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Facts
The assessee, M. Sons Gems N Jewellery Pvt. Ltd., engaged in the gems and jewellery export business, claimed Rs. 5,75,38,704/- as bad debts under Section 36(1)(vii), asserting failed recovery efforts after a Delhi High Court mediation. The Assessing Officer (AO) disallowed this for lack of sufficient evidence. The assessee also disputed disallowances for loss on sale of assets, Section 43B liabilities, various expenses, and additions for advances from customers (under Section 68) and trade payables (under Section 68), which were largely confirmed by the CIT(A). Grounds of appeal 1-4, challenging the assessment's jurisdiction and process, were not pressed.
Held
The Tribunal allowed the bad debt claim (Ground 5) for statistical purposes, remitting it to the AO for verification that the amounts were previously offered as income. It allowed the claim for considering a revised computation (Ground 6), clarifying that the Goetze India decision does not restrict Tribunals from entertaining such claims. However, the claim for business loss on sale of assets (Ground 7) was dismissed as the return claiming loss was not filed under Section 139(1). Additions under Section 43B (Ground 8), advances from customers (Ground 10), and trade payables (Ground 11) were set aside and remitted to the AO for de novo adjudication with specific directions for verification and compliance. The addition for expenses (Ground 9) was partly confirmed for Rs. 1,30,032/-, and the remitted portion of Rs. 3,71,300/- was upheld. The claim for levying costs on authorities (Ground 12) was dismissed.
Key Issues
Whether bad debts claimed under Section 36(1)(vii) required proof of recovery efforts; the scope of the Tribunal's power to consider revised computations not filed with the original return (Goetze India case applicability); allowability of business loss when the return claiming such loss was not filed under Section 139(1); validity of disallowances under Section 43B; and the justification for additions under Section 68 concerning advances from customers and trade payables due to non-verification.
Sections Cited
143(3), 36(1)(vii), 153C, 143(2), 251, 141, 43B, 71, 72, 139(1), 68, 133(6), 145, 155, 28, 254
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Income Tax Appellate Tribunal, DELHI BENCH, ‘F’: NEW DELHI
Before: SHRI ANUBHAV SHARMA&
ORDER PER AMITABH SHUKLA, AM,
The captioned appeal has been preferred by the assessee against order dated 26.03.2019 of the ld. Commissioner of Income Tax(Appeals)-27, New Delhi [hereinafter referred to as ‘ld. CIT(A)’] arising out of assessment order dated 29.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) pertaining to Assessment Year 2015-16.
The assessee has raised following grounds of appeal contesting the order of Ld. First Appellate Authority:-
“1. That both the lower authorities were not justified in making and confirming the assessment order u/s 143(3) since the same was not in accordance with the Provisions of the Income Tax Act, 1961 and is illegal on account of various grounds which are as under: a) Order passed without jurisdiction and; b) Assessment required to be completed u/s 153C and; c) No reasons recorded for notice u/s 143(2) 2. That the Ld. CIT (A) was not justified in giving the finding that NA additional evidence were filed by the assessee. The same were Furnished as per the directions of the Ld. CIT (A).
That the Ld. CIT (A) was not justified in travelling beyond the powers given u/s 251 of the Tax Act, 1961 in giving various directions which are not permissible.
4. That the Assessment order passed by the LD. AO and sustained by the CIT (A) deserves to be quashed as void ab initio since the same was passed a) without providing proper opportunity of hearing; and b) by ignoring the article 141 of the Constitution of India; and c) by not following the orders of the Courts and Tribunals; and d) in contravention of various CBDT Instructions; and e) without following the Principals of Natural Justice; and f) without disposing off the Objections raised by the assessee; and g) without application of mind and biasly. 5 That under the facts and circumstances of the case, both the lower authorities were not justified in making and sustaining the addition of Rs. 5,75,38,704/- for disallowance of bad debts claimed by the assessee in accordance with the provisions of Section 36(1) (vii) and the same deserves to be deleted. 6 That under the facts and circumstances of the case, both the low authorities were not justified in not accepting the revised computation of income filed during the assessment proceedings. Page 2 of 22
7. That under the facts and circumstances of the case, both the lower As authorities were not justified in making and sustaining the addition of Records Rs. 44,15,227/- for disallowance of loss on sale of assets.
8. That under the facts and circumstances of the case, the Ld. AO was As Act not justified in making an addition of Rs. 11.94.013/- u/s 43B of the giving the directions to the Ld. AO for verification.
9. That under the facts and circumstances of the case, Ld. AO was not justified in making and addition of Rs. 5.01.332/- on account of various expenses payable and Ld. CIT (A) was not justified in giving the following directions: a) In respect of Rs. 3,71,300/- by setting aside the issue to the Ld. AO for verification for the same beyond his powers; and b) In respect of balance amount of Rs. 1,30,032/- by confirming the addition 10. That under the facts and circumstances of the case, both the lower authorities were not justified in making and sustaining the addition of Rs. 50,96,137/- on account of addition of advance from customers. 11. That under the facts and circumstances of the case, both the lower authorities were not justified in making and sustaining the addition of Records Rs. 4,25,38,806/- on account of addition of trade payables. 12 That under the facts and circumstances of the case, appropriate costs to be levied on both the authorities for harassment by making and sustaining the high pitch assessment and also for not following the provisions of the Income Tax Act, 1961 and various orders of the Supreme Court of India, High Courts and Tribunals. 13 That the appellant craves leave to add, amend, alter or withdraw any ground of appeal
at the time of hearing with the permission of the Hon'ble ITAT, Delhi Bench.
3. At the outset, the ld. Counsel submitted that it is not pressing ground of appeal no.1 to 4, consequently, ground of appeal no. 1 to 4 are dismissed as not being pressed.
4. Ground of appeal no.5 is regarding the addition of Rs.5,75,38,704/- made by the ld. Assessing Officer invoking the provisions of section 36(1)(vii) of the Act and its confirmation by the ld. CIT(A) and ground of appeal no.6 is regarding the non-acceptance of the revised computation qua bad dates.
5. Brief factual matrix of the case is that the assessee company has been engaged in the business of trading of gems and jewellery including its exports. During the year under consideration, the assessee had claimed an amount of Rs.5,75,38,704/- as bad debts under section 36(1)(vii) of the Act. Before the Assessing Officer, the assessee had further claimed that due to some clerical error an amount of Rs.16,40,175/- was omitted to be added back to the computation of income. In support of its claim for bad debts, the assessee had submitted that amounts qua two entities M/s MSM Gems LLC and M/s Allure Jewells LLC were claimed as bad debts in view of mediation order of the Hon’ble High Delhi High Court as the assessee’s efforts to recover even after mediation proceedings failed, the assessee was compelled to claim the amounts as bad debts under section 36(1)(vii). The ld. Assessing Officer argued that the assessee has not been abele to adduce sufficient evidences in support of its claim of making recovery and therefore proceeded to make the impugned addition of Rs.5,75,37,804/-. Page 4 of 22 The ld. CIT(A) found deficiencies in the settlement agreement between the assessee and the other parties qua mediation proceedings before the Hon’ble Delhi High Court. He accordingly proceeded to confirm the addition of the ld Assessing Officer. As regards the issue of rejection of revised computation by the ld. Ld. Assessing Officer, he concurred with the reliance of the Assessing Officer on the decision of the Hon’ble Apex Court in the case of Goetze India Pvt. Ltd.
6. Per Contra, ld. CIT-DR, Ms. Monika Singh, vehemently argued in favour of the orders of the lower authorities and requested for confirming the order of the ld. CIT(A).
The ld. Counsel for the assessee reiterated its arguments taken before the ld. CIT(A) by placing reliance upon the documents produced therein. The ld. Counsel for the assessee submitted that it had made export sales in Financial Year 2005-06 and 2006-07 and that the bad debts claimed had a direct relation with the impugned sales. It was submitted that the basic pre-condition of making bad debts only qua receipts which have been offered as income in previous year was totally satisfied. As regards contention that the assessee had not made adequate efforts for recovery, the ld. Counsel for the assessee invited our attention to the decision of the Hon’ble Apex Court in the case of TRF Ltd. 323
Page 5 of 22 ITR 397 (SC), wherein, Hon’ble Supreme Court has held that post amendment of section 36(1)(vii), it was not necessary for the taxpayer to establish irrecoverability of debts to justify its claim of deduction under section 36(1)(vii) of the Act. Reference was also invited to CBDT Circular No.12 of 2016 dated 30.05.2016, if it is written off is irrecoverable by assessee. The ld. Counsel argued that the impugned amount of Rs.5,75,37,804/- is totally allowable u/s 36(1)(vii) of the Act in accordance with the ratio laid down by the Hon’ble Apex Court in the case of TRF Ltd. (supra).
We have heard rival submissions in the light of material available on records. At this stage, we deem it necessary to reproduce the statutory provisions governing section 36(1)(vii) and 36(2) of the Act.
“36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28— …………………………………………………………………………… (vii) subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year: Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful
Page 6 of 22 debts account made under that clause: Provided further that where the amount of such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof becomes irrecoverable or of an earlier previous year on the basis of income computation and disclosure standards notified under sub-section (2) of section 145 without recording the same in the accounts, then, such debt or part thereof shall be allowed in the previous year in which such debt or part thereof becomes irrecoverable and it shall be deemed that such debt or part thereof has been written off as irrecoverable in the accounts for the purposes of this clause. Explanation 1.—For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee. Explanation 2.—For the removal of doubts, it is hereby clarified that for the purposes of the proviso to clause (vii) of this sub-section and clause (v) of sub-section (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under clause (viia) and such account shall relate to all types of advances, including advances made by rural branches;
(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply— (i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or Page 7 of 22 part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee; (ii) if the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made; (iii) any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year), but the Assessing Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year; where any such debt or part of debt is (iv) written off as irrecoverable in the accounts of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year) and the Assessing Officer is satisfied that such debt or part became a bad debt in any earlier previous year not falling beyond a period of four previous years immediately preceding the previous year in which such debt or part is written off, the provisions of sub-section (6) of section 155 shall apply; (v) where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed Page 8 of 22 unless the assessee has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause.
A perusal of the above statutory prescription provides that an assessee is entitled u/s 36(1)(vii) of the Act to claim an amount as bad debts subject to satisfaction of condition in section 36(2). The assessee has placed on records through its paper book to adduce that the amount of receipts have been offered qua sale proceeds made in FY 2005-06 and 2006-07 respectively. We have noted that Hon’ble Apex Court in its decision in the case of TRF Limited has observed as under:-
“…. 36.(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28-- (i) to (vi) xxxx xxxx xxxx (vii) subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year." This position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer's account is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This Page 9 of 22 exercise has not been undertaken by the Assessing Officer. Hence, the matter is remitted to the Assessing Officer for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off….”
We have noted that the allowance of bad debts is required to be made in the year in which it is claimed by an assessee. We have, however noted that the impugned allowance is subject to filing of necessary evidences in this regard by the assessee qua disclosure of income in earlier years. Before us, the assessee has filed a paper book indicating the impugned amounts in respect of which bad debts have been claimed towards disclosed as receipts in AY 2006-07 and 2007-08 and thus offered as income for the respective years. We have noted that the ld. AO has made addition on the premise that efforts for recovery were not made by the assessee. In the decision of Hon’ble Apex Court in the case of TRF (supra), it is held that bad debts are to be allowed once offered as income in any year. Accordingly, in respectful compliance to the decision of the Hon’ble Supreme Court in the case of TRF Ltd. (supra), we are of the considered view that the assessee is entitled for its claim of deduction u/s 36(1)(vii). We therefore set-aside the order of the lower authorities and direct the ld. AO to conduct a limited verification into the Returns of Income of the assessee AY 2006- 07 and 2007-08 and ascertain as to whether the impugned amounts qua which bad debts have claimed u/s 36(1)(vii) were indeed offered as Page 10 of 22 income for the said years. In the event of assessee having been offered the same, then to delete the addition of Rs.5,75,37,804/-. The ground of appeal no.5 raised by the assessee is therefore allowed for statistical purposes.
As regards the issue raised by the assessee through ground of appeal no.6 regarding non-consideration of its revised computation filed during the assessment proceedings,
12. We have noted that the Ld.AO has denied the claim by placing reliance upon the decision of Hon’ble Apex Court in the case of Goetz India. As regards assessee’s revised claims, the Ld.CIT(A) in his order held that claims made in the Return of Income can only be considered for allowance. He has further proceeded to hold that the assessing officer does not have any power to entertain any claims not made in the Return of Income and further that the CIT(A) enjoys only those powers which are available to an assessing officer. We have noted that the Ld. AO holds the view that in view of Hon’ble Apex Court’s decision in the case of Goetze India assesse’s claim cannot be accepted. The Ld. First appellate authority has concurred with the views of the Ld. AO. The question that thus emerges is whether Hon’ble Apex Court’s decision in the case of Goetze India would be applicable or not. At this Page 11 of 22 stage it is necessary to examine the ratio laid down by their Lordships in the case of Goetze India Supra reproduced herein below:-
“…. The question raised in this appeal relates to whether the appellant assesse could make a claim for deduction other than by filing a revised return. The assessment year in question was 1995-96. The return was filed on 30-11-1995, by the appellant for the assessment year in question. On 12- 1-1998, the appellants ought to claim a deduction by way of a letter before the assessing officer. The deduction was disallowed by the assessing officer on the ground that there was no provision under the Income Tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return.
3. This appellant's appeal before the Commissioner (Appeals) was allowed. However, the order of the further appeal of the department before the Income Tax Appellate Tribunal was allowed. The appellant has approached this court and has submitted that the Tribunal was wrong in upholding the assessing officer's order. He has relied upon the decision of this court in National Thermal Power Company Ltd. v. CIT (1998) 229 ITR 383, to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal.
The decision in question is that the power of the Tribunal under section 254 of the Income Tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income Tax Appellate Tribunal under section 254 of the Income Tax Act, 1961. There shall be no order as to costs…..”.
A plain reading of the above shows that no doubt their Lordship have mandated that claims of the assessee cannot be entertained by the Ld. AO, which are made otherwise then through a Return of Income – original or revised, however they have excluded consideration of such claims made before the tribunal. Thus, a tribunal would be well within its rights to consider entertaining such claims. The claim of the assesse Page 12 of 22 is therefore directed to be accordingly considered. The ground of appeal no.6 raised by the assessee is therefore allowed.
Ground of appeal no.7 raised by the assessee is regarding disallowance of an amount of Rs.44,15,227/- on account of loss on sale of assets. The assessee had made the impugned claim by filing the revised computation during assessment proceedings. The ld. AO had disallowed the impugned claim as the Return of Income was not filed u/s 139(1) of the Act. The ld. CIT(A) concurred with the findings of the AO holding that the impugned claim was made by revising the belated return. While doing so he relied upon his decision that the benefit of decision of Hon’ble Apex Court in the case of Goetze India was not available.
Per Contra, ld. DR relied upon the decision of lower authorities.
The ld. Counsel for the assessee reiterated the argument taken before the lower authorities.
We have considered rival submissions in the light of materials available on record. We have in the preceding para held that the decision of Hon’ble Apex Court permits this Tribunal to consider any claims not made in the Return of Income. We have however also noted that it is settled principal of law that if the provisions of the Act are Page 13 of 22 unambiguously clear, a different interpretation cannot be made. In the instant case, the issue at hand is allowance of claim of business loss to the assessee. We have noted that the same is covered by provisions of section 71 r.w.s. 72 of the Act. We have noted that statutory prescription of the Act governing the allowance of business loss clearly provide that the same is allowable only if the Return of Income claiming loss has been filed under section 139(1) of the Act. In the instant case, the same has admittedly been not done by the appellant assessee and the impugned loss was claimed by way of revised computation of income filed during assessment proceedings. The reliance of appellant assessee on the decision of Hon’ble jurisdictional High Court in the case of Jai Parabolic Springs Ltd. 306 ITR 42 has been found to be thus distinguished on facts. The assessee therefore shall not be entitled for the claim of the impugned business loss of Rs.44,15,227/-. Ground of appeal no.7 raised by the assessee is therefore dismissed.
Ground of appeal no. 8 pertains to disallowance made by the ld. AO u/s 43B of the Act. We have noted that the ld. AO had noted statutory liability of Rs.2,49,581/- on account DVAT, Rs.4,40,730/- on account of EPF and Rs.5,03,702/- on account of TDS aggregating to Rs.11,94,513/- As per para-4 of the order of the ld. AO, the appellant had admitted that the said liabilities are payable and could not be paid Page 14 of 22 because of acute financial crisis. Before us, the ld. Counsel for the assessee submitted that these amounts have been added back by it in its computation of income and hence were allowable.
Per Contra, the ld. DR observed that these amounts have been rightly added back by the ld. AO.
The ld. Counsel for the assessee argued that the ld.CIT(A) had actually set-aside the matter to the file of the ld. AO with the directions of verification from records and to draw consequent conclusions. It was submitted that after a long gap of nearly five year no effect has been given by the Revenue authorities.
We have considered rival submissions in the light of material available on record. Non-compliance to the directions of a superior appellate authority by an Assessing Officer is a case of serious concern and cannot be summarily ignored. On the impugned matter, we have also noted that the ratio laid down by Hon’ble Apex Court in the case of Checkmate Services may also be applicable qua some of the disputed amounts. Be that as it may be in the interest of justice, we direct the ld. AO to adjudicate the matter de novo considering documents and evidences placed by the assessee as well as the ratio laid down by Hon’ble Apex Court in the case of Checkmate Services by way of a Page 15 of 22 speaking order and after giving due opportunity of being heard. The ld. AO shall ensure that an order in this regard is passed within three months of the receipt of this order by his PCIT concern. Any deviation to these directions shall be adversely viewed. The ground of appeal no.8 raised by the Revenue is therefore allowed for statistical purposes.
Ground of appeal no.9 is regarding the action of ld. CIT(A) in respect of addition of Rs.5,01,332/- confirming the addition made by the Ld. AO on account of various expenses. The ld. AO had made the impugned additions on the premise that the assessee had failed to provide any evidence to substantiate its claims. The ld. CIT(A) confirmed the addition of Rs.1,30,032/- and remitted Rs.3,71,300/- to the ld. AO for verification. As regards Rs.3,71,300/-, the ld. CIT(A) had considered the evidences produced during appellate proceedings indicating that the impugned amount was added back by the assessee for want of requisite TDS. Consequently, the ld. CIT(A) remitted the issue to the Ld. AO for verification and a decision. As regards the addition of Rs.1,30,032/-, the ld. CIT(A), added the same since there was no evidence forthcoming from the assessee.
Per Contra, the ld. DR relied upon the orders of the lower authorities.
The ld. Counsel for the assessee reiterated the arguments taken before the lower authorities.
We have heard rival submissions in the light of material available on record. Upon consideration of the facts of the case, we do not find any infirmity in the decision of the ld. CIT(A) to have remitted the issue to the ld. AO for verification and/or added unexplained amounts. Accordingly, we are of the considered view that as the decision of the ld. CIT(A) does not call for any interference at this stage, the same is confirmed and the ground of appeal no.9 raised by the assessee is dismissed.
Ground of appeal
no.10 is regarding addition of Rs.50,96,137/- made by the ld. AO and its confirmation by the ld. CIT(A). the Ld. AO had made the impugned addition. The ld. AO has discussed the issue on page-5 of his order. An amount of Rs.62,96,137/- was noted as advance from customers. Before the AO under section 133(6), only amount aggregating to Rs.12 lakhs could be satisfied by the assessee. Consequently, the ld. AO added the amount of Rs.50,96,137/- under section 68 of the Act. The ld. CIT(A) attempted to verify the same during the appellate proceedings by asking the assessee to file requisite details required under section 68. Before the ld. CIT(A), assessee
Page 17 of 22 submitted that the impugned amounts have been duly accepted by the Revenue during Assessment Years 2011-12 to 2014-15 and hence cannot be added back. The said reply of the assessee has been considered by the ld. CIT(A) on page 33 and 34 of his order.
Per Contra, the ld. DR relied upon the orders of the lower authorities.
The ld. Counsel for the assessee reiterated the arguments made before lower authorities.
We have heard rival submissions in the light of material available on record. The impugned advances from customers were appearing as liability in the financials of the assessee. Section 68 casts responsibility upon the taxpayer to establish identity, creditworthiness and genuineness of transactions qua liabilities appearing in its financial during a particular year. We have noted from the order of the ld. AO that the assessee did not discharge this responsibility before him. We have also noted that even before the ld. CIT(A), the assessee merely harped upon the issue of the impugned liabilities having connected with earlier years and that therefore they cannot be added. We have noted that apart from making this bald statement, the assessee did not come forward with any specific details to establish that impugned liabilities
Page 18 of 22 were indeed pertaining to earlier years. Thus, non-verification of transactions lies at the cores of impugned addition. Be that as it may be, we are of the considered view that ends of justice would be met if the issue is remitted to the file of the ld. AO for readjudication denovo. Accordingly, we set-aside the order of the lower authorities and direct the ld AO to readjudicate the matter of trade advances of Rs.50,96,137/- de novo, in accordance with law and by way of passing a speaking order. It shall be bounden upon the assessee to comply with the statutory notices issued by the AO. Any non-compliance may be adversely viewed. The ground of appeal no.10 raised by the assessee is allowed for statistical purposes.
Ground of appeal no.11 is regarding addition of Rs.4,25,38,806/- made by the ld. AO and its confirmation by the ld. CIT(A). the Ld. AO had made the impugned addition. The ld. AO has discussed the issue on page-6 of his order. Before the AO under section 133(6), only amount aggregating to Rs.26,96,891/- could be satisfied by the assessee. Consequently, the ld. AO added the amount of Rs.4,25,38,806/- as unconfirmed liabilities. The ld. CIT(A) attempted to verify the same during the appellate proceedings by asking the assessee to file requisite details. Before the ld. CIT(A), assessee submitted that it did not get sufficient time by the AO to satisfy its queries. The said reply of the Page 19 of 22 assessee has been considered by the ld. CIT(A) on page 33 and 34 of his order. The ld. CIT(A) noted that the assessee has failed to discharge his responsibility even during appellate proceedings. Consequently, he added the addition made by the ld. AO.
Per Contra, the ld. DR relied upon the orders of the lower authorities.
The ld. Counsel for the assessee reiterated the arguments made before lower authorities.
We have heard rival submissions in the light of material available on record. The impugned advances from customers were appearing as liability in the financials of the assessee. We have noted from the order of the ld. AO that the assessee did not discharge this responsibility before him. We have also noted that even before the ld. CIT(A), the assessee failed to justify the impugned entries with any demonstrative evidences . Thus, non-verification of transactions lies at the cores of impugned addition. Be that as it may be, we are of the considered view that ends of justice would be met if the issue is remitted to the file of the ld. AO for readjudication de novo. Accordingly, we set-aside the order of the lower authorities and direct the ld AO to readjudicate the matter of trade advances of Rs. 4,25,38,806/- de novo, in accordance with law
Page 20 of 22 and by way of passing a speaking order. It shall be bounden upon the assessee to comply with the statutory notices issued by the AO. Any non-compliance may be adversely viewed. The ground of appeal no.10 raised by the assessee is allowed for statistical purposes.
Ground of appeal no.12 is regarding the demand for imposition of cost upon lower authorities for harassment and making high pitched assessments while not complying with the decisions of Tribunals, High Courts and Hon’ble Apex Court. The ground raised by the appellant has been found to be general in nature and hence dismissed.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 17th December, 2025.