ITO, NEW DELHI vs. M/S. SUJAN TIMBER TRADERS PVT. LTD., NEW DELHI

Facts of the case, in brief, are that the assessee is a company and engaged in the business of trading of timber, plywood, laminates and adhesives. It filed its return of income on 17.09.2011 declaring total income of Rs.2,90,220/-.

Before the ld. CIT(A), it was submitted that during the course of assessment proceedings a questionnaire was issued in which the Assessing Officer asked the assessee for various details and the assessee has filed all the requisite details as called for by him. It was categorically stated before the Assessing Officer that opening and closing stock has been valued at cost price or market value whichever is less. It was also submitted that market value in respect of the category of stock does not fall in normal working conditions of the business. The assessee had also stated that the parties to whom the material were supplied are regular customers of the assessee and the confirmations were filed and the auditors have not pointed out any mistake in the accounts. The assessee had also filed quantitative details of the valuation of opening and closing stock. It was accordingly argued that the addition is not called for. 4.1 Based on the argument advanced by the assessee, the ld. CIT(A) deleted the addition. While doing so, she noted that sufficient evidence was produced before the Assessing Officer for proving the creditworthiness and genuineness of the sale made to the said two parties. Further, the amount has already been included in the sales of the company for the year under consideration and, therefore, addition u/s 68 does not deserve to be made.

Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal.

The ld. DR strongly relied on the order of the Assessing Officer. He submitted that the ld. CIT(A) without properly appreciating the facts of the present case has deleted the entire addition made by the Assessing Officer which is not justified.

The ld. counsel for the assessee on the other hand heavily relied on the order of the ld. CIT(A). Referring to page 34 to 37A of the Paper Book, he drew the attention of the Bench to the confirmations of the said parties on account of sales to them for the period from 01st April, 2010 to 31st March, 2011. Referring to page 38 to 41 of the Paper Book, he drew the attention of the Bench to the copy of certificate from M/s PICO Event Marketing (India) Pvt. Ltd. certifying the invoices with corresponding challans along with copy of invoices and challans. Referring to page 43 of the Paper Book, he drew the attention of the Bench to the copy of account confirmation from M/s Litmus Design Pvt. Ltd.. Referring to page 44 of the Paper Book, he drew the attention of the Bench to copy of certificate from M/s Litmus Design Pvt. Ltd. certifying the invoices with corresponding challans. Referring to page 129 to 131 of the Paper Book, he drew the attention of the Bench to the copy of questionnaire dated 23.08.2013 by the Assessing Officer. Referring to page 132 to 138 of the Paper Book, he drew the attention of the Bench to the reply of the above questionnaire. Referring to page 139 to 145 of the Paper Book, he drew the attention of the Bench to the valuation of opening and closing stock. Referring to page 146 of the Paper Book, he drew the attention of the Bench to the copy of show-cause notice dated 17.01.2014 by the Assessing Officer. Referring to page 147 to 150 of the Paper Book, he drew the attention of the Bench to the reply dated 24.01.2014 to the above show cause notice. He submitted that the accounts of the assessee are audited and the auditors have not given any adverse report as there is no qualification on the quantitative details of stock that has been given by the assessee and the sales have been accepted by the Assessing Officer. The parties to whom supplies are made are regular customers of the assessee and they have confirmed to have purchased the goods from the assessee. Under these circumstances, it is not justified to make the addition by the Assessing Officer. He submitted that the ld. CIT(A) under the facts and circumstances of the case has rightly deleted the addition. Therefore, the ground raised by the Revenue should be dismissed.

We have considered the rival arguments made by both the sides and perused the material available on record. We find the Assessing Officer in the instant case made addition of Rs.77,75,083/- on account of sales made to M/s Litmus Design Pvt. Ltd. – Rs.3,36,334/- and M/s Pico Event Pvt. Ltd. – Rs.74,38,749/- on the ground that the bills produced on account of sales to the above two parties are not verifiable because there is a broad gap between the date of bill and actual date of delivery of goods. Further, the assessee company did not provide any detail of inventory. We find the ld. CIT(A) deleted the addition on the ground that the assessee has furnished sufficient evidence for proving the creditworthiness and the genuineness of the sales made to the above two parties and the amount has already been included in the sales of the company for the year under consideration. We do not find any infirmity in the order of the ld. CIT(A) on this issue. A perusal of the Paper Book filed on behalf of the assessee shows that the assessee has filed the requisite details before the Assessing Officer in response to the query raised by him from time to time. The assessee has furnished the copy of account confirmations from the above two parties and has also filed full quantitative details of the valuation of opening and closing stock. The accounts of the assessee are audited and the auditors have not given any adverse report. There is no qualification on the quantitative details given by the assessee in the auditor’s report prepared under Companies Auditors Report Order, 2003 issued by the Central Government in terms of section 227(4A) of the Companies Act, 1956. We, therefore, fully agree with the findings of the ld. CIT(A) that the assessee had produced sufficient evidence before the Assessing Officer for proving the creditworthiness and genuineness of the sales made to the above two parties.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open Court on this 12th September, 2018.