ITO, Erode V. Smt. Rolex Suguna Mary, Erode

ITA 1734/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61304 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 27-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH KAMATH JT
• 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 AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NO.1734/MDS/2011 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER WARD I(3) ERODE VS SMT. ROLEX SUGUNAMARY PROPX. M/S G.R.LEATHERS 101-A, RAMAMURTHY NAGAR ERODE 638 003 [PAN AELPR2379J] (APPELLANT) (RESPONDENT) C.O.NO.158/MDS/2011 ASSESSMENT YEAR : 2007-08 SMT. ROLEX SUGUNAMARY PROPX. M/S G.R.LEATHERS 101-A, RAMAMURTHY NAGAR ERODE 638 003 VS THE INCOME TAX OFFICER WARD I(3) ERODE (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI YOGESH KAMATH, JT. CIT ASSESSEE BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 18-07-2012 DATE OF PRONOUNCEMENT : 19-07-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVE NUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-I, COIMBATORE, DATED 25.08.2011. I.T.A.NO.1734/11 C.O.NO.158/11 :- 2 -: 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL OF THE REVEN UE IS THAT THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF ` 13,84,500/- ON ACCOUNT OF UNPROVED TRADE CREDITORS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 31.3.2008 ADMITTING AN INCOME OF ` 3,98,290/-. THE ASSESSMENT WAS MADE U/S 143(3) O N 31.12.2009 DETERMINING THE INCOME OF ` 79,24,328/-. 4. THE ASSESSEE FILED APPEAL AGAINST THE ADDITIONS MA DE BY THE ASSESSING OFFICER AND THE CIT(A) DELETED THE ADDITI ONS. 5. ON FURTHER APPEAL BY THE REVENUE TO THE TRIBUNAL, T HE TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A) AND DISM ISSED THE APPEAL OF THE REVENUE. 6. MEANWHILE, THE CIT-II, COIMBATORE, VIDE ORDER DATED 26.3.2010 SET ASIDE THE ASSESSMENT MADE U/S 143(3 ) WITH A DIRECTION TO REDO THE ASSESSMENT AND IN THE ASSESSMENT FRAMED U/S 143(3) R.W.S 263 ON 30.12.2010, THE ASSESSING OFFICER DETE RMINED THE INCOME OF THE ASSESSEE AT ` 93,08,828. 7. THE A.R OF THE ASSESSEE SUBMITTED BEFORE US THAT T HE DIFFERENCE BETWEEN THE ASSESSMENT MADE ON 31.12.200 9 AND 30.12.2010 WAS THAT IN THE EARLIER ASSESSMENT THE A SSESSING OFFICER MADE ADDITION IN RESPECT OF NINE TRADE CREDITORS AN D DID NOT MAKE THE I.T.A.NO.1734/11 C.O.NO.158/11 :- 3 -: ADDITION IN RESPECT OF ONE CREDITOR, NAMELY, M/S JA I HIND LEATHERS, ERODE, WHO WAS HAVING A CREDIT BALANCE AS AT THE EN D OF THE YEAR AT ` 13,84,500/-. IN THE ASSESSMENT SUBSEQUENTLY FRAME D PURSUANT TO THE DIRECTION OF THE CIT, ADDITION OF THIS AMOUNT O F ` 13,84,500/- WAS MADE AND THEREFORE, THE INCOME WAS ASSESSED AT ` 93,08,828/- IN PLACE OF ` 79,24,328/- DETERMINED IN THE ORIGINAL ASSESSMENT. 8. THE A.R OF THE ASSESSEE FILED BEFORE US A COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE PASSED IN A SSESSMENT YEAR 2007-08 IN I.T.A.NO.843/MDS/2011 AND C.O.NO.100/MDS /2011, DATED 4.10.2011 AND SUBMITTED THAT THE TRIBUNAL HAS DELET ED THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NINE T RADE CREDITORS IN THE ORIGINAL ASSESSMENT. HE SUBMITTED THAT THE FAC TS IN THE PRESENT APPEAL ARE ALSO SIMILAR TO THE FACTS WHICH WERE BEF ORE THE TRIBUNAL IN I.T.A.NO. 843/MDS/2011 AND THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THAT APPEAL, TH E APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. 9. ON THE OTHER HAND, THE DR SUPPORTED THE ORDER OF TH E ASSESSING OFFICER. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER OBSERVED THAT T HE TRADE CREDITOR I.T.A.NO.1734/11 C.O.NO.158/11 :- 4 -: NAMELY, M/S JAI HIND LEATHERS, IN WHOSE NAME ASSE SSEE HAD SHOWN AN AMOUNT OF ` 13,84,500/- WAS NOT GENUINE. THE ASSESSING OFFICE R OBSERVED THAT THE ASSESSEE FILED BEFORE HIM COMPUT ER GENERATED LEDGER COPY OF M/S JAI HIND LEATHERS, COPY OF BANK STATEMENT OF THE ASSESSEE IN WHICH PAYMENTS MADE TO M/S JAI HIND LEA THERS ARE RECORDED AND COPY OF SALES TAX ASSESSMENT ORDER OF M/S JAI HIND LEATHERS PASSED BY ASSISTANT COMMISSIONER (CT) FAC, PERIA AGRAHARAM CIRCLE, ERODE ON 11.1.2010 PASSED FOR ASSESSMENT YE AR 2006-07. THE ASSESSING OFFICER ALSO OBSERVED THAT THE INSPECTOR DEPUTED BY HIM HAS CAUSED DISCRETE ENQUIRIES ABOUT THE EXISTENCE OF TH E FIRM, BUT HE COULD NOT LOCATE THE CONCERN, THEREFORE, THE GENUINENESS OF THE CONCERN IS CONCLUDED AS FICTITIOUS AND HE PROPOSED TO ADD BACK THE CREDIT STANDING AGAINST THE NAME OF M/S JAI HIND LEATHERS. HE ALSO CONCLUDED THAT THIS GOES TO PROVE THAT THE ASSESSEE IS TRYING TO CREATE FORGED MATERIALS IN SUPPORT OF HER CLAIM AND DEVIATE THE A SSESSMENT PROCEEDINGS. HE ALSO NOTED THAT GETTING TIN NUMBE R, SALES TAX REGISTRATION NO. AND PAN IS NOT A DIFFICULT MATTER NOWADAYS. HOWEVER, THE ASSESSEE COULD NOT PRODUCE THE PROPRIETOR OF THE SAID CONCERN BEFORE THE ASSESSING OFFICER AND THAT ON SCRUTINY O F THE BANK ACCOUNT STATEMENT OBTAINED FROM INDIAN OVERSEAS BANK, ERODE BRANCH, IT REVEALED THAT THE PAYMENT DETAILS POINTED OUT BY T HE ASSESSEE WERE NOT REFLECTED THEREIN. IN THE ABSENCE OF CORRESPON DING ENTRIES IN THE BANK ACCOUNT, THE ONUS WAS ON THE ASSESSEE TO PROV E THESE I.T.A.NO.1734/11 C.O.NO.158/11 :- 5 -: TRANSACTIONS BY PROVIDING THE MATERIAL EVIDENCES OF EITHER SIDE WHICH SHE FAILED TO DO. THE ASSESSING OFFICER, THEREFORE, MADE AN ADDITION OF ` 13,84,500/- TO THE INCOME OF THE ASSESSEE. 11. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE HAS SUBM ITTED AS UNDER: THE ASSESSING OFFICER IS WRONG IN STATING AT PAGE 1 OF THE ASSESSMENT ORDER THAT 'DURING THE COURSE OF SU RVEY PROCEEDINGS, THE ASSESSEE ADMITTED CERTAIN SUNDRY T RADE CREDIT BALANCES AS UNPROVED AND AGREED TO PAY THE TAXES', FOR THE APPELLANT NEVER GAVE ANY SUCH STATEMENT AS . ALLEG ED. THE ORDER OF THE ASSESSING OFFICER IS A NULLITY IN AS MUCH AS , THE ORDER HAS BEEN PASSED 'AS DIRECTED BY THE COMMISSIONER OF IN COME TAX-II, COIMBATORE' AT PAGE 4 OF THE ASSESSMENT ORDER, REL YING ON THE DECISION OF THE APEX COURT IN 314 ITR 81. THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS FILED IN A DETAILED REPLY FILED BEFORE HIM ON 6.12.2010 IN RESPECT OF THE SAME CREDITOR N AMELY M/S JAI HIND LEATHERS. IN THE COURSE OF APPELLATE PROCEEDIN GS BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), COIMB ATORE IN THE CASE OF SHRI A.CHARLES IN APPEAL NO.274/09-10, THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CL AIM OF THE SAID APPELLANT AND DIRECTED THE DELETION OF SAID A DDITION MADE IN THAT CASE. THE TRADING RESULTS OF THE APPELLANT AR E ACCEPTED AND NO EVIDENCES ARE BROUGHT ON RECORD TO SAY THAT THE SAID CREDITOR IS BOGUS. 12. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS, OBSE RVED THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS N OT CLEARLY BROUGHT OUT THE EXPLANATION OF THE ASSESSEE REGARDING THE TRADE CREDIT BALANCES WHICH THE ASSESSING OFFICER WANTED TO TREA T AS INCOME. THE ASSESSING OFFICER OBSERVED THAT DURING THE POST SUR VEY INVESTIGATION IT HAS COME TO LIGHT THAT THE ASSESSEE TRIED TO EVADE TAX BY CREATING FICTITIOUS CONCERNS ON PAPER IN THE NAMES OF HER B ENAMIS AND OPENED BANK ACCOUNTS AND SHOWN THESE FICTITIOUS CONCERNS A S HER TRADE I.T.A.NO.1734/11 C.O.NO.158/11 :- 6 -: CREDITORS WITHOUT DOING ANY BUSINESS AND DIVERTED H UGE MONEY INTO THESE BANK ACCOUNTS. THE CIT(A) HAS NOTED THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOT BROUGHT ON RECO RD REGARDING THE INVESTIGATIONS MADE BY HIM IN THIS REGARD. THE CIT (A) FURTHER OBSERVED THAT THE ASSESSING OFFICER RELIED ON INSPE CTORS REPORT WHICH WAS NOT COMPLETE. THE ASSESSING OFFICER HAS NOT MA DE ANY DETAILED BANK ENQUIRIES TO PROVE HIS CASE THAT THE ASSESSEE OPENED BANK ACCOUNT IN THE NAME OF FICTITIOUS CONCERNS. THE CI T(A) HAS FURTHER OBSERVED THAT THE ASSESSEE HAS ADDRESSED A LETTER TO THE ASSESSING OFFICER ON 6.12.2010 WHEREIN THE ASSESSEE SUBMITTE D THE RELEVANT FACTS OF THE REPORT OF THE INSPECTOR OF INCOME-TAX . THE ASSESSEE SUBMITTED THAT THE INSPECTOR HAS STATED THAT TANNER Y WAS CLOSED FROM 2007 ONWARDS AND COULD NOT BE VERIFIABLE WHETHER TH E CONCERN WAS FUNCTIONING EVEN PRIOR TO 2007. THE CIT(A), THEREF ORE, OBSERVED THAT THIS COULD NOT BE TREATED AS ENOUGH PROOF ABOUT NON -EXISTENT OF THE CREDITOR FIRM AND THE CREDIT SHOWN OF ` 13,84,500/- CANNOT BE REJECTED AND ADDED TO THE INCOME RETURNED. THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE RELATE TO THE PERIOD 2006-07. DURING THE ASSESSMENT YEAR 2007-08 THE ASSESSEE MADE PURCHASES OF ` 67,80,384/- AND MADE PAYMENT OF ` 71,83,294/- LEAVING A CLOSING BALANCE OF ` 9,81,590/- AND THAT EVEN DURING THE ASSESSMENT YEAR 2008-09 THE ASSESSEE MADE PURCHASES FROM M/S JAI HIND LEATHERS OF ` 61,95,540/- I.T.A.NO.1734/11 C.O.NO.158/11 :- 7 -: AND THE ACCOUNT WAS CLOSED IN ASSESSMENT YEAR 2008- 09. THE CIT(A) HAS NOTED THAT THE ASSESSING OFFICER HAS NOT ADDED THE PURCHASES OF ` 13,84,500/- MADE DURING THE ASSESSMENT YEAR 2006-07 AND IT CANNOT BE CONCLUDED FROM THE INSPECTORS REPORT WITHOUT AN Y BASIS THAT THE FIRM WAS NOT FUNCTIONING DURING THE RELEVANT ASSESS MENT YEAR. THE ASSESSING OFFICER HAS ACCEPTED THE TRADING RESULTS OF THE ASSESSEE THE CIT(A) FURTHER NOTED THAT THE ASSESSEE FILED D ETAILS OF BANK ACCOUNT THROUGH WHICH THE PAYMENTS WERE MADE TO M/S JAI HIND LEATHERS. THE ASSESSING OFFICER AT PAGE 3 OF HIS O RDER HAS STATED THAT THE PAYMENT DETAILS POINTED OUT BY THE ASSESSEE WE RE NOT REFLECTED IN THE BANK ACCOUNT STATEMENT OBTAINED FROM INDIAN OVE RSEAS BANK, ERODE BRANCH. THE BANK STATEMENT OF THE ASSESSEE FOR THE PERIOD 1.4.2007 TO 31.3.2009 WAS FILED BEFORE THE ASSESS ING OFFICER VIDE LETTER DATED 6.12.2010 OF THE ASSESSEE. THE CIT(A ) OBSERVED THAT AN EXAMINATION OF THE BANK ACCOUNT SHOWED THAT PAYMENT S WERE MADE TO M/S JAI HIND LEATHERS THROUGH INDIAN OVERSEAS BANK ACCOUNT ON 7 TH JULY, 10 TH JULY, 19 TH JULY, 21 ST JULY, 25 TH JULY, 28 TH JULY, 3 RD AUGUST, 25 TH AUGUST AND 21 ST SEPTEMBER, THROUGH CHEQUES. THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE TO SHOW THAT THE BANK TRANSACTIONS ARE NOT GENUINE. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 13,84,500/-. I.T.A.NO.1734/11 C.O.NO.158/11 :- 8 -: 13. WE FIND THAT THE TRIBUNAL, IN REVENUES APPEAL INI.T.A.NO.843/MDS/2011 AGAINST THE ORIGINAL ASSESS MENT ORDER DATED 31.12.2009 PASSED U/S 143(3), IN THE SIMILAR SET O F FACTS, HAS OBSERVED AS UNDER: 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE H AVE FOUND THAT THE ASSESSING OFFICER, IN HIS ORDER, HAS MENTI ONED THAT COPIES OF SALES TAX RETURNS REVEALED THAT SHRI PACH AMUTHU 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 FIN D 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 OFF ICER HAS NOT MADE ANY COMMENTS REGARDING THE PURCHASES MADE BY THE ASSESSEE. THE TRADE CREDITOR IS ON ACC OUNT OF PURCHASE TRANSACTIONS MADE DURING THE YEAR. THE AS SESSEE 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 PAYMENT MADE BY THE ASSESSEE TO THIS PART Y. THE ASSESSEE HAD ALSO MADE PURCHASES FROM THIS PARTY IN EARLIER YEARS. THE ASSESSEE PRODUCED THE PROPRIETO R OF THIS CONCERN BEFORE THE ASSESSING OFFICER FOR EXAMINATIO N. THUS, WHEN THE ASSESSING OFFICER ACCEPTED PURCHASES EFFECTED BY THE ASSESSEE FROM THIS PARTY AND THE TR ADING RESULTS HAVE NOT BEEN DISTURBED, MAKING ADDITION ON THE CLOSING BALANCE AS ON 31.3.2007 IS NOT JUSTIFIED FR OM ANY ANGLE. THE TRANSACTIONS WITH THIS PARTY ARE FOUND TO BE THROUGH BANKING CHANNELS ONLY. THE ASSESSING OFFIC ER HAS NOT FOUND THIS TRANSACTION TO BE NON-GENUINE WITH T HE HELP OF EVIDENCE. THE ASSESSEE PRODUCED THE COPIES OF BILL S, BANK PAYMENT AND SALES TAX ORDER, THEREFORE, THE DELETIO N IN QUESTION IS QUITE JUSTIFIED. 14. WE FIND THAT IN THE PRESENT APPEAL ALSO, THE FACTS AND ISSUE INVOLVED ARE SIMILAR. THE ASSESSING OFFICER HAS AC CEPTED THE PURCHASES OF ` 67,80,384/- MADE BY THE ASSESSEE FROM M/S JAI HIN D LEATHERS AS I.T.A.NO.1734/11 C.O.NO.158/11 :- 9 -: GENUINE. THE TRADE CREDIT IS ON ACCOUNT OF PURCHAS E TRANSACTIONS MADE DURING THE YEAR. THE ASSESSEE HAS MADE PAYMENTS O F ` 71,83,294/- DURING THE YEAR. THE ASSESSING OFFICER HAS ACCEPTE D THE PURCHASES EFFECTED BY THE ASSESSEE FROM THIS PARTY AND THE TRADING RESULTS HAVE NOT BEEN DISTURBED AND ADDITION HAS BEEN MADE ON TH E CLOSING BALANCE AS ON 31.3.2007. THE TRANSACTIONS WITH THE PARTY W ERE FOUND BY THE CIT(A) TO BE THROUGH BANKING CHANNELS ONLY. THE SA ME HAS NOT BEEN CONTROVERTED BY THE REVENUE BY BRINGING ANY MATERIA LS ON RECORD. THE ASSESSING OFFICER HAS NOT FOUND THESE TRANSACTIONS TO BE NON-GENUINE WITH THE HELP OF EVIDENCE. THE ASSESSEE PRODUCED THE COPIES OF BILLS, BANK STATEMENT AND THE SALES TAX ORDER. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN I.T.A.NO.843/MDS/2011, WE CONFIRM THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF ` 13,84,500/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS TRADE CREDIT. THUS, THE GROUNDS O F APPEAL OF THE REVENUE ARE DISMISSED. 15. THE CROSS OBJECTION FILED BY THE ASSESSEE IS SIMPLY IN SUPPORT OF THE ORDER OF THE LD. CIT(A) WITHOUT ANY MATERIAL GROUNDS. IN VIEW OF OUR ORDER IN REVENUES APPEAL, WE DISMIS S THE CROSS OBJECTION FILED BY THE ASSESSEE. I.T.A.NO.1734/11 C.O.NO.158/11 :- 10 -: 16. IN THE RESULT, BOTH, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMI SSED. ORDER PRONOUNCED ON THURSDAY, THE 19 TH OF JULY, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 19 TH JULY, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR