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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. BILLAIYA
Instant appeal preferred by the assessee is directed against the order dated 13th February 2014, passed by the learned Commissioner (Appeals)–2, Mumbai, for the assessment year 2007–08.
The solitary issue invol.ved in this appeal is in relation to disallowance of loss claimed of ` 29,45,38,756.
M/s. Garima Tradelink Pvt. Ltd. 2
Briefly stated the facts are, assessee a company is engaged in purchase and sale of edible oil. For the year under consideration, assessee filed its return of income on 30th October 2007, declaring total income at ` nil. However, in the computation of income, the assessee had computed loss of ` 29,45,38,756. During the assessment proceedings, the Assessing Officer, on verifying the details of purchases expressed doubt regarding the genuineness of the purchases made by the assessee from few parties, hence, he issued notice under section 133(6) of the Act to the concerned parties. As alleged by the Assessing Officer, in response to the notices issued under section 133(6) of the Act, only few replies were received from the parties towards the fag end of the year, hence, could not be verified. Therefore, the Assessing Officer treating the purchases made by the assessee to be not genuine and mere book entries disallowed the claim of loss of ` 29,45,38,756 and treated it as an income of the assessee. Being aggrieved of the assessment order so passed, the assessee preferred appeal before the learned Commissioner (Appeals).
Before the first appellate authority, the assessee strongly contesting the allegation made by the Assessing Officer submitted that it has carried out its business of trading in edible oil either from Indore office or from Mumbai. It was submitted since the business involved
M/s. Garima Tradelink Pvt. Ltd. 3 high sea trading full fledged office is not required as transactions of purchase and sale took place over telephone and completed by endorsement of documents. As regards the allegation of genuineness of purchases made from certain parties, it was submitted that the complete details of parties along with the purchase bills having already been submitted no adverse inference can be drawn. On the basis of submissions made, the learned Commissioner (Appeals) called for a remand report from the Assessing Officer. In the remand report, the Assessing Officer, though accepted that parties from whom assessee had effected purchases have responded to the notices issued under section 133(6) and supplied their account copies accepting that they have entered into transactions of sales and purchases with the assessee but the Assessing Officer again expressing doubt on the genuineness of such transactions opined that the purchases are mere book entries, hence, cannot be accepted. On the basis of the observations made by the Assessing Officer in the remand report, learned Commissioner (Appeals) opined that the assessee has not carried out any genuine business transactions and the transactions shown by the assessee are merely on paper, hence, cannot be accepted. Accordingly, he confirmed the disallowance of loss claimed by the assessee.
M/s. Garima Tradelink Pvt. Ltd. 4 5. The learned Counsel for the assessee reiterating the stand taken before the Departmental Authorities, submitted, the inferences drawn by the Assessing Officer and the learned Commissioner (Appeals) are merely on presumption and surmises as neither they have conducted any enquiry nor brought any material on record to indicate that purchases and sales made by the assessee to the concerned parties are not genuine and bogus. Drawing our attention to the remand report of the Assessing Officer, the learned counsel submitted, all the parties in response to the notices under section 133(6) had submitted their replies along with ledger copies accepting the fact that they have effected sales to the assessee. He also submitted, the entire transaction is reflected not only in the books of account but is through bank account. He submitted, bank statements were also furnished before the Departmental Authorities. The learned counsel submitted, as against the aforesaid evidences available on record establishing the genuineness of the transaction, the Assessing Officer has neither conducted any enquiry nor proved with evidence that the transactions are not genuine. Learned counsel submitted, even in the assessment made under section 143(3), in case of the concerned parties, these transactions have been accepted by the Department. The learned counsel submitted, sales tax assessment in case of assessee has also been completed for the impugned assessment year accepting the M/s. Garima Tradelink Pvt. Ltd. 5 turnover. He submitted, even in assessee’s own case in assessment year 2012–13, similar transactions entered with very same parties, have been accepted by the Assessing Officer while completing assessment under section 143(3) and furnished a copy of the order dated 25th November 2014. He further emphasised that the assessment order passed for the assessment year 2012–13 accepting similar transactions with very same parties was after the submission of the remand report for the impugned assessment year. He, therefore, submitted, there being no evidence on record to show that the purchase and sale transactions entered into with the concerned parties are not genuine the addition made on account of disallowance of loss claimed on mere presumption and surmises is not sustainable. For such proposition, he relied upon the following decisions:– i. Gujarat Gas Financial Services Ltd. v/s ACIT, [2013] 26 ITR 775 (Ahd.) ii. Jyotirindra Narain Sinha Choudhury v/s CIT, [1953] 31 ITR 20 (Cal.)
The learned Departmental Representative preferred to rely upon the order of the learned Commissioner (Appeals).
We have considered the submissions of the parties and perused the material available on record. On a perusal of the assessment order, it is very clear that the Assessing Officer has not conducted any M/s. Garima Tradelink Pvt. Ltd. 6 enquiry before treating the purchase transactions made by the assessee as non–genuine. As per his own admission, he has not verified replies received from the parties in response to notice under section 133(6). However, in course of the appeal proceedings, Assessing Officer was again given opportunity to examine the genuineness of the transaction entered into by the assessee. As could be seen from the remand report dated 30th December 2013, submitted by the Assessing Officer before the learned Commissioner (Appeals), he has accepted the fact that all the parties with whom the assessee has entered into purchase and sale transactions during the relevant previous year have responded to notices issued under section 133(6) and also accepting the transaction with the assessee they have submitted ledger account copies before the Assessing Officer. The Assessing Officer has also accepted that assessee has submitted bank statements through which the purchase and sale transactions were effected. Therefore, when all the parties with whom the assessee had entered into transactions have confirmed the fact by producing their ledger copies and as the transactions are through banking channels which is reflected in the bank statement of the assessee, the Assessing Officer by making certain general observations like Government duties have not been paid or assessee’s existence in Bombay in the address given is doubtful cannot treat the purchase and sale transactions to be M/s. Garima Tradelink Pvt. Ltd. 7 bogus / non–genuine merely on presumption and surmises without bringing any cogent or positive evidence on record to establish such fact. Moreover, as could be seen from the material placed on record, assessment in case of some of the parties with whom the assessee had entered into transactions have been completed under section 143(3) of the Act by respective Assessing Officers accepting the purchase and sale transactions entered into by them with the assessee. Therefore, when one wing of the Department has accepted the purchase and sale transactions, it is not understood how a different view can be taken in case of the assessee. Moreover, the fact that similar transactions with very same parties have been accepted by the Department while concluding assessment in case of assessee in assessment year 2012–13 cannot be ignored. Further, assessee’s claim that sales tax authorities have completed assessment for the relevant year accepting the purchase / sale turnover requires examination. On a perusal of the impugned orders of the Departmental Authorities, it is clear that the purchase and sale transactions shown by the assessee have been treated as bogus / not genuine by the Departmental Authorities being too obsessed with the fact that the address of place of business at Mumbai given by the assessee is doubtful as on enquiry conducted it was found that the said premise has been given on lease to another company. In our view, merely on M/s. Garima Tradelink Pvt. Ltd. 8 the basis of aforesaid fact, it cannot be concluded that the assessee has not carried out any business activity or the purchase and sale transactions shown are not genuine. In this regard, assessee’s claim that most of his business transactions are carried out from Indore office requires to be examined. As the Departmental Authorities have not conducted necessary investigation or enquiry into the matter in the manner it is required to be done, before making addition, we are unable to sustain it. However, we are inclined to restore the matter back to the file of the Assessing Officer for verifying assessee’s claim and making denovo assessment after providing due and adequate opportunity of being heard to the assessee and considering the evidence and material brought on record.
In the result, assessee’s appeal stands allowed for statistical purposes. Order pronounced in the open Court on 7th January 2016