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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Principal Commissioner of Income, Bathinda, (in brevity ‘the PCIT’) order passed u/s 263 of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2014-15. The impugned order was emanated from the order of ld. DCIT, Circle-1, Bathinda, (in brevity ‘the AO’) order passed u/s 143(3) of the Act.
2. The assessee has taken the following grounds:
“1. That the learned Principal Commissioner of Income Tax (Pr. CIT) has erred in assuming the jurisdiction under section 263 of the Income Tax Act and thereby setting aside the order to the file of the AO to frame the assessment de novo.
That the learned Pr. CIT has failed to consider the facts that the assessment was framed by the AO after due application of mind and verification of issues referred in the notice to his satisfaction in accordance with law, therefore, the finding of the learned Pr. CIT that the assessment has been made without making adequate enquiries is against the facts.
3. That the learned Pr. CIT has erred in law and on facts of the case by holding that the transaction of import of raw material & high seas sale thereof are speculative in nature as per provisions of section 43(5) of the Income Tax Act, whereas as per explanation furnished and material placed on record at the time of assessment as well as during the proceedings before the learned Pr. CIT, the transactions of import & high seas sales does not fall under the purview' of speculative nature.
That the learned Pr. CIT has erred in law and on facts of the case by holding that the transactions of import of raw material & high seas sale thereof are speculative in nature especially when transactions are non-
speculative transactions as per clause (a) of section 43(5) of the Income Tax Act.
5. That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed of.”
Brief fact of the case is that the assessment was completed u/s 143(3) of the Act after verification of books of account and other documents. The total turnover of the assessee was Rs.17,89,63,396/-. Out of which the high seas transaction was executed i.e. purchase goods of Rs.7,53,70,714/- on dated 26.04.213 and 14.03.2013 and related to purchase high seas sale was made for Rs.7,01,36,004/-. Accordingly, the assessee’s company incurred loss Rs.52,34,714/-. During assessment proceeding the ld. AO treated this sale as a normal sale. The assessment was completed u/s 143(3) & the claim of loss of the assessee was allowed by the ld. AO. The ld. PCIT by invoking section 263 alleged the assessment order as erroneous and prejudicial to the interest of the revenue. The ld. PCIT mentioned this transaction u/s 43(5) of the Act and the loss is rejected by treating the loss as the speculative loss. The assessee during processing u/s 263 submitted all relevant documents related to the transaction of the high sea sale for purchase of “Core Sheets” from M/s Metal One Corporation, Japan. Finally, the goods are delivered to different party. The ld. PCIT rejected the submission of the assessee and due to absence of actual delivery to the assessee the entire transaction was treated u/s 43(5) as speculative transaction and in absence of verification of the fact the assessment order is called erroneous and prejudicial to the interest of the revenue.
Accordingly, the assessment order was setting aside. Being aggrieved assessee filed an appeal before us.
4. The ld. AR of the assessee filed written submissions which are kept in the record. The ld. AR first invited our attention in the assessment order page 1 which is reproduced as below:
“The assessee filed its return of income for the assessment year 2014-15 on 29.11.2014 declaring loss of Rs.85,73,686/-. The case was selected for regular assessment through CASS. Notice u/s 143(2) dated 31.08.2015 was issued and was duly served on the assessee on 05.09.2015. Thereafter, notice u/s 142(1) alongwith a questionnaire dated 05.08.2016 was issued. In response, Sh. Parshotam K. Singla, Advocate & Sh. K.K.Singla, ITP, authorized representatives of the assessee and Sh. Krishan Kumar, Accountant attended the assessment proceedings and furnished information as requisitioned. The case was discussed and heard. The assessee entity is carrying on the business of Manufacturing of electronic transformers and sales therof. Books of account have been maintained by it in the form of cash book, ledger and Journal which were produced alongwith allied bills/vouchers and test checked. The accounts of the assessee have been audited as per the provisions of section 44AB of the I.T. Act, 1961 and audit report in form 3CA and 3CD was furnished by the assessee during the course of assessment proceedings.”
4.1 The ld. AR specifically mentioned that all the documents are submitted before the ld. AO during assessment and accordingly, the ld. PCIT collected all the details from the file of the ld. AO. The ld. AR further invited our attention in the submission before the ld. assessing officer where the details were submitted in point no. 6, which is the clear indication for submission of the relevant documents. The copy of this submission is reproduced as below:
4.2 The ld. AR further invited our attention in the copy of the bill, bill of lading, invoice of the seller at Japan and relevant vouchers. The ld. AR further argued that section 43(5) is mentioned about the non-delivery of goods. But it is never mentioned that the goods should be delivered to the assessee. From the documents, it is clearly indicated that the goods are duly delivered to M/s KRYFS Power Components Ltd. Mumbai. The relevant high seas sale agreement is annexed APB page 20 to 23.
The ld. DR vehemently argued and relied on the order U/s 263. The ld. DR filed a written submission and as per written submission the ld. DR respectfully relied on the order of Hon’ble Jurisdictional High Court in the case of Chaman Lal Madan Lal vs. CIT (1996) 89 Taxman.com 249 (P & H).
We heard the rival submission and considered the documents available in the record. First, the order of Jurisdictional High Court was duly mentioned by the ld. DR is clearly distinguishable where the delivery was not taken related to high sea sale. But in assessee’s case the delivery was executed and copy of the agreement is annexed. The ld. AR relied on the order of Coordinate Bench in the case of DCIT vs. G H Crop Science P. Ltd. in date of order 23.02.2023.
14.2 It is seen that the CIT(A) has stated on page 25 that the import of edible oil by the assessee from exporter outside India is not speculative as the edible oil was loaded in the ship by seller of goods which amounts to physical delivery of the goods taken by the buyer i.e., appellant as an importer. It has been further held by the CIT(A) that the edible oil has been purchased by the assessee while in transit and the appellant has sold the same to the subsequent buyer on High Seas and the physical delivery of the goods has been taken by the end user for which the evidence has been placed on record. The Ld. CIT(A) has categorically discussed on Page 24 that the fact of taking the physical delivery of the goods by the assessee is not the test for determining the speculative transaction in terms of section 43(5) but the test is settlement of the transaction entered into by the assessee or on his behalf otherwise than by actual delivery of the commodityor scrips. For this finding, he relied on the judgments of Andhra Pradesh High Court in the case of CIT vs. Lakshminarayana Trading Co (1995) 82 Taxman 301(AP); Rajasthan High court in the case of Sripal Satypal vs. ITO (2008) 217 CTR [Raj] and Calcutta High Court in the case of Hoosen Kasam Dada(India) Ltd. vs. CIT (1964) 52 ITR 171. Accordingly, it is held that the transactions of trading in edible oil by the appellant are not speculative in nature within the meaning of section 43(5) of the Act. Therefore, the business loss incurred by the appellant is eligible for set off against other income in terms of the provisions of section 71(1) of the Act.”