THE I.T.O., BHAGALPUR vs. M/S SILK CENRE, BHAGALPUR

Following grounds have been raised in this appeal: “i) The order of the CIT(A) is perverse and bad in law & facts in as much as she did not consider the basic fact that the Assessee/Assessee’s AR had resorted to complete non- cooperation and non-compliance throughout the fresh Assessment Proceeding u/s 263/143(3) and presented wrong and misleading plea that reasonable opportunity was not granted when they failed to make compliances to repeated opportunities over period of 14 months (detailed facts at Para 1 of “Statement of Facts”. ii) The order of CIT(A) is perverse and bad-in-law & facts as much as her observation that “Sale & Purchase have been accepted by the AO…..& the trading results” is absolutely incorrect because the Assessee never complied with any notices including notice u/s 142(1) of the Act and never produced Books of Accounts in the form of Cash Book, Ledger, Purchase & Sale Ledger & their Vouchers before

From above grounds, it is gathered that the only grievance of the department relates to the deletion of addition of Rs.1,36,37,183/- made by the AO on account of trade creditors.

Facts of the case in brief are that the assessee was dealing in Silk & artificial cloths on wholesale basis and its assessment was completed at an income of Rs.1,60,000/- on 18.09.2007 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act). Later on, the CIT, Bhagalpur vide his order dated 06.12.2009 u/s 263 of the Act set aside the assessment order and directed to make fresh assessment. Consequently, the AO started the assessment proceedings and noticed that in the balance sheet furnished by the assessee, the sundry creditors were shown at Rs.1,36,37,183/- and the assessee had furnished details of closing balance of all the

Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the summons u/s 131 of the Act dated 08.10.2010 were issued to Smt. Sonam Budhia, Mr. Praveen Kumar Budhia, HUF, Sh. Om Prakash Budhia and Sh. Shiv Kumar Budhia to appear before the AO in the case of Gaurav Kumar Sah, Prop. M/s J.B. Lubricants, Patal Babu Road, Bhagalpur with whom the assessee had no business transactions whatsoever. The photo copies of the said summons were furnished before the ld. CIT(A). It was further submitted that in case the assessee failed to produce the trade creditors and books of accounts were not relied upon, then the AO should have estimated the profit instead of making the addition of the amount of trade creditors. It was

The ld. CIT(A) after considering the submissions of the assessee observed that the AO could not find any item of purchases and sales as bogus or inflated or suppressed to justify the addition of the trade creditors to the income of the assessee and moreover, the sales against the purchases had been accepted by the AO. She further observed that the AO had accepted trading results i.e. sale and purchases and found nothing adverse in the trading results and that many of the trade creditors were old having their business relationship with the assessee as was apparent from the ledger copies which revealed that most of them had opening balances to their credits. The ld. CIT(A) also pointed out that the AO issued notices to the few of the trade creditors but made the addition of the entire trade creditors without giving any basis or pointing out any defect in the books of account. She, therefore, deleted the addition made by the AO.

Now the department is in appeal. The ld. Standing Counsel of the department reiterated the observation made by the AO and further submitted that since the creditors did not appear before the AO, he could not examined them and that the assessee did not produce the books of account before the AO. Therefore, the addition was rightly made.

In his rival submissions, the ld. Counsel for the assessee reiterated the submissions made before the authorities below and drew our attention towards page nos. 7 to 9 of the assessee’s paper book which is the copy of original assessment order dated 18.09.2007 wherein the AO categorically stated that the assessee appeared from time to time alongwith the papers/documents and produced the books of accounts which were test checked and that the replies to

We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that in the original assessment framed u/s 143(3) of the Act, the AO accepted that the assessee furnished books of accounts and also the details/documents asked for which were duly examined. Thereafter, the book results were accepted. In the present assessment proceedings on the direction of the ld. CIT(A), the AO had accepted the book results and also did not doubt the trade results. He had not pointed out any inflated purchases or suppressed sales, the gross profit rate was also not doubted which was better than the preceding year. In our opinion, when the AO considered the purchases from the creditors as genuine than considering the creditors as non-genuine and making the addition for them in total, particularly when the sundry creditors were old one having opening balance, the impugned addition made by the AO was not justified. Therefore, the ld. CIT(A) rightly deleted the addition. We, do not see any valid ground to interfere with the findings of the ld. CIT(A).

In the result, the appeal of the department is dismissed. (Order Pronounced in the Court on 08/03/2018)