Sunder Synthetics Pvt.Ltd, Secunderabad V. DCIT, Central Circle-4, Hyderabad

ITA 770/HYD/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8961 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 21-05-2012
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Unexplained cash credit; Search and seizure; Additional evidence
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A NOS. 768, 769, 770, 771 & 772/HYD/2012 AYS: 2003-04, 2004-05, 2005-06, 2006-07 & 2009-10 S UNDER SYNTHETICS PRIVATE LIMITED, SECUNDERABAD [PAN: AADCS3983J] VS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD I.T.A NOS. 963, 964 & 965/HYD/2012 ASSESSMENT YEARS: 2003-04, 2004-05 & 2005-06 ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD VS M/S. SUNDER SYNTHETICS (P) LIMITED, SECUNDERABAD [PAN: AADCS3983J] (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI SUNIL KUMAR JAIN, AR FOR REVENUE : S HRI RAJAT MITRA, DR DATE OF HEARING : 08 - 0 1 - 201 5 DATE OF PRON OUNCEMENT : 11 - 03 - 2015 O R D E R PER BENCH : IN THIS BATCH OF APPEALS, THERE ARE ASSESSEE'S APP EALS FOR ASSESSMENT YEARS (AYS) 2003-04 TO 2006-07 & 2009-10 , WHEREAS REVENUE'S APPEALS ARE FOR AYS. 2003-04 TO 2005-06 ONLY. SINCE COMMON ISSUES ARE INVOLVED, THESE ARE CONSIDERED TOGETHER AND DISPOSED-OFF BY THIS COMMON ORDER. ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 2 -: 2. WE HAVE HEARD THE LD.COUNSEL AND LD.DR IN DETAIL AND CALLED FOR DETAILS ALSO IN THE COURSE OF HEARING. AFTER CONSI DERING THE PAPER BOOKS PLACED ON RECORD AND SUBMISSIONS BY ASSESSEE, ISSUE S ARE DECIDED AS UNDER. 3. BRIEFLY STATED, ASSESSEE IS A PRIVATE LIMITED CO MPANY ENGAGED IN MANUFACTURING OF DECORATIVE LAMINATED SHEETS. IT H AS FILED RETURNS ORIGINALLY AND CONSEQUENT TO SEARCH AND SEIZURE OPE RATION IN THE GROUP CASES, PROCEEDINGS U/S. 153A OF THE INCOME TAX ACT (ACT) WERE INITIATED AGAINST ASSESSEE. AS SEEN FROM THE ASSESSMENT ORDE R, EVEN THOUGH SEARCH PROCEEDINGS WERE CONDUCTED ON 29-01-2009, IN RESPONSE TO NOTICE U/S.153A (DATE OF ISSUE NOT MENTIONED IN THE ORDER) ASSESSEE FILED RETURNS ON 12-11-2010. EVEN THOUGH THE ASSESSING O FFICER STATES THAT NOTICES WERE ISSUED AND EXPLANATIONS WERE CALLED FO R, THE ORDER INDICATES THAT THE CASE WAS HEARD ONLY ON ONE DAY I.E., 24-12 -2010 AND ORDERS HAVE BEEN PASSED ON 31-12-2010. ASSESSING OFFICER MADE VARIOUS ADDITIONS IN THE ORDERS IN THE RESPECTIVE YEARS NOT BASED ON ANY INCRIMINATING MATERIAL OR SEIZED MATERIAL BUT ON TH E BASIS OF ASSESSEE'S CLAIMS IN P&L A/C. ASSESSING OFFICER MADE AN ADDIT ION OF SUNDRY CREDITORS BALANCES AT THE END OF THE YEAR IN EACH O F THE ASSESSMENT YEARS FROM AY.2003-04 TO 2006-07. ASSESSING OFFICER ALSO MADE ADDITION OF ADVANCES AGAINST SALES RECEIVED BY ASSESSEE IN AY.2 003-04 TO 2006-07. IN ADDITION, ABOVE TWO, IN THE AY.2006-07, ASSESSIN G OFFICER ALSO MADE ADDITION ON THE COMMISSION RECEIVED TO AN EXTENT OF RS.26,61,915/- AND DISALLOWANCE OF FUEL CHARGES TO AN EXTENT OF RS.31, 06,169/- IN AY.2009- 10. 4. BEFORE THE CIT(A), SINCE ASSESSING OFFICER HAS N OT GIVEN OPPORTUNITY NOR ISSUED ANY SHOW CAUSE NOTICE, ASSES SEE FILED ADDITIONAL EVIDENCES IN THE FORM OF CONFIRMATION LETTERS, ACCO UNT COPIES AND ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 3 -: SUBMISSIONS WHICH THE LD.CIT(A) SENT ON REMAND TO T HE ASSESSING OFFICER. THE ASSESSING OFFICER VIDE HIS LETTER DT. 31-01-2012 SUBMITTED A REMAND REPORT THROUGH THE ADDITIONAL COMMISSIONER W HO FORWARDED IT BY LETTER DT.21-02-2012. EVEN THOUGH ON SOME ASPECTS ASSESSING OFFICER ACCEPTED ASSESSEE'S CONTENTIONS, ADDL.CIT DID NOT A GREE AND THEREFORE CIT(A) PASSED THE ORDER ON MERITS CONSIDERING BOTH THE REPORT AND FORWARDING LETTER. THE LD.CIT(A) DELETED THE ADDIT IONS MADE ON ACCOUNT OF SUNDRY CREDITORS, WHEREAS HE HAS CONFIRMED THE A DDITIONS ON ACCOUNT OF ADVANCES AGAINST SALES AND FUEL CHARGES WHICH WE RE PAID IN CASH. AS FAR AS ADDITION ON ACCOUNT OF COMMISSION IS CONCERN ED, HE REMANDED THE MATTER TO ASSESSING OFFICER. ASSESSEE IS AGGRIEVED ON THE ISSUE OF ADVANCES AGAINST SALES, COMMISSION RECEIVED AND FUE L CHARGES IN THE ABOVE YEARS AS CONFIRMED BY LD.CIT(A). REVENUE IS AGGRIEVED ON THE DELETION OF ADDITIONS OF SUNDRY CREDITORS. 5. WE WILL CONSIDER THE REVENUE'S APPEALS FIRST. IN THE THREE REVENUE APPEALS FOR AYS.2003-04, 2004-05 & 2005-06, LD.CIT( A) DELETED THE ADDITION OF SUNDRY CREDITORS MADE RESPECTIVELY OF R S.32,37,070/-, RS.21,76,103/- AND RS.11,09,801/-. FOR THE SAKE OF DISCUSSION, WE TAKE UP THE ADDITION MADE IN AY.2003-04 BY THE ASSE SSING OFFICER. IN THE ASSESSMENT ORDER, ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF SUNDRY CREDITORS OF RS.32,37,070/-, ASSESSEE VIDE H IS LETTER DT.09-12- 2010 SUBMITTED THAT THE LIST OF SUNDRY CREDITORS ASSESSMENT YEAR WISE WITH COMPARISON TO LAST YEAR BALANCES AND THE CREDI TOR'S FULL ADDRESS AND TELEPHONE NUMBERS WILL BE SUBMITTED WITHIN A WEEK . VIDE LETTER DT.24-12- 2010, ASSESSEE FURNISHED THE CREDITOR'S FULL ADDRES S AND TELEPHONE NUMBERS AS ANNEXURE-I. ASSESSING OFFICER WAS OF TH E OPINION THAT ASSESSEE FURNISHED INFORMATION ONLY FOR AY.2009-10 (WHICH WAS ACCEPTED BY THE ASSESSING OFFICER) BUT DID NOT FURNISH INFOR MATION FOR THE RELEVANT ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 4 -: ASSESSMENT YEARS. ACCORDINGLY, HE TREATED THE SUND RY CREDITORS AS UN- EXPLAINED INVESTMENT AND MADE RESPECTIVE ADDITIONS. 6. BEFORE THE LD.CIT(A), ASSESSEE FURNISHED WRITTEN SUBMISSIONS, COMPLETE DETAILS WHICH WERE SUBMITTED BEFORE AO AND CONTENDED THAT THESE WERE NOT CONSIDERED BY THE ASSESSING OFFICER. THE LD.CIT(A) AFTER CONSIDERING THE OBSERVATIONS OF THE ASSESSING OFFIC ER, DELETED ADDITION BY STATING AS UNDER: '4.4 THE OBSERVATIONS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT ARE PERUSED. AS COULD BE SEEN FROM THE GIST OF THE INFORMATION RELATED TO THE SUNDRY CRED ITORS, THE APPELLANT COMPANY HAS THE OPENING BALANCE OF SUNDRY CREDITOR S THAT STOOD AT RS.24,01,329 AS ON 01.04.2002 AS AGAINST THE CLOSI NG BALANCE OF RS.32,37,070 ON 31.03.2003, WITH A FURTHER CREDITS OF RS.57,37,067 TAKEN PLACE, WHILE THE AMOUNTS OF RS.43,58,593 BEI NG THE DEBITS FOR THE YEAR UNDER REFERENCE UNDER THE SAME HEAD. WHIL E MAKING THE ADDITION, THE ASSESSING OFFICER HAS CONFINED HIMSE LF TO THE CLOSING BALANCE OF THE SUNDRY CREDITORS AND TREATED THE EN TIRE CLOSING BALANCE OF SUNDRY CREDITORS AS UNEXPLAINED CREDITS AND ACCORDINGLY ADDED TO THE TOTAL INCOME OF THE APPELLANT. THE ME THODOLOGY ADOPTED BY THE ASSESSING OFFICER PRIMA FACIE SUFFERS FROM CERTAIN DEFICIENCIES AS MUCH AS THE ENTIRE CLOSING BALANCE S OF THE SUNDRY CREDITORS CANNOT BE TREATED AS THE UNACCOUNTED CREDITS AS THE CLOSING BALANCES ALWAYS HAVE OPENING BALANCES EMBEDDED IN THEM. FURTHER, WHAT MATTERS F OR THE YEAR UNDER REFERENCE IS THE TOTAL OF THE CREDITS THAT H AVE BEEN CREDITED DURING THE YEAR IN THE BOOKS OF THE APPELLANT AND IN THE INSTANT CASE, THE TOTAL OF THE CREDITS FOR THE YEAR UNDER REFERENCE STOOD AT RS.57,37,067, WHICH COULD HAVE BEEN THE REAL UNEXP LAINED CREDITS ON THE LINES OF PRESUMPTIONS OF THE ASSESSING OFFI CER, IN CASE OF FAILURE OF APPELLANT TO EXPLAIN THEM. FURTHER, AS CONTENDED BY THE APPELLANT, THE ACCOUNTS OF SUNDRY CREDITORS ARE RU NNING ACCOUNTS WITH VARIOUS PURCHASES AND PAYMENTS INCORPORATED O N CONTINUOUS BASIS AND AS SUCH, THE CLOSING BALANCES CANNOT BE TREATED AS UNACCOUNTED CREDIT STANDING AGAINST THE NAMES OF T HE CREDITORS WITHOUT BRINGING ANY CONCRETE EVIDENCE AS REGARD T O THE FICTITIOUS NATURE OF PURCHASES OR THE CREDITS, AND MORE SO WH EN THE DEBITS TO SUCH ACCOUNTS ARE NOT DISBELIEVED. FURTHER, THE APPELLANT HAS CONFIRMED TO HAVE FILED THE SAID INF ORMATION BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 5 -: WHICH WAS NOT DISPUTED, AND AS SUCH, THERE IS NO V ALID GROUND FOR THE ASSESSING OFFICER TO TREAT ENTIRE CLOSING BALA NCE OF THE SUNDRY CREDITORS AS UNEXPLAINED CREDITS AND ACCORDINGLY T HE INCOME OF THE APPELLANT. THE ACCOUNT EXTRACTS OF THE RESPECTIVE SUNDRY CREDITORS IN THE BOOKS OF THE APPELLANT INDICATE CLEARLY THAT T HEY ARE THE RUNNING ACCOUNTS AND THE TRANSACTIONS ARE ON ACCOUNT OF TH E PURCHASES AND PAYMENTS OVER THE PERIOD AND THE CLOSING BALANCES AT THE END OF THE FINANCIAL YEAR ARE CONFIRMED BY THE SAID PARTIES. ON THE BASIS OF THE SAID INFORMATION THAT ARE BROUGHT ON THE RECORD AN D FACTS OF THE CASE, I AM OF THE CONSIDERED OPINION THAT THERE IS NO GROUND FOR THE ASSESSING OFFICER TO TREAT THE ENTIRE CLOSING BALA NCE OF SUNDRY CREDITORS AS UNEXPLAINED CREDITS, THAT TOO IN A S EARCH RELATED ASSESSMENTS LIKE THE CASE OF THE APPELLANT FOR TH E YEAR UNDER REFERENCE. SEVERAL JUDICIAL AUTHORITIES HELD THAT ROUTINE AND GENERAL DISALLOWANCES, IN ABSENCE OF MATERIAL FOU ND AT THE TIME OF SEARCH, CANNOT BE MADE IN ASSESSMENT COMPLETED U/S 153A. IT WAS ALSO HELD THAT, WHEN NO INCRIMINATING MATERIA L IS FOUND DURING THE COURSE OF SEARCH, THE ASSESSING OFFICER CANNO T MAKE ANY ADDITION ON ISSUES WHICH HAVE ALREADY BEEN CONSIDERED.ACCORDINGLY, IT IS HELD THAT THE ADDITI ON OF RS.32,37,070 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TREAT ING THE SUNDRY CREDITORS AS UNEXPLAINED CREDITS/UNEXPLAINED INVE STMENT, IS NOT SUSTAINABLE. HENCE, THIS GROUND OF APPEAL IS TREAT ED AS ALLOWED'. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE DETAILS AVAILABLE ON RECORD. WE AGREE WITH THE OBSERVATION OF THE LD.CIT(A) THAT THE METHODOLOGY ADOPTED BY THE ASSESSING OFFICER PRIMA FACIE SUFFERS FROM CERTAIN DEFICIENCIES. ENTIRE CLOSING BALANCE CANNOT BE TREATED AS UN-ACCOUNTED CREDITS WITHOUT EXAMINING WHAT WAS REC EIVED DURING THE YEAR. MOREOVER, THESE ARE ALL TRADE CREDITS AND AR ISING OUT OF BOOKS OF ACCOUNTS, OUT OF THE RUNNING ACCOUNTS ON ACCOUNT OF PURCHASES AND PAYMENTS MADE OVER A PERIOD OF TIME. FURTHER, THE CLOSING BALANCES HAVE BEEN CONFIRMED BY THE PARTIES. IN VIEW OF THI S, THERE IS NO MERIT IN REVENUE'S CONTENTIONS. WE UPHOLD THE ORDER OF CIT( A) AND REJECT THE REVENUE'S CONTENTIONS IN THE RESPECTIVE ASSESSMENT YEARS. EVEN THOUGH REVENUE RAISED AS GROUND NO.5, THE ISSUE OF NOT HAV ING ANY INCRIMINATING MATERIAL WHICH LD.CIT(A) ALSO CONSIDE RED, WE ARE OF THE ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 6 -: OPINION THAT THERE IS NO NEED FOR ADJUDICATING THIS ISSUE ON LEGAL PRINCIPLES ALONE WHEN ON FACTS, NO ADDITION CAN BE MADE OUT OF THE CLOSING CREDIT BALANCES WHEN PURCHASES/ OTHER TRANS ACTIONS WERE ACCEPTED. WHETHER THERE IS INCRIMINATING MATERIAL OR NOT, ASSESSING OFFICER'S ADDITION PER SE IS NOT CORRECT ON FACTS I TSELF. THEREFORE, WE DO NOT INTEND TO ADJUDICATE THE LEGAL CONTENTIONS RAIS ED IN THE REVENUE'S GROUNDS, AS IS NOT APPLICABLE TO THE FACTS OF THE C ASE. 8. IN THE RESULT, ALL THE THREE APPEALS OF REVENUE ARE DISMISSED. ASSESSEE'S APPEALS FOR AYS.2003-04, 2004-05, 2005-0 6 & 2006-07 : 9. IN THESE FOUR ASSESSMENT YEARS, ASSESSEE'S MAIN GRIEVANCE IS WITH REFERENCE TO CONFIRMATION OF ADVANCES RECEIVED. AS SESSING OFFICER AS BRIEFLY STATED ABOVE HAS TREATED THE ADVANCES RECEI VED OF RS.11,31,458/- IN AY.2003-04, RS.15,20,332/- IN AY.2004-05, RS.23, 56,571/- IN AY.2005-06 AND RS.9,13,008/- IN AY.2006-07 AS UNEXP LAINED CREDITS. BEFORE THE LD.CIT(A), ASSESSEE FURNISHED VARIOUS AC COUNT COPIES AND ALSO CONFIRMATIONS OF THE PARTIES, THEIR PAN NUMBERS TO SHOW THAT THESE ARE TRADE CREDITORS WHICH WERE ADJUSTED AGAINST SALES I N LATER YEARS OR DURING THE YEAR. LD.CIT(A), AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSING OFFICER, HOWEVER, DID NOT AGREE WITH ASSE SSEE'S CONTENTIONS. HIS ORDER ON THIS ISSUE IN PARA 5.4 AND 5.5 IN AY.2 003-04 IS AS UNDER: '5.4 THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AS WELL AS IN THE REMAND REPORT AN D THE WRITTEN SUBMISSIONS OF THE APPELLANT ARE PERUSED. AS COULD BE SEEN FROM THE FACTS OF THE CASE, THE CLOSING BALAN CE OF THE CREDITORS AGAINST THE ADVANCES INCLUDE THE OPENING BALANCES WHICH WAS NOT CONSIDERED BY THE ASSESSING OFFICER AND AS SUCH THE ENTIRE CLOSING BALANCE WAS TREATED AS UNEXPLAI NED CREDITS ON THE PREMISES THAT, THE APPELLANT HAS NOT FURNISHED ANY INFORMATION RELATED TO THE SAID CREDITORS. FROM TH E INFORMATION BROUGHT ON RECORD, THE CLOSING BALANCE OF THE CRED ITORS AGAINST ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 7 -: ADVANCES, INCLUDE THE OPENING BALANCE OF RS.5,42,7 33 WHICH HAVE BEEN CREDITED WITH THE FURTHER ADVANCES OBTAI NED DURING THE YEAR TO THE TUNE OF RS.22,69,553 AND DEBITED W ITH AN AMOUNT OF RS.16,80,828 BEING THE AMOUNTS SQUARED U P OR SALES MADE TO THE PARTIES FOR THE YEAR UNDER REFERENCE. IN THE STRICT PARLANCE OF THE LANGUAGE OF SEC.68, THE CREDITS TH AT APPEAR IN THE BOOKS OF THE ASSESSEE DURING THE RELEVANT YEAR ALO NE CAN BE TREATED AS UNEXPLAINED CREDITS IF THE APPELLANT FA ILS TO EXPLAIN THE TRANSACTION TO THE SATISFACTION OF THE: ASSESS ING OFFICER. IN THIS CASE, SUCH FRESH CREDITS ARE TO THE EXTENT OF RS.22,69,553 WHICH COULD HAVE BEEN EXAMINED FROM THE POINT OF V IEW OF UNEXPLAINED CREDITS BY THE ASSESSING OFFICER, IN C ASE OF FAILURE OF THE ASSESSEE TO EXPLAIN THEM, AS AGAINST TREATING THE ENTIRE CLOSING BALANCE OF THE CREDITORS AS THE UNEXPLAINE D CREDITS. THIS INDICATE THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE ON WRONG PREMISES AND WRONG BASIS, AS SUCH, DO NOT HA VE THE MERIT TO SUSTAIN THE ADDITIONS MADE ON PRESUMPTIVE BASIS. COMING TO THE REPORT OF THE ASSESSING OFFICER AS WELL AS THE ADDL.CIT ON THE GENUINENESS OF THE TRANSACTIONS OF ADVANCES RECEIV ED BY THE APPELLANT, IT MAY BE RELEVANT TO MENTION THAT THIS OFFICE HAS FORWARDED THE ANNEXURES CONTAINING. THE DETAILS OF THE CREDITORS AGAINST ADVANCES AS WELL AS THE CONFIRMATIONS WHICH ARE CONNOTING THE NATURE OF THE TRANSACTIONS AND IF TH E ASSESSING OFFICER IS NOT SATISFIED WITH THE CREDITWORTHINESS OF SUCH CREDITORS, IT WAS FOR THE ASSESSING OFFICER TO GO AFTER THE CREDITOR AND EXAMINING OF THE SAME. THE MERE ABSENCE OF DET AILS AS ENUMERATED IN THEIR REPORTS WILL NOT BE THE GROUND FOR MAKING THE ADDITIONS, THAT TOO BY TREATING THE ENTIRE CLOSING BALANCE OF THE CREDITORS, IN A SEARCH RELATED CASE AS IN THE CASE OF THE APPELLANT. 5.5 PROVISIONS OF SEC.68 STIPULATE THAT THE AMOUNT S THAT CREDITED INTO THE BOOKS OF ACCOUNT OF THE ASSESSEE, THAT AR E EITHER UNEXPLAINED BY THE ASSESSEE OR THE EXPLANATION OFF ERED IS NOT ACCEPTABLE TO THE ASSESSING OFFICER, CONSTITUTE TH E UNEXPLAINED CREDITS, SO AS TO BE TREATED AS THE INCOME OF THE APPELLANT. IN THE INSTANT CASE, AT THE STAGE OF THE . ASSESSMENT, THE ASSESSING OFFICER TREATED THE CREDITORS AGAINST THE ADVANCES , AS ''UNEXPLAINED CREDITS, ON THE PRETEXT OF ABSENCE OF EXPLANATION OF THE ASSESSEE AND THE SAME REASON WAS INDICATED IN THE REMAND REPORT S. FURTHER, IN ABSENCE OF THE ADVERSE INFORMATION ON THE FICTITIO US NATURE OF THE CREDITORS, THERE IS NO GROUND FOR SUCH ADDITIONS I N THE SEARCH RELATED ASSESSMENTS AS HELD BY VARIOUS JUDICIAL DECISIONS. HOWEVER, KEEPING THE INCOMPLETE NATURE OF INFORMATION, SPEC IALLY THE BANK ACCOUNT EXTRACTS NOT FILED BY THE AUTHORIZED REPRE SENTATIVE TO VERIFY ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 8 -: THE TRUE NATURE OF THE TRANSACTIONS, EVEN AT THE S TAGE OF THE APPELLATE PROCEEDINGS, THE ASSESSING OFFICER IS DI RECTED TO EXAMINE THE CREDITORS AGAINST THE ADVANCES TO THE EXTENT O F FRESH CREDITS FOR THE YEAR UNDER REFERENCE, IN TREATING THE SAME AS GENUINE TRANSACTIONS OR OTHERWISE. SUBJECT TO THE ABOVE VE RIFICATIONS, THE APPEAL OF THE APPELLANT IS TREATED AS PARTLY ALLOW ED'. 10. LD.COUNSEL REFERRING TO THE DETAILS FURNISHED B EFORE THE AUTHORITIES WAS OF THE SUBMISSION THAT ALL THESE CREDITS ARE TR ADE CREDITS AND THERE IS NO NEED TO TAKE THEM AS CASH CREDITS. WE HAVE ASKE D FOR THE LEDGER COPIES OF ALL THE PARTIES, ACCOUNT-WISE AND ASSESSE E HAS FURNISHED THE SAME. AS CAN BE SEEN FROM THE DETAILS, THE CREDITS FROM M/S.GOYAL TRADERS ARE TRADE CREDITS WHICH ARE ADJUSTED TOWARD S SALES IN AY.2003- 04 AND 2004-05. LIKEWISE, THE CREDITS IN THE CASE OF M/S.VICTORY PLYWOOD ARE ALSO ADJUSTED TOWARDS SALES AND THERE A RE PURCHASE CREDITS ALSO. THEREFORE, BOTH CREDIT AND DEBITS IN THIS AC COUNT PERTAIN TO ASSESSEE'S TRADE TRANSACTIONS. LIKEWISE IN THE CAS E OF M/S.GLORY PAPER IN AYS.2003-04 TO 2005-06. SIMILARLY, IN THE CASES OF M/S.GOYAL TIMBER TECHNIQUE, M/S.BAKELITE HYLAM LIMITED, M/S.DHANALAX MI PAPER, M/S.SUNITA COMMERCIAL (P) LTD., M/S.AMBIKA HYDRAULI CS. THESE ARE OF TRADE TRANSACTIONS AND THE ADVANCES AROSE AS PART O F TRADE. TO THAT EXTENT, ASSESSEE CONTENTION THAT TRADE CREDITS CANN OT BE CONSIDERED AS CASH CREDITS HAS TO BE ACCEPTED. MOREOVER THESE ADV ANCES WERE SUBSEQUENTLY GOT ADJUSTED ALSO. THERE IS NO MERIT I N ORDER OF ASSESSING OFFICER AND CIT(A) IN CONFIRMING THE SAME AS THESE ARE NOT CASH CREDITS PER SE. 10.1 HOWEVER, IN THE CASE OF M/S.SHALIMAR PLYWOOD A SSESSEE HAS RECEIVED AN AMOUNT OF RS.4,50,000/- IN THE YEAR 200 2-03 RELEVANT TO AY.2003-04 WHICH ACCORDING TO ASSESSEE'S STATEMENT FILED BEFORE US WAS CONTINUING UPTO 31-03-2005. WHETHER IT WAS SUBSEQU ENTLY ADJUSTED OR RETURNED HAS NOT BEEN PLACED BEFORE US. THEREFORE, WE ARE OF THE OPINION ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 9 -: THAT THIS AMOUNT CAN BE EXAMINED WHETHER IT IS TRAD E CREDIT OR CASH CREDIT. LIKEWISE, IN THE CASE OF M/S.YOUSUF & CO., ASSESSEE RECEIVED ON 18-10-2003 THE AMOUNT WAS ALSO CONTINUING TILL 31-0 3-2005 BEING RS.1,37,180/-. IN THE CASE OF M/S.SEKHAR PLYWOOD A LSO AMOUNT OF RS.1,01,360/- RECEIVED ON 28-03-2005 WAS ALSO CONTI NUING AS SUCH TILL 31-03-2006. IN THE CASE OF M/S.KAVITA HARDWAR AMO UNT RECEIVED ON 27- 03-2005 OF RS.2,05,700/- WAS ALSO CONTINUING AS CLO SING BALANCE. IN THE CASE OF M/S.VIKRAM PLYWOOD AMOUNT RECEIVED ON 18-03 -2005 RS.3,50,000/- AND ON 21-03-2005 RS.1,68,794/- WERE ALSO CONTINUING AS CLOSING BALANCES. IN THE CASE OF M/S.AJAY LAMINATE S AMOUNT RECEIVED ON 14-03-2005 OF RS.3,49,875/- AND IN THE CASE OF K.BH ASKAR RAO OF RS.2,50,573/- DT.15-03-2005 WERE ALSO CONTINUING AS SUCH. IN THE CASE OF R.SUBBA RAO, ENTIRE AMOUNT RECEIVED RS.5,87,941/ - BETWEEN 18-03- 2005 TO 23-03-2005 AND AMOUNTS IN THE CASE OF K.RAJ AN RAO, RS.7,18,540/- RECEIVED BETWEEN 02-01-2005 TO 05-03- 2005 WERE ALSO CONTINUING AS CLOSING BALANCES. IN THE CASE OF H. HARISH KUMAR OF RS.5,28,741/- RECEIVED ON 15-03-2005 WAS ALSO CONTI NUING AS SUCH. ASSESSEE DID NOT GIVE ANY INFORMATION WHEN THESE AM OUNTS WERE ADJUSTED OR RETURNED. IN THE ABSENCE OF THESE DETA ILS, WE ARE UNABLE TO GIVE ANY FINDING, WHETHER THE AMOUNTS CAN BE CONSID ERED AS CASH CREDITS OR TRADE CREDITS. THEREFORE, ISSUE OF EXAMINING TH ESE AMOUNTS ARE RESTORED TO THE FILE OF ASSESSING OFFICER TO EXAMIN E IN RESPECTIVE ASSESSMENT YEARS AND DETERMINE WHETHER THEY CAN BE TREATED AS UN- EXPLAINED CASH CREDITS. ASSESSING OFFICER'S ORDER D ID NOT SPECIFY THE DETAILS OF CREDIT. THEREFORE ABOVE ANALYSIS IS BASE D ON THE DETAILS FILED BY ASSESSEE. ASSESSING OFFICER IS DIRECTED TO EXAMINE THE AMOUNTS THAT WERE CONSIDERED FOR ADDITION AND EXCLUDE TRADE CREDITS F ROM PURVIEW OF CASH CREDITS. IF ASSESSEE HAS FURNISHED ANY MODE OF RECE IPT/MODE OF ADJUSTMENT OR REPAYMENT OF THE AMOUNTS AND CONFIRMA TIONS FROM THE SAID PARTIES, THEN ASSESSING OFFICER CAN MAKE NECES SARY ENQUIRIES TO ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 10 -: EXAMINE WHETHER THEY ARE GENUINE OR NOT. WITH THES E OBSERVATIONS, THE ISSUE OF EXAMINING THE CREDITS WHICH ARE NOT ADJUST ED IN THE TRADE EITHER DURING THE YEAR OR LATER YEAR IS RESTORED TO THE FI LE OF THE ASSESSING OFFICER. BALANCE OF THE CREDITS WHICH ARE TRADE CR EDITS STANDS DELETED, MODIFYING ORDER OF THE CIT(A) TO THAT EXTENT TOO. IN THE RESULT, ASSESSEE'S GROUNDS ARE ALLOWED PARTLY FOR STATISTICAL PURPOSES . ASSESSING OFFICER SHOULD GIVE DUE OPPORTUNITY TO ASSESSEE TO FURNISH NECESSARY INFORMATION/CONFIRMATIONS TO THE EXTENT OF THE CRED ITS AVAILABLE ON THE ABOVE ISSUE. 11. THE NEXT ISSUE FOR CONSIDERATION IN AY.2006-0 7 IS WITH REFERENCE TO THE COMMISSION RECEIVED TO THE EXTENT OF RS.26,61,9 15/-. ON THE BASIS OF THE TDS CERTIFICATES ISSUED BY M/S.AMIT COMMERCI AL COOPERATION AND M/S.C.J. CHEMICALS PRIVATE LIMITED, ASSESSING OFFIC ER WAS OF THE OPINION THAT THE COMMISSION RECEIVED BY ASSESSEE TO AN EXTE NT OF RS.26,61,915/- WAS NOT ACCOUNTED FOR IN AY.2006-07. IT SEEMS ASSE SSING OFFICER HAS NOT GIVEN ANY OPPORTUNITY TO ASSESSEE BEFORE MAKING ADD ITION. BEFORE THE LD.CIT(A), ASSESSEE EXPLAINED THAT ASSESSEE HAS REC EIVED ADVANCE FROM THE ABOVE PARTIES IN THE FINANCIAL YEAR 2005-06 AND THE SERVICES WERE RENDERED IN ACCOUNTING YEAR RELEVANT TO AY.2007-08. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS ACCOUNTED FOR THE RECEI PT OF COMMISSION IN THAT YEAR AND CLAIMED THE TDS IN THAT YEAR. THE MA TTER WAS REMITTED TO THE ASSESSING OFFICER AND ASSESSING OFFICER HAS ACC EPTED THE SAME IN HIS REPORT. HOWEVER, THE CIT(A) WAS OF THE OPINION THA T ASSESSEE HAS MENTIONED AY.2005-06 ALSO WHEREIN IT WAS SUPPOSED T O HAVE RECEIVED COMMISSION OF RS.24,35,341/-. THEREFORE, HE DIRECT ED THE ASSESSING OFFICER TO EXAMINE THE ISSUE. 12. ON CONSIDERING THE FACTS PLACED ON RECORD, WE A RE OF THE OPINION THAT THERE IS NO DISPUTE WITH REFERENCE TO ACCOUNTI NG OF THE COMMISSION ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 11 -: OF RS.26,61,915/- IN THE AY.2007-08, DURING WHICH Y EAR ASSESSEE HAS RENDERED SERVICES AND ACCOUNTED AS INCOME. THE TDS CLAIM ALSO PERTAINS TO AY.2007-08. CONSIDERING THESE FACTS, W E DO NOT SEE ANY REASON TO SUSTAIN THE ADDITION IN AY.2006-07, JUST BECAUSE THE OTHER PARTIES HAVE DEDUCTED TDS ON ADVANCE AMOUNTS PAID. IN VIEW OF THIS, CIT(A) ORDER STANDS MODIFIED. ASSESSEE'S GROUND IS ALLOWED. THE ADDITION IS DELETED FROM AY.2006-07. 13. NEXT ISSUE FOR CONSIDERATION IS ISSUE OF FUEL C HARGES. THIS ISSUE ARISES IN AY.2009-10. ASSESSEE HAS CLAIMED AN AMOUN T OF RS.31,06,169/- AS FUEL CHARGES. ASSESSING OFFICER IN HIS BRIEF ORDER MENTIONED THAT FOR THE FIRST TIME, FUEL EXPENSES WE RE DEBITED DURING THE YEAR AND ASSESSEE HAS NOT JUSTIFIED, THEREFORE, THE SAME WERE DISALLOWED. BEFORE THE CIT(A), ASSESSEE FURNISHED THE DETAILS A ND CIT(A) REMANDED FOR EXAMINATION. ASSESSING OFFICER VIDE HIS REMAND REPORT DT.30-01- 2012 GAVE BRIEF REPORT AS UNDER: 'THE AR OF THE ASSESSEE WAS ASKED TO GIVE DETAILS A BOUT FUEL CHARGES AMOUNTING TO RS.31,06,169/-. THE AR OF TH E ASSESSEE HAS SUBMITTED LEDGER COPY, PAN AND PHONE NUMBER OF THE SUPPLIER OF THE FUEL. THE SUPPLIER WAS CONTACTED ON PHONE. H E HAS CONFIRMED HIS PAN AND THE TRANSACTIONS WITH ASSESSEE-COMPANY . HENCE, AFORESAID AMOUNT FOR FUEL CHARGES MAY BE GIVEN CRE DIT TO THE ASSESSEE'. WHILE FORWARDING THE ABOVE REPORT, THE ADDITIONAL C IT DID NOT AGREE WITH THE REPORT. THE ADDITIONAL CIT WAS OF THE OPINION THAT ASSESSING OFFICER OUGHT TO HAVE BROUGHT OUT NECESSARY DOCUMENT ON REC ORD BEFORE STATING THAT CREDIT OF FUEL CHARGES MAY BE GIVEN TO ASSESSE E. ADDITIONAL CIT NOTED THAT THE BILLS ARE RAISED ON ONE DAY I.E., 31 -01-2009 AND ALL PAYMENTS ARE MADE IN THE MONTH OF FEBRUARY AND MARC H AND COMPLETE DETAILS OF MR. RAMESH KUMAR ARE NOT KNOWN. THEREFO RE, THE ADDITIONAL CIT EXPRESSED DOUBT ABOUT THE GENUINENESS OF THE CL AIM. IN THE ABSENCE ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 12 -: OF COMPLETE DETAILS, THE LD.CIT(A) ON EXAMINATION O F THE REPORTS, MADE FURTHER ENQUIRIES AND FOUND THAT ASSESSEE MAINTAINE D BANK ACCOUNT WITH IOB, SECUNDERABAD AND BANK EXTRACT INDICATED THAT A MOUNTS HAVE BEEN ENCASHED BY THE RECIPIENT IN CASH, EXCEPT ON ONE OC CASION ON 24-03- 2009, THEREFORE, HE HAS CONFIRMED THE DISALLOWED AS UNDER: '5.5 IN RESPONSE TO THE SAME, THE APPELLANT HAS FUR NISHED CERTAIN INFORMATION INCLUDING THE BANK ACCOUNT EXTRACT OF T HE APPELLANT MAINTAINED WITH INDIAN OVERSEAS BANK, R.P.ROAD BRANCH, SECUNDE RABAD BEARING ACCOUNT NO.043202000003073. AS COULD BE SEEN FROM T HE BANK ACCOUNT EXTRACT FOR THE PERIOD UNDER REFERENCE, THE APPELLA NT HAS MADE THE FOLLOWING AMOUNTS VIDE THE BEARER CHEQUE WITH THE C HEQUE NUMBERS INDICATED WHICH HAVE BEEN ENCASHED BY THE RECIPIENT IN CASH, EXCEPT ON ONE OCCASION. THE DETAILS ARE AS UNDER; S.NO. DATE CHEQUE NO. NARRATION CODE AMOUNT (DEBIT) 1 24.3.09 705563 TO M RAMESH KU CSH 297653 2 24.3.09 705562 TO M RAMESH KU CSH 241538 3 24.3.09 705565 TO M RAMESH KU CSH 240255 4 24.3.09 705568 TO M RAMESH KU CSH 217902 5 24.3.09 705569 TO M RAMESH KU CSH 240255 6 24.3.09 705571 TO M RAMESH KU CSH 280853 7 24.3.09 705572 TO M RAMESH KU CSH 247043 8 24.3.09 705570 TO M RAMESH KU CSH 309902 9 24.3.09 705567 TO M RAMESH KU CSH 274748 10 24.3.09 705566 TO M RAMESH KU CSH 303165 11 24.3.09 705564 TO M RAMESH KU CSH 244575 12 25.3.09 705561 RAMESH KUMAR CLG 208280 TOTAL 3106169 5.6 AS COULD BE SEEN FROM THE ABOVE INFORMATION, TH E APPELLANT COULD NOT SUBSTANTIATE THE REASONS FOR BOOKING THE EXPENDITUR E BY RAISING THE BILLS ON SINGLE DAY AND BY PAYING THE AMOUNTS TO THE EXTE NT OF RS.28,97,889 ON A SINGLE DAY AND IN CASH THEREBY THE GENUINENESS OF THE TRANSACTION. THE ABNORMALITY OF THE TRANSACTION RAISED THE DOUBTS AN D THE PAYMENTS BY CASH HAD CONFIRMED THE SAME. IT IS NOT KNOWN HOW AN D WHAT PROMPTED THE APPELLANT TO RAISE THE BILLS ON THE SAME DAY AND PA ID THE AMOUNT ON A SINGLE DAY TO THE EXTENT OF RS.28,97,889, BY CASH, TO BE A CASE WHERE SUCH TRANSACTION IS NOT DOUBTFUL. THE CASH PAYMENTS ALSO ATTRACT THE PROVISIONS OF SEC.40A(3) OF THE I.T.ACT, 1961, SINCE THE SAME WERE MET FOR THE PURPORTED EXPENSES/PURCHASES. HOWEVER, IT MAY BE RE LEVANT TO NOTE THAT ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 13 -: THE PAYMENT OF RS.2,08,280 WAS PAID BY CHEQUE AS PE R THE INDICATION IN THE BANK ACCOUNT THAT HAS BEEN CLEARED ON 25.3.2009 . THUS, BASED ON THE INFORMATION THAT HAS BEEN BROUGHT ON THE RECORD, TH E CLAIM OF THE APPELLANT FOR EXPENDITURE TO THE TUNE OF RS.28,97,889 IS NOT AN AL LOWABLE EXPENDITURE AND AS SUCH THE SAME IS CONFIRMED OUT OF THE TOTAL DISALLOWANCE OF RS.31,06,169 MADE BY THE ASSESSING OF FICER. THOUGH THE ASSESSING OFFICER HAS MADE THE DISALLOWANCES, ON PRIMA FACIE SUSPICION, THE MAJOR PORTION OF THE SO CALLED EXPENSE R EPRESENTING THE FUEL CHARGE, IN THE FORM OF PURCHASE OF PADDY HUSK F ROM A SINGLE PARTY, THAT TOO BY RAISING BILLS ON A SINGLE DAY AND DISCHAR GED THE LIABILITY BY PAYMENTS IN CASH, CONCLUSIVELY PROVES THE FICTITIOUS N ATURE OF EXPENSES BOOKED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. AC CORDINGLY, THE MAJOR PORTION OF THE ADDITIONS MADE BY THE ASSESSING OFFICER AS REPRESENTED BY CASH PAYMENTS, ARE CONFIRMED AND THE APPELLANT GETS ONLY A PART RELIEF TOWARDS THE PAYMENT MADE IN CHEQU E. HENCE, THIS GROUND OF APPEAL IS TREATED AS PARTLY ALLOWED'. 14. BEFORE US, IT WAS SUBMITTED THAT LD.CIT(A) WAS NOT CORRECT IN CONFIRMING THE CASH PAYMENTS WITHOUT EXAMINING THE GENUINENESS OF THE PAYMENTS. IT WAS THE SUBMISSION THAT ASSESSEE DID INDEED PAY THE AMOUNTS FOR THE FUEL RECEIVED FROM THE SAID PERSON AND THEREFORE, THERE IS NO NEED FOR DISALLOWANCE. LD COUNSEL ALSO COMME NTED THAT ADDL. CIT REPORT IS NOT CORRECT AS AO EXAMINED AND ACCEPTED T HE CLAIM IN REMAND. 15. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE R IVAL CONTENTIONS WITH THE HELP OF THE ORDERS OF THE AUTHORITIES. AS SEEN FROM THE INFORMATION AVAILABLE ON RECORD, THERE IS NO DISPUT E WITH REFERENCE TO THE FACT THAT JOURNAL ENTRY FOR THE ABOVE EXPENDITURE W AS PASSED ON ONE DAY FOR THE SO CALLED FUEL CHARGES AND ASSESSEE HAS ISS UED DIFFERENT CHEQUES, WHICH SEEMS TO HAVE BEEN ENCASHED ON A SINGLE DAY I N CASH. ASSESSING OFFICER ALSO, EVEN THOUGH ACCEPTED BY RINGING UP TH E PERSON ON PHONE, DID NOT MAKE ANY ENQUIRY WITH REFERENCE TO THE GENU INENESS OF THE TRANSACTIONS. THE RESERVATIONS OF THE ADDITIONAL C IT SEEMS TO BE SOMEWHAT GENUINE SINCE ASSESSING OFFICER DID NOT MA KE PROPER ENQUIRY. AT THE SAME TIME, CIT(A) ALSO IN OUR OPINION IS NOT CORRECT IN ALLOWING THE AMOUNT TO THE EXTENT OF CLEARANCE THROUGH BANK ACCO UNT WHILE ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 14 -: DISALLOWING THE CASH PAYMENTS. UNLESS THE TRANSACT ION IS PROVED TO BE NON-GENUINE, JUST BECAUSE THE PAYMENTS WERE MADE IN CASH OR IS DRAWN BY THE SAID PERSON FROM THE BANK, THE SAME CANNOT B E CONSIDERED AS NON-GENUINE. SINCE ASSESSING OFFICER ALSO DID NOT ENQUIRE, NOR CIT(A) CONSIDERED IT NECESSARY TO EXAMINE THE GENUINENESS OF TRANSACTIONS, WE ARE OF THE OPINION THAT THE CLAIM OF FUEL CHARGES S HOULD BE ENQUIRED AFRESH. ASSESSEE IS DIRECTED TO FURNISH THE NECESS ARY INVOICES RAISED, THE MODE OF TRANSPORT OF HUSK TO THE FACTORY PREMISES A ND UTILISATION OF THE HUSK IN THE PROCESS OF MANUFACTURING OF DECORATIVE LAMINATED SHEETS AND THE GENUINENESS OF THE PAYMENTS TO THE SAID PARTY. ASSESSING OFFICER SHOULD EXAMINE THE GENUINENESS OF THE CLAIM IN THE LIGHT OF THE DETAILS FURNISHED BY ASSESSEE AND THEN CAN CONSIDER ALLOWIN G OR DISALLOWING THE CLAIM BASED ON THE FACTS. WITH THESE OBSERVATIONS, THE ISSUE IS RESTORED TO THE FILE OF ASSESSING OFFICER AND ASSESSEE'S GRO UNDS HAVE BEEN CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, APPEALS OF REVENUE ARE DISMISSED AND APPEALS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 11 TH MARCH, 2015. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUN TANT MEMBER HYDERABAD, DATED 11 TH MARCH, 2015. TNMM ITA NOS. 768 TO 772 /HYD/12 ITA NOS. 963 TO 965/HYD/12 SUNDER SYNTHETICS PVT. LTD., :- 15 -: COPY TO : 1. SUNDER SYNTHECIS PRIVATE LIMITED, 1 - 7 - 228/44, U.B.COMPLEX, PARADISE CIRCLE, SECUNDERABAD. 2. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCL E-4, HYDERABAD. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, 8 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 3. CIT(APPEALS)-VII, HYDERABAD 4. CIT(CENTRAL), HYDERABAD 5. D.R. ITAT, HYDERABAD