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Before: Shri George Mathan & Shri A. Mohan Alankamony
आदेश /O R D E R
PER A. MOHAN ALANKAMONY, AM:
This appeal by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-3, Coimbatore, dated 18.01.2018 in for the assessment year 2009-10 passed U/s. 250(6) r.w.s. 143(3) of the Act.
2. The assessee has raised several grounds in his appeal however the crux of the issue is that the Ld.CIT(A) has erred in sustaining the addition made by the Ld.AO amounting to Rs.49,00,000/- towards unexplained cash credit U/s.68 of the Act.
3. The brief facts of the case are that the assessee is an individual engaged in the business of export of hosiery garments, e-filed his return of income for the assessment year 2009-10 on 30.09.2009 admitting total income of Rs.4,20,840/- and subsequently filed revised return declaring total income of Rs.5,02,290/-. Initially the return was processed U/s.143(1) of the Act and subsequently the case was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued on 08.09.2010. Finally assessment order was passed U/s.143(3) of the Act on 30.12.2011 in the second round of litigation wherein the Ld.AO made addition of Rs.49,00,000/- towards unexplained cash credit U/s.68 of the Act and Rs.13,42,235/- towards disallowance of expenses U/s.40(a)(ia) of the Act.
During the course of scrutiny assessment proceedings, it was observed by the Ld.AO that the assessee had received through cheque a sum of Rs.40 lakhs from M/s. Halifax Constructions and sum of Rs.9,00,000/- from M/s. Sabari Foundation Pvt. Ltd., in the relevant assessment year. It was also observed that the assessee had returned an amount of Rs.15,00,000/- to M/s. Halifax
Construction and Rs.5,00,000/- to M/s. Sabari Foundation through self-drawn cheques. The Ld.AO in order to confirm the transaction sent a letter to M/s. Halifax Construction and M/s. Sabari Foundation. With respect to M/s. Halifax Construction, the Ld.AO did not receive any reply. However with respect to M/s.
Sabari Foundation, a letter was received stating that “we do not have any direct transaction with the assessee”. On query, the assessee made the following submission before the Ld.AO:-
“… 1. Two of my relatives Mr.C. Suresh and Mr. R. Prabhu had the plan to enter into local hosiery garment business and had given to me an advance of Rs.49 lakhs in aggregate as trade advance towards supply of goods.
The cheques were issued by Sabari Foundation (P) Ltd. and Halifax Constructions and hence I accounted the same in that name.
Only later, I came to know that they received those cheques as settlement of their unsecured loans as the partners of “The Nilgiris” and the same was transferred to me.
4. Due to various issues in the textile industry they have decided to suspend that idea temporarily till the market is improved. During that year, during their personal visit, they have asked a portion of the money advanced by them and I have returned the same.
5.Since these persons were hospitalized due to illness, I am not able to provide the confirmation within the available time….”
However the Ld.AO rejected the explanation offered by the assessee because of the following reasons:-
(i) The creditors who had advanced the amount to the assessee did not confirm the transaction.
(ii) The advance was not reported in the audit report in Form 3CD dated 29.08.2009 under Sl.No.24.
(iii) The assessee had not submitted confirmation letters from the creditors.
For the above stated reasons the Ld.AO invoking the provisions of Section 68 of the Act, made addition in the hands of the assessee to the tune of Rs.49 lakhs.
On appeal, the Ld.CIT(A) confirmed the order of the Ld.AO by observing as follows:-
“5. Eventhough the assessee has claimed that the amounts were received from Shri C. Suresh and Mr. R. Prabhu who are relatives of the assessee, they have not filed any confirmation letter from them either during the course of assessment or during the course of appeal. The assessee has not mentioned the purported trade advances from two relatives in form No.3CD dated 29.08.2009 filed with the Return of income. Therefore, the amounts said to be received from the relatives are only a fiction created by the assessee.
5.1 The credits were noted as trade advance. There was no indication of any act from the side of the assessee nor the creditor towards, entering into any business relationship. No agreements were entered into and it is found that the creditors are construction company and a foundation, having no presence in the business domain of the appellant. This appears as a fictitious story. It is also noted that sums of Rs.15 lakhs and Rs.5 lakhs were shown paid back to M/s. Halifax Construction and M/s.Sabari Foundation Pvt.Ltd during the year in self cheques and by cash. The AO may see whether provisions of Sec.269T would be attracted.
5.2 In view of the facts and circumstances mentioned above and in the absence of any other evidence produced by the assessee either during the course of assessment or during the course of appeal the amount of Rs49 lakhs received by the assessee is treated as unexplained cash credit u/s.68 of the Income Tax Act and confirmed in the hands of the appellant.”
Before us the Ld.AR submitted that the assessee has now obtained the confirmation statement from M/s. Halifax Construction and Mr. C. Suresh Proprietor of KPRK Garments explaining the transaction with respect to M/s.
Sabari Foundation Pvt. Ltd.,. The Ld.AR further pleaded that the matter may be remitted back to the file of Ld.AO to consider the issue in the light of the confirmation statements obtained from the creditors. The Ld.DR strongly opposed to the submission of the Ld.AR and prayed for confirming the orders of the Ld.Revenue Authorities.
We have heard the rival submissions and carefully perused the materials on record. From the petition filed by the assessee, we find that the case is before us for the second time as the Tribunal had earlier remitted the appeal of the assessee back to the file of Ld.AO for fresh consideration. From the conduct of the assessee it appears that the assessee is not co-operating before the Revenue promptly by producing the confirmation statements from the sundry creditors. It also appears that the assessee intends to unnecessarily prolong the litigation for the reasons best known to him. Though we do not appreciate the attitude of the assessee, in the interest of justice we hereby remit the matter back to the file of Ld.CIT(A) in order to consider the issue in the light of the confirmation statement furnished by the assessee from the creditors and their genuineness after obtaining Remand Report from the Ld.AO. We also caution the assessee to promptly co- operate before the Ld.Revenue Authorities in their proceedings, failing which the Ld.Revenue Authorities shall be at liberty to pass appropriate order in accordance with law and merit based on the materials on record after giving the assessee due opportunity of being heard.
In the result the appeal filed by the assessee is allowed for statistical purposes as indicated herein above.
Order pronounced in the open Court on 17th of December, 2018 at Chennai.