ACIT, NEW DELHI vs. M/S. VIRAJ STEEL & ENERGY PVT. LTD., NEW DELHI

The relevant facts as culled from the material on records are as under :

Assessee is a company who is stated to be engaged in the business of running a steel plant. Assessee filed its return of income for A.Y. 2013-14 declaring NIL income. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 29.03.2016 and the total income was determined at Rs.7,20,94,000/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 06.03.2017 in Appeal No.121/16-17/35/16-17 deleted the addition made by AO. Aggrieved by the order of CIT(A), Revenue is now in appeal and has raised the following grounds: 1. “That the commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of Rs.7,20,94,000/- made by the AO on account of unverified sundry creditors.”

On the date of hearing, none appeared on behalf of assessee though as per the office records, the notice intimating the date of hearing was served upon the assessee. The case records further reveal that in the past, the case was adjourned several times as there was no representation from the side of assessee. In such a situation, we proceed to dispose of the appeals ex parte qua the assessee and after hearing the Learned DR.

During the course of assessment proceedings, AO noticed that the assessee had shown an amount of Rs.7,20,94,000/- on account of sundry creditors. The assessee was asked to furnish the confirmation letters and the details of the sundry creditors. Assessee inter alia submitted that the creditors arise out of the genuine business transactions of purchase and these are the normal trade creditors. It was further submitted that since the sales arising out the same purchases are accepted to be genuine, the trade creditors cannot be considered to be non-genuine. The submissions of the assessee was not found acceptable to AO. AO noted that in the absence of the confirmation letters of the creditors, the submissions of the assessee cannot be accepted. He accordingly made addition of Rs.7,20,94,000/- and added to its income.

Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the assessee, remand the report received from the AO and the reply of the assessee deleted the addition. While deleting the addition, CIT(A) noted that perusal of the details of sundry creditors revealed the reduction in “Trade Creditors” from Rs. 8.83 crore (rounded off) to Rs. 7.21 crore (rounded off) during the year under consideration and the reduction in “Trade Creditors” for capital goods from Rs. 1.93 crore (rounded off) to Rs. 1.87 crore (rounded off). He has further given a finding that the transactions of capital goods were not debited to Profit & Loss account. He further held that if a trading liability is shown by the assessee in the books as payable then merely because assessee could not provide the confirmations, the liability cannot be said to have ceased. He has further given a finding that the sundry creditors were in respect of normal business transactions and are not in the nature of cash credit or losses and the complete details was provided by the assessee during the course of assessment proceedings. He has further given a finding that the notice u/s 133(6) of the Act was issued to the creditors by the AO on 23.03.2016 and the assessment was completed on 29.03.2016 and therefore it was practically not possible that in the period of 6 days the notices were served to the creditors located in remote location of Orissa and reply will be received. He thereafter considering the totality of the facts deleted the addition. Aggrieved by the order of CIT(A), Revenue is now before us.

Before us, Learned DR supported the order of AO.

We have heard the Learned DR and perused the materials available on record. The issue in the present ground is with respect to the deletion of addition of Rs.7.21 crore made on account of sundry creditors. We find that CIT(A) after considering the remand report received from the AO and the submissions of the assessee has given a finding that the sundry creditors were on account of purchase and were in respect of normal business transactions. He has further given a finding that there has been reduction in the sundry creditors as compared to the earlier years and the sundry creditors are being reflected in the books of the assessee and are shown as payable. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.

In the result, appeal of the Revenue is dismissed.