M/S TULSIAN REFINERY PRIVATE LTD.,GUMMIDIPOONDI vs. DCIT, CENTRAL CITCLE-3(4), CHENNAI

The grievance of the assessee in the aforesaid appeals for Assessment Years (AY) 2016-17 & 2017-18 is common i.e., additions arising out of certain search proceedings. The facts as well as issues are identical in both the years. The appeal for AY 2016-17 arises out of the order of learned Commissioner of Income Tax (Appeals)-18, Chennai, [CIT(A)] dated 30-11-2021 in the matter of an assessment framed by Ld. 2 & 66/Chny/2022 DCIT, Central Circle-3(4), Chennai (AO) u/s. 153C r.w.s 143(3) of the Income Tax Act on 30-12-2019. The grounds raised by the assessee read as under: - 1.The action of the Ld.CIT(A) upholding the order passed by the Assessing Officer is bad in law and against the facts and circumstances of the case. 2.The Ld.CIT(A) erred in confirming the addition made by the AO which was solely based on the statement recorded at the time of search and the submissions of the Director of the appellant who was undergoing treatment. 3.The Ld.CIT(A) erred in confirming the disallowance of Rs.28,70,959/- as unexplained expenditure of the appellant. 4.The Ld.CIT(A) ought not to have seen that in the light of the order of the Hon'ble Settlement Commission in the case of Kaleessuari Refineries P Ltd, there is no warrant for any addition or disallowance.

The Ld. AR advanced arguments and placed on record order passed by Hon’ble Income Tax Settlement Commission (ITSC) in the case of searched person i.e., M/s Kaleeswari Refinery Private Ltd. (KRPL) for AYs 2011-12 to 2018-19. The Ld. Sr. DR supported the orders of lower authorities. Having heard rival submissions and upon due consideration of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident corporate assessee is stated to be engaged in supply of edible oils. Consequent to search action u/s 153A in the case of KRPL on 17-05-2017, impugned assessment was framed on assessee on the basis of certain incriminating material found during the course of search operations. The sole issue that arises is alleged bogus interest expenditure as claimed by the assessee. 3.2 The seized material, inter-alia, contained details of refined sunflower oil supplied by assessee to KRPL. It transpired that KRPL 3 & 66/Chny/2022 purchased oil from various parties including the assessee. M/s KRPL took delivery only after verifying the quality of oil by quality control department. Such quality reports form an integral part of record keeping along with invoices, weighing slips etc. However, some of the purchases were not accompanied with the quality reports and therefore, the same were held to be bogus in nature. For this year, this value for the assessee was quantified at Rs.25.37 lacs. The value for AY 2017-18 was quantified at Rs.80.59 Lacs. The said facts were put to Shri Ajay Kumar Tulsian (Managing Director of the assessee) and sworn statement was recorded on 05.07.2017. 3.3 In reply to question No.5, it was admitted that the assessee provided bogus and inflated bills / invoices to KRPL. The worksheet of the said bogus bills was also provided. It was admitted that the assessee booked both bogus and inflates sales in the assessee company and also inflated book stock to show more profit to the banks for getting loans. It was further stated that the assessee could not book any bogus expenses in the books but the profit was adjusted out of assessee’s accumulated losses. In reply to question no.8, the assessee submitted that it received interest free loan of Rs.6 Crores from KRPL. Since interest was to be paid as per law, the assessee made an arrangement that the assessee would issue bogus sales vouches to KRPL who would make payment thereof through RTGS. The assessee, in turn, would return the same amount as payment of interest towards loan receipts. 3.4 On the basis of statements as well as after onsidering the reconciliation statement filed by the assessee, Ld. AO concluded that the assessee issued bogus sales vouchers to KRPL which was used by the assessee to settle the interest dues to KRPL against loans availed from 4 & 66/Chny/2022 them. The interest of Rs.72 Lacs so claimed by the assessee was found to be bogus in nature. However, the assessee retracted the earlier statements and filed reply dated 24-12-2019 to submit that the assessee has not done any bogus sale. The interest was paid through banking channels after complying with TDS provisions. However, going by the statement of MD recorded on 05-07-2017 as well as subsequent reconciliation statement filed by the assessee, Ld. AO concluded that the payment of interest was only for the purpose of returning money to KRPL pertaining to bogus sales bills. Accordingly, the amount of Rs.28.70 Lacs was added to the income of the assessee as unexplained expenditure. 3.5 Similar assessment has been framed for AY 2017-18, wherein Ld. AO held that interest expenditure of Rs.72 Lacs was unexplained expenditure. Another addition made for this year was bogus import expenses of Rs.8.59 Lacs which are related to alleged bogus sales bills issued by the assessee to KRPL. Appellate Proceedings 4. During appellate proceedings, the assessee submitted one loan agreement which was held to be made-belief document and rejected. The retraction made by the assessee was also rejected since the medical grounds raised by the assessee were held to be far-fetched only. The MD was actively participating in the affairs of the company without any impediment. Finally, it was held by Ld. CIT(A) that the interest expenditure was nothing but accommodation entry provided by the assessee for KRPL. Therefore, impugned additions were confirmed against which the assessee is in further appeal before us. Similar was adjudication for AY 2017-18.

The appeal for AY 2016-17 stand dismissed. The appeal for AY 2017-18 stand allowed. Order pronounced in open court on 19th October, 2023.