Sri Senthil Mills, Udamalpet V. ITO, Pollachi

ITA 1207/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61274 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-07-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 22-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: T BANUSEKAR F
• Keywords: Unexplained cash credit; Unexplained investment; Corroborative evidences
• Section: 40A(3); 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER ITA NOS.1226 & 1227(MDS)/2010 ASSESSMENT YEARS : 2005-06 & 2006-07 THE INCOME-TAX OFFICER, WARD I(1), POLLACHI. VS. M/S.SRI SENTHIL MILLS, GANAPATHIPALAYAM, PULANKINAR, UDUMALPET PAN AAMFS2251H. (APPELLANT) (RESPONDENT) AND ITA NOS.1207 & 1208(MDS)/2010 ASSESSMENT YEARS : 2005-06 & 2006-07 M/S.SRI SENTHIL MILLS, THE INCOME-TAX OFFICER, GANAPATHIPALAYAM, VS. WARD I(1) , PULANKINAR, UDUMALPET. POLLACHI . (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI SHAJI P JACOB, IRS, C IT ASSESSEE BY : SHRI T.BANUSEKAR, F.C.A. DATE OF HEARING : 6 TH JULY, 2012 DATE OF PRONOUNCEMENT : 13 TH JULY, 2012 - - ITA 1226 & 1227/2010, ETC. 2 O R D E R PER V.DURGA RAO, JUDICIAL MEMBER.- THESE CROSS APPEALS BY THE ASSESSEE AND THE REVEN UE RELATING TO THE ASSESSMENT YEARS 2005-06 AND 2006-0 7 ARISE OUT OF THE ORDERS DATED 30-4-2010 PASSED BY THE COMMISS IONER OF INCOME-TAX(APPEALS)-II, COIMBATORE. 2. FIRST WE SHALL TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.1207(MDS)/2010. THE ASSESSEE HAS RAISED FIVE GR OUNDS IN ITS APPEAL. THE ONLY EFFECTIVE GROUND NO.2 IS AS F OLLOWS:- THE COMMISSIONER OF INCOME-TAX(APPEALS)-II ERRED I N CONFIRMING AN ADDITION OF RS.22,23,566/- AS PROFIT ON SUPPRESSED SALE OF YARN. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A F IRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G IN YARN AND FABRIC. THE ASSESSEE FILED ITS RETURN OF INCOM E FOR THE ASSESSMENT YEAR 2005-06 ON 27-10-2005 DECLARING A T OTAL LOSS OF RS. 1,15,634/-. THEREAFTER A SURVEY UNDER SECTION 133A OF THE - - ITA 1226 & 1227/2010, ETC. 3 ACT WAS CONDUCTED ON 16-2-2007. BASED ON THE SURVE Y THE ASSESSMENT WAS REOPENED. THE FOLLOWING ADDITIONS A RE MADE:- 1.INCOME FROM SUPPRESSED SALE OF YARN RS. 38,18,131/- 2. DISALLOWANCE UNDER SECTION 40A(3) RS. 9,56,300/- 3. UNEXPLAINED CREDIT UNDER SECTION 68 RS. 74,75,000/- THE ASSESSING OFFICER HAS MADE A TOTA L ADDITION OF RS.1,21,33,797/-. 4. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) CHALLEN GING THE ADDITION OF RS. 38,18,131/- (INCOME FROM SUPPRESSED SALE OF YARN) AND RS. 74,75,000/- (UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT). THE ASSESSEE SUBMITTED BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS) WITH REGARD TO SUPPRESSED SALE OF YARN THAT FOR COMPUTING A QUANTI TATIVE TALLY OF YARN PRODUCED AND SOLD, THE ASSESSING OFFICER ADOPT ED A NORM OF FIVE UNITS OF ELECTRICITY TO PRODUCE ONE KILO OF YARN. BASED ON THIS NORM, THE ASSESSING OFFICER CALCULATED THE PRO DUCTION AT 968552 KGS. OF YARN. ON THE BASIS OF THIS PRODUCTI ON, THE ASSESSING OFFICER DETERMINED THE SUPPRESSED QUANTIT Y OF SALE OF YARN AT 553192 KGS., THE VALUE OF WHICH WAS DETERMI NED AT THE - - ITA 1226 & 1227/2010, ETC. 4 RATE OF ` 85/-, RESULTING IN A GROSS VALUE OF RS. 4,70,21,32 0/-. INCOME THEREFROM WAS DETERMINED BY APPLYING A GROSS PROFIT RATE OF 8.12%, RESULTING IN AN ADDITION OF RS. 38,18,131/-. IT WAS FURTHER SUBMITTED BEFORE THE COMMISSIONER OF INCOME - TAX(APPEALS) THAT THE ABOVE ADDITION MADE BY THE AS SESSING OFFICER WAS NOT CORRECT FOR THE REASON THAT BEFORE TAKING OVER THE UNIT FOR CONVERSION, THE UNIT WAS NOT FUNCTIONING, THE MACHINES WERE NOT BRAND NEW MODERN MACHINES AND HENCE THE NO RMS OF SITRA ARE NOT APPLICABLE TO THE UNIT UNDER CONSIDER ATION. RESETTING THE PLANT TO COTTON YARN PRODUCTION IN PL ACE OF POLYESTER BY THE PREVIOUS LESSEE AND ALSO THE TEETHING TROUBL E FACED AT THE TIME OF RESTARTING THE UNIT AFTER A LONG GAP WHEN T HE UNIT WAS LYING IDLE HAS TO BE TAKEN NOTE OF WHILE COMPUTING THE PRODUCTION OF YARN AND CONSUMPTION OF ELECTRICITY. THE ASSESS ING OFFICER ALLOWED A PRODUCTION LOSS FOR AROUND 1200 HOURS FOR ALL THE ABOVE FACTORS IN PARA NO.7 OF HIS ORDER. THE ASSESSING O FFICER PASSED THE ASSESSMENT ORDER BASED ON FOUR ASSUMPTIONS: (I) NUMBER OF UNITS CONSUMED (4842760 UNITS), (II) CONSUMPTION IS CALCULATED AT 5 UNITS PER KG. OF 40S YARN, (III) SALE RATE IS ADOPTED AT RS. 85/- AND (IV) THE GROSS PROFIT IS ADOPTED AT 8.12%. THE LEARNED - - ITA 1226 & 1227/2010, ETC. 5 COMMISSIONER OF INCOME-TAX(APPEALS), AFTER CONSIDER ING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSIONS OF THE ASSESSEE, HELD THAT AS PER FORM 3CD OF THE R ELEVANT ASSESSMENT YEAR THE GROSS PROFIT TO TURNOVER RATIO WAS 2.57% FOR THE ASSESSMENT YEAR 2005-06 AND 7.52% FOR THE ASSES SMENT YEAR 2006-07 RESPECTIVELY. CONSIDERING THE ISSUE I N TOTALITY THE COMMISSIONER OF INCOME-TAX(APPEALS) WAS OF THE VIEW THAT IT WILL MEET THE ENDS OF JUSTICE IF THE GP RATE IS ADOPTED AT 5% (BEING THE AVERAGE OF 2.57% PLUS 7.52%), INSTEAD OF 8.12% ADOPTED BY THE ASSESSING OFFICER. CONSEQUENTLY INCOME FROM SU PPRESSED SALE OF YARN WOULD WORK OUT TO RS.22,23,566/-. HE, THEREFORE DIRECTED THE ASSESSING OFFICER TO ADOPT RS.22,23,56 6/- IN LIEU OF RS.38,18,131/-. 5. BEING AGGRIEVED, THE ASSESSEE AS WELL AS THE REVENUE CARRIED THE MATTER IN APPEALS BEFORE THE TR IBUNAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D BEFORE US THAT THE ADDITION MADE BY THE ASSESSING O FFICER AND SUSTAINED BY THE COMMISSIONER OF INCOME-TAX(AP PEALS) OF RS. 22,23,566/- CANNOT BE SUSTAINED AND THERE IS NO BA SIS FOR IT - - ITA 1226 & 1227/2010, ETC. 6 AND THE ENTIRE ADDITION IS TO BE DELETED. ON THE O THER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPOR TED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT T HE ENTIRE ADDITION IS TO BE SUSTAINED. 7. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECOR DS OF THE CASE AND GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER HAS OBSERVED THAT THE ASSESSEE HAS NOT MAINTAINED PROPE R BOOKS OF ACCOUNTS AND THEREFORE HE REJECTED THE BOOKS OF ACC OUNT AND INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND THE SAME WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS). THEREAFTER, THE ASSESSING OFFICER AD OPTED THE G.P. RATE AT 8.12% (AVERAGE OF 8.72% AND 7.52%, ADM ITTED BY THE ASSESSEE FOR THE PREVIOUS YEAR AND THE SUCCEEDI NG YEAR). THE ASSESSEE OBJECTED TO THE G.P. RATE ON THE GROUN D THAT COMPARISON OF GP RATE OF OTHER COMPANIES IN SIMILAR LINE OF BUSINESS QUOTED BY THE ASSESSING OFFICER COULD NOT BE MADE FOR THE REASON THAT SOME OF THEM DEALT WITH SYNTHETIC Y ARN, BED SHEET, ETC., WHEREAS THE ASSESSEE DEALT WITH COTTON YARN. AS PER FORM 3CD OF THE RELEVANT ASSESSMENT YEARS, THE GROS S PROFIT TO - - ITA 1226 & 1227/2010, ETC. 7 TURNOVER RATIO WAS 2.57% FOR THE ASSESSMENT YEAR 20 05-06 AND 7.52 FOR THE ASSESSMENT YEAR 2006-07 RESPECTIVELY. CONSIDERING THE ISSUE IN TOTALITY, THE LEARNED COMMISSIONER OF INCOME- TAX(APPEALS) ADOPTED A G.P. RATE OF 5%, BEING THE A VERAGE OF 2.57% + 7.52%), THE RATE ADOPTED BY THE ASSESSEE IN ITS LETTER SUBMITTED ON 20-10-2009 INSTEAD OF 8.12% ADOPTED BY THE ASSESSING OFFICER. WE FIND NO INFIRMITY IN THE ORD ER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ADO PTING A G.P. RATE OF 5% BY CONSIDERING THE AVERAGE OF THE G .P. RATES FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07. THIS GRO UND OF APPEAL OF THE ASSESSEE, THEREFORE, STANDS DISMISSED . 8. INSOFAR AS THE APPEAL FILED BY THE REVENUE IN I TA NO.1226(MDS)/2010 FOR THE ASSESSMENT YEAR 2005-06, THE REVENUE HAS RAISED GROUND NOS.2 AND 3 WITH REGARD T O THE GP ADDITION ADOPTED BY THE CIT(A) AT 5%. IN THIS REGA RD THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 9. WE HAVE HEARD BOTH THE PARTIES. THIS GROUND OF APPEAL RAISED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A) ADOPTING THE GP RATE AT 5%, THE FACTS AND TH E REASONS - - ITA 1226 & 1227/2010, ETC. 8 DISCUSSED IN DETAIL IN THE APPEAL FILED BY THE ASSE SSEE FOR THE SAME ASSESSMENT YEAR AND WE CONFIRMED THE ORDER OF THE LEARNED CIT(A). WE, THEREFORE, DISMISS THIS GROUND OF APPEAL RAISED BY THE REVENUE. 10. THE FOURTH GROUND OF APPEAL RAISED BY THE REVE NUE IS IN RESPECT OF THE CLAIM OF RS.69,97,391/-. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING S THE AO HAS OBSERVED THAT THE LEDGER ACCOUNT COPY OF THE FI RM IN THE BOOKS OF M/S.RISHAB TRADING CO. FOR THE FINANCIAL Y EAR 2004-05 SHOWED NIL OPENING BALANCE. THE TOTAL DEBITS IN TH E ACCOUNT IS RS.47,491/- AND THE TOTAL CREDITS IS RS.6,21,000/-, RESULTING IN A DEBIT BALANCE OF RS.5,73,509/-. HOWEVER IT WAS SEE N THAT THE ASSESSEE HAD BEEN MAINTAINING TWO LEDGER ACCOUNTS F OR THE SAME PARTY IN ITS BOOKS OF ACCOUNT. IN ONE ACCOUNT THERE IS A CLOSING CREDIT BALANCE OF RS.34,75,000/- AND THE OT HER ACCOUNT SHOWS A DEBIT BALANCE OF RS.5,77,789/-. THE SUM OF RS.34,75,000/- WAS STATED BY THE ASSESSEE AS A SECU RITY DEPOSIT RECEIVED THROUGH M/S.KALAVATHY FINANCE LTD. THE AS SESSEES EXPLANATION WAS CROSS CHECKED WITH M/S.KALAVATHY FI NANCE LTD, AND FOUND THAT NONE OF THE TRANSACTIONS FOR THE FIN ANCIAL YEAR - - ITA 1226 & 1227/2010, ETC. 9 2004-05 RELATED TO M/S.RISHAB TRADING CO. THEREFOR E, THE SUM OF RS.34,75,000/- WAS PROPOSED TO BE TREATED AS UNE XPLAINED CREDIT UNDER SECTION 68 OF THE ACT. 11. THE LEDGER ACCOUNT COPY OF THE FIRM IN THE BOO KS OF M/S.GURUSIKH TRADING CO. FOR THE FINANCIAL YEAR 200 4-05 SHOWED NO TRANSACTIONS. HOWEVER, IT WAS SEEN THAT THE ASSE SSEE HAS MAINTAINED LEDGER ACCOUNTS ADMITTING A BALANCE OF R S.40 LAKHS. THIS SUM OF RS.40 LAKHS WAS STATED BY THE ASSESSEE AS A SECURITY DEPOSIT RECEIVED THROUGH M/S.KALAVATHY FIN ANCE LTD. THE ASSESSEES EXPLANATION WAS CROSS CHECKED WITH M/S.KALAVATHY FINANCE LTD. AND FOUND THAT NONE OF T HE TRANSACTIONS FOR THE FINANCIAL YEAR 2004-05 RELATED TO M/S.GURUSIKH TRADING CO. THEREFORE, THE SUM OF RS. 40 LAKHS WAS PROPOSED TO BE TREATED AS UNEXPLAINED CREDIT UN DER SECTION 68 OF THE ACT. 12. DURING THE COURSE OF THE ASSESSMENT PROCEEDING S THE ASSESSEE HAS SUBMITTED BEFORE THE AO THAT THE A MOUNT OF RS.74,75,000/- RECEIVED FROM M/S.KALAVATHY FINANCE LTD. BY CHEQUES ONLY. THESE AMOUNTS WERE TRANSFERRED TO M/ S.GURUSIKH TRADING CO. AND M/S.RISHAB TRADING CO. THROUGH JOUR NAL ENTRIES - - ITA 1226 & 1227/2010, ETC. 10 ON THE INSTRUCTION OF BROKER M/S.VIJAY DAIMA. AS W E HAVE ALREADY EXPLAINED, IF SUCH JOURNAL ENTRIES ARE TO B E DISREGARDED, THE CREDIT WOULD HAVE STOOD IN THE NAME OF M/S.KALA VATHY FINANCE. SECTION 68 IS NOT APPLICABLE IN THIS INST ANCE AS THE PAYMENT HAD BEEN RECEIVED BY CHEQUE ONLY. 13. THE AO AFTER CONSIDERING THE ABOVE EXPLANATION OF THE ASSESSEE HAS OBSERVED THAT THE RECEIPTS OF PAYM ENTS BY M/S.KALAVATHY FINANCE LTD., ALL BEING THROUGH CHEQU ES, ARE CORRECT. HOWEVER, THE BREAK UP OF DETAILS OF PAYME NTS MADE ON ACCOUNT OF PARTIES SHOWS THE NAMES, VIZ. AKASH AGEN CY, DEVIKA TEXTILES, SUJIT POWERLOOM, JAMIL AH NINAL, ASLAM SH AIK, ASLAM SETH, AMASH KACHI, K.N.SHUKLA, RAJESH TEXTILE AND S ATHYAM ENTERPRISE. NOWHERE THE NAMES OF GURUSIKH TRADING CO. OR RISHAB TRADING CO. OR M/S.VIJAY DAIMA HAVE BEEN ENT ERED. ACCORDINGLY, THE AO HAS MADE AN ADDITION OF RS.74,7 5,000/- UNDER SECTION 68 OF THE ACT. 14. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE ASSESSEE HAS SUBMITTED BEFOR E THE LD. CIT(A) THAT THE AMOUNT OF RS.74,75,000/- RECEIVED F ROM M/S. KALAVATHY FINANCE LTD. THROUGH CHEQUE ON BEHALF OF RISHAB - - ITA 1226 & 1227/2010, ETC. 11 TRADING CO. GURUSIKH TRADING CO., THE PAYMENT IS GE NUINE AND THE IDENTITY OF THE PERSON FROM WHOM SUCH CHEQUES W ERE RECEIVED IS NOT IN DISPUTE. THEREFORE, THE ASSESSE E HAS DISCHARGED THE ONUS CAST ON HIM AND THE ADDITION MA DE IN THIS RESPECT IS NOT WARRANTED. THE LEARNED CIT(A) AFTER CALLING THE REMAND REPORT FROM THE AO AND AFTER EXAMINING THE D ETAILS, OBSERVED THAT LEDGER FOLIO OF KALAVATHY FINANCE LTD . IN THE ASSESSEES BOOKS OF ACCOUNTS ALSO CONTAIN THIS RECE IPT DETAILS. AS THE ASSESSEE HAD AGENTS FOR ITS BUSINESS ACTIVIT Y AND THOSE AGENTS PROCURED THE ORDERS FROM VARIOUS PARTIES ON BEHALF OF THE ASSESSEE, THE ASSESSEE CANNOT BE EXPECTED TO ACCOUN T FOR THE RECEIPTS (SECURITY DEPOSIT FROM SUCH PARTIES IN THE IR RESPECTIVE NAMES). THE ACCOUNTING OF THE RECEIPTS FROM THE SOURCE(M/S.KALAVATHY FINANCE LTD.) ON BEHALF OF THE AGENTS IS SUFFICIENT. WITH THE ABOVE OBSERVATION THE LEARNED CIT(A) DELETED THE ADDITION MADE BY THE AO UNDER SECTION 6 8 OF THE ACT TO THE TUNE OF RS.67,97,301/- AND CONFIRMED THE ADD ITION OF RS.6,50,000/-. 15. ON BEING AGGRIEVED THE REVENUE CARRIED THE MAT TER IN APPEAL BEFORE THE TRIBUNAL. THE LEARNED DEPARTM ENTAL - - ITA 1226 & 1227/2010, ETC. 12 REPRESENTATIVE STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONE R (APPEALS). 16. WE HAVE HEARD BOTH THE SIDES IN DETAIL, PERUSE D THE RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORIT IES BELOW. THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HAS R ECEIVED RS.74,75,000/- FROM M/S.KALAVATHY FINANCE LTD. THE ABOVE AMOUNT WAS RECEIVED BY THE ASSESSEE AS A SECURITY D EPOSIT ON BEHALF OF M/S.GURUSIKH TRADING CO. OF RS.40 LAKHS, RISHAB TRADING CO. OF RS.34,75,000/-, TO WHOM THE ASSESSEE IS SUPPLYING FABRIC. THE CASE OF THE AO IS THAT THE A SSESSEE HAS RECEIVED THESE AMOUNTS FROM M/S.KALAVATHY FINANCE L TD., WHICH IS JOT DOUBTED. ONLY HIS OBJECTION IS THAT THERE I S NO ENTRY IN THE BOOKS OF ACCOUNTS OF M/S.KALAVATHY FINANCE LTD. IN RESPECT OF TWO PARTIES, VIZ, RISHAB TRADING CO. AND GURUSIKH T RADING CO. IT IS EXPLAINED BY THE ASSESSEE BEFORE THE AO THAT THE AMOUNT RECEIVED FROM M/S.KALAVATHY FINANCE LTD. THROUGH BA NKING CHANNEL AND THESE AMOUNTS WERE TRANSFERRED TO M/S.G URUSIKH TRADING CO. AND M/S. RISHAB TRADING CO. THROUGH JOU RNAL ENTRIES - - ITA 1226 & 1227/2010, ETC. 13 ON THE INSTRUCTION OF THE BROKER M/S.VIJAY DAIMA. HOWEVER, THE AO HAS NOT BELIEVED THE EXPLANATION OF THE ASSESSEE . THE ADDITION WAS MADE BY INVOKING SECTION 68 OF THE INC OME-TAX ACT, 1961. BEFORE THE CIT(A) THE ASSESSEE HAS SUBMITTED ALL THE DETAILS AND ALSO EXPLAINED THE PURPOSE FOR WHICH TH IS AMOUNT ARE RECEIVED AND ALSO FILED CONFIRMATION FROM M/S.KALAV ATHY FINANCE LTD. TO THE EXTENT OF RS.69,97,391/-. INSOFAR AS T HE OTHER RECEIPT OF RS.3,00,000/- AND RS.3,50,000/- M/S.KALAVATHY FI NANCE LTD. HAS NOT CONFIRMED THE TRANSACTION. THEREFORE, THE CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF RS.6,50,000 /-. WHEN THE ASSESSEE RECEIVED PAYMENTS FROM A LIMITED COMPANY A ND THE PAYMENT ALSO RECEIVED THROUGH A BANK, I.E. CHEQUE P AYMENT AND ALSO FILED A CONFIRMATION FROM THE COMPANY, IN OUR OPINION THE ASSESSEE HAS DISCHARGED ONUS CAST UPON HIM. WE, TH EREFORE, ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY DELE TED THE ADDITION MADE BY THE AO TO THE EXTENT OF RS.69,97,391/-. TH IS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 17. IN THE RESULT THE REVENUES APPEAL IS DISMISSE D. 18. NEXT WE WILL TAKE UP THE ASSESSEES APPEAL I N ITA NO.1208(MDS)/2010 FOR THE ASSESSMENT YEAR 2006-07. THE FACTS - - ITA 1226 & 1227/2010, ETC. 14 IN BRIEF RELATING TO THE ADDITION OF RS.16,30,178/- ARE THAT THE ASSESSEE DID NOT MAINTAIN PROPER STOCK RECORDS. TH E AO WAS ADOPTED THE SAME BASIS OF STOCK VALUATION AS PER TH E ASSESSEES SUBMISSION ON 24-12-2007. DURING THE APPELLATE PRO CEEDINGS IMPOUNDED MATERIALS WERE PERUSED AND FROM THAT IT C OULD BE NOTICED BY THE CIT(A) THAT THE TOTAL SALE OF FABRIC DURING THE RELEVANT ASSESSMENT YEAR WAS 48,03,596 MTRS. HOWEV ER, THE AO ADOPTED A FIGURE OF 5774446 MTRS. THIS REQUIRED CORRECTION. CONSEQUENTLY THE WORKING WILL BE AS FOLLOWS: THE AMOUNT OF FABRIC CONVERTED FROM 563400 KGS OF YARN IS 4507200 MTRS (AS SUBMITTED IN ASSESSEES LETTER BEFORE AO ON 24-12-2007) (AT THE CONVERSION RATE OF 8/KG (I.E.) 5,63,400 X 8) THE FABRIC SOLD AS PER THE LEDGER FOLIO 4803596 MTRS. DIFFERENCE 296396 MTRS. RATE ADOPTED AS IN ASSESSEES SUBMISSION/ ASST.ORDER/REMAND REPORT RS.5.50/METRE (SALE VALUE @ RS.12-/ - CONVERSION CHARGES @ 6.5 PE R MTR.) UNEXPLAINED INVESTMENT IN STOCK 296396 X 5.50 = RS. 1630178 THE CIT(A) HAS DIRECTED THE AO TO ADOPT THE VALUE O F RS.16,13,178/- AS UNACCOUNTED INVESTMENT IN STOCK I LIEU OF RS.38,73,363. AS AGAINST THE ABOVE DIRECTION OF TH E CIT(A), THE - - ITA 1226 & 1227/2010, ETC. 15 ASSESSEE AS WELL AS THE REVENUE FILED APPEALS BEFOR E THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THERE IS NO UNEXPLAINED INVESTMENT IN THE STOCK. O N THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY S UPPORTED THE ORDER PASSED BY THE CIT(A). THE LD. CIT(A) AFTER C ONSIDERING THE ENTIRE DETAILS AND ALSO THE VARIOUS FIGURES CAME TO THE CONCLUSION THAT THE UNEXPLAINED INVESTMENT IN STOCK OF 2,96,39 6 MTRS. X 5.50 = 16,30,178, AS AGAINST THE UNACCOUNTED INVESTMENT ESTIMATED BY THE AO OF RS.38,73,263/-. THE LD. CIT(A) DISCUS SED THE ISSUE IN DETAIL IN HIS ORDER IN PAGE 14 PARA 7.7. NO MAT ERIAL WAS BROUGHT TO OUR NOTICE THAT THE CALCULATION MADE BY THE CIT(A) IS NOT CORRECT. THIS GROUND OF APPEAL RAISED BY THE A SSESSEE IS THEREFORE DISMISSED. 19. ANOTHER GROUND RAISED BY THE ASSESSEE IS IN RE SPECT OF THE ADDITION OF RS.7,41,881/-. THE FACTS IN BR IEF ARE THAT TRANSACTIONS WITH M/S.NEHA FURNISHINGS LTD. OF ` 7,41,881/- AND WITH M/S.GURUSIKH TRADING CO. OF ` 39,566/- WERE NOTICED. THE ASSESSING OFFICER HAS OBSERVED THAT ON AN EXAMINATI ON OF BOTH THE SETS OF BOOKS OF ACCOUNT OF M/S. NEHA FURNISHIN G PVT. LTD.IT WAS NOTICED THAT THERE WAS AN ENTRY DATED 7-3-2006 UNDER THE - - ITA 1226 & 1227/2010, ETC. 16 CAPTION PURCHASE FOR A SUM OF ` 7,41,881/- IN THE SECOND SET OF BOOK. THE SAME IS NOT FOUND IN THE FIRST SET. THE ASSESSEE DID NOT PRODUCE ANY SUPPORTING EVIDENCE IN THIS REGARD BEFORE THE ASSESSING OFFICER. IN RESPECT OF M/S.GURUSIKH TRAD ING CO. ON EXAMINATION OF BOTH THE SETS OF BOOKS OF ACCOUNT IT WAS NOTICED THAT THERE WAS JOURNAL ENTRY DATED 29-3-2006 UNDER THE CAPTION NAAMUSEE TRADERS FOR A SUM OF ` 4,39,566/- IN THE SECOND SET OF BOOKS. THERE WAS NO SUCH ENTRY IN THE FIRST SET . HOWEVER, THERE WAS A JOURNAL ENTRY DATED 28-5-2005 UNDER THE CAPTION NAAMUSEE TRADERS FOR A SUM OF ` 4 LAKHS IN THE FIRST SET, WHICH IS NOT THERE IN THE SECOND SET. THE ASSESSEE DID N OT PRODUCE ANY SUPPORTING EVIDENCE. NO CLARIFICATION WAS OFFE RED. NO EVIDENCE WAS PRODUCED. THE ASSESSING OFFICER AFTER EXAMINING THE BOOKS OF NAAMUSEE TRADERS FOUND THAT THERE WAS NO SUCH ENTRY FOR ` 4,39,566/- IN THE LEDGER FOLIO OF M/S.SENTHIL MILL S IN THE BOOKS OF M/S.NAAMUSEE TRADERS. THE ASSESSEE EVEN F AILED TO FILE CONFIRMATION LETTER BEFORE THE ASSESSING OFFIC ER, FROM M/S.NEHA FURNISHINGS PVT. LTD. AND M/S.GURUSIKH TRA DING CO. NOR OBTAINED COPY OF ASSESSEES LEDGER FOLIO IN THE IR BOOKS OF ACCOUNT. ACCORDINGLY, THE AO MADE AN ADDITION OF R S.7,41,881/-. - - ITA 1226 & 1227/2010, ETC. 17 20. DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEES COUNSEL ADMITTED THAT NO INVOICE WAS PRO DUCED BEFORE THE ASSESSING OFFICER IN RESPECT OF THE TRAN SACTION INVOLVING M/S. NEHA FURNISHING CO. AND M/S.GURUSIKH TRADING CO. HE ALSO SUBMITTED THAT THE ASSESSEE DID NOT PR ESS THE GROUND IN RESPECT OF THE ADDITION OF ` 39,566/- RELATING TO M/S.GURUSIKH TRADING CO. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE DID NOT PRODUCE SUPPORTING EVIDENCE EITHER IN THE FORM OF INVOICE OR SUBSEQUENT PAYMENT DETAILS. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) CONFIRM ED THE VIEW TAKEN BY THE ASSESSING OFFICER IN RESPECT OF M /S.NEHA FURNISHINGS LTD. AND M/S.GURUSIKH TRADING CO. AND CONSEQUENTLY THE ADDITION OF ` 7,49,233/- WAS SUSTAINED. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 21. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRANSACTIONS WITH THE ABOVE TWO COMPANIES ARE GENUINE. SIMPLY BECAUSE NO EVIDENCE IS PRODUCED, IT CANNOT B E SAID THAT THE TRANSACTIONS ARE NOT GENUINE. ON THE OTHER HAN D THE LEARNED - - ITA 1226 & 1227/2010, ETC. 18 DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS PASSED BY THE AUTHORITIES BELOW. 22. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECO RDS OF THE CASE AND GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. THE ASSESSEE HAS FAILED TO EXPLAIN THE TRANSACTIONS RELATING TO M/S.NEHA FURNISHINGS LTD. AND M/S.GURUSIKH TRADING CO. EVEN DURING THE APPELLATE PROCEEDINGS ALSO NO EVIDENCE W AS PRODUCED BEFORE US. EVEN BEFORE US NOTHING WAS SUBMITTED. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS). THEREFORE, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS ). THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 23. INSOFAR AS REVENUES APPEAL IN ITA NO.1227(MDS)/2010 FOR THE ASSESSMENT YEAR 2006-07 I S CONCERNED, THE SECOND GROUND OF APPEAL RAISED BY TH E REVENUE IS IN RESPECT OF DELETION OF ADDITION OF RS.7,49,50 3/-. 24. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE AO HAS OBSERVED THAT IN THE BOOKS OF ACCOUNT FURNISHED IN APRIL, 2007 RELATING TO THE FINANCIAL YEAR 2005-06 THE BILLS OF PURCHASE THE SALES PRODUCED CE RTAIN - - ITA 1226 & 1227/2010, ETC. 19 DISCREPANCIES WERE FOUND. THE ASSESSEE FIRM WAS AS KED TO CLARIFY DISCREPANCIES IN RESPECT OF JAYMAN TEXTILES PVT. LTD. OF RS.7,49,233/-. IT WAS SUBMITTED BEFORE THE AO THAT THE BOOKS FURNISHED TO THE DEPARTMENT WAS ACTUALLY THE PROVIS IONAL BOOKS AND THAT THE AUDITED BOOKS WHICH WAS SUBSEQUENTLY F URNISHED ON 17-7-2007 DID NOT REFLECT THE ABOVE DISCREPANCIES. FOR THE DIFFERENCE POINTED OUT IN RESPECT OF JAYMANTEXTILES THE ASSESSEE HAS INSERTED AN ENTRY OF RS.7,49,503/- AGAINST THE DATE 24 TH MARCH, 2006 AS A PURCHASE MADE AND PRODUCED TH E BILL ON 17-7-2007 ALONGWITH THE FRESH SET OF BOOKS. THE AO AFTER CALLING THE EXPLANATION FROM THE ASSESSEE ADDED THE SAME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT ON THE GR OUND THAT THE CHANGES WERE MADE IN THE LEDGER ACCOUNT AFTER DISCR EPANCIES WERE POINTED OUT. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IT WAS SUBMIT TED BEFORE THE LD. CIT(A) THAT THE ENTRIES IN RESPECT OF M/S.JAYMA N TEXTILES PVT. LTD. RELATING TO VALUE OF INVOICES NOT ENTERED INTO THE BOOKS EARLIER, BUT ADJUSTED DURING THE COURSE OF AUDITING ACCOUNTS. THESE INVOICES ARE FROM LIMITED COMPANIES INCORPORA TED UNDER THE COMPANIES ACT HAVING A CORPORATE FORM AND THE T RANSACTIONS - - ITA 1226 & 1227/2010, ETC. 20 ARE GENUINE. THE AO HAS NOT DISPROVED THE TRANSACT ION AND ALSO NOT HELD THAT THE PURCHASES ARE BOGUS. THESE TRANS ACTIONS ARE NOT CASH TRANSACTIONS COMING WITHIN THE SCOPE OF SE CTION 68 OF THE ACT. THE JOURNAL ENTRY PASSED IN THE ACCOUNT O F THE THIRD PARTY IS NOT A CASH ENTRY BUT A GENERAL ENTRY WHICH CANNOT BE CONSIDERED FOR INVOKING SECTION 68. THE LD. CIT(A) AFTER CONSIDERING THE ENTIRE EXPLANATION OF THE ASSESSEE HAS HELD THAT SECTION 68 CAN BE INVOKED ONLY IF A SUM, (I.E., AN AMOUNT OF MONEY) FOUND CREDITED AND THERE IS NO EXPLANATION A BOUT THE SOURCE OR THE EXPLANATION IS FALSE. IN THE PRESENT CASE NO CASH RECEIPT WAS INVOLVED AND SECTION 68 HAS NO APPLICAT ION. 25. ON BEING AGGRIEVED, THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 26. THE LEARNED DR SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD.CIT(A). 27. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECO RDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE AO HAS FOUND THAT DIFFERENCE OF RS.7,49,223/- IN THE BOOKS FURNI SHED BEFORE - - ITA 1226 & 1227/2010, ETC. 21 HIM. SUBSEQUENTLY AUDITED BOOKS OF ACCOUNTS WERE F URNISHED BEFORE HIM. THE AO HAS NOT ACCEPTED THE SUBSEQUENT AUDITED ACCOUNTS SUBMITTED BEFORE HIM ON THE GROUND THAT ON LY AFTER THESE DISCREPANCIES ARE POINTED OUT AND SUBSEQUENT CHANGES WERE MADE. ON APPEAL THE LD. CIT(A) BY CONSIDERING THE ENTIRE EXPLANATION OF THE ASSESSEE HAS HELD THAT SECTION 6 8 CAN BE INVOKED ONLY IF SOME AMOUNT OF MONEY CREDITED AND T HERE IS NO EXPLANATION OR THE EXPLANATION OF THE ASSESSEE IS F ALSE. IN THE PRESENT CASE NO AMOUNT WAS CREDITED TO THE ACCOUNT OF THE ASSESSEE. THE ASSESSEE SUBMITTED AUDITED BOOKS OF A CCOUNT SUBSEQUENT TO THE MISTAKE POINTED OUT BY THE AO. W E, THEREFORE, ARE OF THE OPINION THAT INVOKING OF SEC TION 68 BY THE AO IS NOT CORRECT. WE FIND NO INFIRMITY IN THE ORD ER PASSED BY THE CIT(A). THIS GROUND RAISED BY THE REVENUE IS D ISMISSED. 28. THE NEXT GROUND OF APPEAL, I.E. 4, 5 AND 6 RAI SED BY THE REVENUE ARE SAME AS THE GROUND NO.1 RAISED BY T HE ASSESSEE IN APPEAL NO.1208(MDS)/2010. IN VIEW OF T HE DISMISSAL OF THE GROUND RAISED BY THE ASSESSEE, THE SAME ANALOGY THESE GROUNDS OF APPEAL RAISED BY THE REVEN UE ARE DISMISSED. - - ITA 1226 & 1227/2010, ETC. 22 29. IN THE RESULT THE REVENUES APPEAL IS DISMISSE D. 30. TO SUM UP, THE ASSESSEES APPEALS AND THE REVENUES APPEALS ARE DISMISSED. ORDERS PRONOUNCED ON FRIDAY, THE 13 TH OF JULY, 2012 AT CHENNAI. SD/- SD/- (N.S.SAINI) (V.DURGA RAO) ACCOUNTANT MEMBER JU DICIAL MEMBER CHENNAI, DATED, THE 13 TH JULY, 2012. V.A.P. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.