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

(ि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 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.

3. With regard to ground No.1, ld. AR submitted that the AO has made 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, submitted that the creditors as declared by the assessee should be accepted as genuine creditors and addition may be deleted.

4. On the other hand, ld. Sr. DR vehemently supported the orders of 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.

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.

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 satisfaction of the AO. The relevant provisions of Section 68 of the Act are as under :- Cash credits.

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 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.

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 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.