ARUSUVAI FOOD PROCESSORS PRIVATE LIMITED,CHENNAI vs. ITO, CORP WARD 1(1), SALEM
आयकर अपीलीय अिधकरण, ‘ए’ यायपीठ, चे ई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘A’ BENCH: CHENNAI
ी एबी टी. वक
, ाियक सद एवं
एवं
एवं
एवं
ी जगदीश, लेखा सद के सम
BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER
आयकर अपील सं./ITA Nos.477, 478 & 479/Chny/2024
िनधारणवष/Assessment Years: 2015-16 & 2016-17
M/s.Arusuvai Food Processors –
Pvt. Ltd.,
No.52/17, Raja Badhar Street,
Pondy Bazar,
T. Nagar, Chennai-600 017. v.
The ITO,
Corporate Ward-1(1),
Chennai.
[PAN: AAHCA 6759 L]
(अपीलाथ/Appellant)
(यथ/Respondent)
अपीलाथ क ओर से/ Appellant by :
Mr.D. Anand, Advocate
यथ क ओर से /Respondent by :
Mr.M. Mohan Babu, Addl.CIT
सुनवाईकतारीख/Date of Hearing
:
03.07.2025 / 09.07.2025
घोषणाकतारीख /Date of Pronouncement
:
26.09.2025
आदेश / O R D E R
PER ABY T. VARKEY, JM:
ITA Nos.477 & 478/Chny/2024 are appeals preferred by the assessee against separate orders of the Learned Commissioner of Income
Tax (Appeals)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, dated
26.12.2023 for the Assessment Year (hereinafter referred to as ‘AY‘)
2015-16 & 2016-17. ITA No.479/Chny/2024 is against the action of the Ld.CIT(A) confirming the penalty levied by the AO u/s.271(1)(c) of the ITA Nos.477, 478 & 479/Chny/2024
(AY 2015-16 & 2016-17)
M/s.Arusuvai Food Processors Pvt. Ltd.
:: 2 ::
Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) for AY 2016-
17. 2. The main grievance of the assessee in appeals [ITA Nos.477 &
478/Chny/2024] are against the action of the Ld.CIT(A) confirming the quantum addition of ₹3,62,03,822/- u/s.68 of the Act for AY 2015-16 and ₹2,37,62,122/- for AY 2016-17. Since the issues are identical and are permeating in both assessment years, we will deal with them together.
3. The brief facts are that the assessee company is engaged in the business of trading in food grains, including dal, grams, and pulses. For the Assessment Year (AY) 2015–16, the assessee filed its return of income (RoI) on 23.09.2015, declaring total income of ₹23,450/-. The case of the assessee was subsequently selected for scrutiny under the Computer Aided Scrutiny Selection (CASS) criteria, pursuant to which statutory notices under Sections 143(2) and 142(1) of the Act, were issued. During the course of assessment proceedings, it was noted by the AO from perusal of the financial statements of the assessee that a sum of ₹3,62,03,822/- was disclosed as a trade payable to one of its Directors,
Shri V. Elangovan.
4. The AO examined Shri V. Elangovan who, inter-alia, stated that he used to arrange dal products, pulses etc., from farmers of Andhra,
ITA Nos.477, 478 & 479/Chny/2024
(AY 2015-16 & 2016-17)
M/s.Arusuvai Food Processors Pvt. Ltd.
:: 3 ::
Telangana & Maharashtra which were supplied to assessee company for which he used to get commission from suppliers in cash (1-2%). And since same suppliers (who were arranged by Shri V. Elangovan) used to give pulses, grains, etc., on credit to the assessee company, credit balance which was due to them was shown in the name of Shri V.
Elangovan as outstanding in the books of the assessee company and whenever the assessee company disbursed the money owed to the farmers [from whom the credit purchases were made and payment made to them through Shri Elangovan], the same was reduced to that extent in the books of assessee. The AO was of the view that Shri V. Elangovan was contradicting his own statements while filing his replies. According to him, Shri V. Elangovan was not creditworthy and therefore, he doubted his creditworthiness, even though, the assessee company had duly confirmed the existence of the aforesaid liability of ₹3.62 Crs. as payable to Shri V. Elangovan and had explained the nature of the transaction as ‘trade payable’ in the current liabilities and the creditor/ Shri V. Elangovan has confirmed the same before the AO. The AO doubting the creditworthiness of Shri V. Elangovan, proceeded to treat the said sum as an unexplained credit since the liabilities were not proved by the assessee company and made an addition of ₹3,62,03,822/- u/s.68 of the Act. And similar addition was made at ₹2,37,62,122/- for AY 2016-17. ITA Nos.477, 478 & 479/Chny/2024
(AY 2015-16 & 2016-17)
M/s.Arusuvai Food Processors Pvt. Ltd.
:: 4 ::
Aggrieved by the action of the AO, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre (CIT(A) – NFAC), raising, inter alia, the following grounds: 1. Whether the AO was justified in making an addition of ₹3,62,03,822/- under Section 68 in respect of trade payables standing in the name of Mr. V. Elangovan, without appreciating the explanations furnished by the Appellant. 2. Whether trade payable forming part of the audited books of account for AY: 2014-15 and being brought forward trade payable for the impugned assessment year be brought to tax again under Section 68 of the Act. 6. The Ld.CIT(A) has, inter-alia, upheld the action of the AO by rejecting the aforesaid grounds on the plea that assessee failed to prove the genuineness of the transaction with Shri V. Elangovan and hence, according to him, addition made under Section 68 is justified, by holding as under: 6.6 Against this background, the 5 grounds of appeal raised by the appellant w.r.t the assessment made are taken up together for the sake of brevity and adjudicated as below: 6.7 In all the grounds of appeal the appellant has contested the addition made by the AO on account of unexplained credit u/s 68 of the Act. The issue of addition has been examined in detail in the Assessment Order as discussed hereinabove. The appellant has not been able to discharge its onus of explaining the source of the credits to the satisfaction of the AO. The onus lay on the appellant to rebut the conclusion of the AO with credible evidence, which he failed to do even during appellate proceedings despite the lapse of a prolonged period of time with multiple opportunities accorded. In its submission during appellate proceedings, the appellant stated that without prejudice to its claim of no addition to be made, if at all, the same was to be made in the hands of Mr. Elangovan in his individual capacity as the appellant company had already established his identity, creditworthiness and genuineness of transaction during assessment proceedings. I do not find any merit in this contention of the appellant. While the Identity of Mr. Elangovan may have been established, his creditworthiness and genuineness of the transaction certainly were not, as seen from the details in the Assessment Order wherein the findings of his examination on oath are also discussed. The Initial onus not being discharged by the appellant, there was no reason to shift it to the other. As observed by the AO, a mere entry in the balance sheet cannot be construed as a satisfactory disclosure of transaction. The appellant ought to have been able to provide details of goods/services received by it for ITA Nos.477, 478 & 479/Chny/2024 (AY 2015-16 & 2016-17) M/s.Arusuvai Food Processors Pvt. Ltd.
:: 5 ::
which the said trade payables were recorded. The onus lay on it to furnish evidence in respect of the transaction claimed to have transpired between the two entities. In the absence of the same and the findings made by the AO, the addition cannot be said to be arbitrary and judgemental. The said transaction/s had failed the test of genuineness and human probability. As held by the Hon'ble Supreme Court in the case of CIT v. Durga Prasad More [1971] 82 ITR
540, the taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.
………
………
6.19 Simply making a claim and not following it up with credible, supporting evidence is an exercise in futility. In view of the facts discussed hereinabove and the case laws referred to, I see no reason to interfere with the findings of the AO in the Assessment Order. No merit is thus found in these grounds of appeal raised by the appellant and the same are dismissed.
7. The assessee’s contention before the Ld.CIT(A) against the addition made u/s 68 is that credit balance of ₹3.62 Crs. was old balances, which was undisputedly brought forward from earlier years (AY 2014-15), hence no fresh amounts were credited in the accounts of the creditor (Shri V.
Elangovan) under consideration during the relevant accounting year, therefore, Section 68 is not attracted. Further, the assessee strenuously contended before the Ld.CIT(A) that the question whether the liabilities were genuine or not can’t be examined in the assessment proceedings for the year under consideration and such question could be examined only in the year in which the entries were first made in the accounts of the sundry creditor (Shri V. Elangovan). However, the Ld.CIT(A) has rejected the same with a specious plea that each assessment year is a separate unit and that the trade receivables and payables remained unexplained in ITA Nos.477, 478 & 479/Chny/2024
(AY 2015-16 & 2016-17)
M/s.Arusuvai Food Processors Pvt. Ltd.
:: 6 ::
both years (AY 2014-15 & AY 2015-16). Accordingly, the Ld.CIT(A)/NFAC confirmed the entire addition of ₹3,62,03,822/- & ₹2,37,62,122/- under Section 68, and dismissed the appeal for AYs 2015-16 & 2016-17. 8. Aggrieved by the impugned actions of the Ld.CIT(A), the assessee is before us. The Ld.AR assailing the action of the Ld.CIT(A) contended that the credit balance of ₹3.62 Crs. was the closing balance as on 31.03.2015 reflected in the name of Shri V. Elangovan which is nothing but brought forward balance of ‘trade payables’ by the assessee company to him and to buttress such a contention drew our attention to Page
No.23 of the Paper Book, wherein, the balance-sheet of the assessee company is found placed. He drew our attention especially to the head
“current liabilities” and especially to the entry ‘trade payables’ as on 31.03.2015 which is shown as ₹3,62,03,822/-. Then, he also drew our attention to Page No.27 of the Paper Book, wherein, the details of ‘trade payables’ is given which shows the assessee’s admission that amount of ₹3,62,03,822/- was outstanding against Shri V. Elangovan. According to the Ld.AR, in the backdrop of the given facts, Section 68 addition can’t be made, since the credit shown against the creditor/Shri V. Elangovan was brought forward balance from earlier AY 2014-15. According to the Ld.AR, in the absence of any fresh amount credited in the accounts of creditor under consideration, during the relevant accounting year, question of ITA Nos.477, 478 & 479/Chny/2024
(AY 2015-16 & 2016-17)
M/s.Arusuvai Food Processors Pvt. Ltd.
:: 7 ::
addition u/s.68 of the Act is legally untenable. So according to the Ld.AR, the AO/Ld.CIT(A) erred in treating old balances of ‘trade payable’ as income of the assessee for the year under consideration when the liability still existed in the books of accounts. In order to buttress the aforesaid contentions, the assessee submitted a chart as under which is noted to have been culled out from the Balance-Sheet of the respective years:-
Sl.No.
Details of Submission
Documentary Evidences
1
Disclosure in AY 2014–15
Credit balance payable to Mr.
V.
Elangovan recorded at ₹5,82,24,405/- under “Trade Payables” in “Current
Liabilities.”
5th Annual Report (FY 2013–
14), Page 12 & Note No. 3
(Page 16).-filed separately
2
Disclosure in AY 2015–16
Balance reduced to ₹3,62,03,822/- as on 31.03.2015, reflecting part- settlement and continuing liability.
6th Annual Report (FY 2014–
15), Balance Sheet (Page
23), Note No. 3(Page 27).
3
Disclosure in AY 2016–17
Liability further reduced to ₹2,37,62,122/- as on 31.03.2016, clearly a carried-forward balance from earlier years.
7th Annual Report (FY 2015–
16), Balance Sheet (Page
66) & Note No. 3(Page
70).
4
Nature of Credit Balance
No fresh credit in the relevant year, but a carried-forward liability consistently disclosed in audited accounts.
Audited financial statements for earlier years.
5
Revenue’s Conduct
No addition or dispute raised by the Revenue in earlier assessment year
2014-15 when the balance first arose or was at a higher figure.
Consistent acceptance of liability in prior assessments.
9. On the basis of the above chart, it was explained by the Ld AR that in the account of the sundry creditor (Shri V. Elangovan), the ‘trade payables’ to Shri V. Elangovan as on 31.03.2014 i.e. for AY 2014-15
(earlier year) was to the tune of ₹5,82,24,405/- and to prove this fact, drew our attention to 5th Annual Report at Page No.12 wherein under the ITA Nos.477, 478 & 479/Chny/2024
(AY 2015-16 & 2016-17)
M/s.Arusuvai Food Processors Pvt. Ltd.
:: 8 ::
‘current liabilities’, trade payable ₹5,82,24,405/- is shown to have been reflected & the Note No.3 to Page No.16 showed that an amount of ₹5,82,24,405/- was payable to Shri V. Elangovan as on 30.03.2014 that is relevant for AY 2014-15. Turning our attention to Sixth (6th) Annual
Report relevant for AY 2015-16, found placed at Page Nos.1 to 33 of Paper Book, the Ld.AR asserted that there was no fresh credit during the relevant assessment year ended 31st March, 2015 and pointed out that the ‘trade payable’ to Shri V. Elangovan got reduced from ₹5.82 Crs. to ₹3.62 Crs. from the earlier year [refer 6th Annual Report Page No.23 & 27
supra]. Therefore, according to Ld AR, since no fresh credit was there during the relevant AY 2015-16, no addition u/s.68 of the Act is sustainable. Similarly a perusal of 7th Annual Report of assessee found placed at Page Nos.34-76 of Paper Book, and especially Page No.66
[balance-sheet as on 31.03.2016] under current liabilities, trade payables is shown as ₹4,50,43,642/- and details of trade payables is given in Page
No.70 which shows an amount of ₹2,37,62,122/- still outstanding as payable as on 31.03.2016 to Shri V. Elangovan. So according to the Ld.AR, in the absence of fresh credit in the AY 2016-17, no addition u/s.68 of the Act is legally tenable. And for such a proposition, he relied on the decision of the Hon’ble Delhi High Court in the case of CIT v. Shri
Vardhman Overseas Ltd., reported in 343 ITR 408 (Del). Therefore,
ITA Nos.477, 478 & 479/Chny/2024
(AY 2015-16 & 2016-17)
M/s.Arusuvai Food Processors Pvt. Ltd.
:: 9 ::
according to Ld AR, the impugned addition made u/s.68 of the Act to the tune of ₹3,62,03,822/- for AY 2015-16 & ₹2,37,62,122/- is unjustified as it represents genuine ‘trade payables’ carried forwarded from earlier years and therefore, prayed for deletion of the same.
10. The Ld.AR’s contention is that there was no fresh credit during the relevant accounting year ended March 31, 2015, in the account of the sundry creditor (Shri V. Elangovan) and the balance as on the last day of the accounting year represented opening balance only [₹5,82,24,405/-], which got reduced to ₹3,62,03,822/- as on 31.03.2015. It was therefore asserted by him that provisions of Sec.68 of the Act can’t be invoked to add the balances in the account of the sundry creditor. Similar contention was made for assailing the action of AO invoking section 68, to add the balances in the account of this sundry creditor for AY 2016-17 to the tune of ₹2,37,62,122/-, which according to him is legally untenable.
11. Per contra, the Ld.DR relied on the decision of the Ld.CIT(A) and doesn’t want us to interfere in the same.
12. We have heard both the parties and perused the material available on record. We note that the assessee company is incorporated under the Companies Act, 2013, and its books of account are subject to regular statutory audit u/s.44AB of the Act. It is noted that assessee company
ITA Nos.477, 478 & 479/Chny/2024
(AY 2015-16 & 2016-17)
M/s.Arusuvai Food Processors Pvt. Ltd.
:: 10 ::
under the Companies Act, 2013, is required under statute to file the annual accounts and annual return within 30 days and 60 days, respectively, from the conclusion of the Annual General Meeting (AGM).
And the filing of annual accounts with the