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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Per Pramod Kumar, Vice President:
By way of this appeal, the assessee has challenged correctness of learned CIT(A)’s order dated 12th February 2015, in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2011-12.
Grievances raised by the appellant are as follows:-
“1.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in dismissing the appeal of the appellant company.
2.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in holding that M/s Vishal Agrotech is a sister concern of the appellant company because of its office in the same premises and M/s Aditya Marine Limited is also a sister concern because of its different kind of nature of work.
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3.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in upholding the finding of the Assessing Officer that the transactions in castor oil and castor seeds were sham transactions and thereby excluding the total purchases and sales of the appellant company from the working of the total income.
4.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in upholding the action of the Assessing Officer in assessing the total income at Rs.1,66,58,916/- against the returned loss of Rs.28,03,216/-.
5.0 The appellant may be allowed to add, amend, alter or raise additional grounds of appeal.”
Briefly stated, the relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing Officer noted that the assessee has warehouse rental income of Rs.42,17,319/-, weigh bridge income of Rs.3,67,915/-, truck hiring income of Rs.14,40,000/- as also long term capital gain of Rs.1,39,35,612/- on sale of land. However, these incomes have been wiped off on account of alleged loss in castor seed and castor oil trading. When these transactions were probed further, it was noted that admittedly the assessee did not have any storage facility for castor oil and castor seed, and that there were no opening and closing balances in respect of the same. It was also found that the assessee had nine transactions in respect of castor oil, that on all these occasions purchases were made from one Vishal Agrotech operating from the same premises from which the assessee is operating, that on all the occasions castor oil was sold to Aditya Marine Ltd on the same date in the same quantity but on a substantially lower rate, and that the transactions, therefore, seemed dubious. In respect of castor seed transactions also, the story was on the same pattern. All the three purchase transactions for castor seed were from Golden Tulip Hotels & Apartments Pvt Ltd, all the three sale transactions were to RPK Agrotech Exports and Vishal Agrotech, and all these concerns were operating from the same premises from which the assessee was operating. When assessee was put to notice as to why loss incurred on these transactions not be disallowed, it was submitted that the transactions were genuine business transactions “executed at arm’s length” and the parties “enjoyed the address of the registered office for ease of work, and the same has been used for a short span” but their different addresses were also furnished. Rejecting these submissions, the Assessing Officer observed as follows:-
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“8. The written submission of the assesses has been carefully considered. The contention of the assessee that It had done purchase and sale of castor seed and castor oil because of the contract already entered into is devoid of any merit. To prove that there was obligatory contract, the assesses has furnished copy of 'Sale Orders’ on simple paper in which the assessee has requested M/s. Aditya Marine Ltd, Vishal Agrotch and RPK Agrotech Exports (P) Ltd to supply certain goods. The Photo copy of these so called ‘Contract Notes’ which are eight in number are annexed to this assessment order (numbered 1 to 8) and shall form part of the assessment order. The assessee had, as per invoices furnished, sold Castor Oil to M/s. Aditya Marine Ltd but as per these ‘Sale orders’, the assessee has requested M/s. Aditya Marine Ltd to supply Castor Oil. Similarly, the assessee had, as per copy of invoice, sold Castor seed to M/s. R.P.K. Agrotech Exports (P) Ltd but as per these ‘sale orders’, the assessee has requested M/s. R.P.K. Agrotech Exports (P) Ltd to supply castor seed. These papers are only an afterthought and fails to prove the so called ‘contract’ between the assessee and the other party. Therefore, these papers to prove 'contract sale’ are rejected these do not have any evidentiary value to prove ‘obligation to sale’. As far as address of M/s. Golden Tulip Hotels & Appts (P) Ltd, M/s. Vishal Agrotech and M/s RPK Agrotech are concerned, these have been shown based at the assessee’s premises only as per the invoices furnished in written submissions. Photo copy of these invoices are also annexed to this order (numbered 9 to 11) and shall form part of the assessment order. Admittedly, M/s. Golden Tulip Hotels & Appts (P) Ltd and M/s. RPK Agrotech Pvt. Ltd. are associate concern also. Thus the theory of 'contract sale' or ‘obligatory sale' contended by the assessees is rejected and the loss claimed by the assessee in castor oil and castor seeds trading transactions is ignored and all transactions in castor oil and castor seeds are held as sham transactions. Penalty Proceedings u/s 271(1)(c) of the Income-tax Act is initiated for furnishing inaccurate particulars of income.
Without prejudice to the above, all the transactions in castor oil and castor seeds are speculative transactions as the assessee has not obtained the delivery of goods of alleged trading since the purchased item was sold on the same day in the same quantity and also that there is no transportation expenses claimed by the assesses.”
The loss on these transactions was thus disallowed. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. Learned CIT(A), in a very elaborate and well reasoned order, confirmed the action of the Assessing Officer by observing as follows:-
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The assessee is aggrieved and is in appeal before us. 6. We have heard the rival submissions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
All that the learned counsel has contended before us is that the mere fact that these entities were operating from the same premises cannot lead to the inference that these were sister concerns or the transactions were collusive. He invites our attention to the elaborate documentation in support of genuineness of the transaction and submits that this documentation cannot be ignored. The contentions raised before the authorities below were reiterated.
In our considered view, the arguments of the learned counsel are somewhat superficial and miss the fundamental genuineness aspect as has been well elaborated by learned CIT(A) in an erudite analysis. The variations in castor oil and castor seed prices are not supported by the authoritative data reproduced by the CIT(A). The sequence of events, showing repeated loss transactions, do not make sense either. It is also difficult to understand that when ultimate buyer and the seller operate from the same premises, why is the assessee roped in every time, and every time that happens, assessee incurs a loss. There is no explanation about the nature of office sharing arrangement or the nature of their association. The “ease of business” for every connected party operating from the same premises is too vague an explanation to merit judicial approval.
As we hold so, we are reminded of Hon'ble Supreme Court's observation, in the case of CIT v. Durga Prasad More [1971] 82 ITR 540, to the effect that "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". Similarly, in a later decision in the case of Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89 (SC), Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. ...............Similarly the observation .................. that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove
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that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available ........................................................In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably". We will be superficial in my approach in case we simply go by the self serving documents filed by the assessee and overlook clear the unusual pattern in the documents filed by the assessee and pretend to be oblivious of the ground realities. As Hon'ble Supreme Court has observed, in the case of Durga Prasad More(supra), .......it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents". As a final fact finding authority, this Tribunal cannot be superficial in its assessment of genuineness of a transaction, and this call is to be taken not only in the light of the face value of the documents sighted before the Tribunal but also in the light of all the surrounding circumstances, preponderance of human probabilities and ground realties. Genuineness is a matter of perception but essentially a call on genuineness of a transaction is to be taken in the light of well settled legal principles. There may be difference in subjective perception on such issues, on the same set of facts, but that cannot be a reason enough for the fact finding authorities to avoid taking subjective calls on these aspects, and remain confined to the findings on the basis of irrefutable evidences. Hon'ble Supreme Court has, in the case of Durga Prasad More (supra), observed that "human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law". This faith in the Tribunal by Hon'ble Courts above makes the job of the Tribunal even more onerous and demanding and, in my considered view, it does require the Tribunal to take a holistic view of the matter, in the light of surrounding circumstances, preponderance of probabilities and ground realities, rather than being swayed by the not so convincing, but apparently in order, documents and examining them, in a pedantic manner, with the blinkers on.
In view of the above discussions and bearing in mind entirety of the case, we approve well reasoned order of the CIT(A) and decline to interfere in the matter.
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In the result, the appeal is dismissed. Pronounced in the open court today on the 11th June, 2019
Sd/- Sd/-
Ms. Madhumita Roy Pramod Kumar (Judicial Member) (Vice President) Ahmedabad, the 11th day of June, 2019 **bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad
Date of dictation: .....order prepared as per 7 pages manuscripts of Hon’ble VP- attached......11.06.2019.. 2. Date on which the typed draft is placed before the Dictating Member: .... 11.06.2019... 3. Date on which the approved draft comes to the Sr. P.S./P.S.: …11.06.2019... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement: .... 11.06.2019... 5. Date on which the file goes to the Bench Clerk : . ……. 6. Date on which the file goes to the Head Clerk : ……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: …. 8. Date of Despatch of the Order: ………………......