SREE SHANTHOSH STEELS PVT. LTD.,CHENNAI vs. ACIT, CHENNAI

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ITA 805/CHNY/2016Status: DisposedITAT Chennai25 January 2017AY 2011-126 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the addition on account of unexplained cash credit could not be sustained as the cash was available at other business centers. However, it found that the addition for stock shortage was not warranted given the small percentage of the difference relative to the total turnover and the nature of the business.

What were the facts?

During a survey, the assessee's cash balance was found to be less than recorded in their books, leading to an addition of ₹21,59,850/- as unexplained cash credit. Additionally, a shortage of 12.53 MT in closing stock was identified, resulting in an addition of ₹5,68,385/-.

What were the issues?

Whether the difference in cash found during a survey can be treated as unexplained cash credit, and whether a small shortage in closing stock is a valid ground for addition.

Which sections of the Income-tax Act were involved?

Section 68,Section 133A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY

Hearing: 10.01.2017Pronounced: 25.01.2017

आयकर अपीलीय अिधकरण, ‘सी’ �यायपीठ, चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी एन.आर.एस. गणेशन, �याियक सद�य एवं �ी ए. मोहन अलंकामणी, लेखा सद�य के सम� BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. : 805/Mds/2016 िनधा�रण वष� / Assessment Year :2011-12 M/s. Sree Shanthosh Steels Pvt. Ltd., The Asstt. Commissioner of C/o Subbaraya Aiyar Padmanabhan v. Income Tax, & Ramamani, Advocates, Corporate Circle – 6(2), New No.114 (Old No.248), Chennai. Royapettah High Road, Royapettah, Chennai – 600014. PAN : AAJCS6974R (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri Saroj Kumar Parida, Advocate ��यथ� क� ओर से/Respondent by : Shri A.V. Sreekanth, JCIT सुनवाई क� तारीख/Date of Hearing : 10.01.2017 घोषणा क� तारीख/Date of Pronouncement : 25.01.2017 आदेश /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-15, Chennai dated 05.01.2016 and pertains to the assessment year 2011-12.

2.

Shri Saroj Kumar Parida, the Ld. counsel for the assessee submitted that the first issue arises for consideration is addition of ₹21,59,850/-. According to the Ld. counsel, on the date of search operation, the Revenue authorities accounted the cash only at the head office and the cash available at other places was not taken into account. The shortfall of cash at the head office alone was compared with cash balance as per the Books of Account and the addition was made under Section 68 of the Income Tax Act, 1961 (in short ‘the Act’), as unexplained income. According to the Ld. counsel, shortfall in cash cannot be assessed as unexplained cash credit. Cash was in fact available at other centres of the assessee’s business. Therefore, the addition on account of shortfall in cash cannot be sustained.

3.

On the contrary, Shri A.V. Sreekanth, the Ld. Departmental Representative submitted that there was a survey in the premises of the assessee on 11.03.2011 under Section 133A of the Act. The cash balance as on 11.03.2011 was ₹80,40,957/-. The expenses incurred by the assessee towards development expenses was ₹40,74,210/-, the cash as per the books of sister concern was ₹14,17,327/-. The Assessing Officer in fact found the difference of ₹21,59,850/- as unexplained cash credit under Section 68 of the Act. In the absence of any other details, the CIT (Appeals) confirmed the order of the Assessing Officer.

4.

We have considered the rival submissions on either side and perused the material available on record. There was a difference between the actual cash found during the course of search operation and the cash book found. The actual cash found during the course of search operation was ₹3,89,570/-. The cash as per the Books of Accounts of sister concern was ₹14,17,327/-. The cash used for development expenditure towards Edianchavadi stockyard was ₹40,74,210/-. The difference between the actual cash found and the balance in the cash book could not be reconciled by the assessee. In the absence of any explanation for the difference in the Books of Accounts, this Tribunal is of the considered opinion, the addition made by the Assessing Officer has to be sustained. Therefore, the CIT (Appeals) has rightly confirmed the order of the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the lower authority.

5.

The next ground of appeal is with regard to addition of ₹5,68,385/- towards closing stock differences.

6. Shri Saroj Kumar Parida, the Ld. counsel for the assessee submitted that during the course of survey operation there was no actual weight of the stock was taken in to consideration. Since there was a mixed steel items, the Revenue authorities counted the numbers physically. According to the Ld. counsel, determination of weight of the stock on the basis of physical accounting will not be accurate at all. According to the Ld. counsel, the assessee has sold 35204 Metric tons (MT) of the stock during the year under consideration. The Assessing Officer estimated the average of stock at 12.53 MT. The shortage estimated by the Assessing Officer was less than 0.034%. Hence, this addition has to be deleted.

7. On the contrary, Shri A.V. Sreekanth, the Ld. D.R., submitted that the difference in stock was 12.53 MT. The assessee claimed before the lower authorities that the difference in stock was too meager when compared to the total turnover of 35204MT. The Assessing Officer ignoring the smallness of the difference in the stock, made addition of ₹5,69,385/-.

8. We have considered the rival submissions on either side and perused the material available on record. The assessee claims that the difference in stock was only 12.53 MT which is less than 0.034% of the total stock of the steel. It is not in dispute. Steel sold by the assessee was 35204 MT and the shortage of stock is only 12.53 MT. This Tribunal is of the considered opinion that in this kind of business, shortage of stock cannot be avoided. Taking into consideration of the 0.034% of the difference in stock of steel, the nature of business and the smallness of the shortage, this Tribunal is of the considered opinion addition of ₹5,69,385/- is not called for. Accordingly the order of the lower authorities are set aside and the addition of ₹5,69,385/- is deleted.

9.

In the result the appeal of the assessee is partly allowed.

Order pronounced on 25th January, 2017 at Chennai.

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