M/s. Shree Ganesh Ventures v. The Deputy Commissioner of Income Tax, Non-Corporate Circle-6, Chennai
[Citation -2016-LL-0929-47]

Citation 2016-LL-0929-47
Appellant Name M/s. Shree Ganesh Ventures
Respondent Name The Deputy Commissioner of Income Tax, Non-Corporate Circle-6, Chennai
Court ITAT-Chennai
Relevant Act Income-tax
Date of Order 29/09/2016
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags mistake apparent on record • unexplained cash credit • undisclosed income • levy of interest • current account • central excise
Bot Summary: PAN: AAOFS04 87K Appellant by : Dr.Anita Sumanth, Advocate Respondent by : Mr. A.V.Sreekanth,JCIT Da t e of h e ar in g : 16th September, 2016 D at e of Pr on oun c em ent : 29th September, 2016 O R D E R Per A. Mohan Alankamony, AM:- This appeal filed by the assessee was earlier disposed off by the order of the Tribunal dated 16.03.2016 which was subsequently recalled vide order dated 22.07.2016 because certain documents furnished by the assessee was lost sight off and not examined by the Bench on the earlier occasion. The assessee has raised several grounds in its appeal they are concised below for adjudication:- i) The learned Commissioner of Income Tax(Appeals) has erred in upholding the addition of Rs.2,19,69,862/- being credits in the name of M/s. D.G. Traders as undisclosed income of the assessee. Ii) The learned Commissioner of Income Tax(Appeals) has erred in upholding the addition of Rs.2,79,06,603/- being credits in the name of M/s. Sree Ganesh Steels as undisclosed income of the assessee. The learned Assessing Officer had made addition of Rs.4,98,76,465/- invoking section 68 of the Act because the identity and genuiness of the sundry creditors M/s Sree Ganesh Steels for Rs.2,79,06,603/- M/s. D.G. Traders for Rs.2,19,69,862/- was not established because of the following reasons:- i) The learned Assessing Officer had deputed his inspector to serve notice under section 133(6) of the Act to M/s. D.G.Traders in the address provided by the assessee. V) The assessee s contention with respect to M/s. DG Traders was that the enquiries were made three years after the transaction and the assessee had relied on the address given by the parties at the time of the transaction which was not acceptable to the Ld.A.O. vi) The assessee s contention that purchases were made through mediators and therefore the assessee did not have direct accessibility to its creditors was also not acceptable to the Ld.A.O. vii) The goods were purchased from the sundry creditors who are scrap dealers in the unorganized 5 ITA No.2344 /Mds/2015 sector of business can also be not treated as valid reason for not proving the identity of the sundry creditors. As pointed out by the learned Authorized Representative the assessee has provided TNGST numbers of the sundry creditors and certain other details to prove their identity and genuineness of the transaction. Levy of interest under section 234B 234C of the Act was imposed on the assessee by the Revenue, aggrieved by which the assessee is in appeal before us.


IN INCOME TAX APPELLATE TRIBUNAL , C BENCH, CHENNAI BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./I.T. A.No.2344/Mds/201 5 (ss essm ent Year: 2007- 08) M/s. Shree Ganesh Ventures, Vs Deputy Commissioner of 14A, Ennore High Road, Income Tax, Chennai-600 019. Non-Corporate Circle-6, Chennai. PAN: AAOFS04 87K ( Appellant) (Respondent) Appellant by : Dr.Anita Sumanth, Advocate Respondent by : Mr. A.V.Sreekanth,JCIT Da t e of h e ar in g : 16th September, 2016 D at e of Pr on oun c em ent : 29th September, 2016 O R D E R Per A. Mohan Alankamony, AM:- This appeal filed by assessee was earlier disposed off by order of Tribunal dated 16.03.2016 which was subsequently recalled vide order dated 22.07.2016 because certain documents furnished by assessee was lost sight off and not examined by Bench on earlier occasion. 2. Brief facts of case are that assessee is partnership firm engaged in trading of steel products filed its return of income for assessment year 2007-08 on 15.11.2007 admitting income of Rs.30,07,110/-. 2 ITA No.2344 /Mds/2015 Subsequently case was taken up for scrutiny and assessment was completed under section 143(3) of Act, wherein learned Assessing Officer made additions of Rs.4,98,76,465/- towards unexplained cash credit standing in name of i) Shree Ganesh Steels Rs.2,79,06,603/- ii) M/s. D.G.Traders Rs.2,19,69,862/- and Rs.17, 20,000/- due to disallowance under section 40A(3) of Act. 3. assessee has raised several grounds in its appeal, however, they are concised below for adjudication:- i) learned Commissioner of Income Tax(Appeals) has erred in upholding addition of Rs.2,19,69,862/- being credits in name of M/s. D.G. Traders as undisclosed income of assessee. ii) learned Commissioner of Income Tax(Appeals) has erred in upholding addition of Rs.2,79,06,603/- being credits in name of M/s. Sree Ganesh Steels as undisclosed income of assessee. iii) learned Commissioner of Income Tax (Appeals) has erred in upholding disallowance of Rs.17,20,000/- made by Assessing Officer under section 40A(3) of Act. iv) learned Commissioner of Income Tax (Appeals) has erred in upholding levy of interest made by learned Assessing Officer under section 234B & 234C of Act. 3 ITA No.2344 /Mds/2015 Ground Nos 1 & 2 (Unexplained cash credit):- Additions of Rs.2,79,06,603/- & Rs.2,19,69,862/- being credits in names of M/s Sree Ganesh Steels & M/s. D.G. Traders respectively as undisclosed income of assessee: 4. learned Assessing Officer had made addition of Rs.4,98,76,465/- invoking section 68 of Act because identity and genuiness of sundry creditors M/s Sree Ganesh Steels for Rs.2,79,06,603/- & M/s. D.G. Traders for Rs.2,19,69,862/- was not established because of following reasons:- i) learned Assessing Officer had deputed his inspector to serve notice under section 133(6) of Act to M/s. D.G.Traders in address provided by assessee. However, inspector could not locate concern M/s. D.G.Traders. On enquiry in locality, it was revealed that no such concern operated in that area. ii) When same was informed to assessee firms partner Mr. M.R.Goyenka though he requested 4 ITA No.2344 /Mds/2015 for time for producing sundry creditors, he was not able to do so. iii) With respect to letter sent to M/s. Sree Ganesh Steels, it was replied by them that they did not have any dealings or transaction with assessee firm. iv) On examining payment made to M/s. Sree Ganesh Steels from current account maintained by assessee in its bank A/c., it was revealed that amount was paid to various individuals other than M/s Sree Ganesh Steels. v) assessee s contention with respect to M/s. DG Traders was that enquiries were made three years after transaction and assessee had relied on address given by parties at time of transaction which was not acceptable to Ld.A.O. vi) assessee s contention that purchases were made through mediators and therefore assessee did not have direct accessibility to its creditors was also not acceptable to Ld.A.O. vii) goods were purchased from sundry creditors who are scrap dealers in unorganized 5 ITA No.2344 /Mds/2015 sector of business can also be not treated as valid reason for not proving identity of sundry creditors. viii) Enquiries from partners of firm and staff also revealed that transactions were not genuine. 5. On appeal, learned Commissioner of Income Tax (Appeals) upheld order of learned Assessing Officer agreeing with his findings. 6. Before us, learned Authorized Representative made following submissions:- i) Both additions were made based on enquiries behind back of appellant; therefore it is in violation of principles of natural justice. ii) enquiries made by inspector were not put before assessee for rebuttal. iii) additions are made for not proving sundry creditors at same time purchases made by assessee is not in dispute. 6 ITA No.2344 /Mds/2015 iv) assessee has furnished details of its quantitative purchase, sales and stock tally before Revenue. v) assessee has discharged its prima facie burden for proving genuineness of purchase. Since there was time lag for making enquiries and purchases related to scrap which is in business falling in unorganized sector, it was difficult to locate sundry creditors. vi) purchases made by assessee were also not doubted by Central Excise authorities. vii) sales tax registration and CST registration of sundry creditors were furnished to Revenue which proved that identity of sundry creditors. Further learned Authorized Representative submitted paper book containing 1 to 60 pages which were true copies of originals which form part of records produced before Revenue such as i) details of sales tax (VAT, CST registration numbers of M/s. DG Traders and Sree Ganesh Steels, statement of purchases made from M/s.DG Traders 7 ITA No.2344 /Mds/2015 and Sree Ganesh Steels, invoices for entire period of purchase from both parties and requisite details submitted before sales tax authorities etc. 7. learned Departmental Representative on other hand reiterated findings made by learned Assessing Officer and learned Commissioner of Income Tax (Appeals) in their respective orders and argued in support of same. 8. We have heard rival submissions and carefully perused materials available on record. As pointed out by learned Authorized Representative assessee has provided TNGST numbers of sundry creditors and certain other details to prove their identity and genuineness of transaction. At same time, Department has genuine reason for not accepting same because they were not able to locate sundry creditors, invoices submitted by assessee from both parties appears to have been made by same person etc. However, from facts of case, it is not disputed that sundry creditors pertain to 8 ITA No.2344 /Mds/2015 purchases of scrap. Normally, trading of scrap takes place in unorganized business sector and unregulated market from where assessee has to depend on procuring its raw materials. Generally margin of profit in nature of business of assessee is minimal as less as one per cent or even lesser. There is also no finding by Revenue that assessee had not purchased scrap but only doubt was with respect to genuiness of two sundry creditors who had supplied raw materials to assessee. Further assessee has submitted following materials to show that sundry creditors were genuine:- i) Order of Assistant Commissioner of Sales Tax dated 12.9.2016 and notice of demand from ACST dated 12.9.2016 to show genuineness of local purchases of iron & steel (at page No.196 & 198 of paper book) ii) Details of TIN number, CST Number and PAN of M/s. DG Traders and M/s.Sree Ganesh Steels (at page 199 of paper book). iii) Details of TIN, CST no. downloaded from relevant Govt. website which shows that both M/s. DG Traders and 9 ITA No.2344 /Mds/2015 M/s. Sree Ganesh Steels were active dealers under CST Act (page no.200 to 203 of paper book) iv) PAN no. of M/s.Sree Ganesh Steels and M/s. DG Traders (Suresh Singh Solanki) (downloaded from Govt. website) 9. From these documents which is part of record and not before Tribunal at time of earlier hearing proves fact that identity of these sundry creditors are genuine. Since above referred documents were lost sight off by Tribunal on earlier occasion, mistake had crept into Order of Tribunal which is apparent on record because of non-consideration of certain facts. Further, it is also evident that assessee had paid by cheque to sundry creditors, may be not directly by indirectly which is not prohibited by Act. Further there is also no other finding by Revenue on these aspects. Thus, when identity of sundry creditors is proved and when quantity of purchase of raw materials is not in dispute, then transaction cannot be treated as bogus. Therefore, we are of considered view that learned Assessing Officer is not justified in invoking provisions of section 68 of Act with regard to 10 ITA No.2344 /Mds/2015 both these sundry creditors. Hence, we hereby direct learned Assessing Officer to delete addition made by invoking provisions of section 68 of Act with regard to both these sundry creditors. Thus, issue is decided in favour of assessee. 10. With respect to other grounds raised by assessee in appeal, we do not find it necessary to interfere with our earlier orders because there is no mistake apparent on record with respect to those issues. Therefore, same order is repeated once again. Ground No.3: Disallowance of Rs.17,20,000/- under section 40A(3) of Act: 5. During course of assessment proceedings, it was observed by learned Assessing Officer that assessee has paid cash to various individuals. It was explained by assessee that it had paid cash through its employees to M/s. Sree Ganesh Steels against purchases. However, on verification, it was proved that they did not have any transaction with assessee. Further from statement of Mr.Abdul Rehman, it was evident that assessee has paid aforesaid amount towards purchases without disclosing names of party from whom purchase were made. Since aggregate of such amount paid was Rs. 86/- lakhs, learned Assessing Officer disallowed 20% of same by invoking provisions of section 40A(3) of Act. On appeal, learned 11 ITA No.2344 /Mds/2015 Commissioner of Income Tax (Appeals) confirmed order of learned Assessing Officer because before him also no material with cogent evidence was furnished to support claim that cash purchases were less than statutory limit. On this issue also no materials were furnished before us to establish that provisions of section 40A(3) of Act cannot be invoked in case of assessee. Therefore, we do not find it necessary to interfere with orders of Revenue on this issue. Ground No.4: Levy of interest under section 234B & 234C: 6. Levy of interest under section 234B & 234C of Act was imposed on assessee by Revenue, aggrieved by which assessee is in appeal before us. However by decision of various higher judiciaries it is settled that levy of interest under section 234B & 234C is consequential in nature and therefore this ground is dismissed as such. 11. In result, appeal of assessee is partly allowed. Order pronounced in open court on 29th September. 2016 Sd/- Sd/- ( Duvvuru RL Reddy ) A. Mohan Alankamony ) Judicial Member Accountant Member Chennai, Dated 29th September, 2016 somu Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. M/s. Shree Ganesh Ventures v. Deputy Commissioner of Income Tax, Non-Corporate Circle-6, Chennai
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