SHRI.NASIR PASHA,MYSORE vs. INCOME TAX OFFICER, MYSORE

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ITA 2306/BANG/2016Status: DisposedITAT Bangalore07 April 2017AY 2008-096 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's explanation of a mistake in recording creditor names and outstanding amounts was not plausible. The substitution of entirely new creditors in a revised statement of affairs, not supported by the original audited books, was considered a fresh, unsubstantiated claim.

What were the facts?

The Assessing Officer added Rs. 15,05,867 to the assessee's income as unexplained creditors after four out of five creditors denied outstanding balances. The assessee claimed it was a mistake in the books and provided new creditor details.

What were the issues?

Whether the assessee provided a plausible explanation for unexplained creditors, and if a substituted claim not supported by original books of account can be accepted.

Which sections of the Income-tax Act were involved?

Section 44A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCH-SMC “ C ”

Before: SHRI VIJAY PAL RAO

For Appellant: Shri V. Srinivasan, Advocate

This appeal by the assessee is directed against the order dt.29.4.2016 of Commissioner of Income Tax (Appeals) for the Assessment Year 2008-09.

2.

The assessee has raised the following grounds :

3. The only issue arises in this appeal of the assessee is regarding the addition made by the Assessing Officer on account of unexplained creditors. The assessee is an individual and engaged in the business of purchase and sale of timber. The assessee also undertook job work and earned labour charges. During the scrutiny assessment proceedings, the Assessing Officer noted that the sundry creditors of the assessee is having a total outstanding of Rs.17,56,579 as on 31.03.2008. The Assessing Officer conducted the investigation and found that out of five sundry creditors, four with total outstanding balance of Rs.15,05,867 denied any such outstanding due from the assessee as on 31.3.2008. When the assessee was confirmed with the fact the assessee produced new name of creditor with different amount shown as outstanding in place of the four sundry creditors who denied the reported dues of Rs.15,05,867. The Assessing Officer did not accept the new claim made by the assessee and made the addition of the said amount of Rs.15,05,867. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) but could not succeed.

4. Before the Tribunal, the learned Authorised Representative of the assessee has submitted that this is the first year of tax audit and there is an error of carry forwarding the amount from the earlier year. The learned Authorised Representative has further contended that during the course of appellate proceedings, the assessee filed the correct details of the sundry creditors in the statement of affairs however neither the Assessing Officer nor CIT (Appeals) examined or verified the correct names of the creditors and the amounts as produced by the assessee. He has further submitted that the assessee also produced the ledger account of the creditors as well as confirmations. He has further submitted that the Assessing Officer in the assessment proceedings examined these creditors who have accepted the transaction of giving the advance to the assessee. Thus the learned Authorised Representative has submitted that the assessee explained the source of these credits and also produced the relevant record including the lease rent. He has further contended that the balance as shown under the sundry creditors is nothing but rental income received accumulated for the years to be distributed among the family members. Thus the learned Authorised Representative has submitted that the CIT (Appeals) without going into the merits of the case has rejected the explanation of the assessee on the ground of bogus claim.

5.

On the other hand, the learned Departmental Representative has submitted that the production of new statement of affairs by substituting creditor is an after thought when the Assessing Officer has already conducted the enquiry and found that the claim of the assessee is bogus and no outstanding was found as on 31.3.2008. The assessee has made a false claim as regards the rental income of the assessee as the assessee has not offered any rental income in the return of income therefore this is an afterthought false claim. He has relied upon the orders of the authorities below.

6.

Having considered the rival submissions as well as the relevant material on record, it is noted that in the books of accounts of this year was subjected to the audit under Section 44A of the Act . The assessee shown outstanding balance of Rs.17,56,579 in respect of 5 creditors. The Assessing Officer carried out an investigation and found that four of them with total outstanding balance of Rs.15,05,867 denied any such amount due from the assessee as on 31.3.2008. This fact has been accepted by the assessee however the assessee came up with a plea that there was a mistake in the accounts and statement of affairs. The assessee then filed a fresh statement of affairs with substituted name of creditors. It is pertinent to note that it is not a case of stray incident of mistake in respect of a creditor or an amount in respect of a creditor but it is a case where out of 5 creditors shown in the books of accounts, the Assessing Officer found that 4 creditors were wrongly mentioned in the books of accounts. Thus from the facts and circumstances of the case, the explanation of the assessee being a mistake in recording the name of the creditors and outstanding in the regular books of accounts is not a plausible and acceptable explanation being bona fide mistake or error. Further the assessee has not come out with the correct record to say that these balances were ever outstanding in respect of these four persons and there is a mistake of entries of repayment but the assessee has completely substituted sundry creditors itself in the revised statement of affairs. The CIT (Appeals) has fairly allowed the assessee to establish its claim by issuing a remand order and after receiving the remand report it was found that the claim of the assessee is not a genuine claim but it is only a set up of a new false claim, which is not part of the audited books of accounts. There is no quarrel on the point that the assessee can raise a fresh plea even without filing the revised return of income before the appellate authority but the said plea and claim shall be based on the entries recorded in the books of accounts but in the case in hand the very fact of the claim is not recorded in the books of accounts. Therefore it is not a mistake of any entry or mistake in the return of income but this is completely a fresh claim of the assessee which does not born out from the books of accounts. Accordingly, in the facts and circumstances of the case, I do not find any error or illegality in the impugned orders of the authorities below.

7.

In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 07.04.2017.

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