ITO, CHENNAI V. M/s. Lexpo International, CHENNAI

ITA 649/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64226 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 29-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAJAGOPAL JT
• Assessee Lawyers: S N SURANA
• Keywords: Unexplained cash credit; Source of fund
• Section: 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI , ACCOUNTANT MEMBER AND SHRI V. DURGA RAO , JUDICIAL MEMBER ] I.T.A.NO. 649 /MDS/2012 ASSESSMENT YEAR : 2008 - 09 THE INCOME TAX OFFICER BUSINESS WARD XIII(3) CHENNAI VS M/S LEXPO INTERNATIONAL FLAT NO.E - 2 - 6, GEMNI PARSN APTS. OLD NO.599/NEW NO.448 CATHEDRAL GARDEN ROAD ANNA SALAI, CHENNAI 600 006 [PAN AAAFL 1977F] ( APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. RAJAGOPAL, JT. CIT RESP ONDENT BY : SHRI S.N.SURANA DATE OF HEARING : 28 - 08 - 2012 DATE OF PRONOUNCEMENT : 30 - 08 - 2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) - XII, CHENNAI, DATE D 21.12.2011. 2 . GROUND NOS.1 & 4 OF THE APPEAL ARE GENERAL IN NATURE AND HENCE, REQUIRES NO SEPARATE ADJUDICATION BY US. 3 . GROUND NO.2 OF THE APPEAL READS AS UNDER: I.T.A.NO. 649/ 12 : - 2 - : 2.1 THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF SERVICE TAX TO THE RETURNED INCOME. 2.2 THE LD. CIT(A) FAILED TO NOTE THAT THE SERVICE TAX IS NOT AN ALLOWABLE EXPENDITURE U/S 30 TO 36 OF THE INCOMETAX ACT, 1961. 2.3 THE ID CIT(A) OUGHT TO HAVE NOTED THAT THE SERVICE TAX IS TO BE COLLECTED ON BEHALF OF THE GOVERNMENT FROM THE PER SON TO WHOM SERVICES ARE RENDERED AND PAID INTO THE GOVERNMENT ACCOUNT BY THE DEDUCTOR AS IN THE CASE OF EXCISE DUTY, VAT, ETC, AND NOT AN ALLOWABLE EXPENDITURE AS PER THE IT ACT, 1961. 4 . AT THE TIME OF THE HEARING, THE DR SUBMITTED THAT HE WAS NOT PRESS ING THIS GROUND OF APPEAL, THEREFORE, THIS GROUND IS DISMISSED AS NOT PRESSED. 5 . GROUND NO.3 OF THE APPEAL READS AS UNDER: 3.1 THE LD. CIT(A) DELETED THE ADDITION OF UNPROVED SUNDRY CREDITORS U/S 68. 3.2 THE LD. CIT(A) FAILED TO NOTE THAT WHEN THE ASSES SEE CLAIM LIABILITY OF PAYMENT TOWARDS SUNDRY CREDITORS IN THE BALANCE SHEET, THE ASSESSEE IS REQUIRED TO PROVE IDENTITY OF THE CREDITORS AND ALSO GENUINENESS OF THE TRANSACTIONS. 3.3 IT IS SUBMITTED THAT THE CIT(A) OUGHT TO HAVE NOTED THAT THE INABIL ITY TO PROVE COMPLETE IDENTITY OF THE CREDITOR AND SOURCE OF FUNDS CONSTITUTE FAILURE ON THE PART OF THE ASSESSEE TO DISCHARGE ONUS OF PROOF OF GENUINENESS OF THE TRANSACTION U/S 68. 6 . THE CIT(A) HAS DECIDED THE ISSUE BY OBSERVING AS UNDER: B) UNPROVE D SUNDRY CREDITORS ` 28, 11,200: THE ASSESSING OFFICER IN HIS ORDER OBSERVED THAT THERE ARE CERTAIN UNPROVED CREDITORS IN THE ASSESSEE'S BOOKS OF ACCOUNTS AMOUNTING TO ` 28,1L,200/ - AND BROUGHT THE SAME TO TAX U/S.68 OF THE ACT. THE RELEVANT PORTION OF THE ORDER IS - I.T.A.NO. 649/ 12 : - 3 - : 'FURTHER TO THE ABOVE, THE ASSESSEE'S REPRESENTATIVE FILED CONFIRMATIONS FROM THE FOLLOWING PERSONS: I ) M/S BOKARIA TRADERS ` 6,26,048 II ) FUZAIL AHMED, PROP.FAIZAL LEATHERS ` 7,45,080 III ) M/S SKIN TRADE AGENCIES ` 9,91,120 IV ) M/S GOLU & CO. ` 50,000 V ) RAMESH BROTHERS ` 10,000 IN RESPECT OF M /S . BOKARIA TRADERS COPIES OF THE RETURN OF INCOME ALONG WITH ACCOUNT COPIES ARE FILED. IN RESPECT OF SL.NO.(IV)&(V), THE ACCOUNT COPIES ALONGWITH CONFIRMATION WAS FILED BY SHRI AJEET CHAND BHANDARI PROP. OF M/ S A.RAMESH BROTHERS AND IN RESPECT OF M/ S. GOLU & CO. PROP. BEING HIS WIFE. IN RESPECT OF SI. NO. (II) & (III), WHEREIN IT IS ONLY STATED THAT THE AMOUNTS ARE DUE TO THEM FROM THE ASSESSEE AND IS PENDING FROM THE YEAR 1995 - 96, HOWEVER NO RE TURNS ARE FILED, NOR ACCOUNT COPIES ARE PRODUCED FOR VERIFICATION, HENCE THESE AMOUNTS TOTALLING TO ` 17,36,200/ - ARE NOT PROVED, HENCE TREATED AS BOGUS UNEXPLAINED CREDIT U/ S. 68 AND ADDED TO THE RETURNED INCOME OF THE ASSESSEE AND BROUGHT TO TAX. TH E LETTER ADDRESSED TO SHRI RANJITH MEHTA, TO THE ADDRESS PROVIDED BY THE ASSESSEE WAS RETURNED BY THE POSTAL DEPARTMENT, THIS WAS BROUGHT TO THE NOTICE OF THE ASSESSEE'S REPRESENTATIVE AND INFORMED THAT THIS CLAIM WILL BE DISALLOWED AS NOT PROVED. HENCE ` 1,84,000/ - IS TREATED AS UNEXPLAINED CREDIT U/ S. 68 AND ADDED TO THE RETURNED INCOME OF THE ASSESSEE AND BROUGHT TO TAX. IN RESPECT OF THE CLAIM OF M/ S. TATIA GLOBAL VENTURE LTD., IT IS CLEARLY ESTABLISHED THAT THE ASSESSEE IS NOT THE REAL DEBTOR, BUT ONLY SHRI SHRI RANJIT SINGH BOKARIA, HENCE THE CLAIM FOR THE AMPUNT OF RS.8,91, 000 / - IS TREATED AS BOGUS AND BROUGHT TO TAX AS UNEXPLAINED U/S.68. ( ` 8, 91,000/ - ). I.T.A.NO. 649/ 12 : - 4 - : WHERE IN CASE THE ASSESSEE CLAIMS LIABILITY OF PAYMENT TO TRADE CREDITORS SHOWN IN BALANCE - SHEET, IT IS DEFINITELY REQUIRED TO PRIMA FACIE PROVE IDENTITY OF TRADE CREDITORS AS WELL AS GENUINENESS OF THE TRANSACTION. INABILITY TO PROVE THE COMPLETE IDENTITY OF THE CREDITOR AND THE SOURCE OF FUNDS CONSTITUTE FAILURE ON THE PART OF THE AS SESSEE TO DISCHARGE THE ONUS OF PROOF TO PROVE GENUINENESS OF THE TRANSACTION U/S.68.' THE ASSESSING OFFICER BROUGHT THE ABOVE AMOUNTS TO TAX BY WAY OF UNEXPLAINED CREDITS U / S.68 OF THE ACT. AS PER THE PROVISIONS OF SEC.68 OF THE ACT, ONLY THE CREDITS INT RODUCED DURING THE YEAR ALONE HAVE TO BE ASSESSED TO TAX AS UNEXPLAINED CASH CREDITS IF THE ASSESSEE FAILED TO FURNISH SATISFACTORY EXPLANATION. THE RELEVANT P ROVISIONS ARE - CASH CREDITS. 68 . WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINT AINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION O FFERED BY HIM IS NOT, IN THE OPINION OF THE A SSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. AS PER THE ABOVE PROVISIONS, IF THE ASSESSEE FAILS TO OFFER SATISFACTORY EXPLANATION REGARDING ANY CASH CREDITS INTRODUCED BY THE ASSESSEE, SUCH CREDITS HAVE TO BE ASSESSED TO TAX AS UNEXPLAINED CASH CRED ITS AND DEEMED TO BE THE INCOME OF THE ASSESSEE IN THE YEAR IN WHICH SUCH CREDITS ARE INTRODUCED. THUS, YEAR OF INTRODUCTION IS THE KEY FACTOR FOR ASSESSING THE CASH CREDITS U /S .68 OF THE ACT. WHEREAS, IN THE INSTANT CASE, ALL THE CREDITS WERE INTRODUCE D IN THE EARLIER ASSESSMENT YEARS AND NOT DURING THE F.Y.2007 - 08. IN FACT THE ASSESSING OFFICER IN HIS ORDER ALSO MENTIONED THAT THE ABOVE CREDITS ARE BASICALLY ON ACCOUNT OF THE OPENING BALANCES BROUGHT FORWARD FROM THE EARLIER YEARS. THEREFORE, THE SA ME STANDS OUTSIDE THE PURVIEW OF SEC 68 OF THE ACT. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN INVOKING SEC.68 OF THE ACT. THE ADDITION MADE BY THE ASSESSING OFFICER IS THEREFORE, DELETED. I.T.A.NO. 649/ 12 : - 5 - : 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE O RDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER MADE ADDITION OF THE FOLLOWING TRADE CREDITS AS THE IDENTITY OF THE TRADE CREDITORS AND GENUINENESS OF THE TRANSACTIONS WERE NOT PROVED BY THE A SSESSEE AND THEREFORE, THE SAME WERE TREATED AS BOGUS: ( I ) M/S BOKARIA TRADERS ` 8,91,000 ( II ) FUZAIL AHMED, PROP. FAIZAL LEATHERS ` 7,45,080 ( III ) M/S SKIN TRADE AGENCIES ` 9,91,120 ( IV ) SHRI RANJITH MEHTA ` 1,84,000 ` 2 8 ,11,200 8 . ACCORDING TO THE ASSESSI NG OFFICER, WHERE THE ASSESSEE CLAIMS LIABILITY OF PAYMENT TO TRADE CREDITORS IN THE BALANCE SHEET AND IS NOT ABLE TO PROVE THE COMPLETE IDENTITY OF THE CREDITORS AND THE SOURCE OF FUNDS , THE ONUS OF WHICH IS ON THE ASSESSEE, THE SAME CAN BE ADDED AS UNE XPLAINED CREDIT U/S 68 OF THE ACT. THEREFORE, HE MADE ADDITION TO THE INCOME OF THE ASSESSEE OF ` 28,11,200/ - . 9 . ON APPEAL, THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT THESE CREDITS RELATED TO EARLIER ASSESSMENT YEARS AND DID NOT PERTAIN TO THE FIN ANCIAL YEAR 2007 - 08 RELEVANT TO THE ASSESSMENT YEAR 2008 - 09. I.T.A.NO. 649/ 12 : - 6 - : 10 . THE DR, BEFORE US, COULD NOT DISPUTE THIS FINDING OF THE CIT(A) THAT THE ABOVE CREDITS OF ` 28,11,2000/ - SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT WERE THE OPENING BALANCES FOR THE YEAR UNDE R CONSIDERATION BY BRINGING ANY COGENT AND RELEVANT MATERIAL ON RECORD. 11 . WE FIND THAT THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SHRI VARDHMAN OVERSEAS LTD VS ACIT, [2008] 24 SOT 393(DELHI), HAS HELD THAT WHERE THE AMOUNTS OF CREDIT WERE BROUGHT FORW ARD BALANCES, THEY COULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS THE QUESTION OF GENUINENESS THEREOF COULD BE EXAMINED ONLY IN THE YEAR IN WHICH THEY WERE CREDITED TO THE ACCOUNT OF THE ASSESSEE. 12 . FURTHER, THE HON'BL E DELHI HIGH COURT IN THE CASE OF CIT VS USHA STUD AGRICULTURAL FARMS LTD [2008]301 ITR 384(DELHI) HAS HELD THAT SINCE IT WAS A FINDING OF FACT BY THE CIT(APPEALS) THAT THE CREDIT BALANCES IN THE ACCOUNT OF THE ASSESSEE DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION U/S 68 OF THE ACT AND NO FAULT COULD BE FOUND WITH THE ORDER OF THE TRIBUNAL ENDORSING THE DECISION OF THE CIT(A). I.T.A.NO. 649/ 12 : - 7 - : 13 . THUS, FOR THE ABOVE STATED REASONS, WE DO NOT FIND ANY GOOD A ND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). I T IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 14 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 30 TH OF AUGUST , 2012 , A T CHENNAI . SD/ - SD/ - ( V. DURGA RAO ) JUDICIAL MEMBER ( N.S.SAINI ) ACCOUNTANT MEMBER DATED: 30 TH AUGUST , 2012 RD COPY TO: APPELLANT / RESPONDENT / CIT(A) /CIT/ DR