Sooraj Leathers, Vellore V. ITO, Vellore

ITA 305/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9474 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 18-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2016
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNANJCIT
• Assessee Lawyers: K RAVI
• Keywords: Unexplained cash credit
• Section: 143(3); 131; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER ./ I.T.A.NO.305 /MDS./2016 ( / ASSESSMENT YEAR :2009-10) M/S.SOORAJ LEATHERS, NO.11,6 TH CROSS STREET, PHASE II, SATHUVACHARI, VELLORE 632 009. VS. INCOME TAX OFFICER, INCOME TAX WARD I(1), VELLORE. PAN AAWFS 5387 A ( / APPELLANT ) ( / RESPONDENT ) !' # $ / APPELLANT BY : MR.K.RAVI,ADVOCATE %&!' # $ / RESPONDENT BY : MR.P.RADHAKRISHNAN,JCIT, D.R ' ( # )* / DATE OF HEARING : 18.04.2016 +, # )* /DATE OF PRONOUNCEMENT : 22.04.2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)- 13, CHENNAI DATED 04.12.2015 PERTAINING TO THE ASSESSMENT YEAR 2009-10. ITA NO./MDS/2014 2 2. THE GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO SUSTAINING THE ADDITION OF ` 66,98,357/- MADE U/S.68 OF THE ACT BY THE LD.CIT(A) . 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM AND IS ENGAGED IN THE PROCESSING AND WHOLE SALE TRADING OF RAW AND WET BLUE LEATHERS. THE ASSESSEE FILED ITS RETURN OF INC OME ADMITTING AN INCOME OF ` 340,080/- ON 30/09/09. SUBSEQUENTLY A REVISED RETU RN WAS FILED ON 04/12/09 ADMITTING AN INCOME OF ` 3,77,880/-. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) AND THE CASE WAS SELECTED FOR SCRUTINY BY ISSUE OF NOTICE DATED 18/08/10 U/S 143( 2) OF THE ACT. THE ASSESSEES AUTHORIZED REPRESENTATIVE APPEARED FROM TIME TO TIME AND GAVE THE INFORMATION AND EXPLANATIONS THAT WERE SOU GHT FOR BY THE ASSESSING OFFICER. THE ASSESSING OFFICER SOUGHT CON FIRMATION OF THE BALANCE OF SUNDRY CREDITORS LYING IN THE BOOKS OF A CCOUNT AMOUNTING TO RS.441 LATHS. SUMMONS U/S 131 WAS ISSUED ON THE ASSESSEE VIDE NOTICE DATED 05/12/11. THIS NOTICE WAS NOT SIGNED B Y THE ASSESSING OFFICER. THE MANAGING PARTNER MR.K.GOPU APPEARED AN D A SWORN AFFIDAVIT WAS OBTAINED FROM HIM ON 12/12/11 WHEREIN THE SUNDRY CREDITORS AMOUNTING TO ` 99,69,331 WAS ALLEGEDLY HELD TO BE BOGUS. ITA NO./MDS/2014 3 SUBSEQUENTLY THE LEARNED ASSESSING OFFICER HAD COMP LETED THE ASSESSMENT U/S 143(3) ON 31/12/2011 AND MADE AN ADD ITION OF ` 1,38,31,660/- FOR THE REASON THAT THE APPELLANT COU LD NOT PROVIDE THE ADDRESSES, CREDITS WERE NOT CONFIRMED OR PARTIALLY CONFIRMED, NO SUCH ADDRESS AND NO COMPLIANCE. OUT OF A TOTAL OF 54 CRE DITORS, 20 CREDITORS BALANCES WERE ADDED BY THE ASSESSING OFFI CER. CONSEQUENTLY THE TAXABLE INCOME WAS DETERMINED AT ` 1,42,09,540/- AND THE TAX DEMAND WAS DETERMINED AT ` 61,12,750/-. AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE PREFERRED AN APP EAL BEFORE LD.CIT(A). ON APPEAL, LD.CIT(A) PARTIALLY ALLOWED T HE APPEAL BASED ON THE REMAND REPORT OF THE ASSESSING OFFICER WHERE IN SOME MORE CONFIRMATIONS WERE OBTAINED BY THE ASSESSEE AND THE BALANCE WAS ADDED U/S 68 OF THE ACT. OUT OF AN AMOUNT OF ` 1,38,31,660/- MADE BY THE ASSESSING OFFICER, AN AMOUNT OF ` 66,98,357/- WAS CONFIRMED U/S.68 OF THE ACT. HENCE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. ITA NO./MDS/2014 4 4.1 THE LD.A.R CLASSIFIED THE CREDITORS AND MADE R EMARKS ON THE BELOW MENTIONED CREDITORS AS FOLLOWS:- 1. CREDITS UNCONFIRMED/PARTIALLY CONFIRMED NAME BALANCE AS ON 31.03.2009 AMOUNT UNCONFIRM ED ADDITION UPHELD REMARKS J J TRADERS 603679 475000 475000 TRANSACTIONS HAVE CONTINUED IN 2009-10 AND LATER YEARS RAJESH CORPORATION 283883 12555 12555 TRANSACTIONS HAVE CONTINUED IN 2009-10 AND LATER YEARS STANDARD CHEMICALS 182000 182000 182000 BALANCE CONTINUES TILL 31.3.11 AND IT IS NIL IN 31.3.12 TOTAL 1069562 669555 669555 2. ADDRESS NOT GIVEN NAME BALANCE AS ON 31.03.2009 AMOUNT UNCONFIR MED ADDITION UPHELD REMARKS SIRAJ A 949380 949380 AFFIDAVIT SUBMITTED, OLD AGE, FROM HYDERABAD PAYABLE A/C 32427 32427 32427 NO DETAILS AVAILABLE, PROBABLY SOME EXPENDITURE PROIVDED POLLACHI SAMINATHAN 953000 953000 AFFIDAVIT SUBMITTED. DEATH COPY OF DEATH CERTIFICATE AVAILABLE IN FILE SHAMEEL BELLARY 933648 933648 AFFIDAVIT SUBMITTED. OLD AGE, FROM BELLARY ZAKRIA 853073 853073 ACCOUNT COPY SUBMITTED. DEATH INV. COPIES WITH CHECK POST MARKING AVAILABLE. TOTAL 3721528 32427 3721528 3. NO SUCH ADDRESS NAME BALANCE AS ON 31.03.2009 AMOUNT UNCONFIRM ED ADDITION UPHELD REMARKS FINE LEATHERS 610470 610470 610470 INV COPIES WITH CHECK POST MARKINGS AVAILABLE INDIAN HIDE CO., 458035 458035 458035 INV COPIES WITH CHECK POST MARKINGS AVAILABLE RELIANCE TRADERS 321200 321200 321200 INV COPIES WITH CHECK POST MARKINGS AVAILABLE TOTAL 1389705 1389705 1389705 ITA NO./MDS/2014 5 4. NO COMPLIANCE NAME BALANCE AS ON 31.03.2009 AMOUNT UNCONFIRM ED ADDITION UPHELD REMARKS BISMILLIAH TRADERS 630870 630870 630870 LETTER RECD BY PARTY, BUT NOT RESPONDED BALANCE RS.840451 IN SUBSEQUENT YEAR INDO ASSOCIATES 148999 148999 148999 LETTER RECD BY PARTY, BUT NOT RESPONDED BALANCE RS.380349 IN SUBSEQUENT YEAR METRO TRADING CO. 137700 137700 137700 LETTER RECD BY PARTY, BUT NOT RESPONDED BALANCE NIL IN SUBSEQUENT YEAR TOTAL 917569 917569 917569 ACCORDING TO THE LD.A.R, OUT OF ABOVE CREDITS, CERT AIN CREDITS ARE ONLY OPENING BALANCE AND IT CANNOT BE CONSIDERED FOR ADD ITION IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND PRAYED THAT THE SAME MAY BE DELETED. FOR THIS PROPOSITION, HE RELIED ON THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. USHA STUD AGRICUL TURAL FARMS LTD. REPORTED IN [2008] 301 ITR 384 (DEL). 4.2 ON THE OTHER HAND, LD.D.R SUBMITTED THAT BEFOR E THE LOWER AUTHORITIES, THE ASSESSEE HAS BEEN GIVEN AMPLE OPPO RTUNITIES TO PROVE THE GENUINENESS OF THE ABOVE CREDITS, BUT THE ASSESSEE WAS MISERABLY FAILED TO PROVE THE GENUINENESS AND CREDI T WORTHINESS OF THE PARTIES. AFTER FAILING TO PROVE ALL THE INGRED IENTS OF SEC.68, THE ASSESSEE HAS AGREED THAT OUT OF SUNDRY CREDITORS AM OUNTING TO ITA NO./MDS/2014 6 ` 1,38,31,660/-, AN AMOUNT OF ` 66,98,357/-, WHICH CANNOT BE PROVED AS GENUINE TO BE SUSTAINED. AGAINST THIS ADMISSION MADE BY THE ASSESSEE, THE ASSESSEE CANNOT FILE THE APPEAL BEFOR E THIS TRIBUNAL. FURTHER, HE SUBMITTED THAT OPENING CREDIT CANNOT GO OUT OF PURVIEW OF SEC.68 OF THE ACT IN VIEW OF LANGUAGE OF SEC.68 OF THE ACT, AS THE SAME IS FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, MAINTAINED FOR IN THAT PREVIOUS YEAR. WHEN THE A SSESSEE IS NOT ABLE TO OFFER PROPER EXPLANATION, THE SAME MAY BE CONSID ERED AS INCOME OF ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE AS SESSMENT YEAR UNDER CONSIDERATION. THUS, HE SUBMITTED THAT, THE WORD IN PREVIOUS YEAR FOUND IN THE SECTION 68, IS HAVING VERY SIGNIFICA NCE AND THE SAME IS TO BE CONSIDERED FOR MAKING ADDITION U/S.68 OF THE ACT. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE HAS AGREED FOR A DDITION OF ` 66,98,357/- AS UNEXPLAINED CREDIT AS INCOME OF ASSE SSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. NOW, THE PLEA OF THE ASSESSEE IS THAT THOUGH CERTAI N CREDITS WOULD NOT BE PROVED DUE TO THE CIRCUMSTANCES BEYOND THE CONTR OL OF ASSESSEE, ITA NO./MDS/2014 7 AT LEAST THE OPENING BALANCE, WHICH IS CARRIED FORW ARD FROM EARLIER PREVIOUS YEAR AND IT CANNOT BE CONSIDERED AS INCOME OF ASSESSEE U/S.68 OF THE ACT IN THE ASSESSMENT YEAR UNDER CONS IDERATION. THE ASSESSEE HAS FURNISHED THE DETAILS OF OPENING BALA NCE AND CLOSING BALANCE TO THE LOWER AUTHORITIES, BUT CONFIRMATIO NS WERE NOT FURNISHED IN RESPECT OF THESE IMPUGNED CREDITORS DU E TO THE REASONS EXPLAINED IN THE REMARK COLUMN OF THE TABLE EXTRACT ED HEREIN ABOVE PRODUCED. THE CONTENTION OF THE DEPARTMENTAL REPRE SENTATIVE IS THAT THESE CREDITS ARE ACCEPTED BY THE ASSESSEE AS UNEXP LAINED AND OFFERED IT AS INCOME U/S.68 OF THE ACT BEFORE THE L OWER AUTHORITIES AND THE SAME CANNOT BE QUESTIONED BEFORE THE TRIBUNAL. IN OUR OPINION, THIS ARGUMENT OF THE DEPARTMENTAL REPRESENTATIVE CA NNOT BE UPHELD IN VIEW OF THE JUDGMENT OF JURISDICTIONAL HIGH COUR T IN THE CASE OF MARIAM AYSHA V. COMMISSIONER OF AGRICULTURAL INCOME -TAX REPORTED IN [1976] 104 ITR 381 (MAD) WHEREIN HELD THAT THAT CONSENT/ACCEPTANCE GIVEN BY ASSESSEE CANNOT GIVE JURISDICTION AND A RIGHT TO THE ASSESSING AUTHORITY TO MAKE AN ADDIT ION, IS AN ESSENTIAL PRINCIPLE OF LAW. THE TAXING AUTHORITY CAN ACT ONLY IF THERE IS POWER UNDER THE STATUTE TO DO SO. FURTHER, THE ADDITIO N WAS MADE BY ITA NO./MDS/2014 8 INVOKING THE PROVISIONS OF THE SECTION 68 OF THE AC T. IF THE LIABILITIES ARE OLD, NO CREDIT HAS BEEN MADE IN SO FAR THOSE CR EDITS IN THE BOOKS OF ACCOUNTS IN THE ASSESSMENT YEAR UNDER CONSIDERAT ION, SEC.68 CANNOT BE APPLIED. THIS VIEW OF OURS IS SUPPORTED BY THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF USHA STUD AGRICU LTURAL FARMS LTD., CITED SUPRA WHEREIN HELD THAT CREDIT BALANCE IN THE ACCOUNT OF THE ASSESSEE DID NOT PERTAIN TO THE YEAR UNDER CONSIDER ATION, THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION U/S.68 OF THE ACT. HENCE, IN OUR OPINION, THE LIABILITIES WHICH WERE NOT CREDITED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION , THE PROVISIONS OF THE SECTION 68 CANNOT BE APPLIED AND THE AO IS D IRECTED TO EXCLUDE THE SAME FROM THE ADDITION U/S.68 OF THE ACT AFTER DULY VERIFYING THE SAME. IT NEEDLESS TO SAY THAT OPPORTUNITY OF HEARI NG TO BE GIVEN TO ASSESSEE BEFORE DECIDING THE SAME BY AO. 6. REGARDING OTHER CREDITS, THE ASSESSEE FAILED TO ADDUCE ANY EVIDENCE TO PROVE THE IDENTITY OF PARTIES, CREDIT W ORTHINESS AND GENUINENESS OF THE TRANSACTIONS IN SPITE OF GIVING REPEATED OPPORTUNITY TO THE ASSESSEE BY THE AO AS WELL AS BY THE LD.CIT(A). ITA NO./MDS/2014 9 THUS, THE FAILURE ON THE PART OF ASSESSEE IS TO PLA CE NECESSARY EVIDENCE TO PROVE THE TRANSACTIONS U/S.68 OF THE AC T, THE LOWER AUTHORITIES IS JUSTIFIED IN TREATING THOSE CREDITS AS UNEXPLAINED CREDIT U/S.68 OF THE ACT 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 22 ND OF APRIL,2016 AT CHENNAI. SD/- SD/- ( ' . . '# . $ ) ( N.R.S.GANESAN ) ( ) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND APRIL,2016. K S SUNDARAM. # %)-. / . ) /COPY TO: 1. !' /APPELLANT 2. %&!' /RESPONDENT 3. ' 0) () /CIT(A) 4. ' 0) /CIT 5. .3 %)4 /DR 6. 5 6( /GF