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TMI Blog2023 (7) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... f opinion by the AO not supported by any direct or indirect evidence. Also not in dispute that the sales made by the assessee were through banking channels. Thus AO cannot disallow the claim of loss, when the Assessing officer has not pointed out any specific defect or short comings on the trading transactions. D.R. appearing for the Revenue could not place on record any contra view against the findings of the Ld. CIT(A). Thus the ground raised by the Revenue is devoid of merits and the same is liable to be rejected. Loss on sale of Gold bar - AO held that the sale rate on a particular date was Rs. 1520/- per gram whereas market rate was Rs. 1590 per gram - HELD THAT:- As seen from the assessment order, the market rate of Rs. 1590/- arrived by the A.O. were not supported by any credible evidence. Inquiries conducted by the A.O. by summoning purchasers by issuing notice u/s. 133(6) also has not given any untoward inferences. The AO has also not confronted the market price at 1590/- with any evidences to the assessee but however adopted this figure and disallowed Rs. 12,00,380/- on sale of Gold bar. In the case of CIT Vs. Sham Lal [ 1980 (4) TMI 69 - PUNJAB AND HARYANA HIG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act ) relating to the Assessment Year 2010-11. 2. The brief facts of the case is that the assessee is Private Limited Company engaged in trading of Gold, Gold Jewellery, Diamonds and other Commodities. For the Assessment Year 2010-11, the assessee filed its Return of Income on 24-09-2010 declaring total income of Rs. 3,03,370/-. The return was taken up for scrutiny assessment and the Assessing Officer made the following disallowances: i. Disallowance of trading loss: (a) Cut Polished diamonds Rs. 75,77,155/- (b) 0.995 Gold Kg. Bar Rs. 12,00,380/- (c) 22 carat Gold Ornaments Rs. 15,29,577/- ii. Addition u/s. 68 of I.T. Act Rs. 2,90,00,000/- iii. Disallowance of interest expenses Rs. 13,11,396/- 3. Aggriev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely upon any information the basis of such information has to be clearly disclosed in the assessment order. Apart from that, such information has to be confronted to the appellant during the course of assessment proceedings. After giving an opportunity to the appellant to rebut such allegation only can any conclusion be drawn? I have examined the assessment order and in fact find that the AO has failed miserably in this task of providing the basis as to how the rate of Rs. 1,590/- on a particular day has been derived. Where this primary onus cast upon the AO has not been discharged, the question of confronting such details and obtaining the rebuttal would never arise. It therefore appears that the AO has not confronted any evidence or other material collected behind the back of the appellant and used against him while drawing adverse inferences. It was held in CIT v. Sham Lal (1981) 127 ITR 816 (P H) that the revenue is not entitled to place reliance on the material which was brought on the record at the back of the assessee. The assessee is, entitled to rebut the material placed before him if he so chooses. Any material placed on the record without notice to the assessee ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied certain transactions and disallowed the losses occasioned or incorrectly applied closing rates for valuing inventories or not furnishing the information collected behind the back of the assessee and using the same against him the additions by itself cannot be confirmed. The books of accounts are audited and all evidences and other material called for has been furnished during the course of assessment proceedings. No defect or other shortcomings have been pointed in the books of accounts. In fact, the books of accounts have not even been rejected by the AO. The genuineness of the transactions have not been doubted by bringing any material or other evidence on record. Selecting transactions and disregarding the loss arising therefrom is not permissible when the genuineness of the transaction has not been disproved. In view of the above factual matrix and the various judicial pronouncements (supra), the addition is hereby directed to be deleted. Ground No.2 is accordingly allowed. 3.1. The Ld CIT[A] deleted the additions made under section 68 of Rs. 2.9 crores after considering various information and passed a detailed order observing as follows: 4.9 The AO has stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs stage are discussed as under: Sr. No. Name of Depositor Amount Remarks 1 Ganesh Plantations Ltd. 20000000 Interest 961644 The appellant had furnished confirmation letter with PAN, copy of accounts, acknowledgement of the return of income and bank statement on pg.140 to 145 of the PB. Further TDS has been duly deducted on the interest payments made. The entire loan has been returned in the previous year relevant to A.Y.2012-13 and the copies of account are placed on pg.2 3 of the PB accompanying the counter comments dated 23.07.2018 to the remand report. 2 Gulabben H. Doshi 1500000 Interest 87255 Copy of account with confirmation, contra account with PAN, address and bank statement had been furnished on pg.146 to 148 of the PB. Further she had complied with the letter issued u/s 133(6) by filing the details vide letter dated 13.06.2013. The copy of the same is placed on pg.151 of the PB wherein she had categorically intimated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been returned in the subsequent year. Copies of accounts of the subsequent years have been placed on page 13 to 17 of the PB accompanying the counter comments to the remand report dated 23/07/2018. The amount in question has been returned in the previous year relevant to A.Y.2013-14. 5 Pratimaben H. Thakkar 50,00,000 Interest 262497 The copy of account with confirmation, PAN, address, Phone No. with copy of bank statement have been placed on page 184 to 187 of the PB. Further, on page 188 of the PB letter had also been written by the appellant company to the depositor requesting for the copy of the acknowledgement of the return of income. However, the depositor did not make available the copy of the acknowledgement of the return of income and this fact was also intimated to the AO and a request was made to undertake direct verification at his end since the depositor was not cooperating. However, the PAN details had been furnished and direct verification could have been made by the AO from the computer systems itself. Further, the loans have been returned in the subsequent year. Copies of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thiness and genuineness of the transactions. The burden cast upon the appellant therefore stands duly discharged. The AO has not brought any material or other evidence on record by which the creditworthiness or genuineness of the cash credit can be challenged. Further, the loans in question have been returned in the subsequent years and such repayments have also been accepted. Under such circumstances I hold that the cash credits are genuine and the addition is accordingly directed to be deleted. Ground No.4 is accordingly allowed. 4. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in holding that trading loss of Rs. 1,03.07.112/- (Rs. 75,77,155/- on Cut and Polished Diamonds, Rs. 12,00,380/- on 0.995 Gold KG Bar and Rs. 15,29,577/- on 22 Carat Gold Ornament) incurred by assessee are genuine and thus deleting the said additions/disallowances made in the assessment order. 1.1 The Ld. CIT(A) erred in not considering the fact that the assessee did not incur loss on stocks held for substantial period of time but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legation that the loss are not genuine, the A.O. do not find discrepancy in the quantity of diamonds as reflecting in the books of accounts. Thus the Ld. Counsel relying upon Co-ordinate Bench of this Tribunal decision in the case of Khandwala Gems Trading Corporation Vs. ACIT 54 TTJ (Jaipur) 479 wherein it was held that no adverse inference can be drawn, where quality records were not maintained when there is no discrepancy in the quantifying tally which was pointed out by the A.O. 6.1. Regarding loss on sale of 0.995 kg. gold bar. The Ld. Counsel submitted that the AO has not brought on record any evidence to establish the market rate being Rs. 1590/- per gram. The AO also failed to consider that the trading were done with identifiable parties through normal banking channels and not to related parties. Therefore the A.O. not correct in denying the loss of Rs. 12,00,380/- on sale of gold bar. 6.2. On the loss of 22 ct. Gold ornaments. The assessee applied Rs. 1725/- per gram and not 1580/- per gram as alleged by the A.O. It is evident from Page No. 137 of the Paper Book wherein the last invoice raised by the assessee revealing that the rate at 1725/- per gram. The Ld. Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed the losses claimed by the assessee, which in our considered view is not judicious. The assessee furnished copies of the bills carrying the purchasers name, address and other details. However the A.O. has not made verification of the above details and disallowed the loss of Rs. 75,77,155/- on Cut and Polished Diamonds on the ground that qualitative details were not furnished by the assessee. The Coordinate Bench of this Tribunal in the case of Khandwala Gems Trading Corporation Vs. ACIT (ITAT-JP) reported in [1995] 14 CCH 197 has considered identical issue and held as follows: It is indeed very difficult to appreciate the contention of the Department that the absence of quality wise details cast an aspersion on the trading results declared by the assessee, particularly when no discrepancy in the quantitative tally has been pointed out. A discrepancy in the quantitative tally maintained by the assessee in this case would have certainly entitled the AO to conclude that there is suppression of sales. In certain businesses, absence of quality-wise details may also lead one to the conclusion of suppressed sales, say, in the case of ball bearings where the sales value will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his figure and disallowed Rs. 12,00,380/- on sale of Gold bar. 9.1. The Hon ble Punjab and Haryana High Court in the case of CIT Vs. Sham Lal [1981] 127 ITR 816 held that the Revenue is not entitled to place reliance on the material which was brought on record behind back of the assessee. Any material placed on record without notice to the assessee cannot be relied upon by the Revenue. The Ld. CIT(A) has followed this decision of the High court and relying upon various other High Courts judgments and thereby deleted the additions, which does not require any interference especially when the Ld. D.R. could not place before the appellate authorities, the market value as adopted by the Assessing Officer. Thus the ground raised by the Revenue is devoid of merits and the same is liable to be dismissed. 10. Similar is the disallowance made by the Assessing Officer on the losses in respect of 22 carat Gold Ornaments sold by the assessee. The A.O. has not made out a case that the sales are to the related persons only. Here also, the A.O. merely on doubts and suspicions made the disallowance, which in our considered view is not correct in law. The above findings of our is supported by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. (P) Ltd. (1986) 159 ITR 71 (SC) First proviso to section 136(2) of the Indian Income-tax Act, 1922 [corresponding section 52 of the Income-tax Act, 1961] - Capital gains - Transfer in case of understatement of consideration - With a view to sequestering the shares held by assesses in a company from clutches of Government, it sold them at a price much lower than their market value and in fact incurred a loss - Revenue could not prove that consideration was understated - Whether first proviso to section 12B(2) was applicable to assessee's case - Held, no CIT v Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC) Section 28(1) of the Income-tax Act, 1961 [Corresponding to section 10(1) of the Indian Income-tax Act, 1922] Business income Chargeable as Assessment year 1947-48 Assessee-company floated a subsidiary company and transferred to that various shares held by it- In turn subsidiary company transferred to assessee its shares - ITO valued shares transferred by assessee at market rate and held that assessee deemed to have made profits as book value of these shares was less than its market value-AAC held that transaction between assessee and its subsidiary compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UF but beyond that there was no other evidence The Tribunal without any evidence on the record had drawn the inference that the amount in question did reach the representative assessee in his capacity as guardian of the assessee To say that G was representative assessee or that the amount did reach the representative assessee in his capacity as guardian of the assessee, was not correct so far as the record of the instant was concerned. The inference drawn by the Tribunal that the amount having come to G's hands must be considered to have reached his hands in his capacity as guardian of assessee was not warranted by the evidence on record and was contrary to whatever evidence that had been led on behalf of the assessee and this -evidence had not been challenged on behalf of the revenue. In view the earlier order of the High Court in view of the fact that he only question that he Tribunal had to consider was whether, the amount had in fact reached the assessee, or not, the Tribunal should have concentrated its attention on the question in the light of the contentions taken up by the revenue and in the light of the evidence led before it. It was not open to the Tribunal in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, it was found that those lenders did not disclose in their income tax return the transaction or that they had not disclosed the aforesaid amount, the Assessing Officer could call for further explanation from the assessee to prove the genuineness of the transaction or creditworthiness of the same. However, without verifying such fact from the income tax return of the creditors, the action taken by the Assessing Officer in examining the lenders of the assessee was a wrong approach. Moreover, those lenders have made inconsistent statements as pointed out by the Commissioner (Appeals) and in such circumstances, both the Commissioner (Appeals) and the Tribunal, were justified in setting aside the addition as the Assessing Officer, without taking step for verification of the income tax return of the creditors, took unnecessary steps of further examining those creditors. If the Assessing Officers of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the Assessing Officer in question has no justification to disbelieve the transactions reflected in the account of the creditors. In other words, the Assessing Officer had no authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakh was repaid - Therefore, an amount of Rs 1.45 crore remained outstanding to be paid to 'IA' - Balance loan amount was repaid by assessee in immediately next financial year - Whether when Department had accepted same, addition made by Assessing Officer was to be deleted-Held, yes [Para 6] [In favour of assessee] AO is right in saying that the names of few creditors are not found in Audit report (form 3CD). However, circumstantial evidences such as balance sheet repayments can't be ignored. Appellant candidly admitted human error during remand proceedings which claimed to have happened because of repayments which happened before audit report was signed. The same was actually outstanding on 31st March. The additions have been made on the basis of Balance sheet on record. The explanation filed by assessee is logical viz-a-viz facts on record. The AR of the appellant has demonstrated that all the loans have been repaid in the subsequent years. Where the repayments of the loans have been accepted, in light of the above referred decision the cash credits cannot be treated as non-genuine. 11.4 Respectfully following the above judicial precedents, we do not find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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