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Facts
Assessee, Vrindavan Fabrics Private Limited, filed its return for AY 2017-18. The AO made an addition of Rs. 46,03,682/- under Section 68 of the Income Tax Act, 1961, treating trade payables/closing balances from seven parties as unexplained cash credits, alleging late submission of details hindered inquiry. The Commissioner (Appeals) sustained this addition.
Held
The Tribunal found that the assessee had furnished all necessary details and supporting evidence. It observed that the AO failed to conduct any inquiry, made selective additions only for seven parties despite larger transactions and numerous creditors, and had already accepted the purchases and related payments. Consequently, the Tribunal held that the addition under Section 68 could not be sustained on mere conjectures and ordered its deletion.
Key Issues
Whether the addition under Section 68 of the Income Tax Act, 1961, for unexplained trade payables was justified when the assessee provided all details and the AO failed to conduct proper inquiry.
Sections Cited
Section 68 of the Income Tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SH. SAKTIJIT DEY & SH. M. BALAGANESH
BEFORE SH. SAKTIJIT DEY, VICE PRESIDENT AND SH. M. BALAGANESH, JUDICIAL MEMBER Assessment Year: 2017-18 Vrindavan Fabrics Private ITO Limited, Delhi Sanoli Bye Vs Ward – 5 Panipat Pass, HUDA Sector-29 Panipat 132103 PAN No.AACCV7480N (APPELLANT) (RESPONDENT) Appellant by Sh. Amit Kaushik, Advocate Respondent by Sh. Vivek Vardhan, Sr. DR Date of hearing: 07/02/2024 Date of Pronouncement: 19/02/2024 ORDER PER SAKTIJIT DEY,VP: This is an appeal by the assessee against the order dated 07.11.2023 passed by National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18.
The dispute in the present appeal is confined to addition of an amount of Rs.46,03,682/- u/s. 68 of the Income Tax Act, 1961.
3. Briefly stated the facts are, the assessee is a resident corporate entity. For the assessment year under dispute, the assessee filed its return of income on 07.10.2017 declaring total income of Rs. 5,10,270/-. In course of assessment proceedings the Assessing Officer (AO) called upon the assessee to furnish the details of sundry creditors and trade payables with their address, PAN numbers etc. Alleging that the assessee furnished the details on 19.12.2019 i.e. at the fag end of the year, which made impossible any enquiry to be carried out regarding the genuineness of the trade payables, the AO added back trade payables / closing balances in respect of seven parties aggregating to Rs.46,03,682/-, by treating it as unexplained cash credit u/s. 68 of the Act. Though, the assessee contested the aforesaid addition before learned Commissioner Appeals, however, the addition was sustained.
Before us learned Counsel appearing for the assessee submitted that in course of assessment proceedings the assessee has responded to the querries raised by the AO and furnished all the details asked for.
He submitted, without verifying the details furnished by the assessee or making any enquiry the AO has added back certain trade payables on selective basis. He submitted, when the AO has accepted the purchases and also did not raise any doubt regarding the payment made towards such purchases, he could not have added back the closing balances of some of the parties.
The Learned Departmental Representative strongly relied upon the observations of the AO.
We have considered rival submissions and perused the material available on record. From the order of the AO it is very much clear, incourse of assessment proceedings the assessee has furnished all the details called for in relation to sundry creditors/ trade payables. Simply saying that the details were furnished by the assessee at the fag end of the year which made any enquiry impossible, the AO has added certain trade payables. On perusal of materials placed on record, it is observed that in response to the querry raised by the AO the assessee had uploaded its reply on 30.11.2019 with all supporting evidences, such as, list of sundry creditor’s, details of payments made, account confirmations etc.
It is quite evident, the AO has not examined any of the details furnished by the assessee. In a purely selective basis the AO has added back closing balances of only seven parties.
From the material placed on record it is observed that the assessee has transactions running into 8.10 crores during the year. The list of sundry creditors as on 31.03.2017 was to the tune of Rs.1,49,75,383.50 consisting more than 45 parties. Whereas, the AO has selectively added back closing balance of 7 parties only. Even in respect of said 7 parties the assessee has furnished all relevant and necessary details including the name, addresses, PAN, confirmations, bank statements etc.
Not even a semblance of enquiry has been made by the AO to ascertain the genuineness of the transaction with the parties. Unfortunately, though, all the materials were available before learned First Appellate Authority, he also did not make any attempt to factually examine the issue in relation to materials available on record. On the contrary he simply went by the observations of the AO. When the assessee has furnished all supporting evidences to prove the genuineness of the transaction relating to the purchases made, in our view, no addition u/s. 68 of the Act can made merely on the basis of conjectures and surmises. More so, when the AO has accepted the purchases and the payments made towards such purchases.
In aforesaid view of the matter, we have no hesitation in deleting the addition.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 19.02.2024.