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Income Tax Appellate Tribunal, “D
Before: SHRI SHRI SANJAY GARG, SHRI SANJAY GARG & SHRI ASHWANI TANEJA SHRI SHRI ASHWANI TANEJA, , ,
O R D E R
आदेश / O R D E R आदेश आदेश / O R D E R / O R D E R
Per Sanjay Garg, Judicial Member:
The Present appeal has been preferred by the revenue against the order of ld.CIT(A)-33, Mumbai-, dated 28.1.2013 for the assessment year 2009-10. The revenue is aggrieved against the action of the ld.CIT(A) in deleting the addition of Rs.3,51,39,888/- which was made by the AO under section 41(1) of the Income Tax Act, 1961 on account of cessation of liability.
Facts of the case are that during the assessment proceedings the AO observed that the sundry creditors for an amount of Rs.3,51,39,388/- were outstanding. When asked to explain, the assessee explained that he was engaged in the business of fabrication, erection and contract work for the factory erection and installation. That these sundry creditors were in relation to the purchases made by the assessee. Due to the shortage of funds, he could not make the payment to the said parties. On being asked to file confirmations, the assessee filed confirmation of almost all the sundry creditors. But the AO found that the PAN of all the creditors were not mentioned on the confirmation letters. He, therefore, assumed that the assessee had made false signatures on the creditors’ confirmation letters. He also made an observation that if the signatures on the creditors’ confirmation letters would found forged on the letter then prosecution may be lodged against the assessee. He on this account assumed that the creditors were not genuine creditors but they exist in the books of account only to book bogus expenses. He further found that the creditors were outstanding for many years. Accordingly, added sundry creditors amounting to Rs.3,51,39,388/- in the total income of the assessee under section 41(1) of the Act.
Being aggrieved by the above order, the assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee furnished details of all the 113 sundry creditors and claimed that the said creditors had supplied him various materials like, cement, hardware and spares, steel and pipes, consumables purchase, cement suppliers, valves, flange and fittings suppliers, sand and brick suppliers, fabrication and welding material suppliers, paints suppliers, vessels and pump suppliers, fuel and gas suppliers etc. He further submitted that out of said 113 creditors, some were reputed parties like M/s ACC Ltd, M/s Avery India Ltd, M/s Bombay Paints Ltd, M/s City Bank Gold International Card, M/s Orbit Corporation etc., whose identity was not doubtful and that they were regularly supplying the materials to the assessee. It was also submitted that in respect of certain parties, legal proceedings were also going on.
Further, in subsequent years, payments to certain parties had also been made. That purchases made from the parties were debited to the profit and loss account and have never been doubted by the AO. The assessee could not pay to these creditors because of crunch /paucity of funds but the liability of the assessee still exists. The ld.CIT(A) after considering the submissions of the assessee asked the assessee to furnish PAN/sales tax Numbers of all the creditors and also to furnish particulars of payments made to them in the respective years through banking channels.
The assessee accordingly furnished the confirmation from 29 parties and further supporting documents like bills and vouchers in respect of 57 parties. The assessee also submitted the details of payments made in the subsequent years in respect of 48 parties. The ld. CIT(A) called for a remand report in this respect from the AO. The AO submitted his remand report against which the assessee also filed his reply. After considering all the details of the creditors and evidences in respect of material supplied like PAN/CST No./TAN No./VAT TIN No and in case of some parties; Agency Identity No. and Service Tax No., the details of bills and vouchers etc., the ld.CIT(A) divided the list of creditors into two parts. In the first part, he placed creditors whose details were given and also confirmation were filed and it was held that there were no reasons to disbelieve the outstanding liability of the assessee against these creditor. He observed that the AO had not conducted necessary inquiry in this respect and held that creditors as bogus merely on assumption, which was not justified.
In the second category, he placed creditors where no confirmations were filed by the assessee during the appellate proceedings before the ld. CIT(A), however, confirmations were filed from those creditors during the assessment proceedings. The Ld. CIT(A) observed that the AO had disbelieved the said creditors only on assumption. He did not make necessary inquiry even during the remand proceedings. The AO did not choose to ascertain if the payment shown as made by the cheques to all these parties were genuine or otherwise. He noted from the remand report that the AO simply commented in the remand report that the confirmation filed by the assessee were made during the course of scrutiny proceedings also and hence verification in this regard was not necessary.
The ld. CIT(A) observed when the assessee had filed the necessary details like PAN, TAN, VAT,CST Nos. including the identity of the parties was established; even the assessee had furnished the bills and vouchers, then, in the absence of any inquiry made by the AO, it cannot be held that the same were bogus creditors. Even the assessee had made payment through banking channel which could have been ascertained by the AO. He further observed that out of total 113 creditors, the assessee filed confirmation list along with bills and vouchers in respect of 99 sundry creditors and in case of remaining 14 creditors the details of payments made have been given. Hence, considering the facts and circumstances of the case, the ld. CIT(A) held that as the assessee has admitted his liability towards sundry creditors and when the identity of the creditors was also established, the assessee has also explained the nature of the credits which was towards purchases made by the assessee from these parties and necessary details like bills and vouchers were also furnished and hence under these facts and circumstances of the case, there was no cessation of liability. He accordingly deleted the additions so made by the AO u/s 41(1) of the Act.
After considering the rival submissions and in view of the well reasons and detailed order of the ld. CIT(A), we do not find any merit in the appeal of the revenue and the same is accordingly dismissed.