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Income Tax Appellate Tribunal, DELHI BENCH “C” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI O.P. KANT
PER AMIT SHUKLA, J.M.: The aforesaid appeal has been filed by the assessee against the impugned order dated 07.04.2017, passed by Ld. Commissioner of Income Tax (Appeals)-XVIII, New Delhi for the quantum of assessment passed u/s. 143(3) for the Assessment Year 2012-13.
2. In various grounds of appeal, the assessee has raised the addition of Rs.26,43,879/- in respect of closing balance of sundry creditors; and non service of notice u/s.143(2) within the statutory time limit.
3. The brief facts qua the first issue raised are that assessee-company is engaged in the business of manufacturing of foot wares. The Assessing Officer from the perusal of the balance-sheet noticed that there are trade payable outstanding as on 31.12.2013 to the tune of Rs.26,43,879/-. He required the assessee to furnish confirmed copy of account from the sundry creditors. In response, the assessee filed ledger account copies of sundry creditors and other details like purchase bills, books of account, and vouchers, etc. along with self certified copies of account. The ld. Assessing Officer held that no confirmations from these parties were made available and notices sent u/s. 133(6) remain unserved. Accordingly, he added balance payable amount to sundry creditors for sums aggregating to Rs.26,43,879/- as unexplained u/s.68.
4. Ld. CIT (A) too has confirmed the said addition after referring to various judgments.
5. Before us, ld. counsel submitted that the assessee is in the business of manufacturing and sales of foot wares and has made purchases of Rs.1,10,27,257/- and turnover disclosed was at Rs.2,26,48,398/-. He submitted that neither the purchases nor the sales have been disputed by the Assessing Officer and the assessee had running account with these parties with whom it has been making regular purchases and also making regular payments. No discrepancy as such has been found in the books of account or purchase bills. Even the gross profit after excluding the extraordinary loss due to fire is excluded, then the same is much more than the earlier years. Purchases were made in the Financial Year 2011-12 and inquiry was made after 3-4 years, therefore, if the notice could not be served at the address available with the assessee, that does not mean the liability under the sundry creditors are bogus or the purchases made from them are not genuine. Further, the Assessing Officer never confronted the result of the inquiry so that the assessee could have made endeavour to give the correct address, if some of the parties have shifted to other places or why they did not responded. In support, he relied upon the judgment of Hon’ble High Court in the case of CIT vs. Winstral Petro Chemicals, 330 ITR 603 (Delhi) and in the case of CIT vs. Ritu Anurag Agarwal, in ITA No.325/2008. Thus, no addition could be made u/s.68, because purchases made from such parties have duly been accepted and the corresponding sales.
6. Ld. counsel further pointed out that out of total 14 parties, there were opening balances in the account of 10 parties and substantial repayment have been made during the year itself for which there is no dispute and the only addition which has been made is of closing balance. In support, he referred pages 86 and 87 of the paper book which were submissions and details filed before the CIT (A).
7. On the other hand, ld. DR strongly relied upon the order of the Assessing Officer and ld. CIT (A) and submitted that onus was on the assessee to prove that the amount shown payable to the sundry creditor were genuine for which neither confirmations were filed nor any response was made by the parties on the notices sent by the Assessing Officer u/s. 133(6), therefore, addition as sustained by the ld. CIT (A) should be confirmed.
We have heard the rival submissions and also perused the relevant finding given in the impugned orders as well as the material placed on record. The assessee is in the business of manufacturing and sales of foot wares and had shown total purchase of raw materials Rs.1,10,27,257/- and made corresponding sales of manufactured product of Rs.2,26,48,398/-. Admittedly, the purchase and sales made by the assessee were duly supported by the bills/invoices and vouchers in which no discrepancy has been pointed out and same stands accepted. In respect of 14 parties, the assessee had shown trade payable outstanding as on 31.03.2012, i.e., at Rs.26,43,879/-, which has been added by the Assessing Officer on the ground that assessee has failed to furnish confirmation from the said parties/sundry creditors and notices u/s.133(6) were not responded back. Once assessee has filed the purchase bills from the said parties, which has been accepted and all these parties were having a running account with the assessee and purchases from said party in the earlier years or during the year is not in dispute, which means that the assessee was having regular business transaction of purchases to the said parties. Once again it is reiterated that the purchases made during the year and the payments made during the year have not been doubted which stand accepted and it is only the balance amount which stood payable at the year-end which has been added u/s.68. In our opinion such an addition cannot be held to be deemed income from unexplained sources.
Before the authorities below, the assessee has filed the following details of the parties along with the address, opening balance, purchases made during the year, repayments during the year as well as the closing balance.
S.No Name Address Evidences Opening Closing Purchases Repayment . furnished balance made s during the balance during the year year 1 Asian 189,855 150,000 39,855 J-3368 DSIDC Certified Industrial Area, Polymers Copies of Narela, Delhi Ledger
21,077 129,855 150000 962 Asian Poly Certified Plast Copies of J-3368 DSIDC Ledger Industrial Area, Narela, Delhi 3. Garg 17,300 251,500 250000 118,800 Certified Copies of Traders A-65, DSIDC Ledger Industrial Area, Narela, Delhi 4. 305,531 150000 155,531 Goel Certified Packaging Copies of Ind H-1432, DSIDC Ledger Industrial Area, Narela, Delhi 5. Mansa 286,895 286,895 Certified - K-134, Sec. 3, Copies of Industries Bwana, Delhi Ledger 6. 73,013 432,020 373013 432,020 Certified PCL Oil and 702, DLF Tower Copies of Solvents B, DIS Jasola, Ledger Ltd Delhi 7. Pooja Certified 150,960 110,544 240000 21,504 Plastic KH-714, Swam Copies of Ledger Park, Mundka, Delhi
8. Ritzy 353,613 4,541,241 4400000 494,854 Certified Polymers 703, DLF Tower Copies of B, DIS Jasola, Ledger Delhi 9. 403,200 1,260,000 730000 903,200 Certified Shiv Poly D-7, Khasra No. Copies of Chem 30/23, Nagli Ledger Poona Extn, Delhi 10. 2,300 52,500 50000 4,800 Shri F-1994, Certified Shyam DSIDC Copies of Enterprises Industrial Area, Ledger Narela, Delhi
11. 13232 - - 13232 Shubham E-952, Certified Polymers DSIDC Copies of Industrial Area, Ledger Narela, Delhi
105840 87112 375000 17952 SR Brothers E-862, DSIDC Certified Industrial Area, Copies of Narela, Delhi Ledger
19015 150923 4900 120938 Sumit Sales 4449/10, Jai Certified Co. Mata Market, Copies of Trinagar, Delhi Ledger
- 1533335 1500000 33335 Ritzy 703, DLF Tower Certified Chemicals B, DIS Jasola, Copies of Pvt. Ltd. Delhi Ledger
The above detail goes to prove that purchases from the said parties have been substantially accepted.
If the trading as a whole has been accepted including purchases and the sales and the gross profit, then amount payable on account of purchases at the year-end cannot be added as a deemed income. This proposition have been upheld by the Hon’ble Jurisdictional High Court in the case of CIT vs. Ritu Anurag Agarwal (supra), wherein it has been held that once there is no case of disallowance for corresponding purchases no addition could be made u/s.68 on the outstanding balance of the creditor relating to purchases and where the trading result have been accepted by the Assessing Officer. Similar position is applicable on the facts of the present case also. Thus, respectfully following the same principle, we hold that the addition made on account of amount outstanding balance in the balance-sheet under the head sundry creditor cannot be disallowed or added u/s.68, and same is directed to be allowed. Since, we have already allowed the appeal; the second ground is purely academic.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 2nd February, 2021