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Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI
Before: SH. N. K. SAINI & SMT. BEENA A. PILLAI
The present appeal has been filed by assessee against order dated 29.12.2013 passed by Ld. CIT(A)-XIX, New Delhi for assessment year 2008-09 on following grounds of appeal: 1. confirming the addition in a sum of Rs. 13,06,1087- of genuine outstanding made by the Assessing Officer by invoking the provision of Section 41(1) of the Income Tax Act, 1961; 2. not admitting additional evidence even though such evidence was necessary for the dispensation of justice.
3. Both the above actions being arbitrary erroneous and unjust must be quashed with directions for appropriate relief.
Brief facts of case are as under assessee filed its return of income on 30.07.2008 declaring total income of Rs. 8,31,901/-. The case was selected for scrutiny and notices under section 143 (2) dated 12.09.2009 was issued and served upon assessee. On receipt of notices, representative of assessee attended and discuss the case with assessing officer. Ld. AO observed that assessee is engaged in the business of export of ready-made garments, under name and style of M/s Outclass Apparels, as well as earned income from other sources. On perusal of balancesheet Ld. AO observed that sundry creditors worth Rs. 63,57,594/- was outstanding during the year under consideration. Assessee was asked to provide confirmations of sundry creditors. Ld. AO called for confirmation of sundry creditors in reply to which assessee vide letter dated 11.26.2010 stated that: “however, in the following cases as per our knowledge the business has been shut down. We have attached a copy of the invoices for confirming the address of the parties. 1. Vishnu Fabs 2. Archita Creation 3. S.N Enterprises 4. Smile India 5. A Nitisun Fabs 6.
Ld. AO observed that assessee failed to provide any confirmations in respect of the above parties and has also failed to prove whether these creditors were currently having any business relation with assessee or not, and was a case of cessation of liability of assessee. As these creditors have closed down their business and have moved away. Ld. AO concluded that inability to bring any confirmation from these creditors goes to confirm that assessee is not in business terms currently with any one of them and therefore, outstanding credit against these parties has ceased to exist as per provisions of section 41(1), which he treated as income in the hands of assessee. Before Ld. AO therefore, made addition in the hands of assessee.
Aggrieved by assessment order, assessee preferred appeal before Ld. CIT(A). Ld. CIT(A) assessee submitted as under: “The Assessing Officer asked the assesses to file confirmation from the Sundry Creditors. "The assessee provided confirmation in maximum number of cases but some of the parties as stated above whose total credit balance amounted to Rs. 73,06,108/- remained untraceable The assessee replied to the Assessing Officer that in few cases as per our knowledge the business have been shut down and we attached a copy of their invoices as a proof of their address known to us in view that A. O. can serve a notice u/s 133(6). The assessee made all efforts to trace the creditors. The learned Assessing Officer has stated that the assessee has failed to prove whether these creditors are currently having any business relation with the assessee or not. The learned A.O considered it as a case of cessation of liability since the creditors have closed down their business and have moved away and the outstanding credit against these parties has ceased to exist as per provisions of Sec 41(1) and therefore treated as the income in the hands of assessee. Your honor, this is to submitted that it is absolutely true that the assessee did not have any relationship with those creditors since all their accounts were settled before our hearing started u/s 143(3) for the year under consideration. The assessee had made the payments to these creditors against their balance outstanding as on 31.03.2008 during next years The amount of these creditors were paid in the A.Y. 2009-10 and A. Y. 2010-11. We have enclosed a copy of accounts of these parties and our bank statement as a proof of payment in the next assessment year. Hence, in view of the above it is requested to your honor to delete the above addition and oblige.”
The assessee thus filed coy of accounts of these parties for A.Y 2010-11 alongwith bank statements as to prove the payments made in subsequent assessment year.
Thereafter, Ld. CIT(A) remanded submissions alongwith additional evidence advanced by assessee to Ld. AO vide letter dated 11.17.2011 for his comments. Ld. AO in the remand report dated 10.10.2013 stated as follows: Kind reference is invited to your letter F. No. CIT(A)-XXVI/2011-12/Nil, dated 17.11.2011 the above subject. Before submitting my comments I would like to state that additional evidence filed by the assessee should not be allowed due to following reasons: a. The AO did not refuse to admit the said evidence as it was not at all produced by the assessee during the assessment proceedings. b&c The assessee was not prevented by any sufficient case from producing evidence called upon by the AO. d The assessment order was passed after giving sufficient opportunity to the assessee to produce the evidences.
Despite the above facts my comments are as under Ground No. 1 The only ground raised is of the addition of Rs. 13,06,108/- on account of Sundry creditors. On perusal of balance sheet it was seen that sundry creditors worth Rs. 63,57,5947- was outstanding. Vide order sheet entry dated 09.11.2010 the AR of the assessee was asked to submit the confirmation of creditors. The assessee in his submission dated 26.11.2010 has given confirmations from seven parties however in the case of the following creditors amounting to Rs 13.06,108/-; the assessee submitted that "as per our knowledge the business have been shut down." i) Vishnu Fabs ii) Archita Creations iii) S N Enterprises iv) Smile India v) A Nitisun Fabs The assessee attached few invoices from the above creditors assuming that the AO will serve a notice u/s 133(6) of the I. T. Act, 1961. The onus of providing confirmation lies with the assessee and not with the AO. Since the assessee has claimed that the payment were made as late during the A. Y. 2009-10 & A.Y. 2010-11 the evidence to this effect~were not produced before the AO during assessment proceeding, therefore the payments could not be verified in the absence of the detail filed by the assessee, despite being given ample opportunities, and the same confirmation remain unverifiable. Submitted for kind perusal and necessary action please.
A copy of the remand report was provided to assessee. In the rejoinder dated 23.12.2013 assessee submitted that these evidences are very much relevant for disposing of this ground and therefore, they must be admitted as they are genuinely reliable. Ld. CIT(A) however, rejected assessee’s request for admission of additional evidence and upheld order addition made by Ld. AO.
Aggrieved by order of Ld. CIT(A) assessee is in appeal before us now. 8. Ground No. 2 raised by assessee is in respect of not admitting additional evidence by Ld. CIT(A). Ld. Counsel submitted that this additional evidence are very much relevant and necessary for dispensation of justice to assessee. He placed reliance upon decision of Hon’ble Supreme Court in the case of Tek Ram( Ded through LH) vs.CIT, reported in 357 ITR 133. Hon’ble Supreme Court has held as under: “Where in his appeal before the Supreme Court, the assessee placed a number of documents before the court, the court, observed that the documents were of some relevance and should be looked into by the High Court before it came to a conclusion whether the appeal required to be allowed or rejected. The court, set aside the order passed by the High Court and remanded the matter to the High Court for fresh disposal of the appeal, after accepting the documents that were or might be filed by the assessee and leaving all the contentions of both parties open”.
Ld. Counsel submitted that issue may be set aside back to file of Ld. CIT for reconsideration of these evidences as these are very much necessary for deciding issue in hand.
Ld. Sr. DR did not oppose to set aside this issue to file of Ld. CIT (A).
In our opinion, the documents, which assessee filed before Ld. CIT(A) should have been considered by Ld. CIT(A) to be of any relevance before he comes to conclusion to rejected it. We, therefore, set aside this issue to file of Ld. CIT(A) to consider these documents filed by assessee during first appellate proceedings vide this submission. Ld. CIT(A) may analyse these documents filed and decide the issue afresh as per law. Needless to say that he may give proper opportunity to assessee to represent his case. Accordingly, ground no.2 raised by assessee stands allowed.
As we are setting aside this issue to the file of Ld. AO far as consideration on the basis of documents filed as additional evidence, ground No. 1 also stands settled for re-adjudication. Accordingly ground No. 1 also stands allowed for statistical purposes. In the result appeal filed by the assessee stands allowed for statistical. Order pronounced in the open court on 25th May, 2017.