M/S. CHAMICAL SALE CORP.,NEW DELHI vs. ITO, NEW DELHI

In support of the grounds, the Learned AR submitted that assessee, a firm, was having gross rental income of Rs.7,79,626 and the taxable income after statutory deduction at Rs.4,26,010. It had claimed set off of business loss of Rs.2,49,593 from the flower business. The assessee claimed that it had conducted flower business from 02.04.2007 to 29.7.2007 (four months 2 only) and had incurred the loss of Rs.2,49,593. It had purchased flowers of Rs.3,73,453 and had sold them at Rs.1,23,860 as such had incurred the loss of Rs.2,49,593. The Assessing Officer did not agree with the assessee on the basis that the assessee had not produced any pakka bills for the purchase and sale of flowers and there were no employees for the flower business. The Assessing Officer noted that the flower business was conducted by two partners, namely, Shri Suresh Goel and Shri Gautam Goel who were residing in a posh farm house at Sultanpur, Mehrauli. The Assessing Officer thus alleged that assessee had not conducted any flower business and the claim set off of business loss was bogus. The Learned AR submitted that the Assessing Officer failed to appreciate that the assessee was engaged in flower business since past several years and the same has been accepted as such. He submitted that normally the flower vendors and purchasers are unskilled and uneducated labours who are not accustomed to pakka bills and bank accounts. The Assessing Officer has made the disallowance of the claimed loss without rejected the books of account under sec. 145(3) of the Act. His finding that no businessman of the stature of partners would enter into such business is based on mere assumption and surmises. The Learned AR referred page Nos. 1 to 55 of the paper book under the certificate that page Nos. 1 to 51 were filed both before the Assessing Officer and Learned 3 CIT(Appeals) and page Nos. 52 to 55 are the submissions made on behalf of the assessee before the Learned CIT(Appeals). At page Nos. 1 to 51 have been placed, copies of acknowledgement of return and computation of income along with balance sheet for the financial year 2007-08 relevant to assessment year 2009-10; reply dated 24.8.2009, 02.03.2010, 22.4.2010, 8.7.2010, 6.9.2010 and 26.11.2010 filed by the assessee before the Assessing Officer, ledger account of purchase of flowers and sale of flowers during the year; cash invoices of purchase on sample basis; receipts as evidence of payments of house-tax of Rs.1,71,040; and partnership deed of Shri Suresh Goel, Shri Gautam Goel and Smt. Anuradha Goel for running the flower business. The Learned AR placed reliance on the following decisions: i) CIT vs. Dhanraj Giri Raja - 91 ITR 544 (SC); ii) CIT vs. Dalmia Cement (B) Ltd. - 254 ITR 377 (Del.); iii) Omar Salay Mohamed Sait vs. CIT - 37 ITR 151 (SC);