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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 ..... ther 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 that the creditors are not bogus. The Assessing Officer has not proved that the transactions are not genuine and therefore, the balance lying in the creditors account as on 31.03.2007 cannot be added as income of the assessee. Against this order of the Commissioner of Income Tax (Appeals), the Revenue is in appeal before us. 5. The counsel for the Revenue submits that the Assessing Officer directed the ITI to make certain enquiries regarding the trade creditors of the assessee and the ITI found that the creditors are not in existence. Therefore, the Assessing Officer is justified in making the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Tanners, based on the similar report of the ITI on the similar ground of non-existence of trade creditors. The counsel submits that in the case of Smt. Rolex Suganamary the Coordinate Bench of this Tribunal in its order dated 04.10.2011 in I.T.A. No. 843/Mds/2011 deleted the said additions made by the Assessing Officer in respect of the trade creditors Sabari Leather Exports and Victory Tanners and confirmed the order of the Commissioner of Income Tax (Appeals) in deleting the addition. A copy of the said order of this Tribunal was placed on record. 7. We have heard both sides, perused the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 exceeding Rs.. 2 crores during the financial year 2006-07. However, no enquiries regarding his sources, bank accounts were made. No attempt was made by the Assessing Officer to find out his business address in the light of adverse report of ITI. The assessee had purchased goods worth Rs.. 1,00,48,000/- from M/s Sabari Leather Exports. The Assessing Officer has not made 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 Rs.84,50,000/- during the year but surprisingly, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 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 proves the name of the Proprietor as V. Thiagarajan and the existence 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 disallowed. Copies of the bills issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner 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 submission, objections to the contents of the relevant portion of the report of the ITI was filed. Account copy of the above party in the books of accounts of the appellant for the years ending 3 1 .03.2007 and 31.03.2008 and the bank statements of the above party have already been filed. Besides, copy of the Sales Tax assessment order dated 11.01.2010 has already been filed. The chart above shows that the appellant has effected purchases from the said party not only in this year but also in the subsequent year. When the Assessing Officer accepts the purchases effected by the appellant from the above party and when the trading results have not been refuted by the Assessing Officer, resort to making additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 transactions, for the appellant has not effected any purchases from the said party but has only sold goods to the said party and the chart below clarifies the some. Emphasis is on the bold letters above because the reasoning/ conclusion by the Assessing Officer which had resulted in other additions (all are disputed) are not at all applicable to the transactions between the said party and the appellant, for the appellant has effected only sales to the above party. Particulars Asst. Year Particulars Asst. Year 2008-09 2005-06 2006-07 2007-08 Opening Balance NIL NIL NIL Advance Payable 976435 Sales NIL 2520248 1469135 Advance Received 219139 Total NIL 2520248 1469135 Total 1195574 Less: Amount Received NIL 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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