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2016 (4) TMI 79 - AT - Income TaxPenalty levied u/s 271(1)(c ) - Disallowance of loss - Held that - A perusal of the documentary evidences take to a conclusion that the assessee has demonstrated the genuineness of the transaction. The enquiry itself was taken up by the revenue authorities many years after the transaction took place. In view thereof, the claim of loss of ₹ 7,42,631.78 incurred by the assessee in purchase and sale of cotton bales through M/s Garg Enterprises has to be allowed. Allowability of loss in respect of transactions with M/s Chandulal Mohan Lal - Held that - The loss has to be allowed, as the assessee has demonstrated the genuineness of the same Loss in the case of M/s Sita Ram Sher Singh and M/s Mahalaxmi Cotton P.Ltd. - Held that - As loss claimed should be allowed, though there are certain deficiencies on the part of the assessee. The deficiencies are not such that the assessee s claim could be disallowed. Thus the penalty has no legs to stand. - Decided in favour of assessee
Issues Involved:
1. Disallowance of loss incurred by the assessee firm in trading with various firms. 2. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Disallowance of Loss Incurred by the Assessee Firm in Trading with Various Firms: Disallowance of Loss of Rs. 7,42,631.78 with M/s Garg Enterprises: The A.O. disallowed the loss on the grounds that registered letters sent to the firm were returned undelivered, local traders denied the firm's existence, and discrepancies in expenses and balance sheet entries. The assessee countered by stating the firm had closed in 1999, provided documentary evidence including sales and purchase vouchers, confirmatory letters, affidavits, and statements from the firm's manager. The Tribunal concluded that the assessee had demonstrated the genuineness of the transactions and allowed the claim of loss. Disallowance of Loss of Rs. 1,50,506.00 with M/s Chandu Lal Mohan Lal: The A.O. disallowed the loss based on discrepancies in bank account details, statements from third parties, and non-production of account books. The assessee provided evidence such as bank account statements, confirmation letters, affidavits, and other documents to support the genuineness of the transactions. The Tribunal found the evidence sufficient to demonstrate the genuineness of the loss and allowed the claim. Disallowance of Loss of Rs. 1,85,233.08 with M/s Sita Ram Sher Singh and Rs. 1,99,038.74 with M/s Mahalaxmi Cotton P. Ltd.: The A.O. disallowed the losses citing issues such as insufficient bank balances at the time of transactions, discrepancies in cheque numbers, and non-production of account books. The assessee argued that the transactions were genuine, provided bank certificates, and other documentary evidence. The Tribunal acknowledged certain deficiencies but found them insufficient to disallow the claims, thus allowing the losses. 2. Confirmation of Penalty Levied Under Section 271(1)(c) of the Income Tax Act, 1961: Since the Tribunal deleted the quantum additions, it held that the penalty under Section 271(1)(c) had no basis to stand. Consequently, the penalty was cancelled, and the appeal regarding the penalty was allowed. Conclusion: The Tribunal allowed the appeal of the assessee, directing that the losses disallowed by the A.O. and confirmed by the Ld.CIT(A) be allowed. Additionally, the penalty imposed under Section 271(1)(c) was cancelled. Both appeals filed by the assessee were allowed, and the order was pronounced in the open court on 15th February 2016.
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