Chalasani Srinivas, Machilipatnam V. THE ITO, WARD -1, Machilipatnam

ITA 417/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2100 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment
• Section: 142(1); 68

Judgement Text

ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , ' BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.417/VIZAG/2013 ( / ASSESSMENT YEAR : 2010-11) CHALASANI SRINIVAS MACHILIPATNAM VS. ITO, WARD-1, MACHILIPATNAM [ PAN: ABBPC9770B] ( / APPELLANT) ( / RESPONDENT ) ./ I.T.A.NO.418/VIZAG/2013 ( / ASSESSMENT YEAR : 2010-11) TAMMANA SURYANARAYANA MACHILIPATNAM VS. ITO , WARD - 1 , MACHILIPATNAM [ PAN: ADHPT8046M] ( / APPELLANT) ( / RESPONDENT ) / APPELLANT BY : SHRI G.V.N. HARI, AR '# / RESPONDENT BY : SHRI M.N. MURTHY NAIK, DR / DATE OF HEARING 28.01.2016 ' / DATE OF PRONOUNCEMENT : 05.02.2016 ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEES, ARE DIR ECTED AGAINST THE SEPARATE, BUT IDENTICAL ORDERS OF CIT(A), VIJAYAWAD A DATED 5.4.2013 FOR THE ASSESSMENT YEAR 2010-11. SINCE, THE FACTS ARE I DENTICAL AND ISSUES INVOLVED IN THESE APPEALS ARE COMMON, THEY HAVE BEE N CLUBBED, HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDE R FOR THE SAKE OF CONVENIENCE. ITA NO.417/VIZAG/2013: 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESS EE IS AN INDIVIDUAL INVOLVED IN THE BUSINESS OF RUNNING RICE MILL, FILE D HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 14.9.2010 DECLAR ING TOTAL INCOME OF RS.3,91,520/-. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS THE AC T) AND LATER CONVERTED INTO SCRUTINY AND ACCORDINGLY, NOTICES U/ S 143(2) & 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE A UTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FURNISHED THE REQUISITE INFORMATION. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED TRADE ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 3 CREDITORS/RYOT CREDITORS TO THE TUNE OF RS.64,93,08 0/-. TO ASCERTAIN THE CORRECTNESS OF CLAIM OF THE ASSESSEE, THE A.O. DIRE CTED THE INSPECTOR OF INCOME-TAX (ITI), TO CAUSE ENQUIRIES WITH SUCH CRED ITORS IN ORDER TO EXAMINE THEIR GENUINENESS AND CREDITWORTHINESS OF T HE TRANSACTIONS. THE ITI AFTER CAUSING THE ENQUIRIES IN HIS REPORT S TATED THAT 6 CREDITORS AS LISTED BY THE A.O. IN HIS ORDER HAVE NOT CONFIRM ED ANY BUSINESS TRANSACTION WITH THE ASSESSEE FIRM. THEREFORE, THE A.O. HELD THAT THE ASSESSEE HAS NOT PROVED VERY GENUINENESS OF THE TRA NSACTION AND HENCE, A SUM OF RS.8,54,752/- WAS ADDED AS UNEXPLAINED CAS H CREDIT U/S 68 OF THE ACT. SIMILARLY, THE A.O. NOTICED THAT THE ASSE SSEE HAS DEBITED VARIOUS EXPENDITURES UNDER THE HEAD FREIGHT CHARGES , LOADING CHARGES AND COOLIE EXPENSES. TO SUBSTANTIATE THE CLAIM, TH E ASSESSEE WAS ASKED TO FURNISH THE BILLS & VOUCHERS IN SUPPORT OF THE E XPENDITURE DEBITED TO P&L ACCOUNT. ON VERIFICATION OF THE BILLS & VOUCHE RS SUBMITTED BY THE ASSESSEE, THE A.O. NOTICED THAT THE EXPENDITURES IN CURRED UNDER THE HEAD LOADING CHARGES, FREIGHT CHARGES AND COOLIE EX PENSES ARE SUPPORTED BY SELF MADE VOUCHERS AND DOES NOT HAVE A NY SUPPORTING BILLS & VOUCHERS. THEREFORE, THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT PROVED THE CLAIM OF EXPENDITURE WITH SUPPOR TING EVIDENCES. HENCE, DISALLOWED 15% OF SUCH EXPENDITURES AND ADDE D TO THE TOTAL INCOME. ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 4 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE HAS MADE WRITTEN SUBMISSIONS AND STATED THAT AS REGARDS THE TRADE CREDITORS, HE HAD PURCHASED PADDY FROM FARMERS ON CREDIT AND SUBS EQUENTLY MADE THE PAYMENT. THE ASSESSEE FURTHER SUBMITTED THAT H E IS INTO THIS BUSINESS FROM PAST 30 YEARS AND HE IS ALSO A RICE M ILLER IN AND AROUND MACHILIPATNAM. BECAUSE OF HIS REPUTATION IN THE BU SINESS, THE FARMERS HAVE SUPPLIED THE PADDY ON CREDIT AND SUBSEQUENTLY TAKEN MONEY. THE ASSESSEE FURTHER SUBMITTED THAT IT IS NOT A CASE OF THE A.O. THAT THERE IS A MISTAKE IN THE PURCHASE MADE BY THE ASSESSEE, BUT THE A.O. ONLY DOUBTED THE CREDITORS BY STATING THAT THE FARMERS A RE NOT AVAILABLE WHEN THE ITI WAS VISITED THE FARMERS. THE ASSESSEE FURT HER SUBMITTED THAT JUST BECAUSE, THE FARMERS HAVE NOT CONFIRMED THE TR ANSACTIONS BEFORE ITI, IT CANNOT BE HELD THAT THE TRANSACTIONS ARE NO T GENUINE. SIMILARLY, WITH REGARD TO ADHOC DISALLOWANCE ON EXPENDITURE, T HE ASSESSEE SUBMITTED THAT THE A.O. HAS MADE 15% DISALLOWANCE O F SUCH EXPENDITURE WHICH IS OF HIGHER SIDE, THEREFORE REQU ESTED TO SCALE DOWN THE DISALLOWANCE TO 5%. THE CIT(A), HOWEVER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ADDITIONS MADE TOWARDS TRADE CREDITORS U/S 68 OF THE ACT. WHILE DOING SO, THE CIT WAS OF THE OPINION THAT THE A.O. HAS RIGHTLY MADE THE ADDITION S, AS THE ASSESSEE ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 5 HAS NOT PROVED THE GENUINENESS OF THE TRANSACTIONS. IT WAS FURTHER OBSERVED THAT THE TRANSACTIONS ARE DONE IN CASH AND DUE TO CLOSE NEXUS BETWEEN THE FARMERS AND THE MILLERS, IN MY OPINION, THE A.O. TOOK A RIGHT DECISION IN SUBJECTING SUCH CREDITS FOR TAX A ND ACCORDINGLY, CONFIRMED THE ADDITIONS MADE BY THE A.O. TOWARDS CA SH CREDITS U/S 68 OF THE ACT. SIMILARLY, THE CIT(A) AFTER CONSIDERING T HE EXPLANATIONS FURNISHED BY THE ASSESSEE, SCALED DOWN THE ADHOC DI SALLOWANCES OF EXPENDITURE TO RS.30,000/-. 4. AGGRIEVED BY THE CIT(A)S ORDER, THE ASSESSEE IS IN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS OF THE CASE AND ALSO THE LAW APPLICABLE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.8,54,752/- MADE BY THE ASSESSING OFFICER TOWARDS ALLEGED UNEXPLAINED INVESTMENT WITH REGARD TO CREDITS IN TH E ACCOUNT OF FARMERS WHO SUPPLIED PADDY TO THE APPELLANT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUG HT TO HAVE APPRECIATED THAT A CREDIT BALANCE IN BOOKS DOES NOT TANTAMOUNT TO INVESTMENT AND HENCE THE PROVISIONS OF S.68 ARE NOT APPLICABLE TO THE CASE O F THE APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUG HT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN GIVI NG OPPORTUNITY TO THE APPELLANT TO REBUT THE CONTENTS OF THE REPORT SUBMITTED BY THE IN SPECTOR OF INCOME TAX. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN ASSUMING THAT THERE IS A CLOSE NEXUS BETWEEN THE APPELLANT A ND THE FARMERS AND IGNORING THE OVERWHELMING EVIDENCE IN FAVOR OF THE APPELLANT IN THE FORM OF CONFIRMATION FETTERS AND ALSO THE DETAILS OF LAND HOLDINGS OF TH E FARMERS. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN SUSTAINING TO THE EXTENT OF RS,30000 THE AD HOC DISALLOWANCE M ADE BY THE ASSESSING OFFICER @15% OF THE OTHER EXPENSES CLAIMED BY THE APPELLANT . ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 6 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 5. THE LD. A.R. SUBMITTED THAT THE CIT(A) WAS ERRED IN CONFIRMING THE ADDITION OF RS. 8,54,752/- TOWARDS UNEXPLAINED CASH CREDITS WITH REGARD TO THE CREDITS IN THE ACCOUNT OF FARMERS TOWARDS SU PPLY OF PADDY. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS SUBMIT TED CONFIRMATION LETTERS FROM CREDITORS AND ALSO FURNISHED THE NECES SARY BILLS & VOUCHERS FOR HAVING PURCHASED THE PADDY FROM THE FARMERS. T HE A.O. WITHOUT APPRECIATING THE FACTS PROPERLY SIMPLY MADE ADDITIO NS BASED ON THE ITIS REPORT. THE A.R. FURTHER SUBMITTED THAT WHEN THE IT I VISITED THE FARMERS, THEY WERE NOT AVAILABLE IMMEDIATELY, HOWEVER, ALL T HE FARMERS HAVE CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE BY FIL ING THE CONFIRMATION LETTERS. THEREFORE, THE A.O. WAS NOT CORRECT IN BR USHED ASIDE EVIDENCES FILED IN THE FORM OF CONFIRMATION LETTERS AND ALSO MERELY RELIED UPON ITI REPORT FOR MAKING THE ADDITIONS. SIMILARLY, AS FAR AS THE DISALLOWANCE OF EXPENDITURE IS CONCERNED, THE A.R. SUBMITTED THAT T HE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITIONS TO THE EXTENT OF RS.30,000/-, AS THE ASSESSEE HAS FURNISHED BILLS & VOUCHERS IN SUPPORT OF THE EXPENDITURE DEBITED IN PROFIT & LOSS ACCOUNT. THEREFORE, REQUE STED TO DELETE THE ADDITIONS MADE BY THE A.O. ON THE OTHER HAND, THE L D. D.R. STRONGLY SUPPORTED THE ORDER OF CIT(A). ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 7 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE FIRST ISSUE, CAME UP FOR OUR CONSIDERATION IS ADDITIONS TOWARDS TRADE CREDITORS U/S 68 OF THE ACT . THE A.O. MADE ADDITIONS OF RS.8,54,752/- TOWARDS TRADE CREDITORS, ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE TRANSACTIONS. THE A.O. WAS OF THE OPINION THAT THESE CREDITORS HAVING DENIED ANY BUSINESS TRANSACTIONS WITH THE ASSESSEE, THEREFORE, THE ASSE SSEE FAILED TO PROVE THE VERY GENUINENESS OF THE TRANSACTIONS. IT IS TH E CONTENTION OF THE ASSESSEE THAT HE HAS FURNISHED CONFIRMATION LETTERS FROM THE CREDITORS, THEREFORE, DISCHARGED THE INITIAL BURDEN CAST UPON HIM. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. WAS NOT CORRECT IN MAKING ADDITIONS MERELY ON THE BASIS OF THE ITIS REPORT, BECAUSE WH EN THE ITI VISITED THE FARMERS, THEY WERE IMMEDIATELY NOT AVAILABLE. HOWE VER, ALL THE FARMERS HAVE FILED CONFIRMATION LETTERS FOR HAVING SUPPLIED THE PADDY TO THE ASSESSEE FIRM. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS PAID THE AMOUNTS SUBSEQUENTLY AND PROOF OF WHICH HAS BEE N FILED BEFORE THE A.O. AS WELL AS CIT(A). HOWEVER, THE A.O. AS WELL AS CIT(A) HAVE BRUSHED ASIDE THE EVIDENCES FILED BY THE ASSESSEE A ND MADE THE ADDITIONS MERELY BASED ON THE ITIS REPORT. ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 8 7. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTH ORITIES AND SUBMISSIONS MADE BY THE ASSESSEE. ON PERUSAL OF TH E RECORDS, WE FIND THAT WHEN ITI CAUSED ENQUIRIES, THE CREDITORS HAVE DENIED ANY BUSINESS TRANSACTION WITH THE ASSESSEE. THEREFORE, THE BASIC REQUIREMENT OF GENUINENESS OF THE TRANSACTION IS ABSENT. THOUGH, T HE ASSESSEE CLAIMS THAT HE HAS FURNISHED CONFIRMATION LETTERS BEFORE T HE A.O. AS WELL AS CIT(A), NO SUCH FINDINGS WERE RECORDED IN THE ORDER S OF THE LOWER AUTHORITIES. EVEN BEFORE US, THE ASSESSEE FAILED T O FURNISH EVIDENCES IN THE FORM OF CONFIRMATION LETTERS FOR HAVING CONFIRM ED THE CREDITORS. MERELY STATING THAT HE HAS FILED CONFIRMATION LETTE RS WOULD NOT SUFFICIENT COMPLIANCE OF THE PROVISIONS OF SECTION 68 OF THE A CT. THE A.O. CATEGORICALLY STATED THAT THE CREDITORS HAVE DENIED THE TRANSACTION WITH THE ASSESSEE. THEREFORE, IT IS ABUNDANTLY CLEAR THA T THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE TRANSACTIONS. ONCE, THE ASSESSEE FAILED TO PROVE THE INITIAL BURDEN CASTS UPON HIM, BY FURN ISHING IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINES S OF THE CREDITORS, THE ADDITION MADE BY THE A.O. U/S 68 OF THE ACT SHO ULD SUSTAIN. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. HAS RIGHTLY MADE THE ADDITIONS. THE CIT(A), AFTER CONSIDERING THE EXPLAN ATION OF THE ASSESSEE, UPHELD THE A.O. ORDER. WE DO NOT FIND ANY ERROR OR I NFIRMITY IN THE ORDER ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 9 OF THE CIT(A). HENCE, WE INCLINED TO UPHOLD THE OR DER OF THE CIT(A) AND REJECT THE GROUND RAISED BY THE ASSESSEE. 8. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS WHETHER THE CIT(A) IS RIGHT IN SUSTAINING THE ADDITIONS OF RS.3 0,000/- TOWARDS ADHOC DISALLOWANCE OF EXPENDITURE. THE A.O. MADE 15% DIS ALLOWANCE OF EXPENDITURE UNDER THE HEAD FREIGHT CHARGES, LOADING CHARGES AND COOLIE CHARGES. THE A.O. WAS OF THE OPINION THAT THE ASSE SSEE COULD NOT FURNISHED BILLS & VOUCHERS IN SUPPORT OF THE EXPEND ITURE CLAIMED UNDER THESE HEADS. THE CIT(A) AFTER CONSIDERING THE EXPL ANATIONS FURNISHED BY THE ASSESSEE RESTRICTED THE ADDITIONS TO RS.30,000/ -. THE FACT REMAINS SAME EVEN BEFORE US. THE ASSESSEE HAS NOT FILED AN Y EVIDENCE TO COUNTER THE FINDINGS OF THE FACTS RECORDED BY THE C IT(A). THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY REST RICTED THE ADDITIONS TO RS.30,000/- AND WE DO NOT SEE ANY REASON TO INTERFE RE IN THE ORDER OF CIT(A). HENCE, WE INCLINED TO UPHELD THE ORDER OF THE CIT(A) AND REJECT THE GROUND RAISED BY THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NOS.417&418/VIZATG/2013 CHALASANI SRINIVAS & TAMMANA SURYANARAYANA, MACHILI PATNAM 10 ITA 418/VIZAG/2013: 10. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL IS IDENTICAL TO ITA NO.417/VIZAG/2013. THEREFORE, FOR THE REASONS RECOR DED IN THE PRECEDING PARAGRAPH, WE DISMISS THE APPEAL FILED BY THE ASSESSEE. 11. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE ES IN ITA NOS.417 & 418/VIZAG/2013 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 5 TH FEB16. SD/- SD/- (. ) ( . ) ( V. DURGA RAO ) ( G. MANJUNATHA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ) /VISAKHAPATNAM: - / DATED : 5.2.2016 VG/SPS ' /) 0)/ COPY OF THE ORDER FORWARDED TO :- 1. / THE APPELLANT SRI CHALASANI SRINIVAS, PROP: SRINIVASA TRADERS, PLOT NO.D.NO.20-97, GANDHINAGAR, MACHILIPATNAM 2. / THE APPELLANT SRI TAMMANA SURYANARAYANA, PROP. SW AMY AYYAPPA TRADERS, PLOT NO.E1-D1, INDUSTRIAL ESTATE, MACHILIP ATNAM. 3. '# / THE RESPONDENT THE ITO WARD-1, MACHILIPATNAM 4. 4 / THE CIT, VIJAYAWADA 5. 4 () / THE CIT (A), VIJAYAWADA 6. ) ' 9, ' 9 , ) / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER