PREM KUMAR V. CIT, BATHINDA

ITA/699/2009

AI Insights

The case involves an appeal by Prem Kumar against the Commissioner of Income Tax, Bathinda, concerning the disallowance of a business loss claim of `9,94,000 related to cotton trading for the assessment year 2005-06. The primary legal contention was whether the Income Tax Appellate Tribunal was justified in upholding the disallowance of the loss. The Assessing Officer had initially disallowed the claim due to lack of evidence supporting the transactions and the non-existence of the purported trading firm. This decision was upheld by the CIT(A) and the Tribunal, leading to the present appeal. The High Court found that the appellant failed to provide substantial evidence to support the existence of the trading firm or the authenticity of the transactions.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 759043 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 17-12-2013
• Assessment Year: misc
• Other Referred Cases: Goetze (India) Limited v. CIT (2006) 284 ITR 323
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: VINEET DHANDA; G S HOODA
• Assessee Lawyers: BRIJ MONGA
• Keywords: Business loss; Disallowance; Income Tax; Sham transactions; Cotton Trading
• Section: 143(3); 143(1); 271(1)(c); 260A

Judgement Text

"ITA No.699 of 2009 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.699 of 2009 (O&M) Date of decision: 17.12.2013 Prem Kumar …Appellant Vs. Commissioner of Income Tax, Bathinda …Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr. Brij Mohan Monga, Advocate for the appellant. Mr. Vineet Dhanda, Advocate for Mr. G.S.Hooda, Advocate for the revenue. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 29.5.2009, Annexure A.3, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar in ITA No.86(ASR)/2009, for the assessment year 2005-06. The appeal was admitted on 12.5.2010 to consider following substantial questions of law:- i) Whether on the facts and circumstances of the case the Tribunal is justified in upholding the disallowance of loss of `9,94,000/- by holding that the firm M/s Manoj Trading Co. does not exist in Mandi Dabwali ignoring the documentary evidence of a government department i.e. Assessment order by the Sales Tax Department, which finds mention at Page No.5 of the CIT(A)'s order (Annexure A.2)? Singh Gurbax 2014.01.10 10:47 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.699 of 2009 (O&M) 2 ii)Whether on the facts and circumstances of the case the Tribunal is justified in upholding the disallowance of loss of `9,94,000/- holding that the whole transaction of `39,08,455/- was done by mere cash payment of `10,000/- ignoring the other payment of `9,84,000/- paid by demand draft and duly reflected in the copy of account furnished to the Assessing Officer and reproduced by him in para 3.2 of the assessment order? 2. A few facts relevant for the decision of the controversy involved, as narrated in the appeal may be noticed. The assessee, an individual filed his income tax return for the assessment year 2005-06 on 31.7.2005 declaring income at ` 93,094/- with ITO Ward 2(1) Bathinda. He claimed business loss of ` 9,94,000/- to be carried forward. The return was processed under section 143(1) of the Act. The case was selected for scrutiny and notice was issued to the appellant. He appeared before the Assessing Officer and submitted written submissions including documentary evidence. The assessment was completed under Section 143(3) of the Act vide order dated 28.12.2007, Annexure A.1 by making certain additions. The claim for loss on sale and purchase of cotton at ` 9,94,000/- to be carried forward was disallowed by the Assessing Officer. Aggrieved by the order, the appellant filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 12.11.2008, Annexure A.2, the CIT(A) partly allowed the appeal. The revenue filed appeal before the Tribunal. The appellant not feeling satisfied also filed cross objections before the Tribunal. After considering the matter, the disallowance of loss was confirmed and the cross objections were dismissed by the Tribunal vide order dated 29.5.2009, Annexure A.3 impugned herein. Hence the present Singh Gurbax 2014.01.10 10:47 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.699 of 2009 (O&M) 3 appeal. 3. Learned counsel for the appellant submitted that the amount of `9,94,000/- which was allegedly received from M/s Manoj Trading Co. was a genuine receipt. The Assessing Officer while deciding the issue against the assessee vide order dated 28.12.2007, Annexure A.1, had recorded as under:- “Perusal of the above account clearly shows that as against an advance of ` 10,000/- transaction worth ` 39,08,455/- is shown to have taken place which is highly improbable specially keeping the facts in view mentioned above as a matter of fact, the assessee is unable to produce any evidence in support of the claim of loss. It is also interesting to note that no date of advance has been mentioned on the copy of account. The above mentioned facts clearly bring out the following:- i) The assessee has failed to produce books of account along with evidence of sale/purchase and expenses. ii)The whole transactions are for ` 39,08,455/- but business was done with cash deposit of ` 10,000/- only which is not believable. No transaction was made except ` 10,000/- in cash. iii)No firm by the name M/s Manoj Trading Co. is existing at Dabwali and at Shop No.162, Grain Market, Dabwali. iv)No such telephone or contact number was found installed at the business premises of M/s Manoj Trading Co. Dabwali. v) No proof of physical delivery of cotton taken or given was furnished. vi)No location of Godown of Shri Prem Kumar as well as so called firm M/s Manoj Trading Co. was furnished. vii)Moreover, it is pertinent to mention that the assessee Singh Gurbax 2014.01.10 10:47 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.699 of 2009 (O&M) 4 himself has not claimed the loss against the income earned during the year. Neither has he revised his return during the course of assessment. viii)The assessee failed to produce any evidence in support of the loss claimed. For the sake of argument, if at all, it is taken that the transaction took place, it is seen that the delivery of goods had never been taken by the assessee which clearly shows that had the loss been there it would have been in the nature of speculation loss. 3.3. The above facts clearly show that it is an after thought of the assessee only to adjust the loss against the income of the later years as the assessee has received huge payments on account of land acquisition compensation, additional compensation, solatium and interest etc. Moreover, no evidence to prove that such delivery of cotton was made or business was done, has been filed. Thus, keeping in view the above facts, it is held that the loss claimed at ` 9,94,000/- under head business loss is not allowed. I am satisfied that the assessee has furnished inaccurate particulars and concealed the income and penalty proceedings under Section 271(1) (c) have been initiated.” 4. The above finding was upheld by the CIT(A) vide order dated 12.11.2008, Annexure A.2 with the following observations:- “Facts of the case are that during the course of assessment proceedings, the Assessing Officer noticed that the appellant has claimed loss on account of his cotton trading amounting to ` 9,94,000/-. In order to ascertain the genuineness of this transaction and actual delivery of cotton, the Assessing Officer deputed an Inspector to make enquiries. The enquiries made by the Inspector revealed that neither the firm namely M/s Manoj Trading Co., Dabwali was existing nor the Singh Gurbax 2014.01.10 10:47 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.699 of 2009 (O&M) 5 telephone numbers given on the letter head, upon which copy of account was submitted, were in existence. These facts were confronted to the appellant by the Assessing Officer. However, the appellant could not prove the genuineness of these transactions. No worthwhile evidence regarding actual delivery of goods and location of godowns etc. could be furnished. And not being satisfied with the explanation of the appellant in this regard, the Assessing Officer held these transactions as only on paper and thus by treating the same as sham transactions disallowed the loss claimed of ` 9,94,000/- on this account. I am in agreement with the observations of the AO and hold that the AO is justified in not allowing the claim of loss of ` 9,94,000/-. The AO's action is upheld, disallowance of ` 9,94,000/- is sustained and the appeal of the appellant is dismissed on the ground.” 5. The Tribunal affirmed the findings recorded by the CIT(A) vide order dated 29.5.2009, Annexure A.3 as under:- “11. Now we will take up CO No.9 (Asr)/2009 filed by the assessee. The ground No.1 in the CO is as under: '1. That the learned CIT(A) has erred in law and on facts in confirming the AO's view that loss on account of cotton trading amounting to ` 9,.94,000/- is sham transactions and no actual delivery of cotton had been taken without considering the evidence and explanation furnished by the assessee appellant. Therefore, the same i.e. loss of ` 9,94,000/- be allowed. 11.1Brief facts of the issue are that during the course of assessment, it was noticed that the assessee has claimed loss of ` 9,94,000/- in trading of cotton. In order to ascertain genuineness of the transaction and actual delivery of cotton, the AO deputed the Inspector to make enquiries. The enquiries made Singh Gurbax 2014.01.10 10:47 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.699 of 2009 (O&M) 6 by the Inspector revealed that neither the firm namely M/s Manoj Trading Co.Dabwali was existing nor the telephone numbers given on the letter head, upon which copy of account was submitted, were in existence. These facts were confronted to the assessee by the AO. However, the assessee has not produced the location of godown given and not being satisfied with the explanation of the assessee, the AO disallowed the loss claim of ` 9,94,000/-. The same was confirmed by the learned CIT(A). Aggrieved, the assessee is in appeal before us. 12. The learned counsel for the assessee, Shri P.N.Arora, submitted that the transactions are genuine and loss incurred in normal course of business and it is to be allowed. 13. The learned Departmental Representative (DR) relied on the order of the learned CIT(A). 14. We have heard both the parties and perused the material available on record. The assessee made a transaction of `39,08,455/- with cash deposit of ` 10,000/-. Depending upon the human probability and surrounding circumstances is not believable. The firm M/s Manoj Trading Co. is not existing at Dhabwali. The assessee has taken plea that the telephone number furnished might have been changed since the supplier is in Australia. But the assessee failed to give any concrete evidence regarding the whereabouts of the supplier. The assessee has not furnished any proof of physical delivery of the cotton. The assessee has also not produced location of godown of Shri Prem Kumar as well as firm M/s Manoj Trading Co. Moreover, the assessee himself has not claimed loss against Singh Gurbax 2014.01.10 10:47 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.699 of 2009 (O&M) 7 the income earned during the year by filing the revised return. Reliance is placed on the judgment of Hon'ble Supreme Court in the case of Goetze (India) Limited v. CIT (2006) 284 ITR 323 where it has been held as follows: 'Deduction – Return – Deduction claimed after return filed – No power in Assessing Authority to entertain claim made otherwise than by way of revised return - Income Tax Act, 1961.' No evidence in support of loss has been produced. In the absence of delivery challans received for the movement of goods, the lower authorities were justified in disallowing the same. The same is confirmed and the CO filed by the assessee is dismissed.” 6. Learned counsel for the appellant was unable to demonstrate that M/s Manoj Trading Co. was being assessed under the Haryana Value Added Tax Act, 2003. However, on query being put to learned counsel for the appellant to give permanent account number of M/s Manoj Trading Company, he was unable to give any satisfactory reply. 7. The findings recorded by the Assessing Officer and affirmed by the CIT(A) and the Tribunal being findings of fact have not been shown to be erroneous or perverse in any manner. No substantial question of law arises in this appeal. Consequently, finding no merit in the appeal, the same is dismissed. (Ajay Kumar Mittal) Judge December 17, 2013 (Jaspal Singh) 'gs' Judge Singh Gurbax 2014.01.10 10:47 I attest to the accuracy and integrity of this document High Court Chandigarh "