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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI L.P. SAHU
ORDER
Per L.P. Sahu, Accountant Member:
This appeal by the Revenue arises out of the order dated 19.03.2012 of ld. CIT(A)-XII, New Delhi for the assessment year 2007-08 on the following grounds : “
1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.15,46,830/- on account of Sundry Creditors ignoring this fact that the assessee was failed to substantiate his claim in spite of sufficient opportunities were provided to assessee during the course of assessment proceedings.
2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in admitting the additional evidences under Rule 46A of the I.T.
Rule, 1962 without providing opportunity to the AO as required under sub-rule 3 of Rule 46A.
The assessee filed its return of income on 30.10.2007, declaring income of Rs.8,36,257/- which was processed u/s. 143(1) of the IT Act. The case was selected for scrutiny and notice u/s. 143(2) was issued on 29.09.2008 and served upon the assessee. During the course of scrutiny, the assessee was asked to file confirmation of sundry creditors but the assessee could not file the confirmation of the following creditors: Sr. No. Name of Creditors Amount 1. M/s. Dee Décor Cr. Rs.8,19,106/- 2. Mr. Lal Chand Cr. Rs.1,01,893/- 3. M/s. Mianaam Garden Flowers Cr. Rs.3,62,041/- 4. M/s. Verdant Bio-Technologies Cr. Rs.2,12,040/- 5. M/s. Jain Sanitary and Hardware Cr. Rs. 51,750/- The AO, therefore, added the aforesaid creditors balance totaling to Rs.15,46,830/- to the income of the assessee. Aggrieved by the assessment order, the assessee filed an appeal before the ld. CIT(A) who deleted the addition after admitting the confirmation and ledger account with complete address, placed before him. The aggrieved Revenue has, therefore, come up in this appeal before us against the impugned order.
The ld. DR relying upon the order of the AO submitted that the deletion of addition made by the ld. CIT(A) is not justified after admitting the additional evidence submitted by the assessee before him in the shape of confirmations etc. without giving any opportunity to the Assessing Officer to examine the same which is in sheer contravention of Rule 46A of the IT Rules. He, therefore, urged to set aside the impugned order and to restore the matter back to the AO.
The ld. AR, on the other hand, relied upon the order of the first appellate authority and submitted that the books of account were duly audited by a qualified Chartered Accountant and during the course of assessment proceedings, the books of accounts and vouchers were produced before the AO. The Gross profit of the assessee during the instant year was 44.16% which is better as compared to 31.47% in the immediately preceding year. The ld. AR of the assessee submitted the details of opening balance, purchases during the year, payments made and closing balance which is as under : S. Name of the Opening Purchases Payment Closing No. Creditor balance as during the made balance as on year (in during the on 01.04.2006 Rs.) year (in 31,93,2997 (in Rs.) Rs.) (in Rs.) i. Jain Sanitary - 3,53,796 3,02,046 51,750 and hardware (see page 6)
Ii Dee Décor 8,19,106 - - 8,19,106 (see page 8) iii. Lal Chand (See 7,37,878 7,21,985 13,57,970 1,01,893 page 9) Iv Verdant Bio- 4,73,040 - 2,25,000 2,12,040 Technologies (see page 10) v. Mainaam 6,75,121 13,86,920 17,00,000 3,62,041 Garden, Flowers (see page 10A) Total 15,46,830
It was submitted that despite the fact that the assessee has provided complete details of the outstanding credit balances and also complete vouchers which clearly provide complete address of the creditors, the AO without making any enquiry from the creditors made the additions of the aforesaid outstanding balances of the creditors. He also submitted that if a sum is credited in the books of accounts in previous assessment years, the same cannot be taxed in any assessment year other than that year. Reliance is placed on CIT vs. Prameshwar Bohra 301 ITR 404 HC(Rajasthan) and Usha Stud 301 ITR-HC (Del.). He also argued that opening balance of the purchases, purchases made during the year and the payments made to the parties from whom the purchases were made had been accepted by the AO. Further, the books of accounts were audited which were accepted by the AO. It was submitted that the AO was not justified in making the addition by doubting the balances outstanding in the names of parties from whom the purchases were made. Reliance is placed on the following decisions : (i). ACIT vs. Bahri Bros. Pvt. Ltd. 154 ITR 244 (Pat) (ii). Mather Platt (India) Ltd. vs. CIT, 168 ITR 493 (Cal.) (iii). CIT vs. Pancham Das Jain 205 CTR 444 (All.) (iv). Shree Nashik Panchvati Panjarpole vs. DIT (Exemptions) 26 DTR 113 (Bombay) (v). CIT vs. Ritu Anurag Aggarwal reported in (2012) DTLONLINE 134 (Del.) (vi) ITO vs. Zazsons Exports Ltd. 153 ITD 1 (Lko-TM) (vii). CIT vs. M/s Nikunj Exim Enterprises P. Ltd. 372 ITR 619 (Bom.)
It was also submitted that the AO had power to summon the parties, but no such exercise was done. Therefore, the addition only on the basis of suspicion was not justified in view of the decision in the case of Nathu Ram Premchand vs. CIT 49 ITR 561. In another decision of Hon’ble Allahabad High Court in the case of CIT vs. Pancham Dass Jain (2006) 205 CTR 440 the identical issue has been decided as under : “The Tribunal has recorded a categorical finding of fact based on appreciation of materials and evidence on record that the AO had accepted the purchases, sales as also the trading result disclosed by the assessee. It had recorded a finding that the two amounts represented the purchases made by the assessee on credit and, therefore, the provisions of sec. 68 could not be attracted in the present case. The view taken by the Tribunal on this issue is sustainable inasmuch as on the basis of the findings recorded by it that these two amounts represented purchases made by the assessee on credit and the purchases and sales having been accepted by the Department, the question of addition of the said two amounts under sec. 68 did not arise inasmuch as the provisions of sec. 68 would not be attracted on the purchases made on credit.”
The ld. AR further submitted that the disallowance made by the AO of outstanding credit balances in respect of purchase is wholly un-sustainable. Reliance is placed on the following judgments : (i). Jagdamba Trading Co. vs. ITO, (2007) 16 SOT 66 (Jodh) (ii). CIT vs. Nangalia Fabrics (P) Ltd., 220 Taxman 17. (iii). CIT vs. Nikunj Exim Enterprises Pvt. Ltd.(2015) 372 ITR 616.