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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRAMOD KUMAR, VP & SHRI ABY T. VARKEY, JM
O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-02, Thane dated 12.02.2020 for the assessment year 2014-15.
The sole ground raised
by the assessee is against the action of the Ld. CIT(A) confirming the addition of Rs.16,93,608/- made by AO on account of sundry creditor in respect of M/s. S.P. Engineers Products.
3. Brief facts the AO noted on this issue was that the assessee had declared total income of Rs.1,78,46,660/- and that the assessee was engaged in the business of manufacturing of round rectangular pipes from steel coils/sheets, which are passed through rolling mills and is used further for manufacture of scaffolding and props by adding accessories like angles, ledgers, jack nuts etc. During the course of assessment proceedings, the AO noted from perusal of the list of 2 A.Y. 2014-15 Nyka Steel Pvt. Ltd. Sundry Creditors that there were certain parties with whom there were no transactions during the year and their opening credit balance were being carried forward. In order to examine the genuineness of these creditors, the AO issued notices u/s 133(6) to five (5) parties named in the chart in the assessment order. According to the AO, the notices were returned unserved. Therefore, he asked the assessee to show cause as to why adverse view should not be taken against these five (5) Sundry Creditors. According to the AO, the assessee neither produced the sundry creditors for his examination nor could prove the genuineness of the creditors. Therefore, according to him the liabilities against them have ceased to exist u/s 41(1) of the Income Tax Act, 1961 (hereinafter “the Act”) and added Rs.3,45,42,779/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) before whom the assessee contended that the AO out of five (5) Sundry Creditors has wrongly treated the four (4) parties as Sundry Creditors whereas they were sundry debtors (except M/s. S.P. Engineering Products). It was also pointed out by the assessee that in the earlier and subsequent years, these parties were treated as genuine and therefore the amounts should not have been treated as cessation of liability and it was pointed out that the transactions if any were also settled in due course through banking channel and therefore the amount cannot be treated as cessation of liability; and therefore, according to assessee cessation of liability cannot be assumed. In the light of the aforesaid submissions, the Ld. CIT(A) called for the remand report from the AO and took note that except M/s. S.P. Engineering Products others had regular transactions with the assessee. And therefore, the Ld. CIT(A) held that other than the sundry creditors is M/s. S. P. Engineering Products, no 3 A.Y. 2014-15 Nyka Steel Pvt. Ltd. addition as per the Section 41(1) of the Act was warranted and he confirmed only Rs.16,93,608/- and deleted Rs.3,45,42,779/-. Aggrieved by the aforesaid action of the Ld. CIT(A), the assessee is before us.
We have heard both the parties and perused the records. Assailing the action of the Ld. CIT(A), the Ld. AR brought to our notice that the assessee has made payment to M/s. S. P. Engineering Products in the subsequent financial year i.e. AY. 2016-17 and in order to support the same drew our attention to the ledger extract showing proof of the payment which fact was also brought to the notice of the Ld. CIT(A). However, according to her, the Ld. CIT(A) did not consider the same and therefore he erred in partially confirming the addition. The Ld. AR also drew our attention to the page no. 17 of the P.B wherein the confirmation from M/s. S. P. Engineering Products India is found placed. She also drew our attention to the ledger confirmation for AY. 2016-17 (1st April 2015 to 31st March, 2016) wherein it is shown that as on 1st April, 2015, the opening balance pertaining to assessee was to the tune of Rs.16,93,608/- and that the assessee had made payment on 19 May, 2015, Rs. 5,00,000/- and again on 13th Nov, 2015 another deposit of 5,00,000/- was made. Thereafter on 21st Jan,2016 another amount of Rs.1,93,000/- was transferred through banking channel to M/s. S. P. Engineering Products. And thereafter on 31st March, 2016, the Sundry Creditor M/s. S. P. Engineering Products has given discount of Rs.608/- Thus, the Ld. AR submitted that the amount due to M/s. S.P. Engineering of Rs.16,93,608/- was squared up with the Sundry Creditor M/s. S. P.
4 A.Y. 2014-15 Nyka Steel Pvt. Ltd. Engineering Products. According to the Ld. AR, even though these evidence were furnished before the Ld. CIT(A) still he did not look into the same. The Ld. DR could not controvert the facts brought out by the Ld. AR in respect of this Sundry Creditor on which the Ld. CIT(A) has confirmed the addition. Be that as it may, we note that these additional facts the AO was not aware when he made the addition. Therefore, in the interest of justice for both the sides, we are of the opinion that the let this particular fact i.e, that the assessee have squared up the amount due to the Sundry Creditors of M/s. S. P. Engineering Products be verified albeit in the subsequent assessment year AY. 2016-17. Therefore, we set aside the impugned order of the Ld. CIT(A) and remit the matter only for the limited purpose for verifying whether the assessee’s contention regarding payment of Rs.16,93,608/- to M/s. S. P. Engineering Products as revealed from the confirmation of accounts given by the Sundry Creditor (M/s. S. P. Engineering Products) to the assessee company is correct. And if the AO finds it to be correct, then no disallowance is warranted. With his observation, we allow the assessee’s appeal on statistical purposes.