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Income Tax Appellate Tribunal, ‘SMC’ ‘B’ BENCH, CHENNAI
Before: Shri A. Mohan Alankamony
आदेश / O R D E R This appeal by the Revenue is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-4, Chennai dated 23.08.2016 in ITA No.30/2015-16/A.Y. 2012-13/CIT(A)-4 for the assessment year 2012-13 passed u/s.250(6) r.w.s.143(3) of the Act.
At the time of hearing none appeared on behalf of the assessee. It is pertinent to mention that when the case came up for hearing on 04.04.2017, the Ld.AR Shri V. Ravichandran sought time for filing certain details. Hence the case was adjourned to 05.06.2017. However none appeared on that date.
Hence the case was posted for hearing on 07.06.2017. On 07.06.2017 also none appeared on behalf of the assessee.
Therefore the Bench decided to proceed with the hearing ex- parte.
The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Ld.CIT(A) has erred in deleting the addition made by the Ld.AO on account of bogus sundry creditors amounting to Rs.38,65,030/-.
The brief facts of the case are that the assessee is an individual engaged in business, filed his return of income for the assessment year 2012-13 on 22.09.2012 admitting his income as Rs.8,63,380/-. The case was taken up for scrutiny under CASS and finally order U/s.143(3) of the Act was passed on 30.03.2015, wherein the Ld.AO assessed the income of the assessee at Rs.47,28,410/- by treating certain sundry creditors to be bogus.
During the course of scrutiny assessment, it was observed by the Ld.AO that, there was huge increase in sundry creditors.
The aggregate sundry creditors for the relevant previous year was Rs.2,21,02,936.91. To verify the genuineness of the sundry creditors, the Ld.AO sent letters to 15 sundry creditors after short listing from the long list of sundry creditors. With respect to 4 sundry creditors as detailed herein below, the letters were returned ‘un-served’ 1) M/s. Maa Bhagwati Sales Rs. 6,28,327/- 2) M/s. North Star Tubes (P) Ltd Rs.11,33,406/- 3) M/s. Shivam Enterprises Rs.21,03,297/- 4) M/s. Tirupati Enterprises Rs. 9,92,398/- ------------------------ TOTAL Rs.48,57,428/- -------------------------
On further scrutiny, it was revealed that the sundry creditors to the extent of Rs.38,65,030/- was nonexistent and therefore the Ld.A.O added the same to the income of the assessee and accordingly the income of the assessee was assessed at Rs.47,28,410/-. The finding of the Ld.AO is reproduced herein below for reference:- “3.3 On its examination, it is seen that in respect of sundry creditor, of M/s. Maa Bagawathi Steels listed in item No.(i), in para 3.1 above, the transactions have continued in the subsequent year and the payments have not been made but squared up through a journal entry of Rs.6,28,327/-. Even as on 01/04/2010, it is only an opening balance and during the financial year 2012-13, it has been squared up by way of a journal entry to I King Steels I. Hence the long duration of credit and lack of payment determines the transaction to be bogus in nature.
3.4 In respect of M/s. North Star Tubes Private Limited listed in item No.(ii) in para 3.1 above, it is not clear as to how such a huge credit of RS.11 ,33,406/- which is comprised in the opening balance as on 01/04/2011 has not been paid even as on 31/03/2013. In the financial year 2013-13, only a part payment of Rs.1,91,312/- is made on 11/07/2013. The long duration of unpaid credit, particularly when it is of such magnitude, remaining as balance for several years, is against the test of human probabilities. Hence, it requires to be concluded that the assessee had either settled the amounts towards purchases outside the books of account or the creditor is only an accommodator of bills and not supplier of goods. Either way, the balance of RS.11,33,406/- is non-existent as on 31/03/2012 and hence added to the taxable income of the assessee.
3.5 In respect of M/s. Shivam Enterprises listed in item No.(iii) in para 3.1 above, the feature is similar to that of M/s. North Star Tubes Private Limited. The opening balance as on 01/04/2010 has not been paid even as on 01/04/2013. In the financial year 2013-14, a paltry sum of RS.1 ,75,000/- has been paid. On the same aspect that such long duration of credit cannot exist in this line of trade, and while the letters issued have also returned unserved, it is clear that M/s. Shivam Enterprises is an accommodator of bills and as on 01/04/2012, the balance due amounting to Rs.21,03,297/- to him does not actually exist.
3.6 In respect of M/s. Tirupathi Enterprises listed in item No.(iv) in para 3.1 above since the transactions have been undertaken subsequently through banking channels and while the transaction is live, the version of the assessee is found to be acceptable.”
On appeal, the Ld.CIT(A) opined that the Ld.AO had failed
to discharge the onus cast upon him and his findings were based on mere surmises and conjunctures, therefore devoid of merit.
Further by holding that the provisions of Section 41(1) of the Act were wrongly invoked, the Ld.CIT(A) deleted the addition made by the Ld.A.O. The Ld.CIT(A) arrived at such decision because of the following reasons:-
1) The assessee vide letter dated 18.02.2015 had submitted copies of the purchase invoices, transportation receipts, proof for the goods being passed through check post, copies of the ledger folios in respect of the transaction and the bank statements for having made the payments to sundry creditors.
2) Thus the primary onus on the part of the assessee has been complied with.
3) The Ld.AO had not cross verified the authenticity of the purchase bills and other documents provided by the assessee. Thus the Ld.AO had failed to fulfill the onus shove on him.
4) The finding of the Ld.AO that the sundry creditors were bogus and nonexistent was based on the observation that the sundry creditors were outstanding for long duration and squared up through journal entries, which does not have merit.
Before us the Ld.DR submitted that the Ld.AO had taken
effort to send letters to the sundry creditors for obtaining confirmation statement. Further he had analyzed the sundry creditors based on the information provided by the assessee such as the assessee’s ledger account, bills and invoices etc., and had come to a conclusion that the transaction was not genuine. Thus the Ld. AO had complied with the onus thrust on him and had arrived at a reasonable conclusion. He therefore submitted that the orders of the Ld.AO may be reinstated.
We have heard the arguments advanced by the Ld.DR. As submitted by the Ld.DR, the Ld.AO had ensured all means
available before him in order to verify the transaction. The assessee has not made any serious effort to prove the genuineness of the sundry creditors with whom he has close
7 association. Therefore, we find merit in the order of the Ld.AO. However, in the interest of justice we remit back the matter to the file of the Ld.CIT(A) in order to verify the genuineness of the documents submitted before the Revenue authorities after obtaining a remand report from the Ld.A and thereafter pass appropriate order in accordance with merit and law.
In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the court on the 08th June, 2017.