POONAM NARANG,FARIDABAD vs. INCOME TAX OFFICER, WARD 2(1), FARIDABAD, FARIDABAD

3. The relevant facts giving rise to this appeal are that the appellant/assessee, Proprietor of M/s. Kartik Electricals, engaged in the business of trading of electrical appliances/goods, filed her Income Tax Return (hereinafter, the ‘ITR’) on 30.11.2014 declaring income of Rs.2,12,530/-. The case was picked up for limited scrutiny on the reasoning that the appellant/assessee had a large amount of sundry creditors. During the course of assessment proceedings, the appellant/assessee was required, vide statutory notices as detailed on page 2 of the assessment order, to explain the genuineness of the 2 Poonam Narang sundry creditors of Rs.2,45,64,754/-. However, no compliance was ever made by the appellant/assessee. Therefore, the Assessing Officer (hereinafter, the ‘AO’) had no option except to complete the assessment before getting barred by the limitation. The AO therefore, treated the sundry creditors of Rs.2,45,64,754/- as non-genuine liability and taxed it accordingly. Aggrieved, the appellant/assessee filed appeal before the CIT(A) who upheld the addition of sundry creditors of Rs.2,45,64,754/- out of Rs.2,45,64,754/- and allowed relief of Rs.19,03,851/-.

4. Before us, the Ld. Authorized Representative (hereinafter, the ‘AR’) reiterated the facts, details, etc. submitted before the CIT(A). The Ld. AR argued that the AO could not treat the sundry creditors as non-genuine after accepting the trading results; i.e. purchases and sales. To buttress his arguments, the Ld. AR placed reliance on the decision of the Hon’ble Delhi High Court in the case of Ritu Anurag Agarwal in (order dated 22.07.2009), wherein it was held that unless the AO disputed the purchases & sales and disturbed trading results, the sundry creditors could not be questioned. Further, our attention was also drawn to the fact that the appellant/assessee had paid these liabilities in the subsequent years. In support of the Poonam Narang above arguments, the Ld. AR also placed relianceon the following decisions:- (i) Sita Devi Juneja [187 Taxmann 96], (P&H) (ii) Vardhman Overseas Ltd. [343 ITR 408] (Delhi)

5.1 It was argued by the Ld. Sr. DR that it could not be ruled out that these liabilities might have not been paid in cash or non-genuine/bogus and kept accounted for in the Books of Account to match with the asset side of the Balance Sheet. The Ld. Sr. DR further argued that the case 4 Poonam Narang laws relied upon by the Ld. AR were of no relevance in the present case as these cases were distinguishable on the facts. The Ld. Sr. DR drew our attention to the page 22-27 of the impugned order and submitted that the details of payments of Rs.20,000/- at a time on consecutive dates made against purchases in lakhs spoke volumes. In this regard, he drew out attention to the observations of the Ld. CIT(A) and submitted that the preponderance of probability of payment of Rs.20,000/- in cash on consecutive dates in cases of Parmar Electricals, N H Electronics, Lakhani Light House, Khanna Electricals, Bajwa Electricals, Apna Electrics Store were very remote as no prudent businessman would like to make payment or send his man to collect his dues on daily basis unless designed so. Mangla Electric Store, Durga Electricals, Jain Electricals, Jyoti Engineering Corporation and Veera Enterprises did not respond to the statutory notices of the AO; however, the appellant/assessee, on specific query, failed to produce them in person before the AO though she had filed their confirmations. In other cases, the Ld. CIT(A) found the explanation of the appellant/assessee as unsatisfactory; hence he upheld the order of the AO. In view of the above, the Ld. Sr. DR prayed for dismissal of appeal particularly when the Ld. AR failed to bring any new material on the record to demonstrate that these sundry creditors were genuine and to controvert the finding of the Ld. CIT(A).

Poonam Narang 6. We have heard both the parties and have perused the material available on record. Admittedly, the appellant/assessee did not respond to any statutory notice during the assessment proceedings. Even then, the AO completed assessment under section 143(3) instead of 144 of the Act. The appellant/assessee produced additional evidences during the appellate proceedings. We find merit in the arguments /submissions /contentions of the Ld. Sr. DR that the appellant/assessee had failed to explain the sundry creditors before the Authorities below. The sundry creditors are in the nature of credits in the Books of account and it is the duty of the appellant/assessee to explain and demonstrate the genuineness thereof, if questioned.