The Commissioner Of Income Tax,Chennai v. M/S.shree Ganesh Ventures,14A Ennore High Road,Chennai 600 019

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 18.11.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE MR.JUSTICE M.S.RAMESH The Commissioner of Income Tax,Chennai. Vs. M/s.Shree Ganesh Ventures,14A Ennore High Road,Chennai 600 019.PAN: ...Respondent Tax Case (Appeal) filed under Section 260A of the Income TaxAct, 1961 against the order of the Income Tax AppellateTribunal, 'C' Bench, Chennai, dated 29.9.2016 made in ITANo.2344/Mds/2015.Against the order dated 22.07.2016 & 16.03.2016 made inI.T.A. No. 2344/Mds/2015 on the file of the Income Tax AppellateTribunal, 'C' Bench, Chennai against the order of the Commissioner of Income Tax(Appeals)-5, Chennai dated 18.11.2015 made in I.T.A. No. 305/CIT(A)-5/2013-2014. Against the order of the Deputy Commissioner of Income Tax,Circle XII, Chennai dated 30.12.2009 under section 143(3) of theIncome Tax Act 1961 for the Assessment year 2007-2008. For Appellant : Ms.R.Hemalatha, Senior Standing Counsel This Appeal was admitted on the following questions of lawby this Court on 20.7.2020:-"(i) Whether the learned Income Tax AppellateTribunal has power to review its order on aMiscellaneous Application filed by the Revenue https://hcservices.ecourts.gov.in/hcservices/ Department and pass a fresh order on merits, which iscontrary to the earlier order passed under Section254(2) of the Income Tax Act, 1961? (ii) Whether the Tribunal is right in deletingthe Additions made by the Assessing Authority underSection 68 of the Income Tax Act, with regard to thetwo Dealers viz., M/s.D.G.Traders and M/s.GaneshSteels, from whom the Assessee is said to havereceived Iron, for the Dealers not being produced bythe Assessee or they could not be located in theirregistered premises during the course of Survey, andcan it be dealt with in the subsequent hearing bythe Tribunal by review under Section 254, upon aMiscellaneous Application filed by the RevenueDepartment? (iii) Whether on the facts and in the circumstancesof the documentary evidence on record before theAssessing Authority as well as the learned Tribunalwhich is not scrutinized by the Tribunal whilepassing the order on Appeal filed by the Assessseecan amount to a mistake apparent on the face ofrecord within Section 254(2) of the Act entitling theTribunal to recall its earlier order?" 2. The learned Tribunal initially upheld the additionsmade in the declared income of the Assessee vide order dated16.3.2016 for the Assessment Year 2007-2008 with the followingobservation:- "Ground Nos. 1 & 2 (Unexplained Cash credit): -4.AdditionsofRs.2,79,06,603/-&Rs.2,19,69,862/- being credits in the names ofM/s.SreeGaneshSteels&M/s.D.G.Tradersrespectively as undisclosed income of the assessee.The learned Assessing Officer had madeaddition of Rs.4,98,76,465/- invoking section 68 ofthe Act because the identity and genuineness of thesundry creditors M/s. Sree Ganesh Steels forRs.2,79,06,603/-&M/s.D.G.TradersforRs.2,19,69,862/- was not established. The learnedAssessing Officer had issued notice under Section133(6) to the above sundry creditors, but theletter was returned stating that no such entityexisted in that address. Subsequently, afterseveral opportunities provided by the learnedAssessing Officer which is vividly explained in hisorder additions were made invoking the provisionsof section 68 of the Act for Rs.4,98,76,465/-.Before the learned Commissioner of Income Tax(Appeals) also the assessee could net establish the identity and creditworthiness of the creditors.Therefore the learned Commissioner of Income Tax(Appeals) confirmed the order of the learnedAssessing Officer. Even before us, neither theassessee nor its Authorized Representative couldproduce any materials with cogent evidence toestablish the identity and genuineness of thecreditors. Therefore, we do not have any otheroption but to confirm the orders of the Revenue onthis issue." 3. The Assessee moved a Miscellaneous Application pointingout about the identity and genuineness of the creditors,M/s.Shree Ganesh Steels and M/s.D.G.Traders and that there wasalso material on record including PAN Numbers, the Invoicesfrom those creditors, etc. but, the learned Tribunal failed totake note of the same while passing the order on 16.3.2016 andtherefore, the said order deserves to be revoked, reviewed andrectified under Section 254 of the Act and fresh order has to bepassed on the same. 4. The learned Tribunal accepted the mistake on its partand the same Hon'ble Accountant Member (Mr.A.Mohan Alankamony)recalled the order dated 16.3.2016 vide order dated 22.7.2016 inMiscellaneous Application No.54/Mds/2016 in ITA No.2344/Mds/2015and passed the order with the following observation:- "2. Before us, the learned Authorized Representativesubmitted that with respect to the addition made undersection 68 in regard to the creditors M/s.Shree GaneshSteels and M/s.D.G.Traders, the Tribunal in its orderdated 16.3.2016 has stated that "even before us neitherthe assessee nor its Authorized Representative couldproduce any material with cogent evidence to establishthe identity and genuineness of the creditors” and withthis finding confirmed the order of the Revenue. Thelearned Authorized Representative submitted thatvarious details such as invoice from these creditorsdisclosing their address, sales-tax registration numberetc. were furnished in the paper book which was eithernot examined or brought to notice before the Bench.Further, the learned Authorized Representativesubmitted that even for the disallowance made undersection 40A(3) of the Act for Rs.17,20,000/-, theTribunal had arrived at a similar decision withoutexamining the materials on record. For the above statedreasons the learned Authorized Representative pleadedthat the order of the Tribunal may be recalled forconsidering these facts and rectifying the mistakesthat had crept into the order of the Tribunal whilearriving at the derision on the earlier occasion. 3. The learned Departmental Representativevehemently opposed to the submissions of the learnedAuthorized Representative by arguing that all thesefacts were considered by the Bench while arriving itsderision on the earlier occasion. It was thereforerequested that the order of the Tribunal may beconfirmed. 4. We have heard the rival submissions andcarefully perused the materials available on record.From the arguments of the learned AuthorisedRepresentative and on examining the order of theTribunal, it is apparent that the documents furnishedby the assessee in the paper book was lost sight offand were net examined by the Bench on the earlieroccasion and there is no discussion with respect to thesame in the order of the Tribunal. Therefore in theinterest of justice, we hereby recall the order of theTribunal in order to examine the materials on recordpointed out by the assessee and thereafter rectify themistake if any, in the order of the Tribunal. TheRegistry is directed to post the appeal for hearing indue course and intimate both the parties." 4. We have heard the rival submissions andcarefully perused the materials available on record.From the arguments of the learned AuthorisedRepresentative and on examining the order of theTribunal, it is apparent that the documents furnishedby the assessee in the paper book was lost sight offand were net examined by the Bench on the earlieroccasion and there is no discussion with respect to thesame in the order of the Tribunal. Therefore in theinterest of justice, we hereby recall the order of theTribunal in order to examine the materials on recordpointed out by the assessee and thereafter rectify themistake if any, in the order of the Tribunal. TheRegistry is directed to post the appeal for hearing indue course and intimate both the parties." 5. After hearing both sides, the Tribunal finally partlyallowed the Appeal of the Assessee for the Assessment Year 2007-2008 vide its order dated 29.9.2016 and granted the requisiterelief by setting aside the additions under Section 68 of theAct with the following observation:-"Ground Nos.1 & 2 (Unexplained cash credit):-AdditionsofRs.2,79,06,663//-&Rs.2,19,69,862/- being credits in the names ofM/s.SreeGaneshSteals& M/s.D.G.Tradersrespectively as undisclosed Income of theassessee:4. The learned Assessing Officer had madeaddition of Rs.4,98,76,465/- invoking section 68of the Act because the identity and genuinenessesof the sundry creditors M/s.Sree Ganesh Steels forRs.2,79,06,603l-&M/s.D.G.TradersforRs.2,19,69,862/- was not established because ofthefollowing reasons:- i) The learned Assessing Officer had deputedhis Inspector to serve notice under section 133(6)of the Act to M/s.D.G.Traders in the addressprovided by assessee. However the Inspector couldnot locate the concern M/s.D.G.Traders. On enquiryin the locality, it was revealed that no suchconcern operated in that area. ii) When the same was informed to theassessee firms' partner Mr.M.R.Goyenka though herequested for time for producing the sundrycreditors, he was not able to do so. iii) With respect to the letter sent toM/s.Sree Ganesh Steels, it was replied by themthat they did not have any dealings or transactionwith the assessee firm. iv) On examining the payment made to M/s.SreeGanesh Steels from the current account maintainedby the assessee in its bank A/c., it was revealedthat the amount was paid to various individualsother than M/s.Sree Ganesh Steels. v) The assessee's contention with respect toM/s.DG Traders was that the enquiries were madethree years after the transaction and the assesseehad relied on the address given by the parties atthe time of the transaction which was notacceptable to the Ld. A.O. vi) The assessee's contention that purchaseswere made through mediators and therefore theassessee did not have direct accessibility to itscreditors was also not acceptable to the Ld. A.O.vii) The goods were purchased from the sundrycreditors who are scrap dealers in the unorganizedsector of business can also be not treated asvalid reason for not proving the identity of thesundry creditors.viii) Enquiries from the partners of the firmand staff also revealed that transactions were notgenuine. 5. On appeal, the learned Commissioner ofIncome Tax (Appeals) upheld the order of thelearned Assessing Officer agreeing with hisfindings.6. Before us, the learned AuthorizedRepresentative made the following submissions:-i) Both the additions were made based onenquiries behind the back of the appellant;therefore it is in violation of principles ofnatural justice.ii) The enquiries made by the Inspector werenot put before the assessee for rebuttal. iii) The additions are made for not provingthe sundry creditors at the same time thepurchases made by the assessee is not in dispute. iv) The assessee has furnished the details ofits quantitative purchase, sales and stock tallybefore the Revenue. iii) The additions are made for not provingthe sundry creditors at the same time thepurchases made by the assessee is not in dispute. iv) The assessee has furnished the details ofits quantitative purchase, sales and stock tallybefore the Revenue. v) The assessee has discharged its primafacie burden for proving the genuineness of thepurchase. Since there was a time lag for makingenquiries and the purchases related to scrap whichis in the business falling in unorganized sector,it was difficult to locate the sundry creditors. vi) The purchases made by the assessee werealso not doubted by the Central ExciseAuthorities. vii) The sales tax registration and CSTregistration of sundry creditors were furnished tothe Revenue which proved that the identity of thesundry creditors. Further the learned Authorised Representativesubmitted a paper book containing 1 to 60 pageswhich were true copies of the originals which formpart of the records produced before the Revenuesuch as i) details of Sales Tax (VAT, CSTregistration numbers of M/s DG Traders and SreeGanesh Steels, statement of purchases made fromM/s.DG Traders and Sree Ganesh Steels, invoicesfor the entire period of purchase from both theparties and the requisite details submitted beforesales tax authorities etc. 7. The learned Departmental Representative onthe other hand reiterated the findings made by thelearned Assessing Officer and the learnedCommissioner of Income Tax (Appeals) in theirrespective orders and argued in support of thesame. 8. We have heard the rival submissions andcarefully perused the materials available onrecord. As pointed out by the learned AuthorizedRepresentative the assessee has provided TNGSTnumbers of the sundry creditors and certain otherdetails to prove their identity and genuineness ofthe transaction. At the same time, the Departmenthas a genuine reason for not accepting the samebecause they were not able to locate the sundrycreditors, the invoices submitted by the assesseefrom both the parties appears to have been made bythe same person etc. However, from the facts ofthe case, it is not disputed that the sundrycreditors pertain to purchases of scrap.Normally, the trading of scrap takes place in theunorganized business sector and unregulatedmarket from where the assessee has to depend onprocuring its raw materials. Generally the marginof profit in the nature of business of theassessee is minimal as less as one per cent or even lesser. There is also no finding by theRevenue that the assessee had not purchased scrapbut the only doubt was with respect to thegenuineness of two sundry creditors who hadsupplied raw materials to the asseesee. Furtherthe assessee has submitted the following materialsto show that the sundry creditors were genuine:-i) Order of the Assistant Commissioner of SalesTax dated 12.9.2016 and notice of demand from ACSTdated 12.9.2016 to show the genuineness of thelocal purchases of iron & steel (at page No.196 &198 of the paper book).ii) Details of TIN number, CST Number and PAN ofM/s.DG Traders and M/s.Sree Ganesh Steels (at page199 of the paper book).iii) Details of TIN, CST No. downloaded from therelevant Govt. website which shows that bothM/s.DG Traders and M/s.Sree Ganesh Steels wereactive dealers under the CST Act (page No.200 to203 of the paper book). iv) PAN No. of M/s Sree Ganesh Steels and M/s.DGTraders (Suresh Singh Solanki) (downloaded fromthe Govt. Website).9. From these documents which is part of therecord and not(sic) before the Tribunal at thetime of earlier hearing proves the fact that theidentity of these sundry creditors are genuine.Since the above referred documents were lost sightoff by the Tribunal on the earlier occasion,mistake had crept into the Order of the Tribunalwhich is apparent on record because of non-consideration of certain facts. Further, it isalso evident that the assessee had paid by chequeto the sundry creditors, may be not directly by(sic) indirectly which is not prohibited by theAct. Further there is also no other finding by theRevenue on these aspects. Thus, when the identityof the sundry creditors is proved and when thequantity of purchase of raw materials is not indispute, then the transaction cannot be treated asbogus. Therefore, we are of the considered viewthat the learned Assessing Officer is notjustified in invoking the provisions of section 68of the Act with regard to both these sundrycreditors. Hence, we hereby direct the learnedAssessing Officer to delete the addition made byinvoking the provisions of section 68 of the Actwith regard to both these sundry creditors. Thusthe issue is decided in favour of the assessee." 6. Aggrieved by the same, the Revenue has filed the presentAppeal before us under Section 260A of the Act raising theaforesaid questions of law. 7. Having heard the learned counsel for the parties, we areof the opinion that the Rectification of the earlier order dated16.3.2016 passed by the learned Tribunal falls within the fourcorners of Section 254 of the Act and when once the learnedTribunal, particularly, the same Member of the Tribunal admittedthat the record or Paper Book before the Tribunal alreadycontained relevant material which was lost sight of and ignoredby the learned Tribunal, there was a justifiable cause forrecall and rectification of the earlier order and consideringthe materials which was already on record of the learnedTribunal and the learned Tribunal, therefore, rectified theorder and granted the requisite relief by deleting the additionsunder Section 68 of the Act with respect to the said twoDealers. 8. The contention of the learned Senior Standing Counselappearing for the Revenue Mrs.Hemalatha is that the saidmaterial was never before the original Assessing Authority orbefore the first Appellate Authority and therefore, the Tribunalhas erred in taking the same into account, is rathermisconceived. 8. The contention of the learned Senior Standing Counselappearing for the Revenue Mrs.Hemalatha is that the saidmaterial was never before the original Assessing Authority orbefore the first Appellate Authority and therefore, the Tribunalhas erred in taking the same into account, is rathermisconceived. 9. The powers of assessment vested with all the threeAuthorities including the Appellate Authorities are co-extensivein law and there is no prohibition in law in producing therelevant materials before the permission of the secondAppellate Authority viz., the Tribunal. There is no dispute orquestion raised about the manner in which the said documentswere placed before the learned Tribunal. It is only thequestion whether the learned Tribunal failed to take note of thesaid relevant evidence while passing the original AppellateOrder. 10. Since the learned Tribunal found that the saidmaterial was already on the record of the learned Tribunal, whenit passed the order on 16.3.2016, we cannot doubt that thematerial was produced before the learned Tribunal in a doubtfulmanner. No such objection was raised by the Revenue before thelearned Tribunal itself. Therefore, the question of materialbeing on record of the learned Tribunal is beyond the pale ofdoubt and the finding of the learned Tribunal binds us. 11. As far as the question of deletion of additions underSection 68 of the Act is concerned, since the learned Tribunal,after considering the materials which were already on the recordof the Tribunal, like TIN Number, PAN Number, Invoices, etc., of https://hcservices.ecourts.gov.in/hcservices/ these two Trade Creditors/Sellers and it has granted therequisite relief to the Assessee, we do not find any question oflaw to be arising on this issue. Further, with regard to thescope of Section 254 of the Act, we find that ignoring thematerial already on record on the part of the learned Tribunalwas a mistake apparent on the face of record under Section 254and the learned Tribunal has, in our opinion, rightly recalledits order and rectified the mistake and it has rightly set asidethe additions under Section 68 of the Act and they are onlyfindings of facts based on relevant material. 12. Therefore, the questions of law framed are answeredagainst the Revenue and in favour of the Assessee. With theabove observations, the Appeal of Revenue is liable to bedismissed and accordingly, it is dismissed. No order as tocosts. s/d- Assistant Registrar True Copy Sub-Assistant Registrarssk.To 1. Income Tax Appellate Tribunal, 'C' Bench, Chennai 2. The Commissioner of Income Tax, (Appeals)-5 Chennai.3. The Deputy Commissioner of Income Tax, Circle XIIChennai +1 Cc to Mr.T. Ravikumar, Advocate sr 37086.+1 CC to Mr.M.V.Swaroop, Advocate sr 37203. GP(CO)SP(15/12/2020)