GANESH MILLERS PRIVATE LIMITED,KARANJIA,MAYURBHANJ,ODISHA V. ASST.COMMISSIONER OF INCOME TAX, BALESWAR CIRCLE,BALESWAR

ITA 341/CTK/2023

AI Insights

Ganesh Millers Private Limited appealed against the order of the CIT(A), National Faceless Appeal Centre, Delhi, which confirmed additions and disallowances made by the AO for the assessment year 2015-2016. The main issues in the appeal were the addition of Rs.49,38,608 under the head unexplained cash credit and the adhoc disallowance of Rs.1,69,260 on expenses debited against the purchase of old gunny bags. The Tribunal found that the issue of the genuineness of trade creditors needed re-examination and allowed the assessee to present further evidence. The Tribunal also found merit in the assessee's argument regarding the disallowance on gunny bags, leading to the deletion of the disallowance.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472121 (ITAT-CUTTACK)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-10-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 07-11-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: S.C.MOHANTY
• Assessee Lawyers: S.K.AGRAWALLA
• Keywords: Set aside; Corroborative evidences; Unexplained cash credit; Assessment record
• Section: 68; 13

Judgement Text

" आयकर आयकर आयकर आयकर अपीलीय अपीलीय अपीलीय अपीलीय अिधकरण अिधकरण अिधकरण अिधकरण, कटक कटक कटक कटक \u0001यायपीठ \u0001यायपीठ \u0001यायपीठ \u0001यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER आयकर अपील सं सं सं सं/ITA No.341/CTK/2023 (िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण वष\u0005 वष\u0005 वष\u0005 वष\u0005 / Assessment Year : 2015-2016) Ganesh Millers Private Limited Karanjia Main Road, Karanjia, Odisha-757037 Vs ACIT, Baleswar Circle, Baleswar PAN No. :AADCG 8009 P (अपीलाथ\u000f अपीलाथ\u000f अपीलाथ\u000f अपीलाथ\u000f /Appellant) .. (\u0010\u0011यथ\u000f \u0010\u0011यथ\u000f \u0010\u0011यथ\u000f \u0010\u0011यथ\u000f / Respondent) िनधा\u0005\u0013रती िनधा\u0005\u0013रती िनधा\u0005\u0013रती िनधा\u0005\u0013रती क\u0016 क\u0016 क\u0016 क\u0016 ओर ओर ओर ओर से से से से /Assessee by : Shri S.K.Agrawalla, CA राज\u0018व राज\u0018व राज\u0018व राज\u0018व क\u0016 क\u0016 क\u0016 क\u0016 ओर ओर ओर ओर से से से से /Revenue by : Shri S.C.Mohanty, Sr. DR सुनवाई क\u0002 तारीख / Date of Hearing : 16/10/2024 घोषणा क\u0002 तारीख/Date of Pronouncement : 16/10/2024 आदेश आदेश आदेश आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 12.09.2023, passed in Appeal No.CIT(A), Cuttack/10238/2017-18 vide DIN & Order No.ITBA/NFAC/S/250/2023-24/1055985206(1) for the assessment year 2015-2016, on the following grounds of appeal :- 1. That, the Ld. Commissioner of Income Tax (Appeals) committed an error of law in confirming the additions of 49,38,608 under the head unexplained cash credit which is liable to be deleted. 2. That, the Commissioner of Income Tax (Appeals) erred in facts in circumstances in confirming the adhoc disallowance of 1,69,260 which is 20% expenses debited against the purchase of old gunny bag and the same is liable to be deleted. 3. That, the appellant craves to alter, amend, modify or add any other ground that may be considered necessary in the course of appeal proceeding. 2. Brief facts of the case are that the assessee is a private limited company engaged in the business of running a rice mill. The return of income was e-filed on 30.09.2015 declaring total income at ITA No.341/CTK/2023 2 Rs.23,31,260/- and, the same was assessed u/s.143(3) of the Act at Rs.74,39,130/- by making various disallowance vide order dated 08.12.2017. In first appeal, the assessee got no relief, therefore, the present appeal is filed before us. 3. With regard to ground No.1, ld. AR submitted that the AO has made addition of Rs.49,38,608/- by treating the sundry creditors as unexplained, though, all these parties are the supplier of goods to whom the payments were made during the subsequent assessment year. This fact was not appreciated by the AO. He further submitted that the payments were made through banking channel to most of the parties and the AO has accepted the purchases as well as the trading results declared by the assessee, therefore, corresponding credits of the creditors should have been accepted. In support of the claim that the payments were made in subsequent year, he placed the copy of the ledger accounts of these parties as appearing in the books of accounts of the assessee in subsequent year and submitted that these creditors are paid off in subsequent year, therefore, the same could not be held as unexplained cash credits in the hands of the assessee. In support of the claim that the purchase were made of paddy from these parties, he drew our attention to page 134 of the paper book which is the stock register of paddy wherein the purchases made and the quantity milled were duly recorded and the closing stock of 638.50 quintals was shown which is in consonance to the stock declared in the financial accounts as on 31.03.2015. He, thus, ITA No.341/CTK/2023 3 submitted that the creditors as declared by the assessee should be accepted as genuine creditors and addition may be deleted. 4. On the other hand, ld. Sr. DR vehemently supported the orders of the lower authorities and submitted that in this case the AO has issued summons u/s.133(6) of the Act to the parties claimed as sundry creditors on the addresses provided by the assessee. However, most of them were returned unserved with remark “refused” or “left” or “no such address” or “insufficient address”. On our specific direction, the ld. Sr. DR has prepared a detailed chart from the assessment records according to which out of total 184 summons issued u/s.133(6) of the Act to the parties, 124 summons were served, 60 summons were not served. Out of 124 summons served only seven parties had responded but as per the ld. Sr. DR, the response was vague. Remaining 117 parties have not responded to the summons served upon them. The report as submitted by the ld. Sr. DR which is prepared on the basis of the assessment record is placed on record. He, therefore, submitted that these creditors are nothing but the unsecured money of the assessee which was introduced in the name of various persons as trade creditors in the books of accounts. He further submitted that it appears that the assessee has inflated his purchases by inserting these parties as creditors to suppress the profits of the business and, therefore, he prayed for the confirmation of the additions made by the lower authorities. 5. We have considered the rival submissions and perused the material available on record. In this case, from the details furnished, it is seen that ITA No.341/CTK/2023 4 in the financial statement i.e. Balance sheet, the assessee has shown the figures of sundry creditor at Rs.49,38,608/- under the title “Trade Payable”. However, no list was provided along with financial statements. During the course of assessment proceedings, a list of these parties was supplied to the AO which is at paper book at pages 44 to 47 as filed before the AO vide letter dated 25.05.2022. From the perusal of this list, it appears that none of the parties had opening balance and the outstanding balances appearing against in their names are with regard to the purchases made from them during the year itself. It is also seen that neither during the course of assessment proceedings nor before us assessee has bothered to file the ledger accounts of all these parties and when the assessee was asked to furnish the evidence of payments made in subsequent years as claimed by it, only copies of ledger accounts of these 189 parties as appearing in the books of account of the assessee were filed, however, no supporting evidence such as bank statements etc. were filed to substantiate the claim. 6. It is also interesting to note that out of 189 parties, 121 were squared off in next financial year by making payment in cash. As observed above, that out of 184 summons issued by the AO u/s.133(6) of the Act only 7 parties have responded that too in vague manner, therefore, genuineness of the transactions carried out with these parties remained doubtful. Even their identity is also doubtful. Since in case of 121 parties, payments were made in cash, therefore, there could be a possibility that either these parties are non-existent as in the case of 60 ITA No.341/CTK/2023 5 summons issued u/s.133(6) of the Act returned unserved or the purchase price may be inflated to suppress the profits of the business. 7. One more glaring fact is that in the paper book page 134, the assessee has provided the copy of stock register for paddy. On a single day purchase of 380.20 quintal on 01.04.2014, 492 quintal on 2.7.2014 and so on were recorded and in similar manner on 4.7.2014 900 quintals were shown as quantity milled and on 5.7.2014, 600 quintal were shown as quantity milled. To our understanding this stock register should have been kept wherein each individual purchases through purchase vouchers should be entered separately so as to give the details of each purchase voucher as well as the name of parties from whom purchases were made. From the perusal of the stock register of paddy account it appears that it was prepared in a hurried manner to support the quantity of paddy purchases and milled, this also create doubt about the genuineness of the trade creditors. In the case of the assessee, the assessment for A.Y.2016-2017 was also completed u/s.143(3) of the Act, a copy of the same is available in the paper book at pages 135-137. A perusal of the same also reveal that doubts were raised about the sundry creditors and disallowance was made on adhoc basis without any examination. This also creates doubts about the genuineness and existence of the sundry creditors in this year also. As these are the credits in the books of accounts of the assessee as per Section 68 of the Act, the burden is casted upon the assessee to establish these credits as genuine to the ITA No.341/CTK/2023 6 satisfaction of the AO. The relevant provisions of Section 68 of the Act are as under :- Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : [Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,— (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: [Provided also] that nothing contained in the first proviso 86[or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. 8. In the instant case as observed above, the assessee has failed to prove the identity of the creditors as in most of the cases no reply was received against the summons issued u/s.133(6) of the Act. Thus, neither ITA No.341/CTK/2023 7 the genuineness of transaction nor their creditworthiness is established. The only contention of the assessee was that all of these parties were squared off during the next year. As observed above, more than 120 parties were paid in cash. Thus, this claim of assessee is also doubtful. It also raises doubt in the mind as to how agriculturists are able to stay creditor for such long period of time. 9. Since the ledger accounts of the parties as filed by the ld. AR during the course of hearing, on our request, for subsequent year were not available before the lower authorities, therefore, in the interest of justice, we set aside this issue to the file of AO for re-examination the trade creditors in the light of the observations made hereinabove. Needless to say the assessee be allowed adequate opportunity of hearing before concluding the issue. Liberty should be granted to the assessee to produce the trade creditors for verification if so desired by the assessee. The ld. AR is also directed to file the copy of the ledger account of these parties as appearing in the books of account of the assessee for subsequent year before the AO, a copy of which was filed before us. Thus, this ground of appeal is allowed for statistical purposes. 10. In second ground of appeal, the assessee has challenged the disallowance of Rs.1,69,260/- made out of the purchase of gunny bags. The AO has made the disallowance @20% out of the purchases of the old gunny bags of Rs.8,46,300/- claimed in the profit and loss account. Before us, ld. AR of the assessee submitted that the assessee has purchased the gunny bags of Rs.8,46,300/-and also shown the income of ITA No.341/CTK/2023 8 Rs.7,72,479/- from the sales of gunny bags and only claimed Rs.73,721/- as expenses under the head of “gunny bags”. Both these figures are appearing n the note 17 & 13 appended to the profit and loss account respectively. Since the assessee has claimed the deduction of Rs.73,721/-only, no disallowance could be made for the amount higher than this and also looking to the fact that the assessee is showing income from sale of gunny bags, the disallowance made by the AO is hereby deleted. This ground of appeal is allowed. 11. In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 16/10/2024. Sd/- (GEORGE MATHAN) Sd/- (MANISH AGARWAL) \u0001याियक \u0001याियक \u0001याियक \u0001याियक सद\bय सद\bय सद\bय सद\bय / JUDICIAL MEMBER लेखा सद\u0003य/ ACCOUNTANT MEMBER कटक कटक कटक कटक Cuttack; \u0003दनांक Dated 16/10/2024 Prakash Kumar Mishra, Sr.P.S. आदेश आदेश आदेश आदेश क\u0002 क\u0002 क\u0002 क\u0002 \u0003ितिलिप \u0003ितिलिप \u0003ितिलिप \u0003ितिलिप अ\tेिषत अ\tेिषत अ\tेिषत अ\tेिषत/Copy of the Order forwarded to : आदेशानुसार आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, (Assistant Registrar) आयकर आयकर आयकर आयकर अपीलीय अपीलीय अपीलीय अपीलीय अिधकरण अिधकरण अिधकरण अिधकरण, कटक कटक कटक कटक/ITAT, Cuttack 1. अपीलाथ\u0007 / The Appellant- Ganesh Millers Private Limited Karanjia Main Road, Karanjia, Odisha-757037 2. \b\tयथ\u0007 / The Respondent- ACIT, Baleswar Circle, Baleswar 3. आयकर आयु\u0006(अपील) / The CIT(A), 4. आयकर आयु\r / CIT 5. िवभागीय \u0010ितिनिध, आयकर अपीलीय अिधकरण, कटक कटक कटक कटक / DR, ITAT, Cuttack 6. गाड\u0010 फाईल / Guard file. स\tयािपत \bित //True Copy// "