The Tax Publishers2020 TaxPub(DT) 2339 (Del-Trib) : (2020) 080 ITR (Trib) 0436

INCOME TAX ACT, 1961

Section 37(1)

Sale and purchase of items under reference from independent parties have not been doubted by AO. It is also not necessary that for each and every business cancellation orders, the parties shall have to resort to litigation before Civil Court by filing a Civil Suit. Also, documentary evidences which had not been rebutted by AO could not be disbelieved by AO on irrelevant reasons. Considering totality of facts and circumstances, AO failed to establish that loss suffered by assessee was not genuine and there was no reason to sustain disallowance.

Business loss - Loss on cancellation of orders by buyers - Disallowance on the allegation of creation of documentary evidence in pre-planned manner for creating business loss to offset capital gain -

Assessee engaged in running the proprietary concern, namely, M/s. Aky Clothing claimed business loss. AO disallowed business loss holding that assessee has created documentary evidence in pre-planned manner for creating business loss to offset short-term capital gain on sale of plot of land. According to assessee, main reason for business loss in trading of designed fabric was cancellation of purchase orders by M/S. C and M/s. S. were available. Held: Assessee produced parties concerned to prove that he had received orders from those parties which were later on cancelled. Both the parties confirmed transaction with assessee in their statement made before CIT(A) as well as confirmed in reply to notice under section 133(6) before AO. In 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 had been confirmed by parties, there was no reason to doubt statements of parties as well as their reply under section 133(6). The sale and purchase of items under reference from independent parties have not been doubted by AO it is also not necessary that for each and every business cancellation orders, the parties shall have to resort to litigation before Civil Court by filing a Civil Suit. Also, documentary evidences which had not been rebutted by AO could not be disbelieved by AO on irrelevant reasons. Considering totality of facts and circumstances, AO failed to establish that loss suffered by assessee was not genuine and there was no reason to sustain disallowance.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15



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