Shree Ganesh Ventures, CHENNAI V. DCIT, CHENNAI

ITA 2344/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8381 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Unexplained cash credit; Principle of natural justice
• Section: 40A(3); 143(3); 234B; 133(6); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! ' . # , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.2344/MDS/2015 ( / ASSESSMENT YEAR: 2007-08) M/S. SHREE GANESH VENTURES, 14A, ENNORE HIGH ROAD, CHENNAI-600 019. VS THE DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-6, CHENNAI. PAN:AAOFS0487K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR.ANITA SUMANTH, ADVOCATE /RESPONDENT BY : MR. A.V.SREEKANTH,JCIT /DATE OF HEARING : 16 TH SEPTEMBER, 2016 /DATE OF PRONOUNCEMENT : 29 TH SEPTEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM :- THIS APPEAL FILED BY THE ASSESSEE WAS EARLIER DISPO SED OFF BY THE ORDER OF THE TRIBUNAL DATED 16.03.2016 WHICH WAS SUBSEQUENTLY RECALLED VIDE ORDER DATED 22.07.2016 BECAUSE CERTAIN DOCUMENTS FURNISHED BY THE ASSESSEE WAS LOS T SIGHT OFF AND NOT EXAMINED BY THE BENCH ON THE EARLIER OC CASION. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE TRADING OF STEEL PR ODUCTS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-0 8 ON 15.11.2007 ADMITTING INCOME OF RS.30,07,110/-. 2 ITA NO.2344 /MDS/2015 SUBSEQUENTLY THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT, WHEREIN THE LEARNED ASSESSING OFFICER MADE ADDITION S OF RS.4,98,76,465/- TOWARDS UNEXPLAINED CASH CREDIT S TANDING IN THE NAME OF I) SHREE GANESH STEELS RS.2,79,06,60 3/- II) M/S. D.G.TRADERS RS.2,19,69,862/- AND RS.17, 20,00 0/- DUE TO DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. 3. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL, HOWEVER, THEY ARE CONCISED BELOW FOR ADJUDICATION:- I) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN UPHOLDING THE ADDITION OF RS.2,19,69, 862/- BEING CREDITS IN THE NAME OF M/S. D.G. TRADERS AS UNDISCLOSED INCOME OF THE ASSESSEE. II) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN UPHOLDING THE ADDITION OF RS.2,79,06, 603/- BEING CREDITS IN THE NAME OF M/S. SREE GANESH STEEL S AS UNDISCLOSED INCOME OF THE ASSESSEE. III) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.17,20,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) OF THE ACT. IV) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN UPHOLDING THE LEVY OF INTEREST MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 234B & 234C OF THE ACT. 3 ITA NO.2344 /MDS/2015 GROUND NOS 1 & 2 (UNEXPLAINED CASH CREDIT):- ADDITIONS OF RS.2,79,06,603/- & RS.2,19,69,862/- B EING CREDITS IN THE NAMES OF M/S SREE GANESH STEELS & M /S. D.G. TRADERS RESPECTIVELY AS UNDISCLOSED INCOME OF THE ASSESSEE: 4. THE LEARNED ASSESSING OFFICER HAD MADE ADDITION OF RS.4,98,76,465/- INVOKING SECTION 68 OF THE ACT BEC AUSE THE IDENTITY AND GENUINESS OF THE SUNDRY CREDITORS M/S SREE GANESH STEELS FOR RS.2,79,06,603/- & M/S. D.G. TR ADERS FOR RS.2,19,69,862/- WAS NOT ESTABLISHED BECAUSE OF THE FOLLOWING REASONS:- I) THE LEARNED ASSESSING OFFICER HAD DEPUTED HIS INSPECTOR TO SERVE NOTICE UNDER SECTION 133(6) OF T HE ACT TO M/S. D.G.TRADERS IN THE ADDRESS PROVIDED BY THE ASSESSEE. HOWEVER, THE INSPECTOR COULD NOT LOCATE T HE CONCERN M/S. D.G.TRADERS. ON ENQUIRY IN THE LOCALI TY, IT WAS REVEALED THAT NO SUCH CONCERN OPERATED IN THAT AREA. II) WHEN THE SAME WAS INFORMED TO THE ASSESSEE FIRMS PARTNER MR. M.R.GOYENKA THOUGH HE REQUESTED 4 ITA NO.2344 /MDS/2015 FOR TIME FOR PRODUCING THE SUNDRY CREDITORS, HE WAS NOT ABLE TO DO SO. III) WITH RESPECT TO THE LETTER SENT TO M/S. SREE GANESH STEELS, IT WAS REPLIED BY THEM THAT THEY DID NOT HA VE ANY DEALINGS OR TRANSACTION WITH THE ASSESSEE FIRM. IV) ON EXAMINING THE PAYMENT MADE TO M/S. SREE GANESH STEELS FROM THE CURRENT ACCOUNT MAINTAINED B Y THE ASSESSEE IN ITS BANK A/C., IT WAS REVEALED THAT THE AMOUNT WAS PAID TO VARIOUS INDIVIDUALS OTHER THAN M /S SREE GANESH STEELS. V) THE ASSESSEES CONTENTION WITH RESPECT TO M/S. D G TRADERS WAS THAT THE ENQUIRIES WERE MADE THREE YEAR S AFTER THE TRANSACTION AND THE ASSESSEE HAD RELIED O N THE ADDRESS GIVEN BY THE PARTIES AT THE TIME OF THE TRANSACTION WHICH WAS NOT ACCEPTABLE TO THE LD.A.O. VI) THE ASSESSEES CONTENTION THAT PURCHASES WERE MADE THROUGH MEDIATORS AND THEREFORE THE ASSESSEE DID NOT HAVE DIRECT ACCESSIBILITY TO ITS CREDITORS WAS ALSO NOT ACCEPTABLE TO THE LD.A.O. VII) THE GOODS WERE PURCHASED FROM THE SUNDRY CREDITORS WHO ARE SCRAP DEALERS IN THE UNORGANIZED 5 ITA NO.2344 /MDS/2015 SECTOR OF BUSINESS CAN ALSO BE NOT TREATED AS VALID REASON FOR NOT PROVING THE IDENTITY OF THE SUNDRY CREDITORS. VIII) ENQUIRIES FROM THE PARTNERS OF THE FIRM AND S TAFF ALSO REVEALED THAT TRANSACTIONS WERE NOT GENUINE. 5. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) UPHELD THE ORDER OF THE LEARNED ASSESSING OFFICER AGREEING WITH HIS FINDINGS. 6. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE MADE THE FOLLOWING SUBMISSIONS:- I) BOTH THE ADDITIONS WERE MADE BASED ON ENQUIRIES BEHIND THE BACK OF THE APPELLANT; THEREFORE IT IS I N VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. II) THE ENQUIRIES MADE BY THE INSPECTOR WERE NOT P UT BEFORE THE ASSESSEE FOR REBUTTAL. III) THE ADDITIONS ARE MADE FOR NOT PROVING THE SUN DRY CREDITORS AT THE SAME TIME THE PURCHASES MADE BY TH E ASSESSEE IS NOT IN DISPUTE. 6 ITA NO.2344 /MDS/2015 IV) THE ASSESSEE HAS FURNISHED THE DETAILS OF ITS QUANTITATIVE PURCHASE, SALES AND STOCK TALLY BEFORE THE REVENUE. V) THE ASSESSEE HAS DISCHARGED ITS PRIMA FACIE BURD EN FOR PROVING THE GENUINENESS OF THE PURCHASE. SINCE THERE WAS A TIME LAG FOR MAKING ENQUIRIES AND THE PURCHASES RELATED TO SCRAP WHICH IS IN THE BUSINESS FALLING IN UNORGANIZED SECTOR, IT WAS DIFFICULT TO LOCATE THE SUNDRY CREDITORS. VI) THE PURCHASES MADE BY THE ASSESSEE WERE ALSO NO T DOUBTED BY THE CENTRAL EXCISE AUTHORITIES. VII) THE SALES TAX REGISTRATION AND CST REGISTRATIO N OF THE SUNDRY CREDITORS WERE FURNISHED TO THE REVENUE WHICH PROVED THAT THE IDENTITY OF THE SUNDRY CREDIT ORS. FURTHER THE LEARNED AUTHORIZED REPRESENTATIVE SUBMI TTED A PAPER BOOK CONTAINING 1 TO 60 PAGES WHICH WERE TRUE COPIES OF THE ORIGINALS WHICH FORM PART OF THE RECORDS PRO DUCED BEFORE THE REVENUE SUCH AS I) DETAILS OF SALES TAX (VAT, CST REGISTRATION NUMBERS OF M/S. DG TRADERS AND SREE GA NESH STEELS, STATEMENT OF PURCHASES MADE FROM M/S.DG TRA DERS 7 ITA NO.2344 /MDS/2015 AND SREE GANESH STEELS, INVOICES FOR THE ENTIRE PER IOD OF PURCHASE FROM BOTH THE PARTIES AND THE REQUISITE DE TAILS SUBMITTED BEFORE SALES TAX AUTHORITIES ETC. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND REITERATED THE FINDINGS MADE BY THE LEARNED AS SESSING OFFICER AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THEIR RESPECTIVE ORDERS AND ARGUED IN SUPPORT OF THE SAME. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. AS POINT ED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE THE ASSESSEE HAS PROVIDED TNGST NUMBERS OF THE SUNDRY CREDITORS AND CERTAIN OTHER DETAILS TO PROVE THEIR IDENTITY AND GENUINENE SS OF THE TRANSACTION. AT THE SAME TIME, THE DEPARTMENT HAS A GENUINE REASON FOR NOT ACCEPTING THE SAME BECAUSE THEY WERE NOT ABLE TO LOCATE THE SUNDRY CREDITORS, THE INVOICES S UBMITTED BY THE ASSESSEE FROM BOTH THE PARTIES APPEARS TO HAVE BEEN MADE BY THE SAME PERSON ETC. HOWEVER, FROM THE FACT S OF THE CASE, IT IS NOT DISPUTED THAT THE SUNDRY CREDITORS PERTAIN TO 8 ITA NO.2344 /MDS/2015 PURCHASES OF SCRAP. NORMALLY, THE TRADING OF SCRAP TAKES PLACE IN THE UNORGANIZED BUSINESS SECTOR AND UNREGU LATED MARKET FROM WHERE THE ASSESSEE HAS TO DEPEND ON PRO CURING ITS RAW MATERIALS. GENERALLY THE MARGIN OF PROFIT IN THE NATURE OF BUSINESS OF THE ASSESSEE IS MINIMAL AS LESS AS O NE PER CENT OR EVEN LESSER. THERE IS ALSO NO FINDING BY T HE REVENUE THAT THE ASSESSEE HAD NOT PURCHASED SCRAP BUT THE O NLY DOUBT WAS WITH RESPECT TO THE GENUINESS OF TWO SUND RY CREDITORS WHO HAD SUPPLIED RAW MATERIALS TO THE ASS ESSEE. FURTHER THE ASSESSEE HAS SUBMITTED THE FOLLOWING MATERIALS TO SHOW THAT THE SUNDRY CREDITORS WERE GENUINE:- I) ORDER OF THE ASSISTANT COMMISSIONER OF SALES TAX DATED 12.9.2016 AND NOTICE OF DEMAND FROM ACST DATED 12.9 .2016 TO SHOW THE GENUINENESS OF THE LOCAL PURCHASES OF I RON & STEEL (AT PAGE NO.196 & 198 OF THE PAPER BOOK) II) DETAILS OF TIN NUMBER, CST NUMBER AND PAN OF M/ S. DG TRADERS AND M/S.SREE GANESH STEELS (AT PAGE 199 OF THE PAPER BOOK). III) DETAILS OF TIN, CST NO. DOWNLOADED FROM THE RE LEVANT GOVT. WEBSITE WHICH SHOWS THAT BOTH M/S. DG TRADERS AND 9 ITA NO.2344 /MDS/2015 M/S. SREE GANESH STEELS WERE ACTIVE DEALERS UNDER THE CST ACT (PAGE NO.200 TO 203 OF THE PAPER BOOK) IV) PAN NO. OF M/S.SREE GANESH STEELS AND M/S. DG T RADERS (SURESH SINGH SOLANKI) (DOWNLOADED FROM THE GOVT. W EBSITE) 9. FROM THESE DOCUMENTS WHICH IS PART OF THE RECORD AND NOT BEFORE THE TRIBUNAL AT THE TIME OF EARLIER HEAR ING PROVES THE FACT THAT THE IDENTITY OF THESE SUNDRY CREDITOR S ARE GENUINE. SINCE THE ABOVE REFERRED DOCUMENTS WERE LO ST SIGHT OFF BY THE TRIBUNAL ON THE EARLIER OCCASION, MISTAK E HAD CREPT INTO THE ORDER OF THE TRIBUNAL WHICH IS APPARENT ON RECORD BECAUSE OF NON-CONSIDERATION OF CERTAIN FACTS. FURT HER, IT IS ALSO EVIDENT THAT THE ASSESSEE HAD PAID BY CHEQUE T O THE SUNDRY CREDITORS, MAY BE NOT DIRECTLY BY INDIRECTLY WHICH IS NOT PROHIBITED BY THE ACT. FURTHER THERE IS ALSO NO OTH ER FINDING BY THE REVENUE ON THESE ASPECTS. THUS, WHEN THE IDENTI TY OF THE SUNDRY CREDITORS IS PROVED AND WHEN THE QUANTITY OF PURCHASE OF RAW MATERIALS IS NOT IN DISPUTE, THEN THE TRANSA CTION CANNOT BE TREATED AS BOGUS. THEREFORE, WE ARE OF THE CONSI DERED VIEW THAT THE LEARNED ASSESSING OFFICER IS NOT JUST IFIED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT WI TH REGARD TO 10 ITA NO.2344 /MDS/2015 BOTH THESE SUNDRY CREDITORS. HENCE, WE HEREBY DIREC T THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION MA DE BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT WI TH REGARD TO BOTH THESE SUNDRY CREDITORS. THUS, THE ISSUE IS DEC IDED IN FAVOUR OF THE ASSESSEE. 10. WITH RESPECT TO THE OTHER GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH OUR EARLIER ORDERS BECAUSE THERE IS NO MISTAKE APPARENT ON RECORD WITH RESPECT TO THOSE ISSUES. T HEREFORE, THE SAME ORDER IS REPEATED ONCE AGAIN. GROUND NO.3: DISALLOWANCE OF RS.17,20,000/- UNDER SECTION 40A(3) OF THE ACT: 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAS PAID CASH TO VARIOUS INDIVIDUALS. IT WAS EXPLAINED BY THE ASSESSEE THAT IT HAD PAID CASH THROUGH ITS EMPLOYEES TO M/S. SREE GANESH STEELS AGAINST PURCHASES. HOWEVER, ON VERIFICATION, IT WAS PROVED THAT THEY DID NOT HAVE ANY TRANSACTION WITH THE ASSESSEE. FURTHER FROM THE STATEMENT OF MR.ABDUL REHMAN, IT WAS EVIDENT THAT THE ASSESSEE HAS PAID THE AFORESAID AMOUNT TOWARDS PURCHASES WITHOUT DISCLOSING THE NAMES OF THE PARTY FROM WHOM THE PURCHASE WERE MADE. SINCE THE AGGREGATE OF SUCH AMOUNT PAID WAS RS . 86/- LAKHS, THE LEARNED ASSESSING OFFICER DISALLOWED 20% OF THE SAME BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. ON APPEAL, THE LEARNED 11 ITA NO.2344 /MDS/2015 COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESSING OFFICER BECAUSE BEFORE HIM ALSO NO MATERIAL WITH COGENT EVIDENCE WAS FURNISHED TO SUPPORT THE CLAIM THAT CASH PURCHASES WERE LESS THAN THE STATUTORY LIMIT. ON THIS ISSUE ALSO NO MATERIALS WERE FURNISHED BEFORE US TO ESTABLISH THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT CANNOT BE INVOKED IN THE CASE OF THE ASSESSEE. THEREFORE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDERS OF THE REVENUE ON THIS ISSUE. GROUND NO.4: LEVY OF INTEREST UNDER SECTION 234B & 234C: 6. LEVY OF INTEREST UNDER SECTION 234B & 234C OF THE ACT WAS IMPOSED ON THE ASSESSEE BY THE REVENUE, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE US. HOWEVER BY THE DECISION OF THE VARIOUS HIGHER JUDICIARIES IT IS SETTLED THAT L EVY OF INTEREST UNDER SECTION 234B & 234C IS CONSEQUENTIAL IN NATURE AND THEREFORE THIS GROUND IS DISMISSED AS SUCH. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 29 TH SEPTEMBER. 2016 SD/- SD/- ( ! ' . # ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 29 TH SEPTEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /