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Facts
The assessee filed its ITR for A.Y. 2014-15. The Assessing Officer (AO) made an addition of Rs. 4,32,30,000/- under section 68, stating that the identity, creditworthiness, and genuineness of a transaction (unpaid consideration for land purchase shown as sundry creditor) remained unverified. The AO also added Rs. 33,76,750/- under section 68 for sundry creditors that remained static for three years, deeming them unexplained. The CIT(A) deleted both additions.
Held
The Tribunal found that the CIT(A)'s reliance on a Civil Court order regarding the land transaction was unsubstantiated as it quoted the assessee's submissions, not the court order itself. Therefore, the issue of Rs. 4.32 Cr. requires proper examination and verification by the AO. For the Rs. 33.76 Lacs addition, the CIT(A) considered them financial creditors without providing reasons, so this issue also needs re-examination by the AO. Both grounds of appeal by the Revenue were statistically allowed, and the issues were restored to the file of the AO for fresh verification and examination.
Key Issues
1. Deletion of addition under section 68 for Rs. 4.32 Cr. due to unverified identity, creditworthiness, and genuineness of a transaction (unpaid land consideration). 2. Deletion of addition under section 68 for Rs. 33.76 Lacs related to static unexplained sundry creditors.
Sections Cited
Section 68 of the Income-tax Act, 1961
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Income Tax Appellate Tribunal, DELHI ‘F’ BENCH,
Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the orderof the ld. CIT(A)-38, Delhi dated 23.11.2017pertaining to A.Y. 2014-15.
The Revenue has raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 4,32,30,000/- made by the Assessing Officer u/s 68 of the Income-tax Act, 1961 [the Act, for short] without appreciating the fact that the appellant could not prove the genuineness and credit worthiness of the person who claimed to be the share holder of the appellant company.
2. On the facts and in the circumstances of the caase, the ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 33,76,75/- made by the Assessing Officer being unexplained sundry creditors u/s 68 of the Act.”
Several notices have been issued to the assessee but each went unrepresented. Notices were issued by RPAD all of which were returned with the postal remark as “left”. It appears that that the assessee is not interested in prosecution of the appeal, hence we decided to deal with the case ex-parte. We heard the ld. DR at length and the case records were carefully perused.
Briefly stated, the facts of the case are that the assessee filed its return of income electronically on 27.03.2015 declaring an income of Rs. 7,28,890/-. Return was selected for limited scrutiny assessment through CASS for the reason “Large increase in sundry creditors against reduction in business income as compared to preceding year”. The assessing officer after examination and verification of some details filed by the assessee passed the assessment order u/s 144 disallowing a sum of Rs. 4,32,30,000/- u/s 68observing that the identity, creditworthiness and genuineness of the transaction remained unverified.
Further, the Assessing Officer observed that certain sundry creditors, being Amit gupta, Exaar MGF, Parmod Yadav and Sai Rail Co-operative Society remained static over the last three years and hence came to the conclusion that it implied that these liabilities have ceased to exist and the assessee company has no contractual obligation left to pay these amounts. Therefore, the Assessing Officer held these liabilities have ceased to exist and a sum of Rs. 33,76,750/- was added to the income of the assessee.
Aggrieved by the above additions, the assessee went in appeal before the ld. CIT(A) who allowed the claim of the assessee.
Now the aggrieved Revenue is in appeal before us.
The ld DR has vehemently argued that the sale deed referred to by the CIT(A) and the order of the Civil Court, Ghaziabad was never presented to the AO. Further, the DR relied on the decision of the hon’ble Supreme Court in the case of Dahiben Vs Arvindbhai Kalyanji Bhanusali dated 09.07.2020 for the proposition that non payment of the sale consideration does not make the registered sale deed void nor does it constitute a valid ground for cancellation.
We have heard the submissions of the ld DR and have perused the relevant material on record.With regard to the first issue, we find that the ld. CIT(A) has stated that the assessee had purchased a land from a farmer by the name of Sh. Ram Bhushan vide registered sale deed dated 11.04.2013 for an amount of Rs 5,60,00,000/-. Out of the said amount Rs. 4,32,00,000/- remained unpaid which is reflected in the Balance Sheet under the head sundry creditors. The CIT(A) refers to an order of the Civil Court, Ghaziabad dated 18.10.2016 where the Civil Court has cancelled and deregistered the sale deed on account of non-payment of part sale consideration to the farmer Ram Bhushan. The CIT(A) purportedly quotes the portion of the order of Civil Court of Ghaziabad to prove that there was a transaction of purchase of the land and on account of non-payment of part consideration, the creditor remained as outstanding as 31.03.2014.
We, however, note that the CIT(A) in his order at para 4.3has not quoted the portion of the Civil Court’s, Ghaziabad order of cancellation and deregistration of sale deed. On a closer perusal of the quotation, it is found that the CIT(A) has quoted the submissions of the assessee before him instead of the order of the Civil Court. We therefore are of the firm opinion that reliance on the Civil Court’s order by the CIT(A) is not completely substantiated. We are therefore of the considered opinion that the matter of establishing the identity and genuineness of the creditors requires a proper examination and verification. We therefore find it appropriate to restore the issue to the file of the AO for verification and examination in the light of the purported sale deed and the order of the Civil Court, Ghaziabad. The ground no of the Revenue is statistically allowed.
With regard to the addition of Rs. 33,76,750/- made by the Assessing Officer and deleted by the ld. CIT(A), we find that the CIT(A) has considered these creditors as financial creditors and not operational creditors without giving any reasons. We are of the considered opinion that this issue should also be restored to the file of the AO to examine and verify the nature of the creditors and to take necessary action as per law. Ground No. 2 is also statistically allowed.
In the result, the appeal of the Revenue in is statistically allowed.
The order is pronounced in the open court on 26.07.2024.