SMT. VENKATESWARAN LAKSHMI, CHENNAI V. ITO, NCW - 1 (3), CHENNAI

ITA 637/CHNY/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4958 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-06-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 25-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Keywords: Unexplained cash credit; Onus to prove; Set aside
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ ITA NO.:637/CHNY/2020 / ASSESSMENT YEAR: 2015-16 SMT. VENKATESWARAN LAKSHMI, NEW NO.6, TANJORE ROAD, T.NAGAR, CHENNAI 600 017. PAN: ABAPL 4312M V. THE INCOME TAX OFFICER , NON CORPORATE WARD - 1(3), CHENNAI 34. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE /RESPONDENT BY : SMT. R. ANITHA, ADDL.CIT /DATE OF HEARING : 21.09.2021 /DATE OF PRONOUNCEMENT : 27.09.2021 / O R D E R PER G MANJUNATHA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 2, CHENNAI, DATED 21.02.2020 AND PERTAINS TO ASSESSMENT YEAR 2015-16. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS, AND CIRCUMSTANCES OF THE CASE. 2. THE COMMISSIONER OF INCOMETAX (APPEALS) ERRED IN CONFIRMING THE ADDITION UNDER SECTION 68 OF THE SUNDRY CREDITORS AMOUNTING TO RS.2517730/- STANDING TO THE CREDIT OF SRIDHAR B CO AS UNDISCLOSED SUNDRY CREDITS OF THE CURRENT YEAR. 2 I.T.A. NO.637/CHNY/2020 2.1 THE COMMISSIONER OF INCOMETAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT AS PER THE ACCOUNTS OF THE APPELLANT, THERE WAS A DEBIT BALANCE OF RS.13,38,163 DUE FROM VERY SAME ENTITY M/S.SRIDHAR & CO AND THE RESULTANT AMOUNT WAS A DEBIT BALANCE OF RS.10,61,462.24 RECEIVABLE FROM SRIDHAR B CO. HENCE, THE CREDIT ENTRY WHICH WAS PART OF THE TRANSACTIONS WITH M/S.SRIDHAR & CO NOT BE ASSESSED IN ISOLATION AS UNEXPLAINED CREDIT. 2.2 THE COMMISSIONER OF INCOMETAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE CORRESPONDING ENTRIES IN THE BOOKS OF ACCOUNT OF M/S.SRIDHAR & CO HAS BEEN ACCEPTED BY THE DEPARTMENT. 3. THE COMMISSIONER OF INCOMETAX (APPEALS) ERRED 1N CONFIRMING THE ADDITION OF AN AMOUNT OF RS.10,09,223/- SHOWN AS INOPERATIVE ACCOUNT BUT HAD NOT WRITTEN OFF. 3.1 THE CIT(APPEALS) OUGHT TO HAVE APPRECIATED THAT ANY AMOUNT WHICH CONTINUES TO BE SHOWN AS CREDIT BALANCE IN THE BOOKS OF ACCOUNT AS ON DATE OF CLOSURE OF THE BUSINESS OF THE LAST DATE OF THE PREVIOUS YEAR CANNOT BE ADDED BACK AS INCOME OF THE APPELLANT. 4. THE COMMISSIONER OF INCOMETAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD INFACT RECE1VED A SUM OF RS.1,63,884.10 OUT OF THE SAID AMOUNT OF RS.10,09,023/- AND THE BALANCE AMOUNT WAS WRITTEN BACK AND OFFERED TO TAX IN THE NEXT ASSESSMENT YEAR VIZ AY 2016-17. HENCE ADDITION OF RS.10,09,233/- DURING THE CURRENT YEAR REQUIRES TO BE DELETED. 5. THE COMMISSIONER OF LNCOMETAX (APPEALS) ERRED IN ADDING A SUM OF RS.22,41,030/- SHOWN AS AMOUNT DUE TO M/S. CHANDILYA TRADERS AS UNEXPLAINED CREDIT WITHOUT APPRECIATING THE FACTS OF THE CASE AND ENTRIES IN THE BOOKS OF ACCOUNT OF THE APPELLANT. 5.1 THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE CREDIT AMOUNT WAS TRANSFERRED FROM M/S.SREENIVAS & CO ALONG WITH CORRESPONDING DEBIT ENTRY FOR THE SAME AMOUNT AS RECEIVABLE FROM M/S.SREENIVASA & CO, IN VIEW OF THE BALANCING ENTRIES. 5.2 THE COMMISSIONER OF INCOMETAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE MOVEMENT OF THE TRANSACTION WHEREBY SREENIVAS LEATHER PVT LTD TRANSFERRED THE LIABILITY FOR PURCHASE OF GOODS TO M/S.V.SREENIVAS & CO WITH THE CORRESPONDING DEBIT AS DUE FROM SREENIVASA LEATHER PVT LIMITED. AGAIN, V SREENIVASA & CO HAD TRANSFERRED THIS AMOUNT OF RS.22,41,030/- WITH THE CORRESPONDING DEBIT IN FAVOUR OF V.SREENIVAS & CO AS A CREDIT TRANSFERRED TO THE APPELLANT (SHOWN DUE TO M/S. CHANDILYA TRADERS ) IS BALANCED BY THE CORRESPONDING DEBIT IN FAVOUR OF V.SREENIVASA & CO AND THE FACT THAT DEBIT HAS BEEN REALIZED WOULD SHOW THAT THE CREDIT CANNOT BE ADDED AS UNEXPLAINED CREDIT. 3 I.T.A. NO.637/CHNY/2020 5.3 THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE LIABILITY ACCRUED IN RESPECT OF PURCHASE OF LEATHER FROM M/S.C&E AND AS THERE WAS SOME DISPUTE REGARDING THE QUALITY OF SUPPLY OF GOODS THE LIABILITY WAS TRANSFERRED TO THE APPELLANT WHO IS ONE OF THE AGENTS OF THE SUPPLIER OF GOODS. HENCE, ASSIGNMENT OF LIABILITY WAS FOR BUSINESS REASONS. 5.5 THE COMMISSIONER OF LNCOMETAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT WHEN THE SOURCE AND REASON FOR ASSIGNMENT OF CREDIT IS KNOWN AND THERE WAS A CORRESPONDING MATCHING DEBIT IN FAVOUR OF THE ASSIGNOR, THE AMOUNT OF CREDIT BALANCE CANNOT BE ADDED AS UNEXPLAINED CREDIT. 6 THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM BUSINESS AND OTHER SOURCES, FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015-16 ON 30.09.2015, ADMITTING TOTAL INCOME OF RS.68,470/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED UPON THE ASSESSEE TO FILE CONFIRMATION LETTER FROM SUNDRY CREDITORS TO PROVE GENUINENESS OF CREDITORS SHOWN IN BOOKS OF ACCOUNTS. THE ASSESSEE HAS FILED CONFIRMATION LETTER FROM SUNDRY CREDITORS TO THE TUNE OF RS.86,70,709/- BUT NO DETAILS WAS FILED FOR REMAINING SUNDRY CREDITORS AMOUNTING TO RS.35,26,953/-. OUT OF THIS, SUNDRY CREDITORS APPEARED IN THE NAME OF M/S. C & E LTD., FOR RS.22,41,030/- AND SUNDRY CREDITORS IN THE NAME OF M/S. SRIDHAR & CO. FOR RS.2,76,700/- WAS CONSIDERED NON- GENUINE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY, THE AO NOTICED THAT THE ASSESSEE HAS MAINTAINED LEDGER 4 I.T.A. NO.637/CHNY/2020 ACCOUNT IN THE NAME OF INOPERATIVE ACCOUNT AND CARRIED A BALANCE OF RS.10,09,223/-. SINCE, NO DETAILS WERE FILED TO JUSTIFY CREDITS IN BOOKS OF ACCOUNTS OF THE ASSESSEE, THE AO HAS TREATED THE SAME AS CESSATION OF LIABILITY AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, BUT COULD NOT SUCCEED. THE LD.CIT(A) FOR THE REASONS STATED IN HIS APPELLATE ORDER, SUSTAINED ADDITION MADE BY THE AO TOWARDS SUNDRY CREDITORS FOR NON-FURNISHING OF CONFIRMATION LETTERS AND OTHER EVIDENCES AND HAS ALSO CONFIRMED ADDITION TOWARDS CESSATION OF LIABILITY. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION MADE BY THE AO TOWARDS SUNDRY CREDITORS AMOUNTING TO RS.25,17,730/- STANDING IN THE NAME OF TWO CREDITORS IGNORING EXPLANATION FURNISHED BY THE ASSESSEE. THE LD.AR FURTHER REFERRING TO PAPER-BOOK SUBMITTED THAT LIABILITY TOWARDS M/S. C & E LTD., HAD BEEN TRANSFERRED BY ONE OF GROUP COMPANY M/S. SRINIVAS LEATHERS PVT. LTD., TO M/S. M/S. V. SREENIVAS & CO. AND FURTHER SAID AMOUNT HAS BEEN ULTIMATELY TRANSFERRED TO M/S. CHANDILYA TRADERS, ANOTHER GROUP COMPANY WHERE SMT. V. LAKSHMI IS A PROPRIETOR. OUT OF AMOUNT TRANSFERRED, THE ASSESSEE HAS MADE 5 I.T.A. NO.637/CHNY/2020 PAYMENT OF RS.10 LAKHS AND BALANCE AMOUNT IS STILL OUTSTANDING. HE FURTHER SUBMITTED THAT AS REGARDS ADDITION TOWARDS RS.2,76,700/- IN THE NAME OF M/S. SRIDHAR & CO., THE AO HAS MISTOOK THE FACTS WITHOUT CONSIDERING DEBIT AND CREDIT BALANCES APPEARED IN THE PARTY NAME UNDER THE GROUP SUNDRY DEBTORS AND CREDITORS. IF YOU NETTED OF THE AMOUNTS, THERE IS NO DIFFERENCE AS COMPUTED BY THE AO. THE LD.AR FURTHER REFERRING TO ANOTHER ADDITION OF RS.10,09,223/- AS CESSATION OF LIABILITY, SUBMITTED THAT THE ASSESSEE HAS KEPT NON- RECOVERABLE AMOUNT UNDER INOPERATIVE ACCOUNT, HOWEVER, IN SUBSEQUENT YEAR THE SAME HAS BEEN WRITTEN OFF AND CREDITED TO PROFIT & LOSS ACCOUNT. THEREFORE, ADDITION TOWARDS LIABILITY WHICH IS CONTINUED IN BOOKS OF ACCOUNTS FOR RELEVANT ASSESSMENT YEAR AND FURTHER WRITTEN OFF IN THE BOOKS IN SUBSEQUENT FINANCIAL YEAR CANNOT BE CONSIDERED AS CESSATION OF LIABILITY. THEREFORE, HE SUBMITTED THAT TO VERIFY THESE FACTS, THE MATTER MAY BE SET ASIDE TO THE FILE OF THE AO. 5. THE LD.DR ON THE OTHER HAND STRONGLY SUPPORTING ORDER OF THE AO & THE LD.CIT(A) SUBMITTED THAT THE ASSESSEE HAS BROUGHT OUT NEW FACTS WHICH WERE NOT BEFORE THE AO AS WELL AS THE CIT(A). THEREFORE, ON THIS BASIS THE APPEAL CANNOT BE SET ASIDE TO THE FILE OF THE AO. SHE FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT FILE 6 I.T.A. NO.637/CHNY/2020 CONFIRMATION LETTER FROM CREDITORS BEFORE THE AO AND THE LD.CIT(A) AND SAID LAPSE IS CONTINUED EVEN BEFORE THE TRIBUNAL. THEREFORE, IT IS AMPLY CLEAR THAT THE ASSESSEE HAS FAILED TO DISCHARGE HER ONUS TO PROVE LIABILITY SHOWN IN BOOKS OF ACCOUNTS AND HENCE, THE AO WAS RIGHT IN MAKING ADDITIONS TOWARDS SUNDRY CREDITORS AS UNEXPLAINED CREDIT AND INOPERATIVE ACCOUNT AS CESSATION OF LIABILITY. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIALS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE HAS TAKEN LIABILITY OF ANOTHER GROUP COMPANY TO HER BOOKS OF ACCOUNTS AND CLAIMED THAT BECAUSE THERE ARE INTERCONNECTING TRANSACTIONS BETWEEN GROUP COMPANIES, LIABILITY HAS BEEN TRANSFERRED IN BOOKS OF ACCOUNTS OF THE ASSESSEE TO MAKE PAYMENT TO THE PARTY. THE ASSESSEE FURTHER CLAIMED THAT SAID LIABILITY WAS TRANSFERRED FROM M/S. V. SREENIVAS & CO., TO ASSESSEE BOOKS IN THE YEAR 2010-11 AMOUNTING TO RS.32,41,030/- AND OUT OF WHICH, A SUM OF RS.10 LAKHS HAS BEEN PAID IN FINANCIAL YEAR 2014-15 RELEVANT TO ASSESSMENT YEAR 2015-16. THE REMAINING BALANCE AMOUNT OF RS.22,41,030/- IS CONTINUED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE AO HAS MADE ADDITION TOWARDS SUNDRY CREDITORS ONLY ON THE GROUND THAT THE ASSESSEE COULD NOT FURNISH CONFIRMATION LETTER FROM THE PARTIES. EXCEPT THIS, THE AO HAS NOT DOUBTED TRANSACTIONS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE INCLUDING 7 I.T.A. NO.637/CHNY/2020 TRANSFER FROM ANOTHER GROUP COMPANY ACCOUNT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT MERELY FOR NON-FURNISHING OF CONFIRMATION LETTER FROM THE PARTIES, GENUINE LIABILITY ARAISED IN NORMAL TRADING ACTIVITY CANNOT BE CONSIDERED AS UNEXPLAINED CREDIT. BUT, FACT REMAINS THAT THE ASSESSEE HAS PUT UP NEW FACTS WHICH ARE NOT AVAILABLE TO THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS, WHICH IS EVIDENT FROM THE FINDING GIVEN BY THE LD.AO THAT HE WENT ON TO MAKE ADDITIONS ONLY FOR NON-SUBMISSION OF CONFIRMATION LETTERS. THEREFORE, TO ASCERTAIN THE FACTS WITH REGARD TO NATURE OF LIABILITY AND GENUINENESS OF SUCH TRANSACTIONS, THE MATTER NEEDS TO BE RE- EXAMINED BY THE AO. AS REGARDS, ADDITION TOWARDS LIABILITY IN THE NAME OF M/S. SRIDHAR & CO., IT WAS THE EXPLANATION OF THE ASSESSEE THAT THERE WAS A CREDIT AND DEBIT BALANCE IN THE SAME PARTY ACCOUNT, IF BOTH BALANCES ARE NETTED OFF, THEN THERE IS NO DIFFERENCE AS CLAIMED BY THE AO. THE ASSESSEE HAS FILED LEDGER ACCOUNTS OF DEBIT AND CREDIT BALANCES. THE FACT NEEDS TO BE VERIFIED. HENCE, WE SET ASIDE THE ISSUE OF ADDITION TOWARDS SUNDRY CREDITORS AS UNEXPLAINED CREDIT AND DIRECT THE AO TO VERIFY EVIDENCES FILED BY THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 7 INSOFAR AS, ADDITION TOWARDS INOPERATIVE ACCOUNT, ALTHOUGH THE AO HAS MADE ADDITION OF RS.10,09,223/-, THE ASSESSEE HAS 8 I.T.A. NO.637/CHNY/2020 RECOVERED PART OF LIABILITY IN THE SUBSEQUENT FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2016-17 AND BALANCE AMOUNT HAS BEEN WRITTEN OFF AS IRRECOVERABLE AND OFFERED TO TAX. THE ASSESSEE HAS FILED NECESSARY EVIDENCES TO PROVE THAT PART OF LIABILITY HAS BEEN RECOVERED AND REMAINING AMOUNT WAS WRITTEN OFF AND CREDITED TO PROFIT & LOSS ACCOUNT. BUT, FACT REMAINS THAT THESE FACTS WERE NOT EXAMINED BY THE AO AND HENCE, THIS ISSUE NEEDS TO BE VERIFIED BY THE AO IN LIGHT OF EVIDENCES FILED BY THE ASSESSEE. THEREFORE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO RECONSIDER THE ISSUE IN LIGHT OF VARIOUS EVIDENCES FILED BY THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE ORDER PRONOUNCED IN THE COURT ON 27 TH SEPTEMBER, 2021 AT CHENNAI. SD/- SD/- ( . ) (DUVVURU RL REDDY) / JUDICIAL MEMBER ( . ) (G. MANJUNATHA) /ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 27 TH SEPTEMBER, 2021 RSR 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. /GF.