K VISWANATHAN, TIRUPPUR V. ITO WARD 1 (2), TIRUPPU

ITA 723/CHNY/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8756 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALINA SURESH BABU
• Assessee Lawyers: N VIJAY KUMAR
• Keywords: Unexplained cash credit; Opportunity of being heard; Revised return
• Section: 143(3); 68

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHE NNAI , . , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.723/CHNY/2018 / ASSESSMENT YEAR :2009-10 SHRI K. VISWANATHAN, NO.11, SITE NO.26, AMARJOTHI, A.S. NAGAR, EAST WEST 5 TH STREET, KANGEYAM ROAD, TIRUPUR 641 004. PAN: AKNPK6740Q VS. THE INCOME TAX OFFICER, WARD 1(2), TIRUPUR ( /APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI N. VIJAY KUMAR, CA /RESPONDENT BY : SHRI BALINA SURESH BABU, JCIT / DATE OF HEARING : 17.12.2018 /DATE OF PRONOUNCEMENT : 17.12.2018 / O R D E R PER A. MOHAN ALANKAMONY, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, COI MBATORE, DATED 18.01.2018 IN ITA NO.50/17-18 FOR THE ASSESSMENT YEAR 2009-10 PASSED U/S. 250(6) R.W.S. 143(3) OF THE ACT. ITA NO.723/CHNY/2018 2 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HIS APPEAL HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED I N SUSTAINING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS.49,00,000/- TOWARDS UNEXP LAINED CASH CREDIT U/S.68 OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF EXPORT OF HOSIERY GARMEN TS, E-FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 30.09.2009 ADMIT TING TOTAL INCOME OF RS.4,20,840/- AND SUBSEQUENTLY FILED REVISED RETURN DECLARING TOTAL INCOME OF RS.5,02,290/-. INITIALLY THE RETURN WAS PROCESSED U /S.143(1) OF THE ACT AND SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UND ER CASS AND NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 08.09.2010. FI NALLY ASSESSMENT ORDER WAS PASSED U/S.143(3) OF THE ACT ON 30.12.2011 IN THE S ECOND ROUND OF LITIGATION WHEREIN THE LD.AO MADE ADDITION OF RS.49,00,000/- T OWARDS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT AND RS.13,42,235/- TOWARDS DISALLOWANCE OF EXPENSES U/S.40(A)(IA) OF THE ACT. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEE DINGS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD RECEIVED THROUGH CHEQUE A SUM OF RS.40 LAKHS FROM M/S. HALIFAX CONSTRUCTIONS AND SUM OF RS .9,00,000/- FROM M/S. SABARI FOUNDATION PVT. LTD., IN THE RELEVANT ASSESSMENT YE AR. IT WAS ALSO OBSERVED THAT THE ASSESSEE HAD RETURNED AN AMOUNT OF RS.15,00,000 /- TO M/S. HALIFAX ITA NO.723/CHNY/2018 3 CONSTRUCTION AND RS.5,00,000/- TO M/S. SABARI FOUND ATION THROUGH SELF-DRAWN CHEQUES. THE LD.AO IN ORDER TO CONFIRM THE TRANSACT ION SENT A LETTER TO M/S. HALIFAX CONSTRUCTION AND M/S. SABARI FOUNDATION. WITH RESPE CT TO M/S. HALIFAX CONSTRUCTION, THE LD.AO DID NOT RECEIVE ANY REPLY. HOWEVER WITH RESPECT TO M/S. SABARI FOUNDATION, A LETTER WAS RECEIVED STATING TH AT WE DO NOT HAVE ANY DIRECT TRANSACTION WITH THE ASSESSEE. ON QUERY, THE ASSES SEE MADE THE FOLLOWING SUBMISSION BEFORE THE LD.AO:- 1. TWO OF MY RELATIVES MR.C. SURESH AND MR. R. PRAB HU HAD THE PLAN TO ENTER INTO LOCAL HOSIERY GARMENT BUSINESS AND HAD GIVEN T O ME AN ADVANCE OF RS.49 LAKHS IN AGGREGATE AS TRADE ADVANCE TOWARDS SUPPLY OF GOODS. 2. THE CHEQUES WERE ISSUED BY SABARI FOUNDATION (P) LTD. AND HALIFAX CONSTRUCTIONS AND HENCE I ACCOUNTED THE SAME IN THA T NAME. 3. ONLY LATER, I CAME TO KNOW THAT THEY RECEIVED TH OSE CHEQUES AS SETTLEMENT OF THEIR UNSECURED LOANS AS THE PARTNERS OF THE NILGI RIS AND THE SAME WAS TRANSFERRED TO ME. 4. DUE TO VARIOUS ISSUES IN THE TEXTILE INDUSTRY TH EY HAVE DECIDED TO SUSPEND THAT IDEA TEMPORARILY TILL THE MARKET IS IMPROVED. DURIN G THAT YEAR, DURING THEIR PERSONAL VISIT, THEY HAVE ASKED A PORTION OF THE MO NEY ADVANCED BY THEM AND I HAVE RETURNED THE SAME. 5.SINCE THESE PERSONS WERE HOSPITALIZED DUE TO ILLN ESS, I AM NOT ABLE TO PROVIDE THE CONFIRMATION WITHIN THE AVAILABLE TIME. HOWEVER THE LD.AO REJECTED THE EXPLANATION OFFERED BY THE ASSESSEE BECAUSE OF THE FOLLOWING REASONS:- ITA NO.723/CHNY/2018 4 (I) THE CREDITORS WHO HAD ADVANCED THE AMOUNT TO TH E ASSESSEE DID NOT CONFIRM THE TRANSACTION. (II) THE ADVANCE WAS NOT REPORTED IN THE AUDIT REPO RT IN FORM 3CD DATED 29.08.2009 UNDER SL.NO.24. (III) THE ASSESSEE HAD NOT SUBMITTED CONFIRMATION L ETTERS FROM THE CREDITORS. FOR THE ABOVE STATED REASONS THE LD.AO INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT, MADE ADDITION IN THE HANDS OF THE ASSES SEE TO THE TUNE OF RS.49 LAKHS. 5. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BY OBSERVING AS FOLLOWS:- 5. EVENTHOUGH THE ASSESSEE HAS CLAIMED THAT THE AM OUNTS WERE RECEIVED FROM SHRI C. SURESH AND MR. R. PRABHU WHO ARE RELAT IVES OF THE ASSESSEE, THEY HAVE NOT FILED ANY CONFIRMATION LETTER FROM THEM EI THER DURING THE COURSE OF ASSESSMENT OR DURING THE COURSE OF APPEAL. THE ASSE SSEE HAS NOT MENTIONED THE PURPORTED TRADE ADVANCES FROM TWO RELATIVES IN FORM NO.3CD DATED 29.08.2009 FILED WITH THE RETURN OF INCOME. THEREFORE, THE AMO UNTS SAID TO BE RECEIVED FROM THE RELATIVES ARE ONLY A FICTION CREATED BY TH E ASSESSEE. 5.1 THE CREDITS WERE NOTED AS TRADE ADVANCE. THERE WAS NO INDICATION OF ANY ACT FROM THE SIDE OF THE ASSESSEE NOR THE CREDITOR TOWARDS, ENTERING INTO ANY BUSINESS RELATIONSHIP. NO AGREEMENTS WERE ENTERED I NTO AND IT IS FOUND THAT THE CREDITORS ARE CONSTRUCTION COMPANY AND A FOUNDATION , HAVING NO PRESENCE IN THE BUSINESS DOMAIN OF THE APPELLANT. THIS APPEARS AS A FICTITIOUS STORY. IT IS ALSO NOTED THAT SUMS OF RS.15 LAKHS AND RS.5 LAKHS WERE SHOWN PAID BACK TO M/S. HALIFAX CONSTRUCTION AND M/S.SABARI FOUNDATION PVT.LTD DURING THE YEAR IN SELF CHEQUES AND BY CASH. THE AO MAY SEE WHETHER PROVISIONS OF SEC.269T WOULD BE ATTRACTED. ITA NO.723/CHNY/2018 5 5.2 IN VIEW OF THE FACTS AND CIRCUMSTANCES MENTIONE D ABOVE AND IN THE ABSENCE OF ANY OTHER EVIDENCE PRODUCED BY THE ASSESSEE EITH ER DURING THE COURSE OF ASSESSMENT OR DURING THE COURSE OF APPEAL THE AMOUN T OF RS49 LAKHS RECEIVED BY THE ASSESSEE IS TREATED AS UNEXPLAINED CASH CRED IT U/S.68 OF THE INCOME TAX ACT AND CONFIRMED IN THE HANDS OF THE APPELLANT. 6. BEFORE US THE LD.AR SUBMITTED THAT THE ASSESSEE HAS NOW OBTAINED THE CONFIRMATION STATEMENT FROM M/S. HALIFAX CONSTRUCTI ON AND MR. C. SURESH PROPRIETOR OF KPRK GARMENTS EXPLAINING THE TRANSACT ION WITH RESPECT TO M/S. SABARI FOUNDATION PVT. LTD.,. THE LD.AR FURTHER PL EADED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF LD.AO TO CONSIDER THE ISSUE IN THE LIGHT OF THE CONFIRMATION STATEMENTS OBTAINED FROM THE CREDITORS . THE LD.DR STRONGLY OPPOSED TO THE SUBMISSION OF THE LD.AR AND PRAYED FOR CONFI RMING THE ORDERS OF THE LD.REVENUE AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. FROM THE PETITION FILED BY THE ASSESSEE, WE FIND THAT THE CASE IS BEFORE US FOR THE SECOND TIME AS THE TRIBUNAL HA D EARLIER REMITTED THE APPEAL OF THE ASSESSEE BACK TO THE FILE OF LD.AO FOR FRESH CO NSIDERATION. FROM THE CONDUCT OF THE ASSESSEE IT APPEARS THAT THE ASSESSEE IS NOT CO -OPERATING BEFORE THE REVENUE PROMPTLY BY PRODUCING THE CONFIRMATION STATEMENTS F ROM THE SUNDRY CREDITORS. IT ALSO APPEARS THAT THE ASSESSEE INTENDS TO UNNECESSA RILY PROLONG THE LITIGATION FOR THE REASONS BEST KNOWN TO HIM. THOUGH WE DO NOT APP RECIATE THE ATTITUDE OF THE ASSESSEE, IN THE INTEREST OF JUSTICE WE HEREBY REMI T THE MATTER BACK TO THE FILE OF ITA NO.723/CHNY/2018 6 LD.CIT(A) IN ORDER TO CONSIDER THE ISSUE IN THE LIG HT OF THE CONFIRMATION STATEMENT FURNISHED BY THE ASSESSEE FROM THE CREDITORS AND TH EIR GENUINENESS AFTER OBTAINING REMAND REPORT FROM THE LD.AO. WE ALSO CAUTION THE A SSESSEE TO PROMPTLY CO- OPERATE BEFORE THE LD.REVENUE AUTHORITIES IN THEIR PROCEEDINGS, FAILING WHICH THE LD.REVENUE AUTHORITIES SHALL BE AT LIBERTY TO PASS APPROPRIATE ORDER IN ACCORDANCE WITH LAW AND MERIT BASED ON THE MATERIALS ON RECORD AFTER GIVING THE ASSESSEE DUE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OF DECEMBER, 2018 AT CHENNAI. SD/- SD/- !' /CHENNAI, #$ /DATED 17 TH DECEMBER, 2018 RSR $ &' (' /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. , ( )/CIT(A) 4. /CIT 5. /DR 6. /GF ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) /ACCOUNTANT MEMBER