ITO, CHENNAI V. M/s. Sanruga & Co., CHENNAI

ITA 1596/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1129 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 21-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MRS PUSHYA SITARAM
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A, CHENNAI BEFORE SHRI U.B.S. BEDI, J.M. & SHRI B. RAMAKOTAIAH, A.M. I.TA. NO.1596/MDS/2010 ASSESSMENT YEAR 2006-07 THE INCOME TAX OFFICER, BW I(4), NO.7, RAMAKRISHNA STREET, WEST TAMBARAM CHENNAI 600 045. VS . M/S. SANRUGA & CO., NO. 12, FIRST STREET, CHANDRAN NAGAR, CHROMPET, CHENNAI 44. [PAN: AAWFS2657R] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB ASSESSEE BY : MRS. PUSHYA SITARAM O R D E R PER U.B.S. BEDI, J.M. THIS APPEAL OF THE DEPARTMENT IS DI RECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) IX, CHENNAI DAT ED 29.06.2010 RELEVANT TO T HE ASSESSMENT YEAR 2006-07, WHEREBY THE DEPARTMENT HAS RAISED 4 GROUNDS FROM GROUND NO. 2 TO 5 WHEN GROUNDS NO. 1 AND 6 ARE GENERAL. 2. SO FAR AS GROUND NOS. 2 AND 2.1 AND 3 AND 3.1 ARE CONCERNED, THE LD. DR RELIED UPON THE GROUNDS OF APPEAL AND PLEADED FOR REVERSAL OF THE ORDER, WHEREAS, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE LD. CIT(A)S ORDER AND PLEADED FOR ITS CONFIRMATION. 3. AFTER HEARING BOTH THE SIDES AND CONSI DERING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE IN GROUND NO. 2 AND 2.1 RELATES TO DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) ON ACCOUNT OF FREIGHT CHARGES AND THE LD. CIT(A) FAILED TO APPREC IATE THAT THE ASSESSEE DID NOT CLAIM THAT ALL PAYMENTS WERE LESS THAN ` . 20,000/-. AFTER HAVING CONSIDER ED THE ARGUMENTS OF BOTH THE ITA NO.1596/MDS/10 2 SIDES, MATERIALS ON RECORD, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER PASSED BY THE LD. CI T(A), WHICH IS FOUND TO BE JUST AND PROPER. AS REGARDS GROUND NO.3 AND 3.1, THE ISSUE RELATES TO DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER TOWARDS INTEREST AND BAN K CHARGES CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE HAS BEEN CHALLENGED ON THE GROUND THAT THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE DID NOT SUBSTANTIATE THIS CLAIM WITH EVIDENCE, BUT THE LD. DR COULD NOT BE ABLE TO ES TABLISH, WHEN THE MATTER HAS BEEN DULY DISCUSSED AND REMAND REPORT OBTAINED BY T HE LD. CIT(A) FROM THE ASSESSING OFFICER, AS TO HOW THE RELIEF GIVEN BY THE LD. CIT(A) IS NOT PROPER AND JUSTIFIED. KEEPING IN VIEW THE ENTIRETY OF FACTS, CIRCUMSTANCES AN D MATERIAL ON RECORD, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A) IN THIS REGARD AND DISMISS THE GROUNDS IN GROUN DS NO.2, 2.1, 3 AND 3.1 OF THE APPEAL OF THE DEPARTMENT. 4. GROUND NO.4 AND 4.1 RELATES TO REST RICTING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AT 25% OF VARIOUS EX PENSES TO 10% AND THE LD. DR COULD NOT SUBSTANTIATE ITS PLEA AS RAISED IN THE APPE AL OF THE DEPARTMENT AS TO HOW SUCH ACTION OF THE LD. CIT(A) IS NOT CORREC T. CONSIDERING THE ENT IRETY OF FACTS, CIRCUMSTANCES AND MATERIAL ON RECORD, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A). 5. LAST GROUND BEING GROUND NO.5, 5.1 AND 5.2, CHALLENGE IS WITH REGARD TO DELETION OF ADDITION ON ACCOUNT OF UNPROV ED SUNDRY CREDITORS ON THE GROUND THAT THE LD. CIT(A) OUGHT TO HAVE NOT ICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITA NO.1596/MDS/10 3 A LETTER FROM M/S. CHANDRIKA ENTERPRISES WA S SENT THROUGH REGISTERED POST TO THE ASSESSING OFFICER, STATING THAT THERE WAS NO TRANSACTION WITH THE ASSESSEE DURING THE YEAR 2005-06 AND AT THE SAME TIME, AN AFFIDAVIT WA S SUBMITTED BY THE SAID CONCERN BEFORE THE LD. CIT(A) STATING THAT AN AMOUNT OF ` . 6,05,708/- IS DUE FROM THE ASSESSEE AND THE LD. CIT(A) SHOULD HAVE APPRECIATED THAT FOR THE INSTANCE INDICATES THE PURPORTED CONFIRMATION LETTER IN THE FORM OF AFFIDAVIT ARE NOT FREE FROM DOUBT. THEREFORE, IT WAS PLEADED THAT THE CLAIM OF THE ASSESSEE REGARDING SUNDRY CREDITORS REMAINED UNSUBSTANTIATED AND THER EFORE, THE ORDER OF THE FIRST APPELLATE AUTHORITY ON THIS POINT SHOULD BE REVERSED. 5.1 THE LD. COUNSEL FOR THE ASSESSEE, WH ILE RELYING UPON THE ORDER OF THE LD. CIT(A) HAS SUBMITTED THAT SINCE AFFIDAVIT WAS FILED BEFORE THE LD. CIT(A) IN THIS REGARD AND THE SAME WAS SENT TO THE ASSESSING OFFICER, WHO SUBMITTED REMAND REPORT ALSO, SO IT CANNOT BE SAID THAT PROPER PROCEDURE HAS NOT BEEN FOLLOWED BY THE LD. CIT(A) TO GIVE THE RELIEF AS WAS ELIGIBLE TO THE ASSESSEE AND THE ASSESSING OFFICER HAD MADE PROPER ENQUIRY TO FIND THE TR UTHFULNESS OF THE AFFIDAVIT AND DID NOT RAISE ANY OBJECTION BEFORE THE LD. CIT(A). THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING T HE IMPUGNED ADDITION AS MADE BY THE ASSESSING OFFICER. 5.2 THE LD. DR IN ORDER TO COUNTER T HE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ADDITI ON HAS OTHERWISE BEEN DELETED ON THE BASIS OF PROBABILITY THAT ADDITION OF ` . 40,62,342/-, WHICH WAS NEAR LY HALF OF THE TOTAL TURNOVER CANNOT BE TERMED AS PROFIT WHEN THE ASSESSEE IS DEALING IN TRADING OF THE TEA. SO, THE LD. DR PLEADED T HAT THE IMPUGNED ORDER ON THIS POINT MAY BE REVERSED. ITA NO.1596/MDS/10 4 6. WE HAVE HEARD BOTH THE SIDES, CONS IDERED THE MATERIAL ON RECORD AND FIND THAT THE ASSESSING OFFICER HAS MADE FOLLOW ING REMARKS WHILE MAKING THE IMPUGNED ADDITION: THE ASSESSEE HAS CLAIMED SUNDRY CREDITORS TO THE EXTENT OF ` .31,83,289/- AS PER HIS BALANCE SHEET FOR THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2006-07 WHEREIN THE ASSESSEE FURNISHED THE CONF IRMATION LETTERS TO THE EXTENT OF ` . 38,06,415.09. THE ASSESSEE HAS NOT FURNISHED THE INCOME TAX ASSESSMENT DETAILS OF THE CREDITORS. OU T OF THE 6 CREDITORS 3 OF THE ABOVE HAVE NO PAN AND ONE OF THE MAIN CREDITO R M/S. AGRO INDUSTRIES, COONUR - PAN: AALPE4983B HAS NOT F ILED HIS RETURN OF INCOME. FOR THE REMAINING TWO CREDITORS THE ASSESSEE HAS NOT FURNIS HED INCOME TAX DETAILS. HENCE, IT IS NOT POSSIBLE TO VERIFY THE GENUINENESS WITH THE INCOME TAX DEPARTMENT. 6.1 WHEREAS, THE LD. AR FILED THE WRITT EN SUBMISSION BEFORE THE FIRST APPELLATE AUTHORITY AS UNDER: I. THE ACCOUNT OF THE APPELLANT IS AUDITED BY CHARTERED ACCOUNTANT U/S 44AB OF THE INCOME TAX ACT. II. PROPER BOOKS OF ACCOUNTS WE RE MAINTAINED AND PRODUCED BEFORE REMAND AO AND WAS ALSO ACCEPTED BY THE REMAND AO IN HIS REPORT. III. PURCHASE OF ` . 65,61,386/- WERE MADE AND T HE APPELLANT ACHIEVED A TURNOVER OF ` .97,27,052/- DURING THE PREVI OUS YEAR WHICH COULD NOT HAVE BEEN MADE WITHOUT PURCHASE OF MATERIALS ON CREDIT ( ` .30,95,122). FURTHER WHILE THE REMAND AO IS ACCEPTING THE PURCHASES AND SALES, HE IS NOT INCLINED TO ACCEPT THE TRADE CREDITORS (IT IS NOT LOAN CREDITORS), WHICH IS AGAINST THE BASIS BUSINESS PRACTICES AND THEREFORE BAD IN LAW. IV. THE APPELLANT PLEADS THAT THE BENEFIT OF DOUBT ON ACCOUNT OF NON VERIFICATION OF TRADE CREDITORS MAY BE GIVEN TO THE APPELLANT AND THE ADDITION OF ` .30,95,122 BEING TRADE CREDITORS MAY BE DELETED. 6.2 THE LD. CIT(A), FURTHER CONSIDERING T HE ENTIRETY OF FACTS, CIRCUMSTANCES AND MATERIAL ON RECORD HAS CONCLUDED TO DELETE THE IMPUGNED ADDITION BEING NOT SUSTAINABLE BY HOLDING T HAT THE ADDITION HAS BEEN M ADE BY THE ASSESSING OFFICER ITA NO.1596/MDS/10 5 FOR NON-VERIFICATION OF CONFIRMATION, WHICH IS NOT SUFFICIENT TO MAKE THE ADDITION OF THE TRADE CREDITORS BECAUSE THEY ARE PUREL Y TRADE CREDITORS AND NOT LOAN CREDITORS, WHEN ACCOUNTS ARE ALSO AUDITED UNDER SECTION 44AB. 7. CONSIDERING THE ENTIRETY OF FACTS, CIRCUMSTANCES AND MATERIAL ON RECORD, WE ARE OF THE VIEW THAT SINCE THE ADDITION AS MADE BY THE ASSESSING OFFICER AND DELETED BY THE LD. CIT(A) IS NOT SUSTAI NABLE, AS SUCH, WHILE CONCURRING WITH THE CONCLUSION AS DRAWN BY THE LD. CIT(A), WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A) IN THIS REGARD. 8. AS A RESULT, THE APPEAL OF THE DEPARTMENT GETS DISMISSED. ORDER PRONOUNCED ON 04.02.2011. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI, DATED, THE 04.02.2011 VM/- COPY TO : APPELLANT/RES PONDENT/CIT(A)- /CIT, /DR