AYSHA TRADERS,CHENNAI vs. ITO, OOTY

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ITA 1569/CHNY/2016Status: DisposedITAT Chennai24 November 2016AY 2011-124 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that since the AO accepted the purchases and the creditor was hospitalized and later died, the AO should have summoned the creditor's books of accounts to verify the genuineness of the purchase. As the AO did not conduct a thorough inquiry, the issue was remitted back to the AO for re-examination.

What were the facts?

The assessee had a trade credit of Rs. 17,46,500/- in the name of M/s. Thomas Brothers. The Assessing Officer (AO) treated this as unexplained credit as the creditor's representative stated the amount was for pepper supply but it was not reflected in the creditor's books. The CIT(A) confirmed the AO's order.

What were the issues?

Whether the trade credit can be treated as unexplained income when the creditor's representative confirmed the transaction but the books of the creditor were not examined by the AO, especially after the creditor's demise?

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC/C” BENCH, CHENNAI

Before: SHRI CHANDRA POOJARI

For Respondent: Mr. Mr. Ashish Tripathi,JCIT, D.R
Hearing: 24.11.2016

आदेश / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

1.

This appeal is filed by the Assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-3, Coimbatore dated 26.02.2016 in dated 26.02.2016 passed under Sec.143(3) of the Act.

2.

The Main grievance of the assessee in this appeal is that the Ld. CIT (A) erred in confirming the assessment of `17,46,500/- representing the trade credit relatable to M/s.Thomas Brothers for supply of pepper in two invoices/bills dated 14.02.2011 and 04.01.2011 as income of assessee in the computation of taxable total income without assigning proper reasons and justification.

3.

The facts of the issue are that there was a credit of `17,46,500/- in the name of M/s.Thomas Brothers. The AO summoned the creditor Mr.V.J.Thomas. In response to notice issued by the AO, his brother Mr.V.J.Joseph appeared stating that Mr.V.J.Thomas was unwell and admitted to the hospital.

Mr.V.J.Joseph submitted before the AO that Mr.V.J.Thomas supplied pepper to the assessee and the amount outstanding is relating to purchase of pepper from Mr.V.J.Thomas. However, the said amount was not shown as receivable in the books of accounts of M/s.Thomas Brothers. Hence, the AO treated it unexplained credit in the hands of assessee i.e Mr.V.J.Thomas. Aggrieved, the assessee carried the appeal before the Ld.CIT(A). On appeal, Ld.CIT(A) confirmed the order of AO. Against this, the assessee is in appeal before us.

4.

The ld.A.R submitted that this is a trade creditor outstanding regarding purchase of pepper and the AO accepted the purchases and also the purchaser accepted the corresponding credits to be considered as genuine and he cannot treat it as unaccounted credit u/s.68 of the Act. If the AO not agreed with the submissions of Mr.V.J.Joseph, then he should have summoned the relevant documents from the creditor and examined it. According to him, in the present case, it is an admitted fact that Mr.V.J.Thomas was hospitalized and thereafter he died. It is impossible to get any confirmation Mr.V.J.Thomas, as such the books of accounts of M/s.Thomas Brothers may be summoned and it is to be examined whether it is genuine purchase or not.

5.

On the other hand, ld.D.R relied on the order of the lower authorities.

6.

We have heard both the parties and perused the material on record. We find force in the argument of the ld.A.R that if the AO accept the purchase made from M/s.Thomas Brothers and the person concern was hospitalized, the AO should have summoned the books of accounts of M/s.Thomas Brothers and examined whether the purchase was actually made or not and thereafter, he could have decided the issue. Since the AO had not carried on the enquiry to the logical end, in our opinion it is appropriate to remit to the file of AO to re-examine the issue after giving opportunity of hearing to the assessee. Accordingly, this issue is remitted to the file of AO for fresh consideration.

7.

In the result, the appeal of assessee is partly allowed for statistical purposes.

Order pronounced on 24th November, 2016 at Chennai.

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