M/s. Sriram Industries & Chemicals, Tuticorin V. ITO, Tuticorin

ITA 72/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81177 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 09-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2014
• Court: TRIBUNAL
• Department Lawyers: C V PAVANA KUMAR
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained cash credit; Business income
• Section: 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHE NNAI . . . , !' , # $! % BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 72/MDS/2014 / ASSESSMENT YEAR : 2009-10 M/S.SRIRAAM INDUSTRIES & CHEMICALS, 93C/6H/1A, KANDAN COLONY, SECOND STREET, TUTICORIN-628 008 [PAN: AAPFS 0801 A] ( '& /APPELLANT) VS INCOME TAX OFFICER, WARD-I(3). TUTICORIN ( '('& /RESPONDENT) / APPELLANT BY : SHRI G.BASKAR, ADVOCATE / RESPONDENT BY : SHRI C.V.PAVANA KUMAR, JCIT / DATE OF HEARING : 09-09-2014 ! / DATE OF PRONOUNCEMENT : 12-09-2014 $) / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNIN G THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-I, MAD URAI DATED 18-11-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 9-10. I.T.A. NO. 72/MDS/2014 2 2. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS A 100% EXPORT ORIENTED UNIT [EOU], MANUFACTURING AND SELLING MAGN ESIUM SULPHATE HEPTAHYDRATE. THE ASSESSEE FILED ITS RETU RN OF INCOME FOR THE AY.2009-10 ON 25-09-2009 DECLARING NIL TAXABL E INCOME AFTER CLAIMING EXEMPTION U/S.10B OF THE INCOME TAX ACT, 1 961 (HEREIN AFTER REFERRED TO AS THE ACT). THE CASE OF THE AS SESSEE WAS SELECTED FOR SCRUTINY AND NOTICES U/S.143(2) WERE I SSUED TO THE ASSESSEE ON 03-09-2010 AND 23-05-2011. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT DURING THE PERIOD RELEVANT TO AY UNDER CONSIDERATIO N, THE ASSESSEE HAS RECEIVED ` 5.00 LAKHS EACH FROM SHRI IYYAPPAN AND SHRI M.RAMAMOORTHY IN CASH AND HAS RE-PAID THE AMOUNT IN SAME MANNER. THE ASSESSEE WAS ASKED TO FURNISH THE DETA ILS OF THE AFORESAID PERSONS TO CHECK THE VERACITY OF TRANSACT IONS. THE ASSESSEE PRODUCED SHRI IYYAPPAN AS WELL AS SHRI M.R AMAMOORTHY BEFORE THE ASSESSING OFFICER. STATEMENTS OF BOTH T HE PERSONS WERE RECORDED. BOTH THE AFORESAID PERSONS ADMITTED TO HAVE PAID ` 5.00 LAKHS EACH TO THE ASSESSEE AND ADMITTED THAT T HE AMOUNT HAS BEEN RECEIVED BACK BY THEM DURING THE PERIOD RE LEVANT TO AY.2009-10. BOTH THESE PERSONS I.E., SHRI IYYAPPAN AND SHRI M.RAMAMOORTHY ARE NOT ASSESSED TO TAX. THE ASSESSI NG OFFICER AFTER EXAMINING THE STATEMENTS AND THE AFFIDAVITS F ILED BY THESE I.T.A. NO. 72/MDS/2014 3 PERSONS CAME TO THE CONCLUSION THAT EXCEPT FOR THE AFFIDAVITS TENDERED BY THESE PERSONS AND LEDGER COPY FILED BY THE ASSESSEE, THERE IS NO OTHER DOCUMENT OR EVIDENCE TO SHOW CRED ITWORTHINESS OF THE CREDITORS AND GENUINENESS OF TRANSACTION. T HE ASSESSING OFFICER VIDE ORDER DT.23-12-2011 INTER ALIA MADE AD DITION OF ` 10.00 LAKHS U/S.68 AS UNEXPLAINED CASH CREDIT. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS ), VIDE IMPUGNED ORDER UPHELD THE FINDINGS OF ASSESSING OF FICER. NOW, THE ASSESSEE HAS COME IN SECOND APPEAL BEFORE THE T RIBUNAL ASSAILING THE ORDER OF CIT(APPEALS). 3. SHRI G.BASKAR, APPEARING ON BEHALF OF THE ASSESS EE SUBMITTED THAT ASSESSEE IS 100% EOU AND IS ELIGIBLE FOR CLAIMING EXEMPTION U/S.10B OF THE ACT. THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UN-PROVED CREDITORS IS BUSINESS INCOME OF THE ASSESSEE AND THUS, THE ASSESSEE IS EL IGIBLE TO CLAIM EXEMPTION ON THE SAME. ON MERITS, THE LD.COUNSEL C ONTENDED THAT THE ASSESSEE HAD PRODUCED BOTH THE CREDITORS BEFORE THE ASSESSING OFFICER. BOTH THE PERSONS FILED AFFIDAVI TS ADMITTING THAT THEY HAVE GIVEN ` 5.00 LAKHS EACH TO THE ASSESSEE. IN THE AFFIDAVIT I.T.A. NO. 72/MDS/2014 4 THEY HAVE FURTHER STATED THAT THEY HAVE RECEIVED BA CK THE AMOUNT ADVANCED TO THE ASSESSEE. THE ASSESSEE HAS BEEN AB LE TO ESTABLISH THE IDENTITY OF THE CREDITORS, THEREFORE, THE AUTHORITIES BELOW HAVE ERRED IN MAKING ADDITION U/S.68 OF THE A CT. 4. ON THE OTHER HAND, SHRI C.V.PAVANA KUMAR, APPEAR ING ON BEHALF OF THE REVENUE SUBMITTED THAT ALTHOUGH THE I DENTITY OF THE PERSONS HAVE BEEN PROVED BUT THE CREDITWORTHINESS H AS NOT BEEN PROVED. THE LD.DR PRAYED FOR SUSTAINING THE IMPUGN ED ORDER AND DISMISSING THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES, AND HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. THE LD.COUNSEL FO R THE ASSESSEE HAS MADE TO TWO FOLD SUBMISSIONS IN RESPECT OF UN-P ROVED CREDITORS AMOUNTING TO ` 10.00 LAKHS. THE FIRST SUBMISSION OF THE LD.COUNSE L IS, SINCE THE ASSESSEE IS A 100% EOU AND IS ELIGIBL E TO CLAIM EXEMPTION U/S.10B, THE ADDITION MADE U/S.68 ON ACCO UNT OF UN- PROVED CREDITORS IS THE BUSINESS INCOME OF THE ASSE SSEE. THEREFORE, ON THE SAID ADDITION, THE ASSESSEE IS EL IGIBLE TO CLAIM EXEMPTION U/S.10B. I.T.A. NO. 72/MDS/2014 5 A READING OF THE PROVISIONS OF SECTION 10B MAKES UNAMBIGUOUSLY CLEAR THAT THE PROFITS AND GAINS DERI VED BY 100% EOU FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUT ER SOFTWARE IS ELIGIBLE TO CLAIM DEDUCTION U/S.10B. THUS, IT IS T HE PROFITS AND GAINS FROM THE EXPORT BUSINESS OF THE SPECIFIED ITEMS THA T THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION UNDER THE PROVIS IONS OF SECTION 10B. ADDITIONS MADE U/S.68 FALLS UNDER THE HEAD, I NCOME FROM OTHER SOURCES AND IS THUS, NOT PART OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. WE DO NOT AGREE WITH THE CONTENTION S OF THE LD.COUNSEL FOR THE ASSESSEE THAT ASSESSEE IS ELIGIB LE FOR EXEMPTION U/S.10B ON THE ADDITIONS MADE U/S.68. ACCORDINGLY, THIS CONTENTION OF THE ASSESSEE IS REJECTED. 6. THE SECOND SUBMISSION MADE BY LD.COUNSEL FOR THE ASSESSEE IS ON THE MERITS OF THE ISSUE. THE ASSESS EE HAS PRODUCED BOTH THE ALLEGED CREDITORS BEFORE THE ASSE SSING OFFICER. BOTH THE PERSONS HAVE FILED AFFIDAVITS ADMITTING TH AT THEY HAVE ADVANCED ` 5.00 LAKHS IN CASH IN VARIOUS INSTALLMENTS LESS THA N ` 20,000/- EACH TO THE ASSESSEE. EXCEPT FOR THE ADMI SSION IN THE FORM OF AFFIDAVIT, THERE IS NO DOCUMENT ON RECORD W HAT-SO-EVER TO SHOW THE GENUINENESS OF THE TRANSACTIONS. MOREOVER , THE MANNER IN WHICH CASH AMOUNTS HAVE BEEN ACCEPTED BY THE ASS ESSEE FROM I.T.A. NO. 72/MDS/2014 6 BOTH THE AFORESAID PERSONS RAISES A SERIOUS SUSPICI ON ON THE VERACITY OF THE TRANSACTIONS. IN THE CASE OF SHRI IYYAPPAN, AMOUNTS WERE RECEIVED DURING 1 ST APRIL, 2008 TO 4 TH APRIL, 2008 IN THE INSTALLMENTS RANGING FROM ` 18,000/- TO ` 19,500/- BY WAY OF CASH. THE TOTAL CREDITS AS ON 4 TH APRIL, 2008 WERE TO THE TUNE OF ` 5.00 LAKHS. THE AMOUNTS WERE RETURNED DURING THE PERIOD DECEMBER, 2008 TO MARCH 2009 BY WAY OF CASH IN THE INSTALLMEN TS OF ` 15,000/- TO ` 19,500/-. SIMILARLY, IN THE CASE OF SHRI M.RAMAMOORTHY, THE AMOUNTS WERE RECEIVED DURING 1 ST APRIL, 2008 TO 5 TH APRIL, 2008 IN INSTALLMENTS RANGING FROM ` 18,000/- TO ` 19,500/- I.E., BELOW ` 20,000/- BY WAY OF CASH. THE TOTAL CREDITS AS ON 5 TH APRIL, 2008 WERE TO THE TUNE OF ` 5.00 LAKHS. AS IN THE CASE OF SHRI IYYAPPAN, THE AMOUNTS WERE RETURNED TO SHRI M.RAMAMOORTHY DUR ING THE PERIOD DECEMBER, 2008 TO MARCH 2009 BY WAY OF CASH IN INSTALLMENT RANGING FROM ` 15,000/- TO ` 19,500/-. TRANSACTIONS WITH BOTH THE PERSONS WERE ARRANGED IN A SIMILAR DUBIOUS MANNER TO CIRCUMVENT THE PROVISIONS OF THE ACT. THERE IS NO DOCUMENT ON RECORD TO INFUSE CONFIDENCE FOR ACCEPTING THE AFORE SAID TRANSACTIONS AS GENUINE. I.T.A. NO. 72/MDS/2014 7 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A PPEALS). ACCORDINGLY, THIS APPEAL OF THE ASSESSEE IS DISMISS ED AND THE FINDINGS OF CIT(APPEALS) ARE AFFIRMED. ORDER PRONOUNCED ON FRIDAY, THE 12 TH SEPTEMBER, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( !' ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) '#$ / VICE PRESIDENT % &' / JUDICIAL MEMBER (% /CHENNAI, )& /DATED: 12 TH SEPTEMBER, 2014 TNMM &* +,-, /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ./0 /CIT(A) 4. . /CIT 5. ,12 3 /DR 6. 245 /GF