ITO, NEW DELHI vs. SH RAJAT LIHLA, DELHI

The present appeal has been filed by the Revenue against the order of the ld. CIT(A)’s-XXV, New Delhi, vide his order dated 30/11/2011 for A.Y. 2007-08 on the following grounds:

Brief facts of the case are as under: The assessee filed its return of income on 31/10/07 declaring total income at Rs. 1,48,395/-. The case was processed u/s 143(1). Subsequently it was selected for scrutiny and notices were issued to the assessee. 2.1. The ld. AO completed the assessment ex-parte u/s 144 on 23/12/09 by making the following additions: i) addition on account of unverified sundry creditors amounting to Rs. 21,52,440/- ii) addition on account of unverified unsecured loans amounting to Rs. 75,000/-.

Aggrieved by the order of the ld. AO the assessee preferred an appeal before the ld. CIT(A). 3.1. Before the ld. CIT(A) the assessee argued that the ld.AO was not justified in making adhoc additions merely because the assessee was not able to represent the case during the course of the assessment proceedings, as the assessee was out of the country. Accordingly, the assessee submitted all the details in respect of the sundry creditors and unsecured loans before the ld.CIT(A). The ld. CIT(A) called for the remand report in lieu of the additional evidence filed by the assessee. After considering the remand report, the ld. CIT(A) deleted the addition made by the assessee in respect of the sundry creditors and unsecured loans.

Aggrieved by the order of the ld. CIT(A) the Revenue is in appeal before us. Ground no. 1: 4.1 It was contended by the ld. AR that the assessee is a proprietor of M/s Sulochna Exports and the list of sundry creditors as on 31/03/07 was submitted before the ld. CIT(A) on which the remand report was called for. In the remand report the ld. AO has recorded that the assessee has furnished the confirmation from the unsecured lenders. He has further recorded that these creditors are continuing from the previous year and are old creditors which is proved from the opening and the closing balances. Further the ld. AR submitted that the sundry creditors as are very much existing and that the assessee has also made some payments to certain sundry creditors during the year which proves that the liability of the sundry creditors has not seized, and they continue to be a liability for the assessee, which has to be paid back by the assessee, and as such, the ld. AO was not justified to make the additions. 4.2. On the contrary, the ld. DR submits that the assessee did not file the proper books of accounts before the ld. AO. She relies upon the order of the ld. AO.

We have considered the rival contentions of both the parties and perused the paper book filed before us. The remand report dated 4.3.11 is placed at pages 79 to 81 of the paper book. It is observed that the ld. AO has recorded a finding that the unsecured creditors have been existing with the assessee even in the previous year and that the assessee has filed the confirmations from these parties at the time of first appellate proceedings. It is also observed that the ld. AO could not produce any material on record to prove that these details filed by the assessee are not genuine. The ld. AO has therefore, failed to justify the additions made in respect of the unsecured loans. It is also observed that these creditors were old and, therefore, did not pertain to the year under consideration and has been brought forward from the earlier years which has not been disputed by the Revenue. 5.1. The amount payable to these creditors can be added to the assessee’s total income only in the year in which the assessee’s liability to pay the amount gets seized, or gets extinguished, and not in the year under consideration, where the assessee has admittedly shown the liability in the balance sheet. We, therefore, do not find any infirmity with the order of the ld. CIT(A). The ground no. 1 of the Revenue is, therefore, dismissed. Ground no. 2: 6. The ld. AR submitted that the adhoc addition made by the AO under the head unsecured loans during the course of the assessment proceedings was because the details were not available. The ld. AR submitted that the details were submitted before the ld. CIT(A) as additional evidence on which a remand report was called for. In the remand report the ld. AO has accepted that these loans does not belong to the present year under consideration and that these are old continuing loans. On the basis of the findings of the ld. AO in the remand report the ld. CIT(A) deleted the additions.

We observe that there is a considerable merit in the submissions of the ld. AR. As the loans pertain to the previous years which have been brought forward in this year and has been shown as a liability in the balance sheet. This position has been accepted by the ld.AO in his remand report at page 81 of the paper book. In view of the above facts and circumstances, the findings of the ld. CIT(A) does not call for any interference. This ground of appeal