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TMI Blog2012 (12) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 2007-08. Shri Yogesh Kamath, IRS, JCIT represented on behalf of the Revenue and Shri S. Sridhar, Advocate represented on behalf of the assessee. 2. The only grievance in the grounds of appeal of the Revenue is that the Commissioner of Income Tax (Appeals) erred in deleting the addition made on account of unproved trade creditors on the ground that the additions were made based on the report of the Income Tax Inspector [ITI] and no further enquiries were made by the Assessing Officer. 3. The facts of the case are that the assessee is an individual carrying on the business of leather tanner under the trade name of M/s. Sony Leathers. The assessee filed return of income for the assessment year 2007-08 on 15.04.2008 admitting income of Rs..4,21,080/-. The assessment was completed under section 143(3) of the Act on 31.12.2009 determining the income of the assessee at Rs..50,82,540/-. While completing the assessment, the Assessing Officer made addition of Rs.. 41,83,212/- stating that the trade creditors are not in existence based on the report given by the Income Tax Inspector. 4. On appeal, the Commissioner of Income Tax (Appeals) deleted the addition holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance outstanding in the said creditors account in the subsequent assessment year i.e. 2008-09. In respect of Chola Leathers, the counsel submits that the Assessing Officer erred fundamentally in resorting to addition of Rs..9,76,435/- since the assessee has not effected any purchases from the above said parties, but has only sold the goods to the said parties. The balance lying in the account of the said party as on 31.03.2007 was the advance received by the assessee from the said party for which sales were effected in the subsequent assessment year i.e. 2008-09. Therefore, the Assessing Officer is not at all justified in making the said addition on the ground that Chola Leathers is a fictitious concern and the transactions with the said party are bogus. The counsel for the assessee further submits that these additions were made based on the report submitted by the ITI that trade creditors were not in existence. He also submits that similar additions were made by the very same Assessing Officer i.e. ITO Ward III(1), Erode in the assessment of Smt. Rolex Sugunamary for the assessment year 2007- 08 at Rs.. 16,02,200/- in respect of the creditors Sabari Leather Exports and Victory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of some of the bills issued by the above parties to the appellant (ledger 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 parties appear are enclosed separately in respect of Sabari Leather Exports - market as (A) and in respect of M/s Oriental Leathers marked as (B). the perusal of the above shows that the parties are registered under the TNGST and CST Acts. Further, the said parties have not collected Sales tax on the sale of goods to the appellant. The implication of TNGST Act, in this 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, meaning thereby that the appellant has purchased the said goods from registered dealers in the state. In other) words, it is proved that the said parties are real persons. 7. After considering the rival submissions, we have found that the Assessing Officer, in his order, has mentioned that copies of sales tax returns revealed that Shri Pachamuthu has done business transactions/turnover e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the report reveals that one Shri E.K.M.G.Bazeer Ali was present and gave a letter stating that the above party was not known to him. This had lead the ITI to give a report that the credit seemed to be not genuine. Copies of the bills issued by the party to the appellant and bank statement of the appellant wherein the transactions of the appellant with the said party appears are enclosed. The perusal of the above shows that the party is registered under the TNGST and CST Acts. Hence the addition requires deletion. In respect of Victory Tanners, the ITI report reveals 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 ITI to give a report that the credit shown at Rs. 7,97,125/- to be rejected and added to income. The important point to be noted from the report of the ITI is that while the Proprietor of M/s Victory Tanners is Shri V. Thiagarajan, as per the heading in the report of the ITI, the ITI in his report did mention the name of Shri Nallamuthu as the Proprietor of Victory T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbed. Again, the report of ITI cannot stand against the overwhelming evidence referred to above. Accordingly, the deletions made by the ld. CIT(A) are in order and cannot be interfered with. Accordingly, the appeal of the Revenue, stands dismissed. 8. Respectfully following the order of the Coordinate Bench of this Tribunal in the case of Smt. Rolex Sugunamary, we delete the addition of Rs.9,80,150/- and Rs. 9,90,250/- made towards unproved trade creditors of Sabari Leather Exports and Victory Tanners respectively. With regard to the addition made in respect of Jaihind Leathers and Chola Leathers, the Commissioner of Income Tax (Appeals) has considered the submissions of the assessee evidencing on record and came to the conclusion as under: Submission of the appellant: 2) Jaihind Leathers Rs.12,36,377/- Particulars Asst. Year Particulars 2005-06 2006 07 2007,08 2008-09 Opening Balance NIL NIL NIL 1236375 Purchase NIL NIL 1236375 2918791 Total NIL NIL 1236375 4155166 Less: Amount NIL NIL NIL 4155166 Closing Balance NIL NIL 1236375 NIL In the earlier written subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases from the said firms are not genuine. The AO has accepted the trading results of the appellant. As seen from the details furnished, the appellant has made purchases during the assessment year 2008-09 also and squared up the amount. The appellant has furnished the bank account transactions with the said firms. It is also relevant to mention that the ITI report in the case of Jaihind Leathers and Victory Tanners is same and it was stated that Shri Nallamuthu is the Proprietor of both the concerns. The ITI seems to have made the mistake of 'cut and paste' while preparing report in the above two concerns. The ITI Report has not been given to the assessee during the course of assessment proceedings. In view of the above discussion, I direct the Assessing Officer to delete the addition made on account of credit balance in the case of M/s Jaihind Leathers and M/s Victory Tanners. Submission of the appellant: 4) Chola Leathers - Rs. 9,76,435/-: Assessing Officer erred fundamentally in resorting to addition of Rs.9,76,435/- on the reason that the appellant might have created a bogus concern in a fictitious name as discussed in the earlier para and indulged in bogus transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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