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The Deputy Commissioner of Income Tax, Company Circle II (1) , Chennai Versus Shri Melakardi Puthalath Farook

2016 (3) TMI 44 - ITAT CHENNAI

Addition made under section 68 - CIT(A) deleted the addition - Held that:- In the instant case, the ld. CIT(A) has observed that the names and the addresses of the persons from whom the amounts have come into the assessee’s bank accounts are made available to the Assessing Officer. Further, the amounts were received by way of cheques/ bank transfers etc. and therefore, the identity and genuineness of the transactions have been established by the assessee and moreover, in the assessment order the .....

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ld. CIT(A) is required to obtain remand report 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, .....

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d 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 account of M/s. Farwood Industries Ltd., the Assessing Officer has noticed that there were many cash payments debited in the books of the company on various dates. When the assessee was asked to explain these cash payments, before the Assessing Officer, the assessee has submitted as under: In .....

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oken 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 at/east by taking an extended time. In this backgrou .....

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hich, the assessee has submitted as under: The company where the assessee is the Promoter - Managing Director, following the global economic meltdown from FY 08 adds that the serious financial impasse led to a situation where the lending banker, unfortunately for FIL, took an aggressive posture as regards its inability to service its repayment obligations to the bank. So much so, it even reached a situation where the bank enforced unilateral appropriations from remittances made into the account .....

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ther 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 a .....

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submission made by the assessee, the Assessing Officer has observed that the assessee has received ₹.1,54,45,513/- from various customers. Since the assessee is separate person from the company the amount received by the assessee must be taxed in the hands of the assessee. Regarding the expenses claimed to be made, the assessee could not produce the proof for the expenses claimed to be made, by the assessee on behalf of the company as of now. The Assessing Officer has further noticed that .....

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cer. The ld. CIT(A), after considering the submissions of the assessee and examining the details filed before the Assessing Officer, deleted the addition made by the Assessing Officer. 6. Aggrieved, the Revenue is in appeal before the Tribunal and the ld. DR supported the order passed by the Assessing Officer. He also relied on the decision in the case of Hindustan Tobacco Ltd. TIOL -726-HC Kol-IT. On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. .....

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day to day basis and the company s bank accounts were not in operation due to the banker s restrictions, the assessee, being the MD of the company, allowed his personal bank accounts 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 th .....

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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 Assessing Officer has clearly explained that when the company, (M/s. Farwood Industries Limited) in which he is the managing .....

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r the purposes of business of the company like payments of salaries, wages, clearing creditors etc. All the receipts (credits) into the bank and their withdrawals/utilization were also reflected clearly in the books of account of the company. The receipts are accounted in the books of the company as income. The ledger extracts of the company, furnished before the Assessing Officer as well as the undersigned, clearly showed these facts. In fact, the assessee, during the course of assessment proce .....

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mited wherein I am a member in the board as Managing Director. The entries which do not relate to the company are as follows: a. Three credit entries each for ₹ 5,70,000 on 07-06-2008 in ICICI account b. One debit entry for ₹ 15,00,000 on 07-06-2008 in ICICI account c. One credit entry for ₹ 11,40,000 on 09-06-2008 in ICICI account d. One debit entry for ₹ 6,00,000 on 14-07-2008 in ICICI account e. Two debit entries for ₹ 2,50,000 each on 01-08-2008 in ICICI account .....

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on 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 .....

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e the company's amounts received by the assessee are to be assessed in the hands of the assessee only. Accordingly the Assessing Officer invoked the provisions of section 68 of the Act and assessed the said credits to tax. The above contentions and conclusions of the Assessing Officer are not justified on two counts. Firstly, the assessee clearly explained that the credits into the above bank accounts are the receipts of the sale (contract) proceeds of M/s. Farwood Industries Limited and rec .....

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to attract the provisions of 68 of the Act, three ingredients are to the satisfied, i.e. the assessee's failure to establish/prove - (i) identity of the creditors, or (ii) genuineness of the transaction, or (iii) the credit worthiness of the creditors to the satisfaction of the Assessing Officer. In other words, only the credits found in the books of account of the assessee becomes "unexplained credits" under section 68 of the Act, only when the assessee fails to establish/prove ( .....

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pected the creditworthiness of the creditors. Nor there was any attempt by the Assessing Officer to examine this issue. Thus, it cannot be held that the creditworthiness is not established. Therefore, none of the three ingredients for attracting the provisions of 68 of the Act are 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 Office .....

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₹ 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. Therefore even these amounts (credits), which are not .....

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