2016 (11) TMI 713 - HC - Income Tax

Disallowance of commodity loss - ingenuine transaction - Held that - The onus was upon the assessee to prove the genuineness of the transactions by producing the relevant evidence and the material on record which he failed to do. He was unable to produce the authorised representatives of M/s. Anand Commodities Trading Services as the initial onus was upon him to establish genuineness of the loss. Opportunity was given to the appellant in this regard. The evidence collected from Ludhiana Stock Exchange and confronted to the assessee proved that the commodity transaction was not actually carried out but was merely accommodation entries. Further, Ludhiana Commodities Trading Services Limited in reply dated April 8, 2013 to the query dated April 3, 2013 by the Commissioner of Income-tax (Appeals) intimated that M/s. SMS and Company Prop. Shri Sham Sunder Khanna was not registered as a client with M/s. Anand Commodities Services Limited in the year 2015-16. The assessee-appellant was prima facie required to prove the validity of the transaction. The assessee having failed to do so, no right accrues in his favour on account of non- summoning of the witness under section 131 of the Act by the Assessing Officer.

Issues:
1. Confirmation of commodity loss by the Income-tax Appellate Tribunal.
2. Disallowance of commodity loss due to lack of evidence.
3. Legality of confirming the impugned additions without considering evidence.

Confirmation of Commodity Loss:
The appellant, a stockbroker, declared income for the assessment year 2006-07 and incurred a commodity loss of Rs. 7,16,617, with Rs. 4,20,824 being disallowed by the Assessing Officer. The appellant's appeal before the Commissioner of Income-tax (Appeals) was partly allowed, but the Tribunal upheld the addition of Rs. 4,20,824. The appellant failed to produce concrete evidence during the assessment proceedings to prove the genuineness of the transactions. Despite the appellant's request to summon the concerned persons under section 131 of the Income-tax Act, no action was taken. The Tribunal found that the commodity transaction was not genuine, and the appellant's failure to produce material and evidence led to the confirmation of the addition.

Disallowance of Commodity Loss due to Lack of Evidence:
The appellant's counsel argued that the Assessing Officer's failure to summon the authorized representatives of M/s. Anand Commodities Trading Services affected the findings against the appellant. However, the authorities found that the appellant did not meet the initial onus of proving the transactions' genuineness. The evidence collected indicated that the commodity transactions were accommodation entries, not genuine trades. The appellant's inability to prove the validity of the transactions, despite opportunities provided, led to the maintenance of the addition of Rs. 4,20,824. The Tribunal emphasized the appellant's failure to produce necessary material and evidence, supporting the decision to uphold the addition.

Legality of Confirming Impugned Additions:
The appellant contended that the authorities confirmed the additions without considering various contentions and evidence, leading to a perverse and illegal order. However, the Tribunal found that the appellant did not provide sufficient evidence to prove the genuineness of the transactions. The judgment cited by the appellant's counsel was deemed irrelevant to the current case. As the appellant failed to refute the findings recorded by the authorities, no substantial question of law arose, resulting in the dismissal of the appeal.

In conclusion, the High Court upheld the Tribunal's decision to confirm the addition of Rs. 4,20,824 as commodity loss, emphasizing the appellant's failure to substantiate the genuineness of the transactions. The lack of concrete evidence and material led to the dismissal of the appeal, as no substantial question of law was identified to challenge the authorities' findings.

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