UTSTARCOM INC.,GURGAON V. ADIT, NEW DELHI

ITA 188/DEL/2014

AI Insights

The case involves UT Starcom Inc., which appealed against the decision of the Commissioner of Income-tax Appeals (CIT(A)-XXV, New Delhi) confirming the addition of Rs. 2,73,29,510 to its income for the Assessment Year 2006-07. The addition was made by the Assessing Officer under sections 143(3) read with section 144C(3) of the Income Tax Act, 1961, on account of alleged loss of goods in transit. The Tribunal examined the submissions and evidence presented by both parties, including the audit report, book entries, and invoices, but found them insufficient to prove the claim of loss. The Tribunal emphasized the need for concrete evidence such as the point of loss, details of complaints lodged, and proof of insurance, which the assessee failed to provide.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31461 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Other Referred Cases: Maharashtra State Board of Secondary and Higher Secondary Education v. K S Gandhi
• Laws Referred To: Income Tax Act, 1961, Indian Evidence Act, 1872
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RINI HANDA
• Assessee Lawyers: SAURABH KANSAL; PRATHAM MALIK
• Keywords: Revenue expenditure; Onus to prove; Principle of natural justice
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’, NEW DELHI Before Sh. Satbeer Singh Godara, Judicial Member & Sh. S. Rifaur Rahman, Accountant Member ITA No. 188/Del/2014 : Asstt. Year: 2006-07 UT Starcom Inc., (formerly operating through a branch office in India), C/o 10th Floor, Signature Tower-B, South City-I, Gurgaon-122001 Vs ADIT, Circle-3(1), International Taxation, New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACU5017A Assessee by : Sh. Saurabh Kansal, Adv. & Sh. Pratham Malik, Adv. Revenue by : Ms. Rini Handa, Sr. DR Date of Hearing: 10.03.2025 Date of Pronouncement: 19.03.2025 ORDER Per Satbeer Singh Godara, Judicial Member: This assessee’s appeal for Assessment Year 2006-07, arises against the CIT(A)-XXV, New Delhi’s in case No. 91/2010- 11 dated 30.09.2013, in proceedings u/s 143(3) r.w.s. 144C(3) of the Income Tax Act, 1961 (in short “the Act”). 2. Heard both the parties at length. Case file perused. 3. The assessee pleads the following substantive grounds in the instant appeal: “That on the facts and circumstances of the case, the learned Commissioner of Income-tax Appeals (‘Ld. CIT(A)’) ITA No. 188/Del/2014 UT Starcom Inc. 2 has erred in confirming the addition made by the Assessing Officer regarding the claim of material lost in transit amounting to Rs.2,73,29,510.” 4. Both the parties next invite our attention to the CIT(A)’s detailed discussion affirming the Assessing Officer’s findings rejecting the assessee’s claim amounting to Rs.2,73,29,510; reading as under: “4.00. I carefully went through the grounds of appeal. Grounds 1 & 3 are of general nature hence dismissed. As regards ground no. 2, the statement of facts, various submissions made by the appellant from time to time in the course of appellate proceedings were given meritorious consideration. The order of the Ld. AO was also perused and grounds leading to the addition i.e. disallowance of Rs.2,73,29,510/- on account of loss allegedly occurring in transit to the appellant was considered. The main plank of the appellant’s argument all through has been that (1) the audit report of the competent Chartered Accountant (II) proper entries in the books of account disclosing the loss of goods in transit, (III) the case laws and (IV) invoices go to establish with certainty the fact that the goods were of course lost in transit Per contra, during the appellate proceedings, the appellant was required to produce documentary as well as oral evidence in support of its claim of the above loss. The appellant had no documentary evidence of the following facts inter alia;- (i) Point of loss of goods- (ii) Details with proof of lodging of complaints with regard to loss of goods in transit. (iii) What was the source of information reporting loss to the appellant assessee documentary evidence i.e., whether a case of inferred/pres timed loss or reported loss. (iv) Manner in which the goods were lost in transit. (v) Origin & destination of goods consigned from US and proof thereof. (vi) Proof of insurance of goods consigned. (vii) Bill of lading. The appellant miserably failed to tender evidence in support of its claim .by making available above information/details at the stage of the appellate proceedings also. (The remarkable point is that the appellant had failed to corroborate the above claim with documentary evidence even al the stage of ITA No. 188/Del/2014 UT Starcom Inc. 3 assessment proceedings. Thus, the initial burden of proof statutorily fastened on the appellant remained un-discharged right from the beginning. Book entries or auditor s certificates and invoices cannot be a substitute for evidence in such cases. They can al best be regarded as mere narration of facts bereft of proof. In this context, it is worth mentioning that the Indian Evidence Act, 1872 has no application to enquiries by Tribunals, even though they may be judicial in character. The law only requires that rules of natural justice should be observed in the conduct of enquiries and if they do so the decisions of Tribunals are not liable to be impeached. Income Tax authorities are not strictly bound by the rules of evidence. In Maharashtra State Board of Secondary and Higher Secondary Education v. K S Gandhi, it was held: “It is thus well-settled law that strict rules of the Evidence Act and the standard of proof envisaged therein do not apply to depart menial proceedings or domestic tribunal. It is open to the authorities to receive and place on record all the necessary relevant, cogent and acceptable material facts though not proved strictly in conformity with the Evidence Act. The material must be germane and relevant to the facts in issue. In grave cases like forgery, fraud, conspiracy, misappropriation etc. seldom direct evidence would be available. Only the circumstantial evidence would furnish the proof. In our considered view inference from the evidence and circumstances must be carefully distinguished from conjectures or speculations. The mind is prone to take pleasure to adapt circumstances to one another and even in straining them a little to force them to form parts of one connected whole. There must be evidence direct or circumstantial to deduct necessary inferences in proof of the facts in issue. There can be no inferences unless there are objective facts, direct or circumstantial from which is infer the oilier fact which it is sought to establish……….The standard of proof is not proof beyond reasonable doubt 'but' the preponderance of probabilities tending to draw an inference that the fact must be more probable. Standard of proof cannot be put in a straitjacket, formula. No mathematical formula could be laid on degree of proof. The probative value could be gauged from facts and circumstances in a given case. The standard of proof is the same hoth in civil cases a and domestic enquiries. The Law of Evidence is the lex fori which governs the Courts. Whether a witness is competent or not whether a certain matter requires to be proved by writing or not whether certain evidence proves a certain fact or not that is to be determined by the law of the country where the question arises, where the remedy is sought to be enforced, and where the Court sits to enforce it. The Law of Evidence is a part of the law of procedure.” ITA No. 188/Del/2014 UT Starcom Inc. 4 Going by the above, it is held that in the instant case, Section 101 of the Indian Eidence Act, 1872 was attracted irrespective of the fiscal law governing the individual. For the sake of convenience the said section is reproduced below:- \"Whoever desires any Court to' give judgment as lo any legal right' or 'liability dependent on the existence of facts which he asserts must prove that those facts exists. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.\" In the instant case, the appellant sought to substantiate the loss of goods in transit with the help of the four facts cited supra viz entries to the above effect in the books of account, the auditor's report, invoices and case laws. As regards, the entries in the books of account Section 34 of the Indian Evidence Act, 1872 is worth: referring to. The said section says \"entries in the books of account, including those maintained in an electronic form) regularly kept in the course of business are relevant whenever they refer to a matter into which the Court has to inquire but such statements shall not alone be sufficient evidence to charge any person with liability.\" Thus on a plain and simple reading of the above section it shall be amply clear that entries are not sufficient without other evidence to prove a fact, though they may be relevant, In the instant case, mere book entries of loss of goods in transit were not sufficient to prove the factum of the claim of loss amounting to Rs 2,73,29,510/-. The same thing may be said about the invoices and the audit report also i.e. though relevant to the fact of purported purchase only, not sufficient. In the case at hand it may be said that the appellant failed to distinguish toe inference of loss of goods in transit from the Evidence and circumstances from inference from conjectures or speculations. In other words he tried to adapt circumstances to one another and even strained them a little to draw the conclusion that the documents cited supra (i) to (iv) in their possession went to establish the fact of loss of goods in transit although it had no proof of what happened when, where and how, resulting in the alleged loss. Thus there was no gainsaying the fact that there was no evidence direct or circumstantial to deduce necessary' inferences in proof of toe fact in issue. There were no objective facts, direct or circumstantial from which it could be inferred that the claim of loss of goods in transit was bonafide. As a matter of fact none of the above evidence relied on by the appellant had any rational nexus or logical relationship with the actual occurrence of the loss of goods in transit. Hence, the documents relied on by the appellant, though relevant to the fact of purported purchase only, were no proof of the actual happening of the event resulting in the ITA No. 188/Del/2014 UT Starcom Inc. 5 disappearance of goods. The inference of loss is held to be based on speculation and conjectures. As regards the case laws, they could not be of any aid to the appellant in as much as none of them were identical in terms of the peculiar factual matrix obtaining in the case at hand. Having regard to all the aforesaid facts and circumstances, I am of the considered view that the ground no. 2 deserves to be dismissed as the appellant did not have any evidence to substantiate its claim of loss of goods in transit for Rs.2,73,29,510/- and the addition is sustained. 5.00. In the result, the grounds of appeal are dismissed.” 5. The assessee’s case in light of it’s detailed paper book running into 31 pages comprising the corresponding of import invoices, financial statement and confirmations from the installation client etc., is that once it has already booked the corresponding revenue, the issue herein deserves to be restored back to the Assessing Officer for afresh factual verification thereof. We find no merit in the assessee’s instant arguments once it has come on record that till date, it has nowhere proved it’s claim of the corresponding material losses in transit despite the fact that the assessment year before us is A.Y. 2006-07. It further transpires during the course of hearing that the assessee has not filed any material before us to have recorded the corresponding material in the books of account forming part of it’s either fixed assets or stock-in-trade giving rise to the revenue expenditure item of material loss in transit i.e. in regular business activities. We thus, affirm both the learned ITA No. 188/Del/2014 UT Starcom Inc. 6 lower authorities’ action rejecting the assessee’s impugned claim in very terms. 6. This assessee’s appeal is dismissed. Order Pronounced in the Open Court on 19/03/2025. Sd/- Sd/- (S. Rifaur Rahman) (Satbeer Singh Godara) Accountant Member Judicial Member Dated: 19/03/2025 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR "