ITO, Erode V. Smt. Rolex Sugunamary, Erode

ITA 843/CHNY/2011

• Counselvise Citation: 84321714 RSA 2011
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N PRAKASH J
• Assessee Lawyers: S SRIDHAR
• Section: 143(3); 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 843/MDS/2011 (ASSESSMENT YEAR : 2007-08 ) THE INCOME TAX OFFICER WARD I(3) ERODE VS SMT. ROLEX SUGUNAMARY PROPX. M/S G.R.LEATHERS 101-A, RAMAMURTHY NAGAR ERODE 638 003 [PAN AELPR2379J] (APPELLANT) (RESPONDENT) C.O. NO. 100/MDS/2011 (ASSESSMENT YEAR : 2007-08 ) SMT. ROLEX SUGUNAMARY PROPX. M/S G.R.LEATHERS 101-A, RAMAMURTHY NAGAR ERODE 638 003 VS THE INCOME TAX OFFICER WARD I(3) ERODE (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI T.N.PRAKASH, JCIT/DR ASSESSEE BY : SHRI S.SRIDHAR, ADVOCATE DATE OF HEARING : 06-09-2011 DATE OF PRONOUNCEMENT : 04-10-2011 ITA 843/11 CO 100/11 :- 2 -: O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THE APPEAL BY THE REVENUE AND THE CROSS OBJECTI ON BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A). COIMBATORE, DATED 23.2.2011, PERTAINING TO ASSESSMENT YEAR 2007 -08. 2. IN REVENUES APPEAL, FOLLOWING GROUNDS HAVE BEEN R AISED: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS AGAINST FACTS AND CIRCUMSTANCES OF TH E CASE. 2. THE LEARNED CIT(A) ERRED IN DELETING TH E DISALLOWANCE OF ` 71,10,181/- ON ACCOUNT OF UNPROVED TRADE CREDITORS . 3. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITIO NS MADE ON THE GROUND THAT THE ADDITIONS WERE MADE IN THE ASSESSMENT ORDER BASED UN THE REPORT OF THE INSPECT OR AND THAT NO FURTHER ENQUIRIES WERE MADE BY THE ASSESSING OFFICER. 4. THE LEARNED CIT(A) ERRED IN OBSERVING THAT ALL THE TRANSACTIONS RELATE TO THE PREVIOUS YEAR RELEVANT T O THE ASSESSMENT YEAR 2005-06 WHICH CANNOT BE DISALLOWED IN THE YEAR UNDER CONSIDERATION. 5. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ADDITIONS WERE MADE ONLY AFTER DETAILED ENQUIRIES, SUCH AS EXISTENCE OF THE TRADE CREDITORS, THEIR CREDIBIL ITY ETC. 6. THE LEARNED CIT(A) ERRED IN NOT CONSIDERIN G THAT NOT ALL THE TRADE CREDITORS WERE GENUINE PARTIES. 7. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THAT THE LETTERS SENT FOR CONFIRMATION OF TRADE CREDITORS WE RE RETURNED UNSERVED STATING THAT THERE WERE NO SUCH ADDRESSEES / CONCERNS. ITA 843/11 CO 100/11 :- 3 -: 8. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERE D THAT THE ASSESSEE FURNISHED CONFIRMATION LETTERS ALONG WITH THE ACCOUNT COPIES WHICH WERE ALL SIGNED BY THE ASSESSE E'S REPRESENTATIVE AND NOT BY THE SAID CREDITORS. 9. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED T HAT MERE FURNISHING OF COPIES OF THE PURCHASE AND SALES BILL S, BILLS FOR PAYMENT OF FREIGHT CHARGES ARE NOT SUFFICIENT T O PROVE THE GENUINENESS OF THE TRANSACTIONS WITH THE TRADE CREDITORS. 10. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDU CED AT THE TIME OF HEARING, THE ORDER OF THE LD. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER RESTORE D. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, FILED HER RETURN OF INCOME FOR ASSES SMENT YEAR 1007-08, ON 31.3.2008 ADMITTING TOTAL INCOME OF ` 3,98,290/-. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMI SES OF THE ASSESSEE ON 12.9.2008 DURING WHICH THE ASSESSEE HAD ADMITTED AN ADDITIONAL INCOME OF ` 28,03,997/- TOWARDS UNPROVED TRADE CREDITORS. THE ASSESSMENT WAS COMPLETED U/S 143(3) IN WHICH T HE FOLLOWING ADDITION/DISALLOWANCES WERE MADE: (I) DISALLOWANCE ON ACCOUNT OF TRADE CREDITORS ` 71,10,181 (II) DISALLOWANCE ON ACCOUNT OF REPROCESSING CHARGES ` 2,60,000 (III) DISALLOWANCE ON ACCOUNT OF DISCOUNT ` 1 ,55,857 ITA 843/11 CO 100/11 :- 4 -: 4. AGGRIEVED, THE ASSESSEE WENT BEFORE THE LD. CIT(A), WHO HAS DELETED THE ENTIRE ADDITIONS MADE BY THE ASSESS ING OFFICER. NOW, THE REVENUE IS AGGRIEVED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE P ERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. THE ASSES SEE CARRIES ON THE BUSINESS AS A LEATHER TANNER UNDER THE TRADE NAME G.R. LEATHERS AS A PROPRIETARY CONCERN. THE ASSESSMENT ORDER WAS PASS ED ON 31.12.2009 DETERMINING TOTAL INCOME OF ` 79,24,328/-. AFTER HEARING BOTH SIDES, WE HAVE FOUND THAT THE DISALLOWANCES ON ACCOUNT OF TRADE CREDITORS STANDING IN THE NAMES OF M/S MOHAMED & CO., M/S YAN AM ABDUL KATHAR AND M/S V.MOHAMED IBRAHIM, TOTALLED TO ` 13,22,090/. IT WAS FOUND THAT THE ASSESSEE HAD DONE NO BUSINESS WITH T HEM DURING THE FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT YEAR 2007-08. THE BALANCES VIZ. ` 5,99,799/-, ` 4,55,769/- AND ` 2,66,522/-, RESPECTIVELY, REPRESENT ONLY OPENING AS BALANCES AS ON 1.4.2006. THE ACCOUNT COPIES OF THE PARTIES AS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06, 2006-07 AND 2 007-08 CONFIRM THE SUBMISSION OF THE ASSESSEE. SO, IT IS CLEAR TH AT NO NEW AMOUNT HAD BEEN CREDITED BY THE ASSESSEE IN THEIR ACCOUNTS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, A PPLICATION OF ITA 843/11 CO 100/11 :- 5 -: SECTION 68 WAS RULES OUT AND ADDITION CANNOT BE MAD E. THE LD. CIT(A) HAS CORRECTLY DELETED THOSE ADDITION. THE ASSESSI NG OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THESE PARTIES ARE BOGUS. THE ASSESSING OFFICER HAS NOT MADE ANY FURTHER ENQU IRIES IN THIS REGARD. THE BALANCES WERE FOUND TO BE BROUGHT WARD BALANCES. IN CASE THE ASSESSING OFFICER HAS FOUND THESE PARTIES AS BOGUS, THE QUESTION OF THEIR GENUINENESS CAN BE EXAMINED ONLY IN THE YEAR IN WHICH THERE WERE TRANSACTION AND CREDITED ACCOUNT O F THE ASSESSEE. THEREFORE, THE DISALLOWANCE MADE ON ACCOUNT OF CASH CREDITS AMOUNTING TO ` 13,22,090/- HAS BEEN CORRECTLY DELETED BY THE LD. CIT(A). 6. ADDITIONS HAVE BEEN MADE ON ACCOUNT OF UNPROVED TRA DE CREDITORS BEING M/S SABARI LEATHER EXPORTS ` 16,03,200/- AND M/S ORIENTAL LEATHERS ` 9,35,275/-. THE CASE OF THE ASSESSEE IS THAT THE ADDITIONS ARE MADE ON THE BASIS OF THE REPORT OF TH E INCOME-TAX INSPECTOR THAT THERE IS NO CONCERN BY SUCH NAME BUT THE ASSESSEE HAD FILED BEFORE THE ASSESSING OFFICER PURCHASE AND SAL E BILLS OF THE SAID CONCERNS BUT THE BOOKS OF ACCOUNT OF THAT CONCERN C OULD NOT BE PRODUCED. IN RESPECT OF ` 9,35,275/- APPEARING IN THE NAME OF M/S ORIENTAL LEATHERS, IT WAS AS PER THE REPORT OF THE ITI, THE PROPRIETOR OF ITA 843/11 CO 100/11 :- 6 -: THE SAID CONCERN SHRI T.M.SAMAIYULLAH HAD EXPIRED. IN THIS REGARD, SUBMISSION OF THE ASSESSEE IS AS UNDER: IN RESPECT OF ADDITION OF ` 9,35,275/- REPRESENTING CREDITS APPEARING IN THE NAME OF M/S ORIENTAL LEATH ERS, THE CONTENTS OF THE RELEVANT PORTION OF THE ITI REVEAL THAT THE PROPRIETOR OF THE SAID CONCERN SHRI T.M.SAMAIYULLAH EXPIRED AND THAT FILING OF A CONFIRMATION LETTER SIGNED BY THE SAID PERSON WITHOUT DATE, LEADING THE ITI TO GIVE A REPO RT THAT THE CREDITS SEEM TO BE NOT GENUINE. COPIES OF SOME OF T HE BILLS ISSUED BY THE ABOVE PARTIES TO THE APPELLANT (LEDGE R COPY OF THE ABOVE PARTIES IN THE B OAKS OF ACCOUNTS OF THE APPELLANT ALREADY FILED) AND BANK STATEMENTS OF THE APPELLANT WHEREIN THE TRANSACTIONS OF THE APPELLANT WITH THE SAID PAR TIES APPEAR ARE ENCLOSED SEPARATELY IN RESPECT OF SABARI LEATHE R EXPORTS - MARKET AS (A) AND IN RESPECT OF M/S ORIENTAL LEATHE RS MARKED AS (B). THE PERUSAL OF THE ABOVE SHOWS THAT THE PAR TIES ARE REGISTERED UNDER THE TNGST AND CST ACTS. FURTHER, T HE SAID PARTIES HAVE NOT COLLECTED SALES TAX ON THE SALE OF GOODS TO THE APPELLANT. THE IMPLICATION OF TNGST ACT, IN THI S CONTEXT IS PARAMOUNT, IN AS MUCH AS THE GOODS SO SOLD BY THEM TO THE APPELLANT ARE, BY VIRTUE OF II SCHEDULE TO THE TNGST ACT, ARE TAXABLE AT THE POINT OF FIRST SALE IN THE STATE, ME ANING THEREBY THAT THE APPELLANT HAS PURCHASED THE SAID GOODS FRO M REGISTERED DEALERS IN THE STATE. IN OTHER) WORDS, I T IS PROVED THAT THE SAID PARTIES ARE REAL PERSONS. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAVE FO UND THAT THE ASSESSING OFFICER, IN HIS ORDER, HAS MENTIONED THAT COPIES OF SALES TAX RETURNS REVEALED THAT SHRI PACHAMUTHU HAS DONE BUSINESS TRANSACTIONS/TURNOVER EXCEEDING ` 2 CRORES DURING THE FINANCIAL YEAR 2006-07. HOWEVER, NO ENQUIRIES REGARDING HIS SOURC ES, BANK ACCOUNTS WERE MADE. NO ATTEMPT WAS MADE BY THE ASSESSING OF FICER TO FIND OUT HIS BUSINESS ADDRESS IN THE LIGHT OF ADVERSE REPORT OF ITI. THE ITA 843/11 CO 100/11 :- 7 -: ASSESSEE HAD PURCHASED GOODS WORTH ` 1,00,48,000/- FROM M/S SABARI LEATHER EXPORTS. THE ASSESSING OFFICER HAS NOT MAD E ANY COMMENTS REGARDING THE PURCHASES MADE BY THE ASSESSEE. THE TRADE CREDITOR IS ON ACCOUNT OF PURCHASE TRANSACTIONS MADE DURING THE YEAR. THE ASSESSEE MADE PAYMENTS OF ` 84,50,000/- DURING THE YEAR BUT SURPRISINGLY, THE ASSESSING OFFICER HAS NOT MADE AN Y COMMENT ON THE PURCHASES MADE FROM THIS PARTY AND REGARDING PAYMEN T MADE BY THE ASSESSEE TO THIS PARTY. THE ASSESSEE HAD ALSO MADE PURCHASES FROM THIS PARTY IN EARLIER YEARS. THE ASSESSEE PRODUCED THE PROPRIETOR OF THIS CONCERN BEFORE THE ASSESSING OFFICER FOR EXAMI NATION. THUS, WHEN THE ASSESSING OFFICER ACCEPTED PURCHASES EFFECTED B Y THE ASSESSEE FROM THIS PARTY AND THE TRADING RESULTS HAVE NOT BE EN DISTURBED, MAKING ADDITION ON THE CLOSING BALANCE AS ON 31.3.2 007 IS NOT JUSTIFIED FROM ANY ANGLE. THE TRANSACTIONS WITH THIS PARTY A RE FOUND TO BE THROUGH BANKING CHANNELS ONLY. THE ASSESSING OFFIC ER HAS NOT FOUND THIS TRANSACTION TO BE NON-GENUINE WITH THE HELP OF EVIDENCE. THE ASSESSEE PRODUCED THE COPIES OF BILLS, BANK PAYMENT AND SALES TAX ORDER, THEREFORE, THE DELETION IN QUESTION IS QUITE JUSTIFIED. 8. IN THE CASE OF M/S ORIENTAL LEATHERS, THE ASSESSEE HAD MADE TOTAL PURCHASES OF ` 1,33,39,325/- AND THERE WAS A CARRY FORWARD ITA 843/11 CO 100/11 :- 8 -: OPENING BALANCE OF ` 2,04,050/-. DURING THE PERIOD, THE ASSESSEE MADE PAYMENTS OF ` 1,26,09,000/- AND THE BALANCE AMOUNT HAS BEEN SHOWN AS TRADE CREDITOR OF ` 9,34,275/-. A CONFIRMATORY LETTER FROM M/S ORIENTAL LEATHERS HAS ALSO BEEN FILED ALONGIWTH COPY OF ACCOUNT SHOWING PAYMENTS HAVING BEEN MADE TO THE PARTY. TH E ITIS REPORT CANNOT STAND IN VIEW OF THE ABOVE EVIDENCE. THUS, THIS AMOUNT ALSO CANNOT BE SUSTAINED AND HAS BEEN CORRECTLY DELETED BY THE LD. CIT(A). 9. AS REGARDS THE DISALLOWANCE MADE IN THE CASE OF M/S AKSHYA LEATHERS, VICTORY TANNERS AND SAI LEATHERS T OTALLING TO ` 32,49,616/- , THE SUBMISSION OF THE ASSESSEE IS AS UNDER: IN THE ASSESSMENT ORDER, THE ADDITIONS ARE MADE IN RESPECT OF TRADE CREDITORS~ BASED ON THE REPORT OF ITI. IN CAS E OF AKSHYA LEATHERS, THE PERUSALS OF THE RELEVANT PORTION OF T HE REPORT REVEALS THAT ONE SHRI E.K.M.G.BAZEER ALI WAS PRESEN T AND GAVE A LETTER STATING THAT THE ABOVE PARTY WAS NO T KNOWN TO HIM. THIS HAD LEAD THE ITI TO GIVE A REPORT THAT TH E CREDIT SEEMED TO BE NOT GENUINE. COPIES OF THE BILLS ISSUE D BY THE PARTY TO THE APPELLANT AND BANK STATEMENT OF THE AP PELLANT WHEREIN THE TRANSACTIONS OF THE APPELLANT WITH THE SAID PARTY APPEARS ARE ENCLOSED. THE PERUSAL OF THE ABOVE SHOW S THAT THE PARTY IS REGISTERED UNDER THE TNGST AND CST ACT S. HENCE THE ADDITION REQUIRES DELETION. IN RESPECT OF VICTORY TANNERS, THE IT! REPORT REVEA LS THAT THE TANNERY WAS CLOSED, THAT LOCAL ENQUIRY REVEALED THAT THIS TANNERY WAS CLOSED FROM 2007, THAT IT COULD NOT BE VERIFIABLE WHETHER THE SAID CONCERN WAS FUNCTIONING EVEN PRIOR TO 2007 AND THIS COULD BE TREATED AS NON-EXISTENT. THIS HAS LED THE IT! TO GIVE A REPORT THAT THE CREDIT SHOWN AT ` 7,97,125/- TO BE REJECTED AND ADDED TO INCOME. ITA 843/11 CO 100/11 :- 9 -: THE IMPORTANT POINT TO BE NOTED FROM THE REPORT OF THE ITI IS THAT WHILE THE PROPRIETOR OF M/S VICTORY TAN NERS IS SHRI V. THIAGARAJAN, AS PER THE HEADING IN THE REPORT OF TH E ITI, THE ITI IN HIS REPORT DID MENTION THE NAME OF SHRI NALLAMUT HU AS THE PROPRIETOR OF VICTORY TANNERS. SINCE THE VERY NAME OF THE PROPRIETOR HAS BEEN WRONGLY MENTIONED, IT EXHIBITS THE NATURE OF ENQUIRY CONDUCTED BY THE ITI AND THE CREDIBILITY OF THE REPORT OF THE ITI. COPY OF THE REGISTRATION CERTIFICATE ISSUED BY THE COMMERCIAL TAX DEPARTMENT, I ENCLOSED HEREWITH PRO VES THE NAME OF THE PROPRIETOR AS V. THIAGARAJAN AND THE EX ISTENCE OF THE ABOVE PERSON. HOWEVER, THE ASSESSING OFFICER IN PAGE 5 OF THE ORDER MENTIONED THAT THIS CONCERN SEEMED TO BE DEFUNCT FROM THE YEAR 2007 ITSELF AND THEREFORE THE CREDIT BALANCE SHOWN IN THE NAME OF THIS CONCERN SHOULD BE DISALLO WED. COPIES OF THE BILLS ISSUED BY THE ABOVE PARTY TO TH E APPELLANT (LEDGER COPY OF THE ABOVE PARTY IN THE BOOKS OF ACC OUNTS OF THE APPELLANT ALREADY FILED) AND BANK STATEMENT OF THE APPELLANT WHEREIN THE TRANSACTIONS OF THE APPELLANT WITH THE SAID PARTY APPEARS ARE ENCLOSED. THE PARTY IS REGISTERED UNDE R THE TNGST AND CST ACTS. IN RESPECT OF M/S SAI LEATHERS ALSO, THE APPELLANT MADE SIMILAR SUBMISSIONS AND FILED COPY OF SALES TAX REG ISTRATION AND ALSO ASSESSMENT ORDER DATED 22.6.2009 OF COMME RCIAL TAX DEPARTMENT. 10. THIS ADDITION IS ALSO BASED ON ITIS REPORT DATED 27.11.2009. THE ASSESSEE HAD PRODUCED CONFIRMATORY LETTER FROM M/S AKSHAYA LEATHERS ALONG WITH PROOF OF BALANCE OUTSTA NDING WHICH WERE PAID BY WAY OF CROSSED CHEQUES. A COPY OF BANK STA TEMENT OF THE PARTY WAS ALSO ENCLOSED. SIMILAR SUBMISSIONS WERE MADE REGARDING M/S VICTORY TANNERS AND M/S SAI LEATHERS. THE ASSE SSING OFFICER DID NOT CHOSE TO MAKE FURTHER ENQUIRIES TO VERIFY THE D ETAILS. THE ASSESSEE HAD MADE PURCHASES FROM M/S AKSHAYA LEATHERS TO THE TUNE OF ` 44,03,825/- AND PAYMENTS WERE MADE OF ` 28,79,500/- LEAVING A CREDIT ITA 843/11 CO 100/11 :- 10 - : BALANCE OF ` 15,24,325/- WHICH WAS PAID IN ASSESSMENT YEAR 2008 -09. IN THE CASE OF M/S VICTORY TANNERS, THE TOTAL PURCH ASES IN ASSESSMENT YEAR 2007-08 WERE ` 79,12,125/- AND PAYMENTS WERE MADE TO THE EXTENT OF ` 71,15,000/- . THE ASSESSEE MADE PURCHASES FROM TH ESE PARTIES IN ASSESSMENT YEAR 2008-09 ALSO. IN THE CA SE OF M/S SAI LEATHERS, PURCHASES WERE MADE OF ` 15,17,894/- AND PAYMENTS WERE MADE OF ` 5,89,728/-. IN ALL THE THREE CASES THERE WERE PUR CHASES MADE BY THE ASSESSEE DURING THE PERIOD AND PAYMENTS WERE ALSO MADE THROUGH BANKING CHANNELS. THE ASSESSING OFFICER HA S NOT DISPUTED THE PURCHASES AND THE PAYMENTS MADE BY THE ASSESSEE. T HE TRADING RESULTS HAVE ALSO NOT BEEN DISTURBED. AGAIN, THE R EPORT OF ITI CANNOT STAND AGAINST THE OVERWHELMING EVIDENCE REFERRED TO ABOVE. ACCORDINGLY, THE DELETIONS MADE BY THE LD. CIT(A) A RE IN ORDER AND CANNOT BE INTERFERED WITH. ACCORDINGLY, THE APPE AL OF THE REVENUE, STANDS DISMISSED. 11. THE CROSS OBJECTION FILED BY THE ASSESSEE IS SIMPLY IN SUPPORT OF THE ORDER OF THE LD. CIT(A) WITHOUT ANY MATERIAL GROUNDS. IN VIEW OF OUR ORDER IN REVENUES APPEAL, WE DISMIS S THE CROSS OBJECTION FILED BY THE ASSESSEE. ITA 843/11 CO 100/11 :- 11 - : 12. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 4.10.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 4 TH OCTOBER, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR