SMT. NANDINI B LINGEGOWDA,BANGALORE vs. ITO, BANGALORE

Per Sunil Kumar Yadav, Judicial Member

This appeal is preferred by the assessee against the order of

CIT(A), interalia, on the following grounds: 1. The learned CIT (Appeals) erred in passing the order in the manner he did. 2. The learned CIT (Appeals) is not justified in confirming the addition in partly of Rs.30,87,616/- in respect of sundry creditors shown by the Appellant observing that the Appellant has failed to prove the same on the facts and circumstances of the case.

ITA No. 566/Bang/2015

Page 2 of 10 3. The learned CIT (Appeals) ought to have appreciated that documents and books of account have been destroyed due to fire in the premises of the Appellant and hence the Appellant could not furnish the same and also sufficient opportunity was not given to the Appellant to collect the details from the trade creditors of the Appellant and accordingly the disallowance as confirmed by the learned CIT (Appeals) is bad in law. 4. The learned CIT (Appeals) erred in confirming the part disallowance as made by the assessing officer without appreciating the fact that the expenditure was incurred in the course of business and for the purpose of business and hence no part of the same was liable to be disallowed. 5. Without prejudice, the additions/disallowances as sustained by the learned CIT (Appeals) is arbitrary, excessive and ought to be deleted in full. 6. The learned CIT (Appeals) erred in confirming the levy of interest under Sections 234B, 234C & 234D of the Act. 7. For these and such other grounds that may be urged at the time of hearing, the Appellant prays that the appeal may be allowed.

addition of Rs.30,87,616/- in respect of three creditors i.e.,

M/s. Colourtech Product Pvt. Ltd., M/s. Orson Chemicals and

M/s. S & S Polymers, except ground No. 1 relating to levy of interest

under section 234B, 234C & 234D of the Act.

fact that the appeal is filed late by 164 days for which an application

of condonation for delay is filed. Having carefully perused the

contentions in the application of condonation, we find that there is a

reasonable cause for the delay in filing the appeal and accordingly

we condone the delay and admit the appeal for hearing.

ITA No. 566/Bang/2015

Page 3 of 10 4. Facts and briefs borne out from the record with regard to

additions are that out of the claim of Sundry Creditors in the balance

sheet at Rs.2,60,98,778/- the assessee had submitted confirmation

before the AO of only Rs.1,06,04,917/-. In the absence of evidence

the AO treated the balance of Rs.1,54,93,861/- as unexplained

income of the assessee. The assessee preferred an appeal before

the CIT(A) with the submission with regard to the disallowance that

the books of accounts were lost in fire during the course of

assessment proceedings. Further, during the course of hearing of

the appeal, the assessee has filed the confirmation letters from the

11 sundry creditors. These confirmations were sent to the AO for

examination in remand proceedings and the AO also obtained

independent confirmations also from them. Out of the 11 creditors,

the AO found that in 8 cases, the transaction balance outstanding as

shown by the assessee matched with the replies of the creditors.

Accordingly, the CIT(A) directed the AO to accept those credits. But

with regard to 3 creditors i.e., M/s. Colourtech Product Pvt. Ltd.,

M/s. Orson Chemicals and M/s. S & S Polymers, the CIT(A) did not

accept the explanations of the assesses and confirmed the additions

of Rs.30,87,616/- after accepting the explanation in part.

ITA No. 566/Bang/2015

Page 4 of 10 5. Aggrieved, the assessee preferred an appeal before the

Tribunal with the submission that before the CIT(A), the assessee

has furnished the confirmation letters of all the three creditors who

have confirmed the outstanding credits appeared in the books of

accounts of the assessee. While examining these credits, the AO

has lost sight of the correct figures and he has taken the different

figures while submitting the remand report. The said figures were

taken by the CIT(A) while adjudicating the issue without verifying the

figures given in the confirmation letters filed by the assessee. During

the course of hearing, the learned counsel for the assessee invited

our attention to the application filed for admission of additional

evidences before the CIT(A), the list of the Sundry Creditors and the

confirmation letters of all the creditors with the submission that the

assessee has filed the confirmation of 11 sundry creditors, with

respect to whom the addition was made by the AO under section 68

of the Act. The learned counsel for the assessee further invited our

attention to the confirmation letters of M/s. Colourtech Product Pvt.

Ltd., appearing at page No. 62 and the details of the transactions

appearing at page Nos. 63 to 68 of the compilation of the assessee.

In the confirmation letter and the details of transactions, the closing

balance or the outstanding dues appears to be Rs.32,92,585.97/-

against the credit balance of Rs.31,91,585/-. Though the figure did

ITA No. 566/Bang/2015

Page 5 of 10 not match, but the outstanding dues in the books of accounts of the

creditor is more than the amount shown by the assessee. But only

for these reasons, the genuineness of the credit cannot be doubted

and the addition of the whole amount cannot be made.

attention to the confirmation letter of M/s. Orson Chemicals appearing

at page No. 77, according to which the outstanding dues from the

assessee was of Rs.8,94,368/-, against the figures shown in the

books at Rs.8,91,368/-. Therefore, the slight difference in the figures

did not warrant the addition under section 68 of the Act. The learned

counsel for the assessee further invited our attention to the

confirmation letter of M/s. S & S Polymers appearing at page No. 82

of the compilation according to which the outstanding amount of

Rs.3,53,123.84/- was shown in the accounts of the creditors against

the amount of Rs.3,53,123/- shown as credit balance in the books of

accounts of the assessee. The assessee has filed all confirmation

letters before the CIT(A). The same was referred to the AO for

verification but unfortunately the AO has mentioned the incorrect

figures in the remand proceedings which were relied upon by the

CIT(A) while making the additions. Since the assessee has

discharged its onus laid upon it, it is for the revenue to bring on

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Page 6 of 10

something record to disbelieve the confirmation letters filed by the

assessee.

the light of the rival submissions, we find that undisputedly before the

AO, the assessee could not file the complete confirmation letters of

all the creditors and for want of confirmation letter, the AO has made

addition of Rs.1,06,04,917/- but during the pendency of the appeal

before the CIT(A), the assessee filed the confirmation letters of the

remaining 11 creditors and on receipt of the confirmation letters, the

CIT(A) called for a remand report from the AO. The AO further

examined the confirmation letters filed by the assessee and also by

calling independent confirmation letters. He accepted the 8 credits

but made the addition on the remaining creditors. The CIT(A)

accepted the remand report and made addition of Rs.30,87,616/-.

The observations of the CIT(A) while making additions are as under:

“Only in the following three cases the details varied as evident from the following table – Sl. Name of Creditor Credit balance Balance No. claimed by confirmed by assessee creditor 1 Colourtech Product Pvt. Ltd., Rs.31,91,585 Rs.21,84,194 2 Orson Chemicals Rs.8,91,368 Company Closed 3 S & S Polymers Rs.3,53,123 Rs.53,123

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Page 7 of 10 7. In the opportunity provided for submitting rejoinder to the AO’s enquiry report the appellant made no further submissions in this matter. Thus, out of the addition of Rs.1,54,93,861 only the difference in respect of the above three parties totaling Rs.21,98,759 and the credit liability of Rs.30,87,616 for which confirmation could not produced even during appeal stage (Rs.1,54,93,861 – Rs.1,24,06,245) are confirmed. The grounds in this regard, therefore, partly succeed.”

assessee has filed the paperbook and invited our attention to the

letter written to the CIT(A) for the admission of additional evidences

which is appearing at page Nos. 56 and 57 of the compilation. Along

with the letter, the assessee has filed the list of confirmations of

sundry creditors’ balance as on 31.03.2009.

page No. 62 of the compilation, we find that the creditor has

confirmed that the balance outstanding as on 31.03.2009 is

Rs.32,92,585.97/-. Along with the confirmations, the assessee has

also filed the statement of account in the books of M/s. Colourtech

Product Pvt. Ltd., and as per the books of accounts, the closing credit

balance is also Rs.32,92,585.97/- against the credit balance shown in

the books of the assessee of Rs. 31,91,585/-. The revenue has not

brought out anything on record to disbelieve the confirmations and

the statement of transactions in the books of accounts of

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Page 8 of 10 M/s. Colourtech Product Pvt. Ltd. They are disbelieving the

confirmation letters on account of slight variation in the figures. But

according to us, this cannot be a ground for rejection of confirmations

as it is a trade transaction.

our attention is invited to the confirmation letter of M/s. Orson

Chemicals available at page No. 77 in which it has been mentioned

that M/s. Orson Chemicals have confirmed the amount outstanding

as per record is Rs.8,94,368/-, against the credit balance of

Rs.8,91,368/-. Since it is a trade credit, the genuineness of credits

cannot be doubted on account of slight difference. Our attention was

also invited to the confirmation of M/s. S & S Polymers appearing at

page No. 82 of the compilation according to which the outstanding

due is Rs.3,53,123/- as on 31.03.2009. In this figure there is no

difference. Since the assessee has discharged its onus by filing the

confirmation letters of all the creditors, the onus is upon the revenue

to bring something on record to disbelieve the confirmation letters

filed by the assessee.

of the CIT(A). We are at loss to understand as to from where the AO

has picked up the figures mentioned in the remand report and

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Page 9 of 10 cognizance of the same was taken by the CIT(A) without verifying the figures. Since the assessee has filed the confirmation letters of all

the creditors and the revenue has not brought out anything on record to disbelieve the confirmation letters filed by the assessee, we find no justification in the addition made by the AO. On account of slight

difference in the figures, the credit balance shown in the books of accounts of the assessee cannot be disbelieved. We therefore find

no merit in the additions and we accordingly set aside the order of the CIT(A) and delete the additions. The other ground of appeal is with

regard to chargeability of interest under section 234B, 234C and 234D. Since this ground is consequential in nature, it needs no

independent adjudication. Accordingly, the appeal of the assessee is allowed.

Pronounced in the open court on 27th April, 2017.

Sd/- Sd/- (INTURI RAMA RAO) (SUNIL KUMAR YADAV) Accountant Member Judicial Member

Bangalore. Dated:27th April, 2017. /NShylu/

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Page 10 of 10

Copy to: 1. Appellants 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file

By order

Assistant Registrar, ITAT, Bangalore.