Tropical Agro System (India) Pvt. Ltd., ... vs Assessee

This appeal of the assessee is directed against the order of

the Commissioner of Income Tax (Appeals)-III, Chennai, dated

17.03.2014 and pertains to assessment year 2009-10. 2 I.T.A. No.1681/Mds/14

2. Dr. Anita Sumanth, the Ld.counsel for the assessee,

submitted that the assessee-company is engaged in the business of

manufacturing and sale of pesticides and chemicals. During the

course of business activity, the assessee had transaction with one

M/s Gharda Chemicals. In the assessment proceedings, the

Assessing Officer found that in the accounts of M/s Gharda

Chemicals, the books of account of the assessee showed a balance

of `80,97,910/-. However, M/s Gharda Chemicals confirmed the

balance to the extent `32,47,029/-. The assessee explained to the

Assessing Officer that some of the cash discounts and debit notes

were not entered by the party and also explained that an amount of

`53,18,014/- was adjusted in the books of M/s Gharda Chemicals

by settling the dues of other party named M/s J.U. Pesticides.

However, the Assessing Officer found that the sum of `50,50,881/-

was not reflected in the accounts of M/s Gharda Chemicals in the

year under consideration. Therefore, he treated the same as

unexplained credit in the hands of the assessee. According to the

Ld.counsel, an amount of `53,18,014/- was due to the assessee by

M/s Gharda Chemicals and the same was adjusted by M/s Gharda

Chemicals in the books. However, the entries were passed. Since

the adjustment of entry was passed in the books of account as per 3 I.T.A. No.1681/Mds/14

the mutual understanding in the normal course of business,

therefore, according to the counsel, it cannot be construed as

unexplained credit.

3. On the contrary, Shri P. Radhakrishnan, the Ld.

Departmental Representative, submitted that all the book entries,

which are said to be made, were made subsequent to 31.03.2009.

According to the Ld. D.R., the assessee is a company, therefore,

the accounts of the assessee have to be audited and finalized as

per the provisions of Companies Act as well as Income-tax Act.

Therefore, if there was any adjustment of entry, as claimed by the

assessee, it should not have been made before 31.03.2009. In this

case, the statement produced by the assessee before the lower

authorities show that the adjustment notes have been made

subsequent to 31.03.2009. Therefore, the CIT(Appeals) has rightly

confirmed the addition made by the Assessing Officer.

4. We have considered the rival submissions on either side and

perused the relevant material on record. The assessee filed

additional evidence before the CIT(Appeals) to show that the

adjustment entries were made in the books of account. Even though

the CIT(Appeals) admitted the same, it appears that he has not

considered the additional material filed by the assessee. From the 4 I.T.A. No.1681/Mds/14

order of the CIT(Appeals) it appears that a remand report was

called for from the Assessing Officer. In the remand report, the

Assessing Officer observed that the adjustment entries were made

subsequent to 31.03.2009. In fact, the CIT(Appeals) has

reproduced the remand report in his order but without any further

discussion, dismissed the appeal of the assessee. When the

assessee claims that some of the cash discounts and debit notes

were not entered by M/s Gharda Chemicals and the amount of

`53,18,014/- was adjusted in the books of M/s Gharda Chemicals

by settling the dues of M/s J.U. Pesticides, this claim ought to have

been examined by the CIT(Appeals). Entry in the books may be

one of the relevant factors to be considered. However, the entry in

the books alone may not be decisive for determining the transaction

between the parties. Therefore, on the basis of the books, the

Assessing Officer has to examine the issue afresh in order to find

out the reason for discrepancy in the books. Whether any cash

discount and debit notes are omitted to enter in the books of

account of M/s Gharda Chemicals and whether the dues of M/s

Gharda Chemicals was settled through M/s J.U. Pesticides, as

claimed by the assessee, needs to be examined. Since these

factors were not examined by both the lower authorities, this

Tribunal is of the considered opinion that the matter needs to be re- 5 I.T.A. No.1681/Mds/14

examined by the Assessing Officer. Accordingly, we set aside the

orders of the lower authorities and the issue of addition of

undisclosed income of `53,18,014/- is remitted back to the file of the

Assessing Officer. The Assessing Officer shall reconsider the issue

afresh in the light of the material that may be produced by the

assessee and thereafter decide the issue after giving reasonable

opportunity to the assessee.

5. In the result, the appeal of the assessee is allowed for

statistical purposes.

Order pronounced on 15th May, 2015 at Chennai.

sd/- sd/- (A.Mohan Alankamony) (N.R.S. Ganesan) (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) लेखा सद य/Accountant Member या यक सद य/Judicial Member

चे नई/Chennai, th 4दनांक/Dated, the 15 May, 2015.

Kri.

आदे श क. , त5ल6प अ7े6षत/Copy to: 1. अपीलाथ+/Appellant 2. ,-यथ+/Respondent

3. आयकर आयु8त (अपील)/CIT(A)-III, Chennai-34

4. आयकर आयु8त/CIT, Chennai-III, Chennai

5. 6वभागीय , त न ध/DR

6. गाड' फाईल/GF.