ACIT, CHENNAI vs. N.SIVAKUMAR, CHENNAI

आदेश / O R D E R

PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

This is an appeal filed by the Revenue against the Order dated 25.11.2013 of Commissioner of Income Tax (Appeals-V), Chennai, in for the AY 2010-11 and raised the following grounds: & CO No.42/Mds/2014 :- 2 -:

2. The Ld. CIT(A) erred in deleting the addition of unexplained cash credit of ₹24 lakhs( ₹10 lakhs + ₹14 lakhs) as the credit entry is on the same date 04.04.2009 in the books of the assessee. 3. The Ld.CIT(A) erred in deleting the addition of commission paid to Mr. Jimlin of ₹58.90 lakhs as the confirmation letter not signed by Mr. Jimlin himself and single journal entry as on 31.03.2010 debiting Mr. Jimlin and crediting to ‘‘Suspense A/c’’. 4. The Ld.CIT(A) erred in deleting the addition of unexplained cash credit of ₹1,25,82,156/- appearing in the Balance Sheet under the head ‘Advance from customers’ of Orient Wang Feng. 5. The Ld.CIT(A) erred in deleting the credit of ₹1,44,50,000/- appearing in the Balance Sheet, under the head ‘Advance from customers’ of NSK Exports. 6. The Ld.CIT(A) erred in deleting the addition of Unexplained cash credit of ₹1,44,50,000/- appearing in the ledger copy of ‘‘Suspense A/c’’ in the name of Oscar Granites & Marbles. 7. The Ld.CIT(A) erred in deleting the addition of unexplained credit in the names of PSR Granites P. Ltd of ₹38,22,479/- and PSR Granites of ₹29,81,564/- appearing in the ledger copy of ‘‘Suspense A/c’’. 8. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set-aside and that of the Assessing Officer restored.

2.0 Ground Nos.1 & 8 are general in nature which do not require specific adjudication.

Ground No.2 is related to the addition of ₹24 lakhs as un-explained 3.0 cash credit in the books of the assessee. The Assessing Officer (hereinafter referred to as ‘AO’) during the assessment proceedings found that there was a cash credit in the books of the assessee amounting to ₹62,99,785/- on 04.04.2009. The AO called for explanation from the assessee in respect of source of the cash credit and the assessee explained the source of ₹10.00 lakhs as agriculture income accumulated over a period of time and was lying with the friends& relatives and the same was received and credited to the capital account. Similarly, a sum of ₹14.00 lakhs was relating to rental income and lying in agricultural operations ploughed back to the business and the sum of ₹39.00 lakhs & CO No.42/Mds/2014 :- 3 -: was out of loans taken from the friends and the relatives. The entire amount of ₹62,99,785/- was received by the assessee on 04.04.2009 and credited to the capital account. The assessee has admitted the agricultural income as well as rental income in his personal income tax returns and but not taken to his capital accounts earlier. The AO not being impressed with the Explanation, made the addition of ₹62,99,785/- to the returned income on deletion of ₹24.00 lakhs.

4.0 Aggrieved by the order of the AO, the assessee went on appeal before the Learned Commissioner of Income Tax(Appeals) (hereinafter referred to as ‘Ld.CIT(A)’) and the Ld.CIT(A) confirmed the addition of ₹39.00 lakhs and deleted the addition of ₹24.00 lakhs relating to agricultural income and rental income. Therefore, the Department is on appeal before us.

5.0 During the appeal the Ld.DR argued that the assessee has introduced a sum of ₹10.00 lakhs as cash credit in his capital account and claimed it as accumulation of agricultural income. Since assessee has neither accounted the income and nor brought to his capital account the genuineness of the transaction was not proved. The assessee has neither furnished the confirmation nor furnished the evidence for agricultural accumulation and hence the source cannot be treated as genuine. The Ld.CIT(A) has not verified the genuineness of transaction and the & CO No.42/Mds/2014 :- 4 -: agricultural accumulations. Therefore The Ld.DR argued that the AO has rightly made the addition and required to be confirmed.

5.1 Appearing for the assessee, Ld.Counsel argued that the assessee was having 33.71 acres of agricultural land and receiving agricultural income regularly. Agricultural income was admitted in the return of income filed by the assessee regularly. The assessee explained that the cash credit made on 04.04.2009 represents the agricultural income which was accumulated over a period of time. The Learned Authorized Representative (hereinafter referred to as ‘Ld.AR’) also explained that no credit was taken for the source of agricultural income towards any expenditure or investment in the earlier years. The Ld.CIT(A) accepted the source of cash credit placing reliance on the evidence filed by the assessee in the form of return of income. Therefore the Ld.A.R argued that since the assessee has already admitted the income in the earlier years and no source was taken for credit the CIT(A) has rightly deleted the addition and no interference is called for.

5.2 We heard the rival submissions and perused the orders of the lower authorities. It is not in dispute that the assessee is holding 33.71 acres of agricultural land and declared the agricultural incomes in his personal returns and the department has accepted the agricultural income. It is also not in dispute that the assessee has not applied the agricultural & CO No.42/Mds/2014 :- 5 -: income to any of the outgoings. Therefore the assessee is entitled for relief for accumulations of agricultural income and we do not find any reason to suspect the source of ₹10.00 lakhs. Therefore, the order of the Ld.CIT(A) is confirmed and the Revenue’s appeal on this issue is dismissed.

The second issue in this ground is related to the addition of ₹14.00 6.0 lakhs representing the rental income. The AO made the addition stating that there was no evidence to show that the rental income was invested in agricultural operations and ploughed back to the business. The Ld.CIT(A) deleted the addition stating that the AO has not disputed the rental income offered by the assessee in the earlier years. The Ld.CIT(A) in his Order reproduced the details in respect of rental income which accounted for ₹11,55,709/- for the AY 2010-11 alone. The assessee explained that the rental income of two years was accumulated and brought in to the business and the Ld.CIT(A) observed that the explanation of the assessee was reasonable and accepted the source and deleted the addition.

6.1 We heard both the parties. It is a fact that the assessee has been admitting the rental income and paid taxes in the earlier years. The rents received by the assessee was ₹11,55,709/- for the AY 2010-11. According to the assessee, ₹14.00 lakhs credited in the capital account represented in the rental income received by the assessee for the last two years. As & CO No.42/Mds/2014 :- 6 -: per the explanation and the information submitted by the assessee, the rents received by the assessee for the last three years would be around ₹20.00 lakhs out of which a sum of ₹14.00 lakhs was credited to the capital account. There was no dispute that the assessee has received rents and offered in the income tax returns. The AO has not given any findings that the rental income received by the assessee was either applied in other investments or spent for personal purposes. When the assessee has explained the source as rental income which was declared in the income tax returns there is no case for any suspicion unless an evidence brought on record to show the rental income was already spent.

The AO has not brought on record any evidence to prove that the rental income claimed by the assessee was not available with him. Therefore, we hold that the source for the credit of ₹14.00 was explained by the assessee and there is no case for making any addition u/s 68. Accordingly we uphold the order of the Ld.CIT(A) and dismiss Ground No.2 of the Revenue.

Ground No.3 is related to the addition of ₹58,90,000/- towards 6.2 commission paid to Mr.Jimlin. During the assessment proceedings, the AO found from the profit and loss account that a sum of ₹58,90,000/- was debited to the Commission Account. The AO disallowed the commission paid to Mr.Jimlin since the confirmation letter was not signed by Mr.Jimlin. The AO verified the signature of the assessee with the passport & CO No.42/Mds/2014 :- 7 -: which does not tally with it and hence the AO viewed that the confirmation letter was not signed by him. There was no written agreement between the assessee and Mr.Jimlin related to the payment of commission by the assessee. The bills were raised for the companies of M/s.Xiamen Orient Wang Feng Industiral Co. Ltd. and M/s.Xiamen Hannyuan Imp. & Exp. Co.

Ltd., but claimed that the company received the payment after deduction of commission payable to Mr.Jimlin. The assessee also submitted two invoices before the AO but could not establish the link between the shipping bill and bank remittances certificates. Therefore, the AO was of the opinion that it was not established by the assessee that the commission was paid for business purpose and disbelieved the payment of commission and made the addition to the returned income. The assessee explained before the Ld.CIT(A) that the assessee received the net amount from China after deducting the commission of Mr.Jimlin. The AO has mistaken the name of Mr.Lin Yuan which was appearing in the passport and Mr.Jimlin is also called as Mr.Lin Yuan. The assessee furnished the the worksheet, random invoices and inward remittance certificates issued by the SBI, Siruthozhil Branch before the Ld.CIT(A) and the Ld.CIT(A) placing reliance on the evidences produced by the assessee deleted the addition and hence the revenue is in appeal before us.

6.3 The Learned Departmental Representative (hereinafter referred to as ‘Ld.DR’) argued that there was a difference in signature in the & CO No.42/Mds/2014 :- 8 -: confirmation letter filed by the assessee and there was no agreement supporting the services rendered by the Mr.Jimlin for payment of commission. Confirmation letter was signed by the consolidated Agent instead of Mr.Jimlin. The Ld.DR further argued that bills were raised for companies of M/s.Xiamen Orient Wang Feng Industiral Co. Ltd., & M/s.Xiamen Hannyuan Imp. & Exp. Co. Ltd., but the company claimed that the amount was received by the assessee company after deduction of the commission payment of Mr.Jimlin which was not established with the relevant invoice and hence the Ld.DR contended that the assessee has not proved that Mr.Jimlin has rendered the services to the assessee company and the payment was made for the business purpose. According to the Ld.DR, disallowances made by the AO required to be confirmed.

6.4 Per contra, the Ld.A.R argued that the services of Mr.Jimlin has been engaged by the assessee company due to operational and logistic problems in China.. The major exports were for China and it is difficult to carry on the business without the knowledge of Chinese language and business practice of China. It is necessary to engage a local Consultant for carrying on the business in China and the assessee has engaged Mr.Jimlin as an Agent for assisting him in China. The Ld.CIT(A) observed that it is a normal practice for any exporter to engage local person to facilitate the business operations conveniently and smoothly and the transactions between the assessee and M/s.Xiamen Orient Wang Feng & CO No.42/Mds/2014 :- 9 -: Industrial Co. Ltd., are nothing but normal regular business transactions involving purchase and sale of granite blocks. The assessee has received the remittances only after deducting the commission through banking channels and AO has not brought on record, any evidence to show that the amount deducted towards commission was brought back to India by the assessee.

6.5 We heard the rival submissions and perused the material placed before us.

The AO disbelieved the confirmation letter since the confirmation letter was signed by Mr.Lin Yuan, Director of M/s.Xiamen Orient Wang Feng Industrial Co. Ltd. The assessee’s AR produced the copy of the passport, wherein it was mentioned against the name of the Mr.Jimlin as Mr.Jimlin alias Mr.Lin Yuan. Therefore, the confusion regarding the signatory of the confirmation letter stands cleared and established that Mr.Jimlin who happens to be one of the Directors of M/s.Xiamen Orient Wang Feng Industrial Co. Ltd., has signed the confirmation letter and received the commission from the assessee. The copy of the confirmation letter also solves suspicion regarding M/s.Xiamen Orient Wang Feng Industrial Co. Ltd., since Mr.Jimlin was one of the Directors. The Ld.CIT(A) observed that the commissions/transactions between the M/s.Xiamen Orient Wang Feng Industrial Co. Ltd., & M/s.Xiamen & CO No.42/Mds/2014 :- 10 -: Hannyuan Imp. & Exp. Co. Ltd., are regular business transactions involving purchase and sale of granite blocks and the Agents are called Consolidated Agents. The sale remittances are remitted to the assessee net of commission from the exporting countries. The commission payment was deducted from the bill and the balance was only remitted to India. This is the evidenced from the bank remittances and also the details of breakup of commission paid from the order of the Ld.CIT(A).

From the total sale of 3303.51 cubic meters aggregating the USD15,50,044.00, the sum of USD 1,30,889.00 equivalent to Indian currency of ₹58.90 lakhs was deducted from the Invoice and the balance only was remitted to the assessee. Therefore, the genuineness of the payment cannot be suspected. The assessee is an Indian Exporter, major exports to China and the Chinese language not known to the assessee and the business practice and the political atmosphere and the local atmosphere is quite different and unfamiliar to the assessee. Therefore, the assessee has no option except to engage the local Agents to facilitate the smooth functioning and to carry out the export operations at China.

Therefore, the engagement of the services of the Consolidated Agents also is not doubtful. Since the confirmation letter furnished by the Mr.Jimlin who has received the commission and it was deducted at source and the balance amount was remitted and confirmation letter says that the recipient has received commission towards sale of granites, we do not see & CO No.42/Mds/2014 :- 11 -: any reason to suspect the payment to Mr.Jimlin. Accordingly, we confirm the order of the Ld.CIT(A). Ground No.3 of the Revenue is dismissed.

7.0 Ground No.4 is related to the unexplained cash credit of ₹1,25,82,156/- relating to advance from customers of M/s.Xiamen Orient Wang Feng Industrial Co. Ltd. During the assessment proceedings, the AO found that there was a credit balance in ‘Suspense A/c’ in the name of M/s.Xiamen Orient Wang Feng Industrial Co. Ltd to the extent of ₹1,35,42,370/-. The assessee furnished the breakup of details from M/s.Xiamen Orient Wang Feng Industrial Co. Ltd only for a sum of ₹ ₹1,25,10,821/- as per the details given below:

Date Account Head Amount 18.02.2010 Global Mao Yi Private Ltd. 5,78,915.00 29.03.2010 Fujian QuanzhouRufia Stone Co. Ltd. 22,47,376.00 30.03.2010 Fujian QuanzhouRufia Stone Co. Ltd. 12,72,630.00 31.03.2010 FDBP 84,11,900.56 Total 1,25,10,821.56

The assessee did not furnish the details for the balance amount of ₹10,31,549/- and the AO made the addition of this amount to the returned income.

7.1 The AO noticed mismatch in the names and observed that the assessee has received the above amounts as under: & CO No.42/Mds/2014 :- 12 -: Date Amount Source of Credit/Debit 18.02.2010 5,78,915.00 Global Mao Yi Private Ltd., Singapore 31.03.2010 22,47,376.00 Legacy Arts and Crafts Co. Ltd., Philippines 31.03.2010 12,72,630.00 Season Corporation Ltd., Max Share CTR, Hongkong

The assessee has stated that the above amounts were received from M/s.Xiamen Orient Wang Feng Industrial Co. Ltd., but assessee has not furnished the details regarding the identity and genuineness of the transaction. From the details given in the above referred tables, the AO observed the mismatch in the names of the persons from whom the amounts were received. The amounts were from other than M/s.Xiamen Orient Wang Feng Industrial Co. Ltd and further the assessee also did not furnish the evidence regarding FDBP. Therefore, the AO has added the entire amount of advance amounting to ₹1,25,42,370/- to the returned income.

7.2 In the first appeal before the Ld.CIT(A), the assessee explained, out of total export sales of USD18,49,661.24, sales amounting to USD15,50,044.04 approx 84% was made through M/s.Xiamen Orient Wang Feng Industrial Co. Ltd., and the sales were made either to M/s.Xiamen Orient Wang Feng Industrial Co. Ltd., or to the nominated customers. As seen from the observation of the AO a sum of ₹84,11,900/- was received through FDBP with a credit facility extended by the banks under the foreign discount bills purchased and the balance amount of ₹40,98,921/- was received from the associates of M/s.Xiamen & CO No.42/Mds/2014 :- 13 -: Orient Wang Feng Industrial Co. Ltd., on two different dates. The Ld.CIT(A) deleted the additions of ₹1,25,10,821/- holding that the transactions are cross verifiable and the entire amount of ₹1,25,10,821/- was received against the sale of granite blocks and supported by invoices, shipping bills, etc. The Ld.CIT(A) has confirmed the addition of ₹10,31,549/- which remained unexplained.

7.3 Aggrieved by the order of Ld.CIT(A), the Department is on appeal before us. The Ld.DR argued that the amount of ₹1,35,42,370/- was outstanding in ‘Suspense A/c’ as on 31.03.2010. ‘Suspense A/c’ means the details were not reconciled as on 31.03.2010. The assessee himself placed the amounts in ‘Suspense A/c’ and created the suspense regarding source of the credits. It is an undisputed fact that the amounts were outstanding as advances in the Balance Sheet as on 31.03.2010 and it is the burden of the assessee to prove the genuineness of outstanding advance by providing the necessary evidence regarding the identity, capacity and creditworthiness of the creditor. The assessee has not produced any evidence before the AO. Further, the Ld.DR argued that before the Ld.CIT(A) also, the assessee has not furnished any such evidence to prove the genuineness, creditworthiness and capacity of creditors. The Ld.CIT(A) deleted the addition merely on assumption that M/s.Xiamen Orient Wang Feng Industrial Co. Ltd., is the major importer of the assesse’s product and the assessee has received an amount of & CO No.42/Mds/2014 :- 14 -: ₹1,25,42,000/- against the sale of granite blocks which was cross verifiable. The Ld.DR further submitted that the assessee has not even proved the genuineness of the outstanding or sales of granites with transaction to transaction, identity and reasons for keeping the balance in advances under the head Creditors. Therefore, the Ld.DR of the view that the issue needs detailed verification. Therefore, this issue should go back to AO for further verification. On the other hand, the Ld.AR relied on the order of the Ld.CIT(A).

7.4 We heard the rival submissions and perused the material placed on record. There was an outstanding amount of ₹1,35,42,370/- in the name of M/s.Xiamen Orient Wang Feng Industrial Co. Ltd. which was received from Global Enterprise Pvt. Ltd., on 18.02.2010, on 29.03.2010 & on 30.03.2010 and a sum of ₹84,11,900/- was FDBP amount. The balance amount of ₹10,31,549/- was not explained by the assessee which was added by the AO and confirmed by the Ld.CIT(A). FDBP amount was the bills received from the customers which were discounted in the bank and the nomenclature extended by the bank is Foreign Discount Bills Purchased (in short ‘FDBP’). All the amounts including the FDBP amounts were explained to be related to the advances received from the customers for supply of granite as stated by the assessee. The assessee also stated that a sum of ₹1,25,10,821/- was related to the sales made to M/s.Xiamen & CO No.42/Mds/2014 :- 15 -: Orient Wang Feng Industrial Co. Ltd. or their customers. No confirmation has been submitted by the assessee from the respective customers who made the payment of advance. FDBP bills discounted in Bank towards the supplies made by the assessee. Further, name and address and details relating to the foreign customers required to be submitted by the assessee before the AO to establish the genuineness and correctness of the outstanding balances and its origin of source with transaction. Though, assessee stated that all the transactions related to the sale transactions but not reconciled the advances with the sale bills one to one basis. In the absence of reconciliation, it is not established whether the sales have already been made to the customers or yet to be made. In case, the sales have been executed necessary reversing entries to be passed in the books of accounts by nullifying the outstanding balances. In any case, there was an outstanding balance in the balance sheet and the burden of the assessee has not been discharged by providing the confirmation and the exact nature of transaction with relevant bills. Therefore, we are of the considered opinion that the issue should go back to the file of the AO for verification of the genuineness of the outstanding balance and the assessee should submit the necessary evidence to prove the outstanding balance as genuine by furnishing necessary evidence before the AO. The AO is free to make necessary enquiries and decide the issue afresh on merits. Accordingly, the issue relating to the addition of ₹1,25,82,156/- is & CO No.42/Mds/2014 :- 16 -: set-aside to the file of AO for fresh consideration on merits. Ground No.4 of the Revenue is allowed for statistical purpose.

8.0 Ground No.5 is related to unexplained cash credit in the name of NSK Exports amounting to ₹1,03,45,310/-

The AO found that a sum of ₹1,04,17,467/- was outstanding in the 8.1 name of M/s.NSK Exports under the head ‘Suspense A/c’ as on 31.03.2010. The AO called for the details and the assessee furnished the details as under:

Date Account Head Amount 03.09.2009 TRV Global Trading 38,34,858.00 20.04.2009 Dhanesh Impex 33,00,000.00 26.06.2009 Dhanesh Impex 1,00,000.00 17.08.2009 Dhanesh Impex 5,00,000.00 18.08.2009 Dhanesh Impex 1,50,000.00 31.03.2010 SaiPrabha Granites 1,40,379.00 31.03.2010 Shri Impex 10,63,948.00 03.03.2010 M & G Sons 50,000.00 06.10.2009 Suspense - Receipt 7,06,125.00 24.02.2010 A.S.Shipping Agencies 5,00,000.00 Total 1,03,45,310.00 8.2 The assessee has provided the details for breakup of the amount for ₹1,03,45,310/- against the outstanding balance of ₹1,04,17,467/-. The AO observed that the assessee could not provide any evidence regarding the receipt of the said amount from NSK Exports and it was shown against the different names and there was complete mismatch in the names.

Therefore, the AO made addition u/s.68 of Income Tax Act. Before the & CO No.42/Mds/2014 :- 17 -: Ld.CIT(A), the assessee stated that M/s.NSK Export was wrongly mentioned and there was no party by name M/s.NSK Exports and it was NSK which means Mr.N.Shivkumar, the assessee himself. Further, it was stated by the assessee that all the above sums were received by Mr.Shivakumar in the bank account maintained with the SBI, Siruthozhil Branch, Chennai, and brought into the business and shown under the head advances. The assessee also explained the details as under: • ₹38,34,858/- received from TRV Global Trading: Assessee is a partner in M/s.TRV Gobal Trading Co., and the amount was received to meet the temporary requirement of funds through bank account.

The assessee also submitted a copy of bank statement and the partnership deed before the Ld.CIT(A). • ₹40.50 lakhs received from M/s.Danesh Pvt. Ltd.: The amount has received from the above granite company for arranging the goods for various deeds. The assessee has furnished a copy of bank statement, confirmation letter before the Ld.CIT(A). • ₹1,40,379/- received from Sai Broker Granites and ₹10,63,948/- from Salem: These amounts were not received physically from the parties and the amounts represents credits allowed to the above parties in the normal course of business. • ₹50,000/- received from M&G Sons: The amount was received as advance from the customers for supply of granite blocks. The & CO No.42/Mds/2014 :- 18 -: amount was received through bank and bank statement was produced before the Ld.CIT(A). • ₹7,06,125/- Miscellaneous receipts: These amounts represent reimbursement of costs/expenses paid by the assessee at the queries to get their jobs completed on priority from the contracts at the queries. These amounts are paid back to them by the quarry owners at regular periodical intervals. • ₹5 lakhs from M/s.AS Shipping Agencies Pvt. Ltd.: The assessee stated that this amount has been received by the Appellant as Security Deposit against the lease of Flat No.85, Block-A, Turn Bulls

Road, Nandanam, Chennai – 600 035. The rental income of this Flat has already been shown in the return of income. A copy of the lease agreement has also been submitted by the assessee before the Ld.CIT(A). • The Ld.CIT(A) deleted the addition of ₹1,03,45,310/- holding that the Appellant has explained the transactions and the transactions are nothing but sale proceeds received against the sales. The Ld.CIT(A) confirmed the addition of ₹72,157/- for non-submission of the details.

8.1 Aggrieved by the order of the Ld.CIT(A) the Revenue is on appeal before us. & CO No.42/Mds/2014 :- 19 -: Appearing for the Revenue, the Ld.DR argued that though the assessee has produced the bank statement, partnership deeds and confirmations before the Ld.CIT(A) and the Ld.CIT(A) has not called for the Remand Reports and given an opportunity to the AO to defend the case. No evidence whatsoever has been produced by the assessee before the AO to substantiate the outstanding advances in the name of M/s.NSK Exports. Therefore, the Ld.DR argued that the outstanding advance was not proved and the addition should be confirmed. Alternatively, the Ld.DR submitted that the case should go back to the AO for further verification.

On the other hand, the Ld.AR defended the Order of the Ld.CIT(A) and according to him, the Ld.CIT(A) rightly deleted the addition of ₹1,03,45,310/-.

8.2 We heard the rival submissions and perused the material placed before us. There was an outstanding balance of ₹1,04,17,467/- as on 31.03.2010 in the name of M/s.NSK Exports which was accepted by both the parties. Out of the said amount, the Ld.CIT(A) has deleted the amount of ₹1,03,45,310/- and confirmed the addition of ₹72,157/-. The Ld.CIT(A) observed that the addition made by the AO amounting to ₹1,03,45,310/- is nothing but sale proceeds received against the sales and sale-wise Invoices/bills were produced before the Ld.CIT(A). In the case of TRV Golbal Trading, the amount was received for meeting the & CO No.42/Mds/2014 :- 20 -: temporary requirements of funds and in the case of Dhanesh Impex the amount was received for the purpose of for arranging goods for them from quarry owners and no details of dates of supply was furnished before the Ld.CIT(A). In the case of Sai Granites and Shri Impex credits were journal entries in the case of Miscellaneous Receipts, it was reimbursement of expenses and in the case of A.S.Shiping Agencies the amount was for Security Deposit. The observation of the Ld.CIT(A) was the transactions were sales. The Explanation was apparently contradictory to the observation of the Ld.CIT(A). It is not clear from the order, on what basis the Ld.CIT(A) landed in conclusion to hold that the transactions were nothing but the sale proceeds. The evidence in the form of bank statement, partnership deeds, confirmations, produced by the assessee before the Ld.CIT(A) was not made available to the AO. The Ld.DR stated that the advances received from the TRV Global, Danesh Impex & Journal entries in the case of Sai Prabha Granites, A.S. Shipping Agencies, MG & Sons and reimbursement of Miscellaneous Expenses required to be verified to find out the fact. In the absence of the evidence regarding genuineness of the transactions, the Ld.DR rightly suggested for remitting the matter back to the file of AO. Therefore, we hold that the case should be remitted back to the AO for further verification. The assessee is directed to submit necessary evidences to prove the genuineness of the outstanding and reconcile the sales made with the sales account on party to party basis or one to one basis before the AO. In the result, the issue is & CO No.42/Mds/2014 :- 21 -: set-aside to the file of AO who will decide the matter afresh on merits after giving opportunity to the assessee. Ground No.5 of the Revenue is allowed for statistical purpose.

9.0 Ground No.6 is related to the addition of ₹1,44,50,000/-cash credits outstanding in the name of Oscar Granites & Marbles. An amount of ₹1,86,56,000/- was outstanding in the above name as on 31.03.2010 under the head ‘Suspense A/c’. Though the amount was outstanding in the name of Oscar Granites & Marbles, the assessee replied that the amounts were received from TRV Global Exports, Shri N.Shivkumar himself and M/s.Xiamen Orient Wang Feng Industrial Co. Ltd. The AO noticed that the amounts were in fact received from TRV Global Exports, Venkataraman, Nagaraj and Veni Exports and the amount of ₹41,46,579/- from M/s.Xiamen Orient Wang Feng. The assessee did not submit any proof of identity and genuineness of the transactions .Hence the Ld.AO has added the entire amount to the returned income. The Ld.CIT(A) confirmed the addition of ₹42,06,000/-comprising of the amount received from M/s.Xiamen Orient Wang Feng and a sum of ₹59,241/- for no explanation and lack of documentary evidence and deleted the remaining addition of ₹1,44,50,000/-.Aggrieved by the order of the Ld.CIT(A) the Revenue is in appeal before us. & CO No.42/Mds/2014 :- 22 -: 9.1 We heard both the parties and perused the material placed on record.

The Ld.CIT(A) stated in the appellate order that the assessee has explained the receipts to the extent of ₹1,85,96,579/- which were received from TRV global Exports a sum of ₹1,11,5000/- and date wise tallied, as per the Assessment Order. But on verification of the Assessment Order, no such endorsement of the AO was found. In the appeal hearing the Ld.AR submitted that the amount was received from TRV global to meet the fund requirements of Ganesh granites. In respect of ₹24.00 lakhs it was explained as withdrawals made on various dates and return of the same advances by the customers on rejection of material supply and the deposits were made by Shri N.Shiva kumar. In respect of advances received from M/s.Veni Exports sum of ₹9.00 lakhs stated to be advance received from the customer deposited in the bank account. It is evidenced from the Assessment order and the explanation of the assessee that the outstanding in the name of Oscar Granites & Marble was wrong classification and the reasons for keeping the above amounts in the name of Oscar Granites & Marbles was not explained by the assessee. Similarly, scrutiny of the details reveal that the amounts were received from the TRV Global Export, Mr.Venkataraman, Mr.Nagaraj and M/s.Veni Exports as against the outstanding in Oscar Granites which is a mismatch. In the explanation offered by the assessee before the Ld.CIT(A), ₹24.00 lakhs was deposited by Mr.Shivakumar from the & CO No.42/Mds/2014 :- 23 -: withdrawals whereas, as per bank account it was deposited in the name of Mr.Nagaraj. On careful analysis of the Assessment Order, Ld.CIT(A)’s Order and the explanation of the assessee it leads to confusion rather than clarity. Though the assessee has claimed that the amount of ₹1,11,50,000/- was received from the TRV Global Exports whether it was received by the assessee himself or received by the Oscar Granites remained unexplained. No confirmation was furnished by the assessee and no verification was made by the Ld.CIT(A). Therefore, we are of the considered opinion that the entire credit of ₹1,44,50,000/- requires thorough verification to find out the nature of actual transaction and the genuineness of outstanding. Therefore, we remit the matter back to the file of AO who in turn make further verifications regarding the genuineness of the outstanding balance and the source. The assessee is directed to produce the confirmations and submit the required information to substantiate it’s claim before the AO. Accordingly, Ground No.6 of the Revenue is allowed for statistical purposes.

10.0 Ground No.7 is related to the addition of ₹38,52,479/- outstanding in the name of PSR Granites Pvt. Ltd., and ₹29,81,564/- in the name of PSR Granites. The above amounts were outstanding in ‘Suspense A/c’ as on 31.10.2010. & CO No.42/Mds/2014 :- 24 -: 10.1 In the case of PSR Granites, the assessee submitted the breakup as follows: • On 25.04.2009 – Shivakumar – ₹8,50,000/- • On 23.02.2010 – Air shipping Agencies – ₹6,74,540/-

------------------ ₹15,24,840/- Total - ------------------

The assessee did not furnish the details for the remaining amount of₹14,57,023/-. Though the amount was outstanding in the name of PSR Granites, as per the details furnished by the assessee, the amounts were in fact credited to the account of Shri N.Shivakumar and Air Shipping Agencies. The assessee has not furnished the explanation for keeping the above amounts in the name of PSR Granites Pvt. Ltd., and source and nature of the transaction was not explained. The assessee did not furnish any reconciliation to establish the genuineness, identity of the above creditor with the relevant Invoices, Sale Bills, etc. Therefore, the AO made the addition of ₹29,81,564/- u/s.68 of Income Tax Act.

11.0 In the case of PSR Granites Pvt. Ltd., the assessee replied that the amount was actually related to purchase made form PSR Granites Pvt. Ltd., but erroneously accounted in M/s.Xiamen Orient Wang Feng. Industrial Co. Ltd. The amount outstanding was ₹36,45,727/- against the account of creditors, but in the balance sheet it was reported as & CO No.42/Mds/2014 :- 25 -: ₹38,22,479/- The assessee also did not furnish the proof and confirmation from the creditors. Therefore, the AO made the addition of ₹38,22,479/- as an unexplained cash credit in the hands of the assessee.

The Ld.CIT(A) deleted the addition holding that it was a normal business transaction and the tax was deducted.

11.1 Aggrieved by the order of the Ld.CIT(A), the Department has filed appeal before us.

The Ld.DR argued that the amount was outstanding in the name of PSR Granites Pvt. Ltd., whereas the assessee claims that the amount was related to Shri N.Shivakumar and A.S. Shipping Agencies. The assessee neither furnished the confirmation letters from A.S Shipping Agencies in the case of PSR Granites and M/s.Xiamen Orient Wang Feng Industrial Co.

Ltd/ PSR Granites Pvt. Ltd for the outstanding amounts. Similarly in the case of Shri N.Shivakumar the source required to be explained and the evidence has to be furnished. The assessee has not filed any evidence before the AO. Though, the Ld.CIT(A) stated that it was normal business transaction supported by TDS Certificates, no evidence was furnished before the AO. Therefore, the Ld.DR of the opinion that the case should be remitted back to the AO. On the other hand, the Ld.AR argued that it was a normal business transaction, the tax was deducted by the assessee & CO No.42/Mds/2014 :- 26 -: and all the evidences were furnished before the Ld.CIT(A) and hence the Order of the Ld.CIT(A) to be confirmed.

11.2 We heard the rival submissions and perused the material placed on record.

As per the AO, it is seen that the assessee has not furnished any evidence to prove the transaction as genuine. The assessee has not explained the source for the credit into the account of Shri N.Shivakumar in the case of PSR Granites Pvt. Ltd., and no confirmation of A.S Shipping Agencies was furnished before the AO. Similarly, no confirmation with regard to PSR Granites Pvt. Ltd./PSR Granites, was furnished before the AO. The fact that the amounts are outstanding under ‘Suspense A/c’ in the name of PSR Granites Pvt. Ltd., and the PSR Granites Pvt. Ltd., is not disputed. When the assessee is showing outstanding balances in the balance sheet, it is the burden on the assessee to prove the transactions are genuine by furnishing necessary evidence to establish the identity, genuineness and correctness of the transaction. It appears that no proper re-conciliation was done by the assessee at the time of finalizing the books of accounts. Though, the assessee claiming that the outstanding represents the sales no evidence has been produced by the assessee before the AO to substantiate the sales. The Ld.CIT(A) also did not call for Remand Report. Therefore, we are of the considered opinion that this issue required further verification by the AO. Accordingly, we set-aside & CO No.42/Mds/2014 :- 27 -: the orders of the lower authorities and remit back the matter to the file of AO with instructions to make fresh enquiries and decide the matter afresh on merits. Ground No.7 of the Revenue is allowed for statistical purpose.

12.0 Cross-Objection No.42/Mds/2014

1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interest of the Appellant and is opposed to the principles of equity, natural justice and fair play.

Amount in ₹ Name of the party Orient Wang Feng 10,31,549.00 NSK Exports 72,157.00 Oscar Granites & Marbles 42,06,000.00 Total 53,09,706.00 12.1 Ground No.1 is general in nature which does not require specific adjudication.

12.2 Ground Nos.2 & 3 are related to the confirmation of addition of ₹39,00,000/- u/s.68 of the Income Tax Act. The assessee has credited a sum of ₹62,99,785/- on 04.04.2009 in the capital account and the source was explained as loan taken in cash from relatives. Though, assessee stated that the confirmations were filed but no such endorsement was & CO No.42/Mds/2014 :- 28 -: made by the AO in the Assessment Order. The AO made the addition for not establishing the identity. The Ld.CIT(A) confirmed the addition stating that the assessee has not proved the identity, capacity and genuineness of the transaction. The assessee filed a Cross Objection in Appeal No.548/2014 of Revenue. The Ld.Counsel appearing for the assessee argued that the loans were genuine and confirmations were furnished before the AO and no addition was called for. However, no evidence was produced by the assessee before this Tribunal evidencing the confirmation having filed before the AO/CIT(A). Further, no fresh confirmations or nay evidence filed before us to prove the genuineness of loans and sources.

Therefore, we do not incline to interfere with the Order of the Ld.CIT(A) and the assessee’s ground on this issue is dismissed.

12.4 Ground No.4 is related to the addition made u/s.68 of Income Tax Act as under:

Amount in ₹ Name of the party Orient Wang Feng 10,31,549.00 NSK Exports 72,157.00 Oscar Granites & Marbles 42,06,000.00 Total 53,09,706.00 12.5 M/s.Xiamen Orient Wang Feng Industiral Co. Ltd., ₹10,31,549/-: i)

Before the AO the assessee did not furnish the details and the source of the credit was not explained and hence the AO made the addition. The assessee explained before the Ld.CIT(A) that the & CO No.42/Mds/2014 :- 29 -: amount of ₹10,39,549/- was on account of discounts retained by the Commission Agent as we all Bank Charges. The Ld.CIT(A) rejected the Explanation of the assessee and confirmed the addition. During the appeal hearing, the Ld.AR did not bring any evidence to show that the amount represent the commission or the bank charges.

Similarly, no evidence was provided explaining the sources.

Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the is confirmed. NSK Exports ₹72,157/-: ii)

The AO made the addition of ₹72,157/- since the assessee failed to furnish the details. The Ld.CIT(A) confirmed the addition as per findings of the AO. Before us also, no evidence or reconciliation was furnished explain the source. Therefore, the order of the Ld.CIT(A) is confirmed. Oscar Granites – ₹42,06,000/-: iii)

The amount was added for non-submission of details by the AO and for the same reason the Ld.CIT(A) confirmed the addition. The Ld.AR argued that the amount related to sales made to Oscar

Granites and Marbles on the last day of the year i.e. 31.03.2010. In Ground No.6 of Revenue’s appeal this issue was remitted back to the file of the AO for fresh adjudication. Therefore, we remit the issue relating to the addition of ₹42,06,000/- also to the file of AO to & CO No.42/Mds/2014 :- 30 -: verify and decide the issue afresh on merits. The assessee’s ground on this issue is allowed for statistical purpose. Ground No.4 of Cross-Objections is partly allowed.

12.6 In the result, the assessee’s cross-objections are partly allowed.

13.0 In the result, the appeal of the assessee allowed for statistical purposes.

Order pronounced in the Open Court on 15th March, 2017, at Chennai.