M/s. Srinivasa Tex, Elampillai v. ACIT, Salem

ITA 249/CHNY/2009 | 2002-2003
Pronouncement Date: 27-07-2011 | Result: Allowed

Appeal Details

RSA Number 24921714 RSA 2009
Assessee PAN AAMFS3767Q
Bench Chennai
Appeal Number ITA 249/CHNY/2009
Duration Of Justice 2 year(s) 4 month(s) 25 day(s)
Appellant M/s. Srinivasa Tex, Elampillai
Respondent ACIT, Salem
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 27-07-2011
Date Of Final Hearing 06-07-2011
Next Hearing Date 06-07-2011
Assessment Year 2002-2003
Appeal Filed On 04-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH B : CHENNAI [BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.S. SAINI ACCOUNTANT MEMBER] I.T.A.NO.249/MDS/2009 ASSESSMENT YEAR : 2002-03 M/S SRINIVASA TEX 3/20 SOUNDAMMAN KIL STREET ELAMPILLAI 637 502 VS THE ACIT CENTRAL CIRCLE SALEM [PAN AAMFS3767Q ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.BASKAR ADVOCATE RESPONDENT BY : SHRI P.B.SEKARAN CIT/DR O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE FOR ASSESSME NT YEAR 2002-03 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) SALEM DATED 2.12.2008. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-FIRM FILED ITS RETURN OF INCOME ORIGINALLY ON 23.9.2002 ADMITTING AN INCOME OF ` 80 830/-. SUBSEQUENTLY A SEARCH WAS CONDUCTED ON 10.8.2004 U/S 132 OF THE ACT IN THE CASE OF ONE SHRI P.MADHUR AJAN WHO IS A PARTNER IN THIS FIRM. CONSEQUENT UPON THE SEARCH NOTICE U/S 153C OF THE ACT WAS ISSUED TO THE ASSESSEE AND IN COMPLIANC E THEREOF THE ITA 249/09 :- 2 -: ASSESSEE FILED RETURN OF INCOME ON 18.2.2005 ADMITT ING AN INCOME OF ` 80 830/- ORIGINALLY ADMITTED. THE ASSESSMENT WAS COMPLETED ON 28.12.2006. THE ASSESSING OFFICER AFTER OBSERVING THAT THE PARTNER SHRI P.MADHURAJAN HAD MADE HUGE INVESTMENTS IN HIS NAME AS COMPARED TO OTHER PARTNERS AND HAD MADE INFLATED CL AIM OF EXPENDITURE AND ALSO OMITTED TO INCLUDE EXCESS INCO ME EARNED OUTSIDE THE BOOKS OF ACCOUNT MADE AN ADDITION OF ` 29 19 770/- CONSISTING OF ` 14 56 690/- TOWARDS WEAVERS CREDIT AND ` 14 59 885/- TOWARDS INFLATION OF EXPENSES. AGGRIEVED THE ASSESSEE-FIRM FILED APPEAL BEFORE THE LD. CIT(A) WHO HAS DISMISSED THE SAME. NOW THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. IN THIS APPEAL MAINLY TWO ADDITIONS AS WE HAVE DISCUSSED ABOVE HAVE BEEN CH ALLENGED. IT WAS ARGUED BY THE LD.AR SHRI G. BASKAR THAT FROM PART NERS RESIDENCE CERTAIN VOUCHERS REGARDING WAGES PAID TO WEAVERS WE RE FOUND AND SEIZED. THESE VOUCHERS MENTIONED WEAVERS NAMES TH EIR ADDRESSES LENGTH OF CLOTH MANUFACTURED BY THEM AMOUNT PAID AND DATE OF PAYMENT. IT WAS ARGUED THAT THIS IS A PRACTICE WHI CH IS USUALLY FOLLOWED BY ALL PERSONS IN THIS LINE. ACCORDING T O THIS PRACTICE THE ITA 249/09 :- 3 -: ASSESSEE-FIRM HAS TO ISSUE POST DATED CHEQUES TO TH E WEAVERS WHICH THEY GOT DISCOUNTED WITH MANY FINANCE FIRMS IN THE AREA. THESE FINANCE FIRMS DISCOUNT THE CHEQUES ISSUED BY THE AS SESSEE-FIRM ON THE STRENGTH OF ITS CREDITWORTHINESS. AS PER THE LD.AR IN THIS WAY THE ASSESSEE IS RELIEVED OF THE BOTHERATION TO MAKE PA YMENTS TO THE POOR WEAVERS IMMEDIATELY HENCE THE WEAVERS COULD ALSO GET THEIR WAGES IN TIME. THE FINANCE-FIRMS GET A SELF-LIQUIDATING ASS ET AND ON THE DUE DATES WHEN THE CHEQUES GOT CLEARED THEIR DUES ARE S ETTLED. THUS IN THIS WAY THE BUSINESS OF THE ASSESSEE-FIRM RUNS SM OOTHLY. THE ASSESSEE-FIRM SENDS CLOTH TO UPCOUNTRY GARMENT EXPO RTERS WHO CONVERT IT INTO GARMENTS AND EXPORT THE SAME TO FOREIGN BUY ERS ON CREDIT OR ON THE STRENGTH OF LETTERS OF CREDIT ISSUED BY THEIR B ANKERS AND EXPORTS HAVE TO BE NECESSARILY IN CONTAINER LOADS WHICH MEA NS HUGE AMOUNTS BEING BLOCKED IN THE PROCESS. IT WAS ARGUED THAT T HESE FACTS WERE ALSO ACCEPTED BY THE WEAVERS WHO WERE EXAMINED BY T HE ADDL. CIT WHO RECORDED THEIR SWORN STATEMENTS. THE WEAVERS H AVE ALSO ADMITTED THAT THE WAGES FOR WEAVING RANGE BETWEEN ` 6 TO 9 PER METRE. ACCORDING TO THE LD.AR THE WEAVERS DELIVER THE CLOTH NOT IN BULK BUT IN SMALL QUANTITIES OF 1000 MTRS TO 2000 M TRS AND THESE ARE SENT THROUGH ALL SORTS OF TRANSPORT. WHEN THESE AR E DELIVERED AT THE PREMISES OF THE ASSESSEE-FIRM THESE ARE RECORDED IN THE SAID VOUCHERS ITA 249/09 :- 4 -: AND THE WAGES ARE SETTLED ONLY ON A WEAKLY BASIS. IT WAS ARGUED THAT THE VOUCHERS ARE PREPARED AS AND WHEN THE DELIVERY OF CLOTH TAKES PLACE. TO EXPLAIN THE BLANK SPACE LEFT FOR SIGNATU RES IT WAS ARGUED THAT THE WEAVERS RARELY COME ALONGWITH THE CLOTH AN D APPEAR ONLY ON THE DESIGNATED DAY WHEN THE CHEQUES ARE MADE READY FOR THEM. THE FINANCE FIRMS PICKUP THE CHEQUES FROM THEM DEPENDIN G ON THEIR URGENCY AND PAY AFTER DEDUCTING THEIR DISCOUNT. TH IS WAS STATED TO BE THE REASON FOR UNSIGNED VOUCHERS. SO ACCORDING TO HIM THE OMISSION WAS UNINTENTIONAL AND THAT NO EFFORT WAS MADE BY TH E ASSESSEE-FIRM TO INFLATE EXPENSES WHICH ARE COMMENSURATE WITH THE EX PENSES SHOWN BY OTHER ASSESSEES IN THE FIELD. ON THE CONTRARY THE LD. CIT/DR SHRI P.B.SEKARAN HAS RELIED ON THE APPELLATE ORDER AND HAS FURTHER ARGUED THAT THESE DISALLOWANCES ARE IN RELATION TO UNSIGNE D VOUCHERS AND ON ACCOUNT OF CASH PAYMENT RECORDED AT THE REVERSE OF THE CHEQUES WHICH IS SUPPOSED TO REPRESENT CASH TAKEN BY SHRI P.MADHU RAJAN FROM THE TOTAL PAYMENT TO THE WEAVERS. AFTER COGITATING THE RIVAL SUBMISSIONS WE FIND THAT FROM THE SEIZED MATERIAL PKS/B&D/S-15 DATED 8.9.2004 AND PKS/B&D/S-28 WHICH ARE LOOSE SHEETS THE ASSES SING OFFICER HAS DOUBTED THE VOUCHERS BECAUSE THESE ARE UNSIGNED AND SAME CASH PAYMENTS ARE WRITTEN ON SOME OF THE CHEQUES. FROM THIS PROCEDURE A STRONG SUSPICION MUST HAVE ARISEN IN THE MIND OF THE ASSESSING ITA 249/09 :- 5 -: OFFICER. THE ASSESSEE-FIRM HAS PAID WEAVING CHARGE S TO THE EXTENT OF ` 29 19 770/- FOR MANUFACTURING 3 30 883 MTRS OF CLO TH WHICH ROUGHLY WORKS OUT TO ` 9/- PER MTR. IT IS AN UNDENIABLE FACT THAT THE EXPENSES FOUND RECORDED ON THE VOUCHERS TALLIED WIT H THE ENTRIES MADE IN THE LEDGER. IT IS ALSO A FACT THAT THE PAYMENTS WERE MADE BY WAY OF CHEQUES AND THE CHEQUES ARE NORMALLY ENCASHED BY TH E WEAVERS THROUGH THE CHEQUE DISCOUNTING CONCERNS. THIS FACT HAS BEEN CONFIRMED BY THE WEAVERS IN THEIR STATEMENTS RECORD ED BY THE DEPARTMENT AS WELL AS THROUGH THEIR AFFIDAVITS DULY ATTESTED AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS NOT PROVED ON RECORD THAT ANY PART OF THIS AMOUNT HAS TRAVELLED BACK TO THE ASSES SEE AFTER ENCASHMENT BUT HIS CONCLUSION IS SOLELY BASED ON H IS SURMISES AND CONJECTURES. THE VOUCHERS CONTAINED THE COMPLETE D ETAILS OF THE PAYEES LIKE THE NAMES OF THE WEAVERS THEIR COMPL ETE ADDRESSES ETC. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT TH E WEAVERS MENTIONED IN THE VOUCHERS ARE FICTITIOUS. THEREFORE IN OUR CONSIDERED OPINION THERE IS NO REASON TO DISALLOW 50% OF THE WAGES CLA IMED BY THE ASSESSEE ON THE BASIS OF SUBJECTIVE BELIEF OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHOULD HAVE GIVEN FULL CREDIT TO THE EXPLANATION OF THE ASSESSEE OR ELSE HE SHOULD HAVE DISPROVED TH E SAME WITH THE HELP OF SOME EVIDENCE. WE ARE UNABLE TO FIND EVE N AN IOTA OF ITA 249/09 :- 6 -: EVIDENCE TO SUPPORT ASSESSING OFFICERS CONCLUSION IN THIS REGARD. LIKEWISE WE ARE UNABLE TO UNDERSTAND WHEN THE PART NER HAS MADE UNEXPLAINED INVESTMENTS HOW THE ASSESSEE-FIRM CAN B E HELD LIABLE FOR THAT. FROM THE ENTIRE RECORD WE ARE UNABLE TO VIS UALIZE AS TO WHY THE ADDITIONS BASED ON ASSUMPTIONS AND HAVING NO LEGS TO STAND BE SUSTAINED. THEREFORE WE ORDER TO DELETE BOTH THE ADDITIONS AND ALLOW THE APPEAL OF THE ASSESSEE. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT O N 27.7.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 27 TH JULY 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR