Pankaj .S, CHENNAI V. ITO, CHENNAI

ITA 392/CHNY/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68753 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-09-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 392/MDS/2012 (ASSESSMENT YEAR : 2001-02) SHRI PANKAJ S., M/S SOMASUNDARAM & SIVARAMAN, CHARTERED ACCOUNTANTS, 10, E BLOCK, KARTIK APTS., 46, VIJAYARAGHAVA ROAD, CHENNAI - 600 017. PAN : (APPELLANT) V. THE INCOME TAX OFFICER, COMPANY WARD III, CHENNAI - 600 034. (RESPONDENT) APPELLANT BY : SH. S. SRIDHAR, ADVOCATE RESPONDENT BY : SH. GURU BASHYAM, JCIT DATE OF HEARING : 05.09.2013 DATE OF PRONOUNCEMENT : 26.09.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, IT ASSAILS AN ADDITION OF ` 14,36,308/- MADE BY THE ASSESSING OFFICER WHICH ARE CONFIRMED BY THE CIT(APPEALS). I.T.A. NO. 392/MDS/12 2 2. FACTS APROPOS ARE THAT ASSESSEE, AN IRON SCRAP D EALER, FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR D ECLARING AN INCOME OF ` 1,54,480/-. ASSESSEE WAS DOING BUSINESS IN THE NA ME OF NIDHI STEELS AS A PROPRIETORSHIP CONCERN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSI NG OFFICER THAT THERE WAS ONE CREDIT OF ` 13,45,293/- IN THE BANK ACCOUNT OF THE ASSESSEE MAINTAINED WITH KARAIKKAL BRANCH OF KARUR VYSYA BANK, ON 3.10.2000, WHICH WAS WITHDRAWN ON THE VERY SAME DAY THROUGH TWO CHEQUES FOR SUMS OF ` 6,50,000/- AND ` 6,95,293/-. THESE WERE BEARER CHEQUES IN THE NAME OF ONE SHRI KUMARAVEL AN D ONE SHRI RAJAKUMAR, RESPECTIVELY. ASSESSING OFFICER FOUND T HAT ENTRIES WITH REGARD TO THESE DEPOSIT AND WITHDRAWALS WERE NOT RE FLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. EXPLANATION OF THE ASSESSEE WAS SOUGHT. REPLY OF THE ASSESSEE WAS THAT THE SAID SU M OF ` 13,45,293/- REPRESENTED AN ADVANCE RECEIVED FROM ONE M/S ELANGO INDUSTRIES LTD. AS PER THE ASSESSEE, INTENDED TRANSACTIONS DI D NOT COME THROUGH AND THEREFORE, THE MONEY WAS RETURNED TO M/ S ELANGO INDUSTRIES LTD. ASSESSING OFFICER ISSUED SUMMONS U NDER SECTION 131 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') TO M/S ELANGO INDUSTRIES LTD. M/S ELANGO INDUSTRIES LTD. FILED A REPLY ENCLOSING COPIES OF THE ACCOUNT OF THE ASSESSEE IN THEIR BOOK S OF ACCOUNTS. I.T.A. NO. 392/MDS/12 3 THE ADVANCE OF ` 13,45,293/- WAS NOT APPEARING IN SUCH BOOKS OF ACCOUNTS. M/S ELANGO INDUSTRIES LTD. ALSO MENTIONE D THAT THE CLAIM OF THE ASSESSEE WAS WRONG. 3. THEREAFTER, A STATEMENT WAS RECORDED FROM THE AS SESSEE WHEREIN HE STATED THAT TWO BLANK CHEQUES WERE ISSUE D BY HIM TO M/S ELANGO INDUSTRIES LTD. ASSESSEE ALSO FILED A LETTE R FROM KARUR VYSYA BANK STATING THAT A CREDIT HAD COME AS A TRANSFER F ROM THEIR T. NAGAR BRANCH. ASSESSING OFFICER THEN MADE ENQUIRIES WITH THE T. NAGAR BRANCH OF KARUR VYSYA BANK. IT WAS FOUND THAT SAID BRANCH WAS DISCOUNTING BILLS ON THE BASIS OF LC. T. NAGAR BRA NCH OF KARUR VYSYA BANK HAD ISSUED A DD BASED ON AN LC, TO ITS KARAIKK AL BRANCH. FOR THE LC, IT SEEMS M/S ELANGO INDUSTRIES LTD. HAD GIV EN COPIES OF CERTAIN INVOICES PURPORTEDLY ISSUED BY THE ASSESSEE . AS PER THESE INVOICES GIVEN TO THE BANK BY M/S ELANGO INDUSTRIES LTD., THEY HAD PURCHASED SCRAP WORTH ` 14,36,308/- FROM THE ASSESSEE. A.O. ALSO NOTED THAT M/S ELANGO INDUSTRIES LTD. HAD NOTED REC EIPT OF THE GOODS IN SUCH INVOICES. THUS THE A.O. CAME TO A CONCLUSI ON THAT ASSESSEE HAD SUPPLIED GOODS WORTH ` 14,36,308/- TO M/S ELANGO INDUSTRIES LTD., WHICH WAS NOT ACCOUNTED BY IT. ACCORDING TO A.O., 2.4% BEING THE NORMAL GP RATE ADMITTED BY THE ASSESSEE, THIS COULD BE APPLIED ON I.T.A. NO. 392/MDS/12 4 THE UNDISCLOSED TURNOVER OF ` 14,36,308/- AS WELL. THUS, ACCORDING TO HIM, ASSESSEE HAD EARNED A PROFIT OF ` 34,471/- ON THE SALES WORTH ` 14,36,308/- EFFECTED TO M/S ELANGO INDUSTRIES LTD., OUTSIDE THE BOOKS OF ACCOUNTS. COST OF PURCHASE FOR EFFECTING SUCH S ALE WAS WORKED OUT AT ` 14,01,837/-. THIS AMOUNT WAS CONSIDERED AS UNACCO UNTED PURCHASES. THUS AN ADDITION OF ` 34,471/- WAS MADE AS UNACCOUNTED PROFITS AND AN ADDITION OF ` 14,01,837/- WAS MADE AS UNACCOUNTED PURCHASE. 3. APPEAL OF THE ASSESSEE BEFORE CIT(APPEALS) DID N OT MEET WITH SUCCESS. THOUGH THE ASSESSEE ARGUED THAT IT WAS AN ACCOMMODATION TRANSACTION FOR THE BENEFIT OF M/S EL ANGO INDUSTRIES LTD., LD. CIT(APPEALS) DID NOT ACCEPT IT. HE CONFI RMED THE ADDITION. 4. NOW BEFORE US, ADV. S. SRIDHAR, APPEARING FOR TH E ASSESSEE, SUBMITTED THAT M/S ELANGO INDUSTRIES LTD. ON 24 TH MARCH, 2004 CLEARLY STATED THAT AN LC WAS ISSUED IN FAVOUR OF THE ASSES SEE, WHICH WAS DISCOUNTED IN KARUR VYSYA BANK, T. NAGAR BRANCH. A CCORDING TO HIM, THIS LETTER CLEARLY STATED THAT DD WAS ISSUED BY T. NAGAR BRANCH OF THE BANK, BASED ON AN LC OPENED BY M/S ELANGO INDUSTRIE S LTD. SUCH DD WAS CREDITED INTO ASSESSEES BANK ACCOUNT WITH K ARAIKKAL BRANCH. ACCORDING TO HIM, ASSESSEE IN HIS STATEMENT GIVEN O N 24 TH MARCH, I.T.A. NO. 392/MDS/12 5 2004, CLEARLY MENTIONED THAT THE AMOUNT OF ` 13,45,293/-, CREDITED INTO KARAIKKAL BRANCH, WAS A TRANSFER FROM T. NAGAR BRANCH OF KARUR VYSYA BANK. LEARNED A.R., RELYING ON THE STATEMENT RECORDED FROM DEPUTY MANAGER OF KARUR VYSYA BANK, T. NAGAR BRANCH ON 29.5.2006, SUBMITTED THAT M/S ELANGO INDUSTRIES LTD . HAD TRANSACTIONS WITH SAID BRANCH, CORROBORATING ASSESSEES VERSION. ACCORDING TO LEARNED A.R., THE INVOICES FILED BY M/S ELANGO INDU STRIES LTD. WITH T. NAGAR BRANCH, FOR OPENING LC, WERE ALL FABRICATED O NES. ACCORDING TO HIM, INVOICES ISSUED BY THE ASSESSEE WERE ENTIRELY DIFFERENT FROM THE INVOICES FILED BY M/S ELANGO INDUSTRIES LTD. BEFORE THE T. NAGAR BRANCH OF KARUR VYSYA BANK. 5. PER CONTRA, SHRI GURU BASHYAM, APPEARING FOR THE REVENUE, SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. ENTRY IN THE BANK ACCOUNT FOR THE CREDIT OF ` 13,45,293/- ON 3.10.2000 IN KARUR VYSYA BANK, KARAIKKAL BRANCH (PAPER-BOOK P AGE 6) IS TRANSFER BY DD FROM T. NAGAR BRANCH. M/S ELANGO IN DUSTRIES LTD. IN THE LETTER DATED 24 TH MARCH, 2004, COPY OF WHICH HAS BEEN PLACED AT PAPER-BOOK PAGE 38, HAS STATED AS UNDER:- I.T.A. NO. 392/MDS/12 6 MARCH 24, 2004 THE INCOME TAX OFFICER, WARD I (3), TAMBARAM. SIR, REF: YOUR SUMMON DATED 15.03.04. OUR LETTER DATED 17.03.2004 PLEASE REFER TO OUR STATEMENT DATED 17.03.04 WHEREI N WE HAD STATED THAT NO DRAFT HAS BEEN TAKEN IN FAVOUR OF NI DHI STEELS, CHENNAI THROUGH OUR INDIAN BANK, T. NAGAR BRANCH AC COUNT. WE HAVE MAINLY VERIFIED WITH ABOVE BANK ACCOUNT SINCE, NIDHI STEELS, HAVE INFORMED US THAT HE HAD RECEIVED THE DRAFT FRO M INDIAN BANK, T. NAGAR BRANCH. BUT, ON FURTHER PERUSAL OF OUR BO OKS WE FOUND THAT WE HAD ISSUED AN LC IN FAVOUR OF THEM WHICH WA S DISCOUNTED IN KARUR VYSYA BANK, T. NAGAR BRANCH AND DRAFT WAS ISS UED IN FAVOUR OF NIDHI STEELS FOR SUPPLY OF RAW MATERIAL TO US. SINCE, NIDHI STEELS COULD NOT MAKE SUPPLY OF RAW MATERIAL WE INS TRUCTED HIM TO PAY THE AMOUNT BACK. THANKING YOU, FOR ELANGO INDUSTRIES LIMITED SD/- S.A. PREMKUMAR DIRECTOR THESE TWO RECORDS, IN OUR OPINION, CLEARLY PROVE TH AT THE CREDIT IN THE BANK ACCOUNT HAD COME FROM T. NAGAR BRANCH OF KARUR VYSYA BANK AND IT WAS BASED ON AN LC OPENED BY M/S ELANGO INDU STRIES LTD. WITH THE SAID BRANCH OF KARUR VYSYA BANK. ASSESSING OFF ICER, BASED ON I.T.A. NO. 392/MDS/12 7 THE INVOICE COPIES FILED BY M/S ELANGO INDUSTRIES L TD. WITH T. NAGAR BRANCH OF KARUR VYSYA BANK, CAME TO A CONCLUSION TH AT ASSESSEE HAD SUPPRESSED SALES OF ` 14,01,837/- MADE TO THEM. WE DO FIND THAT COPIES OF INVOICE PLACED AT PAPER-BOOK PAGES 1 0 TO 27, PURPORTED TO HAVE BEEN RAISED BY M/S NIDHI STEELS IS ENTIRELY DIFFERENT FROM A COPY OF ITS INVOICE DATED 15.3.2000, PLACED AT PAPE R-BOOK PAGE 51. THE QUESTION, THEREFORE, IS WHICH OF THESE WERE THE ACTUAL INVOICES OF M/S NIDHI STEELS. THE INVOICES, WHICH HAVE BEEN US ED FOR OPENING LC, WERE ALL PURPORTEDLY ISSUED DURING THE PERIOD 2 2.9.2009 TO 24.9.2009. UNLESS AND UNTIL IT CAN BE STATED WITH REASONABLE CERTAINTY THAT THESE INVOICES WERE INDEED RAISED BY M/S NIDHI STEELS, WE ARE OF THE OPINION THAT IT WILL NOT BE POSSIBLE TO CONCLUD E THAT ASSESSEE HAD MADE ANY SALES TO M/S ELANGO INDUSTRIES LTD., FOR T HE AMOUNT MENTIONED IN SUCH INVOICES. COPY OF INVOICE PRODUC ED BY THE ASSESSEE FOR ARGUING THAT THOSE FILED BY M/S ELANGO INDUSTRIES LTD. WERE FRAUDULENT IS PLACED AT PAPER-BOOK PAGE 51. T HIS INVOICE IS DATED 15.3.2000, VIZ ABOUT SIX MONTHS PRIOR TO SEPT EMBER, 2000. HENCE, WE ARE OF THE OPINION THAT THE MATTER REQUIR ES A FRESH VISIT BY THE A.O. ASSESSING OFFICER HAS TO CALL FOR ALL THE INVOICES ISSUED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR AND IF THE INVOICES RAISED BY THE ASSESSEE DURING SEPTEMBER, 2000, ARE IN DIFFERENT I.T.A. NO. 392/MDS/12 8 FORMAT THAN THE ONES FILED BY M/S ELANGO INDUSTRIES LTD. FOR OPENING LC, WE ARE OF THE OPINION THAT ADDITION MADE BY THE ASSESSING OFFICER WOULD NOT BE JUSTIFIED. SINCE THESE HAVE TO BE VER IFIED, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF THE A.O. FOR CONSIDERATION AFRESH IN ACCORDANCE WIT H LAW. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 26 TH OF SEPTEMBER, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 26 TH SEPTEMBER, 2013. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-XII, CHENNAI-34 (4) CIT-VII, CHENNAI. (5) D.R. (6) GUARD FILE