Sriram Industries & Chemicals, Tuticorin V. ITO, Tuticorin

MA 170/CHNY/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3565 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-08-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained cash credit; Business income; Business expenditure; Source of fund; Onus to prove
• Section: 10B; 68; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' ! # . $% , & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER M.A. NO. 170/MDS/2015 (IN ITA NO. 72/MDS/2014) / ASSESSMENT YEAR : 2009-10 M/S. SRIRAAM INDUSTRIES & CHEMICALS, 93C/6H/1A, KANDAN COLONY, SECOND STREET, TUTICORIN 628 008 PAN AAPFS0801A APPELLANT) V. THE INCOME-TAX OFFICER, WARD-I(3), TUTICORIN. RESPONDENT) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE / RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT / DATE OF HEARING : 06.11.2015 ! / DATE OF PRONOUNCEMENT: 20.11.2015 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER BY THIS MISCELLANEOUS PETITION, THE ASSES SEE SEEKS RECTIFICATION OF THE ORDER OF THE TRIBUNAL IN ITA N O.72/MDS/2014 DATED 12.9.2014. - - MA 170/15 2 2. THE LD. AR SUBMITTED THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND IS A 100% EXPORT ORIENTED UNIT [EOU], MANU FACTURING AND SELLING MAGNESIUM SULPHATE HEPTAHYDRATE. THE AS SESSEE FILED ITS RETURN OF INCOME FOR THE AY.2009-10 DECLA RING 'NIL' TAXABLE INCOME AFTER CLAIMING EXEMPTION U/S.10B OF THE IT ACT. FURTHER, THE LD. AR SUBMITTED THAT THE SAID RETURN OF INCOME WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE AO OBSERVED THAT DURING THE PERIOD RELEVANT TO A.Y, THE ASSESSEE HAS RECEIVED ` 5 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 FU RNISH THE DETAILS OF THE AFORESAID PERSONS TO CHECK THE VERAC ITY OF TRANSACTIONS. THE ASSESSEE PRODUCED SHRI IYYAPPAN A S WELL AS SHRI M.RAMAMOORTHY BEFORE THE AO. STATEMENTS OF BOT H THE PERSONS WERE RECORDED. BOTH THE AFORESAID PERSONS ADMITTED TO HAVE PAID ` 5 LAKHS EACH TO THE ASSESSEE AND ADMITTED THAT THE AMOUNT HAS BEEN RECEIVED BACK BY THEM DURING THE PE RIOD RELEVANT TO AY.2009-10. THE LD. AR, FURTHER SUBM ITTED THAT THE AO AFTER EXAMINING THE STATEMENTS AND THE AFFIDAVIT S FILED BY THESE PERSONS CONCLUDED THAT EXCEPT FOR THE AFFIDAV ITS TENDERED - - MA 170/15 3 BY THESE PERSONS AND LEDGER COPY FILED BY THE ASSES SEE, THERE IS NO OTHER DOCUMENT OR EVIDENCE TO SHOW CREDITWORTHIN ESS OF THE CREDITORS AND GENUINENESS OF TRANSACTION AND VIDE O RDER DATED 23.12.2011 INTER ALIA MADE ADDITION OF ` 10 LAKHS U/S.68 AS UNEXPLAINED CASH CREDIT. AGGRIEVED BY THE ASSESSM ENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APP EALS). 2.1 THE LD. AR SUBMITTED THAT THE CIT(APPEALS), VIDE IMPUGNED ORDER UPHELD THE FINDINGS OF AO WITH REGAR D TO THIS ADDITION BUT DELETED THE OTHER ADDITION ON THE GROU ND THAT IN ANY EVENT THE INCOME IS EXEMPT 100%. T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE ORDER OF THE CIT(APPEALS). 2.2 BEFORE THE TRIBUNAL, IT WAS SUBMITTED THAT THE ASSESSEE IS 100% EOU AND IS ELIGIBLE FOR CLAIMING EXEMPTION U/S.10B OF THE ACT. THE ADDITION MADE BY THE AO ON ACCOUNT OF UN-P ROVED CREDITORS IS BUSINESS INCOME OF THE ASSESSEE AND TH US, THE ASSESSEE IS ELIGIBLE TO EXEMPTION EVEN IN RESPECT O F THIS ADDITION; AS HAS BEEN HELD BY THE COMMISSIONER (APPEALS) IN R ESPECT OF THE OTHER ADDITION. - - MA 170/15 4 2.3 HOWEVER THIS TRIBUNAL REJECTED THE CONTENT ION ONLY ON THE GROUND THAT ADDITIONS MADE U/S.68 FALLS UNDER THE H EAD, INCOME FROM OTHER SOURCES AND IS THUS, NOT PART OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. FURTHER, IT IS SUBMITTED THAT THE FINDING OF THIS TRIBUNAL IS CONTRARY TO THE SETTLED POSITIO N OF LAW THAT SECTION 68 IS ONLY A PROCEDURAL SECTION DEALING WIT H BURDEN OF PROOF AND IT IS NOT A CHARGING SECTION. THE ASSESSE E HAS NO OTHER SOURCE OF INCOME AND HENCE THERE CANT BE ANY INCOM E FROM OTHER SOURCES AS HELD BY THIS TRIBUNAL. 3. THE LD. DR RELIED ON THE ORDER OF THE TRIBUNAL C ITED SUPRA. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE CONTENTION OF THE LD. AR IS MISPLAC ED. ACCORDING TO THE LD. AR, THE ADDITIONS MADE U/S. 68 OF THE AC T ARE TO BE CONSIDERED AS INCOME FROM BUSINESS SO AS TO GRANT D EDUCTION U/S. 10B OF THE ACT. THE ASSESSEE HAS NOT CHALLENG ED SUSTAINING THE ADDITIONS ON THIS COUNT. THE ONLY DISPUTE BEFOR E US IS WITH REGARD TO GRANTING OF DEDUCTION U/S. 10B OF THE ACT FOR THE RESULTANT INCOME ON ACCOUNT OF ADDITIONS U/S. 68 OF THE ACT. THE PROVISIONS OF SECTION 10B ARE WITH REGARD TO GRANTI NG OF DEDUCTION - - MA 170/15 5 TO 100% EXPORTED ORIENTED UNDERTAKING ON ACCOUNT OF EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE. THE INCOME RESULTING ON ACCOUNT OF ADDITIONS U/S. 68 OF THE ACT CANNOT BE C ONSIDERED AS INCOME DERIVED FROM EXPORT ACTIVITIES THOUGH IT IS INCOME OF EXPORT ORIENTED UNIT. IT DOES NOT NECESSARILY FOLLO W THAT SUCH CREDIT REPRESENTS BUSINESS INCOME OF THE ASSESSEE A S A GENERAL PRACTICE UNLESS THERE IS CLEAR EVIDENCE THAT IT REP RESENTS BUSINESS RECEIPTS. IN THE PRESENT CASE, IT RELATES TO GRANTING OF DEDUCTION WITH REGARD TO PROFIT/GRAIN DERIVED FROM EXPORT ORIENTED UNIT AND UNLESS IT IS PROVED THAT IT IS FROM EXPORT DEDUCTION U/S. 10B CANNOT BE GRANTED. THE CONTENTION OF THE ASSESS EE IS NOT ACCEPTABLE IN VIEW OF THE CLEAR PROVISIONS OF SECTI ON 10B OF THE ACT AND THE IMPUGNED ADDITIONS CANNOT BE SAID TO BE BUSINESS RECEIPTS. THIS IS BECAUSE THE SOURCE OF INCOME IS INCOME FROM OTHER SOURCES AND THE DEPARTMENT DOES NOT HAVE TO L OCATE ANY PARTICULAR SOURCE OF INCOME. IT IS PERTINENT TO PLA CE RELIANCE ON THE JUDGEMENT OF ANDHRA PRADESH HIGH COURT IN THE CASE OF G.M. CHENNA BASAPPA VS. CIT (34 ITR 576) (AP), WHER EIN IT WAS HELD THAT ADDITION ON ACCOUNT OF UNEXPLAINED CASH C REDITS WHICH IS ALTOGETHER IS FROM AN UNKNOWN SOURCE AND THEY AR E LEGALLY - - MA 170/15 6 SUSTAINABLE ADDITIONS. 5. THE SUPREME COURT ALSO HELD IN THE CASE OF CIT VS. ORISSA CORPORATION PVT. LTD. (159 ITR 78) THAT ALTH OUGH SECTION 68 PROVIDES THAT THE PREVIOUS YEAR FOR WHICH THE BO OKS OF ACCOUNT ARE MAINTAINED MAY BE TAKEN AS THE PREVIOUS YEAR FOR ASSESSING THE CASH CREDIT, IT DOES NOT FURTHER PROV IDE THAT CASH CREDIT SHOULD NECESSARILY BE DEEMED TO BE THE PROFI T OF THE BUSINESS FOR WHICH THE BOOKS ARE MAINTAINED. THE CA SH CREDIT MAY BE ASSESSED AS BUSINESS PROFIT OR AS INCOME FRO M OTHER SOURCES AS THE CASE MAY BE. THERE IS NO RULE THAT T HE AMOUNT IS CREDITED IN THE BUSINESS ACCOUNT, WHICH MUST BE TAK EN AS RECEIPT FROM BUSINESS. WHETHER THE AMOUNT OF CREDIT U/S. 68 IS INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES DEPENDS ON THE EVIDENCE AND EXPLANATION FURNISHED BY THE ASSESSEE. 6. WE ALSO FIND THAT THE SUPREME COURT IN THE CASE OF LAXMICHAND BAIJNATH VS. CIT (35 ITR 416) (SC) HELD THAT IF CREDITS ARE FOUND IN BUSINESS ACCOUNT OF THE ASSESS EE AND THE EXPLANATION AS TO THE NATURE AND SOURCE OF ACCOUNT IS REJECTED BY THE INCOME-TAX AUTHORITIES, SUCH AUTHORITIES ARE EN TITLED TO TREAT - - MA 170/15 7 THE CREDIT AS INCOME FROM BUSINESS. THE SAID DECISI ON CANNOT BE INTERPRETED TO MEAN THAT IN ALL CASES SUCH CREDITS MUST BE TREATED AS INCOME FROM BUSINESS. MERELY BECAUSE THE ASSESSE E IS RUNNING A BUSINESS IN WHICH ARE FOUND CERTAIN UNEXP LAINED CASH CREDITS, IT DOES NOT NECESSARILY FOLLOW THAT SUCH C REDITS REPRESENT SUPPRESSED BUSINESS RECEIPTS AND THERE WOULD BE NO ERROR OF LAW IN REGARDING THE UNEXPLAINED CASH CREDITS AS INCOME OF THE ASSESSEE FROM SOME INDEPENDENT AND UNKNOWN SOURCES UNLESS THERE ARE STRONG REASONS FOR CONNECTING THE UNEXPLA INED CASH CREDITS WITH KNOWN SOURCES OF INCOME OF THE ASSESSE E, THERE WOULD BE NO ALTERNATIVE TO TREATING THEM AS INCOME FROM OTHER SOURCES. 7. WE ALSO PLACE RELIANCE ON THE JUDGEMENT OF SUPR EME COURT IN THE CASE OF CIT VS. DEVIPRASAD VISWANATH P RASAD (72 ITR 194), WHEREIN IT WAS HELD THAT WHEN THE ASSESSE E PLEADS THAT THE IMPUGNED CASH CREDITS CAME OUT OF SUPPRESS ED PROFIT, IT IS FOR HIM TO PROVE THAT IT IS SO. IF THESE RECEIP TS ARE ALLOWED BY TREATING AS BUSINESS RECEIPTS, THEN THE ASSESSEE WI LL BE ENTITLED TO SET OFF OF BUSINESS EXPENDITURE AGAINST THESE RE CEIPTS WHICH IS NOT PERMISSIBLE. IN THE PRESENT CASE, THE ASSESSEE IS A - - MA 170/15 8 PARTNERSHIP FIRM AND A 100% EXPORT ORIENTED UNIT, M ANUFACTURING AND SELLING MAGNESIUM SULPHATE HEPTAHYDRATE AND NOT DEALING IN UNEXPLAINED CREDITS. BEING SO, WE ARE INCLINED TO H OLD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 10B OF THE ACT ON ACCOUNT OF ADDITIONS MADE U/S. 68 OF THE ACT. THE M ISC. PETITION FILED BY THE ASSESSEE IS REJECTED ON THE ABOVE REAS ONS. 8. IN THE RESULT, THE MISC. PETITION IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 20 TH OF NOV., 2015 AT CHENNAI. SD/- SD/- ( ' # . % &' ) ( ()* + , ) DUVVURU RL REDDY - ./012304556037- 89: /JUDICIAL MEMBER 9:;<<5=1>01>?@AB@3 (8 /CHENNAI, C9) /DATED, THE 20 TH NOV., 2015. MPO* 9DEF GF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H - /CIT(A) 4. H /CIT 5. FIJK /DR 6. J'L /GF.