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TMI Blog2017 (6) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished by the CIT TDS to the Jurisdictional Administrative CIT of the assessee about the manner in which loss was self created by the assessee in dealing in cotton knitted fabrics, definitely would constitute information, warranting reopening of assessment u/s 147 of the Act. We find from the reasons recorded by the ld AO, there was a live link with formation of belief that income in the hands of the assessee had duly escaped assessment by way of alleged trading loss of cotton knitted fabrics. Hence we are not inclined to accept the arguments of the ld AR on the validity of assumption of jurisdiction u/s 147 of the Act. Hence we hold that the assessment has been validly reopened in the instant case for the Asst Year 2008-09. - Decided against assessee. - I.T.A. No.49/Kol/2014 - - - Dated:- 2-6-2017 - Shri A. T Varkey, Judicial Member And Shri M. Balaganesh, Accountant Member For the Appellant : Shri Manoj Kataruka, Advocate For the Respondent : Shri Goulen Hangshing, CIT, DR ORDER Per M. BALAGANESH, AM 1. This appeal by assessee is arising out of order of CIT(A), Central-I, Kolkata vide appeal No. 45/CC-VIII/CIT(A) C-I/13-14 dated 2.9.2013. Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the persons to whom goods were sold which were purchased from the assessee. M/s Girsih Commercial Pvt Ltd informed that the goods purchased from the assessee were sold to M/s Coral Environments Pvt Ltd. M/s Coral Environments Pvt Ltd submitted that the goods purchased / sold from / to the assessee were sold / purchased to / from M/s Godawari Electro Contractors Pvt Ltd. M/s Visage Equipments Pvt Ltd informed that the goods purchased / sold from / to the assessee were sold / purchased to / from M/s Vaishali Housing Projects Pvt Ltd, M/s Sukaram Marketing Ltd, M/s Suryamani Financing Pvt Ltd and M/s Zipco Industrial Finance Pvt Ltd. M/s SPR Textiles Pvt Ltd informed that the goods sold to the assessee were purchased from M/s Coral Environments Pvt Ltd. M/s Zipco Industrial Finance Pvt Ltd informed that the goods sold to the assessee were purchased from M/s Coral Environment Pvt Ltd. The ld AO opined that it is apparent that these transactions are not normal business transactions, but camouflaged as trading in cotton knitted fabrics to facilitate the assessee to create bogus loss so that the real income from interest can be set off. 3.2. The ld AO observed that from the ledger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly ₹ 1,59,352/- as freight, coolie and cartage expenses which is not all commensurate with the volume of trading activities carried out by the assessee. Moreover, the assessee did not produce any challans, vehicle number for carriage of alleged goods. No opening or closing stock of goods were found in the profit and loss account over the years. 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 CIT(A) 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. Aggrieved, the assessee is in appeal before us on the following grounds:- 3) That on the facts and in the circumstances of the case, the action of the Ld. CIT(A) to confirm the addition made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that this issue is no longer res integra in view of the fact that this tribunal had an occasion to discuss the very same issue in assessee s own case for the Asst Year 2009-10 in ITA No. 678/Kol/2013 dated 13.7.2016 wherein it was held as under:- 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 bills were produced to support this argument. The assessee had only tried to create documents in the form of purchase and sale invoices. We don t find force in the argument of the ld AR that the tax deductions to the tune of ₹ 7.02 lacs and ₹ 6.22 lacs in the financial years ended 31.3.2008 and 31.3.2009 would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Visage Equipments Pvt.Ltd. vii) M/s Tulip Machineries Pvt.Ltd is a common shareholder of M/s Visage Equipments and M/s VaishaliHousing Projects Pvt.Ltd. viii) M/s Coral Environment Pvt.Ltd, M/I Visage Equipment Pvt.Ltd, M/sVaishali Housing Projects Pvt.Ltd. and M/sGodwari 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 VaishaliHousing Projects Pvt.Ltd have same office at 9, Ezra Street, Kolkata.' x) 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 that the loss is self created and it had not occurred naturally to the assessee. All the transactions of purchase of goods being made at higher price is made from the group company having common shareholder / directorship and sold to a group company having common shareholder / directorship at a lesser price thereby incurring loss. All the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 stated that the assessee very likely had tried to reduce its income by booking fictitious loss and that non-verification appeared to be highly suspicious. This tribunal held that the revisionary powers u/s 263 of the Act cannot be invoked on mere presumptions and surmises nor on suspicion. Based on these findings, the tribunal quashed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 SmtIndraJalanvs 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 shirtings, 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 IndraJalanvs ITO supra by arguing that, firstly the business was carried on in that case only for few days and totally consisted of only purchases and sales on six occasions. In the instant case before us, the transactions were carried out throughout the year. Secondly, there was a clear cut finding in that case that the purchase transactions were made by SmtIndra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.AnilPandey, 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 available for storing goods as claimed by the assessee. The ld AO and ld CITA had given a categorical finding that the goods were originated from Godawari Electro Contractors Pvt Ltd and again returned back to it after changing hands amongst Coral Environment Pvt Ltd, India Finance Ltd, Visage Equipments Pvt Ltd and Vaishali Housing Pvt Ltd. The directors an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Asst Year 2008-09 was filed on 28.8.2008 disclosing total income of ₹ 4,99,188/- and the same was processed u/s 143(1) of the Act on 17.11.2009. Later based on the report of the ITO Ward 58(1) TDS Circle, Calcutta and also based on the order of the ld CIT u/s 263 of the Act for the Asst Year 2007-08, the assessment was reopened for the Asst Year 2008-09. The assessee stated that the return already filed may be treated as a return in response to notice u/s 148 of the Act and sought for reasons recorded for reopening the assessment. The reasons recorded were duly furnished by the ld AO to the assessee vide letter dated 12.7.2012. The following sequence of events would explain the issue better:- 29.4.2010 Application made by the assessee for grant of lower deduction of TDS 29.4.2010 Survey conducted by TDS wing of IT department 29.4.2010 to 16.8.2010 Report of the CIT, TDS forwarded to the regular CIT, Central having jurisdiction over the case of the assessee company stating that the deals in cotton knitted fabrics and the resultant loss is fictitious 17.8.2010 / 18.8.2010 Intimation of revision proceedings u/s 263 of the Act fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted survey and during the course of said proceedings, understood the entire modus operandi of the assessee s dealings in the trading of cotton knitted fabrics and drew adverse inference about the same by stating that the loss incurred on such transactions is purely fictitious and the documents prepared in that regard in the form of purchase and sale invoices were purely manufactured and the assessee does not even have any premises for storage of the cotton knitted fabrics and the business address shown thereon is a simple space between the stairs of first and second floor, wherein a small table alone could be occupied. In fact the person in charge of the said premises Shri A Pandey, who was seated in the said small office space also stated before the TDS wing that he had been placed there only to attend to phone calls and receive correspondences. Viewed from this factual matrix of the transactions carried out by the assessee, we hold that the information / report furnished by the CIT TDS to the Jurisdictional Administrative CIT of the assessee about the manner in which loss was self created by the assessee in dealing in cotton knitted fabrics, definitely would constitute informa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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