ITO, CHENNAI V. Shri Khemka Sawarmal, CHENNAI

ITA 3159/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4345 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 15-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC B BENCH, CHENNAI . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.3159/MDS/2016 ( / ASSESSMENT YEAR: 2012-13) THE INCOME TAX OFFICER, NON-CORPORATE WARD 3(3), CHENNAI 34. VS SHRI KHEMKA SAWARMAL, NO.224, FLAT NO.16, LLOYDS ROAD, GOPALAPURAM, CHENNAI 600 086. PAN: AMOPS4245F ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI R. CLEMENT RAMESH KUMAR, ADDL. CIT /RESPONDENT BY : NONE /DATE OF HEARING : 07.06.2017 !' /DATE OF PRONOUNCEMENT : 08.06.2017 / O R D E R THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-4, CHENNAI DATED 23.08.2016 IN ITA NO.30/2015-16/A.Y. 2012-13/ CIT(A)-4 FOR THE ASSESSMENT YEAR 2012-13 PASSED U/S.250(6) R.W.S .143(3) OF THE ACT. 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE. IT IS PERTINENT TO MENTION THAT WHEN THE CASE CAME UP FOR HEARING ON 04.04.2017, THE LD.AR SHRI V. RAVICH ANDRAN SOUGHT TIME FOR FILING CERTAIN DETAILS. HENCE THE C ASE WAS 2 ITA NO.3159/MDS/2016 ADJOURNED TO 05.06.2017. HOWEVER NONE APPEARED ON THAT DATE. HENCE THE CASE WAS POSTED FOR HEARING ON 07.06.2017 . ON 07.06.2017 ALSO NONE APPEARED ON BEHALF OF THE ASSE SSEE. THEREFORE THE BENCH DECIDED TO PROCEED WITH THE HEA RING EX- PARTE. 3. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD.AO ON ACCOUNT OF BOGUS SUNDRY CREDITORS AMOUNTING TO RS.38,65,030/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN BUSINESS, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 22.09.2012 ADMITTING HIS INCOME AS RS.8,63,380/-. THE CASE WAS TAKEN UP FOR SCRUTINY UNDER CASS AND FINALLY ORDER U/S.143(3) OF THE ACT WAS PASSED ON 30.03.2015, WHEREIN THE LD.AO ASSESSED THE INCOME OF THE ASSESS EE AT RS.47,28,410/- BY TREATING CERTAIN SUNDRY CREDITORS TO BE BOGUS. 5. DURING THE COURSE OF SCRUTINY ASSESSMENT, IT WAS OBSERVED BY THE LD.AO THAT, THERE WAS HUGE INCREASE IN SUNDR Y CREDITORS. 3 ITA NO.3159/MDS/2016 THE AGGREGATE SUNDRY CREDITORS FOR THE RELEVANT PRE VIOUS YEAR WAS RS.2,21,02,936.91. TO VERIFY THE GENUINENESS OF THE SUNDRY CREDITORS, THE LD.AO SENT LETTERS TO 15 SUNDRY CRED ITORS AFTER SHORT LISTING FROM THE LONG LIST OF SUNDRY CREDITORS. WIT H RESPECT TO 4 SUNDRY CREDITORS AS DETAILED HEREIN BELOW, THE LETT ERS WERE RETURNED UN-SERVED 1) M/S. MAA BHAGWATI SALES RS. 6,28,327/- 2) M/S. NORTH STAR TUBES (P) LTD RS.11,33,406/- 3) M/S. SHIVAM ENTERPRISES RS.21,03,297/- 4) M/S. TIRUPATI ENTERPRISES RS. 9,92,398/- ------------------------ TOTAL RS.48,57,428/- ------------------------- ON FURTHER SCRUTINY, IT WAS REVEALED THAT THE SUNDRY CREDITORS TO THE EXTENT OF RS.38,65,030/- WAS NONEX ISTENT AND THEREFORE THE LD.A.O ADDED THE SAME TO THE INCOME O F THE ASSESSEE AND ACCORDINGLY THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS.47,28,410/-. THE FINDING OF THE LD. AO IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 3.3 ON ITS EXAMINATION, IT IS SEEN THAT IN RESPECT OF SUNDRY CREDITOR, OF M/S. MAA BAGAWATHI STEELS LISTED IN IT EM NO.(I), IN PARA 3.1 ABOVE, THE TRANSACTIONS HAVE CONTINUED IN THE SUBSEQUENT YEAR AND THE PAYMENTS HAVE NOT BEEN MADE BUT SQUARED UP THROUGH A JOURNAL ENTRY OF RS.6,28,327/- . EVEN AS ON 4 ITA NO.3159/MDS/2016 01/04/2010, IT IS ONLY AN OPENING BALANCE AND DURIN G THE FINANCIAL YEAR 2012-13, IT HAS BEEN SQUARED UP BY W AY OF A JOURNAL ENTRY TO I KING STEELS I. HENCE THE LONG DU RATION OF CREDIT AND LACK OF PAYMENT DETERMINES THE TRANSACTI ON TO BE BOGUS IN NATURE. 3.4 IN RESPECT OF M/S. NORTH STAR TUBES PRIVATE LIM ITED LISTED IN ITEM NO.(II) IN PARA 3.1 ABOVE, IT IS NOT CLEAR AS TO HOW SUCH A HUGE CREDIT OF RS.11 ,33,406/- WHICH IS COMPRISED I N THE OPENING BALANCE AS ON 01/04/2011 HAS NOT BEEN PAID EVEN AS ON 31/03/2013. IN THE FINANCIAL YEAR 2013-13, ONLY A P ART PAYMENT OF RS.1,91,312/- IS MADE ON 11/07/2013. THE LONG DU RATION OF UNPAID CREDIT, PARTICULARLY WHEN IT IS OF SUCH MAGN ITUDE, REMAINING AS BALANCE FOR SEVERAL YEARS, IS AGAINST THE TEST OF HUMAN PROBABILITIES. HENCE, IT REQUIRES TO BE CONCL UDED THAT THE ASSESSEE HAD EITHER SETTLED THE AMOUNTS TOWARDS PUR CHASES OUTSIDE THE BOOKS OF ACCOUNT OR THE CREDITOR IS ONL Y AN ACCOMMODATOR OF BILLS AND NOT SUPPLIER OF GOODS. EI THER WAY, THE BALANCE OF RS.11,33,406/- IS NON-EXISTENT AS ON 31/03/2012 AND HENCE ADDED TO THE TAXABLE INCOME OF THE ASSESS EE. 3.5 IN RESPECT OF M/S. SHIVAM ENTERPRISES LISTED IN ITEM NO.(III) IN PARA 3.1 ABOVE, THE FEATURE IS SIMILAR TO THAT O F M/S. NORTH STAR TUBES PRIVATE LIMITED. THE OPENING BALANCE AS ON 01/04/2010 HAS NOT BEEN PAID EVEN AS ON 01/04/2013. IN THE FINANCIAL YEAR 2013-14, A PALTRY SUM OF RS.1 ,75,00 0/- HAS BEEN PAID. ON THE SAME ASPECT THAT SUCH LONG DURATION OF CREDIT CANNOT EXIST IN THIS LINE OF TRADE, AND WHILE THE L ETTERS ISSUED HAVE ALSO RETURNED UNSERVED, IT IS CLEAR THAT M/S. SHIVAM ENTERPRISES IS AN ACCOMMODATOR OF BILLS AND AS ON 0 1/04/2012, THE BALANCE DUE AMOUNTING TO RS.21,03,297/- TO HIM DOES NOT ACTUALLY EXIST. 3.6 IN RESPECT OF M/S. TIRUPATHI ENTERPRISES LISTED IN ITEM NO.(IV) IN PARA 3.1 ABOVE SINCE THE TRANSACTIONS HA VE BEEN UNDERTAKEN SUBSEQUENTLY THROUGH BANKING CHANNELS AN D WHILE 5 ITA NO.3159/MDS/2016 THE TRANSACTION IS LIVE, THE VERSION OF THE ASSESSE E IS FOUND TO BE ACCEPTABLE. 6. ON APPEAL, THE LD.CIT(A) OPINED THAT THE LD.AO H AD FAILED TO DISCHARGE THE ONUS CAST UPON HIM AND HIS FINDING S WERE BASED ON MERE SURMISES AND CONJUNCTURES, THEREFORE DEVOID OF MERIT. FURTHER BY HOLDING THAT THE PROVISIONS OF SECTION 4 1(1) OF THE ACT WERE WRONGLY INVOKED, THE LD.CIT(A) DELETED THE ADD ITION MADE BY THE LD.A.O. THE LD.CIT(A) ARRIVED AT SUCH DECISI ON BECAUSE OF THE FOLLOWING REASONS:- 1) THE ASSESSEE VIDE LETTER DATED 18.02.2015 HAD SU BMITTED COPIES OF THE PURCHASE INVOICES, TRANSPORTATION REC EIPTS, PROOF FOR THE GOODS BEING PASSED THROUGH CHECK POST , COPIES OF THE LEDGER FOLIOS IN RESPECT OF THE TRANS ACTION AND THE BANK STATEMENTS FOR HAVING MADE THE PAYMENTS TO SUNDRY CREDITORS. 2) THUS THE PRIMARY ONUS ON THE PART OF THE ASSESSE E HAS BEEN COMPLIED WITH. 3) THE LD.AO HAD NOT CROSS VERIFIED THE AUTHENTICIT Y OF THE PURCHASE BILLS AND OTHER DOCUMENTS PROVIDED BY THE ASSESSEE. THUS THE LD.AO HAD FAILED TO FULFILL THE ONUS SHOVE ON HIM. 6 ITA NO.3159/MDS/2016 4) THE FINDING OF THE LD.AO THAT THE SUNDRY CREDITO RS WERE BOGUS AND NONEXISTENT WAS BASED ON THE OBSERVATION THAT THE SUNDRY CREDITORS WERE OUTSTANDING FOR LONG DURA TION AND SQUARED UP THROUGH JOURNAL ENTRIES, WHICH DOES NOT HAVE MERIT. 7. BEFORE US THE LD.DR SUBMITTED THAT THE LD.AO HAD TAKEN EFFORT TO SEND LETTERS TO THE SUNDRY CREDITORS FOR OBTAINING CONFIRMATION STATEMENT. FURTHER HE HAD ANALYZED TH E SUNDRY CREDITORS BASED ON THE INFORMATION PROVIDED BY THE ASSESSEE SUCH AS THE ASSESSEES LEDGER ACCOUNT, BILLS AND IN VOICES ETC., AND HAD COME TO A CONCLUSION THAT THE TRANSACTION W AS NOT GENUINE. THUS THE LD. AO HAD COMPLIED WITH THE ONU S THRUST ON HIM AND HAD ARRIVED AT A REASONABLE CONCLUSION. HE THEREFORE SUBMITTED THAT THE ORDERS OF THE LD.AO MAY BE REINS TATED. 8. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LD. DR. AS SUBMITTED BY THE LD.DR, THE LD.AO HAD ENSURED ALL M EANS AVAILABLE BEFORE HIM IN ORDER TO VERIFY THE TRANSAC TION. THE ASSESSEE HAS NOT MADE ANY SERIOUS EFFORT TO PROVE T HE GENUINENESS OF THE SUNDRY CREDITORS WITH WHOM HE HA S CLOSE 7 ITA NO.3159/MDS/2016 ASSOCIATION. THEREFORE, WE FIND MERIT IN THE ORDER OF THE LD.AO. HOWEVER, IN THE INTEREST OF JUSTICE WE REMIT BACK T HE MATTER TO THE FILE OF THE LD.CIT(A) IN ORDER TO VERIFY THE GENUIN ENESS OF THE DOCUMENTS SUBMITTED BEFORE THE REVENUE AUTHORITIES AFTER OBTAINING A REMAND REPORT FROM THE LD.A AND THEREAF TER PASS APPROPRIATE ORDER IN ACCORDANCE WITH MERIT AND LAW. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON THE 08 TH JUNE, 2017. SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER #$ /CHENNAI, %& /DATED 08 TH JUNE, 2017 JR & () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF