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TMI Blog2019 (7) TMI 1557X X X X Extracts X X X X X X X X Extracts X X X X ..... m the transactions have been entered as to whether they are at arm s length with each or not. The unusual loss hence obviously needed explanation. The assessing officer asked the assessee to explain the reason for the unusual loss. The assessee never gave any explanation. The assessing officer without any application of mind and without bringing on record the reply or the result of any further enquiry laconically passed the summary assessment order allowing the huge loss. In these circumstances the Learned counsel of the assessee s contention that assessee has provided all the necessary details and the assessing officer has applied his mind is clearly not sustainable. Assessee has not given the explanation for the unusual loss despite inquiry. It has also not given details of sister concern. This is vital in view of the dubious nature of layered transaction. Hence in the background of the aforesaid discussion and precedent in our considered opinion there is no infirmity in the order of learned CIT. hence, we uphold the same. - Decided against assessee. - I.T.A. No. 3758/Mum/2018, I.T.A. No. 3759/Mum/2018 - - - Dated:- 19-7-2019 - Shri Shamim Yahya (AM) AND Shri Amarjit Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order dated 18,03.2016 passed by the assessing office for A.Y, 2013-14 in it's case should not be set aside and AO be directed to make fresh assessment. 5. The learned Commissioner of income tax further referred to his show cause notice issued to the assessee in brief as under :- Scrutiny of records revealed during the assessment year under consideration, you had purchased Crude Palm. Oil on high seas of an amount of ₹ 4,10,21,70,317/- and the same were sold out on high seas at a consideration of ₹ 3,86,03,28,219. These high, seas purchase and sale transactions were executed on 16 different occasions on back to back basis. You had purchased the commodities i.e. crude palm Oil and sold it in full at lower rate on the same date on all the 16 occasions on various dates during the period from October 2012 to December 2012 of the financial year 2012-13. The party wise details of purchase and sates along with names of the sellers, buyers, vessel name, port name, quantity purchase sold, per MT cost of purchase sale, total amount and final consignee of goods are tabulated as under: SUPPUBRS DETALS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oil 3.11.2012 5100 45739 233268900 RSIL 9 You Shen Chennai Port Ruchi Soya Industries Ltd. Crude palm Oil 07.11.2012 5500.388 47498 261257429 RSIL 10 Titan Glory, Haldia Port Aishwarya marktrade (India) P. Ltd. Crude palm oil 03.11.2012 4000 46221.25 184885000 - 11 Atlantic Qqueen , Kakinada Port Aishwara Marktrade (India) Pvt Ltd Crude Palm Oil 12.11.2012 1000 62337.5 62337500 12 Tiatan Glory Haldia Port Vishal Victory Qiltech Pvt Ltd Crude Palm Oil 23.11.201 2 2000 43246 86492000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Crude Palm Oil 16.10.2012 1999.913 45233.75 90463665 RSIL 5 Songa Winds, Kandla Port Ruchi Soya Industries Ltd Crude Palm Oil 07.12.2012 4000 40743.25 162973000 6 Galaxy, JNPT Port Dynacom Trading Pvt Ltd Crude Palm Oil 24.12.2012 7499.91 50157 376172986 RSIL 7 Bunga Alamanda Kandla Port Garima Tradelinks Pvt Ltd Crude Palm Oil 31.12.2012 2500 44106.25 110265625 8 Feng Hai, JNPT Port Empire Mulit Ttrade Pvt. Ltd Crude Palm Oil 03.11.2012 5100 40740 207774000 RSIL 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed Purchase quantity (in MT) Bale quantity (in MT) Purchase price (in Rs.) Sale Price (in Rs.) Loss booked (in Rs.) 1 11.10.2012 9674.947 9674.947 483841681 467500695 -16340986 2 20.10.2012 6780.467 6780.467 311343789 296481005 -14362784 3 29.10.2012 7059.794 7059.794 314323208 314326738 3530 4 16.10.2012 1 999.913 1999.913 100266639 90463665 -9802974 5 07.12.2012 4000 4000 1 78970000 162973000 -15997000 6 24.12.2012 7499.91 7499.91 38367 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consignee was mentioned as M/S Ruchi Soya Industries Limited. It is important to note that all these transaction were entered into within a short period of about two months and except two transactions, where total profit of ₹ 6280/- was booked, losses amounting to Rs, 241842096/- in total were booked in these 16 back to back transactions. Moreover, these transactions are entirely non-delivery based, This unusual pattern of the trade is found to be highly suspicious in nature and is apparently devoid of any commercial angle, particularly when in all the transactions consignee is the same party i.e. M/S. Ruchi Soya Industries Limited and transactions are made in short span of time with huge loss in almost all transactions. From the records, it emerges that the Assessing officer has not made proper inquiry into these suspicious transactions to unearth real nature of such transactions and to ascertain real substance of these transactions over the form. It is further noticed that during the course of assessment proceedings, the assesses had also furnished the one page document le, High Sea Purchase and sales contract (HS Contract) in support of the purchase price and sale co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order passed by the A.O. for the A.Y. 2013-14 is erroneous and prejudicial to the interest of the Revenue within the meaning of section 263 of the IT, Act, particularly in light of explanation 2 to section 263 of the IT.Act, 1961 as the assessment order is passed without making inquiries or verification which should have been made and loss of ₹ 24,18,42,096/- form, high seas sale and purchase transactions was allowed to the assessee without proper inquiry. Therefore, you are required to show-cause as to why to assessment order dated 18.03.2016 passed by the assessing office for A. Y. 2013-14 in your case should not be set aside and Assessing Officer be directed to make fresh assessment. 6. Learned CIT noted that assessee s response as under :- the assessment order under consideration is neither erroneous nor prejudicial to the interest of the revenue as the same has been passed by the A.O in exercise of his qusi-judicial power vested in him with due application, of mind in accordance with law in compliance to the principles of natural justice. Further the issue under revision has been duly examined by the AO (though not discussed in the assessment order) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... booked in these 16 back to back transactions. That moreover, these transactions are entirely nondelivery based. That this unusual pattern of the trade is found to be highly suspicious in nature and is apparently devoid of any commercial angle, particularly when in all the transactions consignee is the same party i.e. M/S. Ruchi Soya Industries Limited and transactions are made in short span of time with huge loss in almost all transactions. That from the records, it emerges that the Assessing officer has not made proper inquiry into these suspicious transactions to unearth real nature of such transactions and to ascertain real substance of these transactions over the form. 8. The learned CIT-A also noted the following response of the assessee :- Assessee in its reply further argued that it has been misconstrued that one page document filed during the course of assessment proceedings as High Seas document where as in fact the same is a forward contract. The High seas contracts were annexed to the high seas purchase and sales hills. These High seas contracts are executed on ₹ 100/- adhesive stamp papers. Further argued that the law has not prescribed that the forward con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In light of these facts the AO is directed to verify the issues including the basis adopted to fix the rates as per the international market, which is the party to whom the goods were finally delivered and genuineness of loss claimed. 7. The A.O. was unable to see this larger picture and could not make proper inquiry or verifications on these points. Thus the Assessing Officer has not applied his mind. His actions of allowing loss of ₹ 241842096/- claimed on high seas sales and purchase of edible oils is an erroneous act and prejudicial to the interest of revenue. Therefore, I set aside the order passed by the Assessing Officer u/s 143(3) of the Act for A.Y. 2013-14, which he passed on 18.03.2016 and direct him to verify genuineness the loss claimed in light of the points discussed above on high seas sales and purchase of edible oils. The Assessing Officer must give an opportunity of being heard to the assessee. 11. Against above order assessee is in appeal before us. 12. We have heard both the counsel and perused the records. Learned counsel of the assessee contended that assessee has duly explained the nature of business of the assessee and given details of purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any during the year has engaged in high sea purchase and sale transaction on 16 different occasions on back-to-back basis. The origins of the goods where the same and ultimate destination was same that is Ruchi Soya limited. The transactions were entered into in a short period of 2 months . Except for 2 transactions where small profit of ₹ 6,280/- was booked, losses of ₹ 241842096/- were booked. All these transactions are entirely nondelivery based. The contracts for the high sea sales were entered mid of September 2012 to October 2012. The contracts were not registered. In these circumstances it was amply clear that the transactions were dubious in nature and required proper explanation. The fact that the transactions were unusual the ultimate consignee was Ruchi Soya Ltd. was glaring. The assessing officer has asked the assessee to give details of its sister concern's. But the assessee never gave the details. The detail of sister concern would certainly shed light on the parties with whom the transactions have been entered as to whether they are at arm s length with each or not. The unusual loss hence obviously needed explanation. The assessing officer asked the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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