ITO, Kancheepuram V. S.K.Periyasamy, Kancheepuram

ITA 1361/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5884 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 29-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN JT
• Assessee Lawyers: T DILLI BABU
• Keywords: Business income
• Section: 143(3); 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , , % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1361/MDS/2017 & & /ASSESSMENT YEAR: 2012-13 INCOME TAX OFFICER, WARD-2, KANCHEEPURAM. VS. SHRI S.K.PERIYASAMY, PROP. : M/S. SOLAI AGENCIES, NO.11/4, ANANTHAPETTAI, KANCHEEPURAM 631 501. [PAN: AHPPP 9334C] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR. N .MADHAVAN , JT. CIT *+) , /RESPONDENT BY : MR. T.DILLI BABU, CA , /DATE OF HEARING : 14 . 08 .2017 , /DATE OF PRONOUNCEMENT : 06 .1 1 .2017 / O R D E R PER S.JAYARAMAN, AM : THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-7, CHENNAI IN ITA NO.15/CIT(A)-7/201 5-16 DATED 21.03.2017 MADE ON THE ASSESSMENT ORDER PASSED U/S. 143(3) FOR ASSESSMENT YEAR (A Y ) 2012-13. ITA NO.1361/MDS/2017 :- 2 -: 2. SHRI S.K. PERIYASAMY, THE ASSESSEE, AN INDIVIDUA L IS ENGAGED IN THE BUSINESS OF WHOLESALE AND RETAIL TRADING IN EDIBLE OILS IN THE NAME AND STYLE OF M/S. SOLAI AGENCIES. WHILE MAKING THE ASSESSMENT FOR A Y 2012 -13, THE AO EXAMINED THE CASH BOOK AND FOUND THAT THE ASSESSEE MADE CASH P AYMENTS IN EXCESS OF <. 20,000/- PER DAY TO VARIOUS PARTIES . WHEN THE AS SESSEE WAS ASKED TO IDENTIFY THEM, IT WAS REPLIED THAT THEY ARE TRADE CREDITORS BUT COULD NOT FURNISH ANY EXPLANATION FOR THE PAYMENTS MADE IN EXCESS OF <. 2 0,000/-. THE A O DISALLOWED SUCH CASH PAYMENTS MADE TO VARIOUS PARTIES VIZ. A.K .P. AGENCY, ESWARI STORES, GOWRI AGENCIES, KALAIVANI SWEETS, SAGAR & SUGAR ALLIED PR ODUCTS LTD., DHARANI SUGAR & CHEMICALS LTD., BABU TRADERS AND SRI AMMAN FOODS, I N TOTAL AT <. 46,50,286/- U/S. 40A(3). FURTHER, FROM THE ITS, THE AO FOUND THAT TI ME DEPOSIT OF <. 5,74,335/- AND <. 6,46,226/- WERE MADE BY THE ASSESSEE IN TAMILNADU M ERCANTILE BANK LTD. WHEN THE SOURCES AND DETAILS WERE CALLED FOR, THE ASSESSEE F URNISHED A STATEMENT OF DEPOSITS (MUTHUKUKUVIYAL DEPOSIT-PUB) WHICH STOOD IN THE NAM ES OF SHRI SEENIVASAN & MINOR RAGUL, SONS OF THE ASSESSEE. WHEN THE AO VERIFIED T HEM WITH THE ITS, THE DATA DID NOT MATCH AND HENCE TREATED THOSE DEPOSITS AS UNEX PLAINED INVESTMENTS U/S. 69 AND ADDED TO THE TOTAL INCOME . AGGRIEVED, THE ASSESSE E FILED AN APPEAL BEFORE THE LD. CIT (A). THE CIT (A) CALLED FOR A REMAND REPOR T AND AFTER CONSIDERING THE REMAND REPORT ALLOWED THE ASSESSEES APPEAL. AGGRIEVED, TH E REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. THE CIT (A) FAILED TO CONSIDER THE FINDINGS OF T HE AO IN THE REMAND REPORT. 3. THE CIT (A) FAILED TO CONSIDER THE FACTS THAT AT THE TIME OF ASSESSMENT PROCEEDINGS, THE DISALLOWANCE WAS MADE U/S40A(3) OF THE IT ACT, 1961 AFTER ITA NO.1361/MDS/2017 :- 3 -: VERIFYING THE LEDGER ACCOUNT OF THE MAIN TRADE CRED ITORS OF M/S. AKP AGENCY, M/S. ESWARI STORES, M/S. GOWRI AGENCIES AND M/S. KALAIVA NI SWEETS WITH THE CASH BOOK OF THE ASSESSEE. THE DATE OF PAYMENT AND AMOUNT OF PAYMENT WERE TALLIED WITH CASH BOOK AND THE LEDGER OF THE CREDITORS, IT CONFI RMS THE PAYMENTS WERE MADE IN EXCESS OF RS. 20,000/- BY WAY OF CASH IN A DAY TO THE ABOVE SAID CREDITORS WHICH WARRANTS THE DISALLOWANCE U/S.40A(3) OF THE IT ACT, 1961. 4. THE CIT (A) RELIED ON THE RECAST ACCOUNT AND THE ARGUMENT THAT THE CASHIER IN MAKING A SINGLE CONSOLIDATED ENTRY, WHICH COULD NOT BE CONSIDERED AS A DOCUMENTARY EVIDENCE, UNLESS AND UNTIL WHICH WAS TA LLY WITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WAS THE SUBSTANTIAL EVIDENCE WARRANTS THE DISALLOWANCE U/S.40A(3) OF THE IT ACT 1961. 5. THE CIT (A) FAILED TO CONSIDER THE FACTS THAT A S PER ITS DETAILS THE FDS ARE IN THE NAME OF M/S. SOLAI AGENCIES. 6. THE CIT (A) ERRED IN DELETING THE DISALLOWANCE M ADE ON THE TIME DEPOSIT WITHOUT CONSIDERING THE FACTS THAT THERE WA S A DIFFERENCE BETWEEN THE DATA FURNISHED BY THE ASSESSEE AND THE DATA AS PER ITS, WITH REGARD TO THE NAME OF THE DEPOSITOR AND THE AMOUNT OF DEPOSIT. THESE D ISCREPANCIES WERE ALSO HIGHLIGHTED IN THE ASSESSMENT ORDER AS WELL AS IN T HE REMAND REPORT SUBMITTED BY THE AO. 7. THE CIT (A) ERRED IN ACCEPTING THE ASSESSEE'S C ONTENTION THAT TIME DEPOSIT WAS SHOWN IN THE FINANCIAL STATEMENTS OF TH E ASSESSEE UNDER 'CASH AT BANK', THOUGH THE NAME OF THE DEPOSITOR AND AMOUNT OF THE DEPOSIT REFLECTED IN THE BALANCE SHEET DIFFER WITH THE ITS DETAILS. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OF FICER BE RESTORED. 3. THE D R SUBMITTED THAT THE AO AFTER VERIFYING THE LEDGER ACCOUNT OF THE MAIN TRADE CREDITORS OF M/S. AKP AGENCY, M/S. ESWAR I STORES, M/S. GOWRI AGENCIES AND M/S. KALAIVANI SWEETS WITH THE ASSESSE S CASH BOOK FOUND THAT THE CASH PAYMENTS WERE MADE IN EXCESS OF RS. 20,000 /- IN A DAY TO THEM WHICH WARRANTED THE DISALLOWANCE U/S.40A(3). THE C IT (A) RELIED ON THE RECAST ACCOUNT ON THE PLEA THAT THE ASSESSEES CASHIER MAD E A SINGLE CONSOLIDATED ENTRY IN THE BOOKS AS THE ORIGINAL ENTRY. THE RECAS T ACCOUNT CAN NOT BE CONSIDERED AS A DOCUMENTARY EVIDENCE UNLESS OTHERW ISE THE CONTENTS OF THE RECAST ACCOUNT TALLY WITH THE BOOKS OF ACCOUNTS, W HICH WAS THE SUBSTANTIAL ITA NO.1361/MDS/2017 :- 4 -: EVIDENCE, WITH WHICH THE AO MADE THE VERIFICATION. THE A O IN THE REMAND REPORT POINTED OUT THOSE DISCREPANCIES. IN SPITE O F IT, THE CIT (A) FAILED TO CONSIDER THE FINDINGS RECORDED BY THE AO IN THE RE MAND REPORT. FURTHER, THE CIT (A) FAILED TO CONSIDER THE FACTS THAT AS PER IT S DETAILS THE FDS ARE IN THE NAME OF M/S. SOLAI AGENCIES. HE ERRED IN DELETING THE DISALLOWANCES MADE ON THE TIME DEPOSITS WITHOUT CONSIDERING THE FACTS THA T THERE WAS A DIFFERENCE BETWEEN THE DATA FURNISHED BY THE ASSESSEE AND THE DATA AS PER ITS, WITH REGARD TO THE NAME OF THE DEPOSITOR AND THE AMOUNT OF DEPOSIT. THESE DISCREPANCIES WERE ALSO HIGHLIGHTED IN THE ASSESSME NT ORDER AS WELL AS IN THE REMAND REPORT SUBMITTED BY THE AO. PER CONTRA, THE AUTHORIZED REPRESENTATIVE (AR) SUBMITTED THAT THE ACCOUNTANT OF THE CONCERN H AD MADE THE BULK ENTRIES FOR THE VARIOUS PARTIES AS CASH PAYMENTS BUT THE CA SH WAS PAID ON VARIOUS DATES AS THEIR BUSINESS COMPRISES BOTH RETAIL AS WELL AS WHOLESALE DIVISIONS. THE ASSESSEE RE-CASTED THE ACCOUNTS AND SUBMITTED B EFORE THE LD. CIT (A). THE CIT (A) AFTER EXAMINATION OF ENTIRE MATERIAL INCLUD ING THE REMAND REPORT FURNISHED BY THE AO FOUND THAT THE RECAST ACCOUNT HAS BEEN DULY CONFIRMED BY THE RESPECTIVE CREDITORS. BEING A PETTY RETAIL BUSI NESS, THE CIT (A) HELD THAT THE ARGUMENT OF THE CASHIER MAKING A SINGLE CONSOLIDATE D ENTRY CAN BE TAKEN AT THE FACE VALUE. FURTHER, THE CIT (A) FOUND THAT OUT OF THE DISALLOWANCES, THE FOLLOWING THREE HAVE BEEN PAID BY THE CHEQUE VIZ. (I) SAGAR & SUGAR ALLIED PRODUCTS LIMITED RS. 3 ,43,148/- (II) DHARANI SUGAR & CHEMICALS LIMITED RS. 2,53, 535/- (III) BABU TRADERS RS. 1,11,103/- ____________ TOTAL RS. 7,07,785/- ____________ ITA NO.1361/MDS/2017 :- 5 -: AND AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMST ANCES, THE LD. CIT (A) DELETED THE DISALLOWANCE MADE U/S. 40A(3), WHICH MAY BE CONFIRMED. WITH REGARD TO THE TIME DEPOSITS, THE AR INVITED OUR ATTENTION TO THE COPIES OF BANK STATEMENTS FURNISHED BY THE TAMILNAD U MERCANTILE BANK LTD IN THE PAPER BOOK AND SUBMITTED THAT ACCOUNT NO. 105201670100179 IS HELD IN THE NAME OF MINOR SON RAGUL AND THE OTHER ACCOUNT NO. V IZ. 105201670100178 IS HELD IN THE NAME OF M.V. SEENIVASAN ANOTHER SON OF THE ASSE SSEE. THESE DEPOSITS WERE SHOWN IN THE ASSESSEES BOOKS OF ACCOUNT AND ON DUE EXAMINATION THE CIT (A) DELETED THE ADDITION AND HENCE THE ORDER OF THE L D. CIT (A) ORDER MAY BE UPHELD. 4. WE HEARD THE RIVAL CONTENTIONS GONE THROUGH THE ORDERS AND THE MATERIAL IN THE PAPER BOOK. THE RELEVANT PORTION OF THE REMAND REPORT FURNISHED BY THE AO IS EXTRACTED AS UNDER FROM THE ORDER OF THE CIT (A): DURING THE COURSE OF DISCUSSION, OUT OF THE DISALLOWANCE MADE BY THE AO U/S. 40A(3), THE LD. A.R HAS PRODUCED EVIDENCE FOR THE PAYMENTS MADE FOR RS. 3,43,148/ - AND RS. 2,53,535/- TO SAGAR & SUGAR ALLIED PRODUCTS LIMITED AND DHARANI SUGA R AND CHEMICALS LIMITED RESPECTIVELY. THE LD. A.R HAS SAID THESE PAYMENTS WE RE MADE BY DEMAND DRAFT AND PRODUCED COPIES OF THE COUNTERFOIL FROM INDIAN BANK, KANCHIPURAM BRANCH DATED 27.06.2011 AND 13.09.2011. THE SAME IS VERIFIED AND FOUND TO THE CORRECT. THE AR HAS EXPLAINED AS THE NATURE OF THE BUSINESS OF THE ASSESSEE IS RETAIL AND WHOLESALE IN NATURE AND DEALING IN OIL, SUGAR AND DHALL. THE TRANSACTION S ARE MOSTLY IN CASH WITH THE RETAIL AND WHOLESALE VENDORS. THE MAIN TRADE CREDITORS ARE M/ S. ESWARI STORES, M/S. GOWRI AGENCIES AND M/S. KALAVANI SWEETS. THE AR HAS EXPLAINED THAT THE ACCOUNTANT HAS MADE CONSOLIDATED ENTRIES IN THE BOOKS OF ACCOUNTS AND NOW THE LD. A.R HAS SUBMITTED THE CASH ENTRIES ONE DAY TO DAY BASIS. THE ABOVE EXPLANATION OF THE LD. A.R CAN NOT BE ACCEPTED AS IT IS SEEN FROM THE LEDGER SUBMITTED THAT IT IS THE TOTAL OF THE PAYMENTS MA DE TO M/S. AKP AGENCY FROM 02.04.2011 TO 21.03.2012 WHEREAS AS PER THE LEDGER ACCOUNT SUBMITTED AT THE TIME OF ASSESSMENT PROCEEDINGS THE DATE IS MENTIONED AS UNDER: DATE PARTICULARS VCH TYPE VCH NO. DEBIT 22.02.2012 CASH PAYMENT 1393 3,00,000 ON PERUSAL OF THE LEDGER ACCOUNT OF M/S. ESWARI STO RES SUBMITTED BY THE LD. A.R DURING THE APPELLATE PROCEEDINGS, IT IS SE EN THAT THE DETAILS OF PAYMENTS PERTAIN FROM 01.03.2012 TO 31.03.02012 AND THE SAME DO NOT TALLY WITH THE DATE ITA NO.1361/MDS/2017 :- 6 -: OF PAYMENTS MENTIONED IN THE LEDGER SUBMITTED DURIN G THE ASSESSMENT PROCEEDINGS. THE SAME IS APPLICABLE IN THE CASE OF M/S. GOWRI AGENCIES AND M/S. KALAIVANI SWEETS. 5. THUS, THE A O HAS CLEARLY POINTED OU T THE DISCREPANCIES AND THEY WERE NOT ADDRESSED BY THE CIT (A). IT IS SEEN FROM THE COP IES IN THE PAPER BOOK THAT THE TOTAL SALES MADE BY THE ASSESSEE IS AT RS. 345,282 ,107/- AND IT APPEARS THAT THE ACCOUNTS WERE AUDITED U/S 44AB , AS THE COPY OF TH E TRADING & P & L ACCOUNT IN THE PAPER BOOK INDICATES CERTIFICATION MADE BY CA . MD . IBRAHIM SHARIFF, MEMB NO 018720. IN SUCH SITUATION, THE ISSUES UNDER CONSIDERATION, PRIMA FACIE, SHOULD NOT HAVE ARISEN AT ALL. WHEN THE A O POINTED OUT THE ABOVE DISCREPANCIES , IT SHOULD HAVE BEEN PROPERLY EXPLAINED AND RECONCILED WITH RELEVANT MATERIAL. SINCE IT HAS NOT BEEN DONE , THIS ISSUE REQUIRES RE-EXAMINA TION. ON THE OVERALL FACTS AND CIRCUMSTANCES, WE DEEM IT FIT TO SET ASID E THE ORDER OF THE CIT (A) ON THE ISSUES UNDER CONSIDERATION OF THIS APPEAL AND REMI T THEM TO THE AO FOR A FRESH EXAMINATION. THE A O , AFTER AFFORDING DUE OPPO RTUNITY TO THE ASSESSEE , SHALL DISPOSE THE MATTER IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE REVENUES APPEAL IS TREATED A S ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1361/MDS/2017 :- 7 -: ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH NOVEMBER, 2017 AT CHENNAI. SD/ - (... ) (N.R.S. GANESAN) / JUDICIAL MEMBER SD/ - ( ) ( S. JAYARAMAN ) /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 06 TH NOVEMBER , 2017. EDN , *34 54 /COPY TO: 1. ) /APPELLANT 4. 6 /CIT 2. *+) /RESPONDENT 5. 4 * /DR 3. 6 ( )/CIT(A) 6. & /GF