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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
आदेश /O R D E R
Per Shri D.S.Sunder Singh, Accountant Member : This appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Vijayawada in ITA No.26/CIT(A)/VJA/2015-16 dated 12.07.2017 and cross objections (CO) are filed by the assessee in support of the order of the Ld.CIT(A) for the Assessment Year (A.Y.) 2012-13.
There was a delay of 596 days in filing the CO by the assessee. The assessee did not file petition for condonation of delay, hence the cross objection filed by the assessee is dismissed in limine.
Brief facts of the case are that the Assessing Officer (AO) found during the assessment proceedings that the assessee has accepted the advances from customers amounting to Rs.4,98,49,526/- as per Balance Sheet shown under the head ‘current liabilities’ and creditors for advances for an amount of Rs.1,80,60,116/- aggregating to Rs.6,79,29,642/- as follows: (a) Advances from Customers Rs. 4,98,69,526/- (b) Creditors for advances Rs. 1,80,60,116/- Total Rs. 6,79,29,642/-
3 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada 3.1. During the assessment proceedings, the assessee was asked to furnish the details of creditors for goods along with confirmations and also creditors for advances for which no confirmations were filed by the assessee. Since the assessee failed to produce any details relating to creditors for advances amounting to Rs.6,76,29,642/- consisting of advances from customers Rs.4,98,69,526/- and creditors for advances for an amount of Rs.1,80,60,116/- aggregating to Rs.6,79,29,642, treated the same as not genuine and accordingly made addition of Rs.6,79,29,642/- as unexplained income in the hands of the assessee.
Against the order of the AO, the assessee went on appeal before the CIT(A) and filed the written submissions before the CIT(A). The Ld.CIT(A) called for the remand report from the AO and the AO has submitted the remand report after duly considering the details submitted by the assessee in the remand proceedings. On being considered the written submissions of the assessee as well as the remand report of the AO, the Ld.CIT(A) dealt with the issue under the following two sub-heads. (a) Advances from Customers Rs. 4,98,69,526/- (b) Creditors for advances Rs. 1,80,60,116/-
4 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada 4.1. Ld.CIT(A) found that the assessee has produced the copies of bank accounts, wherein, the advances stated to have been received from the parties were recorded in the earlier years. The assessee produced the books of accounts in support of it’s contentions and out of the Closing Balance, advances of Rs.4,98,69,526/-, opening balance was Rs.5,09,47,386/- as on 01.04.2011 and the advances accepted during the previous year relevant to the assessment year was only Rs.5,37,236/-. The working of closing balance was arrived at Rs.4,98,69,526/ as follows: Opening balance of advances received as 5,09,47,386 on 01.04.2011 Less : Sales recognized during the year 16,15,096 4,93,32,290 Add : Advances received during the year 5,37,236 4,98,69,526
Since the AO has verified the books of accounts, bank account copies, returns of income, audit report filed for the assessment years and they were found to be in order, the Ld.CIT(A) held that the credits to the tune of Rs.4,98,69,526/- did not pertain to the previous year relevant to the assessment year under consideration, hence, there is no case for making the addition u/s 68 of the Act. Accordingly, the Ld.CIT(A) directed the AO to delete the addition made by the AO amounting to Rs. 4,98,69,526/- for the A.Y. 2012-13.
5 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada 5.1. With regard to the addition of Rs Rs.1,80,60,116/-, the Ld.CIT(A) given a finding that the assessee had discharged the burden and the AO did not make any enquiry to disprove the claim of the assessee. Therefore, deleted the addition.
Against the order of the Ld.CIT(A) the Revenue has filed the appeal before this Tribunal. In this appeal memo, the revenue raised 8 grounds in total which are elaborative and argumentative. Subsequently, the revenue filed revised grounds of appeal vide letter dated 16.08.2019 consisting of 5 grounds and requested to decide the revised grounds.
Ground No.1 and 5 are general in nature, which does not require specific adjudication.
Ground No.2 is related to the addition deleted by the Ld.CIT(A) amounting to Rs.5,37,236/- out of the total advances received from the customers amounting to Rs.4,98,69,526/- forming part of the aggregate addition of Rs.6,79,29,642/-. During the appeal hearing, supporting the ground raised by the department in grounds of appeal, the Ld.DR argued that it is evident from the order of the Ld.CIT(A) that the assessee has accepted the advances of Rs.5,37,236/- during the previous year relevant
6 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada to the A.Y. 2012-13. Since the assessee failed to submit the required details to establish the identity and credit worthiness of the creditors, the Ld.CIT(A) ought to have upheld the addition of Rs.5,37,236/- instead of deleting the entire addition. Therefore, the Ld.DR requested to set aside the order of the Ld.CIT(A) and confirm the addition of Rs.5,37,236/- out of the customer advances of Rs.4,98,69,526/-.
On the other hand, the Ld.AR fairly conceded for confirming the addition of Rs.5,37,236/-.
We have heard both the parties and perused the material placed on record. Out of the customer advances of Rs.4,98,69,526/-, advances accepted by the assessee during the relevant assessment year under consideration was Rs.5,37,236/-. The assessee failed to furnish the details called for by the AO. Though the assessee has furnished the account copies, the confirmations and other details called for by the AO were not furnished by the assessee and the Ld.AR also fairly conceded for the addition of Rs.5,37,236/-, therefore, we set aside the order of the Ld.CIT(A) and confirm the addition of Rs.5,37,236/- out of the total customer advances of Rs.4,98,69,526/-. Accordingly, this ground of the appeal of the revenue is allowed.
7 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada
Ground No.3 is related to the addition of Rs.1,80,60,116/- representing creditors for advances. Before the Ld.CIT(A) the assessee submitted that the company has received the advances from the customers during the year under consideration and was grouped as creditors for advances and furnished the details party wise to the Ld.CIT(A). The ld.CIT(A) called for the remand report from the AO. It is explained by the assessee that there was an opening balance of Rs.2,22,31839/- under the head creditors for advances, The assessee reclassified the sum of Rs.1,39,25,863/- as advance from customers, Rs.26,27,476/- as sundry debtors, Rs.12,18,257/- as regular sales. The Ld.CIT(A) explained the position clearly in table in page No. 18 of the order as under : Creditors for Advances Rs. Opening Balance as on 01.04.2011 2,22,31,839 Less : Amount reclassified as advances from 1,39,25,863 customers Less : Amount reclassified as Sundry debtors 26,27,476 Less : Recognised as regular sales 12,18,257 1,77,71,596 44,60,243 Add : Advances received during the years 1,35,99,873 1,80,60,116
11.1. The Ld.CIT(A) found that the assessee has produced the books of accounts, bank accounts, past years return of income with audit report etc.
8 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada for verification. On verification, the AO found that the contentions of the assessee with regard to opening balance, reclassification of advances from customers, sundry debtors and regular sales are supported by the books of accounts. The AO also accepted in the remand report that the advances were received by the assessee, through banking channels during the relevant assessment year and were in the nature of trade credits and not cash credits. The trade advances were subsequently offered as income in the relevant previous year of sale transaction of lifts. The assessee also produced party- wise copies of completion of work certificates issued by the assessee company in which cases, the assessee has completed the work of creation of lifts in the subsequent years along with respective ledger account copy. Returns of income filed by the assessee in subsequent assessment years confirmed the contention of the assessee. All the credits were adjusted towards sales are trade credits and not cash credits. The Ld.CIT(A) further observed that the assessee has furnished the required details and discharged it’s burden and the AO did not make any enquiry to hold that the advances received in question were not genuine. Therefore held that the AO made the addition on surmises and conjectures and accordingly deleted the addition. We reproduce hereunder para 8.3.3. to
9 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada
8.3.4. of the order of the Ld.CIT(A) which is available in page No.19 which reads as under :
“8.3.3. Assessing Officer did not controvert the fact that the advances received by appellant through banking channel during relevant assessment year were in the nature of trade credits and not cash credits. The trade advances were subsequently offered as income in relevant previous year of sale transaction of lifts. The appellant produced party-wise copies of completion of work certificates issued by appellant company in cases where the appellant completed the work of creation of lifts in the subsequent years along with respective ledger account copy. Returns of income filed by appellant in subsequent assessment years confirmed the contention of appellant. All the credits which are adjusted towards sales are trade credits and not cash creditors, in my view, there is no merit in confirming the same as these are not cash credits per se. 8.3.4. If at all Assessing Officer doubted the genuineness, identity and creditworthiness of the persons paying the advances, it is for Assessing Officer to cause necessary enquiry as the relevant details were made available to him by appellant. If on enquiry/ verification, Assessing Officer found any discrepancy, or not satisfied with the evidence, then only he can resort to invoking provisions of section 68 of the Act after giving due opportunity to appellant. From perusal of ITMR, it is evident that no such attempt was made by Assessing Officer either during assessment or remand stage. Further, the quantum of closing stock of appellant was never doubted during assessment proceedings as the books of accounts were not rejected. The Assessing Officer had not pointed out any defects in the submission of appellant that all the amounts (advances) were received in the relevant assessment year through cheques/ NEFT (through banking channel) which confirmed the genuineness of transactions. Under such circumstances, Assessing Officer cannot make addition on surmises & conjectures. Hence addition of Rs.1,80,60,116/- is, in my view, not justified in the absence of any evidence contrary to the claim of appellant.”
Against the order of the Ld.CIT(A), the department has filed appeal before this Tribunal. During the appeal hearing, the Ld.DR strongly supported the order of the AO stating that though the transaction was through banking channel it is obligation of the assessee to provide
10 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada sufficient evidences to establish genuineness, identity and credit worthiness of the credits which the assessee failed to discharge during the assessment proceedings, as well as during the remand proceedings. Therefore requested to uphold the order of the AO and set aside the order of the Ld.CIT(A).
On the other hand, the Ld.AR submitted that the assessee has produced the books of accounts, bills and vouchers during the assessment proceedings which contain the details of advances received with clear address of the customers etc. Therefore, there is no failure on the part of the assessee during the assessment proceedings in the submission of the details. The Ld.AR further invited our attention to page No.4 and 5 of the paper book, wherein the details of advances received from creditors were made available party-wise. The assessee referring to page No.11 of the paper book furnished the details of the sales made against the advances received representing the customer advances of Rs.1,80,60,116/- as per paper book. The assessee has accounted the sales in the subsequent year i.e. 2013-14, 2014-15 and 2015-16. The assessee also enclosed the copy of the sales register in page No.12 to 22 of the paper book, as per which the assessee has affected the sales in the subsequent assessment year 2012-13
11 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada to 2015-16. In the statement in page No.11 of the paper book, the assessee furnished the details of sales against the advances, regular sales and the total sales also and argued that all the above details were furnished to the AO at the time of remand proceedings and there was no failure on the part of the assessee in furnishing the information to the lower authorities. All the customer advances were trade advances and subsequently executed the works and adjusted the same against the sales admitting sales in the subsequent years in the returns of income. Therefore, argued that all the sale advances are genuine and not required to make any addition. Accordingly requested to uphold the order of the Ld.CIT(A).
We have heard both the parties and perused the material placed on record. There is no dispute that the amount of Rs.1,80,60,116/- is trade advances accepted by the assessee through cheques and not by cash credits. The assessee has produced the bills and vouchers, respective ledger account copies before the AO. The trade advances were subsequently offered as income in the relevant previous year of sale transaction. The assessee also furnished party-wise copies of completion of work certificates issued by the customers, in cases where the assessee had completed the work of creation of lifts in subsequent years along with
12 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada respective ledger account copies. Installation and creation of lift is not a routine sales, it takes time period for completion of the work of creation of lifts. All the credits were adjusted against the sales or related to trade transaction and no cash transaction involved. Though the assessee has furnished the complete details, the AO did not cause any enquiry to disprove the evidences produced by the assessee. As observed from the order of the Ld.CIT(A), the AO did not make any effort also during the remand stage. Once the assessee furnished the complete details of ledger accounts, customer details, vouchers and bills and completion certificates of the lifts, the burden of the assessee gets discharged and it is for the AO to make necessary enquiries and to prove the genuineness or otherwise. In the instant case, inspite of the fact that the books of accounts, bills, vouchers, details and the completion certificates are available, the AO did not find any defect in the details furnished by the assessee. Since the assessee has affected the sales and adjusted the sale advances in the subsequent years, there is no reason to suspect the genuineness of the trade creditors, hence, there is no case for making the addition. Accordingly, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. The appeal of the revenue is dismissed on this ground.
13 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada
Ground No.4 is related to the alternate ground of the department to consider the addition u/s 41(1) of the Act. During the appeal hearing, the Ld.DR submitted that even though the Ld.CIT(A) found that the sum of Rs.4,98,69,526/- was related to the earlier years, the Ld.CIT(A) ought to have sustained the addition u/s 41(1) of the Act.
On the other hand, the Ld.AR objected for admission of the ground submitting that the said ground is neither borne out of the assessment order nor emanated from the order of the Ld.CIT(A).
We have heard both the parties and perused the material placed on record. The AO did not make any addition u/s 41(1) of the Act. There is no dispute that the sum of Rs.4,98,69,526/- was not related to the assessment year under consideration and the AO made the addition u/s 68 of the Act. The AO is not permitted to make addition of opening balances u/s 68 of the Act. Though the revenue has raised the ground with regard to sustaining the addition u/s 41(1) of the Act, the assessee has neither admitted the income u/s 41(1) nor the AO made out a case for taxing the creditor u/s 41(1) of the Act. Therefore, the ground raised by the revenue is infructuous, hence dismissed.
14 I.T.A. No.525/Viz/2017 and CO No.104/Viz/2019, A.Y.2012-13 M/s Apple Elevators Pvt. Ltd., Vijayawada
In the result, appeal of the revenue is partly allowed and cross objection of the assessee are dismissed.
Order pronounced in the open court on 4th October, 2019
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नििधंक /Dated : 04.10.2019 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. रधजस्व/The Revenue - Income Tax Officer , Ward-2(4), Vijayawada 2. निर्धाऩरती/ The Assessee - M/s Apple Elevators Pvt. Ltd.,D.No.74-26-21, Main Road, Near Saibaba Temple, Ashok Nagar, Vijayawada 3. The Pr.Commissioner of Income Tax, Vijayawada 4. The Commissioner of Income Tax (Appeals), Vijayawada 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्ड फ़ाईि / Guard file
आदेशािुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, Visakhapatnam