Vildirect: IncomeTax-caselaws-2019-VIL-461-AP-DT

2019-VIL-461-AP-DT

ANDHRA PRADESH HIGH COURT

I.T.T.A. No.185 OF 2019

Date: 25.07.2019

THE PR. COMMISSIONER OF INCOME TAX

M/s . MADHAVA HI-TECH COLD STORAGE PVT. LTD.,

Petitioner: J.V. PRASAD (SC FOR INCOME TAX)

BENCH

SRI M. SEETHARAMA MURTI AND MS. J. UMA DEVI JJ.

JUDGMENT

(per Hon’ble Sri Justice M. Seetharama Murti)

This appeal, under Section 260A of the Income Tax Act, 1961, is filed by the appellant challenging the order, dated16.11.2018, of the Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam passed in I.T.A.No.480/Viz/2016, for the assessment year 2011-12.

We have heard the submissions of the learned Standing Counsel appearing for the appellant and we have perused the material record.

The facts, which require a relevant mention, in brief, are as follows:

The assesse is doing business of multi facility cold storage project and trading in agricultural commodities. It filed its return of income for the assessment year 2011-12, on 30.09.2011, admitting total loss at Rs. 3,34,690/-. Assessment under Section 143(3) was completed, on 14.3.2014, assessing the total income at ‘nil’ after making certain additions/disallowances. The income so assessed was set off against brought forward losses of earlier years. The assesse filed an appeal before the CIT(A) questioning the disallowance made under Section 40(a)(ia) of the Income Tax Act, 1961, (for short, “the Act”) and the disallowance of unproved trade sundry creditors. The CIT(A) partly allowed the appeal, rejecting the ground in respect of sundry creditors, while deleting the addition under Section 40(a)(ia) of the Act, relying on the decision of the Special Bench in the case of Merilyn Shipping Transports Vs. ACIT. The CIT(A) held that as agricultural loans are advanced under a tie-up arrangement with the farmer and as assesse availed over draft facility, interest on both accounts is allowable in the hands of the assesse. Against the order of C.I.T (A), revenue filed an appeal in ITA No. 462/Vizag/2017 having been aggrieved of the decision of disallowances mentioned supra; and, the assesse filed an appeal in I.T.A.No.480/Viz/2016 having been aggrieved of the rejection in respect of the sundry creditors.

The Tribunal by the common order,dated 16.11.2018, which is impugned by the Revenue, dismissed the appeal of the revenue and allowed the appeal of the assesse. Aggrieved thereof, the revenue preferred the present appeal. At the hearing, learned Standing Counsel contended that the following two substantial questions of law are involved:-

1. “Whether, in the facts and circumstances of the case, the order of the Tribunal in considering irrelevant material which coming to conclusions that are not reasonable or logical, is not perverse and liable to be set aside”?

2. “Whether, the Tribunal, simply basing on the self-vouchers/ invoices, without the support of stock records to substantiate the sales, is correct in agreeing with the assesse that the sundry creditor Sri Nagendra Kumar account was closed by way of supply of apple/tamarind/potatoes in the subsequent financial year and deleting the addition of Rs. 38,50,000/- which was already upheld by the CIT(A) towards such unproved sundry creditor, when the assesse failed to discharge its responsibility to prove the genuineness of the transaction and also the identity and creditworthiness of the sundry creditor?”

In support of the submission that the above substantial questions of law are involved, it is further contended that the Tribunal grossly erred in directing deletion of the addition in respect of sundry creditors, when the assesse failed to prove the genuineness of the transaction and the identity and creditworthiness of the sundry creditor. It is also pointed out that in the absence of even confirmation letters of the alleged sundry creditor, the claim of trade sundry creditor remains unproved and that any attempt to correlate the outstanding liabilities with sales affected after an year cannot be countenanced and that the conclusions of the Tribunal that a trader would advance lakhs of rupees for a long period and then buy potatoes or apples after an year is against logical reasoning and therefore the conclusions are untenable and perverse.

We have given earnest consideration to the submissions. We have gone through the successive orders including the order of the Tribunal, which is impugned. The Tribunal, while considering the factual position as well as legal position and after seeking clarifications from the learned AR, who appeared on behalf of the respondent before the Tribunal, recorded factual findings in favour of the respondent herein. Further, in support of its findings, the Tribunal placed reliance on the applicable legal position. The Tribunal also noted as follows: - ‘In the instant case, the advances were received through cheques, but not in cash. The assesse submitted that the said outstanding was adjusted out the sale of potatoes, tamarind etc. in the subsequent assessment year and also produced the invoices before the Ld.CIT(A) for the period 14.04.2011to 10.12.2011. No evidence was brought on record to show that the sales for the subsequent assessment year were not accepted by the AO or false.’ The reasons for the Tribunal recording a finding in favour of the respondent herein are as under: - ‘For a query from the bench the Ld.AR submitted that the sales were accepted by the AO in the subsequent year and there was no addition or relief was given to the extent of the sales made to the trade creditor.

The receipt of advances from customers is a starting point and conclusion of transaction is the relevant sales. Therefore, receipt of advances required to be examined along with sales made by the assesse with stock register. Advances from customers, purchases, stock register and sales account are required to be examined together to verify the genuineness of the advances. No transaction can be isolated since all the transactions are interlinked and depending on each other. The AO isolated the transaction of the advances received against the sales and at the same time, did not examine the genuineness of the sales made to the trade creditor which is part and parcel of the total turnover. There is no justification for making the addition of advances received from the customers without taking into consideration the respective sales. Having accepted the sales account, there is no case for making the addition of the same amount representing advances from the customers.’ In support of the said findings, reliance was placed on the applicable decisions.

On such careful examination, we do not find any infirmity in the findings of the Tribunal warranting interference.

Thus, we find that no substantial questions of law are involved in this appeal and therefore, the appeal is liable to be dismissed.

In the result, the appeal is dismissed.

No order as to costs.

Miscellaneous Petitions, if any pending in this appeal, shall also stand closed.

DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that VATinfoline Multimedia is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.