RAMACHANDRAN SELVARAJ,CHENNAI vs. ITO NON CORPORATE WARD-9(4), CHENNAI
What did the Tribunal hold?
The Tribunal held that the CIT(A) should not have sustained the addition solely on the lack of confirmation letters, especially when ledger extracts and payment details were provided. The issue was set aside to the AO for re-consideration.
What were the facts?
The assessee, engaged in import & export, had additions made for unsubstantiated sundry creditors. The CIT(A) sustained part of the addition after the AO accepted some confirmations but not others.
What were the issues?
Whether the addition for unsubstantiated sundry creditors is justified when the assessee provided ledger extracts and payment details for subsequent financial years.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI MAHAVIR SINGH, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
आदेश / O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-10, Chennai, dated 20.02.2020 and pertains to assessment year 2015-16.
The brief facts of the case are that the assessee is engaged in the business of import & export, filed its return of income for the AY 2015-16 on 29.09.2015 declaring total income at Rs.2,52,150/-. The case was taken up for scrutiny and during the course of assessment proceedings, the AO called upon the assessee to file confirmation letters for sundry creditors.
In response, the assessee vide letter dated 22.12.2017 submitted confirmation letters from sundry creditors to the tune of Rs.19.02 Crs.
However, could not file confirmation letters for remaining balance of sundry creditors of Rs.4053652/-. Therefore, the AO made addition of Rs.40,53,652/-. The assessee carried the matter in appeal before the First Appellate Authority. Before the Ld.CIT(A), the assessee has filed additional evidences in the form of confirmation letters from the parties along with their ledger accounts. The Ld.CIT(A) called for Remand Report from the AO on additional evidences filed by the assessee, for which, the AO has submitted Remand Report dated 13.02.2020 and has accepted confirmation letters filed by the assessee to the extent of Rs.27,06,092/- and for balance amount of Rs.13,47,531/-, the AO has reiterated his stand taken during the course of assessment proceedings. The Ld.CIT(A) after considering the relevant submissions of the assessee and also taken note of Remand Report of the AO, sustained addition to the tune of Rs.13,47,560/- and deleted the addition to the extent of Rs.27,06,092/- on the ground that the assessee could not substantiate the sundry creditors to the tune of Rs.13,47,531/-. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.
We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. We find that the assessee could able to produce confirmation letters from 95% of sundry creditors. However, could not produce confirmation letters from 16 parties aggregating amounting to Rs.13,47,531/-. It was the argument of the assessee before the AO that he could not get confirmation letters from the parties for various reasons, however, filed ledger extracts of the parties and payment details to prove that the sundry creditors amount has been paid in the subsequent Financial Year, but the Ld.CIT(A) has ignored the details filed by the assessee and sustained the additions. We find that when the assessee could able to file confirmation letters, majority of sundry creditors also filed ledger extracts and payment details for remaining creditors, in our considered view, the Ld.CIT(A) ought not to have sustained additions only for the reason that the assessee could not file confirmation letters from the parties, more particularly, when the assessee has filed ledger extract, which proves payment to the creditors by cheque in subsequent Financial Year. However, fact with regard to the submission of ledger extract, and payment details in respect of balance amount of sundry creditors is not forthcoming from the orders of the authorities below.
Therefore, we set aside the issue to the file of the AO and direct the AO to re-consider the issue of balance sundry creditors amounting to Rs.13,47,531/- in light of evidences filed by the assessee including ledger copies for the subsequent Financial Year and bank statement to prove the payments. In case, the assessee proves with evidences payment made to sundry creditors in the subsequent Financial Year, the AO is directed to delete the additions towards sundry creditors.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on the 26th day of July, 2022, in Chennai.
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