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2018 (9) TMI 1626 - AT - Income TaxDisallowance of artificial loss made on account of fictitious transactions - bogus purchases - Held that:- It is clear from the order of the AO that Highland Industries Limited booked bogus sales to Saraf Chemicals Limited and bogus purchases from L.N Chemicals and Modhera Chemicals. The profit was generated out of this arranged transaction of sale and purchase. This profit was set off from fictitious loss created out of transactions between Highland Industries Limited and Tempatation Foods Limited. AO held that the loss claimed by the assessee company on the transactions made from Temptation foods was fictitious and ought to be disallowed. This factious loss was created only to square off the profits shown from Sharaf Chemicals. Without controverting the detailed finding so recorded by the AO, the CIT(A) has deleted the addition merely by observing that the books of accounts of the assessee were audited and have not been rejected by the AO. CIT(A) also stated that no enquiry was done by the AO to establish that the activity on which losses were shown by the assessee were bogus. Without giving any positive finding on the enquiry which AO has failed to do, the CIT(A) cannot delete the addition just by stating that AO has failed to do the enquiry. There should be positive finding by CIT(A) in support of his action of deleting the addition made by AO. We set aside the order of CIT(A) on this issue and restore the matter back to his file for making due enquiry to find out the nature of loss having been incurred by the assessee which was used to set off the income found to be earned during the course of survey. - Appeal of the Revenue is allowed for statistical purposes.
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