ACIT, CIRCLE-29(1), NEW DELHI vs. SAF IMPEX, NEW DELHI

The present appeal has been filed by the Revenue against the order of the ld. CIT(A)-10, New Delhi dated 14.09.2018.

The assessment order and the written submission have duly been considered. On perusal of details, it is noticed that the sundry creditors were in the nature of trade creditors. On perusal of details furnished by the appellant, it is noticed that opening balance of ten creditors, in respect of which addition has been made by the AO, the opening credit balance as on 01.04.2014 was Rs.2,78,96,356/-. The AO has made addition of Rs.3,68,85,701/- on account of unexplained credit u/s 68 of the 2 SAF Impex Act. It is observed by the AO that notice u/s 133(6) was issued to various sundry creditors to ascertain their creditworthiness and most of the creditors have not replied with satisfactory explanation except few. In this connection, it is submitted by the appellant that in show cause notice dated 19.12.2017 issued u/s 142(1) of the Act, the AO has mentioned as under:

So, please explain and provide your reply that why the amount relating to these sundry creditors should not be treated as your income and added back to your total income."

In the said notice, the AO has made the general observation that there was sudden increase sundry creditors as compared to the previous year. It is also noted that the AO did not specify his notice u/s 142(1) issued on 19.12.2017 the details of sundry creditors in respect of which he had adverse finding. It is also observed that the appellant could not put forth a satisfactory reply and did not furnish the ITRs of the concerned parties in order to establish their lending capacity. The AO has observed that - ‘‘Hence appropriate disallowance in this regard has to be made". He has proceeded to add a sum of Rs.3,68,85,701/- u/s 68 of the Act under the head ‘unexplained credit’ with the observation that such credits were not 3 SAF Impex verifiable. The AO did not provide opportunity of being heard to the appellant in respect of the above addition. On perusal of the submissions and the documents furnished by the appellant which also included letters furnished with the AO on different dates during the course of assessment proceedings. The appellant had submitted confirmed copy of ledger account of all the creditors with the AO in the month of May, June and September, 2017. It is submitted that reply to 133(6) notice was received from the following parties:

The appellant furnished reconciliation of accounts with the above mentioned parties during the course of assessment proceedings. Further, notice u/s 133(6) were issued to M/s Atiksh Trading, Narayan Impex, Rainbow Enterprises and Shree Senthil Mills but no reply was received from the said parties. In respect of notice issued to Rahul Fashion, Vaishnavi Fabrics and Vinayak International, notice u/s 133(6) returned back with the postal remarks ‘left’. It is submitted by the appellant that the notice return back due to change of address of the aforesaid three creditors. It is further submitted that reply from the above mentioned three parties were sent by e-mail to the AO on 22.12.2017 alongwith confirmation of accounts. It is submitted by the appellant that confirmation of accounts, copy of ITR of the creditors, bank statement showing payments to the creditors were furnished before the AO. It is also noted that apart from two parties, the remaining eight creditors were old purchase parties. It is also submitted that the payments have 4 SAF Impex been made to the aforesaid parties by cheque. On perusal of details furnished it is noticed that the creditors have shown the following income in their ITRs:

On perusal of facts, it is noticed that the AO has not been able to specify the deficiency and could not bring any material on record to substantiate his findings in light of the fact that all the necessary documents in respect of purchase creditors were furnished by the appellant during the course of assessment proceedings. Considering the facts mentioned above, the action of the AO appears to be arbitrary and is found to be not supported with cogent reasons and material. In view of the above, addition of Rs.3,68,85,701/- cannot be upheld and the same is deleted. Accordingly, the above grounds of appeal are allowed.

In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 09/03/2022.