MADRAS CHELLAM SARASWATHI THANGARAJ,CHENNAI vs. ACIT, CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

The assessee filed this appeal against the order of Commissioner of Income Tax (Appeals)-15, Chennai in dated 12.02.2016 for assessment year 2012-13.

2. Madras Chellam Saraswathi Thangaraj , the assessee , is running a Small Scale Industry manufacturing LT Panel Boards and general fabrication . The assessee filed a return declaring a taxable income of Rs.15,59,410/-. While completing the assessment for ay 2012-13, the AO made the following additions / disallowances :

i) Y.Balakrislman Reddy Rs. 10,00,000 ii) Kilpauk Finance Rs. 7,00,000 iii) Euro Process Finance Rs. 3,50,000

Rs. a) Bandari Metals & Alloys 3,39,094 b) Elmag Insulations 3,39,880 c) Uma Industries 4,41,997 d) Sushi I Electricals 4,17,980 e) TA Traders 7,88,369 23,27,320 Total

4. Rs.3,70,000/-, labour chargesclaimed,was disallowed for want of evidences&(5).

Rs.17,33,685/-, interest disallowed, on the unsecured loan considered as not genuine. Aggrieved by the above order, the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal. Against the order of the CIT(A), the assessee filed this appeal .

3. The AR submitted that in the written submission filed before the CIT(A), reconciliation of the balances were provided and explained that M/s. Sai Enterprises sourced funds and in turn lent to assessee. Assessee accounts all the receipts and repayments in the name of M/s. Sai enterprises. From ledger of Sai Enterprises, it is seen that they have only accounted repayments made by assessee to Sai (receipts from Sai), and consequent repayment made by Sai to principal lender. List of cheques received through Sai with cheque numbers / party name / date of credit in bank furnished before CIT(A). Details of repayments also furnished before CIT(A). On the addition of unsecured loan from Y. Balakrishnan Reddy of Rs.10,00,000/-, the AR submitted that confirmation received by assessee much later only. The loan has been confirmed to be genuine by the party and it ought not to have been summarily rejected by theCIT(A) on theground as to why confirmation was submitted by assesseenow if it was received earlier. On the addition of unsecured loan from Kilpauk Finance at Rs. 7,00,000/- , the AR submitted that due to strained relationship, the confirmation could not be obtained and filed. Inviting our attention to the paper book , the AR submitted that the receipts and payments were only through account payee crossed cheques and ledger account in assessee's books is also furnished . On the addition of unsecured loan from Europrocess Finance at Rs.3,50,000/-, the AR inviting our attention to the paper book and the ledger copy , submitted that the entire amount relates to opening balance. In respect of the addition of sundry creditors, the AR inviting our attention to the paper book and the ledger copy , submitted that the ledger confirmations from the creditors were furnished to the CIT(A) . They are expense creditors. When the expenses have been allowed, the AR pleaded that addition of balances of such creditors cannot be made. On the disallowance of labour charges, the AR submitted that the billscould not beproduced before CIT(A) even though in the letter it has been stated that bills are produced for verification. Inviting our attention to the paper book , the AR submitted that the impugned bills are now available for verification. On the interest disallowance of Rs.17,33,685/-, the AR submitted thatout of Rs.23,22,571/- interest paid, the AO disallowed Rs.17,33,685/- interest paid to others than bank & secured loan . The CIT(A) held that since the unsecured loans are treated as unproved, interest cannot be allowed. Inviting our attention to the paper book , the AR submitted that since the loans are confirmed by creditors, the interest on such loans are allowable and hence pleaded that the assessee’s plea may be allowed. Per contra, the DR supported the orders of the AO/ CIT(A) submitting that the assessee failed to furnish relevant material before them and hence the conclusion drawn by them can not be faulted. In view of that the DR pleaded to sustain the order of the CIT(A).

Since the issues involved are to be decided based on the finding of facts and associated circumstances and the relevant material were not furnished or duly appreciated , as the case may be, due to one or the other conditions, though some of them are placed before us now, we are of the view that in :-5-: AO for a fresh examination and appropriate decision.Accordingly, remit them to the AO.

The assessee shall furnish all the facts and circumstances associated with these transactions, place all the materials on which it relies in support of its contentions before the AO within 45 days from the receipt of this order and then comply to the AO’s requirements as per law. The A O is free to conduct appropriate enquiry as deemed fit , but he shall furnish adequate opportunity to the assessee on the material etc to be used against it and decide the above issues in accordance with law . In the result, the assessee’s appeal is treated as allowed for statistical purposes.

Order pronounced on Friday, the 20th day of April, 2018 at Chennai.