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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 D.S. SUNDER SINGH, Accountant Member:
This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [(CIT(A)], Vijayawada vide Appeal No.196/CIT(A)/VJA/2016-17 dated 14.02.2017 for the Assessment Year (A.Y)2009-10.
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All the grounds of appeal are related to the addition made by the AO relating to trade creditors amounting to Rs.9,80,000/-. During the assessment proceedings, the Assessing Officer(AO) found that the assessee has accepted the unsecured loans to the extent of Rs.9,80,000/-. The assessee failed to furnish the details of the unsecured loans and their sources for the amount of loans with supporting evidences. Hence, the AO treated that the assessee has no explanation, accordingly made the addition u/s 68 of the Income Tax Act, 1961 (hereinafter called as ‘Act’).
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A). The Ld.CIT(A) confirmed the addition since the assessee did not furnish any evidence to support the genuineness of unsecured loan. For the sake of clarity and convenience, we extract relevant part of the order of the Ld.CIT(A) which reads as under : “6.3. The claim of appellant in Ground of Appeal No.3 that a sum of Rs.9,80,000/- represented trade creditors is neither comprehensible nor supported by any evidence. In liquor trade business, all purchases are from A.P.State Breweries Corporation and all purchases are affected only after making advance payment. There can be no outstanding amount payable for purchase of liquor. Andhra Pradesh High Court’s decision in the case of Maddi Suddarsanam Oil Mills Co. Vs. CIT (1959) 37 ITR 369 is not applicable as A.O., did not reject books of account. On the contrary, no books of account were produced before him. Hence, appellant failed to prove the genuineness of unsecured loan either before A.O. or during appeal proceedings. Hence, the addition made on account of unsecured loan creditors amounting to Rs.9,80,000/- is hereby confirmed. Ground of appeal No.3is dismissed.
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6.4. A.O. had not specified the bank account details. He did not get relevant bank account copy either from appellant or bank authorities. The bank deposits may be related to sale proceeds / loan receipts etc. Without analysing them, A.O. cannot hold the same as appellant's additional turnover since already appellant's income is estimated on turnover basis, no separate addition of Rs.1,69,859, in my view, is warranted. Further, this amount may get telescoped into other additions of Rs.6,01,700/- and Rs.9,80,000/-, Hence, addition of Rs.1,69,859/- is directed to be deleted.” 4. Aggrieved by the order of the CIT(A), the assessee filed appeal before this Tribunal. The assessee’s main contention is that once the books of accounts are rejected, there is no requirement of making addition u/s 68 towards trade creditors. Since the assessee filed confirmation letters, addition is unjustified and the assessee was not provided the sufficient opportunity.
We have heard both the parties and perused the material placed on record. In this case, the assessee has accepted the unsecured loans during the year under consideration and the assessee failed to furnish the details and the confirmations along with the sources and the relevant documentary evidences before the AO. The assessee also did not produce any evidence to support the claim before the Ld.CIT(A) to support the unsecured loans. The assessee in the grounds of appeal as well as before the CIT(A) argued that the unsecured creditors are trade creditors. In this case, the assessee is in liquor business and the liquor is purchased from
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A.P.State Breweries Corporation and the purchases are made after making advance payments. Therefore, the question of trade creditors does not arise. The assessee has never produced the books of accounts before the AO. Therefore, the AO estimated the net profit on the turnover. The assessee has not proved that the unsecured loans were generated out of the regular income and out of sale proceeds. Therefore, there is no case for allowing telescopic benefit. Similarly, the argument of the assessee that once the books of accounts are rejected, there is no requirement of making addition separately, under the head ‘trade creditors” does not hold water since the creditors are unsecured loans but not trade creditors as observed by the Ld.CIT(A). It is the obligation of the assessee to establish the identity, credit worthiness and the genuineness of the unsecured loans. Since the assessee failed to establish the genuineness and credit worthiness of the loans we do not find any infirmity in the order of Ld.CIT(A) and the same is upheld. Accordingly, the appeal of the assessee is dismissed.
In the result, appeal of the assessee is dismissed.
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Order pronounced in the open court on 28th November, 2018.
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर ससह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER धिशाखापटणम /Visakhapatnam ददिांक /Dated : 28.11.2018 L.Rama, SPS आदेश की प्रधिधलधप अग्रेधर्ि/Copy of the order forwarded to:- 1. अपीलाथी / The Appellant - Kagitala Venkateswara Rao, S/o Krishna Murthy, D.No.5-141, Vegavaram, West Godavari Dist. 2. प्रत्याथी / The Respondent – The Income Tax Officer, Ward-2, Tanuku 3. The Pr.Commissioner of Income Tax, Rajahmundry 4. The Commissioner of Income Tax (Appeals),Vijayawada 5. धिभागीय प्रधिधिधि, आयकर अपीलीय अधिकरण, धिशाखापटणम /DR, ITAT, Visakhapatnam 6. गाडा फ़ाईल / Guard file
आदेशािुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, VISAKHAPATNAM