TMI Blog2021 (8) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act as supported by the copy of the order u/s 143(3) of the Act for Asst. Year 2012-13 framed on 13.2.2015. We, therefore, hold that the impugned 15 transactions giving rise to loss of are genuine and cannot be termed as colourable with the intention of evasion of tax and ld. Assessing Officer erred in disallowing the same. - Decided in favour of assessee. Addition made on account of diversion of fund - disallowance of interest expenses - AR before us contended that the own fund and interest free fund of the assessee exceeds the interest-free advances, therefore he was of the view that disallowance of interest is not warranted - HELD THAT:- Admittedly the assessee has given interest free loan and advances amounting to ₹ 31,61,09,415/- and simultaneously incurred interest cost of ₹ 14,51,773/- only. The ld. AR before us contended that interest free funds were available with assessee which exceeds the amount of loan and advances given without charging interest. There cannot be any disallowance of interest expenses in a situation where the own fund exceeds the amount of interest free advances provided by the assessee. As such, there is a presumption that the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hearing of appeal. 3. The 1st interconnected issue raised by the assessee in ground no. 1 to 3 is that the learned CIT (A) erred in confirming the disallowance of loss for ₹ 3,25,74,320/- after rejecting the book of accounts by treating the loss claimed by it as bogus in nature. 4. The facts in brief are that the assessee in the present case is an individual and engaged in the business of trading of Gold Bars Ornaments, silver and diamond under the name of style of M/s Adinath Impex. The assessee is also a shareholder in the companies as detailed under: S. No. Name of the company No. of shares % of holding 1. Aryavart Commodities Pvt. Ltd 2 lakh 5.98% 2. Aryavart Infrastructure Pvt. Ltd 1 lakh 9.56% 3. Adinath Ornaments Pvt. Ltd. 9.5 lakh 9.5% 4.1 The assessee has shown sales to above mentioned parties at concessional rate as compare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 4.1 crores only which is very insignificant. Further most of cash sale were made to random customer through counter and such customers mostly are reluctant to disclose their identity. Therefore, their address or contacts details were not mentioned on bills. 6.2 Likewise, the AO s observation that cash book and bank books are not in conformity is vogue and factually incorrect for the reason that cash and bank are containing different nature of transaction. Hence the same can never be matched except cash deposit or cash withdrawal from bank. Therefore, the rejection of books on the above ground is not justified. 6.3 The assessee with regard to concessional sale to related parties submitted that the AO identified three parties to whom sale were made allegedly at lower rate than rate prevailing in the market. At the first instance this observation of the AO factually is incorrect for the reason that out of such 3 parties there is not any sale made to one party namely Aryavart Commodities Pvt. Ltd. Thus, the very basis of disallowances of the loss claimed is wrong. Further the AO made general remarks that the sales are made at lower rate than market without pointing any spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A) vide his order dated 20.02.2013. The relevant portion of the order of the CIT(A) is as under: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Since the disallowance of loss made by the AO was held to be justified in the appellate proceedings for A.Y. 2009-10 and the issue identically involved in the appeal under consideration and hence the disallowance made by the AO is justified and the same is confirmed. Thus, the grounds raised by the appellant are dismissed. 10.1 In view of the above, we hold that the facts of the case for the year under consideration are identical to the facts of the case for the assessment year 2009- 10. Admittedly, the addition for the assessment year 2009-10 has been deleted by this ITAT in the own case of the assessee in ITA No. 1420/Ahd/2013 vide order dated 25-01-2017. The relevant finding of the order of the ITAT reads as under: 10. We have heard the rival contentions and perused the records placed before us and gone through the decisions relied on by the ld. AR. Assessee s appeal revolves round the solitary grievance against the order of ld. CIT(A) confirming addition of ₹ 77,95,670/- made by ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear and no anomaly has been found in the ITA No. 1420/Ahd/2013 Asst. Year 2009-10 15 books of account and assessee has shown a better GP. Assessee took an additional plea by submitting that it has received huge interest free advances from ACPL and if an interest rate of 15% is presumed then also an approximate interest cost of ₹ 48,04,106/- would have been borne by the assessee. With this additional plea assessee submitted that there has been no loss of revenue because on one hand there has been loss in the sale transaction and on the other hand interest has not been paid on the advance/credit received from ACPL. This additional plea was taken up by ld. CIT(A) in deciding against the assessee by observing that if the rate of interest is taken at 18% and it is applied on the credit balance lying with the assessee received from ACPL then approximately notional interest will work out to ₹ 72 lacs which is more or less matches with the loss suffered by the assessee in the impugned 13 transaction with ACPL and, therefore, these are colourable transactions attempted with sole objective of avoiding of true incident of taxation in the hands of the two parties. However, ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the very same day ITA No. 1420/Ahd/2013 Asst. Year 2009-10 17 there is a purchase of ₹ 1305 per gm from Harshad Jewellers vide its bill No.205 dated 20.3.2009. These facts in itself proves the volatility of gold/silver market and also shows the genuineness of the business transaction entered by the assessee which remains disproved even by the Revenue. At this juncture we would like to go through the judicial precedence adjudicating such type of issues. 13. We observe that Hon. Jurisdictional High Court in the case of Marghabhai Kishabhai Patel Co. vs. CIT (supra) while adjudicating the issue relating to purchase of tobacco from its partners at higher price than average price paid to outside parties and held that the Tribunal was not justified in disallowing a part of actual price of tobacco paid by assessee firm when it was not shown that the transaction was not bona fide or one or to be sham one or price paid was not what was shown in the books of account. It was further held that it was not open to the taxing authorities to disregard the figures of he transactions shown in the books of account of the assessee firm. Relevant portion of the Judgment of Hon. High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring ks shares to that subsidiary company and thus forgoing pan of its own profits and at the same time enabling its subsidiary to earn some profits, such a course is not impermissible under law. In view of this legal position and particularly in view of the decision of this High Court in Commissioner- of Income-tax v. Keshavlai Ckandula! [1966] 5^_JTR_12() (Guj), unless it has been shown that the transaction in question was a sham one or unless the value shown was not the value in the books of accounts or unless it was not a bona fide transaction, it is not op en to the taxing authorities to disregard the figures of the transactions shown in the books of account of the firm. The case before the Madras High Court in Sri Ramalinga Choodambikai Mills Ltd. v. Commissioner of Income-tax [1955] 28 ITR 952 (Mad) and before this High Court in Commissioner of Income-tax v. Keshavlai Chandulal [1966] 59_ITR^12P (Guj.) was directly converse of the case before us. In Keshavlai Chandulal's case [1966] 5J^JT]^J12() (Guj) the allegation was that the firm's profit was shown less by reason of the fact of sale to the partners at an undervalue. In the instant case before us it is alleged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on but in any event he had no right to depart from the prices shown in the books of account unless he found the transaction not to be a bona fide one or to be a sham one or unless he found that the prices paid were not what was shown in the books of account and since none of these three conclusions had been reached by him. he had no right to depart from the books of account of the assessee-firm, In view of these conclusions we hold that the Tribunal was not justified in disallowing a part of the actual price of tobacco paid to the partners and question No. (1) must, therefore, be answered in the negative, that is, in favour of the assessee and against the revenue. In view of our conclusion it is really not necessary to answer question No. (2) but in any event it appears that the conclusion reached by the Tribunal that the partners and their relatives were paid higher price was erroneous in law as the Tribunal has not compared comparables. We, therefore, answer question No. (2) in the affirmative, that is, in favour of the assessee and against the revenue. The Commissioner will pay the costs of this reference to the assessee. 14. We further observe that Hon. Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated a false fact in the document is not established. What appears from the Tribunal's order was that the real and main object was to safeguard these shares from being taken over by the Government in settlement of tax dues, and also that the buyer and seller were indirectly connected with each other. 15. The first proviso to section 12B(2) provides 'full value of the consideration for which the sale, exchange, relinquishment or transfer is made1 to be taken as the basis for the computation of the capital gains. Therefore, unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for computation of capital gains. The onus is on the revenue - the inferences might be drawn in certain cases but to come to a conclusion that a particular higher amount was in feet received must be based on such material from which such an irresistible conclusion follows. In the instant case, no such attempt was made. 16. As this Court has explained in K.P. Varghese's case (supra) that the second ingredient that is to say that the word 'declared' in sub-section (2) of section 52 is very eloquent and revealing. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictional High Court in the case of CIT vs. Amitbhai Gunvantbhai (supra) has held as under :- The Tribunal had overlooked one important fact, namely, that the entries in the books of account of 'G ', (HUF) were not challenged by the department as a device or as a cloak to evade the tax. Nowhere on the record the department challenged that the entries did not reflect the real transaction between the parties. In the absence of any such challenge, according to the assessee, it was not open to the Tribunal to come to the conclusion that the money was not received by 'G' in his capacity of HUF but was received by him in his capacity as the guardian of the assessee. The basic principle is the same in the law relating to income-tax as well as in civil law, namely, that if there is no challenge to the transaction represented by the entries or to the genuineness of the entries, then it is not open to the other side-in the instant case the revenue-to contend that what is shown by the entries is not the real state of affairs. No attempt was made by the department to show that, in fact, though the entries were made in the books of account of the HUF, the moneys wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d three parties it ended up without giving any iota of evidence against the assessee as the same have nowhere been highlighted in the assessment order. 18. We are, therefore, of the view that the action of ld. Assessing Officer was erroneous as he has selected only few transactions on which only loss has incurred without giving cognizance to the fact that assessee has gained in other transactions with the impugned parties which are very well evidenced with the independent itemwise transaction details forming part of the books of account of assessee placed at pages 35 to 45 of the paper book. Ld. Assessing Officer also failed to point out any mistake in the alleged transactions except mentioning that the loss has been incurred. Ld. Assessing Officer completely failed to appreciate that every assessee has his own style of doing business and more specifically in the kind of business assessee is entered into it is well established that there is regular fluctuations in the prices of gold/silver/diamonds and jewellery due to which profit/loss are incurred. In the present case when the assessee is maintaining regular books of account which are audited and all transactions are fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est free advance available to the appellant is much more and the AO has completely overlooked this fact while making disallowance of interest. The appellant has relied upon decisions in the case of Reghuveer Synthetics Ltd. 354 ITR 222 (Guj.) and Reliance Utilities Power Ltd. 330 ITR 340 (Bombay). 5.5. In the judgment of Reliance Utilities Power Ltd., it is held that if there is interest free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. This decision is based on finding of fact by the Tribunal that there were sufficient interest free funds available in that case. The real enquiry is whether there are interest free funds available on the asset side and in the absence of sufficient proof of available interest free funds no such presumption can be drawn. As the assessee failed to prove the same, the AO has rightly made the addition. Hence the ground of appeal is dismissed. 14. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 15. The learned AR before us contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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