TaxTMI 
TaxTMI 
2025 (9) TMI 1676
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....22/- for AY 2016-17. Since the issues are identical and are permeating in both assessment years, we will deal with them together. 3. The brief facts are that the assessee company is engaged in the business of trading in food grains, including dal, grams, and pulses. For the Assessment Year (AY) 2015-16, the assessee filed its return of income (RoI) on 23.09.2015, declaring total income of Rs.23,450/-. The case of the assessee was subsequently selected for scrutiny under the Computer Aided Scrutiny Selection (CASS) criteria, pursuant to which statutory notices under Sections 143(2) and 142(1) of the Act, were issued. During the course of assessment proceedings, it was noted by the AO from perusal of the financial statements of the assessee that a sum of Rs.3,62,03,822/- was disclosed as a trade payable to one of its Directors, Shri V. Elangovan. 4. The AO examined Shri V. Elangovan who, inter-alia, stated that he used to arrange dal products, pulses etc., from farmers of Andhra, Telangana & Maharashtra which were supplied to assessee company for which he used to get commission from suppliers in cash (1-2%). And since same suppliers (who were arranged by Shri V. Elangovan) used....
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....s below: 6.7 In all the grounds of appeal the appellant has contested the addition made by the AO on account of unexplained credit u/s 68 of the Act. The issue of addition has been examined in detail in the Assessment Order as discussed hereinabove. The appellant has not been able to discharge its onus of explaining the source of the credits to the satisfaction of the AO. The onus lay on the appellant to rebut the conclusion of the AO with credible evidence, which he failed to do even during appellate proceedings despite the lapse of a prolonged period of time with multiple opportunities accorded. In its submission during appellate proceedings, the appellant stated that without prejudice to its claim of no addition to be made, if at all, the same was to be made in the hands of Mr. Elangovan in his individual capacity as the appellant company had already established his identity, creditworthiness and genuineness of transaction during assessment proceedings. I do not find any merit in this contention of the appellant. While the Identity of Mr. Elangovan may have been established, his creditworthiness and genuineness of the transaction certainly were not, as seen from the det....
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....eparate unit and that the trade receivables and payables remained unexplained in both years (AY 2014-15 & AY 2015-16). Accordingly, the Ld.CIT(A)/NFAC confirmed the entire addition of Rs.3,62,03,822/- & Rs.2,37,62,122/- under Section 68, and dismissed the appeal for AYs 2015-16 & 2016-17. 8. Aggrieved by the impugned actions of the Ld.CIT(A), the assessee is before us. The Ld.AR assailing the action of the Ld.CIT(A) contended that the credit balance of Rs.3.62 Crs. was the closing balance as on 31.03.2015 reflected in the name of Shri V. Elangovan which is nothing but brought forward balance of 'trade payables' by the assessee company to him and to buttress such a contention drew our attention to Page No.23 of the Paper Book, wherein, the balance-sheet of the assessee company is found placed. He drew our attention especially to the head "current liabilities" and especially to the entry 'trade payables' as on 31.03.2015 which is shown as Rs.3,62,03,822/-. Then, he also drew our attention to Page No.27 of the Paper Book, wherein, the details of 'trade payables' is given which shows the assessee's admission that amount of Rs.3,62,03,822/- was outstanding against Shri V. Elangovan. ....
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....2,24,405/- is shown to have been reflected & the Note No.3 to Page No.16 showed that an amount of Rs.5,82,24,405/- was payable to Shri V. Elangovan as on 30.03.2014 that is relevant for AY 2014-15. Turning our attention to Sixth (6th) Annual Report relevant for AY 2015-16, found placed at Page Nos.1 to 33 of Paper Book, the Ld.AR asserted that there was no fresh credit during the relevant assessment year ended 31st March, 2015 and pointed out that the 'trade payable' to Shri V. Elangovan got reduced from Rs.5.82 Crs. to Rs.3.62 Crs. from the earlier year [refer 6th Annual Report Page No.23 & 27 supra]. Therefore, according to Ld AR, since no fresh credit was there during the relevant AY 2015-16, no addition u/s. 68 of the Act is sustainable. Similarly a perusal of 7th Annual Report of assessee found placed at Page Nos.34-76 of Paper Book, and especially Page No.66 [balance-sheet as on 31.03.2016] under current liabilities, trade payables is shown as Rs.4,50,43,642/- and details of trade payables is given in Page No.70 which shows an amount of Rs.2,37,62,122/- still outstanding as payable as on 31.03.2016 to Shri V. Elangovan. So according to the Ld.AR, in the absence of fresh credi....
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.... Tracks the flow of cash and cash equivalents in and out of the company, divided into operating, investing, and financing activities. (iv). Statement of Changes in Capital: Provides information about the company's share capital and the changes during the financial year. (v). Notes to Financial Statements: explains the company's financial data, assumptions, and policies in detail. 13. The assessee is noted to have filed its audited financial statements, including the balance sheet and profit and loss account filed for earlier AY:2014-15 as well as captioned assessment years before the Registrar of Companies (ROC) in accordance with the provisions of Sections 129, 134, and 137 of the Companies Act. The annual returns of assessee company as per section 92 of the Companies Act, 2013 has been filed before us viz., copy of Annual Report for AY:2014-15, 2015-16, 2016-17 and 2017- 18. 14. Having carefully gone through the financials filed by the assessee company, we note that credit balance payable to Shri V. Elangovan has been duly disclosed in the 5th Annual Report [FY 2013-14 i.e. AY 2014-15] which is recorded at Rs.5,82,24,405/- under 'trade payables' in current liabilities as on....
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....t any sum found credited in the books of the assessee during a previous year as the income of that year if: (i) The assessee fails to offer any explanation about the nature and source of the sum so credited, or (ii) The explanation offered is, in the opinion of the Assessing Officer, not satisfactory. Therefore, the one of pre-condition for invoking Section 68 is that the credit must be a fresh or unexplained introduction in the books during the relevant previous year as rightly pointed out by the Ld.AR for the assessee. 15. As noted supra, the impugned sum of Rs.3,62,03,822/- doesn't represent any fresh amount credited in the accounts of the creditor Shri V. Elangovan during the AY 2015-16. Similarly, a sum of Rs.2,37,62,122/- was not fresh amount credited in the accounts of the creditor Shri V. Elangovan during the Ay 2016-17. The said sums in question is noted to be brought-forward trade liability from earlier years consistently reflected under 'trade payables' in the audited financial statements. As per the 5th Annual Report (FY 2013-14), the 'trade-payable' to Mr. V. Elangovan stood at Rs.5,82,24,405/- as on 31.03.2014. In the 6th Annual Report (F....
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....e payables' to M/s. Vitan Agro Industries Ltd. Thus, 'trade payables' of total amount of Rs.4,50,43,642/- was added u/s. 68 of the Act. The AO thereafter taking note of the 'trade receivables' noted that the assessee failed to file the details to prove the identity as well as confirmations from them i.e. M/s. K.C. Food Grains Marketing to the to the tune of Rs.20,84,201/-, & M/s. Universal Enterprises, Dharmapuri Rs.2,19,16,920/-. Thus, 'trade receivables' of total amount of Rs.2,38,01,121/- was added u/s. 68 of the Act. Thus the AO made a total addition of Rs.6,88,61,920/- which action of the AO was confirmed by the Ld.CIT(A) by passing the impugned order. The assessee aggrieved by the action of Ld CIT(A) is before us. 18. Coming to the Issue No.1 'trade payables' of Rs.2,37,62,122/- u/s. 68 of the Act in the name of Shri V. Elangovan. We have already decided the issue, while adjudicating the appeal for AY 2015-16, wherein we directed deletion of Rs.2,37,62,122/- u/s. 68 of the Act. Therefore, this ground is allowed. 19. Issue No.II - Addition of Rs.2,12,81,520/- u/s. 68 of the Act in the name of M/s. Vitan Agro Industries Ltd., - unexplained credit ('trade payables'). 20....
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....eturns and other supporting evidences viz. VAT/GST, etc. Therefore, we direct the deletion of addition of Rs.2,12,81,520/- made u/s. 68 of the Act by treating it as genuine 'trade receivables' towards M/s. Vitan Agro Industries Ltd. 21. Issue No.III - 'trade receivables' [trade debtors] to the tune of Rs.20,84,201/- u/s. 68 of the Act in the name of M/s. K.C. Food Grains Marketing 22. In this regard, the AO on perusal of the financials of assessee company noted that Rs.20,84,201/- was shown as 'trade receivables' from M/s. K.C. Food Grains Marketing. According to the AO, the assessee failed to prove the identity of the debtors. So he made addition u/s. 68 of the Act, which action has been confirmed by the Ld.CIT(A). Against the addition made by the AO/Ld.CIT(A), the assessee contended that trade receivables of Rs.20,84,201/- couldn't have been added u/s. 68 of the Act in the relevant AY 2016-17, because, there was no fresh credit of the said amount during the relevant year ended on 31st March, 2016, in the account of the 'sundry debtor' [M/s. K.C. Food Grains Marketing] and the balance as on the last day of the accounting year represented opening balance only viz., Rs.20,84,2....
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....d, which shows that the assessee company had purchased goods from M/s. Vitan Agro Industries Ltd., and thereafter, sold the same goods on credit to M/s. Universal Enterprise for which the assessee has duly remitted VAT and filed the returns [refer Form No.1]. The assessee is noted to be following the mercantile system of accounting and hence has rightly recorded the receivables on accrual basis. The sales have been recorded in the trading account and corresponding 'trade receivables' in the balance sheet. The AO is noted to have accepted the books, so therefore question of adding the trade receivables u/s. 68 of the Act doesn't arise because the assessee has discharged the burden to prove the nature and source of the credit entries made in its books and the transactions are noted to have been subject to VAT/GST compliances. Such being the position, we direct deletion of Rs.2,17,16,920/- u/s. 68 of the Act. In the result, the appeal of assessee stands allowed for AY 2016- 17 ITA No.479/Chny/2024 25. This is a penalty appeal preferred by the assessee company for AY 2016-17. 26. Brief facts are that the AO reopened the assessment for AY 2016-17 of the assessee company and the....