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TMI Blog2020 (6) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... - Dated:- 29-5-2020 - Shri Bhavnesh Saini, Judicial Member And Shri O.P. Kant, Accountantmember For the Appellant : Shri Ajay Wadhwa, Adv., Ms. Bharti Sharma, CA For the Respondent : Shri Umesh Takyar, Sr.DR ORDER PER O.P. KANT,A.M.: This appeal by the assessee is directed against order dated 26/09/2018 passed by the Ld. CIT(Appeals)-16, New Delhi [in short the Ld. CIT(A) ] for assessment year 2014-15 raising following grounds: 1. That the order of the Commissioner of Income Tax (Appeals), New Delhi [the learned CIT(A)dated 26.09.2018 is bad in law and on facts. 2. That the learned CIT(A) has erred in law and on facts in sustaining the disallowance of business loss of ₹ 56,53,550/- made by the learned Assessing Officer. 3. That the learned CIT(A) sustained the disallowance of business loss of ₹ 56,53,550/- on the basis of surrounding circumstances, preponderance of probability of human conduct. 4. That the learned CIT(A) has earned in law and on fats in sustaining the disallowance of business laws on the basis that the appellant has failed to produce any evidence to prove that the law of claimed by the appellant was genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in appeal before the Tribunal raising the grounds as reproduced above. 3. The grounds raised by the assessee are in relation to the business loss of ₹ 56,53,550/- disallowed by the Assessing Officer and confirmed by the Ld. CIT(A). 3.1 Regarding the business loss, the assessee before the Assessing Officer stated as under: (i) During the year under consideration, there was short term capital gain of ₹ 55,60,703/-from sale of plot of land (ii) The assessee purchased design fabric of ₹ 1,79,50,040/-from M/s Shylgo Textile P. Ltd., 633, Shivaji Road , Azad market, Delhi -110006( in short Shylgo textile ) and sold to four parties for a total sum of ₹ 1,22,96,490/-thereby incurring a loss of ₹ 56,53,550/-. (iii) The assessee claimed to have engaged in trading of grey fabric for the last many years but ventured in trading of design fabric for the first time. The reason for entering in the venture has been stated as trading of the design fabric was more profitable. (iv) Initially during the assessment proceedings, the assessee submitted that by the time it received the delivery of design fabrics, the design had gone out of the fashion and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on collection cancelled the order on 2/11/2013 due to sample provided by the assessee being different from the item that was ordered. In view of this claim the assessee was aware that fabricsuppled by M/s shylgo textile was not as per order and rejected by M/s cotton Collection, still the assessee kept on buying the fabric from M/s shylgo Textile. Despite not providing goods as per order, no legal or otherwise action taken against shylgo Textile. (vi) The said business of trading in designed fabric was stopped from next year onward, which shows that business loss of ₹ 56,60,703/- was created only to adjust the short-term capital earned in the year under consideration. (vii) The Assessing Officer issued notice u/s 133(6) of the Act to M/s Cotton Collection, M/s Sarthak apparel and M/s shylgo Textile but the notice sent to M/s shylgo returned undelivered. In the replies received from M/s Cotton Collection and Sarthak Apparel, the AO found striking similarity in pattern and language. According to the AO, it could not be coincidence and letters must have been written by the one person or under the guidance or instructions of the same person. (viii) The Assessee was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conversation with M/s Cotton Collection andM/s.Sarthak Apparels and pleaded them to honour their commitment. The legal action would not have yielded any result and the assessee was always resisted from taking any legal recourse as it would have spoiled his reputation. (vii) This was assessee s first venture into this form of fabric which unfortunately resulted into loss and compelled the assessee not to pursue this any further. After a loss of ₹ 55 lakh, the assessee would have been full hardy to continue this business. After this loss he stopped business and went to carry on its core business of dealing in grey fabric. (viii) In this trade no securities are taken for this magnitude of the order and generally orders regulated onwords and mouth. 3.5 The assessee requested the Ld. CIT(A) to confront the thirdparty evidences. On being asked by the Ld. CIT(A), the assessee produced the main persons of M/s Cotton collection and M/s. Sarthak Apparel before him. Both persons stated that entire transaction were on verbal communication. No documents were placed on record to prove the genuineness of the export order received by M/s Cotton Collection and order received fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden of evidence may shift constantly as evidence is introduced by one side or the other. In this case, once the evidence that assessee has claimed bogus loss was introduced by the AO, the burden of evidence shifted to the assessee. During the assessment proceeding and even during the appellate proceeding, the assessee has failed to produce any evidence to prove that the loss claimed by him was genuine. In the present case, I find that the plant has failed to discharge its burden of proof and the AO, on the other hand, has proved that the business loss of the appellant was incorrect. Further, the production of the main persons of Cotton Collection and Sarthak Apparel Pvt. Ltd. further strengthened the case of the AO and goes against the appellant , Sh. Sunil Kumar Balooni Proprietor of Cotton collection admitted that no approval of design before placing his order has been given to the appellant. If the appellant wants to venture into new business that too of customized fabrics for export, the appellant should have at least given a specific design or requirement to the party. Both persons stated that the entire transactions are on verbal communications. No Documents are pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 133(6) issued by the Assessing Officer along with the return of income for assessment year 2013-14 and 201415. 4.4 The learnedCounsel further submitted that assessee had also furnished his affidavit wherein he stated on oath that M/s Shylgo textile through the accountant appeared before the learnedAssessing Officer in response to summon under section 131 of the Act alongwith summoned records on 31/12/2016, but the Assessing Officer refused to examine him and even did not record attendance. The counsel submitted that lateron , M/s Shylgo Textile had submitted the summoned documents by speed post dated 31/12/2016. The learnedCounsel referred to affidavit of the assessee, a copy of which is placed on page 128 to 130 of the paper-book. 4.5 The ld. Counsel of the assessee relied on the decision of the Hon ble Supreme Court in the case of SA builders Ltd vs CIT (2007) 158 Taxman 74(SC) and other decisions in support of the proposition that the Assessing Officer should not seek to conduct business by sitting on the armchair of the businessmen and the businessmen knows best how to do his business. 4.6 The LearnedCounsel also relied on the submission made by the assessee befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has produced above two parties to prove that he has received orders from those parties which were later on cancelled. Both the above parties have confirmed the aforesaid transaction with the assessee in their statement made before the Ld. CIT(A) as well as confirmed in reply to the notice under section 133(6) of the I.T. Act before the A.O. In the business transactions it is not necessary that all the transactions should be proved by documentary evidences. The business orders are placed orally as well and particularly when transactions have been confirmed by the parties, there is no reason to doubt the statements of the above persons as well as their reply under section 133(6) of the I.T. Act. The sale and purchase of the items under reference from independent parties have not been doubted by the authorities below. If as per A.O. the pattern and language of the correspondence assessee and these parties are similar is no ground to reject their explanation. It is also not necessary that for each and every business cancellation orders, the parties shall have to resort to litigation before the Civil Court by filing a Civil Suit. The assessee shall have to maintain business relation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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