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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 ..... A.Y.2013-14 allowing the loss to be carried forward and accepting the returned income as Nil. During the year, the assessee company has mainly traded in various types of edible oil on high seas basis. During the A.Y.2013-14 the company has declared business loss of Rs. 9,11,71,698/- from total turnover of Rs. 405,20,20,855/-. This turnover includes the high seas sales of edible oils of Rs. 386,03,28,219/-. Service charges received of Rs. 4,15,00,649/- and Income from other sources of Rs. l5,01f90,987/-[Other receipts at Rs. 1,91,987+Clainis & settlements at Rs. 15,00,00,000/]. 4. The learned Commissioner of income tax in this case noted that scrutiny of records indicated that during the assessment year under consideration, the assessee company had purchased Crude Palm Oil on high seas of an amount of Rs. 4,10,21,70,317/- and the same were sold out on high seas at a consideration of Rs. 3,86,03,28,219/-. These high seas purchase and sale transactions were executed on 16 different occasions on back to back basis, 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 Rs, 6280 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 121514375 RSIL 8 Fecng Hai JNPT Ruchi Soya Industries Ltd Crude Palm 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 13 STX Hero Kandla Port. Ruchi Off Shore Marketing Pvt Ltd Crude Palm Oil 23.11.2O12 13999.13 42744.5 598388078 14 Royal Flos Chennai Port Stride Multitrdae Pvt Ltd Crude Palm Oil 30.11.2012 5999.943 47800 286797291 15 STX Infinity Haldia Port Stride Multitrde Pvt Ltd Crude Palm. Oil 19.12.2012 9555.82 45192 431846617 16 RUN ZB, Chennai Port APL International Pvt. Ltd. Crude Palm Oil 17.12.2012 1502.77 41896.75 62961179 *RSIL is Ruchi Soya Industries Limited BUYERS DETAILS &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same day on 16 different occasions are tabulated as under :- Sr. No. Date of Trade 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 383676646 3761 72986 -7503660 7 31.10.2012 2500 2500 121514375 110265625 -11248750 8 03.11.2012 5100 5100 233268900 207774000 -25494900 9 07.11.2012 5500.338 5500.338 261257429 261260179 2750 10 03.11.2012 4000 4000 184885000 168481000 -16404000 11 12.11.2012 1000 1000 62337500 62337250 -250 12 23.11.2012 2000 2000 86492000 78558500 -7933500 13 23.11.2012 13999.13 13999.13 598388078 563635106 -34752972 14 30.11.2012 5999.943 5999.943 286797291 262644505 -24152786 15 19.12.2012 9555.82 9555.82 431846617 377693786 -54152831 16 17.12.2012 1502.77 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance from the date of High Seas M.O.U. entered into on the date of transaction and the purchase price and sale price mentioned on these MOU is as per H.S. Contacts............... Here it is also taken note of that in assessee's own case, similar issue i.e. generation of loss by way of series of non-delivery based transactions was involved in AY, 2014-15 too wherein the assesses had claimed losses of Rs. 8,66,01,722/- in total. In A.Y. 2014-15, the assessing officer investigated issue deeper and it was found that all such high sea sale and purchase transactions were non-delivery based and were layered ones with so called purchaser of the goods selling again the same set of goods to other parties in high seas only and then this second layer of purchasers too selling goods to another set of purchaser on high seas and so on. When the A.O. tried to de-layer these transactions in A.Y. 2014-15 by way of making inquiries under section 133(6) of the IT. Act from the sellers and purchasers at different layers, it was found that there were lot of sellers and purchasers involved at different layers with each transaction happening on high seas only without actual delivery and by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght for, were adverted to and filed, Further the fact that the assessing officer has raised the query regarding the dealing of the assesses with the limited parties, genuineness of transaction ofpurcha.se and sales from time to time dearly shows that there was due application of mind by the assessing officer. * Further the assessing officer took the sufficient time for verification of the details field by the assesses before passing the aforesaid order and as such the same could not be labeled as passed in haste and hence erroneous. * The AO has cross verified the transaction of High Seas Purchase and sales by issue of notices u/s 133(6) to the respective parties and as such it is incorrect to say that the Assessing Officer has not made proper inquiry to unearth real nature of such transaction". 7. However the learned Commissioner of income tax was not convinced. He observed that assessing officer has failed to make any enquiry into regard to the allowability of the loss claimed by the assessee company on high sea basis on sale and purchase of edible oil, he referred to several case laws and observed the assessee company made high sea purchase of crude palm oil and sold the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable on assessment records regarding basis of rate adopted by the assessee in contracts entered by them. The Assessing Officer did not ascertain basis of such prices and proceeded to complete the assessment based on what the assessee company presented. Sale and purchase transactions entered into based on this contract gave rise to losses to the assessee on repetitive basis. That the Assessing officer did not make any inquiry to ascertain basis of sale and purchase prices in respect of high seas transactions despite there being claim of substantial loss from the side of the assessee in such transactions. That in any case of trading, particularly that involving huge repetitive losses, it is important to find out the genuineness of the sale and purchase prices mutually decided by the parties involved. That the A.O. did not make requisite inquiry in this regard. 10. The learned Commissioner of income tax concluded as under :- "Thus, looking to peculiar facts of the case as discussed above, apparently, high sea sale and purchase transactions claimed to have been entered into by the assessee company are very unusual and apparently lack commercial substance, Parties involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase laws in support of his proposition. 13. Per Contra learned departmental representative submitted that as evident from the assessment order, assessing officer has not at all made proper enquiries to justify the huge losses claimed by the assessee. In this regard he submitted that assessee was duly asked to give the detail of sister concern. He submitted that the assessee in its letter has submitted that detail of sister concern is attached herewith. However, the learned DR submitted that even today assessee has not submitted the list of sister concern. He submitted that this is vital as the assessee has dealt with group companies and in layered transaction shown huge book losses. Learned departmental representative further submitted that assessing officer has duly raised the question of assessee claiming huge losses and asked for explanation. However he submitted that no response to the same has been given by the assessee. Hence learned counsel for the Department submitted that assessing officer has neither made proper application of mind nor made proper enquiry. He submitted that huge losses were claimed by the assessee on dubious high sea sales were allowed by the assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case. In our considered opinion on the facts of this case the decision of honourable Supreme Court in the case of Deniel Merchants P. Ltd. and Anther (supra) is fully applicable. In the said case honourable apex court has expounded that "In all these cases, we find that the Commissioner of Income Tax had passed an order under Section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. It is this order which is upheld by the High Court. We see no reason to interfere with the order of the High Court. The Special Leave Petitions are dismissed". 16. We find that the above case law is fully applicable on the facts of this case. Rather in the present case before us the assessee has not given the explanation for the unusual loss despite inquiry. It has also not given details of sister concern. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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