PROVISIONS OF SECTION 73 OF THE ACT. THE ORDER OF CIT(A) RUNS AS UNDER:- 4. I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. THE AO HAS COME TO THE CONCLUSION THAT THE LOSS IS AN ACCOMMODATION ON THE GROUND THAT IN THE ABSENCE OF WRITTEN AGREEMENT, THE RELATIONSHIP BETW EEN THE ASSESSEE AND THE COMMISSION AGENT IS NOT PROVED AND FURTHER THE PURCHASE & SALES HAVE BEEN THROUGH THE SISTER CONCERNS OF M/S BANWARI LAL VINOD KUMAR. HOWEVER, THE AO HAS NOT CONTRAVENED THE PURCHASE & SALE OF GUAR SEEDS THROUGH THE COMMISSION AGENT. NEITHER DID HE FURTH ER INVESTIGATE TO GO TO THE BOTTOM OF THE FACTS. FURT HER, HE DOES NOT APPEAR TO HAVE APPRECIATED THE RATE OF GUA R SEEDS AS ON THE DATE OF SAUDA MITI VIS-A-VIS ON THE DATE OF INVOICE. MERELY BECAUSE THE PURCHASES/SALES WERE M ADE THROUGH SISTER CONCERNS, IT CANT MAKE A SHAM TRANS ACTION. HE FURTHER FAILED TO SEE THE PAYMENT MADE BY THE AS SESSEE TO THE COMMISSION AGENT. IN VIEW OF THE ABOVE, THE ACTION OF THE AO IN DISALLOWING THE LOSS IS MISDIRECTED AN D THEREFORE DIRECTED TO BE DELETED. HOWEVER, AS NO D ELIVERY OF GOODS HAS BEEN TAKEN, IT CAN BE ONLY A SPECULATI VE LOSS WHICH MAY BE ALLOWED TO BE CARRY FORWARD AS PER THE ITA-6077/DEL/2010 3 PROVISIONS OF SECTION 73 OF THE IT ACT. THE GROUND S OF APPEAL ARE DISPOSED AS INDICATED ABOVE. 5. WE HAVE HEARD THE LEARNED DR. NONE FOR THE ASSE SSEE WAS PRESENT. 6. AFTER CONSIDERING THE TOTALITY OF FACTS AND CIRC UMSTANCES OF THE CASE, WE ARE IN AGREEMENT WITH THE LEARNED CIT(A) T HAT THE LOSS SHOWN BY THE ASSESSEE CANNOT BE DISALLOWED BY TREATING TH E SAME TO BE BOGUS IN NATURE. THE AO HAS TREATED THE SAME TO BE BOGUS IN NATURE MERELY BECAUSE THE TRANSACTIONS WERE ENTERED INTO W ITH RELATED PARTIES WITHOUT MAKING FURTHER ENQUIRY TO GO TO THE ROOT OF THE MATTER. THE CIT(A) HAS RIGHTLY OBSERVED THAT AO HAS NOT CONTRAV ENED THE SALE OF GUAR SEEDS THROUGH COMMISSION AGENTS. NEITHER DID HE FURTHER INVESTIGATE TO GO TO THE BOTTOM OF THE FACTS. THE CIT(A) IS ALSO JUSTIFIED IN HOLDING THAT AO DOES NOT APPEAR TO HAVE APPRECIA TED THE RATE OF GUAR SEEDS AS ON THE DATE OF SAUDA MITI VIS-A-VIS O N THE DATE OF THE INVOICES. WE ARE IN AGREEMENT WITH THE CIT(A)S VI EW THAT MERELY BECAUSE PURCHASES AND SALES WERE MADE THROUGH SISTE R CONCERNS, IT CANNOT MAKE A SHAM TRANSACTION. WE ARE ALSO IN AGR EEMENT WITH THE VIEW OF THE CIT(A) IN HOLDING THAT THE LOSS SHOWN B Y THE ASSESSEE IS TO BE TREATED OF SPECULATIVE IN NATURE INASMUCH AS THE RE WAS NO ACTUAL DELIVERY OF GOODS TAKEN PLACE. WE, THEREFORE, UPHO LD THE ORDER OF CIT(A). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 11 TH MARCH, 2011. SD/- SD/- (K.G.BANSAL (K.G.BANSAL (K.G.BANSAL (K.G.BANSAL) )) ) (C.L.SETHI (C.L.SETHI (C.L.SETHI (C.L.SETHI) )) ) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 11.03.2011. VK. ITA-6077/DEL/2010 4 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR