R.V. Steels Pvt. Ltd, Chennai V. ACIT, Central CircleII(3), Chennai

ITA 2201/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2824 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-03-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 08-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SITAL KUMAR JAIN
• Keywords: Unexplained cash credit; Bad and doubtful debts
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! ' . #$ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.2201/CHNY/2017 ( / ASSESSMENT YEAR: 2007-08) M/S. R.V. STEELS PVT. LTD., 108, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 34. VS THE ACIT, CENTRAL CIRCLE III(3), CHENNAI 34. PAN: AAACR2457B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI SITAL KUMAR JAIN, CA / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT /DATE OF HEARING : 13.06.2018 /DATE OF PRONOUNCEMENT : 13.08.2018 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS)-19, CHENNAI, DATED 22.06.2017 IN ITA NO.118/09-10 FOR T HE ASSESSMENT YEAR 2007-08 PASSED U/S. 250(6) R.W.S. 143(3) OF TH E ACT. 2 ITA NO.2201/CHNY/2017 2. THE ASSESSEE HAS RAISED TWO SIMILAR GROUNDS IN ITS APPEAL AND THEY ARE BRIEFLY STATED HEREIN BELOW FOR ADJUDICATI ON:- (I) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION MADE BY THE LD.AO INVOKING THE PROVISIONS OF SECTION 41(1) OF T HE ACT, AMOUNTING TO RS.25,35,827/- SIC., RS.25,32,827/- TO WARDS UNEXPLAINED CREDIT STANDING IN THE NAME OF M/S. KAL INDI INDUSTRIES. (II) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADD ITION MADE BY THE LD.AO INVOKING THE PROVISIONS OF SECTION 41(1) OF T HE ACT, AMOUNTING TO AMOUNTING TO RS.31,75,900/- TOWARDS UN EXPLAINED CREDIT STANDING IN THE NAME OF M/S. NEHA STEELS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACT URE OF STEEL INGOTS AND CTD BARS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 10.09.2008 DECLARING LOSS OF RS.2,2 8,11,310/-. NOTICE U/S. 143(2) OF THE ACT WAS ISSUED AND FINALL Y ASSESSMENT ORDER U/S.143(3) OF THE ACT WAS PASSED ON 29.12.2009 WHER EIN THE LD.AO MADE SEVERAL ADDITIONS AMONGST WHICH ARE THE ADDITI ONS RELATED TO UNEXPLAINED CREDIT STANDING IN THE NAME OF M/S. KAL INDI INDUSTRIES AND 3 ITA NO.2201/CHNY/2017 M/S. NEHA STEELS AMOUNTING TO RS.25,32,827/- & RS.3 1,75,900/- RESPECTIVELY. 4. DURING THE ASSESSMENT PROCEEDINGS, THE LD.AO HAD ISSUED LETTERS TO THE SUNDRY CREDITORS M/S. KALINDI INDUST RIES & M/S. NEHA INDUSTRIES FOR CONFIRMING THEIR CREDIT BALANCES IN THE BOOKS OF THE ASSESSEE AMOUNTING TO RS.25,32,827 & RS.31,75,900/- RESPECTIVELY. THE LETTER ADDRESSED TO M/S.KALINDI INDUSTRIES WAS RETURNED STATING THAT NO SUCH ADDRESS EXIST AND THE LETTER ISSUED TO M/S. NEHA STEELS WAS RETURNED STATING REFUSED TO ACCEPT. SINCE THE A SSESSEE DID NOT FURNISH SUFFICIENT MATERIALS TO ESTABLISH THE GENUI NENESS OF THE SUNDRY CREDITORS, THE LD.AO ADDED THE SAME TO THE INCOME O F THE ASSESSEE UNDER THE HEAD UNEXPLAINED CREDIT. ON APPEAL BEFORE THE LD.CIT(A), THE ASSESSEE HAD EXPLAINED THAT IN THE CASE OF BOTH THE ABOVE SUNDRY CREDITORS ADDITIONS WERE MADE IN THE ASSESSMENT YEA RS 2004-05 AND 2005-06 WHICH WAS SUBSEQUENTLY DELETED BY THE TRIBU NAL VIDE ORDER DATED 26.11.2010 IN ITA NO.2358/MDS/2007 AND ORDER DATED 13.09.2013 IN ITA NO.1303/MDS/2013 BY HOLDING AS UN DER:- A) ALL THE ADVANCES WERE RECEIVED THROUGH CHEQUES. B) THE ASSESSEE PROVIDED THE COMPLETE NAMES AND ADD RESSES OF THE PARTIES. 4 ITA NO.2201/CHNY/2017 C) THESE WERE RUNNING TRANSACTIONS BETWEEN THE SELL ER AND THE CUSTOMER. HOWEVER THE LD.CIT(A) CONFIRMED THE ADDITIONS BY OB SERVING AS UNDER:- 9. THE ORDER OF THE ITAT IS EXAMINED. IT IS NOTED THAT THE ASSESSEE HAD NOT PRODUCED ANY CONFIRMATION FROM M/S. KALINDI INDUSTR IES DURING VERIFICATION FOR THE AY 2004-05 ALSO. THE SAID CREDIT ENTRY CONT INUES TO BE IN THE BOOKS OF THE ASSESSEE ON 31.3.2007. IT IS THE RESPONSIBIL ITY OF THE ASSESSEE TO EXPLAIN ANY CREDIT ENTRY IN ITS BOOKS OF ACCOUNTS. THE ASSESSEE SHOULD ALSO PROVIDE PROOF THAT THE LIABILITY CLAIMED HAS NOT CE ASED TO HAVE EXISTED AS ON THE BALANCE SHEET DATE. THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST UPON IT. THE ASSESSEE CANNOT BE ALLOWED TO CONTINU E A BOGUS CREDIT ENTRY FOR EVER UNDER THE GUISE THAT IS AN OLD CREDIT ENTRY. M ERELY BECAUSE OF THE CHEQUE TRANSACTION, THE TRADE CREDIT AMOUNT WILL NO T STAND EXPLAINED FOR THAT YEAR OR FOR ALL FUTURE YEARS. MOREOVER, THE ASSESS EE HAS CLAIMED IT TO BE A TRADE CREDITOR AND NOT A LOAN CREDITOR. IN REPLY, THE ASSESSEE HAS ONLY STATED THAT THE PROVISIONS OF SECTION 41(1) ARE NOT APPLIC ABLE TO THE FACTS OF THE CASE. WHEREAS, THE LIABILITIES WHICH HAVE CEASED TO HAVE EXISTED IN THE CASE OF TRADE CREDITORS CAN AS WELL BE BROUGHT TO TAX U/ S.41(1). THIS ISSUE IS SIMILAR TO ALLOWING PURCHASE ADVANCES WRITTEN OFF A S BAD DEBTS. RELIANCE IS PLACED ON THE JUDICIAL DECISIONS IN MYSORE SUGAR CO . LTD (46 ITR 649 SC), B.D. BHARUCHA (65 ITR 403 SC) AND DHANALAKSHMI CORP ORATION (46 ITR 1031 MADRAS) FOR THIS COROLLARY. RELIANCE IS ALSO P LACED ON THE JUDICIAL DECISIONS IN KAMAL BASHA (316 ITR 58 MADRAS), PALKH I INVESTMENTS AND TRADING CO P LTD (288 CTR 473 BOMBAY), SURESH KUMAR T JAIN (128 ITD 74 BANGALORE) AND ASHT LAKSHMI DIAMOND AND JEWELLER Y (154 ITR 688 MUMBAI) IN SUPPORT OF BRINGING THE AMOUNTS FOR TAXA TION U/S 41(1). THE OUTSTANDING CREDIT AMOUNT OF RS.25,32,827 AS ON 31. 3.2007 IS SUSTAINED TO BE BROUGHT TO TAXATION U/S.41(1) AS LIABILITY WHICH HAS CEASED TO HAVE EXISTED. 11. THE EXPLANATION FILED BY THE ASSESSEE IS EXAMIN ED. THIS ISSUE IS SIMILAR TO THE EARLIER ISSUE DISCUSSED IN PARA 9 AB OVE. CONSIDERING THE SAME, THE AMOUNT OF RS.31,75,900 IS SUSTAINED TO BE BROUG HT TO TAXATION U/S.41(1) OF THE IT ACT. 5 ITA NO.2201/CHNY/2017 5. BEFORE US THE LD.AR ARGUED VEHEMENTLY BY REITERA TING THE SUBMISSION MADE BEFORE THE LD.CIT(A) AND THE LD.DR ARGUED IN SUPPORT OF THE ORDER OF THE LD.CIT(A) AS WELL AS TH E LD.AO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE IT IS EVIDENT THAT THE ASSESSEE HAD NOT SUBSTANTIATED THE GENUINENESS OF I TS SUNDRY CREDITORS WITH ANY TANGENT MATERIALS. JUST BECAUSE THE TRIBUNAL IN THE EARLIER YEARS HAD HELD THE SAME SUNDRY CREDITOR S TO BE GENUINE, IT DOES NOT MEAN THAT THEY ARE GENUINE FOR THE RELE VANT ASSESSMENT YEAR ALSO. IN EVERY ASSESSMENT YEAR THE TRANSACTION S HAS TO BE ESTABLISHED TO BE GENUINE BY SUBSTANTIATING WITH CO GENT EVIDENCE. IN THE RELEVANT CASE BEFORE US THE ASSESSEE HAS NOT PR ODUCED ANY CONVINCING DOCUMENTS TO SUPPORT ITS CASE NEITHER BE FORE THE LD.AO NOR BEFORE THE LD.CIT(A). EVEN BEFORE US AT THIS ST AGE, THE ASSESSEE HAS NOT BROUGHT OUT ANY COGENT EVIDENCE TO ESTABLIS H THE GENUINENESS OF THE CREDITORS. THEREFORE IN THIS SIT UATION, WE DO NOT FIND ANY MERIT IN THE CASE OF THE ASSESSEE. HENCE W E DO NOT HAVE ANY OTHER OPTION BUT TO CONFIRM THE ORDERS OF THE L D.REVENUE AUTHORITIES. ACCORDINGLY WE HEREBY SUSTAIN THE ADDI TIONS MADE BY 6 ITA NO.2201/CHNY/2017 THE LD.REVENUE AUTHORITIES AMOUNTING TO RS.25,32,82 7/- & RS.31,75,900/- UNDER THE HEAD UNEXPLAINED CREDIT. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSE D. ORDER PRONOUNCED ON THE 13 TH AUGUST, 2018 AT CHENNAI. SD/- SD/- ( ! ' . #$ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # $% /JUDICIAL MEMBER $% / ACCOUNTANT MEMBER &# /CHENNAI, '$ /DATED 13 TH AUGUST, 2018 RSR $ )* +* /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. . ( )/CIT(A) 4. . /CIT 5. */0 1 /DR 6. 02 /GF