INCOME-TAX OFFICER, PUNE vs. MAHENDRA ONKARMAL NIBJIYA, PUNE

आदेश / ORDER

PER P.M. JAGTAP, VP :

2. The assessee in the present case is an individual who is engaged in the business of trading of building material under the name and style of his proprietary concern “M/s. Jaileela Enterprises”. The return of income for the year under consideration was filed by him on 30-09-2009 declaring a total income of Rs.7,68,850/-. In the Balance sheet filed along with the said return, sundry creditors to the tune of Rs.6,25,80,849/- were shown by the assessee. During the course of assessment proceedings, the AO verified the genuineness of said creditors. In this regard, he required the assessee to furnish ledger account extracts and confirmations from certain sundry creditors. Although the assessee furnished ledger account extracts of the creditors, he failed to file their confirmations. The AO, therefore, issued summons u/s. 131 of the Act calling for the relevant details from the said creditors relating to the assessee as appearing in their books of account. Although some of the creditors complied with the requirements of AO, there was no response from other creditors. In the case of some creditors, even the summons issued by the AO through postal authority were returned back “unserved”. The AO, therefore, deputed the Inspector of Income Tax to make necessary enquiries in case of such creditors. As reported by the Inspector to the AO, atleast two creditors namely M/s. Steel Traders and M/s. C.S. Corporation were found to be not in existence at the address given by the assessee. The AO, therefore, required the assessee to produce the said creditors along with the relevant evidences to establish their identity as well as to confirm the relevant transactions. As noted by the AO in the assessment order, the assessee however failed to comply with the said requirement in spite of sufficient opportunity afforded in this regard. The AO, therefore, treated the credit balances appearing in the name of M/s. Steel Traders and M/s. C.S. Corporation to the tune of Rs.2,82,35,355/- and Rs.97,81,419/-, respectively in the books of account of the assessee on unexplained/unproved and addition of Rs.3,80,16,774/- was made by him to the total income of the assessee u/s. 68 of the Act in the assessment completed u/s. 143(3) of the Act by an order dated 26-12-2011.

3. Against the order passed by the AO u/s. 143(3) of the Act, the assessee preferred an appeal before the CIT(A) and since the submissions made on behalf of the assessee before him in order to establish the genuineness of concerned two creditors were not found acceptable by the ld. CIT(A), he confirmed the findings of AO that there was a failure on the part of assessee to establish the genuineness of concerned two parties. He, however, found that the entire credit balance appearing in the name of M/s. C.S. Corporation represented opening balance while out of the total credit balance of Rs.2,82,35,355/-, a sum of Rs.2,49,84,315/- represented opening balance which had been carried forward from the earlier year. Since, these opening balances pertained to the transactions entered into by the assessee in the earlier years, the ld. CIT(A) held that the same could not be added u/s. 68 of the Act in the year under consideration as unexplained cash credits. He accordingly, deleted the addition made by the AO u/s. 68 of the Act to the extent of Rs.3,47,65,734/- and restricted the addition of Rs.3,80,16,774/- made by the AO to Rs.32,51,040/-. He also directed the AO to consider the credits to that extent pertaining to earlier year in the relevant year for the purpose of taxation in accordance with law. Aggrieved by the order of ld. CIT(A), the Revenue has preferred this appeal before the before the Tribunal.

Order pronounced in the open court on 28th August, 2020.