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Facts
The Revenue challenged the CIT(A)'s decision to delete additions made by the AO under section 68 for unverified trade payables (Rs. 3,41,56,172/-) and advances from customers (Rs. 3,97,586/-). The assessee could not provide all confirmations during assessment but later furnished evidence that the outstanding amounts were either paid through banking channels or written off in subsequent financial years.
Held
The Tribunal acknowledged that the assessee provided confirmations and evidence of subsequent payments/write-offs. However, it noted that some confirmations were not examined by the AO and the DR raised concerns about Rule 46A and the need for verification of write-backs. Consequently, the Tribunal remanded the matter to the AO for fresh verification of the write-backs and payments, instructing that additions be deleted if balances were repaid or written back and offered for taxation in subsequent years.
Key Issues
Whether additions made under section 68 for unverified trade payables and advances from customers were justified, given the assessee's subsequent submission of evidence regarding payments or write-offs that were not fully scrutinized by the Assessing Officer.
Sections Cited
Section 68 of Income Tax Act, Section 142(1) of Income Tax Act, Rule 46A of Income Tax Rules, 1962
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘H’: NEW DELHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI SUDHIR PAREEK
PER SUDHIR PAREEK, JM This appeal is preferred by the Revenue against the order dated 09.09.2019 of the order of learned Commissioner of Income Tax (Appeals)-7 [“Ld. CIT(A), for short], New Delhi, pertaining to Assessment Year 2016-17, on the following grounds:
ITA No.- 9379/Del/2019 M/s Raghuveer Metal Industries Limited “1. The CIT(A) has erred in law and on facts by deleting the addition of Rs. 3,41,56,172/- made by the AO on account of trade payables by not appreciating the fact that though the assessee had provided a list of 46 parties with trade credit balances totalling Rs. 18,19,33,614/-, in 4 lots and has failed to file confirmations in respect of the balance 114 parties involving total credit balance of Rs. 3,17,04,143/- till the date of assessment order.
2. The CIT(A) has erred in law and on facts by deleting the addition of Rs. 3,97,586/- made by the AO on account of advance from customers by not appreciating the fact that the assessee did not file any cross-confirmation at all from the 6 parties involved.”
When the matter was called for hearing, the Ld. Counsel for the assessee supported the order of the Ld. CIT(A) and contended that the solitary controversy involved towards the addition of credits of Rs. 3,45,53,758/- on account of unverified trade payables u/s 68 of the Act. In this regard, the Ld. Counsel contended that the relief granted by the Ld. CIT(A) and submitted that the Assessing Officer issued noticed u/s 142(1) dated 26.11.2018, seeking detailed particulars about the trade payables aggregating to Rs. 21,36,37,757/- along with confirmations. The assessee had collected confirmation from the respected parties but however, the assessee could not furnish confirmations to the extent of Rs. 3,45,53,758/-, involving 63 parties. The confirmation could not be filed due to paucity of time made available at the assessment stage.
ITA No.- 9379/Del/2019 M/s Raghuveer Metal Industries Limited 3. The addition made was challenged before the CIT(A), and the relevant confirmations were filed from other parties of the trade payables. The CIT(A) found merit in the contention of the assessee and granted relief. Before the Tribunal, the Ld. Counsel referred to page no. 121 of the paper book, showing a party-wise summary of the present status, and submitted that out of the outstanding amount of Rs. 3,45,53,758/- an amount of Rs. 1,35,89,929/- in aggregate had been paid through banking channel in the subsequent financial years, as per the chart placed at page no. 121 of the Paper Book. The Ld. Counsel next submitted that the remaining amount, relating to different parties as stipulated at page no. 121, has been written off in different financial years.
The Ld. Counsel thus, submitted that on the face of such facts, where the creditors in question have ultimately been liquidated in subsequent years and are supported by the later confirmation or payments, there is no satisfaction to interfere with the order of the CIT(A).
The Ld. DR for the Revenue supported the assessment order and pointed out that the order passed by the CIT(A) contravened the ITA No.- 9379/Del/2019 M/s Raghuveer Metal Industries Limited principle of natural justice under Rule 46A of the Income Tax Rules, 1962. The Ld. DR pointed out that the confirmations placed as additional evidence before the CIT(A) should not have been admitted without seeking a remand report from the Assessing officer. The DR further contented that the relief granted by the CIT(A) is not permissible under the law and besides the subsequent write back of large amounts by the assessee requires verification to assess the bonafide of the action of the assessee. The Ld. DR thus, pointed out that the order of the CIT(A) granting relief is not sustainable in law.
We have carefully considered the rival submissions and perused the material adverted in the course of hearing, in accordance with 18(6) of ITAT, Rules. The tabular statement referred to on page 121 of the Paper Book is reproduced herein below.
ITA No.- 9379/Del/2019 M/s Raghuveer Metal Industries Limited
On perusal of the tabular statement (supra), it appears that the sundry creditors related to various parties have either been paid back or Witten back, and thus no aspersions can be cast on the 5
ITA No.- 9379/Del/2019 M/s Raghuveer Metal Industries Limited bona fide of the sundry creditors per se. The assessee has filed confirmation, some of which have not been examined by the AO.
While we agree with the case made out on behalf of the assessee on first principles, it will be in fitness of thing to refer the matter back to the AO for suitable verification of the write back and the payments made to the creditors. The AO shall determine the issue afresh in accordance with law. The assessee being entitled to place such evidences as deemed appropriate. Where it is found that the balances have been repaid or written back and offered for taxation in the subsequent years, the additions in question shall be deleted.
The matter is thus restored to the file of the AO in terms of the direction noted above.
In the result, appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the Open Court on 06.08.2024