MS.Chennai Shopping Mail, Kurnool V. Income Tax Officer, Ward-1, Kurnool

ITA 2283/Hyd/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0772 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 03-07-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 06-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: VIRTUE OF RULE DD J R.W. CBDT CIRCULAR DATED
• Keywords: Unexplained cash credit
• Section: 40A(3); 143(3); 22

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.2283/HYD/2018 ASSESSMENT YEAR: 2015 - 16 M/S. CHENNAI SHOPPING MALL, KURNOOL. PAN: AAWFM 8028 N VS. INCOME TAX OFFICER, WARD - 1, KURNOOL. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI K.C. DEVDAS REVENUE BY: SRI NILANJAN DEY, DR DATE OF HEARING: 03/07/2019 DATE OF PRONOUNCEMENT: 21 /0 8 /2019 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), KURNOOL IN APPEAL NO.10124/CIT(A)/KNL/2017 - 18, DATED 31/10/2018 PASSED U/S. 143(3) & U/S. 250(6) OF THE ACT FOR THE ASSESSMENT YEAR 2015 - 16. 2. THE ASSESSEE HAS RAISED 5 GROUNDS IN ITS APPEAL HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LD. AO OF RS. 1,94,11,610/ - (SIC) RS. 1,93,65,810/ - TOWARDS SUNDRY CREDITORS SINCE THEIR GENUINENESS WAS NOT ESTABLISHED. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF RETAIL SALE OF TEXTILE / GARMENTS AND OTHER FABRICS FILED ITS E - RETURN ON 31/10/2015 FOR THE AY 2015 - 16 DECLARING TOTAL TAXABLE INCOME AT RS. 45,800/ - . THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 11/12/2017 WHEREIN THE LD. AO ADDED THE AMOUNT OF RS. 1,93,65,810 / - TOWARDS SUNDRY CREDITORS AS THEIR GENUINENESS WAS NOT ESTABLISHED. 4. THE REVENUE HAD ISSUED SEVERAL NOTICES AND SHOW CAUSE LETTERS TO THE ASSESSEE WITH RESPECT TO THE DATE OF HEARING FIXED MORE THAN 9 OCCASIONS CALLING FOR THE BOOKS OF ACCOUNTS, BANK STATEMENTS, LIST OF CREDITORS, COPIES OF INCOME TAX RETURNS FILED BY TH E PARTNER FIRM ETC. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY OF THE DETAILS CALLED FOR AND ALSO FAILED TO FURNISH THE PARTICULARS OF THE SUNDRY CREDITORS AMOUNTING TO RS. 1,93,65,810. IT WAS FURTHER OBSERVED BY THE LD. AO THAT THE SUNDRY CREDITORS DIS CLOSED BY THE ASSESSEE WAS ABNORMAL. THEREFORE, HE WAS OF THE VIEW THE SUNDRY CREDITORS DISCLOSED BY THE ASSESSEE IS NOT GENUINE. HENCE, THE LD. AO ADDED THE SUNDRY CREDITORS AMOUNTING TO RS. 1,93,65,810 AS UNEXPLAINED CREDITS IN THE HANDS OF THE ASSESSEE . 5. WHEN THE MATTER CAME UP BEFORE THE LD. CIT (A), THE LD. CIT (A) CALLED FOR REMAND REPORT FROM THE LD. AO. IN THE REMAND REPORT THE LD. AO OBSERVED THE FOLLOWING DISCREPANCIES AND FACTS: - 3 (I) THE ASSESSEE COULD NOT PRODUCE THE CONFIRMATION FROM THE RE SPECTIVE SUNDRY CREDITORS. (II) THE ASSESSEE HAS STATED THAT THE BUSINESS OF THE ASSESSEE HAS BEEN DISCONTINUED AND LEGAL CASES HAVE BEEN FILED BY THE CREDITORS AGAINST THE ASSESSEE. (III) THE ASSESSEE HAD MADE CASH PAYMENTS IN EXCESS OF RS. 20,000 TO VARIOUS SUNDRY CREDITORS DURING THE FY 2014 - 15 AGGREGATING TO RS. 65,96,245/ - . (IV) THE ASSESSEE HAD STATED THAT THE CASH PAYMENTS WERE MADE DUE TO THE BUSINESS EXIGENCY AND TO PROTECT THE REPUTAT ION OF THE ASSESSEE. (V) THERE IS AN OVERSTATEMENT OF CREDIT BALANCE BY RS. 1 LAKH WITH RESPECT TO SUNDRY CREDITOR M/S. SIRI SILKS. 6. THEREAFTER, THE LD. CIT (A) FORWARDED THE REMAND REPORT TO THE ASSESSEE AND CALLED FOR ITS EXPLANATION. THE SUBMISSION OF THE ASSESSEE IS BRIEFLY STATED HEREIN BELOW FOR REFERENCE: - (I) THE MANAGING PARTNER OF THE FIRM SRI SEKHAR BABU WAS SUFFERING FROM BLOOD CANCER DETECTED DURING THE YEAR 2015 AND WAS UNDERGOING TREATMENT AND HOSPITALIZED. (II) THE ASSESSEE HAS PRODUCED ITS FINANCIAL STATEMENTS AND AUDIT REPORTS. 4 (III) AS THE BUSINESS WAS DISCONTINUED AND THE MANAGING PARTNER OF THE FIRM WAS HOSPITALISED FURTHER DETAILS COULD NOT BE PRODUCED. (IV) IT WAS THEREFORE REQUESTED THAT BASED ON THE MATERIALS AVAILABLE ON RECORD T HE ASSESSMENT MAY BE COMPLETED. (V) ALL THE SUNDRY CREDITORS WERE PERTAINING TO THE PURCHASES AND THERE WERE CONTINUOUS TRANSACTION S OF REPAYMENT S . (VI) THE NATURE OF THE BUSINESS WAS SUCH THAT THE PURCHASES WERE PREDOMINANTLY BASED ON CREDITS AND THE REPAYMENT S W E RE MADE FROM THE SALE PROCEEDS. (VII) WHEN THE PURCHASES AND SALE ARE ACCEPTED BY THE REVENUE THE CREDITORS CANNOT BE SIMPLY TREATED AS NOT GENUINE. (VIII) SINCE PAYMENTS WERE OVER DUE TO THE CREDITORS FOR PROLONGED PERIOD, THEY HAD DECLINED TO COOPERATE BY FURNISHING CONFIRMATION STATEMENTS IN ORDER TO PUT PRESSURE TO RECOVER THEIR DUES . (IX) OUT OF 225 CREDITORS ONLY FOR 22 CREDITORS CASH PAYMENTS WERE MADE OUT OF COMPULSION AND FOR THE OTHERS PAYMENTS WERE MADE THROUGH ELECTRONIC MODE OR BY CHEQUE. THEREFORE, PROVISIONS OF SECTION 40A(3) OF THE ACT MAY NOT APPLY TO THE ASSESSEE BY VIRTUE OF RULE 6DD(J) R.W. CBDT CIRCULAR DATED 31/5/1977. 7. HOWEVER T HE LD. CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY RELYING ON VAR IOUS DECISIONS OF THE HIGHER JUDICIARY 5 ARRIVED AT A CONCLUSION THAT THE ORDER OF THE LD. AO NEED NOT BE INTERFERED BECAUSE THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE SUNDRY CREDITORS. 8. BEFORE US, THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE L D. REVENUE AUTHORITIES AND FURTHER ARGUED BY STATING THAT DUE TO THE SERIOUS ILLNESS OF THE ASSESSEE THE BUSINESS HAS PRACTICALLY COME TO AN END AND SINCE THE SUNDRY CREDITORS WERE YET TO BE PAID THE ASSESSEE WAS FINDING IT DIFFICULT TO OBTAIN THE CONFIRMATION STATEMENT S FROM THEM . THE LD. A.R FURTHER SUBMITTED THAT, FROM THE BANK STATEMENT OF THE ASSESSEE IT IS EVIDENT THAT THERE WERE TRANSACTIONS BETWEEN THE ASSESSEE AND MOST OF THE SUNDRY CREDITORS. HENCE IT WAS PLEADED THAT THE SUNDRY CRE DITORS MAY BE TREATED AS GENUINE. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE LD. REVENUE AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. CONSIDERING THE NATURE OF THE BUSINESS OF THE ASSESSEE , BEING TRADING IN TEXTILES / GARMENTS ETC., IT IS OBVIOUS THAT LARGELY THE BUSINESS CONSTITUTES CREDIT PURCHASE AND PAYMENTS ARE MADE TO THE CREDITORS FROM THE SALE PROCEEDS. IN THESE CIRCUMSTANCES OVER A PERIOD OF TIME AS PER THE GROWTH IN TURNO VER THE SUNDRY CREDITORS OF THE ASSESSEE WILL SWELL. IN THE CASE OF THE ASSESSEE THE NATURE OF THE BUSINESS CONDUCTED BY THE ASSESSEE IS NOT D ISPUTED . FURTHER, IT IS 6 OBVIOUS THAT WHEN THE ASSESSEE HAS F AILED TO REPAY THE SUNDRY CREDITORS WITHIN THE STIPUL ATED TIME THE RELATIONSHIP BETWEEN THEM MAY NOT BE PLEASANT. IN THIS SITUATION, THE SUNDRY CREDITORS MAY NOT COOPERATE WITH THE ASSESSEE IN ORDER TO PUT PRESSURE ON THE ASSESSEE FOR RECOVERING THEIR DUES . IN THE CASE OF THE ASSESSEE IT IS ALSO A FACT THA T DUE TO THE SERIOUS ILLNESS OF THE MANAGING DIRECTOR , THE BUSINESS OF THE ASSESSEE HAS VIRTUALLY COME TO A STANDSTILL AND HAS BECOME UNORGANISED AND SHATTERED. IN THIS SITUATION, IT WILL NOT BE APPROPRIATE ON THE PART OF THE REVENUE TO TREAT THE ENTIRE S UNDRY CREDITORS AS NOT GENUINE AS IT WOULD BE TOO HARSH ON THE ASSESSEE AND LEAD TO INJUSTICE . CONSIDERING THE FACTS AND PECULIAR CIRCUMSTANCES OF THE CASE IT IS TO BE APPRECIATED THAT THE ASSESSEE IS UNABLE TO PRODUCE THE REQUISITE DOCUMENTS CALLED FOR , S UCH AS CONFIRMATION STATEMENTS FROM THE SUNDRY CREDITORS . HOWEVER , IT IS NEEDLESS TO MENTION THAT T HE LD. REVENUE AUTHORITIES ARE AT LIBERTY TO EXAMINE THE SUNDRY CREDITORS AND THEIR RELEVANT STATE OF AFFAIRS AND THEREAFTER COME TO A CONCL USION WHETHER THE Y ARE GENUINE OR NOT GENUINE. MOREOVER, I T IS NOT A CASE WHERE THE NAMES AND ADDRESSES OF THE SUNDRY CREDITORS ARE NOT AVAILABLE. CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE INTEREST OF JUSTICE , WE HEREBY REMIT THE MATTER BACK TO THE FILE OF THE LD.AO FOR FRESH CONSIDERATION AND TO PASS APPROPRIATE ORDER IN ACCORDANCE WITH MERIT AND LAW KEEPING IN VIEW OF OUR O BSERVATIONS MADE HEREINABOVE. THE ASSESSEE AND ITS REPRESENTATIVES ARE ALSO DIRECTED TO COOPERATE WITH THE LD. REVENUE 7 AUTHORITIES PROMPTLY IN ORDER TO EXPEDITE THEIR ORDERS FAILING WHICH THE LD. REVENUE AUTHORITIES SHALL BE AT LIBERTY TO PASS APPROPRIATE ORDER IN ACCORDANCE WITH MERIT AND LAW BASED ON THE MATERIALS BEFORE THEM. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AS INDICATED HEREINABOVE. PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST , 2019. SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 21 ST AUGUST , 2019 OKK COPY TO: - 1) MS. CHENNAI SHOPPING MALL, 40 - 321 - 18, UPSTAIRS, SHOP NO. 1 TO 5, ABDULLAH KHAN ESTATE, KURNOOL. 2) INCOME TAX OFFICER, WARD - 1, KURNOOL. 3) THE CIT(A) , KURNOOL. 4) THE PR. CIT , KURNOOL. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE