Ramesh Kumar Agarwal, New Delhi V. ITO, Ward-46(3), New Delhi

ITA 7751/DEL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1238 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 06-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Onus to prove; Sham transactions; Set aside
• Section: 143(3); 133(6); 13; 119; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANTMEMBER ITA NO.7751/DEL./2018 ASSESSMENT YEAR: 2014-15 SHRI RAMESH KUMAR AGARWAL, 599, 2 ND FLOOR, GANDHI CLOTH MARKET, NEW DELHI VS. ITO, WARD-46(3), NEW DELHI PAN : AADPA0736C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI AJAY WADHWA, ADV. MS. BHARTI SHARMA, CA RESPONDENT BY SHRI UMESH TAKYAR, SR.DR DATE OF HEARING 25.02.2020 DATE OF PRONOUNCEMENT 29.05.2020 ORDER PER O.P. KANT,A.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 26/09/2018 PASSED BY THE LD. CIT(APPEALS)-16, NEW D ELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2014-15 RAISING FOLLOWING GROUNDS: 1. THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS), NEW DELHI [THE LEARNED CIT(A)DATED 26.09.2018 IS BAD IN LAW A ND ON FACTS. 2. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN SUSTAINING THE DISALLOWANCE OF BUSINESS LOSS OF RS.56,53,550/- MAD E BY THE LEARNED ASSESSING OFFICER. 3. THAT THE LEARNED CIT(A) SUSTAINED THE DISALLOWANCE OF BUSINESS LOSS OF RS.56,53,550/- ON THE BASIS OF SURROUNDING CIRCUMST ANCES, PREPONDERANCE OF PROBABILITY OF HUMAN CONDUCT. 2 ITA NO.7751/DEL./2018 4. THAT THE LEARNED CIT(A) HAS EARNED IN LAW AND ON FA TS IN SUSTAINING THE DISALLOWANCE OF BUSINESS LAWS ON THE BASIS THAT THE APPELLANT HAS FAILED TO PRODUCE ANY EVIDENCE TO PROVE THAT THE LAW OF CL AIMED BY THE APPELLANT WAS GENUINE DESPITE THE FACT THAT THE APP ELLANT HAS FURNISHED ALL THE EVIDENCES TO ESTABLISH THE GENUINENESS OF B USINESS TRANSACTIONS OF PURCHASE AND SALE OF DESIGN FABRICS. 5. THAT THE LEARNED ASSESSING OFFICER AND LEARNED CIT( A) HAS HEARD ON FACTS AND IN LAW IN THIS REGARDING THE STATEMENTS O F PROPOSED BY RECORDED BY CIT(A) HIMSELF AND THEREBY VIOLATING TH E WELL SETTLED PRINCIPLES OF NATURAL JUSTICE. 6. THAT THE LEARNED CIT(A)HAS ERRED IN LAW IN SUSTAINI NG THE DISALLOWANCE OF BUSINESS LOSS OF RS.56,53,550/- BY ALLEGING THAT THESE BUSINESS TRANSACTIONS ARE SHAM TRANSACTIONS FOR THE PURPOSE OF EVADING TAX WITHOUT ANY BASIS OR DOCUMENTARY EVIDENCE. 7. THAT THE LEARNED AO AND THE LEARNED CIT(A) HAS ERRE D IN LAW IN DISREGARDING THE FACT THAT THE ASSESSING OFFICER CA NNOT STEP INTO THE SHOES OF THE BUSINESSMAN SO AS TO DETERMINE HOW THE BUSINESS IS TO BE CONDUCTED [SA BUILDERS LIMITED. (2007) 288 ITR1 (SC )]. 8. THAT THE APPELLANT CRAVES LEAVE TO ADD ALTER, AMEND , SUBSTITUTE, DELETE AND MODIFY ANY OR ALL THE GROUNDS OF APPEAL WHICH A RE WITHOUT PREJUDICE TO ONE ANOTHER, BEFORE OR AT THE TIME OF HEARING TO THE APPEAL. 2.1 BRIEFLY STATED FACTS OF THE CASE AT THAT THE AS SESSEE WAS ENGAGED IN RUNNING THE PROPRIETARY CONCERN NAMELY M /S ANKY CLOTHING. THE ASSESSEE FILED RETURN OF INCOME FOR T HE YEAR UNDER CONSIDERATION ON 25/11/2014 DECLARING TOTAL INCOME OF 7,29,670/-. THE RETURN OF INCOME FILED BY THE ASSES SEE WAS SELECTED FOR SCRUTINY ASSESSMENT FOR THE REASON OF LARGE BUSINESS LOSS SET-OFF AGAINST OTHER HEADS OF THE INCOME. TH E STATUTORY NOTICES UNDER THE INCOME-TAX ACT, 1961 (IN SHORT TH E ACT) WERE ISSUED AND COMPLIED WITH. IN THE ASSESSMENT COMPLET ED UNDER SECTION 143(3) OF THE ACT, THE ASSESSING OFFICER DI SALLOWED BUSINESS LOSS OF 56,53,550/-CLAIMED BY THE ASSESSEE, HOLDING THAT THE IMPUGNED BUSINESS LOSS WAS NOT GENUINE AND WAS AS A RESULT OF METICULOUSLY PLANNED EVENTS AND THE ENTIT IES INVOLVED WERE PART OF THIS EXERCISE IN AN EFFORT TO CREATE D OCUMENTARY EVIDENCE FOR PREPLANNED SCHEME FOR CREATING BUSINES S LOSS JUST TO ADJUST THE SHORT-TERM CAPITAL GAIN , WHICH THE ASSE SSEE HAD FROM 3 ITA NO.7751/DEL./2018 SALE OF HIS PLOT IN NOIDA. ON FURTHER APPEAL BY TH E ASSESSEE, THE LD. CIT(A) CARRIED OUT FURTHER ENQUIRY IN THE MATTE R AND UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. AGG RIEVED WITH THE FINDING OF THE LOWER AUTHORITIES, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUC ED ABOVE. 3. THE GROUNDS RAISED BY THE ASSESSEE ARE IN RELATI ON TO THE BUSINESS LOSS OF 56,53,550/- DISALLOWED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). 3.1 REGARDING THE BUSINESS LOSS, THE ASSESSEE BEFOR E THE ASSESSING OFFICER STATED AS UNDER: (I) DURING THE YEAR UNDER CONSIDERATION, THERE WAS SHOR T TERM CAPITAL GAIN OF 55,60,703/-FROM SALE OF PLOT OF LAND (II) THE ASSESSEE PURCHASED DESIGN FABRIC OF 1,79,50,040/-FROM M/S SHYLGO TEXTILE P. LTD., 633, SHIVAJI ROAD , AZAD MARKET, DELHI -110006( IN SHORT SHYLGO TEXTILE) AND SOLD TO FOUR PARTIES FOR A TO TAL SUM OF 1,22,96,490/-THEREBY INCURRING A LOSS OF 56,53,550/-. (III) THE ASSESSEE CLAIMED TO HAVE ENGAGED IN TRADING OF GREY FABRIC FOR THE LAST MANY YEARS BUT VENTURED IN TRADING OF DESIGN FABRIC FOR THE FIRST TIME. THE RE ASON FOR ENTERING IN THE VENTURE HAS BEEN STATED AS TRADING OF THE DESIGN FABRIC WAS MORE PROFITABLE. (IV) INITIALLY DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT BY THE TIME IT RECEIVED THE DELIVERY OF DESIGN FABRICS, THE DESIGN HAD GONE OUT OF THE FASHION AND HE COULD NOT FIND ANY BUYER FOR THE SAME AND, THEREFORE, SOLD THE GOODS ON LOSS. 4 ITA NO.7751/DEL./2018 (V) SUBSEQUENTLY, SUBMITTED THAT THE ASSESSEE RECEIVED CERTAIN PURCHASE ORDERS OF DESIGN FABRICS FROM TWO PARTIES NAMELY M/S COTTON COLLECTION AND M/S SATHAKAPPARELS PRIVATE LIMITED AND FOR SUPPLYING TH E SAID FABRIC TO THESE PARTIES, THE ASSESSEE FURTHER PLACED ORDER OF THE FABRIC TO SHYLGO TEXTILE. THE SAMPLE S RECEIVED FROM SHYLGO TEXTILE WERE FORWARDED TO TH OSE TWO BUYERS, HOWEVER THE SAMPLES WERE NOT APPROVED AND THEY CANCELLED THE PURCHASE ORDERS. DUE TO CANCELLATION OF PURCHASE ORDERS BY THEM, THE ASSESS EE WAS FORCED TO SELL THE DESIGN FABRIC AT DISCOUNTED PRICE TO THE PARTIES VIZ., (1) INDIA FASHION (2) SAY MY CHOICE INC. (3) ACHIEVER APPARELS PVT. LTD., AND (4) AMIT SALES CORPORATION. THE ABOVE SUBMISSION OF THE ASSESSEE WAS REJECTED B Y THE ASSESSING OFFICER DUE TO FOLLOWING REASONS: (I) BOTH M/S. COTTON COLLECTION AND M/S SARTHAK APPAREL S HAD NOT ONLY GIVEN THE PURCHASE ORDER ON SAME DATE I.E. 25/10/2013 BUT PATTERN AND LANGUAGE OF THE ORDERS B Y BOTH THE BUYER WAS STRIKINGLY SIMILAR. (II) THE ASSESSEE IN LETTER DATED 23/08/2016 STATED THE REASON OF THE LOSS AS DESIGN OF THE FABRIC HAD BECO ME OUTDATED DUE TO LATE DELIVERY OF GOODS BUT IN LETTE R DATED 21/09/2016 AND 26/12/2016 THE REASON FOR LOSS WAS CLAIMED AS DUE TO CANCELLATION OF THE ORDER BY THE ABOVE REFERRED TO PARTIES COMPELLING THE ASSESSEE TO SELL THE DESIGN FABRIC TO OTHER PARTIES IN THE OPEN MARKET A T HEAVY DISCOUNT. ACCORDING TO THE ASSESSING OFFICER THIS S TORY 5 ITA NO.7751/DEL./2018 WAS AFTERTHOUGHT OF THE ASSESSEE TO EXPLAIN THE SAI D ALLEGED LOSS. (III) THE ASSESSEE WAS NOT DEALING WITH THE ABOVE REFERRE D TWO PARTIES PRIOR TO THE ALLEGED ORDERS, STILL THE ASSE SSEE DID NOT TAKE ANY SECURITY FROM THOSE PARTIES FOR DELIVE RY OF THE GOODS. THE PARTY ON WHOM THE ASSESSEE PLACED ORDER I.E. SHYLGO TEXTILE WAS ALSO NOT IN BUSINESS WITH THE AS SESSEE PRIOR TO THIS ALLEGED DEAL AND THAT PARTY HAD ALSO NOT TAKEN ANY SECURITY FROM THE ASSESSEE WHILE ACCEPTIN G THE ORDER. ACCORDING TO THE ASSESSING OFFICER THIS ALLE GED BEHAVIOUR/CONDUCT OF THE ASSESSEE WAS AGAINST BUSIN ESS PRACTICE AND NORMAL HUMAN BEHAVIOUR AND PROBABILITI ES. (IV) THE ASSESSEE DID NOT FILE ANY SUIT FOR LEGAL ACTION AGAINST THOSE PARTIES FOR CANCELLING THE ORDERS, WHICH RESU LTED INTO ALLEGED HUGE LOSSES TO THE ASSESSEE. (V) THE ASSESSEE CLAIMED THAT M/S COTTON COLLECTION CAN CELLED THE ORDER ON 2/11/2013 DUE TO SAMPLE PROVIDED BY TH E ASSESSEE BEING DIFFERENT FROM THE ITEM THAT WAS ORD ERED. IN VIEW OF THIS CLAIM THE ASSESSEE WAS AWARE THAT FABRICSUPPLED BY M/S SHYLGO TEXTILE WAS NOT AS PER ORDER AND REJECTED BY M/S COTTON COLLECTION, STILL THE AS SESSEE KEPT ON BUYING THE FABRIC FROM M/S SHYLGO TEXTILE. DESPITE NOT PROVIDING GOODS AS PER ORDER, NO LEGAL OR OTHER WISE ACTION TAKEN AGAINST SHYLGO TEXTILE. (VI) THE SAID BUSINESS OF TRADING IN DESIGNED FABRIC WAS STOPPED FROM NEXT YEAR ONWARD, WHICH SHOWS THAT BUSINESS LOSS OF RS. 56,60,703/- WAS CREATED ONLY T O ADJUST THE SHORT-TERM CAPITAL EARNED IN THE YEAR UN DER CONSIDERATION. 6 ITA NO.7751/DEL./2018 (VII) THE ASSESSING OFFICER ISSUED NOTICE U/S 133(6) OF T HE ACT TO M/S COTTON COLLECTION, M/S SARTHAK APPAREL AND M /S SHYLGO TEXTILE BUT THE NOTICE SENT TO M/S SHYLGO RE TURNED UNDELIVERED. IN THE REPLIES RECEIVED FROM M/S COTTO N COLLECTION AND SARTHAK APPAREL, THE AO FOUND STRIKI NG SIMILARITY IN PATTERN AND LANGUAGE. ACCORDING TO TH E AO, IT COULD NOT BE COINCIDENCE AND LETTERS MUST HAVE BEEN WRITTEN BY THE ONE PERSON OR UNDER THE GUIDANCE OR INSTRUCTIONS OF THE SAME PERSON. (VIII) THE ASSESSEE WAS ASKED TO PRODUCE THOSE THREE PARTI ES VIDE ORDER SHEET ENTRY DATED 7/12/2016;16/12/2016 A ND 26/12/2016 BUT NONE WERE PRODUCED BY THE ASSESSEE. THE AO ALSO ISSUED SUMMONS U/S 131 OF THE ACT ON 6/12/2016 TO M/S SHYLGO TEXTILE AND ON 8/12/2016 TO ALL THE THREE PARTIES FOR PERSONAL ATTENDANCE , BUT NO COMPLIANCE WAS MADE. (IX) THE INSPECTOR OF THE OFFICE OF THE AO VISITED THE A DDRESS OF M/S COTTON COLLECTION BUT HE FOUND ,THE ADDRESS TO BE OF A RESIDENTIAL BUILDING AND NO ENTITY WAS FOUND TO BE OPERATING FROM THAT ADDRESS. 3.3 IT IS UNDER ABOVE CIRCUMSTANCES; THE ASSESSING OFFICERWAS OF THE VIEW THAT ASSESSEE HAS CREATED DOCUMENTARY EVID ENCE IN PREPLANNED MANNER FOR CREATING BUSINESS LOSS TO OFF SET THE SHORT- TERM CAPITAL GAIN. ACCORDING TO THE ASSESSING OFFIC ERINCOME-TAX LIABILITY IS ASCERTAINED ON THE BASIS OF THE MATERI AL AVAILABLE ON RECORD, SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT AN D PREPONDERANCE OF THE PROBABILITIES AND IN SUCH CLAN DESTINE 7 ITA NO.7751/DEL./2018 OPERATIONS AND TRANSACTIONS, IT WAS IMPOSSIBLE TO H AVE DIRECT EVIDENCE OR DEMONSTRATIVE PROOF OF EVERY MOVE. 3.4 BEFORE THE LD. CIT(A), THE ASSESSEE ATTEMPTED T O REBUT THE FACTUAL OBSERVATIONS MADE BY THE ASSESSING OFFICER, WHILE DISALLOWING THE BUSINESS LOSS. THE SUBMISSION OF TH E ASSESSEE BEFORE THE LD CIT(A) ARE SUMMARIZED AS UNDER: (I) THE ASSESSEE AND HIS FAMILY HAS BEEN IN THE BUSINESS OF THE TRADING OF THE GREY FABRIC SINCE MO RE THAN 25 YEARS. (II) THE ASSESSEE VENTURED INTO DEALING OF DESIGN FABRIC FOR THE FIRST TIME LOOKING TO POSSIBILITY OF HIGH P ROFIT HOWEVER, THE GOODS SUPPLIED BY THE SUPPLIER WERE NOTFOUND AS PERSPECIFICATIONS,AND HENCE REJECTED BY THE BUYERS AND FETCHED VERY LOW VALUE ON SALE IN OPEN MARKET. (III) FOR MAINTAINING A REPUTATION IN THE MARKET, A BUSINESSMAN MAY NOT CHOOSE FOR LITIGATIONAND INSTEAD OF SPOILING RELATIONS WITH THE PERSON, IT IS BETTER TO GET MORE BUSINESS FROM HIM IN THE FUTURE. (IV) NOT ACCEPTING SECURITY FROM BUYERS OR NOT FILING LE GAL SUIT AGAINST THEM ARE SUBJECTIVE CONSIDERATION AND SHOULD NOT BE MAIN STAKE IN MAKING IN ADDITION TO INCOME. (V) STRIKING SIMILARITY IN LETTERS OF M/S COTTON COLLEC TION AND M/S SARTHAK APPARELS MIGHT BE DUE TO DEPUTING SAME PERSON BY THEM AND THEY MIGHT HAVE RESPONDED IN THEIR OWN WAY AND MANNER AND NOTHING MUST BE READ INTO THE LANGUAGE OR PATTERN O F CORRESPONDENCE. 8 ITA NO.7751/DEL./2018 (VI) THE ASSESSEE HAD NUMEROUS VERBAL AND TELEPHONIC CONVERSATION WITH M/S COTTON COLLECTION ANDM/S.SARTHAK APPARELS AND PLEADED THEM TO HONOUR THEIR COMMITMENT. THE LEGAL ACTION WOULD NOT HAVE YIELDED ANY RESULT AND THE ASSESSEE WAS ALWAYS RESISTED FROM TAKING ANY LEGAL RECOURSE AS I T WOULD HAVE SPOILED HIS REPUTATION. (VII) THIS WAS ASSESSEES FIRST VENTURE INTO THIS FORM OF FABRIC WHICH UNFORTUNATELY RESULTED INTO LOSS AND COMPELLED THE ASSESSEE NOT TO PURSUE THIS ANY FURTHER. AFTER A LOSS OF 55 LAKH, THE ASSESSEE WOULD HAVE BEEN FULL HARDY TO CONTINUE THIS BUSINESS. AFTER THIS LOSS HE STOPPED BUSINESS AND WENT TO CARRY ON ITS CORE BUSINESS OF DEALING IN GREY FABRI C. (VIII) IN THIS TRADE NO SECURITIES ARE TAKEN FOR THIS MAGNITUDE OF THE ORDER AND GENERALLY ORDERS REGULATED ONWORDS AND MOUTH. 3.5 THE ASSESSEE REQUESTED THE LD. CIT(A) TO CONFRO NT THE THIRD- PARTY EVIDENCES. ON BEING ASKED BY THE LD. CIT(A), THE ASSESSEE PRODUCED THE MAIN PERSONS OF M/S COTTON COLLECTION ANDM/S. SARTHAK APPAREL BEFORE HIM. BOTH PERSONS STATED THA T ENTIRE TRANSACTION WERE ON VERBAL COMMUNICATION. NO DOCUME NTS WERE PLACED ON RECORD TO PROVE THE GENUINENESS OF THE EX PORT ORDER RECEIVED BY M/S COTTON COLLECTION AND ORDER RECEIVE D FROM VISHAL MEGA MART BY M/S SARTHAK APPARELS. ACCORDING TO THE LD. CIT(A), ONCE THE ASSESSEE WAS MADE AWARE OF THE RESULT OF T HE EXAMINATION OF THE DOCUMENTS WHICH PROVED THE TRANS ACTION WAS NOT GENUINE, THE ONUS WAS ON THE ASSESSEE TO PROVE THAT HE 9 ITA NO.7751/DEL./2018 INCURRED THE LOSS. ACCORDING TO THE LD. CIT(A), IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SRI CHARAN SINGH VS CHANDRA BHAN, AIR 1988 SC 637, THE BURDEN OF PROOF LIES ON THE PARTY WHO SUBSTANTIALLY ASSERT THE AFFI RMATIVE OF ISSUE AND NOT UPON THE PARTY WHO DENIES IT. THE OBSERVATI ON OF LD. CIT(A) ON THE BURDEN OF PROOF OF THE ASSESSEE ARE R EPRODUCED AS UNDER: THE APPELLANTS INSISTENCE THAT THE TRANSACTIONS A RE GENUINE SUPPORTED BY CERTAIN DOCUMENTS CANNOT BE ACCEPTED IN VIEW OF THE FACT AND CIRCUMSTANCES OF THE CASE BROUGHT ON RECORD BY THE ASSESSING OFFICER AFTER PROPER EXAMINATION OF THE MATERIAL FACTS. ONCE THE APPELLANT WAS MADE AWARE OF THE RESULT OF EXAMINATION OF THE DOCUMENTS WHICH PROVED THAT TRANSACTIONS IS NOT GENUINE, THE ONUS WAS ON THE AS SESSEE TO PROVE THAT HE HAS INCURRED GENUINE LOSS UNDER SECTION 101 OF T HE INDIAN EVIDENCE ACT, 1972 AS IT IS THE ASSESSEE WHO IS ASSERTING A CLAIM THAT HE WAS ENGAGED IN GENUINE BUSINESS TRANSACTIONS. IT IS REL EVANT TO NOTE HERE THAT HONBLE SUPREME COURT IN THE CASE OF SRI CHARAN SIN GH VERSUS CHANDRABHANSINGH, AIR 1988 SC 637 HAS CLARIFIED THA T THE BURDEN OF PROOF LIES ON THE PARTY WHO SUBSTANTIALLY ASSERTS T HE AFFIRMATIVE OF THE ISSUE AND NOT UPON THE PARTY WHO DENIES IT. IT HAS BEEN F URTHER HELD THAT THE PARTY CANNOT, ON FAILURE TO ESTABLISH A PRIMA FACIE CASE, TAKE ADVANTAGE OF THE WEAKNESS OF HIS ADVERSARYS CASE. THE PARTY MUS T SUCCEED BY THE STRENGTH OF HIS OWN RIGHT AND THE CLEARNESS OF HIS OWN PROOF. SINCE IN THIS CASE THE APPELLANT HAD MADE THE CLAIM OF LOSS, ALL THE FACTS WHERE ESPECIALLY WITHIN HIM KNOWLEDGE. SECTION 102 OF IND IAN EVIDENCE ACT MAKES IT CLEAR THAT INITIAL ONUS IS ON PERSON WHO S UBSTANTIALLY ASSERTS A CLAIM. IF THE ONUS IS DISCHARGED BY HIM AND A CASE IS MADE OUT, THE ONUS SHIFTS ON TO DEPONENT. IT IS PERTINENT TO MENTION H ERE THAT THE PHRASE BURDEN OF PROOF IS USED IN TWO DISTINCT MEANING I N THE LAW OF EVIDENCE VIZ., THE BURDEN OF ESTABLISHING A CASE, AND THE BURDEN OF INTRODUCING EVIDENCE. THE BURDEN OF ESTABLISHING A CASE REMAIN S THROUGHOUT TRIAL WHERE IT WAS ORIGINALLY PLACED, IT NEVER SHIFTS. TH E BURDEN OF EVIDENCE MAY SHIFT CONSTANTLY AS EVIDENCE IS INTRODUCED BY ONE S IDE OR THE OTHER. IN THIS CASE, ONCE THE EVIDENCE THAT ASSESSEE HAS CLAIMED B OGUS LOSS WAS INTRODUCED BY THE AO, THE BURDEN OF EVIDENCE SHIFTE D TO THE ASSESSEE. DURING THE ASSESSMENT PROCEEDING AND EVEN DURING TH E APPELLATE PROCEEDING, THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE TO PROVE THAT THE LOSS CLAIMED BY HIM WAS GENUINE. IN THE PRESENT CASE, I FIND THAT THE PLANT HAS FAIL ED TO DISCHARGE ITS BURDEN OF PROOF AND THE AO, ON THE OTHER HAND, HAS PROVED THAT THE BUSINESS LOSS OF THE APPELLANT WAS INCORRECT. FURTH ER, THE PRODUCTION OF THE MAIN PERSONS OF COTTON COLLECTION AND SARTHAK APPAR EL PVT. LTD. FURTHER STRENGTHENED THE CASE OF THE AO AND GOES AGAINST TH E APPELLANT , SH. SUNIL KUMAR BALOONI PROPRIETOR OF COTTON COLLECTION ADMITTED THAT NO APPROVAL OF DESIGN BEFORE PLACING HIS ORDER HAS BEE N GIVEN TO THE APPELLANT. IF THE APPELLANT WANTS TO VENTURE INTO N EW BUSINESS THAT TOO OF 10 ITA NO.7751/DEL./2018 CUSTOMIZED FABRICS FOR EXPORT, THE APPELLANT SHOULD HAVE AT LEAST GIVEN A SPECIFIC DESIGN OR REQUIREMENT TO THE PARTY. BOTH P ERSONS STATED THAT THE ENTIRE TRANSACTIONS ARE ON VERBAL COMMUNICATIONS. N O DOCUMENTS ARE PLACED ON RECORD TO PROVE THE GENUINENESS OF THE EX PORT ORDER RECEIVED BY COTTON COLLECTION & ORDER RECEIVED BY VISHAL MEGA M ART BY SARTHAK APPAREL PRIVATE LTD. IN VIEW OF THE FACTS AND CIRCU MSTANCES BORNE OUT OF THE ASSESSMENT ORDER AND LEGAL PRECEDENTS AS DISCUS SED BY THE AO, I AM OF THE VIEW THAT TRANSACTIONS LEADING TO BUSINESS L OSS BY THE APPELLANT ARE SHAM TRANSACTION ENTERED INTO FOR THE PURPOSE OF EV ADING TAX. I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AO. THESE GROUNDS OF APPEAL OF THE APPELLANT ARE DISMISSED. 4. BEFORE US, THE ASSESSEE FILED A PAPER-BOOK CONTA INING PAGES 1 TO 130 AND SUBMITTED THAT LOSS INCURRED BY THE AS SESSEE IS A GENUINE BUSINESS LOSS. 4.1 THE LD. COUNSEL OF THE ASSESSEE REFERRED TO COP IES OF THE STATEMENT OF SH. SUNIL KUMAR BALOONI, PROPRIETOR OF M/S COTTON COLLECTION AND MR RAJESH KUMAR GARG, DIRECTOR OF M/ S SARTHAK APPARELS PRIVATE LIMITED (AVAILABLE ON PAGE K-M OF THE PAPER- BOOK), WHO ATTENDED THE OFFICE OF THE LD. CIT(A) ON 12/04/2018 AND WERE EXAMINED BY THE LD. CIT(A) HIMSELF. ACCORD ING TO THE LEARNEDCOUNSEL, BOTH THE PARTIES IN THEIR STATEMENT CONFIRMED THAT THEY HAD PLACED ORDER TO BY THE DESIGN FABRIC FROM THE ASSESSEE AND ALSO EXPLAIN THE REASONS FOR CANCELLIN G THE ORDER SYSTEMATICALLY SOUGHT TO BE PURCHASED WAS REJECTED BY THE CUSTOMER. THE LEARNEDCOUNSEL SUBMITTED THAT BOTH TH E PARTIES HAD FILED THE REPLIES AND REQUISITE DOCUMENTS IN RE SPONSE TO NOTICE UNDER SECTION 133(6) ISSUED BY THE ASSESSING OFFICER, COPY OF WHICH WERE PLACED ON PAGE 119 TO 123 OF THE PAPE R-BOOK. 4.2 THUS, ACCORDING TO HIM, THE LD. CIT(A) CONFIRME D THE DISALLOWANCE MERELY ON THE BASIS OF SUBJECTIVE CONS IDERATION OR UNSUBSTANTIATED ALLEGATIONS LEVELLED BY THE ASSESSI NG OFFICER I.E. FABRIC SOLD AT LOSS BEFORE THE CANCELLATION OF THE ORDERS IS MERELY A STORY AND AFTERTHOUGHT; THE ASSESSEE HAD NOT TAKEN OR GIVEN ANY SECURITY AT THE TIME OF RECEIVING OR GIVING ORDERS; THE ASSESSEE HAD 11 ITA NO.7751/DEL./2018 NOT FILED ANY LEGAL SUIT AGAINST PARTIES; THE ASSES SEE STOPPED ITS BUSINESS FROM THE NEXT YEAR; THE ASSESSEE SHOULD HA VE GIVEN A SPECIFIC DESIGN REQUIREMENT TO THE PARTY ETC. 4.3 THE LEARNEDCOUNSEL SUBMITTED THAT THE ASSESSEE HAD FURNISHED INVOICES AND LEDGER-CUM-CONFIRMATION IN R ESPECT OF PURCHASE TRANSACTION OF DESIGN FABRIC FROM M/S SHYL GO TEXTILE AND REPLIES FILED BY M/S COTTON COLLECTION AND M/S SARTHAK APPAREL IN RESPONSE TO NOTICE ISSUED UNDER SECTION 133(6) ISSUED BY THE ASSESSING OFFICER ALONG WITH THE RETURN OF I NCOME FOR ASSESSMENT YEAR 2013-14 AND 201415. 4.4 THE LEARNEDCOUNSEL FURTHER SUBMITTED THAT ASSES SEE HAD ALSO FURNISHED HIS AFFIDAVIT WHEREIN HE STATED ON O ATH THAT M/S SHYLGO TEXTILE THROUGH THE ACCOUNTANT APPEARED BEFO RE THE LEARNEDASSESSING OFFICER IN RESPONSE TO SUMMON UNDE R SECTION 131 OF THE ACT ALONGWITH SUMMONED RECORDS ON 31/12/ 2016, BUT THE ASSESSING OFFICER REFUSED TO EXAMINE HIM AND EV EN DID NOT RECORD ATTENDANCE. THE COUNSEL SUBMITTED THAT LATER ON , M/S SHYLGO TEXTILE HAD SUBMITTED THE SUMMONED DOCUMENTS BY SPEED POST DATED 31/12/2016. THE LEARNEDCOUNSEL REFERRED TO AFFIDAVIT OF THE ASSESSEE, A COPY OF WHICH IS PLACED ON PAGE 128 TO 130 OF THE PAPER-BOOK. 4.5 THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS LT D VS CIT (2007) 158 TAXMAN 74(SC) AND OTHER DECISIONS IN SUP PORT OF THE PROPOSITION THAT THE ASSESSING OFFICER SHOULD NOT S EEK TO CONDUCT BUSINESS BY SITTING ON THE ARMCHAIR OF THE BUSINESS MEN AND THE BUSINESSMEN KNOWS BEST HOW TO DO HIS BUSINESS. 4.6 THE LEARNEDCOUNSEL ALSO RELIED ON THE SUBMISSIO N MADE BY THE ASSESSEE BEFORE THE LD. CIT(A). THE LEARNEDCOUN SEL ALSO 12 ITA NO.7751/DEL./2018 SUBMITTED THAT THE INSPECTORS REPORT WITH THE FIND ING THAT M/S COTTON COLLECTION DID NOT EXIST AT THE ADDRESS, WAS NOT PROVIDED TO THE ASSESSEE WHICH IS IN VIOLATION OF THE PRINCIPLE OF THE NATURAL JUSTICE AND SAME CANNOT BE USED AGAINST THE ASSESSE E. IN SUPPORT OF THE CONTENTION THE LEARNEDCOUNSEL RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ANDMAN TIMBERS INDUSTRIES VS CCE CIVIL APPEAL NO. 4228 OF 2006 IN OTHER DECISI ONS. 4.7 THE LEARNEDCOUNSEL ALSO REFERRED TO COPY OF SAL ES INVOICES ISSUED BY THE ASSESSEE IN RESPECT OF THE SALE OF DE SIGN FABRIC TO 4 PARTIES AVAILABLE ON PAGE 56 TO 90 OF THE PAPER-BOO K AND COPY OF INVOICES ISSUED BY M/S SHYALGO TEXTILE, AVAILABLE O N PAGE 91 TO 102 OF THE PAPER-BOOK. HE ALSO REFERRED TO COPY OF LEDGER ACCOUNTS OF THOSE FOUR PARTIES TO WHOM FABRIC WAS SOLD, AVAI LABLE ON PAGE 104 TO 118 THE PAPER-BOOK. 5. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESS EE HAS FAILED TO DISCHARGE HIS ONUS OF JUSTIFYING THE BUSINESS LO SS AND, THEREFORE, THE ORDER OF LD. CIT(A) MIGHT BE UPHELD. 6. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. ACCORDING TO THE ASSESSEE, MAIN REASON FOR BUSINESS LOSS IN T RADING OF DESIGNED FABRIC IS CANCELLATION OF PURCHASE ORDERS BY M/S COTTON COLLECTION AND M/S SARTHAK APPARELS. THE ASSESSEE P RODUCED BOTH THESE PARTIES BEFORE THE LD. CIT(A). STATEMENT OF B OTH THE PARTIES ARE AVAILABLE ON PAGE K TO M OF THE PAPER-BOOK. SH . SUNIL KUMAR BALOONI, PROPRIETOR OF M/S COTTON COLLECTION STATED THAT HE RECEIVED AN ORDER OF EXPORT FROM AUSTRALIA OF SCARF AND FOR SUPPLY OF THAT ORDER, HE PLACED ORDER FOR PURCHASE OF CUST OMIZED FABRICS TO THE ASSESSEE, BUT THE ORDER WAS CANCELLED BECAUS E THE ASSESSEE 13 ITA NO.7751/DEL./2018 SHOWN HIM A SMALL PIECE OF THE ORDERED FABRIC, WHIC H WAS NOT AS PER THE DESIGN ORDERAND REJECTED BY HIS BUYER. 6.1 SIMILARLY, SH RAMESH KUMAR GARG, DIRECTOR OF M/ S SARTHAK APPAREL PRIVATE LIMITED, SUBMITTED THAT IN THE BUSI NESS OF MANUFACTURING READY-MADE GARMENTS , HE RECEIVED AN ORDER OF READY-MADE GARMENTS OF CUSTOMISED FABRICS FROM VISHA L MEGA MART AND FOR SUPPLY OF THAT, HE PLACED AN ORDER FOR PURCHASE OF CUSTOMISED FABRIC TO THE ASSESSEE, BUT LATER ON THA T ORDER WAS CANCELLED BY M/S VISHAL MEGA MART. 6.2. THE ASSESSEE HAS PRODUCED ABOVE TWO PARTIES TO PROVE THAT HE HAS RECEIVED ORDERS FROM THOSE PARTIES WHICH WER E LATER ON CANCELLED. BOTH THE ABOVE PARTIES HAVE CONFIRMED TH E AFORESAID TRANSACTION WITH THE ASSESSEE IN THEIR STATEMENT MA DE BEFORE THE LD. CIT(A) AS WELL AS CONFIRMED IN REPLY TO THE NOT ICE UNDER SECTION 133(6) OF THE I.T. ACT BEFORE THE A.O. IN T HE BUSINESS TRANSACTIONS IT IS NOT NECESSARY THAT ALL THE TRANS ACTIONS SHOULD BE PROVED BY DOCUMENTARY EVIDENCES. THE BUSINESS OR DERS ARE PLACED ORALLY AS WELL AND PARTICULARLY WHEN TRANSAC TIONS HAVE BEEN CONFIRMED BY THE PARTIES, THERE IS NO REASON T O DOUBT THE STATEMENTS OF THE ABOVE PERSONS AS WELL AS THEIR RE PLY UNDER SECTION 133(6) OF THE I.T. ACT. THE SALE AND PURCHA SE OF THE ITEMS UNDER REFERENCE FROM INDEPENDENT PARTIES HAVE NOT B EEN DOUBTED BY THE AUTHORITIES BELOW. IF AS PER A.O. THE PATTER N AND LANGUAGE OF THE CORRESPONDENCE ASSESSEE AND THESE PARTIES AR E SIMILAR IS NO GROUND TO REJECT THEIR EXPLANATION. IT IS ALSO NOT NECESSARY THAT FOR EACH AND EVERY BUSINESS CANCELLATION ORDERS, THE PA RTIES SHALL HAVE TO RESORT TO LITIGATION BEFORE THE CIVIL COURT BY FILING A CIVIL SUIT. THE ASSESSEE SHALL HAVE TO MAINTAIN BUSINESS RELATION WITH THE PARTIES AND FOR BUSINESS INTEREST SOME TIMES SH ALL HAVE TO 14 ITA NO.7751/DEL./2018 SUFFER THE LOSSES, THEREFORE, IT IS ALWAYS NOT ADVI SABLE TO RESORT TO CIVIL LITIGATION FOR A SMALL AMOUNT FOR THE BETTERM ENT OF THE BUSINESS ACTIVITIES. PB-15 IS P & L A/C OF THE ASSE SSEE PROPRIETORSHIP CONCERN WHICH SHOWS ASSESSEE HAS TUR NOVER OF RS.8.82 CORES WHICH SHOWS THE BONAFIDE OF THE ASSES SEE IN CARRYING THE BUSINESS ACTIVITIES. THEREFORE, FOR A SMALL AMOUNT THE AUTHORITIES BELOW SHOULD NOT HAVE DOUBTED THE EXPLA NATION OF THE ASSESSEE AND OTHERS. THE REASONS GIVEN BY THE A.O. ARE MERELY A PRESUMPTION WHICH COULD NOT REJECT THE EXPLANATION OF ASSESSEE THAT HE HAS SUFFERED GENUINE BUSINESS LOSS. THE ASS ESSEE FURNISHED COPY OF THE INVOICES AND LEDGER ACCOUNT I N SUPPORT OF THE ABOVE EXPLANATION. THEREFORE, THE DOCUMENTARY E VIDENCES WHICH HAVE NOT BEEN REBUTTED BY THE A.O. COULD NOT HAVE BEEN DISBELIEVED BY THE A.O. ON IRRELEVANT REASONS. THE A.O. DID NOT EXAMINE THE PARTIES FROM WHOM ASSESSEE HAS PURCHASE D THE ITEMS UNDER REFERENCE WHICH WERE LATER ON SOLD TO O THER PARTIES WHEN THE ABOVE TWO PARTIES REFUSED TO ACCEPT THE GO ODS FROM THE ASSESSEE. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE A.O. HAS FAILED TO ESTA BLISH THAT LOSS SUFFERED BY THE ASSESSEE IS NOT GENUINE. THUS, THER E IS NO REASON TO SUSTAIN THE ADDITION OF RS.56,53,550/-. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND D ELETE THE ENTIRE ADDITION. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 15 ITA NO.7751/DEL./2018 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MAY, 2020. SD/- SD/- (BHAVNESH SAINI) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH MAY, 2020. RK/- (D.T.D.S) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI