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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE – VIRTUAL COURT
Before: SHRI R.S. SYAL
Assessee by Shri M.K. Kulkarni Revenue by Shri S.P.Walimbe Date of hearing 29-10-2020 Date of pronouncement 29-10-2020 आदेश / ORDER PER R.S.SYAL, VP : This appeal by the assessee is directed against the order dated 19-07-2019 passed by the Commissioner of Income-tax (Appeals)- 8, Pune in relation to the assessment year 2013-14.
The only issue raised in this appeal is against the confirmation of Rs.15,66,027/- u/s. 41(1) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’).
Briefly stated, the facts of the case are that the assessee is engaged in the manufacturing of Wooden boxes. During the course of the assessment proceedings, the Assessing Officer (AO) observed that there were certain creditors which remained outstanding from the preceding year. On being called upon to explain as to why the provisions of section 41(1) of the Act be not applied towards such outstanding creditors, the assessee submitted that the balances remained outstanding due to disputes regarding materials not sent as per orders or shortage of materials sent by the parties or poor quality etc. The assessee further submitted that the outstanding balances of the creditors were paid in the financial year 2014-15. The AO observed that the assessee made cash payments of less than Rs.20,000/- on various dates in the year ending 31-03-2015. In order to cross verify the submission of the assessee, the AO caused inquiries conducted u/s.133(6) of the Act in relation to the seven creditors. Two creditors confirmed the assessee’s contention. Regarding the remaining five creditors namely; (1) M/s. Shrikrishna Enterprises, PO Perumbavoor, Kerala-Rs.3,18,972/-; (2) M/s. Anugrah Timber Traders, Perumbavoor, Ernakulam, Kerala-Rs.1,62,215/-; (3) M/s. Asian Plywood Industries, Mekalady, Kalady, Ernakulam Dist., Kerala – Rs.6,04,242/-; (4) M/s. Kapbsons Saw Mill and Industries, Allapra, PO Perumbavoorm, Kerala – Rs.1,60,129/-; and (5)M/s. Kapbsons Board, Allapra, PO Perumbavoorm Kerala- Rs.3,20,469/-, the AO noticed that the letters u/s.133(6) sent to three creditors were returned unserved by the Postal authorities, which fact when brought to the notice of the assessee could not be sorted out. Not convinced with the assessee’s submission, the AO treated such five creditors totaling to Rs.15,66,027/- as ceasing to be payable attracting the provisions of section 41(1) of the Act. Ergo, he made addition for this sum.
The ld. CIT(A) in the first round of proceedings upheld the assessment order. The assessee approached the Tribunal. Vide order dated 07-02-2019, the Tribunal in restored the matter to the file of CIT(A) for a fresh determination of the issue. In the current proceedings again, the ld. CIT(A) has reiterated his earlier view.
Having heard the rival submissions through virtual court and perused the relevant material on record, it is found as an admitted position that the five creditors in question arose out of earlier purchase transactions made by the assessee in the course of business. The AO issued notices u/s.133(6). Those notices were not served but the assessee during the course of assessment proceedings furnished e-mails from some of the parties, who attached confirmed ledger accounts affirming the assessee’s stand.
The AO did not accept the same by holding that “the source cannot be relied upon and all the more suspicious since the creditor could send a mail without receiving the notice issued by this office”.
The assessee further provided telephone number of the partner of M/s. Kapbsons. For this creditor also, an e-mail was sent to the assessee, which was forwarded to the AO giving copy of ledger account and confirmation. It is a matter of record that the assessee paid the amounts to some of the parties in the F.Y. 2014-15, whose copies have also been reproduced in the impugned order. The ld. CIT(A) has doubted the genuineness of the transactions on the ground that cash payments could not have been made because all such parties were coming from Kerala. Once the assessee furnished ledger accounts of the parties evidencing the making of payments in a succeeding year that established the existence of liability at the end of the year under consideration non-justifying the applicability of section 41(1) of the Act. Here is a case in which some of the parties sent confirmations with their ledger accounts to the AO through the assessee. The AO simply doubted the genuineness of e-mails without brining anything concrete on record as to their non-genuineness. In view of the foregoing facts, I am satisfied that the case is not covered u/s.41(1) calling for any addition. I, therefore, order to delete the addition.
In the result, the appeal is allowed.
Order pronounced in the Open Court on 29th October, 2020.