KLT AGRO FOODS LTD,MUMBAI vs. DCIT 9(2), MUMBAI

This appeal, filed by the assessee, being 17.10.2012 passed by learned Commissioner of Income Tax (Appeals)-20, Mumbai (hereinafter called “the CIT(A)”), for assessment year 2009-10, appellate proceedings had arisen before learned CIT(A) from the assessment order dated 22.12.2011 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called “the Act”).

Aggrieved by the appellate order dated 17-10-2012 passed by the learned CIT(A), the assessee carried this matter in appeal before the tribunal and assessee’s counsel has expressed his inability to confirm whether the said amount of Rs.22,47,378/- payable by the assessee was on account of trading or business liability and also has expressed his inability to produce confirmations or get the transactions verified .

The Ld. D.R on the other hand submitted that the assessee has miserably failed to prove that these amounts were still payable to these creditors . The assessee has also failed to prove business nexus of these old transactions with these creditors as the balance is stagnant for last so many years. It was also submitted that the assessee has not carried out business during the subject year under consideration. It was prayed that the addition may be confirmed as was done by the AO and later confirmed by learned CIT(A).

We have considered rival contentions and also perused the material on record . We have observed that the assessee has not carried out any business activity during the year under consideration which is an admitted and undisputed fact between rival parties. The assessee has outstanding creditors reflected of Rs. 1.13 crores as per details with AO as at 31st March, 2009 of which additions were made to the tune of Rs. 22,47,378/- by the AO u/s 41(1) as the assessee has not been able to prove the nature of these creditors which were stagnant for last so many years nor the genuineness of the transactions was proved . The assessee could not produce confirmation from these parties nor the assessee could prove that these liabilities are existing to be payable and has not ceased to exist. The assessee counsel has also expressed the assessee’s inability to produce any further documents etc., with respect to these creditors for proving genuineness and bona fide of these creditors and also to establish nexus with the business transactions of the assessee. Hence , in view of the inability of the assessee in proving that the liability of Rs. 22,47,378/- is still existing to be payable to the creditors as at 31st March, 2009 and the status quo as was there before the authorities below is still existing even before us as to the contentions of the assessee with no changes in factual matrix, we are not inclined to interfere with the concurrent findings of the authorities below as it could not be shown by the assessee that the said finding of lower authorities was perverse or requires our interference due to any special circumstances or changed facts before the tribunal . The assessee did not file loan confirmations even before us nor explained the nature of these creditors and their nexus with business of the assessee even before us. Thus, the appeal of the assessee with regard to this issue stands dismissed. The assessee fails on this ground.We order accordingly.

Second issue is with regard to the unsecured loans of Rs. 16,60,000/- appearing in the balance sheet as at 31st March, 2009 . The assessee was asked by the AO to furnish confirmation of loans and prove authenticity and genuineness of these lenders . The assessee could not file loan confirmations and assessee also could not discharge the burden as cast u/s. 68 of the Act. The assessee also did not furnish current address of these lenders. The AO made additions of Rs. 16,60,000/- u/s. 68 of the Act vide assessment order dated 22-12-2011 passed u/s 143(3). The assessee filed first appeal before the learned CIT-A and made following contentions:-

Aggrieved by the appellate order of learned CIT(A) , the assessee has come in appeal before the tribunal. Ld. A.R submitted that the opening balance and closing balance of the loan was same as per audited Balance Sheet as at 31-03-2008 and 31-03-2009 and no loan were raised during the year under consideration and hence addition could not be made in this year u/s. 68 of the Act, he drew or attention to page 13 of the paper book wherein audited Balance Sheet/schedule 2 of the assessee is placed. Ld. D.R on the other hand submitted that learned CIT(A) has already directed A.O to reverify whether the said loans pertained to earlier years . It was submitted by learned DR that it is not known how the assessee is prejudiced by the directions of learned CIT(A) to the AO to reverify contentions of the assessee. On being asked by the bench , Ld. A.R submitted that the assessee has no objection if this plea of the assessee that it has not accepted any loan during the subject year under consideration can be verified by the A.O and hence it was prayed that no addition can be made u/s. 68 of the Act.

We have considered rival contentions and we have perused the material on record . We have gone through the assessee’s audited Balance sheet as at 31-03-2009 and 31-03-2008 which is filed as part of the paper book at page no. 13(schedule2 to balance sheet is details of unsecured loans from shareholders). We have observed that the assessee has raised loans from share holders of Rs. 16,60,000/- where in the balance as 31st March, 2008 and 31st March, 2009 was constant at Rs. 16,60,000/- and there is no change in the balances of unsecured loan during the year under consideration. Hence, prima facie we are in agreement that there is no movement in the said unsecured loans from shareholder which remained stagnant during the year at Rs.16,60,000/-. However, this contention of the assessee require verification of the books of accounts of the assessee by the AO to see any movement during the year which can be verified only after going through the books of accounts and may not be discernible from the face of the Balance Sheet and hence we are inclined to restore this matter/issue to the file of the A.O for necessary verifications and de-novo determination of the issue on merits in accordance with law after verification of books of accounts. Needless to say proper and adequate opportunity of being heard shall be provided to the assessee by the A.O in accordance with principles of natural justice in accordance law in de-novo proceedings. We order accordingly.

In the result, appeal of the assessee in 2009-10 is partly allowed for statistical purposes.