GANESH MILLERS PRIVATE LIMITED,KARANJIA,MAYURBHANJ,ODISHA vs. ASST.COMMISSIONER OF INCOME TAX, BALESWAR CIRCLE,BALESWAR

आयकर अपीलीय आयकर अपीलीय अिधकरण अिधकरण, कटक कटक �यायपीठ �यायपीठ,कटक आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण कटक कटक �यायपीठ �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER आयकर अपील संसंसंसं/ITA No.341/CTK/2023 (िनधा�रण िनधा�रण िनधा�रण वष� िनधा�रण वष� वष� / Assessment Year : 2015-2016) वष� Ganesh Millers Private Limited Vs ACIT, Baleswar Circle, Baleswar Karanjia Main Road, Karanjia, Odisha-757037 PAN No. :AADCG 8009 P (अपीलाथ� अपीलाथ� अपीलाथ� /Appellant) अपीलाथ� (��यथ� ��यथ� ��यथ� / Respondent) ��यथ� .. िनधा�रती िनधा�रती क� िनधा�रती िनधा�रती क� क� ओर क� ओर ओर सेसेसेसे /Assessee by ओर : Shri S.K.Agrawalla, CA राज�व राज�व क� राज�व राज�व क� क� ओर क� ओर ओर सेसेसेसे /Revenue by ओर : Shri S.C.Mohanty, Sr. DR सुनवाई क� तारीख / Date of Hearing : 16/10/2024 घोषणा क� तारीख/Date of Pronouncement : 16/10/2024 आदेश आदेश / O R D E R आदेश आदेश Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 12.09.2023, passed in Appeal No.CIT(A), Cuttack/10238/2017-18 vide DIN & Order No.ITBA/NFAC/S/250/2023-24/1055985206(1) for the assessment year 2015-2016, on the following grounds of appeal :- 1. That, the Ld. Commissioner of Income Tax (Appeals) committed an error of law in confirming the additions of 49,38,608 under the head unexplained cash credit which is liable to be deleted. 2. That, the Commissioner of Income Tax (Appeals) erred in facts in circumstances in confirming the adhoc disallowance of 1,69,260 which is 20% expenses debited against the purchase of old gunny bag and the same is liable to be deleted. 3. That, the appellant craves to alter, amend, modify or add any other ground that may be considered necessary in the course of appeal proceeding. 2. Brief facts of the case are that the assessee is a private limited company engaged in the business of running a rice mill. The return of income was e-filed on 30.09.2015 declaring total income at

2 ITA No.341/CTK/2023

Rs.23,31,260/- and, the same was assessed u/s.143(3) of the Act at

Rs.74,39,130/- by making various disallowance vide order dated

08.12.2017. In first appeal, the assessee got no relief, therefore, the

present appeal is filed before us.

addition of Rs.49,38,608/- by treating the sundry creditors as unexplained,

though, all these parties are the supplier of goods to whom the payments

were made during the subsequent assessment year. This fact was not

appreciated by the AO. He further submitted that the payments were

made through banking channel to most of the parties and the AO has

accepted the purchases as well as the trading results declared by the

assessee, therefore, corresponding credits of the creditors should have

been accepted. In support of the claim that the payments were made in

subsequent year, he placed the copy of the ledger accounts of these

parties as appearing in the books of accounts of the assessee in

subsequent year and submitted that these creditors are paid off in

subsequent year, therefore, the same could not be held as unexplained

cash credits in the hands of the assessee. In support of the claim that the

purchase were made of paddy from these parties, he drew our attention to

page 134 of the paper book which is the stock register of paddy wherein

the purchases made and the quantity milled were duly recorded and the

closing stock of 638.50 quintals was shown which is in consonance to the

stock declared in the financial accounts as on 31.03.2015. He, thus,

3 ITA No.341/CTK/2023

submitted that the creditors as declared by the assessee should be

accepted as genuine creditors and addition may be deleted.

the lower authorities and submitted that in this case the AO has issued

summons u/s.133(6) of the Act to the parties claimed as sundry creditors

on the addresses provided by the assessee. However, most of them were

returned unserved with remark “refused” or “left” or “no such address” or

“insufficient address”. On our specific direction, the ld. Sr. DR has

prepared a detailed chart from the assessment records according to

which out of total 184 summons issued u/s.133(6) of the Act to the

parties, 124 summons were served, 60 summons were not served. Out of

124 summons served only seven parties had responded but as per the ld.

Sr. DR, the response was vague. Remaining 117 parties have not

responded to the summons served upon them. The report as submitted

by the ld. Sr. DR which is prepared on the basis of the assessment record

is placed on record. He, therefore, submitted that these creditors are

nothing but the unsecured money of the assessee which was introduced

in the name of various persons as trade creditors in the books of

accounts. He further submitted that it appears that the assessee has

inflated his purchases by inserting these parties as creditors to suppress

the profits of the business and, therefore, he prayed for the confirmation

of the additions made by the lower authorities.

available on record. In this case, from the details furnished, it is seen that

4 ITA No.341/CTK/2023

in the financial statement i.e. Balance sheet, the assessee has shown the

figures of sundry creditor at Rs.49,38,608/- under the title “Trade

Payable”. However, no list was provided along with financial statements.

During the course of assessment proceedings, a list of these parties was

supplied to the AO which is at paper book at pages 44 to 47 as filed

before the AO vide letter dated 25.05.2022. From the perusal of this list, it

appears that none of the parties had opening balance and the outstanding

balances appearing against in their names are with regard to the

purchases made from them during the year itself. It is also seen that

neither during the course of assessment proceedings nor before us

assessee has bothered to file the ledger accounts of all these parties and

when the assessee was asked to furnish the evidence of payments made

in subsequent years as claimed by it, only copies of ledger accounts of

these 189 parties as appearing in the books of account of the assessee

were filed, however, no supporting evidence such as bank statements etc.

were filed to substantiate the claim.

squared off in next financial year by making payment in cash. As

observed above, that out of 184 summons issued by the AO u/s.133(6) of

the Act only 7 parties have responded that too in vague manner,

therefore, genuineness of the transactions carried out with these parties

remained doubtful. Even their identity is also doubtful. Since in case of

121 parties, payments were made in cash, therefore, there could be a

possibility that either these parties are non-existent as in the case of 60

5 ITA No.341/CTK/2023

summons issued u/s.133(6) of the Act returned unserved or the purchase

price may be inflated to suppress the profits of the business.

assessee has provided the copy of stock register for paddy. On a single

day purchase of 380.20 quintal on 01.04.2014, 492 quintal on 2.7.2014

and so on were recorded and in similar manner on 4.7.2014 900 quintals

were shown as quantity milled and on 5.7.2014, 600 quintal were shown

as quantity milled. To our understanding this stock register should have

been kept wherein each individual purchases through purchase vouchers

should be entered separately so as to give the details of each purchase

voucher as well as the name of parties from whom purchases were made.

From the perusal of the stock register of paddy account it appears that it

was prepared in a hurried manner to support the quantity of paddy

purchases and milled, this also create doubt about the genuineness of the

trade creditors. In the case of the assessee, the assessment for

A.Y.2016-2017 was also completed u/s.143(3) of the Act, a copy of the

same is available in the paper book at pages 135-137. A perusal of the

same also reveal that doubts were raised about the sundry creditors and

disallowance was made on adhoc basis without any examination. This

also creates doubts about the genuineness and existence of the sundry

creditors in this year also. As these are the credits in the books of

accounts of the assessee as per Section 68 of the Act, the burden is

casted upon the assessee to establish these credits as genuine to the

6 ITA No.341/CTK/2023

satisfaction of the AO. The relevant provisions of Section 68 of the Act are

as under :- Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : [Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,— (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: [Provided also] that nothing contained in the first proviso 86[or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.

prove the identity of the creditors as in most of the cases no reply was

received against the summons issued u/s.133(6) of the Act. Thus, neither

7 ITA No.341/CTK/2023

the genuineness of transaction nor their creditworthiness is established.

The only contention of the assessee was that all of these parties were

squared off during the next year. As observed above, more than 120

parties were paid in cash. Thus, this claim of assessee is also doubtful. It

also raises doubt in the mind as to how agriculturists are able to stay

creditor for such long period of time.

the course of hearing, on our request, for subsequent year were not

available before the lower authorities, therefore, in the interest of justice,

we set aside this issue to the file of AO for re-examination the trade

creditors in the light of the observations made hereinabove. Needless to

say the assessee be allowed adequate opportunity of hearing before

concluding the issue. Liberty should be granted to the assessee to

produce the trade creditors for verification if so desired by the assessee.

The ld. AR is also directed to file the copy of the ledger account of these

parties as appearing in the books of account of the assessee for

subsequent year before the AO, a copy of which was filed before us.

Thus, this ground of appeal is allowed for statistical purposes.

disallowance of Rs.1,69,260/- made out of the purchase of gunny bags.

The AO has made the disallowance @20% out of the purchases of the old

gunny bags of Rs.8,46,300/- claimed in the profit and loss account. Before

us, ld. AR of the assessee submitted that the assessee has purchased

the gunny bags of Rs.8,46,300/-and also shown the income of

8 ITA No.341/CTK/2023

Rs.7,72,479/- from the sales of gunny bags and only claimed Rs.73,721/-

as expenses under the head of “gunny bags”. Both these figures are

appearing n the note 17 & 13 appended to the profit and loss account

respectively. Since the assessee has claimed the deduction of

Rs.73,721/-only, no disallowance could be made for the amount higher

than this and also looking to the fact that the assessee is showing income

from sale of gunny bags, the disallowance made by the AO is hereby

deleted. This ground of appeal is allowed.

Sd/- Sd/- (GEORGE MATHAN) (MANISH AGARWAL) लेखा सद�य/ ACCOUNTANT MEMBER �याियक �याियक सद�य �याियक �याियक सद�य सद�य / JUDICIAL MEMBER सद�य कटक कटक Cuttack; �दनांक Dated 16/10/2024 कटक कटक Prakash Kumar Mishra, Sr.P.S. आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत अपीलाथ� / The Appellant- 1. Ganesh Millers Private Limited Karanjia Main Road, Karanjia, Odisha-757037 ��यथ� / The Respondent- 2. ACIT, Baleswar Circle, Baleswar आयकर आयु�(अपील) / The CIT(A), 3. 4. आयकर आयु� / CIT िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, कटक कटक / DR, ITAT, 5. कटक कटक आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार Cuttack गाड� फाईल / Guard file. 6. स�यािपत �ित //True Copy// (Assistant Registrar) आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, कटक अिधकरण कटक कटक/ITAT, Cuttack कटक