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09-01-2019, Monika India, Section 254, 131(1)(d), Tribunal Mumbai
1. Both the appeals are filed by the assessee directed against the order of the Ld. CIT(A)-23, Mumbai, dated 04.02.2014 for the A.Ys 1997-98 and 998-99, which in itself directed against the order passed by the Assessing Officer (for short ‘the A.O’) u/s. 143(3) r.w.s 254 of the Income tax Act, 1961 (for short ‘the Act’).
2. Since identical issue are involved in these two appeals, they are taken up together and disposed off by this common order for the sake of convenience. The facts of A.Y 1997-98 are taken up for adjudication and the decision rendered thereon would apply with equal force for A.Y 1998-99 also in view of identical facts except with variance in figures.
3. The only common issue involved in this appeal is as to whether the Ld. AO was justified in upholding the disallowance of alleged trading loss incurred by the assessee on sale of goods in the sums of Rs. 30,57,301/- and Rs. 21,01,089/- for the A.Y 1997-98 and 1998-99 respectively in the facts and circumstances of the case.
4. The brief facts of this issue are that the assessee firm is engaged in the trading of pull overs/ synthetic waste / silver/top and acrylic yarn. The assessment was completed u/s 143(3) of the Act, on 27.03.2000 computing total income Rs. 72,20,197/- as against returned income of Rs. 48,000/-. During the course of assessment proceedings u/s 143(3) of the Act, the A.O has observed that the assessee had incurred a loss of Rs. 30,57,301/- on account of trading activities of the material mentioned above. The explanation of the assessee that the hosiery market was depending upon Russian market and due to economic collapse of Russia, the assessee was forced to sell material in local market and the local market too was badly suffered because of the lack of demand abroad; hence, the loss was incurred. The explanation of the assessee firm was rejected by the A.O. The matter was referred to DDIT (Inv-III) Ludhiana who after verification submitted that these were all adjustment entries. In view of this, the A.O has considered the loss claimed on account of trading of synthetic waste pull overs, as not genuine and the same was disallowed. The A.O completed the assessment on 27.03.2000 determining total income at Rs. 72,20,197/- for the Asst Year 1997-98 by disallowing assessee’s claim of loss of Rs. 30,57,301/-.
4.1 Being aggrieved by the said order, the assessee filed appeal before the CIT(A). The CIT(A) vide his order dated 29.03.2004 in appeal No. CIT(A)/12(2)/24/2000-01 dismissed the appeal of the assessee. The Ld. CIT(A)-V, Mumbai, during appellate proceedings observed that the A.O has disallowed assessee firm’s trading activity loss of Rs. 30,57,301/- treating the same aspaper loss. The assessee has no opening stock at the beginning of the year under question, which means the assessee had purchased and sold those goods only in the current year. The assessee had purchased goods on 01.01.1997/- being synthetic waste from M/s. Gopaldas Jagat Ram Pvt. Ltd @ Rs. 63.50 per Kg. whereas on various different dates right from 12.01.1997/- to 25.01.1997 it sold the same goods @ Rs. 27/- per Kg. Thus according to the AO, the theory of falling price was just an eye wash and nothing else as in the entire month the price were steady as can be seen from the facts which were given by the AO on page No.3 of the impugned order. The CIT(A) further observed that this fact was made known to the assessee firm but without any result, as the assessee did not submit any explanation in this regard and had merely expressed his earlier
stand to be correct. To further verify this fact, a summons u/s 131(1)(d) was issued to the DDIT (Inv-III), Ludhiana by the AO to summon the parties to whom the goods were sold. In response to the same, the DDIT (Inv-III), Ludhiana vide letter dated 07.03.2000 submitted that the said M/s. Gopaldas Jagatram purchased synthetic waste from M s. Cannon Steel Pvt Ltd vide invoice No. 67 dated 31.03. 1997 @ 63 per Kg. and the entire lot was sold to M/s Monika India on 01.01.1997 @ 63.50 per Kg. Similarly M/s. Apex Woolen Mills purchased 3,000 Kgs and 1,020 Kgs of acrylic yarn @ Rs. 110/- and Rs. 131/- per Kg from M/s Scottex Industries Ltd vide invoice No. 934 dated 20.02.1997 and invoice No. 934 dated 01.02.1997 and 3,000 Kgs was sold to M/s. Monika India.
4.2 Being aggrieved by the said order of CIT(A)-V, Mumbai, the assessee filed appeal before the Hon’ble Tribunal. The Hon’ble ITAT ‘J’ Bench vide order in ITA No. 3328/M/2004 dated 27.02.2008 has directed the A.O to decide the issue afresh giving the assessee an opportunity to represent his case. As per the directions of the Hon’ble Tribunal, a notice dated 22.08.2008