Kushalraj, CHENNAI V. ITO, CHENNAI

ITA 2610/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4305 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-04-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 07-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: T BANUSEKARC A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS. 2609 & 2610/MDS/2016 / ASSESSMENT YEARS : 2011-12 & 2012-13 SHRI KUSHALRAJ, NO.418, 5 TH FLOOR, MINT STREET, SOWCARPET, CHENNAI 600 079. PAN: AIXPK0721B V. THE INCOME TAX OFFICER, CORPORATE WARD 5(1), CHENNAI 600 006. ( ! /APPELLANT) ( '# ! /RESPONDENT) ! $ /APPELLANT BY : SHRI T. BANUSEKAR,CA '# ! $ /RESPONDENT BY : DR.B. NISCHAL, JCIT $ /DATE OF HEARING : 25.04.2017 $ /DATE OF PRONOUNCEMENT : 05.06.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THESE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST T HE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENN AI DATED 29.07.2016 AND PERTAINS TO THE ASSESSMENT YEARS 201 1-12 & 2012- 13. 2. SHRI T. BANUSEKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THERE WAS A CREDIT OF RS.25 LAKHS AN D RS.45 LAKHS FOR 2 I.T.A. NO. 2609 & 2610/MDS/2016 THE ASSESSMENT YEAR 2011-12 AND 2012-13 RESPECTIVEL Y FROM M/S. MANISH TRADERS AND INTEREST OF RS.1,95,765/- FOR TH E ASSESSMENT YEAR 2011-12 AS CLAIMED BY THE ASSESSEE. THE ASSESSEE EX PLAINED BEFORE THE AO THAT A SUM OF RS.25 LAKHS WAS RECEIVED AS TR ADE ADVANCE THROUGH CHEQUE. THE ASSESSEE SUBSEQUENTLY REFUNDED THE TRADE ADVANCE. IN THE BOOKS OF ACCOUNT, IT WAS SHOWN AS LOAN RECEIVED FROM M/S. MANISH TRADERS. THEREFORE, IT WAS EXPLAIN ED BEFORE THE AO THAT WHAT WAS RECEIVED BY THE ASSESSEE IS NOT A LOA N BUT TRADE ADVANCE. IN FACT M/S. MANISHTRADERS PLACED ORDERS TO THE EXTENT OF RS.74,03,032/- AT THE TIME OF MAKING ADVANCE OF RS. 25 LAKHS. SINCE THE RATES WERE INCREASED THE ORDER WAS CANCELLED. THE AO HOWEVER REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND TH AT THE TRANSACTION WAS SHAM AND BOGUS. THEREFORE THE AO MADE ADDITION OF RS.26,95,765/-. ON APPEAL BY THE ASSESSEE, THE CIT (APPEALS) CONFIRMED THE ADDITION MADE BY THE AO WITHOUT RE-AP PRECIATING THE MATERIAL AVAILABLE ON RECORD. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE RECEIVED TRADE ADVANCE ON RECEIVING ORDER FOR RS.74,03,032/- AND THE TRANSACTION COULD NOT BE CAR RIED OUT, THE ADVANCE REFUNDED TO M/S. MANISH TRADERS, THEREFORE NO ADDITION IS CALLED FOR. 3 I.T.A. NO. 2609 & 2610/MDS/2016 3. ON THE CONTRARY, DR. B. NISCHAL, THE LD. DEPARTM ENTAL REPRESENTATIVE SUBMITTED THAT SO CALLED PURCHASE OR DER TO THE EXTENT OF RS.74,03,032/- IS NOT PRODUCED BEFORE THE AO. TH E BOOKS OF ACCOUNT OF M/S. MANISH TRADERS DISCLOSES THE ADVANCE . THE NOTICE ISSUED TO M/S. MANISH TRADERS WAS RETURNED BY THE P OSTAL AUTHORITIES UNSERVED. HOWEVER THERE WAS BANK TRANSFER BY THE ASSESSEE TO M/S. MANISH TRADERS. THE ASSESSEE HAS ALSO ISSUED A CHEQ UE FOR RS.35 LAKHS ON 21.03.2012. THOUGH THE ASSESSEE CLAIMED TH AT THE CHEQUE WAS ISSUED IN THE NAME OF M/S. NEHRU MARKETING, THE AXIS BANK CONFIRMED THAT THE CHEQUE WAS ISSUED IN THE NAME OF M/S. MANISH TRADERS. THEREFORE ADDITION WAS RIGHTLY CONFIRMED BY THE CIT(APPEALS). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSES SING OFFICER MADE ADDITION OF RS.26,95,765/- U/S.68 OF THE INCO ME TAX ACT, 1961 (IN SHORT THE ACT). THE AO FOUND THAT THE TRANSAC TIONS ARE SHAM. THE FACT REMAINS THAT THERE WAS BANK TRANSACTIONS BE TWEEN THE ASSESSEE AND M/S. MANISH TRADERS. THE ASSESSEE CLA IMS THAT WHAT WAS RECEIVED BY THE ASSESSEE IS A TRADE ADVANCE AND NOT A LOAN. THEREFORE IT CANNOT BE TREATED AS INCOME OF THE ASSE SSEE. THE ASSESSEE ALSO CLAIMS THAT THE TRADE ADVANCE OF RS.2 5 LAKHS WAS 4 I.T.A. NO. 2609 & 2610/MDS/2016 RETURNED TO M/S. MANISH TRADERS. THE ASSESSEE HAS AL SO RAISED A GROUND WITH REGARD TO REOPENING OF THE ASSESSMENT. THE FACT REMAINS IS THAT THE ADDITION OF RS.25 LAKHS IS MADE ON THE CREDIT FUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ANOTHER SUM OF RS.1,95,765/- WAS MADE TOWARDS INTEREST AND THE TOTAL ADDITION OF RS.26,95,765/-. THE ASSESSEE APPEARS TO HAVE CLAIMED BEFORE THE AO T HAT M/S. MANISH TRADERS COULD NOT PAY THE BALANCE AMOUNT IN TIME, THEREFORE THE PRICES GONE UP. SINCE THE PRICE WERE GONE UP, THE TRANSACTION COULD NOT BE COMPLETED, HENCE, THE RETURNED THE TRA DE ADVANCE WITH INTEREST. THE AO OBSERVED IN THE ASSESSMENT ORDER THAT AS PER AGREEMENT THE ASSESSEE WAS ENTITLED TO FORFEIT A PO RTION OF TRADE ADVANCE. FROM THE ORDER OF THE CIT(APPEALS) FOR THE ASSESSMENT YEAR 2010-11, COPY OF WHICH IS PRODUCED BY THE LD. REPRESENTATIVE FOR THE ASSESSEE, IT APPEARS THAT THE ADVANCE OF RS.25 LAKHS WAS ADDED BY THE AO. THE CIT(APPEALS) HOWEVER DELETED THE SAME. THE CIT(APPEALS) FOR THE ASSESSMENT YEAR 2010-11 HAS OBS ERVED AS FOLLOWS: 4.2 THE AO ADDED RS.26,00,000/- STANDING IN THE NA ME OF M/S. MANISH TRADERS IN THE PERSONAL BOOKS OF THE AS SESSEE AS A LETTER WRITTEN TO 'M/S.MANISH TRADERS RETURNED UNSE RVED. WHEN THE ASSESSEE WAS QUESTIONED ON THIS SUBJECT, THE AS SESSEE STATED THAT THE NATURE OF TRANSACTION WITH M/S. MANISH TRA DERS WAS TRADE AND NOT THAT OF LOAN. IT WAS ALSO STATED THAT M/S. MANISH TRADERS PLACED AN ORDER WITH THE ASSESSEE FOR PURCH ASE OF TOYS. SINCE THE DETAIL DID NOT MATERIALIZE, THE ASSESSEE REPAID THE 5 I.T.A. NO. 2609 & 2610/MDS/2016 AMOUNT WITH INTEREST IN THE NEXT FINANCIAL YEAR. TH E ASSESSEE ALSO SUBMITTED PHOTOCOPY OF THE PAN CARD, FORM NO.1 5G AND TNVAT REGISTRATION CERTIFICATE FROM M/S. MANISH TRA DERS TO THE AO. 4.3 PERUSAL OF THE IOB A/C, SOWCARPET BRANCH STANDI NG IN THE PERSONAL NAME OF THE ASSESSEE REVEALS THAT THE FOLL OWING AMOUNTS WERE REPAID TO M/S. MANISH TRADERS. 03.04.2010 RS. 2,50,025/- 09.04.2010 RS.14,00,050/- 06.10.2010 RS.11,08,480/- ------------------- TOTAL RS.27,58,555/- -------------------- IT IS ALSO SEEN THAT M/S. MANISH TRADERS ISSUED A P URCHASE ORDER TO THE ASSESSEE IN WHICH HE ASKED FOR VARIOUS ITEMS FOR A SUM OF RS.74,03,032/-. THE DEAL DID NOT MATERIALIZE INTO A SALE TRANSACTION.I T IS ALSO SEEN THAT M/S. MANISH TRADE RS ISSUED A CHEQUE DATED 29.09.2009) TO THE ASSESSEE DRAWN BY M /S. MAHALAKSHMI TRADING COMPANY IN FAVOUR OF THE ASSESS EE FOR RS.23,00,000/-. A FURTHER SUM OF RS.1,00,000 /- WAS ALSO RECEIVED BY THE ASSESSEE BY CHEQUE DATED 12.01.2010 DRAWN IN FAVOUR OF M/S. MAHALAKSHMI TRADING COMPANY. BOTH WERE REFLECT ED IN THE BANK ACCOUNT OF THE ASSESSEE. PERUSAL OF THE AXIS B ANK A/C IN THE NAME OF KUSHALRAJ REVEALS THAT RS.23,00,000/- WAS C REDITED ON 29.09.2009 BY THE NAME OF M/S. MAHAJAKSHMI TRADING COMPANY. SIMILARLY ON 12.01.2010, RS.1,00,000/- WAS CREDITED IN THE ASSESSEE'S A/C BY THE NAME OF M/S.MAHALAKSHMI TRADI NG CO. THE A.O. ALSO OBSERVED THAT RS.2,00,000/- WAS RECEIVED FROM M/S. JAIN GRANITES BUT NOT ON BEHALF OF M/S. MANISH TRAD ERS. FROM THE ABOVE, IT IS SEEN THAT THE SUM OF RS.26,00,000/ - WAS RECEIVED BY THE ASSESSEE AND WERE CREDITED INTO ASSESSEE'S B ANK A/C. THE AO DID NOT PROVE THAT THERE IS NO ENTITY EXISTING I N THE NAME OF M/S. MAHALAKSHMI TRADING COMPANY WHEREAS THE ASSESS EE FROM 6 I.T.A. NO. 2609 & 2610/MDS/2016 THE VERY BEGINNING INFORMED THE AO THAT THE CHEQUES ISSUED TO THE ASSESSEE ARE IN THE NAME OF MAHALAKSHMI TRADING COMPANY. THE AO ALSO DID NOT DENY THE RECEIPT OF RS.2,00,000 /- FROM M/S. JAIN GRANITES. THE ASSESSEE IN HIS LETTER TO THE AO ALSO INFORMED THAT THE MONEY WAS RECEIVED FROM PARTIES ON BEHALF OF M/S. MAHALAKSHMI TRADING COMPANY. IT WAS ALSO INFORMED T O THE AO THAT THE MONEY WAS RETURNED TO M/S. MANISH TRADERS IN THE SUBSEQUENT YEAR WITH INTEREST. THE AO WAS ALSO PROV IDED WITH THE PAN, TNVAT, FORM 15G, ETC. PERUSAL OF IOB A/C OF TH E ASSESSEE ALSO REVEALS THAT THE SUMS WERE REPAID BACK TO M/S. MANISH TRADERS. IN VIEW OF THE ABOVE DECISION, I AM OF THE CONSIDER ED VIEW THAT THE AO DID NOT PROVE THAT THE SUM OF RS.26 LAKHS WA S ASSESSEE'S OWN MONEY AND THERE IS NO CONCERN IN THE NAME OF M/ S. MAHALAKSHMI TRADING COMPANY. IT WAS ALSO NOT PROVED THAT THE CHEQUES DEPOSITED IN AXIS BANK A/C ARE NOT THAT OF M/S. MAHALAKSHMI TRADING CO. AND M/S. JAIN GRANITES. THE REPAYMENT WERE ALSO NOT DISPROVED BY THE AO. THE AO IS THEREFORE DIRECTED TO DELETE THE ADDITIONS MADE IN THIS REGARD. SINCE THE BUSINESS TRANSACTION DID NOT TAKE PLACE, THE ASSESSEE PAID A SUM OF RS1,10,273/- BEING INTEREST ON THE SA ID AMOUNT OF RS.26,00,000/-. BY MUTUAL AGREEMENT AND TO COMPENSA TE THE LOSS, THE ASSESSEE PAID THE INTEREST AND HENCE IT IS AN A LLOWABLE EXPENDITURE DUE TO BUSINESS EXIGENCIES. THE AO'S OR DER IS SILENT ON THE RECEIPT AND PAYMENT OF MONEY THROUGH BANKING CHANNEL. THE INVESTIGATION WAS NOT TAKEN TO THE LOGICAL END BY THE AO. SINCE THE RECEIPT AND PAYMENT THROUGH BANKING CHANN EL ARE PROVED BY THE ASSESSEE, IT CANNOT BE HELD AS UNEXPL AINED CASH CREDITS. IN VIEW OF THE ABOVE ORDER OF THE CIT(APPEALS) FOR THE ASSESSMENT YEAR 2010-11, WHICH ATTAINED FINALITY, T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT AO CANNOT SAY THAT THE TRANSACTION WAS 7 I.T.A. NO. 2609 & 2610/MDS/2016 SHAM OR BOGUS. THE CIT(APPEALS) SPECIFICALLY FOUND THAT ADVANCE WAS RETURNED BACK TO M/S. MANISH TRADERS. IN VIEW O F THE ABOVE, THE ADDITION MADE BY AO IS NOT SUSTAINABLE. ACCORDINGL Y, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE AD DITION MADE BY THE AO IS DELETED. 5. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED. ORDER PRONOUNCED ON 5 TH JUNE, 2017 AT CHENNAI. SD/- SD/- ( . . ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESA N) /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, /DATED, THE 5 TH JUNE, 2017. JR. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. !' /DR 6. #$ /GF