S.MALAR,SALEM vs. ITO, SALEM

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Salem, dated 04.07.2014 and pertains to assessment year 2007-08.

Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee is engaged in the business of manufacturing and sale of sago, starch from tapioca. In the course of her business activity, the assessee purchased tapioca from various farmers. The Assessing Officer found that the name and address of the persons from whom the tapioca was purchased, were not available in the record. Therefore, he made an addition of `8,81,960/-. According to the Ld. counsel, the tapioca was purchased through bought note from agriculturists from various villages. According to the Ld. counsel, all the purchases were made on credit basis and the payments were made at a later stage. The Ld.counsel further submitted that the assessee has furnished the name and address of the middlemen through whom the purchases were made. The assessee has also furnished three lists of 21 closing credit balances. The Assessing Officer accepted the quantity and cost of purchases made by the assessee. The CIT(Appeals) rejected the claim of the assessee only on the ground that there is no reference about the middlemen for purchasing tapioca. During the assessment proceedings, the assessee in fact furnished name and address of the middlemen engaged by her in purchasing tapioca. In fact, one R. Mani and K. Shanmugam appeared before the Assessing Officer and they were examined by the Assessing Officer. These two persons confirmed the role played by them as middlemen for purchasing tapioca for the assessee. Since the purchase was made from agriculturists through agents, according to the Ld. counsel, there cannot be any addition. Since the purchases were not doubted, the quantity is also admitted, according to the Ld. counsel, there cannot be any addition.

On the contrary, Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that the assessee claimed purchase of tapioca to the extent of `8,81,960/- from the agriculturists. The assessee never claimed before the Assessing Officer that the purchases were made through middlemen. The Assessing Officer found that the transaction was not genuine, the assessee has failed to establish identity of the creditors, creditworthiness of creditors and genuineness of the transaction. In the absence of verifiable details, according to the Ld. D.R., the Assessing Officer made addition under Section 68 of the Income-tax Act, 1961 (in short 'the Act'), which was rightly confirmed by the CIT(Appeals).

I have considered the rival submissions on either side and perused the relevant material on record. From the order of the CIT(Appeals) it appears that the CIT(Appeals) called for remand report from the Assessing Officer. In fact, the CIT(Appeals) reproduced the remand report in his order. After reproducing the remand report and the reply given by the assessee to the remand report, the CIT(Appeals) without much of discussion, rejected the claim of the assessee on the ground that the Assessing Officer has come to a conclusion that the claim of purchase through middlemen is not acceptable. Therefore, he rejected the claim of the assessee.

With the above observation, the appeal of the assessee is allowed for statistical purposes.