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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI N. K. PRADHAN, AM (A.Y:2009-10) The Income Tax Officer 25(1)(2), Vs. Sri Ajit Ramdas Chaudhary, Room No.204, 2nd Floor, Building B-10, Neel Kamal, S. V. No.C-11, Pratyakshakar Bhavan, Road, Dahisar (East), Bandra Kurla Complex, Bandra Mumbai 400 068 (East), Mumbai 400 51 PAN:AAGPC 4173N Appellant .. Respondent Appellant by .. Sri N. Ravi Ramachandran, Sr. DR Respondent by .. Sri Sri K. Shivaram, AR Date of hearing .. 13-10-2016 Date of pronouncement .. 13- 10- 2016 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the Revenue is arising out of the order of the CIT (A)-35, Mumbai in appeal No.CIT (A)35/ITO 25(1)(2)/IT.428/11-12 dated 26-04-2012. Assessment was framed by the ITO, Ward -25(1)(2), Mumbai for assessment year 2009-10 vide his order dated 29-12-2011 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of the Revenue is against the order of the CIT (A) deleting the addition of un-proved creditors appearing in his books of accounts. For this, the Revenue has raised the following ground:- “
(i) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of Rs.2,67,45,632/- under section 68 of I.T. Act, 1961 without appreciating the fact that the assessee had failed to prove the creditors appearing his books of accounts.”
3. Briefly stated facts are that the assessee is proprietor of M/s. Ajit Enterprises. During the financial year 2008-09 relevant to this assessment year 2009-10, the net sales of the year was Rs.4,21,87,209/- and the corresponding purchases was Rs.3,80,50,737/-. As on 31-03-2009, the sundry debtors
Rs.2,95,11,183/- as against outstanding sundry creditors at Rs.3,04,27,454/-. The AO during the assessment proceedings noticed that there is a discrepancy in the account of sundry creditors and according to him these are not verifiable in view of the fact that the notices issued u/s 133(6) of the Act were either not served or reply not received back from the following parties:- Sr. Name of Party As per Assessee As per reply to Difference No. To notice u/s 133(6) 1. Rohan Enterprises 27,52,153 Reply not received 27,52,153 2. A to Z Digital Prints 2,22,390 Reply not received 2,22,390 3. Crown Sales Corporation 1,53,25,040 Reply not received 1,53,25,040 4. Vin International 6,53,435 6,44,999 8,436 5. V3 Enterprises 84,37,613 Left 84,37,613 2,67,45,632 Total According to the Assessing Officer, the assessee could not prove these sundry creditors with documentary evidences and moreover, in regard to the supplier namely V3 Enterprises is a hawala party providing accommodation entries in view of information available on website of Sales Tax Department. Accordingly, he added the sundry creditors as bogus/un-proved amounting to Rs.2,67,45,632/-. Aggrieved, the assessee preferred appeal before the CIT (A).
The CIT (A) deleted the addition by observing in Para 3 of his appellate order as under:- “3. I have carefully considered the findings of the Assessing Officer and submissions of the appellant. It is apparent that the Assessing Officer has considered the Net Profit from the trading activity of the Appellant in arriving at the Total Income, thereby accepting the purchase, sales and the resultant profit. Further, the Appellant has produced documentary evidence in the form of ledger accounts and confirmations in respect of all but one Creditor. These were filed by the Appellant before the Assessing Officer prior to his passing the Order, but the same were not considered and no reasons given for not taking cognizance thereof. The Assessing Officer has pointed out that as the Appellant has dealings with parties listed by the Sales tax Department as a suspicious dealer and shown huge amounts of credit against such party, the entire difference as pointed out totaling to Rs.2,67,45,632/- was added to the total income of the Appellant as unproved Creditors. The Appellant has produced ledger accounts, confirmations and also bank statements to substantiate subsequent payments to Creditors and has thus discharged the onus cast on him to prove the Creditors. The corresponding sales are to reputed parties
Assessing Officer. Further, no addition can be made in the hands of the Assessee on the basis of suspicions of a third party. Even so, there is no rationale to consider that all Creditors’ in respect of Purchases made, to be unproved Creditors, merely because one of them is listed in the website of the Sales Tax Department as a suspicious dealer. The Assessing Officer has accepted the Purchases, Sales and resultant profit from the Appellant’s trading activities. The Appellant has furnished ledger accounts, confirmations and bank statement to substantiate subsequent payments and has thus discharged the onus cast on him. A mere suspicion of a third part with respect to one of the parties is not a ground for addition to the Total Income. In the circumstances, the application of the provision of Section 68 is uncalled for. The case laws relied upon by the Appellant also supports his claim. The Assessing Officer is directed to delete the addition made to the Total Income of the Appellant on account of unproved Creditors. The ground of appeal is allowed.” Aggrieved, the Revenue is in appeal before us.
5. Before us, the learned Sr. DR argued that the assessee failed to produce any evidence to prove these creditors and moreover, the assessee is unable to reconcile the stock position to prove that the goods were moved in and moved out. He argued that the CIT (A) erred in deleting the addition only on one premise that sales are not doubted by the AO or the party has proved that subsequently the payment has been made to the creditors. In view of these arguments, the learned Sr. DR urged the Bench to restore the matter back to the AO. On the other hand, the learned Counsel for the assessee relied on the order of the CIT (A) and he carried us through the documents and evidences filed in the assessee’s paper book consisting of pages 1 to 147.
We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee filed copy of the confirmation of V3 Enterprises, Rohan Enterprises, Vin International and Crown Sales Corporation. But, the assessee could not file confirmation of A to Z Digital Prints. The assessee also filed copy of ledger account showing payments made to these parties subsequently along with bank statement. Before us, the learned Counsel for the assessee explained that the assessee during the assessment proceedings for assessment year 2011-12 filed complete balance confirmation of creditors and the AO has accepted the confirmation as well as the outstanding credit balances in the same party. The learned Counsel for the assessee also drew our attention to the audited accounts wherein complete reconciliation of stock statement is filed in respect to purchases as well sales. We find that the assessee is able to prove that these creditors have been paid subsequently during the financial year 2010-11 relevant to assessment year 2011- 12 and the AO during the course of scrutiny assessment u/s 143 (3) of the Act has accepted this position. We also find that the assessee has made payments to these creditors and to prove the same, the assessee also filed copy of bank statement of these parties along with confirmation in his paper book. We also find that the AO could not disprove the sales made by the assessee and in the absence of purchase; sales could not have been effected. But here, we want to crave out one exception that the assessee is unable to file any confirmation in respect of one party viz. A to Z Digital Prints from whom the assessee had made purchases to the extent of Rs.2,22,390/- and to this extent, the addition is confirmed in absence of any evidence. In view of the above facts and circumstances, we partly confirm the order of the CIT (A) confirming the deletion of sundry creditors except in the case of A to Z Digital Prints for an amount of Rs.2,22,390/-.
In the result, the appeal of the Revenue is partly allowed. Order pronounced in the open court on 13-10-2016.