ITO, Erode V. Shri A.Charles, Erode

ITA 1335/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61391 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 20-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH KAMATH IRS
• Assessee Lawyers: S SRIDHAR
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1335/MDS/2011 ASSESSMENT YEAR : 2007 - 08 THE INCOME TAX OFFICER, WARD I(3), ERODE. VS. SHRI A. CHARLES, PROP. M/S. SONY LEATHERS, 33-B-1, ANNA STREET, VEERAPPANCHATRAM, ERODE 638 004. [PAN: AELPC8371F] (APPELLANT) (RESPONDENT) A PPELLANT BY : SHRI YOGESH KAMATH, IRS., JCIT RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 18.07.2012 DATE OF PRONOUNCEMENT : 26.07.2012 ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, COIMBATORE DATED 31.05.2011 IN ITA NO. 274/09-10 FOR THE ASSESSMENT YEAR 2007-08. SHRI YOGESH KAMATH, IRS, JCIT REPRESENTED ON BEHALF OF THE REVENUE AND SHRI S. SRIDHAR, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 2. THE ONLY GRIEVANCE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE ADDITION MADE ON ACCOUNT OF UNPROVED TRADE CREDITORS ON THE GROUN D THAT THE ADDITIONS WERE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 2 MADE BASED ON THE REPORT OF THE INCOME TAX INSPECTO R [ITI] AND NO FURTHER ENQUIRIES WERE MADE BY THE ASSESSING OFFICER. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON THE BUSINESS OF LEATHER TANNER UNDER THE TRADE NAME OF M/S. SONY LEATHERS. THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSM ENT YEAR 2007-08 ON 15.04.2008 ADMITTING INCOME OF ` .4,21,080/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 31.12. 2009 DETERMINING THE INCOME OF THE ASSESSEE AT ` .50,82,540/-. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER MADE ADDITION OF ` . 41,83,212/- STATING THAT THE TRADE CREDITORS ARE NOT IN EXISTENCE BASED ON THE REPORT GIVEN BY THE INCOME TAX INSPECTOR. 4. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPE ALS) DELETED THE ADDITION HOLDING THAT THE CREDITORS ARE NOT BOGUS. THE ASSESSING OFFICER HAS NOT PROVED THAT THE TRANSACTIONS ARE NOT GENUINE AN D THEREFORE, THE BALANCE LYING IN THE CREDITORS ACCOUNT AS ON 31.03.2007 CAN NOT BE ADDED AS INCOME OF THE ASSESSEE. AGAINST THIS ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 5. THE COUNSEL FOR THE REVENUE SUBMITS THAT THE AS SESSING OFFICER DIRECTED THE ITI TO MAKE CERTAIN ENQUIRIES REGARDIN G THE TRADE CREDITORS OF THE ASSESSEE AND THE ITI FOUND THAT THE CREDITORS ARE N OT IN EXISTENCE. THEREFORE, I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 3 THE ASSESSING OFFICER IS JUSTIFIED IN MAKING THE AD DITION OF ` .41,83,212/- AND THE BALANCE IN THE CREDITORS ACCOUNT AS ON 31.03.20 07 IS BOGUS. THE COUNSEL FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE A SSESSING OFFICER MADE ADDITION OF ` .41,83,212/- IN RESPECT OF 4 TRADE CREDITORS NAMELY , M/S. SABARI LEATHER EXPORT ` . 9,80,150/-, M/S. JAIHIND LEATHERS ` .12,36,377/-, M/S. VICTORY TANNERS ` .9,90,250/- AND M/S. CHOLA LEATHERS ` . 9,76,425/- BEING THE BALANCE APPEARING AS ON 31.03.2007 IN THE ACCOUNT. THE COUNSEL SUBMITS THAT THE ASSESSEE HAS BEEN MAKING PURCHASES FROM SABARI LEATHER EXPORTS NOT ONLY IN THIS YEAR, BUT ALSO IN THE EARL IER YEARS AND ALL THE PURCHASES WERE MADE THROUGH BANKING CHANNEL ONLY. T HE COUNSEL SUBMITS THAT THE ASSESSEE HAS PRODUCED ACCOUNT COPY OF SABA RI LEATHER EXPORTS, JAIHIND LEATHERS AND VICTORY TANNERS IN THE BOOKS O F ACCOUNT OF THE ASSESSEE FOR THE YEAR ENDING 31.03.2007 AND 31.03.2 008 ALONG WITH BANK STATEMENT, COPY OF THE REGISTRATION CERTIFICATE ISS UED BY THE CTO, ERODE DATED 07.11.2001 AND SALES TAX ASSESSMENT ORDER DAT ED 23.02.2010 BEFORE THE ASSESSING OFFICER. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER ACCEPTED THE PURCHASES EFFECTED B Y THE ASSESSEE FROM THE ABOVE PARTIES AND THE TRADING RESULTS HAVE NOT BEEN REFUTED. THE ASSESSING OFFICER RESORTED TO THE ADDITION OF THE CLOSING BAL ANCE AS ON 31.03.2007 SHOWS CLEAR NON-APPLICATION OF MIND AND THE SAME RE QUIRES TO BE DELETED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 4 THE COUNSEL FOR THE ASSESSEE SUBMITS THAT IN RESPEC T OF JAIHIND LEATHERS AND VICTORY TANNERS, CONFIRMATION LETTERS FROM THE SAID PARTIES WERE FILED BEFORE THE ASSESSING OFFICER. THE COUNSEL FOR THE A SSESSEE SUBMITS THAT IN RESPECT OF SABARI LEATHERS AND JAIHIND LEATHERS, TH E ASSESSEE PAID THE BALANCE OUTSTANDING IN THE SAID CREDITORS ACCOUNT IN THE SUBSEQUENT ASSESSMENT YEAR I.E. 2008-09. IN RESPECT OF CHOLA L EATHERS, THE COUNSEL SUBMITS THAT THE ASSESSING OFFICER ERRED FUNDAMENTA LLY IN RESORTING TO ADDITION OF ` .9,76,435/- SINCE THE ASSESSEE HAS NOT EFFECTED ANY PURCHASES FROM THE ABOVE SAID PARTIES, BUT HAS ONLY SOLD THE GOODS TO THE SAID PARTIES. THE BALANCE LYING IN THE ACCOUNT OF THE SAID PARTY AS ON 31.03.2007 WAS THE ADVANCE RECEIVED BY THE ASSESSEE FROM THE SAID PART Y FOR WHICH SALES WERE EFFECTED IN THE SUBSEQUENT ASSESSMENT YEAR I.E. 200 8-09. THEREFORE, THE ASSESSING OFFICER IS NOT AT ALL JUSTIFIED IN MAKING THE SAID ADDITION ON THE GROUND THAT CHOLA LEATHERS IS A FICTITIOUS CONCERN AND THE TRANSACTIONS WITH THE SAID PARTY ARE BOGUS. THE COUNSEL FOR THE ASSES SEE FURTHER SUBMITS THAT THESE ADDITIONS WERE MADE BASED ON THE REPORT SUBMI TTED BY THE ITI THAT TRADE CREDITORS WERE NOT IN EXISTENCE. HE ALSO SUBM ITS THAT SIMILAR ADDITIONS WERE MADE BY THE VERY SAME ASSESSING OFFICER I.E. I TO WARD III(1), ERODE IN THE ASSESSMENT OF SMT. ROLEX SUGUNAMARY FOR THE ASS ESSMENT YEAR 2007- 08 AT ` . 16,02,200/- IN RESPECT OF THE CREDITORS SABARI LE ATHER EXPORTS AND VICTORY TANNERS, BASED ON THE SIMILAR REPORT OF THE ITI ON THE SIMILAR GROUND OF NON-EXISTENCE OF TRADE CREDITORS. THE COUNSEL SU BMITS THAT IN THE CASE OF I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 5 SMT. ROLEX SUGANAMARY THE COORDINATE BENCH OF THIS TRIBUNAL IN ITS ORDER DATED 04.10.2011 IN I.T.A. NO. 843/MDS/2011 DELETED THE SAID ADDITIONS MADE BY THE ASSESSING OFFICER IN RESPECT OF THE TRA DE CREDITORS SABARI LEATHER EXPORTS AND VICTORY TANNERS AND CONFIRMED T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E ADDITION. A COPY OF THE SAID ORDER OF THIS TRIBUNAL WAS PLACED ON RECOR D. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE DECISION OF THIS TRIBUNAL IN THE CASE OF SMT. R OLEX SUGUNAMARY IN I.T.A. NO. 843/MDS/2011 FOR THE ASSESSMENT YEAR 2007-08 DA TED 04.10.2011. ON GOING THROUGH THE ORDER OF THIS TRIBUNAL, WE FIND T HAT THIS TRIBUNAL HAD CONSIDERED THE ADDITION MADE TOWARDS UNPROVED TRADE CREDITORS IN THE CASE OF ROLEX SUGUNAMARY IN RESPECT OF TRADE CREDITORS I .E. SABARI LEATHER EXPORTS AND VICTORY TANNERS. WE ALSO FIND THAT THE ADDITIONS MADE IN THE CASE OF ROLEX SUGUNAMARY WERE BASED ON THE VERY SAM E ITI IN RESPECT OF THESE CREDITORS. THIS TRIBUNAL WHILE SUSTAINING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITIONS H ELD AS UNDER: 6. ADDITIONS HAVE BEEN MADE ON ACCOUNT OF UNPROVED TRA DE CREDITORS BEING M/S SABARI LEATHER EXPORTS ` . 16,03,200/- AND M/S ORIENTAL LEATHERS ` . 9,35,275/-. THE CASE OF THE ASSESSEE IS THAT THE ADDITIONS ARE MADE ON THE BASIS OF THE REPORT OF THE INCOME-TAX INSPECTOR THAT THERE IS NO CONCERN BY SUCH NAME BUT THE ASSESSEE HAD FILED BEFORE THE ASSESSING OFFICER PURCHASE AND SALE BILLS OF THE SAID CONCERNS BUT THE BOOKS OF ACCOUNT OF THAT CONCERN COULD NOT BE PRODUCED. IN RESPECT OF ` . 9,35,275/- APPEARING IN THE NAME OF M/S ORIENTAL LEATHERS, IT WAS AS PER THE REPORT OF THE ITI, THE PROPRIETOR OF THE SAID CONCERN SHRI T.M.SAMAIYULLAH HAD EXPIRED. IN THIS REGARD, SUBMISSION OF THE ASSESSEE IS AS UNDER: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 6 IN RESPECT OF ADDITION OF ` . 9,35,275/- REPRESENTING CREDITS APPEARING IN THE NAME OF M/S ORIENTAL LEATHERS, THE CONTENTS OF THE RELEVANT PORTION OF THE ITI REVEAL THAT THE PROPRIETOR OF THE SAID CONCERN SHRI T.M.SAMAIYULLAH EXPIRED AND THAT FILING OF A CONFIRMATION LETTER SIGNED BY THE SAID PERSON WITHOUT DATE, LEADING THE ITI TO GIVE A REPORT THAT THE CREDITS SEEM TO BE NOT GENUINE. COPIES OF SOME OF THE BILLS ISSUED BY THE ABOVE PARTIES TO THE APPELLANT (LEDGE R COPY OF THE ABOVE PARTIES IN THE B OAKS OF ACCOUNTS OF THE APPELLANT ALREADY FILED) AND BANK STATEMENTS OF THE APPELLANT WHEREIN THE TRANSACTIONS OF THE APPELLANT WITH THE SAID PARTIES APPEAR ARE ENCLOSED SEPARATELY IN RESPECT OF SABARI LEATHER EXPORTS - MARKET AS (A) AND IN RESPECT OF M/S ORIENTAL LEATHERS MARKED AS (B). THE PERUSAL OF THE ABOVE SHOWS THAT THE PARTIES ARE REGISTERED UNDER THE TNGST AND CST ACTS. FURTHER, THE SAID PARTIES HAVE NOT COLLECTED SALES TAX ON THE SALE OF GOODS TO THE APPELLANT. THE IMPLICATION OF TNGST ACT, IN THI S CONTEXT IS PARAMOUNT, IN AS MUCH AS THE GOODS SO SOLD BY THEM TO THE APPELLANT ARE, BY VIRTUE OF II SCHEDULE TO THE TNGS T ACT, ARE TAXABLE AT THE POINT OF FIRST SALE IN THE STATE, MEANING TH EREBY THAT THE APPELLANT HAS PURCHASED THE SAID GOODS FROM REGISTERED DEALERS IN THE STATE. IN OTHER) WORDS, IT IS PROVED THAT THE SAID PARTIES ARE REAL PERSONS. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAV E FOUND THAT THE ASSESSING OFFICER, IN HIS ORDER, HAS MENTIONED THAT COPIES OF SALES TAX RETURNS REVEALED THAT SHRI PACHAMUTHU HAS DONE BUSINESS TRANSACTIONS/TURNOVER EXCEEDING ` . 2 CRORES DURING THE FINANCIAL YEAR 2006-07. HOWEVER, NO ENQUIRIES REGARDING HIS SOURCES, BANK ACCOUNTS WERE MADE. NO ATTEMPT WAS MADE BY THE ASSESSING OFFICER TO FIND OUT HIS BUSINESS ADDRESS IN THE LIGHT OF ADVERSE REPORT OF ITI. THE ASSESSEE HAD PURCHASED GOODS WORTH ` . 1,00,48,000/- FROM M/S SABARI LEATHER EXPORTS. THE ASSESSING OFFICER HAS NOT MADE ANY COMMENTS REGARDING THE PURCHASES MADE BY THE ASSESSEE. THE TRADE CREDITOR IS ON ACCOUNT OF PURCHASE TRANSACTIONS MADE DURING THE YEAR. THE ASSESSEE MADE PAYMENTS OF ` . 84,50,000/- DURING THE YEAR BUT SURPRISINGLY, THE ASSESSING OFFICER HAS NOT MADE AN Y COMMENT ON THE PURCHASES MADE FROM THIS PARTY AND REGARDING PAYMEN T MADE BY THE ASSESSEE TO THIS PARTY. THE ASSESSEE HAD ALSO MADE PURCHASES FROM THIS PARTY IN EARLIER YEARS. THE ASSESSEE PRODUCED THE PROPRIETOR OF THIS CONCERN BEFORE THE ASSESSING OFFICER FOR EXAMINATION. THUS, WHEN THE ASSESSING OFFICER ACCEPTED PURCHASES EFFECTED BY THE ASSESSEE FROM THIS PARTY AND THE TRADING RESULTS HAVE NOT BEEN DISTURBED, MAKING ADDITION ON THE CLOSING BALANCE AS ON 31.3.2007 IS NOT JUSTIFIED FROM ANY ANGLE. THE TRAN SACTIONS WITH THIS PARTY ARE FOUND TO BE THROUGH BANKING CHANNELS ONLY. THE ASSESSING OFFICE R HAS NOT FOUND THIS TRANSACTION TO BE NON-GENUINE WITH THE HELP OF EVIDENCE. THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 7 ASSESSEE PRODUCED THE COPIES OF BILLS, BANK PAYMENT AND SALES TAX ORDER, THEREFORE, THE DELETION IN QUESTION IS QUITE JUSTIF IED. 8. IN THE CASE OF M/S ORIENTAL LEATHERS, THE ASSESSEE HAD MADE TOTAL PURCHASES OF ` . 1,33,39,325/- AND THERE WAS A CARRY FORWARD OPENING BALANCE OF ` . 2,04,050/-. DURING THE PERIOD, THE ASSESSEE MADE PAYMENTS OF ` . 1,26,09,000/- AND THE BALANCE AMOUNT HAS BEEN SHOWN AS TRADE CREDITOR OF ` . 9,34,275/-. A CONFIRMATORY LETTER FROM M/S ORIENTAL LEA THERS HAS ALSO BEEN FILED ALONG W I TH COPY OF ACCOUNT SHOWING PAYMENTS HAVING BEEN MADE TO THE PARTY. THE ITIS REPORT CANNOT STAND IN VIEW OF THE ABOVE EVIDENCE. THUS, T HIS AMOUNT ALSO CANNOT BE SUSTAINED AND HAS BEEN CORRECTLY DELETED BY THE LD. CIT(A). 9. AS REGARDS THE DISALLOWANCE MADE IN THE CASE OF M/S AKSHYA LEATHERS, VICTORY TANNERS AND SAI LEATHERS TOTALLING TO ` . 32,49,616/- , THE SUBMISSION OF THE ASSESSEE IS AS UNDER: IN THE ASSESSMENT ORDER, THE ADDITIONS ARE MADE IN RESPECT OF TRADE CREDITORS~ BASED ON THE REPORT OF ITI. IN CASE OF A KSHYA LEATHERS, THE PERUSALS OF THE RELEVANT PORTION OF THE REPORT REVEALS THAT ONE SHRI E.K.M.G.BAZEER ALI WAS PRESENT AND GAVE A LETTER STATING THAT THE ABOVE PARTY WAS NOT KNOWN TO HIM. THIS HAD LEAD THE ITI TO GIVE A REPORT THAT THE CREDIT SEEMED TO BE NOT GENUINE. COPIES OF THE BILLS ISSUED BY THE PARTY TO THE APPELLANT AND BANK STATEMENT OF THE APPELLANT WHEREIN THE TRANSACTIONS OF THE APPELLANT WITH THE SAID PARTY APPEARS ARE ENCLOSED. THE PERUSAL OF THE ABOVE SHOW S THAT THE PARTY IS REGISTERED UNDER THE TNGST AND CST ACTS. HENCE THE ADDITION REQUIRES DELETION. IN RES PECT OF VICTORY TANNERS, THE ITI REPORT REVEALS THAT THE TANNERY WAS CLOSED, THAT LOCAL ENQUIRY REVEALED THA T THIS TANNERY WAS CLOSED FROM 2007, THAT IT COULD NOT BE VERIFIABLE WHETHER THE SAID CONCERN WAS FUNCTIONING EVEN PRIOR TO 2007 AND THIS COULD BE TREATED AS NON-EXISTENT. THIS HAS LED THE IT I TO GIVE A REPORT THAT THE CREDIT SHOWN AT ` 7,97,125/- TO BE REJECTED AND ADDED TO INCOME. THE IMPORTANT POINT TO BE NOTED FROM THE REPORT OF THE ITI IS THAT WHILE THE PROPRIETOR OF M/S VICTORY TANNERS IS SHRI V. THIAGARAJAN, AS PER THE HEADING IN THE REPORT OF THE ITI, THE ITI IN HIS REPORT DID MENTION THE NAME OF SHRI NALLAMUTHU AS THE PROPRIETOR OF VICTORY TANNERS. SINCE THE VERY NAME OF THE PROPRIETOR HAS BEEN WRONGLY MENTIONED, IT EXHIBITS THE NATURE OF ENQUIRY CONDUCTED BY THE ITI AND THE CREDIBILITY OF THE REPORT OF THE ITI. COPY OF THE REGISTRATION CERTIFICATE IS SUED BY I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 8 THE COMMERCIAL TAX DEPARTMENT, I ENCLOSED HEREWITH PROV ES THE NAME OF THE PROPRIETOR AS V. THIAGARAJAN AND THE EXISTEN CE OF THE ABOVE PERSON. HOWEVER, THE ASSESSING OFFICER IN PAGE 5 OF THE ORDER MENTIONED THAT THIS CONCERN SEEMED TO BE DEFUNCT FROM THE YEAR 2007 ITSELF AND THEREFORE THE CREDIT BALANCE SHOWN IN THE NAME OF THIS CONCERN SHOULD BE DISALLOWED. COPIES OF THE BILLS ISSUED BY THE ABOVE PARTY TO THE APPELLANT (LEDGER COPY OF THE ABOVE PARTY IN THE BOOKS OF ACCOUNTS OF THE APPELLANT ALREADY FILED) AND BANK STATEMENT OF THE APPELLANT WHEREIN THE TRANSACTIONS OF THE APPELLANT WITH THE SAID PARTY APPEARS ARE ENCLOSED. THE PARTY IS REGISTERED UNDER THE TNGST AND CST ACTS. IN RESPECT OF M/S SAI LEATHERS ALSO, THE APPELLANT MADE SIMILAR SUBMISSIONS AND FILED COPY OF SALES TAX REGISTRATIO N AND ALSO ASSESSMENT ORDER DATED 22.6.2009 OF COMMERCIAL TAX DEPARTMENT. 10. THIS ADDITION IS ALSO BASED ON ITIS REPORT DATED 27.11.2009. THE ASSESSEE HAD PRODUCED CONFIRMATORY LETTER FROM M/S AKSHAYA LEATHERS ALONG WITH PROOF OF BALANCE OUTSTANDING WHICH WERE PAID BY WAY OF CROSSED CHEQUES. A COPY OF BANK STATEMENT OF THE PARTY WAS ALSO ENCLOSED. SIMILAR SUBMISSIONS WERE MADE REGARDING M/S VICTORY TANNERS AND M/S SAI LEATHERS. THE ASSESSING OFFICER DID NOT CHOSE TO MAKE FURTHER ENQUIRIES TO VERIFY THE DETAILS. THE ASSESSEE HAD MADE PURCHASES FROM M/S AKSHAYA LEATHERS TO THE TUNE OF ` . 44,03,825/- AND PAYMENTS WERE MADE OF ` . 28,79,500/- LEAVING A CREDIT BALANCE OF ` . 15,24,325/- WHICH WAS PAID IN ASSESSMENT YEAR 2008 -09. IN THE CASE OF M/S VICTORY TANNERS, THE TOTAL PURCH ASES IN ASSESSMENT YEAR 2007-08 WERE ` . 79,12,125/- AND PAYMENTS WERE MADE TO THE EXTENT OF ` . 71,15,000/- . THE ASSESSEE MADE PURCHASES FROM THES E PARTIES IN ASSESSMENT YEAR 2008-09 ALSO. IN THE CASE OF M/S SAI LEATHERS, PURCHASES WERE MADE OF ` . 15,17,894/- AND PAYMENTS WERE MADE OF ` . 5,89,728/-. IN ALL THE THREE CASES THERE WERE PURCHASES MADE BY THE ASSESSEE DURING THE PERIOD AND PAYMENTS WERE ALSO MADE THROUGH BANKING CHANNELS. THE ASSESSING OFFICER HAS NOT DISPUTED THE PURCHASES AND THE PAYMENTS MADE BY THE ASSESSEE. TH E TRADING RESULTS HAVE ALSO NOT BEEN DISTURBED. AGAIN, THE RE PORT OF ITI CANNOT STAND AGAINST THE OVERWHELMING EVIDENCE REFERRED TO ABOVE . ACCORDINGLY, THE DELETIONS MADE BY THE LD. CIT(A) ARE IN ORDER AND CANNOT BE INTERFERED WITH. ACCORDINGLY, THE APPEAL OF THE REVENUE, STANDS DISMISSED. 8. RESPECTFULLY FOLLOWING THE ORDER OF THE COORDIN ATE BENCH OF THIS TRIBUNAL IN THE CASE OF SMT. ROLEX SUGUNAMARY, WE D ELETE THE ADDITION OF ` .9,80,150/- AND ` . 9,90,250/- MADE TOWARDS UNPROVED TRADE CREDITORS OF I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 9 SABARI LEATHER EXPORTS AND VICTORY TANNERS RESPECTI VELY. WITH REGARD TO THE ADDITION MADE IN RESPECT OF JAIHIND LEATHERS AND CH OLA LEATHERS, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONSIDERED THE SUBMISSIONS OF THE ASSESSEE EVIDENCING ON RECORD AND CAME TO THE C ONCLUSION AS UNDER: SUBMISSION OF THE APPELLANT: 2) JAIHIND LEATHERS ` .12,36,377/- PARTICULARS ASST. YEAR PARTICULARS 2005 - 06 200607 2007,08 2008 - 09 OPENING BALANCE NIL NIL NIL 1236375 PURCHASE NIL NIL 1236375 2918791 TOTAL NIL NIL 1236375 4155166 LESS: AMOUNT N IL NIL NIL 4155166 CLOSING BALANCE NIL NIL 1236375 NIL IN THE EARLIER WRITTEN SUBMISSION, OBJECTIONS TO TH E CONTENTS OF THE RELEVANT PORTION OF THE REPORT OF THE ITI WAS F ILED. ACCOUNT COPY OF THE ABOVE PARTY IN THE BOOKS OF ACCOUNTS OF THE APP ELLANT FOR THE YEARS ENDING 3 1 .03.2007 AND 31.03.2008 AND THE BANK STA TEMENTS OF THE ABOVE PARTY HAVE ALREADY BEEN FILED. BESIDES, COPY OF THE SALES TAX ASSESSMENT ORDER DATED 11.01.2010 HAS ALREADY BEEN FILED. THE CHART ABOVE SHOWS THAT THE APPELLANT HAS EFFECTED PURCHAS ES FROM THE SAID PARTY NOT ONLY IN THIS YEAR BUT ALSO IN THE SUBSEQU ENT YEAR. WHEN THE ASSESSING OFFICER ACCEPTS THE PURCHASES EFFECTED BY THE APPELLANT FROM THE ABOVE PARTY AND WHEN THE TRADING RESULTS HAVE N OT BEEN REFUTED BY THE ASSESSING OFFICER, RESORT TO MAKING ADDITION ON LY ON THE CLOSING BALANCE AS ON 31.03.2007 AMOUNTS TO A CLEAR NON-APP LICATION OF MIND AND THE SAME REQUIRES DELETION. ALL THE TRANSACTIONS BY THE APPELLANT WITH THE SAID PARTY WERE THROUGH, BANKING CHANNELS ONLY. HENCE, THE CONCLUSION DRAWN BY THE ASSESSING OFFICER THAT THOUGH THE ABOVE PARTY PRODUCED PURCHASE AND S ALE BILL BUT DID NOT PRODUCE ANY BOOKS OF ACCOUNTS, IN THE ABSENCE OF TH E EXISTENCE OF ENTRIES RELATING TO THE ABOVE PARTY, THE SAME COULD NOT BE VERIFIED AND DESERVED TO BE REJECTED IS NOT LEGALLY SUSTAINABLE IN VIEW OF THE SUBMISSIONS MADE AND EVIDENCES FILED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 10 IN THE CASE OF M/S JAIHIND LEATHERS AND M/S VICTORY TANNERS, THE APPELLANT MADE PURCHASE OF ` .12,36,375/- AND ` .20,40,250/-, RESPECTIVELY. DURING THE ASSESSMENT YEAR 2007-08, THE APPELLANT M ADE PAYMENTS OF ` .10,50,000/- TO M/S VICTORY TANNERS AND THE BALANCE AMOUNT SHOWN AS TRADE CREDITOR IS ` .9,90,250/-. THE APPELLANT FILED THE CONFIRMATION L ETTERS FROM THE SAID FIRMS AND ALSO FILED THE ACCOUNT COPY WHICH SH OWS THE PAYMENTS MADE DURING THE YEAR. THE ITI REPORT DOES NOT BRING OUT ANY ADVERSE INFERENCE OR EVIDENCE ON RECORD TO COME TO CONCLUSION THAT THE C ONFIRMATION LETTER FURNISHED BY THE ASSESSEE REPRESENTATIVE ALONG WITH ACCOUNT COPIES SEEMS TO BE NOT GENUINE. AS SEEN FROM ITI REPORT THE ADDRESS WAS COLLECTED FROM COMMERCIAL TAX OFFICE. THE ENQUIRY REVEALED THAT BO TH THE TANNERIES WERE CLOSED FROM 2007. THE ENQUIRY WAS MADE BY ITI ON 27.11.2009. THE TRANSACTIONS RELATE TO FINANCIAL YEAR 2006-07. IT CANNOT BE CONCLUDED BY ITI, WITHOUT ANY BASIS THAT THE FIRMS WERE NOT F UNCTIONING DURING THE RELEVANT ASSESSMENT YEAR. MOREOVER, NO EVIDENCES AR E BROUGHT ON RECORD TO SAY THAT PURCHASES FROM THE SAID FIRMS ARE NOT G ENUINE. THE AO HAS ACCEPTED THE TRADING RESULTS OF THE APPELLANT. AS S EEN FROM THE DETAILS FURNISHED, THE APPELLANT HAS MADE PURCHASES DURING THE ASSESSMENT YEAR 2008-09 ALSO AND SQUARED UP THE AMOUNT. THE APPELLA NT HAS FURNISHED THE BANK ACCOUNT TRANSACTIONS WITH THE SAID FIRMS. IT I S ALSO RELEVANT TO MENTION THAT THE ITI REPORT IN THE CASE OF JAIHIND LEATHERS AND VICTORY TANNERS IS SAME AND IT WAS STATED THAT SHRI NALLAMUT HU IS THE PROPRIETOR OF BOTH THE CONCERNS. THE ITI SEEMS TO HAVE MADE TH E MISTAKE OF 'CUT AND PASTE' WHILE PREPARING REPORT IN THE ABOVE TWO CONC ERNS. THE ITI REPORT HAS NOT BEEN GIVEN TO THE ASSESSEE DURING THE COURS E OF ASSESSMENT PROCEEDINGS. IN VIEW OF THE ABOVE DISCUSSION, I DIR ECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF C REDIT BALANCE IN THE CASE OF M/S JAIHIND LEATHERS AND M/S VICTORY TANNERS. SUBMISSION OF THE APPELLANT: 4) CHOLA LEATHERS - RS. 9,76,435/-: ASSESSING OFFICER ERRED FUNDAMENTALLY IN RESORTING TO ADDITION OF ` .9,76,435/- ON THE REASON THAT THE APPELLANT MIGHT HAVE CREATED A BOGUS CONCERN IN A FICTITIOUS NAME AS DISCUSSED IN THE EARLIER PARA AN D INDULGED IN BOGUS TRANSACTIONS, FOR THE APPELLANT HAS NOT EFFECTED AN Y PURCHASES FROM THE SAID PARTY BUT HAS ONLY SOLD GOODS TO THE SAID PARTY AND THE CHART BELOW CLARIFIES THE SOME. EMPHASIS IS ON THE BOLD LETTERS ABOVE BEC AUSE THE REASONING/ CONCLUSION BY THE ASSESSING OFFICER WHICH HAD RESUL TED IN OTHER ADDITIONS (ALL ARE DISPUTED) ARE NOT AT ALL APPLICABLE TO THE TRANSACTIONS BETWEEN THE SAID I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 11 PARTY AND THE APPELLANT, FOR THE APPELLANT HAS EFFE CTED ONLY SALES TO THE ABOVE PARTY. PARTICULARS ASST. YEAR PARTICULARS ASST. YEAR 2008-09 2005 - 06 2006 - 07 2007 - 08 OPENING BALANCE NIL NIL NIL ADVANCE PAYABLE 976435 SALES NIL 2520248 1469135 ADVANCE RECEIVED 219139 TOTAL NIL 2520248 146913 5 TOTAL 1195574 LESS: AMOUNT RECEIVED NIL 2520248 2445570 LESS: AMOUNT PAID 1195574 CLOSING BALANCE NIL NIL (*) 976435 CLOSING BALANCE NIL (*) ADVANCE RECEIVED BY THE APPELLANT. I HAVE CAREFULLY CONSIDERED THE IMPUGNED ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER HAS NOT BROUGHT FORWARD ANY EVIDENCE TO SUPPORT THE FACT THAT THE T RANSACTIONS WERE BOGUS. THE ADDITION IS MADE ON THE BASIS OF THE REASONS WH ICH RELATED TO THE ABOVEMENTIONED CREDITORS. NO ENQUIRY REPORT BY THE ITI IS AVAILABLE IN THE CASE OF THE SAID CREDITOR. IN ADDITION, THE CLAIM O F THE APPELLANT THAT ALL THE TRANSACTIONS WERE THROUGH CHEQUES HAS ALSO NOT BEEN VERIFIED BY THE ASSESSING OFFICER. IT IS PLAIN FROM THE ABOVE DISCUS SION THAT THE ADDITION HAS BEEN MADE WITHOUT ANY EVIDENCE AND. THEREFORE, CANNOT BE SUSTAINED IN LAW. HENCE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF ` .9,76,435/-. 9. THERE IS NO MATERIAL ON RECORD TO CONTROVERT TH E FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE TRADE CREDITORS ARE GENUINE, NOT BOGUS AND THE TRANSACTIONS WERE MADE THROUGH BA NKING CHANNELS, THE BALANCE OUTSTANDING AS ON 31.03.2007 WERE PAID SUBS EQUENTLY. SINCE NO MATERIALS WERE PLACED BEFORE US TO CONTROVERT THE F INDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS), WE SUSTAIN TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELEING THE ADDITIONS MADE IN RESPECT OF TRADE CREDITORS NAMELY JAIHIND LEATHERS AND CHOLA LEATHERS. THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1335 1335 1335 1335/M/ /M/ /M/ /M/11 1111 11 12 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON THURSDAY, THE 26 TH JULY, 2012 AT CHENNAI. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER CHENNAI, DATED, THE 26.07.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.