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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
ORDER Per Prashant Maharishi: AM 01. This appeal is preferred by revenue against the order of CIT (A) dated 12.7.2012 for AY 2009-10.
Brief facts of the case are that assessee is a private limited company carrying on the business of publishing. For AY 2009-10, it filed its return of income on 20.09.2009 declaring income of Rs 48,93,828/-. Assessment u/s 143(3) was framed on 30.12.2011 and AO made two additions in the hands of assessee as under :-
a) Rs 44,04,230/- on account of non-genuine sundry creditors b) Rs 1,5890,719/- on account of non-genuine purchases Before CIT (A), assessee contested the above addition who deleted them and therefore Revenue is in appeal before us.
First ground of appeal
is against the deletion of addition of Rs 44,04,230/- towards unexplained sundry creditors. During assessment proceedings A O issued notices u/s 133(6) of the Act to 35 sundry creditors and in only 7 cases independent confirmation were not received by AO as notices u/s 133(6) of the Act received back because of incomplete or old address or business of those parties closed. Therefore, AO made addition of such unconfirmed suppliers amounting to Rs. 44,04,230/- as non-genuine. Assessee carried matter before CIT (A) and submitted that out of seven parties, balances of three parties were outstanding from earlier years and in case of other four parties, it was submitted that they are small. For all seven parties Assessee submitted copies of accounts of those parties, photocopies of purchase bills the details of payments made by the assessee to those parties from the bank account of the assessee. CIT (A) also admitted additional evidence being confirmation of the parties and bank certificates of the payments made. Those additional evidences were sent to AO for remand report in response to which the AO objected to admission of additional evidences and stated that as 133(6) notices remained unresponded in assessment proceedings and therefore additional evidences should not be admitted and on merits, he did not offer any comments. However, CIT (A) deleted the addition after perusing the evidences submitted. Therefore, the revenue is in appeal before us on this ground.
04. Before us the LD DR relied on the orders of AO as well as decision of Honorable Delhi high court in case of CIT V La Medica 250 ITR 575.
05. Ld AR of the assessee submitted a chart showing particulars of each of the seven creditors showing details submitted before AO and CIT (A). He submitted that assessee has submitted copies of accounts of creditors for the current year as well as subsequent years to show the payments made to them, Copies of bank statements of the assessee showing payments to the parties and copies of bills of purchases. He submitted that out of seven accounts, three accounts i.e. M/s Adinath enterprise ( Rs 16,52,186/-) , Rs Sri Traders ( Rs 12,97,200/-) and M/s Shivangi Enterprises (Rs 1399831/-) are all opening balances carried forward from earlier years. According to the chart, he explained that in case of these creditors Copies of the accounts of the parties from AY 2008-09 to 2010-11 from the books of the assessee were submitted to show that how they are paid off. The photocopies of the bills of purchases were also submitted to show their addresses available with the assessee and the material purchased from them in earlier years. Regarding payments made to them, the details of the bank statement of the appellant were submitted showing how payments have been reflected in the bank statement of the assessee. In some cases, assessee has submitted the confirmation/ certificates of the bankers for payments made to those parties.
Regarding other four parties who are of small amounts, he drew our attention to the copies of accounts of the parties for this year as well as subsequent years, photocopies of the bills, copy of the bank accounts of the assessee to show the amounts paid to them. He further submitted that the details of address of the parties were given from the bills and these details are given as available with the assessee. Therefore, his submission was that all those details were available with the AO in remand proceedings and therefore CIT (A) has deleted the addition rightly.
We have carefully considered the rival contentions. We have also perused the orders of AO and Ld. CIT (A). There were 35 sundry creditors standing in the books of accounts of the assessee as at 31.3.2009 and to all of them Ao sent notices u/s 133(6) of the Act. Out of them in case of seven parties, the confirmation could not be obtained because of the reason of old / incomplete address or closure of the business of those parties. Therefore, in absence of the confirmation from these parties AO made addition. The analysis of details submitted by the assessee before AO and CIT(A) is as under :-
Sr Name Amount Whether Details submitted / remarks no Old or New 1 Aadinath industries 16,52,186/- Old Copies of account form AY 2008-09 to 2010-11, copies of purchase bills, Confirmation of the party for Ay 2010-11 where in opening 16, Dwarkapuri balance as at Rs 16,52,186/- MuzzafarNagar UP is confirmed, bankers certificates of ICICI bank and PAN BANPS0016A ING vasya Bank for payments made by assessee to this party 2 Sri Traders 12,97,200/- Old Copies of account form AY 2008-09 to 2010-11, copies of purchase bills, bankers 26/569 Malaviyanagar certificates of ING vasya Lucknow Bank for payments made by assessee to this party, copies of bank statement of appellant wherefrom payment to the party is made 3 Shivangi enterprises 13,99,831/- Old Confirmation of the party for AY 2009-10, copies of purchase bills, bankers 51/27-B Naya Ganj Kanpur certificates of ICICI bank for PAN AFTPG4207M payments made by assessee to this party, copies of bank statement of appellant wherefrom payment to the party is made 4 Express Roadways private 1043/- New Copies of account form AY Limited 2008-09 to 2010-11, copies of purchase bills 7483 Bansal Apartment
Telmill Marg, Ramnagar paharganj New Delhi 5 Dr Avinash Kumar 4600/- New Copies of account form AY 2008-09 to 2010-11, copies of purchase bills
1421/C Opposite Gole Mandim, Sector 3, Shahstri Nagar PAN ANLPA4036E 6 Musharraf Jahan 44975/- NA Assessee submitted that there is no such account in the books of assessee 7 Neel kamal 4395 New Confirmation of the party for AY 2009-10 and 2010-11 copies of purchase bills, Govind Plaza Begum copies of bank statement of Bride Meerut appellant wherefrom payment to the party is made From the above chart, it is apparent that asssessee has supplied the address available with it. It may be possible that there is change in address due to many reasons. During remand proceedings, assessee has produced overwhelming details of the amount standing as creditor in the books of the assessee. Many Creditors are carried forward balances from earlier years. It is also confirmed along with the confirmation of payments made in subsequent years to them from the bankers. Copies of the bills of purchases made from them in earlier years is also submitted in case of outstanding and carried forward creditors and bills of current year in case of new creditors.
Copies of bills submitted shows telephone numbers, Sales tax numbers and central sales tax numbers of suppliers and creditors. Revenue has undisputedly accepted purchases in the earlier years in case of old creditors and in the current year with respect to the new creditors. In case of party no six namely Musharraf Jahana (Rs 44,975/-), submission of the assessee is that such party does not exist in the books of the assessee. We also find this statement correct because we could not find such party in the list of 35 creditors to whom notices were sent. Further bills for the purchases where full address, nomenclature of material along with the quantity and rates, sales tax and central sales tax numbers are available. This in our view is contemporaneous confirmation provided by supplier for purchases booked by assessee. Reliance by revenue on the decision of Honorable Delhi high court in case of CIT V la Medica 250 ITR 575 is also misplaced as in that case because a) AO has not made any inquiry about the rates of purchases made by the assessee despite bills of purchases available with him. In fact, in the present case AO has not disputed the purchases made by the assessee from these parties in current year and previous years. b) There is no such allegation in the present case that bank account of the suppliers is also opened fictitiously. c) Addresses of suppliers were found incomplete in that case but not fictitious. Therefore looking to the facts of the case and details submitted by assessee, we do not find any infirmity in the order of CIT (A) in deleting the addition of Rs. 44,04,230/- on account of alleged bogus sundry creditors. Therefore ground no one of the appeal is dismissed.
Facts of second issue of addition of Rs. 1,58,90,719/- as per ground no 2 of the appeal are in narrow compass. In case of three parties, AO has treated them as non-genuine and purchases made from them has been added to the total income of the assessee as non-genuine purchases in absence of confirmed copies of accounts. Details of purchases made from these parties is as under:-
Sr No Name of the party Amount of purchases 1 Silverton Pulp and papers ( P ) limited 1,44,95,306/- 2 M/s Satya Prakash & co 7,94,011/- 3 M/s Silver Papers 6,01,402/-
Total 1,58,90,719/-
Ld. CIT (A) deleted the addition fully in case of all the three parties for the following reasons:-
Sr No Name of the party Amount of Whether Observation purchases confirmation of AO in submitted Remand Proceedings 1 Silverton Pulp 1,44,95,306/- Confirmation No and papers ( P ) submitted comments limited 2 M/s Satya 7,94,011/- Confirmation No Prakash & co submitted comments 3 M/s Silver Papers 6,01,402/- Confirmation No submitted comments Total 1,58,90,719/- Further before CIT (A) assessee submitted the copies of bills of purchases, income tax details of suppliers, copy of assessee’ s bank account wherefrom the payments for purchases were made to these parties. Therefore aggrieved by the order of CIT (A) revenue is in appeal before us against the deletion of addition of purchases of Rs 1,58,90,719/-
Before us The ld. DR relying on the decision of honorable Delhi High court in case of La Medica 250 ITR 575 submitted that in case of bogus purchases in absence of confirmation addition is rightly made by AO and CIT (A) erred in deleting the same.
Ld. AR of the appellant submitted that when before CIT (A) all the confirmation of the parties were produced and in response to that AO has not offered any comments which itself shows that reasons of deletion of addition was absence of confirmation and now the confirmation is submitted the addition cannot survive. He submitted that over and above the confirmation of the parties assessee has submitted the copies of the bills, copies of income tax return of the parties, copies of assessee’ s bank accounts where from the payments are made. He submitted that as per Para no 6.4 of the order of CIT (A) the full details which are available with the assessee as purchaser of goods is submitted. He further submitted that it is not the case of the AO that he has made some inquiries and parties do not exist. He therefore submitted that CIT (A) has rightly deleted addition. 11. We have carefully considered the rival contentions. An addition of Rs. 1,58,90,719/- was made on account of three parties as assessee did not produce the confirmed copies of account. In appeal before CIT (A) Assessee has submitted the confirmation of all the three parties and these were admitted as additional evidences and AO was directed to submit the remand report. In remand report, AO objected about the admission of additional evidences but did not comment on the confirmations filed by the assessee. Below chart depicts the details submitted before lower authorities :-
Sr No Name of the Amount of Details submitted party purchases 1 Silverton Pulp 1,44,95,306 Copies of the account of the party from the books of the and papers ( P ) /- assessee for the current year as well as subsequent two limited years to show the details of purchases booked and payments made, Confirmation of the party, Copies of purchase bills, Copy of Income tax return of the supplier for the relevant year, Copy of the bank statement of assessee to show the payments to the suppliers 2 M/s Satya 7,94,011/- Copies of the account of the party from the books of the Prakash & co assessee for the current year, Confirmation of the party, Copies of purchase bills, Copy of Income tax return of the supplier along with computation of total income for the relevant year, Copy of the bank statement of assessee to show the payments to the suppliers 3 M/s Silver 6,01,402/- Copies of the account of the party from the books of the Papers assessee for the current year, Confirmation of the party, Copies of purchase bills, PAN of the supplier , Copy of the bank statement of assessee to show the payments to the suppliers Total 1,58,90,719 /- From the above table it is evident that the assessee has submitted all confirmation of the suppliers. Further, the copies of the bills submitted by the assessee also serves the purposes as contemporaneous confirmation of the supplier. If AO finds something fishy and wishes to inquire more it is for him to exercise the powers conferred on him by the statue. It is apparent from the records that AO has not made any inquiry form the suppliers of the goods though the copies of bills showing name, address, telephone, numbers, sales tax numbers, central sales tax numbers, quantity and rate of material purchased by the assessee. It is also not the case of the AO that purchased material has not been received by the assessee or consumed by the assessee or the rates at which the material is purchased is not at prevailing market rates.
It is also not the case of the AO that payments made by assessee to the suppliers is fictitious. For the reasons already given in our findings in ground no one, we hold that reliance placed by revenue of the decision of Honourable Delhi high court in case of CIT V la Medica 250 ITR 575 is misplaced.
Therefore, submission of confirmation of suppliers by assessee along with the bills and details of payments and in absence of any independent inquiry by AO we are of the view that addition made by AO is grossly erroneous.
Hence, we do not find any infirmity in the order of CIT (A) in deleting the addition on account of unconfirmed purchase of Rs 1,58,90,719/- on account of three parties. Therefore ground no two of the appeal is dismissed.
Ground no three of the appeal is against the admission of additional evidence by CIT (A). The ground raised by revenue has also objected that before AO there is a non-compliance of the notices u/s 133(6) of the act. Before us, the Ld. DR did not submit any specific arguments on this ground. However, it would be suffice to say that CIT (A) has given a reasonable opportunity of hearing to AO against the additional evidences submitted by the assessee. He has also offered him an opportunity to submit remand report, which in fact AO submitted. However, in remand report AO kept on objecting to the admission of additional evidences but did not comment on the evidence itself or did not carry any inquiry himself on such evidences. It is also surprising that additional evidences submitted by the assessee before CIT (A) conclusively established correctness of sundry creditors as well as the details of purchases. Further from the order itself it is evident that assessee has not been given reasonable opportunity of hearing during assessment proceedings for example on 20/11/2011 assessee was asked to produce the confirmation of all the seven creditors who are at different places and on 30.12.2011 AO has passed the assessment order. In case of suppliers, assessee was asked to produce confirmation on 20.12.2011 within seven days. No judicial precedents cited in the ground come to rescue of the revenue as the additional evidences are admitted by CIT after affording full opportunity to AO and it is apparent that AO has not granted sufficient opportunity of hearing to assessee.
Therefore, in our view the ground no. Three deserves to be dismissed. 13. In the result, appeal of revenue is dismissed.
(Order Pronounced in the Open Court on 30/10/2015)