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Income Tax Appellate Tribunal, HYDERABAD BENCHES “SMC”, HYDERABAD
Before: SMT. P. MADHAVI DEVI
This appeal filed by the assessee for the AY.2007-08, is directed against the order of the Commissioner of Income Tax (Appeals)–9, Hyderabad, dated 31-07-2017.
Brief facts of the case are that the assessee, a partnership firm, engaged in mercantile business, filed its return of income for the AY.2007-08 on 31-10-2017, admitting an income of Rs.4,14,808/-.
During the course of assessment proceedings u/s.143(3) of the Income Tax Act [Act], the assessee was asked to produce the books of account along with supporting vouchers and bills. Assessee filed the same and on perusal of the said books of account, the Assessing Officer (AO) noticed that the assessee
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has unsecured loans and Sundry Creditors. Assessee was therefore asked to file confirmations with respect to the said loans and creditors.
In reply, the Ld.AR filed information in respect of un- secured loans along with details, such interest paid thereon and the TDS made therefrom. As regards the Sundry Creditors also, assessee filed confirmations from all parties except in respect of only two parties i.e., M/s.Bangalore Tubes and M/s.Transport Corporation of India, wherein outstanding amounts were Rs.9,47,333/- and Rs.4,98,848/- respectively.
When questioned, the assessee stated that in case of M/s.Transport Corporation of India, assessee-firm has informed that the transporter is demanding higher dues and also while transporting the goods there were damages to the material brought by the transporter and hence there is a dispute and no payments were made.
5.1. In respect of M/s.Bangalore Tubes, assessee stated that there are some differences between the father and son, due to which they have closed the shop and no payment has been made during the relevant financial year and now they have started making payments.
The AO, however, concluded that the contention of assessee cannot be accepted in toto as primary onus is on assessee to prove that the loans and creditors are genuine.
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Since the same was not proved with any evidence, the AO treated the entire outstanding amount of Rs.4,98,848/- to M/s.Transport Corporation of India, as deemed income of the assessee and brought it to tax. In the case of M/s.Bangalore Tubes also, AO held that the assessee has not established the genuineness of the creditor and therefore, he brought the sum of Rs.9,47,333/- also to tax as ‘un-explained expenditure’ and brought it to tax.
6.1. Aggrieved, the assessee preferred an appeal before the CIT(A), stating that the transactions are genuine, are reflected in the books of account as well as VAT returns. It was also contended that treating the credit balance of M/s.Transport Corporation of India as deemed income during the year under consideration is incorrect as the same has emanated in the earlier year and was substantiated during scrutiny assessment proceedings of earlier years. The assessee also filed confirmation letters and account copies of M/s.Bangalore Tubes and M/s.Transport Corporation of India as additional evidence. The Ld.CIT(A) called for remand report from the AO which was submitted by the AO. From the remand report, the Ld.CIT(A) observed that the AO in the remand report has stated that the assessee did not file the required documents before him. The Ld.CIT(A) again called for an explanation from the assessee with a direction to attend before the AO in the remand proceedings for verification of the confirmation letters and the copies of the accounts of the above two parties. Assessee did not appear before the AO and therefore, the AO
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submitted a report accordingly. Therefore, the CIT(A) dismissed the appeal of assessee.
6.2. Aggrieved by the order of Ld.CIT(A), the assessee is in second appeal before the ITAT, raising the following Grounds:
“1) The order of the Learned CIT(A), in so far as it is prejudicial to the interest of the appellant, is against law, weight of evidence and probabilities of the case.
2) The learned CIT(A) erred in confirming the addition of Rs.4,98,848/- appearing as sundry credit in the name of M/s. Transport Corporation of India (TCI) despite the fact that it was the brought forward balance from the financial year 2005-06 relevant to A.Y.2006-07. He ought to have deleted the same.
3) The learned CIT(A) erred in confirming the outstanding balance of Rs.9,47,333/- in the name of Mis. Bangalore Tubes as he failed to appreciate that it was the aggregate of purchases during F.Y.2006-07 and that there was dispute known to the deceased partner and the dispute was resolved during the financial year 2009-10 relevant to A.Y.2010-11.
4) The learned CIT(A) failed to appreciate that both the outstanding credit balances of TCI and Banagalore Tubes were paid off through account payee cheques during the financial years 2011-12 and 2009-10 respectively substantiating that they were genuine credits and that the disputes relating to such credit balances were resolved in the later years and accepted as such in the returns of income for A.Y.2010-11 and A.Y.2012-13.
5) The learned CIT(A) failed to appreciate that the reasons given by the A.O. were fictitious and flimsy in the impugned assessment order for treating the two outstanding credit balances as not genuine and consequently erred in confirming the additions.
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6) The learned CIT(A) failed to appreciate that a disgruntled employee of the appellant filed an unauthorized reply before the A.O. during the remand proceedings and consequently erred in confirming the addition.
7) For the above grounds and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal be allowed.
8) The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary”.
At the time of hearing, Ld.Counsel for the assessee submitted that the two Sundry Creditors were paid the amounts in the subsequent assessment years and this proves that these transactions are genuine. Therefore, he prayed that the issue may be set aside to the file of AO for re-verification of these facts.
Ld.DR, however, opposed the contentions of assessee and argued that at the time of assessment proceedings as well as the remand proceedings, the assessee did not co-operate with the AO. Therefore, according to him, no purpose will be served by remanding the issue again to the AO at this stage.
Having regard to the rival contentions, material on record and particularly the contentions of assessee that the assessee has already repaid these creditors in the subsequent assessment years. I find that the assessee has also filed confirmation letters in this regard, before the CIT(A) and the remand report was called-for. In these circumstances, I deem
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it fit and proper to remand the issue back to the file of AO with a direction to verify and consider the issue afresh. The assessee also shall appear and co-operate with the AO for early completion of the assessment proceedings. If the assessee fails to produce any evidence before the AO, the AO shall complete the assessment on the basis of the material already filed by the assessee before the AO.
In the result, the appeal of assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 30th September, 2019
Sd/- (P. MADHAVI DEVI) JUDICIAL MEMBER Hyderabad, Dated: 30-09-2019 TNMM
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Copy to :
M/s.Globe Steel Pipe Co., C/o. Dr.C.P.Ramaswami, Advocate, Flat Nos.102 & 303, Gitanjali Apts., Plot No.108, Srinagar Colony, Hyderabad. 2. Income Tax Officer, Ward-10(4), Hyderabad. )
CIT(Appeals)-9, Hyderabad.
Pr.CIT-6, Hyderabad.
D.R. ITAT, Hyderabad.
Guard File.