TMI Blog2016 (7) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of order of CIT(A), Central-1, Kolkata vide appeal No. 256/CC-VIII/CIT(A)C-1/11-12 dated 24.01.2013. Assessment was framed by DCIT, C.C-VIII, Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AY 2009-10 vide his order dated 30.12.2011. 2. The only issue to be decided in this appeal is as to whether the ld CITA is justified in upholding the disallowance of loss on account of trading in cotton knitted fabrics in the sum of ₹ 12,46,51,755/- in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is in existence for the last three decades and is a listed company and the shares are quoted on stock exchange. It is a non-banking finance company (NBFC) registered with Reserve Bank of India (RBI). The assessee explained before the ld AO that it deals in shares and securities, cotton knitted fabrics and tyres and tubes. The assessee engaged in the trading of cotton knitted fabrics and incurred trading loss of ₹ 12,46,51,755/- which was disallowed by the ld AO on the pretext that the same has been self created by the assessee by indulging with transactions with controlled entities who are i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee Vaishali Visage India Finance (assessee) Coral Godawari 3.3. The ld AO called for the details of transportation charges and loading and unloading charges paid by it. In response to this, the assessee produced certain self made vouchers which show that the payment was made to the same person for coolie, cartage and freight. The ld AO observed that the total expenses debited under transportation charges was only ₹ 1,63,825/- which is not commensurate with the volume of trading activities carried out by the assessee. For this, the assessee took a different plea that in number of cases, the transportation arrangements had been made by the seller or buyer as per the arrangement and understanding and the relevant charges were included in the price of goods. However, he found that the copy of invoice cum challan does not speak so. Based on this, the ld AO observed that it is apparent that there is no actual movement of goods but only papers in the form of purchase and sale invoices were manufactured. 3.4. The ld CITA after going through the submissions of the assessee and the findings given by the ld AO in his order, upheld the order of the ld AO. Agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fashion:- Financial Year Trading loss Rs. Interest Income Rs. 2006-07 31702725 32051560 2007-08 136162256 132913163 2008-09 124651755 123851442 Hence, it is very clear that the assessee company had managed its transactions in such a way that its interest income could be set off with the loss and there would be no tax liability on its interest income. 3.6. We find from the miniscule portion of the transportation charges incurred in the sum of ₹ 1,63,825/- through matador vans which are supported only by self made vouchers but not with any evidences , and in all the cases, the payments made were within the statutory limits prescribed for deduction of tax at source u/s 194C of the Act, and applying the test of human probabilities , it could be safely concluded that there was no movement of goods for alleged purchase and sale of goods. It was also contended that the transportation is loaded in the purchase and sale bills. We find that no supporting b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Godwari Electro Contractor and M/s Visage Equipment and Coral Environments. v) M/s Mayank Services Pvt. Ltd is a common shareholder of M/s Coral Environments, M/s. Vaishali Housing Projects Pvt. Ltd and M/s Godwari Electro Contractor. vi) M/s Sheetal Exports Ltd is a common shareholder of M/s Coral Environments Pvt. Ltd and M/s Visage Equipments Pvt. Ltd. vii) M/s Tulip Machineries Pvt. Ltd is a common shareholder of M/s Visage Equipments and M/s Vaishali Housing Projects Pvt. Ltd. viii) M/s Coral Environment Pvt. Ltd, Ml/ Visage Equipment Pvt. Ltd, M/s Vaishali Housing Projects Pvt. Ltd. and M/s Godwari Electro Contractors Pvt. Ltd. have bank account with common bank i.e. Kotak Mahindra Bank, Rajendranagar Branch, New Delhi. ix) M/s. Coral Environments and M/s Vaishali Housing Projects Pvt. Ltd have same office at 9, Ezra Street, Kolkata. 14. From the above details, it is very clear that all five companies including the assessee company belong to one group. 3.7. The ld AO observed that there was a circuit of companies and the goods were transferred from one to another without actual movement of goods thereon. It would be pertinent to note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same group, the monies remain in the same group of the assessee. Having transactions with the same two companies and regularly booking only losses thereon is beyond human perception. The assessee s version that the assessee had transacted the transactions at the prevailing market prices is beyond the test of human probabilities. 3.8. It would be relevant to address the decision of this tribunal in assessee s own case for the Asst Year 2007-08, wherein this tribunal in ITA No. 252/Kol/2012 dated 11.12.2014 had quashed the revisionary jurisdiction invoked u/s 263 by the ld CIT for probing the very same issue in Asst year 2007-08. This tribunal had held that the very same issue had been duly enquired and examined by the ld AO in the original assessment proceedings for the Asst year 2007-08 and though the same is not written in the assessment order elaborately, it does not amount to lack of enquiry on the part of the ld AO. Moreover, for the Asst Year 2007-08, the ld CIT had also not made any prima facie enquiry to come to a conclusion that the order passed by the ld AO as erroneous in sofaras it is prejudicial to the interests of the revenue. Instead, the ld CIT only had st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws relied upon by the ld AR. Hence the same are factually distinguishable and cannot be applied to the instant case. We find that in the instant case, the ld AO had made extensive enquiries by bringing on record the price differences at various periods at which the assessee had transacted the purchase and sale of goods with a mala fide intent to book the loss by transacting with its group concerns. Hence the case laws relied upon by the ld AR are factually distinguishable with the facts of the instant case. 3.10. We also find that the reliance placed by the ld AO on the co-ordinate bench decision of this tribunal in the case of Smt Indra Jalan vs ITO in ITA No. 2177/Kol/2009 for Asst Year 2005-06 dated 13.4.2010 is very well founded. In the said case, the assessee in the business of trading in suiting and shirting, made purchases to the tune of ₹ 37,42,000/- and claimed to have sold at ₹ 24,86,121/- thereby incurring trading loss of ₹ 12,55,879/- and after claiming certain expenses, the assessee declared loss from business at ₹ 13,56,841/-. The ld AR vehemently argued by distinguishing this tribunal decision in the case of Indra Jalan vs ITO supra by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld AR also argued that the assessee had taken a premises on rent used for storage of goods. But on verification carried out by the Inspector of Income Tax , the assessee was only occupying a small space between the stairs of first floor and second floor of the building , wherein, only one table could be occupied. The survey team could not find the books of accounts during the survey and it was stated that the building in which office of the assessee was situated was to be renovated and hence the assessee had taken away its books of account to the premises of M/s Dadar Properties Finance Pvt. Ltd at Sarat Bose Road, Kolkata. But the survey team found that this fact to be untrue as Mr. Anil Pandey, an employee of the assessee, stated that he was there only to receive letters of the assessee and to attend telephone calls. The ld ITO TDS also did not find any renovation work being done in that office. Though the assessee had submitted rent receipt in respect of godown at 6th floor, 2/7, Sarat Bose Road, Kolkata, no such office could be located in the name of the assessee at 6th floor by the department on personal verification. These facts clearly prove that there was no space availa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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