ESSENTURE TRADING P.LTD,MUMBAI vs. ACIT 10(2), MUMBAI

आदेश / O R D E R

Per Sanjay Garg (Judicial Member)

is regarding the disallowance of business loss of Rs. 1,12,33,039/-

2. The brief facts of the case that are the assessee is engaged in the business of trading in HR & CR coils and galvanized coil/sheets. The assessee returned the loss of Rs. 1,12,33,039/- from its trading activity which was disallowed by the Assessing Officer [AO] observing that the assessee could not establish physical movement of goods and failed to furnish the reliable evidence regarding the sale and purchase of goods. He also observed that there were circular transactions which mean that the goods purchase from one party were ultimately sold to the same party. He therefore held that the genuineness of transactions was not proved. Assessee unsuccessfully assailed the order of the AO before the Ld. CIT(A)

3. Before us, the Ld. AR of the assessee has submitted that the assessee could not show the evidence regarding movements of goods from one location to other as the same were actually not moved from the Essenture Trading Private Limited Assessment Year 2009-10 business premises of the assessee. In fact, the assessee books the order and asks the dealer to directly deliver the goods to the purchaser and in this way the assessee earns commission income on the said transactions. The transportation charges are borne by the purchaser only. The income so earned from above stated trading activity is offered for taxation. On the other hand the Ld. DR has stated that if such an plea of the assessee is to be accepted, then there was no question of incurring any loss by the assessee as no prudent man will book an order on loss basis, when in fact the goods are to be directly delivered by the dealer to the purchaser. The loss under the circumstances can only happen if the goods purchased by the assessee are stored in his godown but thereafter the prices of the goods fall down. However, it is own case of the assessee that he does not purchase and store the goods rather only books order from the purchaser and instruct the dealer to the supply the goods directly to the party and earns his cut/commission on the transaction. The Ld. DR has further demonstrated to us that in fact certain goods have been purchased from one party and sold to other party and thereafter purchased from that other party and resold to the first party and hence there were circular transactions. The Ld. AR could not convinces us about these type of circular transactions and thereby incurring of loss, when the assessee does not store goods at its own.

Essenture Trading Private Limited Assessment Year 2009-10 4 At this stage Ld. AR has stated that in fact the assesse till date has not made payments relating to the above transactions to the concerned parties and that the same are still outstanding in the books of the assessee. He has, therefore, submitted that if the loss on account of these transactions is to be disallowed during relevant year under consideration, then no additions should be made in subsequent years on account of cessation of liability relating to the outstanding amount in relation to the transactions in question.

5. We have considered above submission of Ld. AR. At this stage, the question before us is regarding the genuineness of the loss returned by the assessee. We find that the lower authorities have rightly disallowed the above stated loss as the assessee has miserably failed to prove the genuineness of the transactions in question resulting into the above stated loss. So far as the plea of the assessee that the loss disallowed this year should be considered in the subsequent years if the assessee write off the liability arising out of the above stated transactions is concerned, the issue is left open to the decided when the appropriate stage comes. The assessee may take this plea at the appropriate time in appropriate proceedings for that subsequent relevant year, if any such addition is made by the AO during such proceedings on this account. The Income Tax Authorities will look into the above plea of the assessee and decide the same in accordance with the law. However, so far as the disallowance of Essenture Trading Private Limited Assessment Year 2009-10 loss for the assessment year under consideration is considered, we do not find any infirmity in the impugned order of the CIT(A), the same is accordingly upheld.