T.C.A.No.754 of 2019 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 31.08.2020 CORAM HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and HONOURABLE MRS.JUSTICE PUSHPA SATHYANARAYANA T.C.A.No.754 of 2019 and CMP.No.21759 of 2019 M/s.Sambandam and Company No.97, Thulasingam Street, Perambur 600011. Appellant Versus Income Tax Officer, Ward XIV(2), Chennai Respondent Prayer:- Tax Case Appeal filed under Section 260-A of Income Tax Act, 1961, against order of Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai, dated 03.04.2009 made in I.T.A.No.1256/Mds/2008 relating to Asst Year 1993-94. For Appellant : Ms.Lakshmi Sriram, For Respondent : Mr.M.Swaminathan, Senior Standing Counsel assisted by Ms.V.Pushpa, Standing Counsel 1/8 http://www.judis.nic.in T.C.A.No.754 of 2019 JUDGMENT [Order of Court was made by T.S.SIVAGNANAM, J.] This appeal filed by assessee under Section 260 of Income Tax Act, 1961 ('the Act' for brevity) is directed against order dated 03.04.2009 passed by Income Tax Appellate Tribunal, Madras, 'C' Bench, ('Tribunal' for brevity) in I.T.A.No.1256/Mds/2008 for assessment year 1993-1994. appeal has been filed, raising following Substantial Questions of Law. 1. Whether on facts and circumstances of case, appellate Tribunal is right in law in confirming additions made under Section 68 under Act relating to Naninar Mohammed, Selvam and Manikkam especially when initial burden of proof was discharged by assessee and Department failed to issue summons and allow cross examination as ordered by Tribunal in its earlier order dated 25.11.2005. 2. Whether on facts and circumstances of case, Appellate Tribunal is right in law in confirming additions relating to three persons naninar Mohammed, Selvam and Manikkam after lpase of more than one and half decades especially when assessing officer himself has deleted addition related to Nainar Mohammed in 2/8 http://www.judis.nic.in T.C.A.No.754 of 2019 subsequent assessment year and failed to issue summons and allow cross examination of other two persons. 3.Whether on facts and circumstances of case, Appellate Tribunal is right in law in upholding addition when assessing authority's order dated 28.03.1996 got upset by Tribunal order dated 25.01.2005 in entirety relating to additions concerned with 6 persons, without granting opportunity to appellant as ordered by Tribunal itself on 25.11.2005. 2. We have elaborately heard Ms.Lakshmi Sriram, learned counsel for appellant / assessee and Mr.M.Swaminathan, learned Senior standing counsel for respondent/Revenue assisted by Ms.V.Pushpa, learned standing counsel for Revenue. short issue which falls for consideration is whether additions made by Assessing Officer on ground that in respect of three persons, there is unexplained credit and same was justified ? and whether Tribunal was right in affirming said order passed by Assessing officer ? case has had checkered history. assessment year under consideration is, AY 1993-1994. Earlier round of litigation has made upto Tribunal to enable assessee to 3/8 http://www.judis.nic.in T.C.A.No.754 of 2019 produce six sundry creditors before Assessing Officer for recording statement. Assessing Officer found that from 'Anuppu Account' there were several sundry creditors and assessee stated that they have purchased goods from them. There were totally six persons namely, Pachaiyappan, Selvam, Nainar Mohammed, Jayapal, R.Gajendran and Mani. assessee was able to convince Assessing Officer in respect of three persons. However, Assessing Officer, at first instance, did not give any opportunity to enable assessee to examine or cross examine persons. However on remand by Tribunal in earlier round of litigation, assessee took steps to summon Nainar Mohammed, Selvam and Mani and notice sent by Assessing Officer to Nainar Mohammed returned with postal endorsement 'left'. 3. argument of Ms.Lakshmi Sriram, learned counsel for appellant is that in respect of two persons, Assessing Officer did not give any specific dates to enable assessee to produce those two persons before Assessing Officer for recording statement. It was further argued that in respect of very same persons, for earlier assessment year 4/8 http://www.judis.nic.in T.C.A.No.754 of 2019 namely, 1992-1993 and for subsequent assessment year 1994-95, Assessing Officer accepted those entries in assessee's account in name of same sundry creditors, as genuine. Therefore, there was no reason as to why for assessment year under consideration, AY 1993- 1994, same should not be accepted. It is further argument that Tribunal has erroneously recorded, for earlier assessment year, addition in respect of Naninar Mohammed, Selvam and Mani was confirmed. 4. However on facts we find that for very same three sundry creditors for subsequent assessment year 1994-95 was accepted by Assessing Officer. Section 68 of Act states that where any sum is found credited in books of assessee maintained for any previous year, and assessee offers no explanation about nature and source thereof or explanation offered by him is not satisfactory in opinion of Assessing Officer, sum so credited may be charged to income tax as income of assessee of previous year. proviso under Section 68 of Act may not be very relevant for purpose of this case. 5/8 http://www.judis.nic.in T.C.A.No.754 of 2019 5. In terms of above provision, onus is on assessee to explain sums credited in books of assessee. If explanation offered by assessee about nature and source is acceptable to Assessing officer, then there can be no additions. However, if Assessing Officer finds explanation offered by assessee to be non satisfactory, sum so credited may be charged to income tax as income of assessee. 6. Admittedly in instant case, assessee has provided explanation, such explanation was found acceptable by Assessing officer for previous and subsequent Assessment Years. Assessing Officer did not record specific note of his satisfaction / dissatisfaction with regard to those three persons. assessee is non-suited solely on ground that Mr.Naninar Mohammed did not appear and other two persons did not respond. fact remains that notice sent by Assessing Officer to Mr.Naninar Mohammed returned with postal endorsement 'left' and there appears to have been no attempt made to summon said person by 6/8 http://www.judis.nic.in T.C.A.No.754 of 2019 following other modes of substituted service. However appropriate view that should have been taken is to take note of genuinity of assessee and decision of Assessing Officer in assessee's own case for earlier and subsequent assessment years. We say so because this will prove genuineness of transaction as Assessing Officer accepted those sums found credited in books of account of assessee in names of those three persons to be genuine and explanation offered was found to be appropriate. Therefore, we are of considered view that Assessing Officer should not have disbelieved stand taken by assessee. 7. For above reasons, Tax Case Appeal is allowed and order passed by Tribunal in I.T.A.No.1256/Mds/2008 dated 03.04.2009 is set aside and Substantial Questions of Law are answered in favour of appellant / assessee. No costs. Consequently connected miscellaneous petition is closed. (T.S.S.,J) (P.S.N.,J) 31.08.2020 sk 7/8 http://www.judis.nic.in T.C.A.No.754 of 2019 T.S.SIVAGNANAM, J. AND PUSHPA SATHYANARAYANA, J. sk To Commissioner of Income Tax, Chennai. T.C.A.No.754 of 2019 31.08.2020 8/8 http://www.judis.nic.in Sambandam and Company v. Income-tax Officer, Ward XIV(2), Chennai