A.Sathyanarayana, CHENNAI V. ITO, CHENNAI

ITA 1081/CHNY/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9070 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 02-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2013
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH J
• Assessee Lawyers: S SRIDHAR
• Keywords: Recovery proceedings

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1081/MDS./2013 / ASSESSMENT YEAR : 2007-2008 SHRI A.SATYANARAYANA , NEW NO.121,OLD NO.59, AUDIAPPA NAICKEN STREET, SOWCARPET, CHENNAI 600 079. VS. THE INCOME TAX OFFICER, BUSINESS WARD XIII(3), CHENNAI. [PAN AGBPA 4793 K ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.S.SRIDHAR,ADVOCATE /RESPONDENT BY : MR.A.V.SREEKANTH,JCIT,DR / DATE OF HEARING : 02 - 06 - 201 6 / DATE OF PRONOUNCEMENT : 17 - 06 - 2016 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, DATED 14.0 3.2013 PERTAINING TO ASSESSMENT YEAR 2007-08. ITA NO. 1081/MDS./2013 :- 2 -: 2. THE MAIN GRIEVANCE IN THIS APPEAL IS WITH REGAR D TO SUSTAINING THE ADDITION OF ` 3,55,86,511/- MADE BY THE AO. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF TRADING IN PULSES. THE T OTAL PURCHASES DURING THE YEAR ARE ` 27.,76,47,490/-, AS AGAINST THE SALES OF ` 27,91,28,209/- AND THE NET PROFIT IS ` 2,61,213/-, AS RETURNED BY THE ASSESSEE. THE ASSESS ING OFFICER IN HIS ORDER OBSERVED THAT THE ASSESSEE INFLATED PU RCHASES TO THE EXTENT OF ` 5,44,08,067/-. THE ASSESSING OFFICER, DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, CALLED FOR VARIOUS DETAILS, LIKE PURCH ASE INVOICES, CONFIRMATION LETTERS, ETC. FROM THE DETAILS FILED BY THE ASSESSE E, THE ASSESSING OFFICER OBSERVED THAT MANY OF THE PURCHASE VOUCHERS, CONFIR MATION OF LEDGER EXTRACTS, ETC. ARE WITHOUT SIGNATURE AND SEAL OF TH E SUPPLIERS. THESE DOCUMENTS CONTAINED THE SIGNATURE OF THE ASSESSEE O NLY. HENCE, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT ALL THE SAID PURCHASE INVOICES / VOUCHERS AND THE CONFIRMATION OF LEDGER EXTRACTS, E TC. ARE NOT GENUINE. FURTHER, THE ASSESSING OFFICER, IN ORDER TO VERIFY THE GENUINENESS OF THE PARTIES (PERSONS FROM WHOM THE ASSESSEE CLAIMED TO HAVE MADE PURCHASES) AND PURCHASE TRANSACTIONS, ISSUED SUMMONS TO VARIOU S PERSONS, NUMBERING TO 13 IN ALL. THERE WAS NO RESPONSE FROM THE SAID P ERSONS. EVEN THE SUBSEQUENT ENQUIRIES MADE BY THE ASSESSING OFFICER REVEALED THAT THE PERSONS ARE NOT TRACEABLE. THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT THE PURCHASES CLAIMED TO HAVE BEEN MADE IN THE RESP ECTIVE NAMES ARE NOT GENUINE AND TREATED THEM AS INFLATION OF PURCHASES. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE SAME. AGGRIEVED, THE ASSESSEE CARRIED THE ITA NO. 1081/MDS./2013 :- 3 -: APPEAL BEFORE LD.CIT(A). ON APPEAL, THE LD.CIT(A) O BSERVED THAT PURCHASES FROM M/S.SAVAVI AGRO PULES: ` 13,18,533/-, M/S.ADITHYA GLOBAL TRADING P. LTD.: ` 1,44,22,543/- AND M/S.SOUTHERN PETRO OILS PVT LTD. ` 28,19,267/- ARE GENUINE OUT OF ` 5,41,46,854/-. ACCORDINGLY, CIT(A) DELETED ` 1,85,60,343/- AND SUSTAINED ` 3,55,86,511/- OUT OF ` 5,41,46,854/-. AGGRIEVED WITH THE ORDER OF LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFOR E US. 4. THE MAIN CONTENTION OF THE ASSESSEES COUNCIL I S THAT THE ASSESSEE IS NOT GIVEN COPY OF INSPECTOR REPORT COLLECTED DURING THE COURSE OF REMAND PROCEEDINGS. FURTHER, HE SUBMITTED THAT ASSESSEE I S A SMALL COMMISSION AGENT DEALING IN PULSES AND BY ANY STRETCH OF IMAGI NATION, THE ASSESSEE COULD NOT EARN SUCH HUGE INCOME AS THE ADDITION RE SULTED IN HIGH RATE OF NET PROFIT WHICH IS IMPOSSIBLE IN THIS LINE OF BUSINESS . FINALLY, HE SUBMITTED THAT IF THE PURCHASES WERE NOT CONFIRMED BY THE RESPECT IVE PARTIES, THEN THE BEST THING THE AO COULD HAVE REJECTED THE BOOKS OF ACCO UNTS AND ESTIMATE THE INCOME OF ASSESSEE ON THE BASIS OF THE NET PROFIT I N THAT LINE OF BUSINESS. 5. ON THE OTHER HAND, LD.D.R SUBMITTED THAT THE DE PARTMENT HAS GIVEN AMPLE OPPORTUNITY TO THE ASSESSEE TO PROVE THE PURC HASERS AND AT ALL TIMES, THE ASSESSEE TOOK A PLEA THAT THE PAYMENTS FOR PURC HASERS WERE MADE BY BANKING CHANNELS AND ALL PURCHASERS WERE GENUINE WI THOUT PLACING NECESSARY EVIDENCE CALLED FOR BY THE REVENUE AUTHORITIES. LD. D.R RELIED ON THE ORDERS OF LOWER AUTHORITIES. ITA NO. 1081/MDS./2013 :- 4 -: 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, PURCHASERS AMOUNTING TO ` 3,55,86,511/- FOUND TO BE NON- GENUINE BY THE REVENUE AUTHORITIES AFTER CONDUCTING THE ENQUIRY BY INSPECTOR DURING THE COURSE OF REMAND PROCEEDINGS. THE INSPECTOR REPORT IS AS FOLLOWS:- INSPECRORS REPROT AS DIRECTED BY THE ITO XII(3) I WENT TO THE FOLLOWI NG ADDRESSES, IN THE CASE OF SHRI A.SATHYANARAYANA AMMULAU ON 29.09.2010. SL. NO. NAME OF THE PARTY 1 GREENWAY AGRO FOOD 62, G.A ROAD, 1 FLOOR, OLD WASHERMANPET, CHENNAI 600 021 THE SAID ADDRESS IS COMPLEX WITH THE HOUSE OWNERS HOUSE IN THE GROUND FLOOR. I MET ALL THE SHOP OWNERS, 2 OF WHOM HAVE BEEN THERE FOR THE PAST 10 YEARS, NONE OF THEM WERE ABLE TO RECALL ANY COMPANY BY THE SAID NAME. I ALSO MET THE LANDLADY AND SPOKE TO HER SON BOTH OF WHOM ASSURED THAT ONLY THE FRONT PORTION WAS AVAILABLE PREVIOUSLY AND THE SIDE PORTIONS WERE ADDED RECENTLY. THEY SAID THAT NO TENANT BY THAT NAME OR DOING DHAL COMMISSION BUSINESS OCCUPIED THEIR PREMISES DURING THE PERIOD UNDER THE SAID 2 BALAJI & CO 135, GANDHI ROAD, BALAKRISHNA NAGAR, CHENNAI 600 019 , I FIRST WENT TO GANDHI STREET PLOT NO.135, IT HAS A LINE OF SHOPS, ALL THE TENANTS INCLUDING ONE MONEYLENDER BY THE NAME OF GAJENDRAN WHO HAS BEEN A TENANT FOR OVER 10 YEARS SAID THAT THERE HAS BEEN NO SUCH SHOP UNDER THE SAID NAME AND THERE HAS ALSO BEEN NO ONE DOING DHAL COMMISSION BUSINESS FROM THE SAID PLACE. I THEN WENT TO ALL THE MAIN STREETS IN BALAKRISHNA NAGAR AND MADE ENQUIRIES BUT ALL THE LOCAL RESIDENTS I MET INCLUDING SHOPKEEPERS SAID THAT THEY HAVE NOT HEARD OF SUCH A NAME OR KNEW ANY-BODY TRADING IN DHAL 7 PULSES IN THEIR LOCALITY. 3 ADANI ENTERPRISES LTD .,5, DAMODRAN STREET, KELLYS, CHENNAI 10. THE SAID PREMISES CONSISTS OF 2 HOUSES INSIDE ONE COMPOUND CONVERTED INTO OFFICE SPACE AND COMMERCIALLY LET OUT. IT FOUND FROM THE ENQUIRIES MADE THAT A COMPANY BY SUCH NAME ITA NO. 1081/MDS./2013 :- 5 -: WAS THERE BEFORE SOME 3-4 YEARS IN THE 2ND FLOOR OF THE FRONT HOUSE, BUT, THEY HAD VACATED AND THI NO CONTACT ADDRESS OR DETAILS AVAILABLE. 4 ANITHA & CO 13/1, SINGARAM FIRST LANE, OLD WASHERMANPET, CHENNAL - 600 021 THE SAID ADDRESS IS COMPLEX WITH THE HOUSE OWNERS GARDEN HOUSE IN THE 2 FLOOR. I MET ALL THE SHOP OWNERS, SOME OF WHOM HAVE BEEN THERE FOR MORE THAN 5-6 YEARS, NONE OF THEM WERE ABLE TO RECALL ANY COMPANY BY THE SAID NAME. I ALSO MET THE LANDLADY AND SPOKE TO HER HUSBAND MR.PRAKASH BOTH OF WHOM ASSURED THAT NO SUCH TENANT BY THAT NAME OR DOING DHAL COMMISSION BUSINESS OCCUPIED THEIR PREMISES DURING THE PERIOD UNDER THE SAID NAME. 5 LEELA AGENCIES 204B, 8 CROSS PRAKASH NAGAR, CHENNAI600 110 THE SAID HOUSE WAS LOCKED AND LOOKED UNOCCUPIED. 1 MADE ENQUIRIES WITH THE OPPOSITE HOUSE, NEIGHBOURS. THEY SAID THAT THE HOUSE OWNER IS WORKING ABROAD AND IT WAS OCCUPIED BY HIS BROTHER WHO WAS A CIVIL ENGINEER WITH THE STATE GOVERNMENT WHO HAS SHJFTED HOUSE ONLY BEFORE 20 DAYS BECAUSE OF TRANSFER. THEY SAID THAT THE BROTHER WAS RESIDING ONLY FOR THE PAST 3 YEARS IN THE HOUSE AND DID NOT DO ANY BUSINESS. THE NEIGHBOUR ALSO SOLD THAT PREVIOUS TO THEM A TENANT WAS IN OCCUPATION OF THE HOUSE BUT, THE TENANT DID NOT HAVE ANY BOARD OR DID BUSINESS FROM .THE SAID PLACE, SO, THEY WERE NOT AWARE OF THEIR BUSINESS AND THERE WAS NO CONTACT ADDRESS OR DETAILS AVAILABLE. 6 LAKSHRNJ EXPORT OLD NO.59/NEW NO.64, VAIDYANATHA MUDAII , TONDIARPET, CHENNAI-600 081 THE SAID ADDRESS IS A CENTRAL WARE HOUSE. LAKSHMI EXPORT KEEPS ITS STOCKS THERE AND ITS OFFICE IS IN COIMBATORE. I SPOKE TO THE PERSON AYZTH [9865877791J, WHO IS IN-CHARGE OF THE GODOWN AT CHENNAL OVER PHONE, AS HE WAS NOT AVAILABLE AT THE TIME OF HIS VISIT. HE SAID THAT THE HEAD OFFICE HAS TO BE CONTACTED FOR ANY DETAILS. LAKSHRNI EXPORTS, 408, 1?G STREET, GANDHI NAGAR, COIMBATORE 1. - CONTACT NO. 9865877790. 7 MUTHU TRADING CO. 63, SOIAIAPPAN STREET, OLD WOSHERMANPET, AT PRESENT NO BUSINESS IS CONDUCTED UNDER THE SAID NAME. I MET MR.JYAVEI, WHO SAID THAT MUTHU TRADING CO. WAS RUN AS A ITA NO. 1081/MDS./2013 :- 6 -: CHENNAL 600 021. COMMISSION AGENCY FOR DHAL 7 PULSES BY ONE MR.MUTHUPANDI BEFORE FEW YEARS. MR.MUTHUPAIIDJ HAD AN I ACCIDENT AND THE BUSINESS WAS RUNNING SOME LOSS, HE THEN LEFT FOR HIS NATIVE ASKING MR.JAYAVEL TO LOOK AFTER THE BUSINESS. MR.JAYAVEL SAID THAT AS HE DID NOT HAVE MUCH EXPERIENCE IN THE TRADE THE BUSINESS RAN INTO FURL HER LOSS AND HE HAD DISCONTINUED THE SAME BEFORE 2 YEARS. 8 SRI MAHALAKSHRNI TRADERS V 36/IA, VILLAGE STREET, KALADIPET, CHENNAI 600 019. VILLAGE STREET IS A MAIN MARKET STREET, I FOUND THAT THE PLACE WAS A EMPTY PLOT. I MADE ENQUIRIES WITH THE NEIGHBOURS AT D.NOS. 36/IB, 36/IC, 36/ID THEY SAID THAT THE PLOT IS A VACANT PLOT AND THERE HAS BEEN NO SHOP OR RESIDENCE OR ANY BUILDING AT THE SAID DOOR NO. 1 ALSO MADE ENQUIRES WITH SOME PROVISION SHOP OWNERS AND OTHER TRADERS IN THAT STREET, BUT, NONE OF THEM WERE ABLE TO RECALL ANY COMPANY BY THE SAID NAME OR DOING DHAL OR PULSES COMMISSION BUSINESS. 9 SENTHIL TRADERS 84, TANDAVARAYAN STREET, TONDIARPET, CHENNAI- 600 081 . THE SAID DOOR NUMBER FALLS WITHIN A SMALL LANE OF 2 FEET WIDTH SOME 20 FRET BEHIND THE SHOPS ON THE STREET. IT IS A GROUP OF RESIDENTIAL HOUSES WITH SMALL PORTIONS LET OUT FOR RENT ON RESIDENTIAL USE. ALL THE PERSONS INCLUDING THE HOUSE OWNER WHO ALSO RESIDES IN THE 2 FLOOR SAID THAT NO SUCH TENANT BY THAT NAME OR DOING DHAL COMMISSION BUSINESS OCCUPIED THEIR PREMISES DURING THE PERIOD. 10 SANGAVI AGRO PLUSES 43, ACHARAPPAN STREET, II FLOOR, CHENNAI LI WAS FOUND FROM LOCAL ENQUIRY THAT THE SAID COMPANY HAS NOW SHFTED TO NO. 76, GOVINDAPPA STREET, CHENNAI - 600 001. 1 WENT TO THE SAID PLACE AND THEY SAID THAT THEY HAD ALREADY SUBMITTED A COPY OF THE LEDGER COPY TO THE ASSESSEE EVEN BEFORE 31.03.2010. THEY SAID THAT THEY WILL ONCE AGAIN SEND A COPY OF THE SAME THROUGH THEIR AUDITOR. ITA NO. 1081/MDS./2013 :- 7 -: NOW, THE CONTENTION OF THE AUTHORISED REPRESENTATIV E OF ASSESSEE IS THAT THE COPY OF THE ABOVE REPORT IS NOT FURNISHED TO THE ASSESSEE. HOWEVER, WE FIND THAT REMAND REPORT IS GIVEN TO THE ASSESSEE, VIDE ITS LETTER DATED 20.10.2011 SUBMITTED THAT VARIOUS DOCU MENTS FILED BY HIM WERE NOT VERIFIED BY THE AO WHILE PREPARING THE REM AND PROCEEDINGS. FURTHER, THE FACT IS THAT THE CLAIM OF PURCHASERS M ADE BY THE ASSESSEE WAS NOT PROVED AS GENUINE TO THE SATISFACTION OF TH E AUTHORITIES. FURTHER, OUT OF PURCHASERS AMOUNTING TO ` 5,41,46.854/-, AN AMOUNT OF ` 1,85,60,343/- WERE FOUND TO BE GENUINE AND THE CIT (A) HAD GIVEN A RELIEF TO THE EXTENT OF ` 1,85,60,343/-. THE PLEA OF THE ASSESSEE IS THAT THE PAYMENTS TO PURCHASERS WERE MADE BY CHEQUE, SO THE PURCHASES WERE GENUINE. IN OUR OPINION, THERE IS NO PRESUMPTI ON THAT WHEN THE PAYMENTS WERE MADE BY THE ASSESSEE BY CHEQUE AT VAR IOUS DATES, IT COULD BE TREATED AS GENUINE. EVEN PAYMENTS WERE MA DE BY CHEQUE TO CERTAIN PARTIES, IT CANNOT BE SAID THAT GOODS HAVE BEEN RECEIVED BY THE ASSESSEE UNLESS THE ASSESSEE HAS PLACED NECESSARY E VIDENCE REGARDING RECEIPT OF GOODS OR GETTING THE SERVICES FROM THE R ESPECTIVE PARTIES FOR THE CORRESPONDING PAYMENTS. FURTHER, THE ASSESSEE HAS ALSO MADE A PLEA THAT THE COMMERCIAL TAX DEPARTMENT HAS ACCEPTE D THE ASSESSEES BOOKS OF ACCOUNTS, AS SUCH INCOME TAX DEPARTMENT HA S TO ACCEPT THE SAME. IN THE CASE OF COMMERCIAL TAX ASSESSMENT, TH ERE WAS NO ITA NO. 1081/MDS./2013 :- 8 -: ENQUIRY BY THE AUTHORITIES TO CONSIDER THE TRANSACT IONS, TO COME TO DIFFERENT CONCLUSION BY THEM. BEING SO, THIS ARGUME NT OF ASSESSEE HOLDS NO MERIT. 6.1 COMING TO THE GENUINENESS OF THE PURCHASE MADE BY THE ASSESSEE, ASSESSEE TOOK ONE MORE PLEA THAT CONCERNE D TRO OF ASSESSEE DURING THE RECOVERY PROCEEDINGS HAS GIVEN A FINDING THAT PURCHASES MADE BY THE ASSESSEE IS GENUINE, BUT THAT FINDINGS OF THE TRO HAVE NO RELEVANCE TO THE PRESENT APPEAL. MORE SO, HE CANNOT SIT OVER THE ORDER OF CIT(A). BEING SO, THE PLEA OF AS SESSEE IS REJECTED. 6.2 COMING TO THE MERIT OF THE ADDITION, WHEN THE ASSESSEE CLAIMS ANY PURCHASE OR EXPENDITURE IN THE BOOKS OF ACCOUNT S, IT IS THE DUTY OF THE ASSESSEE TO PROVE THAT IT IS GENUINE ACTUALLY INCURRED BY THE ASSESSEE. THE EVIDENCE BROUGHT ON RECORD BY WAY OF REMAND REPORT SHOWS THAT THE PURCHASERS ARE NOT PROVED. HENCE, T HE BOOK OF ACCOUNT OF ASSESSEE IS NOT RELIABLE AND IT IS TO BE REJECTED. FURTHER, THE AUTHORITIES HEREIN BELOW ONLY DOUBTED THE PURCHASES AND NOT THE SALES. THE PURCHASES AND SALES WOULD ALSO GO TOGETHER. IF THERE IS NO PURCHASE, ASSESSEE CANNOT BE IN SALE. THE ASSESSING OFFICER HAS TO EXAMINE BOTH THE PURCHASES AND SALES. THE TRIBUNAL BEING THE FINAL FACT FINDING AUTHORITY CANNOT CLOSE THE EYE WHEN TH E INJUSTICE WAS TO BE DONE TO THE ASSESSEE OR ASSESSEE HOODWING THE DE PARTMENT. IT IS THE DUTY BOUND TO CORRECT THE INJUSTICE DONE TO PAR TIES. HENCE, IN THE ITA NO. 1081/MDS./2013 :- 9 -: INTEREST OF JUSTICE WE ARE INCLINED TO DIRECT THE A O TO VERIFY WHETHER THE SALES IS GENUINE OR IT IS THE ONLY ACCOMMODATION BY DEPOSITING ASSESSEES OWN MONEY INTO ACCOUNT FROM ANY UNEXPLAI NED SOURCES. IF IT IS SO, THEN ONLY THE AO SHALL CONSIDER THE ENTIRE U NPROVED PURCHASE AS UNEXPLAINED INCOME OF ASSESSEE. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO PROVE AT LEAST THE SALES AS GENUINE, THEN T HERE CANNOT BE ANY ADDITION. IF THE GP AND NET PROFIT RATE DECLARED B Y THE ASSESSEE IS AT PAR WITH THE PREVAILING SITUATION IN THE SIMILAR LI NE OF BUSINESS, THERE CANNOT BE ANY FURTHER ADDITION. WITH THIS OBSERVAT ION, WE REMIT THE ENTIRE ISSUE TO THE FILE OF AO TO CARRY ON NECESSAR Y ENQUIRIES AND DECIDE THE ISSUE AS DIRECTED ABOVE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 17 TH JUNE, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF