The ACIT, Circle-1(1), Visakhapatnam V. Sri Ramma Swamy Kolluru, Visakhapatnam

ITA 356/VIZ/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0657 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-04-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Assessee Lawyers: C V S MURTHY

Judgement Text

ITA NO356/VIZAG/2009 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 356/VIZAG/2009 ASSESSMENT YEAR: 2006-07 ACIT, CIRCLE-1(1), VISAKHAPATNAM SRI RAMA SWAMY KOLLURU, VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO: ACOPK0638G CO NO.70/VIZ/2009 (ARISING OUT OF ITA NO.356/VIZ/2009) ASSESSMENT YEAR: 2006-07 SRI RAMA SWAMY KOLLURU, VISAKHAPATNAM ACIT, CIRCLE-1(1), VISAKHAPATNAM (APPELLANT) PAN NO: ACOPK0638G VS. ASSESSEE BY: SHRI CVS MURTHY DEPARTMENT BY: SHRI D MANOJ KUMAR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27.04.2009 PASSED BY LD. CIT(A), VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2006-07. IN THE CROSS OBJECTION, T HE ASSESSEE IS ONLY SUPPORTING THE ORDER PASSED BY LEARNED CIT(A). THER E IS A DELAY OF 20 DAYS IN FILING THE CROSS OBJECTION AND THE ASSESSEE HAS FILED AN AFFIDAVIT EXPLAINING THE REASONS FOR THE DELAY. HAVING REGAR D TO THE SUBMISSIONS MADE IN THE AFFIDAVIT, WE CONDONE THE DELAY. 2. THE ONLY ISSUE URGED IN THIS APPEAL FILED BY TH E REVENUE IS WHETHER LEARNED CIT(A) IS JUSTIFIED IN DELETING THE ADDITIO N OF RS.18.45 LAKHS. ITA NO356/VIZAG/2009 PAGE 2 OF 4 3. THE FACTS RELATING TO THE ISSUE ARE STATED I N BRIEF. THE ASSESSEE IS TRADING IN IMPORTED EXCAVATOR AND SPARE PARTS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS SHOWN CREDITS IN THE NAME OF 16 PERSONS UNDER T HE HEAD ADVANCE FROM CUSTOMERS. ALL THE AMOUNTS EXCEPT ONE HAD BEEN RE CEIVED IN CASH. THE ASSESSEE COULD PROVIDE ADDRESSES ONLY IN RESPECT OF SIX PERSONS. BARRING THE AMOUNT RECEIVED BY WAY OF CHEQUES AND THE PARTI ES IN RESPECT OF WHOM THE ADDRESSES WERE PROVIDED, THE ASSESSING OFFICER TREATED THE AMOUNTS RELATING TO THE REMAINING 9 PERSONS AS CASH CREDIT S WHICH HAVE NOT BEEN EXPLAINED AND ACCORDINGLY ADDED THE SAME TO THE TOT AL INCOME OF THE ASSESSEE. THE AGGREGATE OF THE AMOUNTS SO ADDED WA S RS.18.45 LAKHS. IN THE APPEAL PREFERRED BY THE ASSESSEE, THE LEARNED C IT(A) NOTICED THAT THESE AMOUNTS WERE ACTUALLY RECEIVED AS TRADE ADVANCES AN D IN THE SUCCEEDING YEAR, THE ASSESSEE HAS SUPPLIED GOODS TO THESE PART IES. ACCORDINGLY, LEARNED CIT(A) DELETED THE SAID ADDITION. NOW THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CARE FULLY PERUSED THE RECORD. FROM THE ORDER PASSED BY LEARNED CIT(A), WE NOTICE THAT THE FIRST APPELLATE AUTHORITY, AT PAGES 6 & 7 OF HIS ORDER, HAS LINKED THE IMPUGNED CREDITS WITH THE CORRESPONDING INVOICES RAISED AGAINST EACH OF T HEM. FURTHER THE LEARNED CIT(A) HAS MADE FOLLOWING OBSERVATIONS: AGAINST THE ABOVE BACK GROUND OF THE FACTS OF THE CASE, THE ISSUE THAT NEEDS CONSIDERATION IS WHETHER THE EXPLANATION OFFERED BY THE APPELLANT REGARDING THE NATURE AND SOURCE OF CREDIT ENTRIES FOUND IN HIS BOOK IS SATISFACTORY. IN TRADING CIRCLE RECEIVING ADVANCES AGAINST SALE AND MORE SO WHEN THE ITEM REQUIRED BY THE CUSTOMER IS T O BE IMPORTED, IS A COMMON PRACTICE. AS ALREADY STATED, THE APPELLANT WAS DEALING WITH MOSTLY IMPORTED ITEMS OF MACHINERIES AND ITS COMPONENTS. WHEN ACTUAL SALES ARE MADE, SUCH ADVANCES ARE ADJUSTED AGAINST SUCH SALES . IN THE INSTANT CASE, PRECISELY THE SAME HAS HAPPENED. AS AND WHEN ADVAN CE FOR SALE HAS BEEN RECEIVED, THE SAME AMOUNT HAS BEEN DULY CREDIT IN T HE BOOKS OF ACCOUNTS ON THE DATE OF RECEIPT. AFTER SUPPLY OF MATERIAL, SALE BILLS HAVE BEEN RAISED ITA NO356/VIZAG/2009 PAGE 3 OF 4 AND AFTER ADJUSTING THE ADVANCE RECEIVED AGAINST TH E SALE BILL, BALANCE AMOUNT, IF ANY PAYABLE, BY THE CUSTOMER HAVE BEEN R EALIZED AND CORRESPONDING ACCOUNTS HAVE BEEN SQUARED UP. THE V AT PAYABLE ON SUCH SALES WAS DULY COLLECTED WHILE RAISING THE SALE BIL L AND SUBSEQUENTLY PAID INTO THE GOVERNMENT ACCOUNT. THERE IS A TIME LAG B ETWEEN THE DATE OF RECEIPT OF ADVANCE AND THE DATE OF ACTUAL DELIVERY OF GOODS BECAUSE OF THE FACT THAT THE MATERIALS HAVE TO BE IMPORTED FROM IN TERNATIONAL MARKET. AS THE ADVANCES FOR SALE RECEIVED HAVE BEEN DULY ACCOU NTED FOR AS SALES IN THE SUBSEQUENT YEAR AS REFLECTED CLEARLY IN THE ABOVE T ABLE, I AM OF THE VIEW THAT THE EXPLANATION OFFERED BY THE APPELLANT REGAR DING THE NATURE AND SOURCE OF CREDIT ENTRIES FOUND IN THE BOOKS OF ACCO UNTS OF THE APPELLANT IN THE FORM OF ADVANCE FOR SALES HAVE BEEN SATISFACTOR ILY EXPLAINED AND HENCE THE PROVISIONS OF SEC.68 WOULD NOT BE APPLICABLE UN DER THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE. HENCE, THE ADDITION OF RS.18,45,000/- MADE IN THIS REGARD IS HEREBY DELETE D. 5. THE CASE OF THE ASSESSING OFFICER WAS THAT T HESE CREDITS REPRESENTED CASH CREDITS, WHICH IS AGAINST THE RECORD OF THE AS SESSEE. THE LEARNED CIT(A) HAS NOTICED THAT THE ASSESSEE HAS SUPPLIED G OODS TO THESE PARTIES IN THE SUBSEQUENT YEAR AND THUS THE IMPUGNED CREDITS H AVE BEEN SQUARED UP. THUS, BY MAKING SALES TO THESE PARTIES, THE ASSESSE E HAS OFFERED THESE CREDITS AS HIS REVENUE RECEIPT IN THE SUBSEQUENT YE AR. HENCE IT IS PROVED THAT THESE CREDITS REPRESENT TRADE CREDITS ONLY. HENCE WE DO NOT FIND ANY MERIT IN THE CASE OF THE ASSESSING OFFICER IN TREAT ING THE IMPUGNED CREDITS AS CASH CREDITS. ACCORDINGLY, WE DO NOT FIND ANY R EASON TO INTERFERE WITH THE DECISION OF LEARNED CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE AND CRO SS OBJECTION OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 05 JULY, 2010 (SUNIL KUMAR YADAV) (B R BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 5 TH JULY, 2010 ITA NO356/VIZAG/2009 PAGE 4 OF 4 COPY TO 1 THE ACIT, CIRCLE-1(1), 4 TH FLOOR, DIRECT TAX BUILDING, MVP DOUBLE ROAD, OPP: RYTHU BAZAR, VISAKHAPATNAM. 2. SRI RAMA SWAMY KOLLURU, PROP: KK ENTERPRISES HIT ACHE MACHINE, D NO.47-7-44/1, 4 TH LANE, DWARAKANAGAR, VISAKHAPATNAM. 3. THE CIT, VISAKHAPATNAM. 4. THE CIT(A), VISAKHAPATNAM 5. THE DR, ITAT, VISAKHAPATNAM. 6. GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM