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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order of the ld CIT (A)-20, New Delhi dated 07.03.2018 for the Assessment Year 2010-11. 2. The assessee has raised the following grounds of appeal:- That the order under section 250 of the Act dated 7th March, 2018 “1. passed by the learned Commissioner of Income-tax (Appeals) (Ld CIT(A) is erroneous and bad in law. 2. that the ld CIT(A) grossly erred on facts and circumstances of the case and in law in confirming an addition amounting to Rs. 17,28,236/- on account of outstanding balances of sundry creditors.
3. That the ld CIT(A) grossly erred on facts and circumstances of the case and in law in confirming an addition amounting to Rs. 6,50,000/- on account of outstanding balances of unsecured loan.
4. That all the grounds are without prejudice to each other.”
3. Appellant is an individual, Doctor , running the profession in the name of M/s Jyoti Medical Centre, filed her return of income for assessment year 2010 – 11 in response to notice under section 148 of the income tax act declaring a total income of ₹ 6 97420. As per the information available in the ITD it was observed that the assessee has not filed a return of income. During the course of assessment proceedings the appellant assessee did not cooperate and did not attend on most of the time with requisite details, therefore the learned assessing officer passed order under section 144 of the income tax act making an addition of ₹ 1870496 on account of outstanding sundry creditors for which the assessee has failed to submit necessary confirmation and documentary evidences. The AO further made an addition of ₹ 650,000/– as assessee has raised and unsecured loan of ₹ 3.5 lakhs from Mr Baij Nath ₹ 3 lakhs from Mrs Rani Jha for which the assessee could not file the confirmation along with the copy of the income tax returns and bank statement of Mr Baijnath Pharma. Though assessee filed the copy of income tax return and confirmation of Ms rani Jha but her returned income was ₹ 1 87470 only. Therefore, the learned assessing officer made an addition of ₹ 650,000 to the total income of the assessee. The learned AO further made disallowance of ₹ 42768 on account of depreciation on fixed assets as assessee could not furnish the information with respect to the addition. A further addition of ₹ 8 10923 was also added for the reason that assessee did not furnish the requisite detail and therefore 30% of the expenses claimed in the profit and loss account were disallowed and added back by the learned assessing officer. Consequently assessment order under section 144 of the income tax act was passed on 20/3/2015 wherein the total income of the assessee was determined at ₹ 4071610/– against the returned income filed by the assessee at ₹ 6 97420/–.
4. Assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned commissioner of income tax appeals – 20, New Delhi who passed order on 7/3 /2018 partly allowing the appeal of the assessee. The learned commissioner of income tax appeals obtained the remand report of the learned assessing officer and thereafter held that out of the total addition of ₹ 1 870496 on account of the creditors the addition of ₹ 1 728236/– is confirmed and the balance addition of ₹ 1 42560 is deleted. With respect to the addition of ₹ Page | 2 650,000 the learned CIT – A confirmed the above addition holding that assessee has failed to produce any evidence with respect to the genuineness of the loan. However, the learned commissioner appeals deleted the disallowance on account of depreciation. With respect to the 30% disallowance of the expenditure, same was deleted. Therefore the assessee aggrieved with the order of the learned commissioner appeals is in appeal before us.
We have heard the rival contentions and perused the orders of the lower authorities. Now we deal with the each of the ground of appeal
raised by the assessee.
6. The first ground of appeal is general in nature and no specific arguments were advanced by the parties and therefore it is dismissed.
7. The second ground of appeal is with respect to the addition of ₹ 1728236/- on account of outstanding balance of sundry creditors. Before the assessing officer, the assessee did not furnish any information and therefore the addition has been made. However, before the learned commissioner of income tax appeals the assessee submitted the complete details of the various creditors. With respect to the several creditors in the remand report mentioned at para number 5.7 of the order of the learned commissioner appeals, the assessee has submitted the confirmation with respect to party number 1, 2, 3, 4, 5, 6, 7, 8 and 9. However the assessee could not furnish the confirmation of Mr Ramesh Chandar , party number
10. However, amount outstanding with respect to that party is nil. Further, the learned commissioner of income tax appeals confirmed the above addition merely because of the reason that these creditors have not been paid by the assessee. The learned commissioner appeals noted that it is strange that the small creditors are not pursuing the payments even after a lapse of more than 5 years and outstanding balance even before assessment year 2010 – 11 are standing against them. She therefore stated that this is against the human probabilities. She was also of the opinion that as the assessee has not filed the return of income for assessment year 2010 – 11 and non- compliance made by the appellant at the time of reassessment Page | 3 proceedings and obtaining confirmation after a gap of 4 months after taking many adjournments the genuineness of the confirmation letters are strongly in doubt. On careful analysis of the reasons given by the learned CIT – A, we are of the opinion that the assessee has submitted the confirmation of those parties before the learned assessing officer during the remand proceedings. Further the learned authorised representative has drawn our kind attention to page number 6 of the order of the learned CIT – A wherein the assessee has submitted that the addition of ₹ 1 870496 on account of sundry creditors is related to the opening balance outstanding as on 1 April 2009. Therefore, it was submitted by him that according to the chart appearing on page number 6 of the order of the learned CIT appeal, all the additions have been made by the learned assessing officer is with respect to the opening balance of those creditors or the depositors. It is apparent that these are not the sundry creditors of the assessee and they are mostly the unsecured loans in the hands of the assessee. Naturally if there is no credit during the year in the books of the assessee then addition cannot be made in the hands of the assessee. Further, none of the lower authorities have stated that for all these credits the assessee has taken deduction of expenditure in earlier years, therefore because of the lapse of time the liabilities are nonexistent. In view of this facts, it is necessary to verify by the lower authorities that whether there is any credit during the year with respect to any of the liabilities added by the assessing officer or if the liabilities are not existing then, whether assessee has taken any benefit of these liability in earlier years or not. In view of this ground number 2 of the appeal of the assessee is set aside to the file of the learned assessing officer with a direction to the assessee to produce the evidence before him about these liabilities received/accrued during the earlier year. The AO on verification of these details may decide the issue afresh. Therefore, this ground is allowed with above direction.
The third ground of appeal is with respect to the addition of ₹ 650,000 with respect to the 2 depositors. ₹ 3 lakhs has been accepted by the assessee from Mrs Rani Jha and ₹ 3.5 lakhs has been accepted by Page | 4 assessee from M/s Baijath Pharmaceuticals . The learned assessing officer has made the addition of unsecured loan of ₹ 3.5 lakhs and ₹ 3 lakhs with respect to the 2 creditors. The assessee has submitted the confirmation and the income tax return with respect to one creditor of ₹ 3 lakhs. But no details were submitted with respect to the 2nd creditor. With respect to the 1st creditor, looking at to the income tax return of that creditor the AO stated that because of the low income of the creditor, she could not have given this advances to the assessee. On appeal before the learned CIT appeal, the addition was confirmed. It was stated by the assessee before the learned CIT appeal that some of ₹ 3 lakhs added in the hands of the assessee is opening balance. Further, the assessee has submitted the confirmation, however certain enclosure of statement of bank and copy of permanent account number is attached of Mr Praveen Sharma. She shared that there is no correlation established by the assessee between 2 persons. However, the assessee was never questioned that what is the relationship between the amount credited in the name of Baijnath pharmaceuticals and Mr Praveen Sharma. Further the assessee has already submitted the confirmation and the income tax return of Mrs. Rani Jha but the addition has been confirmed by the AO and the learned CIT appeal. Further it is interesting to note that the learned commissioner appeals has specifically mentioned that during the course of appellant proceeding the assessee was asked to substantiate the claim that this is an opening balance in assessment year 2010 – 11 but no further proof was submitted by the assessee. In the paper book submitted before us the assessee has submitted the confirmation at page number 32 – 36 and 37 – 40 of these two parties. Looking at page number 33 of the paper book and confirmation submitted by the assessee, it is apparent that assessee has carried forward the amount of ₹ 3 lakhs in case of Mrs. Rani Jha from earlier years. However same could not be proved by the assessee with respect to M/s Baijnath Pharmaceuticals which apparently shows that sum of ₹ 3.5 lakhs has been received on 14 May 2009 by the assessee. It is apparent that opening balance cannot be added in the hands of the assessee and further when assessee did not get any Page | 5 opportunity to explain the relationship between Shri Praveen Sharma and Baijnath pharmaceuticals, the issue needs to be verified by the learned assessing officer. In view of this, ground number 3 of the appeal is set aside to the file of the learned assessing officer for verification whether the sum of ₹ 3 lakhs received from Mrs Rani Jha is pertaining to earlier years and assessee should be given an opportunity to the assessee to explain relationship between the person in whose name the sum is credited and the bank account and the permanent account number of an individual submitted along with the confirmation. Accordingly, ground number 3 of the appeal is allowed with above direction.
9. Ground number 4 and 5 of the appeal are general in nature and therefore there dismissed.
Accordingly, appeal of the assessee is partly allowed for statistical purposes.