DCIT, CENTRAL CIRCLE-3(1), CHENNAI V. M/S GSNR RICE INDUSTRIES PRIVATE LIMITED, CHENNAI

ITA 284/CHNY/2023

AI Insights

The case involves an appeal by the Revenue against the decision of the CIT(A) which had deleted the additions made by the Assessing Officer (AO) under sections 68 and 69 of the Income Tax Act for the Assessment Year 2016-17. The additions were initially made based on entries found in impounded tally accounts during a survey operation. The CIT(A) deleted these additions, referencing earlier Tribunal decisions where similar additions were found unjustified. The Tribunal upheld the CIT(A)'s decision, noting that the facts had not changed and the legal precedents set in earlier years were applicable.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134247 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-06-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 05-03-2023
• Other Referred Cases: DCIT v M/s GSNR Rice Industries Pyt Ltd, DCIT v KN Manivannan, DCIT v KN Nehru
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment
• Section: 68; 69; 20

Judgement Text

आयकर अपीलीय अिधकरण “बी” ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI माननीय ी महावीर िसंह, उपा ! एवं माननीय ी मनोज कुमार अ&वाल ,लेखा सद) के सम!। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ ITA No.284/Chny/2023 (िनधा*रण वष* / As sessment Year: 2016-17) DCIT Central Circle-3(1), Chennai. बनाम/ V s. M/s.GSNR Rice Industries Pvt.Ltd. 21, C.V.Raman Road, Alwarpet, Chennai-600 018. थायीलेखासं./जीआइआरसं./PAN/GIR No. AAMCS-5 8 3 4 -P (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Shri D. Hema Bhupal, (JCIT)-Ld.DR थ कीओरसे/Respondent by : None सुनवाईकीतारीख/Date of Hearing : 22-06-2023 घोषणाकीतारीख /Date of Pronouncement : 30-08-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by Revenue for Assessment Year (AY) 2016-17 arises out of the order of learned Commissioner of Income Tax (Appeals)-18, [CIT(A)] Chennai dated 29-12-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s 147 of the Act on 21-11-2019. The grounds taken by the Revenue read as under: 1. The order of the Id. Commissioner of CIT (Appeals) is erroneous on facts of the case and in law. 2. The Ld. CIT(A) erred in deleting the addition made u/s. 68 of the IT Act amounting to Rs. 4,28,35,000/-, which was made based on the entries retrieved from the 2 ITA No.284/Chny/2023 impounded tally accounts during the survey operation and further the assessee could not explain the tally entries, on receipt of sums, with evidence. 2.1 The Ld. CIT(A) erred in deleting the addition made u/s. 68 of the IT Act on the finding that the addition u/s. 68 should emanate from the regular books of the assesssee only, without appreciating that the addition u/s. 68 of the IT Act was made on the basis of the retrieved entries in the impounded lap top containing tally data, which should be construed as books of accounts maintained by the assessee, within the meaning of section 68 of the IT Act, wherein un- accounted receipts were recorded by the assessee and further the same were not disclosed in the regular books of accounts. 2.2 The Ld. CIT(A) erred in deleting the addition made u/s. 68 of the Act , without appreciating the sworn depositions of the Mangers of the assessee that the cash received does not pertain to GSNR Rice Industries Private Limited (earlier SNR Rice Mill) and the cash received was un accounted and hence after spending the entry was deleted . 3. The Ld. CIT(A) erred in deleting the addition made u/s. 69 of the IT Act amounting to Rs.3,14,83,500 /-, which was made based on the entries retrieved from the impounded tally accounts and further the assessee could not explain the tally entries with evidence. 3.1 The Ld. CIT(A) erred in deleting the addition made u/s. 69 of the IT Act on the finding that the assessee company was in receipt of funds to the tune Rs. 21.35 crores from M/s. True Value Homes Private Limited and the sums on which addition u/s. 69 was made was part of the fund transfers form M/s. True value Homes Private Limited, without appreciating the fact that in the impounded tally data no such entries were found on the source of the payments. 3.2 The Ld. CIT(A) erred in deleting the addition made u/s. 69 of the IT Act on the finding that the assessee company was in receipt of funds to the tune Rs. 21.35 crores from M/s. True Value Homes Private Limited without appreciating the fact that there was evidence regarding the receipt of funds from M/s. True Value Homes Private Limited, in the books of the assessee, so as to explain its source.” At the time of hearing, none appeared for assessee. However, upon perusal of impugned order, It could be seen that Ld. CIT(A) has merely followed the order of Tribunal in assessee’s own case for earlier years. The Ld. Sr. DR pleaded for restoration of assessment order. Having considered case records as well as aforesaid decision of the Tribunal, the appeal is disposed-off as under. Proceedings before Ld. AO 2.1 The assessee being resident corporate assessee is stated to be engaged in agro based industries. A survey was conducted on assessee u/s.133A on 30.01.2018 wherein certain documents, digital records and 3 ITA No.284/Chny/2023 loose sheets were found and impounded. Accordingly, the case was reopened. 2.2 On the basis of impounded documents, Ld. AO alleged that there were evidences to make addition of unexplained cash credit, unexplained income and undisclosed interest, all aggregating to Rs.779.18 Lacs. Accordingly, the case was reopened and notice u/s.148 was issued on 25-03-2019. From the retrieved data, it was alleged that assessee received cash of Rs.425.60 Lacs as recorded in the ledger- KNN-1Ravi in the undisclosed books of accounts of the assessee. The same was not disclosed in the regular books of account. The assessee received another cash of Rs.2.75 Lacs from Shri K.N.Mannivannan towards capital as per undisclosed books of accounts. Rejecting assessee’s submissions, aforesaid credit aggregating to Rs.428.35 Lacs was added to the income of the assessee u/s 68. 2.3 From retrieved tally data, Ld. AO observed that the assessee received cash of Rs.274.65 Lacs and cheque of Rs.0.50 Lacs from Shri K.N.Mannivannan to acquire land and the same was not disclosed in regular books of account. The Ld.AO held that these were unexplained investments in agriculture which was not disclosed in books of account. The assessee had paid cash of Rs.13.68 Lacs and cheque of Rs.25.99 Lacs towards purchase of land which was recorded in undisclosed books of account. The same was also added as unexplained investments in the hands of the assessee. 2.3 The last addition was on account of undisclosed interest income. From retrieved data, It was noted that amount of Rs.36 Lacs was amount receivable as interest on loans given by the assessee to M/s. G. 4 ITA No.284/Chny/2023 Narayana Reddiar Educational Trust. The same was not available in regular books of account and accordingly, added to the income of the assessee. Proceedings before Ld. CIT(A) 3. The Ld. CIT(A), considering the submissions of the assessee as well as earlier decision of Tribunal in ITA Nos.2407 to 2411/Chny/2019 for AYs 2011-12 to 2015-16, deleted the impugned additions by observing as under: - 7. Decision along with Reasons: After carefully considering the assessment order and the submissions of the assessee, the grounds raised by the assessee are decided as under: 7.1 Addition u/s 68 - Rs.4,28,35,000/-( Ground No.2) 7.1.1 The AO stated that the assessee company received cash of Rs.4,25,60,000/- from Shri K.N. Nehru, and Rs.2,75,000/- from Shri. K.N.Manivannan towards Capital which were found in the retrieved tally data of the assessee company, but not appearing in its regular books. As contended by the AR, the above amount of Rs.4,25,60,000/- was already added by the AO in the assessment of Shri. K.N.Nehru for AY 2016-17 and the CIT Appeals - 6 Chennai deleted this addition vide his order in ITA No. 134/CIT(A)2/2018-19 dated 26.07.2019. Similarly, the addition of Rs.2,75,000/- was made by the AO in the case of Shri. K.N.Manivannan for the AY 2016-17 and the CIT(A)- 6 Chennai deleted this addition vide his order in ITA No. 150/CIT(A)6/2018-19 dated 29.05.2019. In the case of assessee (GSNR) itself for the AYs 2011-12 to 2015-16, the CIT(A)-6, Chennai deleted the similar additions made u/s 68 in ITA No. 144 to 149/2018-19 dated 29.05.2019. These appeal orders were upheld by the Hon'ble ITAT. 7.1.2 The Hon'ble ITAT Chennai, by a combined order in ITA No.2407 to 2411/CHNY/2019 (DCIT v M/s GSNR Rice Industries Pyt Ltd) for AYs 2011-12 to 2015-16 and ITA No.2406/CHNY/2019 (DCIT v KN Manivannan) for AY 2016-17 and ITA No.2825/Chny/ 20 19 (DCIT v KN Nehru) for AY 2016-17 dated 09.06.2021 has held at para 23: “Further in order to bring any credit within the ambit of section 68 of the Act, there must be some credit in the books of accounts of the assessee in the name of some person. In this case, neither the person from whom such credits received are recorded nor the date of receipts of such credits. Further in the diary, there is no reference to any information regarding date of receipt and the person from whom such credits were received. Therefore, those entries from the diary and notebook cannot be considered as unexplained cash credits within the ambit of section 68 of the Act, 5 ITA No.284/Chny/2023 because the pre-requisite conditions for invoking the provision of section 68 of the Act, is maintenance of books of accounts by the assessee and further, credit entries must be found from such books of accounts. In this case, what was considered by the AO was some irrelevant documents which are nowhere connected to the assessee and his office and hence, those documents can only be treated as dumb documents and from those documents, no addition can be made u/s 68 of the Act. The ld CIT(A) after carefully considered relevant facts and has rightly held no addition could be made u/s 68 of the Act, towards credit found in diary, notebook and retrieved data from computer CPU and hence we do not find any reason to interfere with the finding the Id.CIT(A)". 7.1.3 Following the above binding decision of the Hon'ble ITAT, the addition of Rs.4,28,35,000/-u/s 68 towards unexplained cash credits is deleted. 7.2 Addition U/S 69 - Rs.3,14,83,500/-(Ground No.3) 7.2.1 The AO stated that the assessee company has received Rs.2,74,65,500 in cash from Shri.K.N.Manivannan as in the retrieved tally data of the Company as Shri.K.N.Manivannan -Agricultural Land and the same was not available in the regular books of Account of the assessee Company. As found in the assessment order itself, a sum of Rs.2,74,65,000/- was also added u/s 69 in the case of Shri.K.N.Manivannan for the very same AY 2016-17 based on the same entries in the retrieved tally data and the same was deleted by the CIT(A) 6 Chennai vide his order in ITA No.150/CIT(A)-6/2018-19 dated 29.05.2019. Further the AO stated that the assessee has paid Rs.13,68,300 in cash for purchase of land as in the retrieved tally data of the Company. The assessee claimed that the above said amount of Rs.13,68,300/- was also part of the cash flow relating to Rs.21.35 crores transferred from M/s True Value Homes Private Limited but the same was not accepted by the AO. 7.2.2 However, the Hon'ble ITAT Chennai as per combined order dated 09.06.2021 in ITA Nos.2407 to 2411/CHNY /2019 in the case of the assessee AYs 2011-12 to 2015-16 and in ITA No.2406/CHNY/2019 (Shri.K.N.Manivannan-AY 2016-17) upheld the claim of assessee accepting the cash flow in which Rs.21.35 cr was shown as received from M/s True Value Homes Private Limited and confirmed the order of the CIT(A) deleting the additions. The summary of cash flow statement is shown below: GSNR RICE INDUSTRIES (P) LTD & GROUP PARTICULARS Amount Rs. Income Admitted in A Y 2011-12 in GSNR Income Admitted in A Y-2012-13 in GSNR Fund Transfer from TVH (P) Ltd - AY 2011-12 Fund Transfer from TVH (P) Ltd- A Y 2012-13 Fund Transfer from TVH (P) Ltd - AY 2013-14 Fund Transfer from TVH (P) Ltd- A Y 2014-15 1,58,45,600 33,40,500 5,00,00,000 4,50,00,000 6, 75,00,000 5,10,00,000 6 ITA No.284/Chny/2023 Total Fund Flow Cash Out Flow - AY - 2012-13 Cash Out Flow - AY - 2013-14 Cash Out Flow - AY - 2014-15 Cash Out Flow - AY -2012-16 Cash Out Flow - AY - 2016-17 Total Cash Out Flow Net Balance 23,26,86,100 1,56,84,825 2,99,55,277 5,23,02,960 4,67,61,465 6,04,11,912 20,51,16,439 2,75,69,661 7.2.3 It is seen from the above that the assessee is left with Rs.2,75,69,661/-even after explaining all the entries in respect of the investments out of Rs.21.35 crore, received from M/s True Value Homes Private Limited. In the circumstances it is seen that based on the cash flow, there is no case for addition Rs.2,74,65,000/- and Rs.13,68,300/- and by following the binding decision of the Hon'ble ITAT as discussed above, the same are deleted. 7.2.4 With reference to Rs.25,99,700 paid through cheque added by the AO u/s 69, it is seen that the amount was paid through cheque via Indian Bank current A/c No.823769016 of the assessee and shown under 'Capital advances' in the balance sheet of the assessee. As the source is clear and the asset was also duly reflected in the balance sheet of the assessee, it cannot be added u/ s 69. Therefore, the amount of Rs.25,99,700 added u/s 69 is also deleted. 7.2.5 With reference to Rs.50,000 paid through cheque added by the AO u/s 69, it is seen that the amount was paid through cheque via Indian Bank current A/c No.823769016 of the assessee and shown under 'Loans and advances' in the balance sheet of the assessee. As the source is clear and the asset was also duly reflected in the balance sheet of the assessee, it cannot be added u/s 69. Therefore, the amount of Rs.50,000 added u/s 69 is also deleted. 7.3 Interest Income u/ s 56- Rs.36,00,000 /- (Ground No.4): 7.3.1 The retrieved tally data is as follows: SNR RICE INDUSTRIES PRIVATE LIMITED G.NARAYANA REDDIAR EDCATIONAL TRUST Ledger Account 1-Apr-15 to 31-Mar-16 Date Particulars Vch Type Vch No. Debit Credit 13-Aug-15 By CASH CREDIT AIC INDIAN BANK 836438772 Receipt Being amount received from Interest purpose 36,00,000.00 To 36,00,000.00 7 ITA No.284/Chny/2023 Closing Balance 36,00,000.00 36,00,000.00 36,00,000.00 7.3.2 The assessee submitted that the narration in the retried tally data appears as "Being amount received from interest purpose", which has been interpreted by the AO as interest received by the assessee from the Narayana Reddiyar Educational Trust. Whereas the assessee submitted before the AO that 'for' has been wrongly typed in the retrieved tally data as 'from', i.e. "Being amount received for interest purpose". The assessee stated that the amount of Rs.36,00,000 was received by it from the Trust by cheque and appears in the balance sheet of the assessee company under 'long term borrowings'. 7.3.3 As the amount was received by the assessee from the Trust by cheque in its Indian Bank cash credit A/ c No.836438772 and the same appears in the balance sheet of the assessee under 'long term borrowings' and in the balance sheet of the Trust under "Receivables". As it is not interest received or receivable from the Trust, the addition made by the AO is not correct. Therefore, the addition is deleted. 8. In the result, the appeal is allowed. Aggrieved, the revenue is in further appeal before us. Our Adjudication 4. It could thus be seen that the findings given by Ld. CIT(A) are based on Tribunal’s decision in assessee’s own case for earlier years and considering the same, the impugned additions have been deleted. The aforesaid fact remains uncontroverted before us. No change in facts could be demonstrated. There is nothing on record to suggest that the cited decision of the Tribunal has been reversed in any manner by any higher judicial authority. Therefore, we find no reason to interfere in the impugned order. 5. The appeal stand dismissed. Order pronounced on 30 th August, 2023. Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा34 / VICE PRESIDENT लेखा सद6 / ACCOUNTANT MEMBER चे8ई Chennai; िदनांक Dated : 30-08-2023 DS 8 ITA No.284/Chny/2023 आदेशकीDितिलिपअ&ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु@/CIT 4. िवभागीय ितिनिध/DR 5. गाडEफाईल/GF