The Tax Publishers2019 TaxPub(DT) 7809 (Chd-Trib) : (2019) 076 ITR (Trib) 0350

INCOME TAX ACT, 1961

Section 37(1)

Since claim of assessee could not be rejected on surmises, suspicion and conjecture and it was for AO to prove that apparent was not real, further, CIT(A) failed to appreciate that delivery taken by “Pakka Arhatias” in the capacity of agent of assessee was to be construed as actual delivery taken by assessee, therefore, AO was directed to accept the loss disclosed by assessee on stock-loss of wheat.

Business expenditure - Stock loss in trading of wheat - Allowability -

AO noticed that assessee had declared “stock loss” and net loss. He confronted the assessee to demonstrate as to how the above loss has occurred to the assessee. In response, it contended that she had purchased wheat which was stored with “Pakka Arhatias” godowns and on account of insect infestation quality of the wheat deteriorated and could not be sold at the market price. AO however, was of the view that it was a bogus transaction manipulated by the assessee in order to evade levy of capital gain tax and accordingly disallowed the same. Held: Suspicion may be strong, but only on the basis of the suspicion claim of the assessee cannot be rejected. Claim of assessee could not be rejected on surmises, suspicion and conjecture. It was for AO to prove that apparent was not real. Similarly, as far as finding of CIT(A) that alleged loss was speculative loss, CIT(A) had based his finding on the ground that actual delivery was not taken. CIT(A) failed to appreciate that delivery taken by “Pakka Arhatias” in the capacity of agent of assessee was to be construed as actual delivery taken by assessee. Therefore, AO was directed to accept the loss disclosed by assessee on stock-loss of wheat.

Relied:CIT v. Daulat Ram Rawatmall (1973) 87 ITR 349 (SC) : 1973 TaxPub(DT) 0323 (SC),Omar Salay Mohamed Sait v. CIT (1959) 37 ITR 151 (SC) : 1959 TaxPub(DT) 0148 (SC), CIT v. Aditya Mills Ltd. (1999) 209 ITR 933 (Raj) : 1994 TaxPub(DT) 0781 (Raj-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16



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