M/S. GODWIN CONSTRUCTION PVT. LTD.,MEERUT vs. DCIT, MEERUT

This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] - IV, Kanpur dated 12.01.2017 pertaining to assessment year 2012-13.

The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs. 1,07,09,429/- as made u/s 68 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] by the Assessing Officer holding the increase in total outstanding balance of sundry creditors as on 31.03.2012 over total creditors balance as on 31.03.2011.

Briefly stated, the facts of the case are that during the course of scrutiny assessment proceedings, the assessee was asked to furnish the complete details of current liabilities, as name and address, PAN of creditors with copy of confirmed account of parties with opening balance exceeding Rs. 1 lakh.

The assessee could not furnish details on the date fixed for compliance. The Assessing Officer once again issued show cause notice asking the assessee as to why the amount of Rs. 1,91,89,937/- being increase in sundry creditors should not be treated as unexplained credit and added back to the income.

The assessee submitted confirmation from parties totaling to Rs. 84,80,508/-.

The Assessing Officer was of the opinion that the genuineness of the sundry creditors cannot be verified and accordingly, added the amount of Rs. 1,07,09,429/-.

The assessee carried the matter before the ld. CIT(A) and vehemently contended that the increase in the amount of sundry creditors is on account of trade purchases and sub-contractors. Purchase payments to sub-contractors are duly reflected in the audited balance sheet and profit and loss account. It was strongly contended that no adverse inference has been drawn in so far as the purchases are concerned and, therefore, provisions of section 68 of the Act do not apply on the facts of the case in hand.

Submissions of the assessee did not find any favour with the ld. CIT(A) who confirmed the addition.

Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. It is the say of the assessee ld. counsel for the assessee that complete details of creditors along with bifurcation was furnished but facts have not been properly appreciated by the lower authorities.

Per contra, the ld. DR strongly supported the findings of the Assessing Officer.

We have carefully considered the orders of the authorities below.

Again on 23.03.2015, the assessee filed the following before the Assessing Officer:

We find that the assessee had given complete bifurcation of the sundry creditors which is as under:

The list of creditors alongwith bifurcation of the sundry creditors is as under:

In our considered opinion, the purchases from creditors and payments made to the creditors during the year under consideration have been considered as genuine by the Assessing Officer. Moreover, there is no cessation of liability payable to such creditors as payment made to them in subsequent year have also been accepted by the Assessing Officer which is apparent from the copy of ledger account placed at pages 148 to 205 of the paper book. Even the sales made by the assessee have been accepted by the Assessing Officer. The books of account have not been rejected.

Considering the facts of the case in totality, we do not find any reason to invoke the provisions of section 68 of the Act, that too, merely because there was an increase in creditors without considering the fact that as per the bifurcation of the creditors exhibited elsewhere, trade creditors are 2.73 crores and credits on account of sub-contractors payments are Rs. 1.16 crores which form part of trading account where no adverse inference has been drawn by the Revenue authorities.

In the result, the appeal filed by the assessee in is allowed.