M/S ASIAN CEMENT,PATHANKOT vs. THE ADDITIONAL COMMISSIONER OF INCOME TAX, PATHANKOT

The following grounds of appeal raised by the Assessee.

The brief facts of the case as per the assessment order are that the that the assessee is running a cement manufacturing unit and declared the sales of Rs.1,26,41,878/- and business receipts of Rs.12,51,969/- on account of handling charges. The assessee had declared gross profit of Rs.25,63,775/- on the sale proceeds of Rs.1,26,41,878/- declared a G.P. Rate of 10.37% as against the G P rate of 5.11% in the immediately preceding year. The assessee was asked to furnish ledger account with complete names and addresses of sundry creditors and debtors shown in the balance sheet. However, the assessee did not furnish the same. The AO referred to the audit report in form 3CB accompanying the return of income, in which the auditor has given remarks that “sundry debtors and creditors balance remain unconfirmed”, therefore the AO asked the assessee to furnish the addresses of the sundry debtors and creditors as appearing in the books of account along with their copies of accounts. However, no reply was furnished by the assessee nor the books of account were produced. Accordingly, the AO treated the sundry debtors of Rs.626,026/- (out of sundry debtors shown at Rs.875,498/-) and sundry creditors amounting to Rs.359,304/- out of sundry creditors shown at Rs.546,296/- as fictitious and made the addition of Rs.626,026/- and Rs.359,304/- respectively.

The said assessment order was challenged by the assessee before the Ld. CIT(A), who while deleting the part, sustained addition to the extent of Rs.4,19,990/- on account of so called fictitious sundry debtors namely Sh. Pankaj Cement Store, M/s. Sharma Traders, M/s. Supreme Enterprises and Varinder Dogra Power Project. Further, sustained addition of Rs.81,730/- and Rs.59,594/- in respect of unconfirmed creditors namely M/s Arora Packers and Sh. Hakin Rai Labh Singh respectively.

The assessee challenged the order passed by the Ld. CIT(A) which is impugned herein in respect of sustaining the addition of Rs.4,19,990/- qua Sh. Pankaj Cement Store, M/s. Sharma Traders, M/s. Supreme Enterprises and Varinder Dogra Power Project. It was submitted by the Ld. Counsel that no addition can be made on account of so-called fictitious sundry debtors because all these are trade debtors and the department had accepted the sales as genuine. There was no reason for making the addition on account of sundry debtors which reflects from the copies of accounts of the parties duly been filed before the Revenue Authorities below as well as available in the Paper Book and from the perusal of same, it clearly reflects that the sales were made to these parties and the sales have duly been accepted by the Department.

On the contrary, the Ld. DR relied upon the order passed by the Ld. CIT(A).

We have gone through with the facts and circumstances of the case. In respect of ground No.1, it was submitted by the Ld. AR that the assessee is manufacturing cement and its books of account are audited and sales and purchase are not doubted, but, some of the sundry debtors have been sustained as bogus debtors by the Ld. CIT(A), however, we realized that while sustaining the addition of Rs.4,19,990/- on account of fictitious debtors namely Sh. Pankaj Cement StoreM/s. Sharma Traders, M/s. Supreme Enterprises and Varinder Dogra Power Project, the ld. CIT(A) observed that the appellant has not furnished the PAN, addresses of the debtor as well as the confirmation of audit balance in the books of the appellant from the debtors concern, and in that eventuality the debt balance in the account of debtor remained unconfirmed/unverified.

1 In respect of sustaining the addition of unconfirmed creditors namely M/s Arora Packers amounting to Rs.81,730/- and Hakim Rai Labh Singh, amounting to Rs.59,594/- it was observed by the Ld. CIT(A) that the creditors have not brought forward balances from the last year and the PAN and the addresses of the said creditors were not provided. However, the said reasoning is contrary to the facts because, it reflects from the PB page 12 to 17, whereby the said balances have been confirmed in the books of the account of the appellant and in respect of Hakim Rai Labh Singh as well, the appellant has also confirmed as closing balance of Rs.59,594.71 (refer page No.80 of the Paper Book).

2 Next issue i.e. Ground No.5 of the appeal relates to the sustaining the addition of Rs.91,511/- and Rs.1,04,511/- on account of M/s R.K. Foods, as it was observed by the Ld. CIT(A) that although the appellant has confirmed credit balance in the account of R.K.M Foods in the books of account of the appellant as on 31.03.2006 which has been duly confirmed in its own books of account for Financial Year: 2005-06, however, the appellant has not furnished the PAN, Address and confirmation of credit balance in the books of the appellant from the creditor concern.

3 Last grounds relates to not allowing deduction u/s 80IB of the Act as claimed by the assessee. We have again revisited the orders passed by the authorities below as it reflects from the order passed by the Ld. CIT(A) whereby he has observed that the assessee is an auditable one and audit report in Form 10CCB was filed along with the return of income and books of account of the Assessee were subjected to audit as required u/s 44AB of the Act. Considering the facts mentioned above, we feel it appropriate to remand the issue under consideration also to the file of the Ld. AO, who shall consider the Assessee's claim in accordance with law.

In the result, the appeal of the assessee is partly allowed and remaining allowed for statistical purposes.