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TMI Blog2016 (3) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Assessing Officer under Rule 46A of the Income Tax Rules. - Decided against revenue - I.T.A.No.1991/Mds/2014 - - - Dated:- 22-1-2016 - Shri Chandra Poojari, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member For The Appellant : Shri A.V. Sreekanth, JCIT For The Respondent : Shri D. Anand, Advocate ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order of the ld. CIT(Appeals) - II, Chennai, dated 20.01.2014 relevant to the assessment year 2009-10. The only effective ground raised in the appeal of the Revenue is with regard to deletion of addition made under section 68 of the Income Tax Act, 1961 [ Act in short]. 2. Brief facts of the case are that the assessee is an individual, having major share holder and the Managing Director in M/s. Farwood Industries Ltd. The assessee has filed his return of income admitting total income of ₹.12,00,000/-. The return was processed under section 143(1) of the Act on 12.03.2011 and the case was selected for scrutiny and notice under section 143(2) of the Act dated 14.09.2011 was duly served on the assessee. On verification of ledger accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 21.04.2008 giving an insight into the critical state of the then relationship between the bank and FIL. We have highlighted the above only with a view- that a holistic perspective is submitted in your hands as regards FIL, its state of finances, the integral role of the assessee Mr. M.P.Farook as the Promoter MD viz a viz FIL and its nearly 400 employees and finally FIL's obligations to other stakeholders such as vendors, clients etc. (It may not be out of context to submit at this juncture that the same bank has gone in to the merits of our periodical submissions from FY 2008 and has, in principle, agreed to consider a comprehensive restructuring package in order to revive the operations of FIL. This is likely to come into effect from March. 2012). We would request you to keep our submissions made in para 1 in focus as we explain the transactions in the current account of the assessee Mr. M. P. Farook as 'reflected in the books of account of FIL. We confirm that the series of transactions except those of personal in nature detailed in our letter dated 16.12.2011, represent monies being sale proceeds of FIL and routed through the personal account of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts for the purpose of receiving the payments from the clients of company. After receiving the amounts from the company s clients, the amounts were utilized for the business activities of the company like payments of salaries, wages, clearing creditors, etc. It was also submitted before us that all the receipts from the clients credited in to the above bank account of the assessee are shown in the company's books as income/receipts. Thus, all the credits in to assessee s bank account (except four entries) are the receipts of the company from its clients and all the debits (except four entries) are the payments to the company/on behalf of the company. Hence the ld. counsel for the assessee has argued that there are no unexplained credits into the bank accounts warranting the provisions of section 68 of the Act. We find force in the arguments of the ld. Counsel for the assessee. After carefully analysing the books of the company, which was furnished before the Assessing Officer, the ld. CIT(A) has observed as under: I have considered the assessee's submissions and the contents of the assessment order. The issue in the present case is very simple. The assessee before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from State Bank of India. The company faced financial issues due to worldwide recession during 2007-2008 and could not repay the installments as agreed. State Bank of India then issued a letter to Farwood Industries Limited insisting to regularize the loan accounts. This situation made it difficult to operate the company bank accounts freely. As a token of a series correspondence from SBI at this juncture, please find attached a copy of State Bank's letter dated 21.04 2008 with the 'caption 'IRREGULARITY IN CONDUCT OF ACCOUNTS'. As the Managing Director of the company, I had the need to run the business the business of the company which provided employment - both direct and indirect -for several employees of the company. I had also to plan for repayment of all committed loans atleast by taking an extended time. In this background I had no other option but to route some of the collections and payments of Farwood Industries Limited through my personal bank accounts. 3. Hope have clarified your queries to your satisfaction. However the Assessing Officer did not accept the assessee's submissions. The Assessing Officer rejected the above explanation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved against the assessee. In fact the first two ingredients are proved in favour of the assessee and the third one was never suspected/ examined by the Assessing Officer. The next observation of the Assessing Officer is that the expenses (debits in the above bank accounts) are not explained by the assessee. Even this observation of the Assessing Officer is correct. All the expenses are reflected in the books of the company. Out of the total credits of Rs.l,54,45,513/-, into the assessee's bank accounts, assessee's own transactions (credits) are only four i.e., (i) Three credits each of ₹ 5,70,000 on 07-06-2008 in ICICI account i.e. ₹ 5,70,000 x 3 = ₹ 17,10,000/- (ii) One credit Of ₹ 11 ,40,000 on 09-06-2008 in ICICI account i.e. ₹ 11 ,40,000 x 1 = ₹ 11,50,000/- The above amounts (credits) are received from (i) Ms. Vandana - ₹ 5,70,000/- on 07.06.2008, (ii) Ms. Sumitra - ₹ 5,70,000/- on 07.06.2008, (iii) Mr. Prdeep - ₹ 5,70,000 /- on 07.06.2008 and (iv) Mr. G. Rahul - ₹ 11,50,000/ - on 09.06.2008. The amounts have come through banking channels and the persons are identifiable. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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