GATEWAY ENTERPRISES,CHENNAI vs. ITO, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 5, Chennai, dated 24.02.2016 and pertains to assessment year 2007-08.

Shri M. Gopichand, the Ld. representative for the assessee, submitted that the assessee-firm is engaged in the business of trading in accessories for leather goods and garments. In the liability side of the balance sheet, an amount of `38,83,905/- was shown against trade creditors. According to the Ld. representative, Assessing Officer called for confirmation letters from sundry creditors. The assessee could not produce any confirmation letter from M/s Mehta Elastic Industries to the extent of `1,37,750/-. In the absence of any material, the Assessing Officer found that the transaction was not genuine. Accordingly, he added the sum of `1,37,750/- to the total income of the assessee. According to the Ld. representative, the assessee purchased goods from M/s Mehta Elastic Industries. In fact, the assessee was purchasing goods from the said Mehta Elastic Industries from assessment year 1998-99. The opening balance as on 01.04.2006 was `1,56,250/-. The assessee has paid a sum of `19,500/- by cheque and the closing balance was `1,37,750/-. According to the Ld. representative, the assessee has produced copy of bills and ledger. Inspite of that, the CIT(Appeals) has confirmed the order of the Assessing Officer. M/s Mehta Elastic Industries has filed conformation letter, therefore, according to the Ld. representative, the CIT(Appeals) is not correct in confirming the addition made by the Assessing Officer.

On the contrary, Shri Supriyo Pal, the Ld. Departmental Representative, submitted that the so-called ledger copy shows that a sum of `19,500/- was paid by cheque. The ledger copy does not indicate cheque number and other bank details. According to the Ld. D.R., the assessee has also filed copies of the invoices which contain no details of M/s Mehta Elastic Industries in Surat, therefore, the payment has to be made only through banking channel. In the absence of any details, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. Referring to the confirmation letter said to be filed by M/s Mehta Elastic Industries, the Ld. D.R. submitted that the confirmation letter was in fact prepared by the assessee, and at the bottom of the confirmation letter, a rubber stamp of Mehta Elastic Industries was affixed and somebody else has signed as proprietor.

We have considered the rival submissions on either side and perused the relevant material available on record. The assessee has filed copies of ledger account, bills/invoices before the Assessing Officer and the CIT(Appeals). The assessee has also produced confirmation letter from M/s Mehta Elastic Industries. The confirmation letter was rejected by the CIT(Appeals) on the ground that rubber stamp of M/s Mehta Elastic Industries was affixed in the bottom of the letter and somebody else has signed as proprietor.

In the normal circumstances, this Tribunal would have remitted back the matter to the file of the Assessing Officer for re- examination. In the case before us, the addition is only `1,37,750/-. Remanding back to the file of the Assessing Officer would not serve any purpose. By considering the smallness of addition made by the Assessing Officer as confirmed by the CIT(Appeals), this Tribunal is of the considered opinion that in the absence of enquiry by the authorities below, the addition made by the Assessing Officer is not justified. Accordingly, the orders of the authorities below are set aside and the addition of `1,37,750/- is deleted.

In the result, the appeal filed by the assessee is allowed.