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Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE
Before: SHRI GEORGE GEORGE K. & SHRI B.R. BASKARAN
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The assessee has filed this appeal challenging the order passed by Ld. CIT(A) confirming the addition of Rs.30.79 crores made by the A.O in assessment year 2014-15.
The facts relating to the above said issue are stated in brief. The assessee is a partnership firm and is engaged in the business of dealing in electronic air purifier, solar street light and home light goods and also other electronic goods. It filed its return of income for the year under consideration on 23.11.2014 declaring total M/s. Penta Sun Solar Power Pack Technology, Bangalore
Page 2 of 6 income of Rs.5,34,430/-. During the course of assessment proceedings, the A.O. noticed that the assessee has declared sundry creditors balance of Rs.30.79 crores in the balance sheet. Hence, the A.O. asked the assessee to furnish details of sundry creditors along with their PAN number, ITR details and postal address. Before the A.O., the assessee furnished copies of unsigned purchase invoices issued by the sundry creditors. Accordingly, the A.O. issued notices to the sundry creditors calling for information u/s 133(6) of the Income-tax Act,1961 ['the Act' for short]. However, all the letters sent to sundry creditors were returned back unserved with the postal remark “No such person” or “left” or “insufficient address”. When this fact was pointed out to the assessee, it submitted that its relationship with sundry creditors were not good due to non-payment of their dues and accordingly prayed that the A.O. may issue summons u/s 131 of the Act. Accordingly, the A.O. issued summons to 6 sundry creditors. Accordingly, the AO issued summons to six creditors, but it could be served only to two creditors, viz., M/s. Divya Enterprises and M/s. Keerti Infosystems. Both the above said parties appeared before the A.O. and denied any business transaction with the assessee. When these facts were pointed out, the assessee reiterated that it has produced tax invoices and it will not be possible to produce ITR copies or bank statements of the sundry creditors. Hence, the A.O. held that the sundry creditors shown in the balance sheet is not genuine and accordingly added the amount of Rs.30,79,84,569/- to the total income of the assessee as unexplained credit.
Before Ld. CIT(A) the assessee offered altogether different explanation. It submitted that one of the partners of the assessee firm named Shri Kiran Pandurang is having a proprietary concern M/s. Penta Sun Solar Power Pack Technology, Bangalore
Page 3 of 6 under the name and style M/s. Penta Systems Solutions. It was submitted that all the sales have been made by the assessee firm to M/s. Penta Systems Solutions only. It was submitted that the purchases and sales shown in the financial statements of the assessee firm are bogus, i.e., no purchases have been made by the assessee firm at all. It was submitted that the financial statements were prepared only to avail bank loan of Rs.10 crores. Accordingly it was submitted that the sundry creditors balance is also bogus one. The assessee also filed an affidavit obtained from Shri Kiran Pandurang in support of the above said contentions. The Ld. CIT(A) did not accept the contentions of the assessee and accordingly, confirmed the additions with the following observations:- 5. I have carefully gone through the Assessment order, Statement of facts, Grounds of appeals and the submissions made by the Appellant. In the peculiar facts and circumstances surrounding the case, I am inclined to make the following observations.
5.1 The partners of the appellant firm were completely aware of the fact of deliberately furnishing inaccurate particulars right from Day one, i.e., from the day they filed the Return of Income for the appellant firm.
5.2 The appellant firm was served with an assessment order u/s 143(3) of the Income Tax Act, 1961 on 29.12.2016 and promptly appeal was filed against the same on 7.1.2017. The grounds of appeal did not carry even a single word about the transactions not being genuine. The Statement of facts also did not mention any such facts.
5.3 On 27.6.2017, the appellant filed a stay petition before the Commissioner of Income Tax (Appeals)-6, quoting case laws about ‘High pitched assessments’ and ‘financial hardship’ etc. He still did not mentioned anything about furnishing of inaccurate particulars. 5.4 It was only vide letter dated 26.02.2018 that the appellant filed this plea of bogus purchases & sales. This gives rise to suspicion of appellant having second thoughts, so as to save the Firm from any taxation demands.
M/s. Penta Sun Solar Power Pack Technology, Bangalore Page 4 of 6 5.5 Subsequently, vide letters dated 13.3.2018 and 24.3.2018 written submissions were furnished admitting that the financial statements were prepared only to avail bank loan and that the purchases & sales bills were not genuine. Shri Kiran Pandurang, Partner of the appellant firm has backed up the claims made in the above letters with a Sworn Affidavit filed with this office conveying that the return signed & furnished by him had deliberately carried incorrect particulars of his firm’s income and assets.
6. However, since the appellant has not filed any Revised or belated return rectifying the above discrepancy, I am constrained to consider the original return as the only return of income and the resultant 143(3) order issued as the only impugned order which needs to be adjudicated.
6.1 In view of the above facts, I am not inclined to interfere with the action of the Ld. A.O. at this juncture as the only issue involved is of disallowance of sundry creditors which the Ld. A.O. was not able to verify and now the appellant himself admits that there was no genuineness in the whole web of transactions, which only concurs with the findings of the Ld. A.O. Accordingly, the addition made by the Ld. AO is upheld and the grounds raised in this regard are dismissed.”
Aggrieved, the assessee has filed this appeal before us.
The Ld A.R reiterated the contentions made before Ld CIT(A). He submitted that the purchases and sales have not been effected at all as shown in the financial statements. He reiterated that the financial statements were prepared only for purposes of availing loan from banks. On the contrary, the Ld D.R supported the order passed by Ld CIT(A).
We heard rival contentions and perused the record. We notice that the assessee has changed its stand before the Ld CIT(A) submitting that the financial statements have been prepared for the purpose of availing bank loan and hence the transactions shown in the financial statements are not true. In this regard, the assessee has furnished an affidavit obtained from one of the partners named Shri Kiran Panduranga. It is the submission of the assessee that it M/s. Penta Sun Solar Power Pack Technology, Bangalore
Page 5 of 6 has shown sales turnover of Rs.13.84 crores and the said sales have been made to M/s Penta System Solution, the proprietory concern of Shri Kiran Pandurenga. It was also submitted that the remaining amount of purchases of Rs.16.58 crores have been shown as closing stock. According to the assessee, the above said purchases and sales have not taken place at all. We notice that the Ld CIT(A) rejected the above said submissions as an afterthought.
There should not be any doubt that the onus to prove the above said contentions shall lie upon the shoulders of the assessee. Besides the income tax return, the assessee should be filing statements under sales tax Act also. The assessee has not explained anything about the same. It was stated that the aggregate amount of sales made to M/s Penta System Solutions was Rs.13.84 crores, meaning thereby, the same constitutes purchases in the hands of M/s Penta System Solutions. It is also required to explain how the above said purchases were dealt with in the books of M/s Penta System Solutions. If that concern has shown sales from out of above said purchases, then the same would militate against the claim of the assessee.
We noticed earlier that the Ld CIT(A) did not examine above said submissions of the assessee. Considering the huge amount of addition made by the AO, we are of the view that, in the interest of natural justice, the assessee may be provided with an opportunity to furnish documents in support of its submissions. As noticed earlier, it is the responsibility of the assessee to furnish all the relevant details in order to convince the tax authorities that the transactions shown in the financial statements are not genuine. Accordingly we restore this issue to the file of Ld CIT(A) for examining the submissions of the assessee, since new stand was M/s. Penta Sun Solar Power Pack Technology, Bangalore
Page 6 of 6 taken before him. The assessee is also directed to furnish all relevant details/information and explanations before Ld CIT(A) to support its submissions. After affording adequate opportunity of being heard, the Ld CIT(A) may take appropriate decision in accordance with law.
In the result, the appeal of the assessee is treated as allowed for statistical purposes.