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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, AM:
This appeal by the Revenue is preferred against the order of the Ld. CIT(A)-31, Mumbai dated 25.11.2010 pertaining to assessment year 2007-08.
The grievance of the Revenue is two-fold. Firstly, the Revenue is aggrieved by the deletion of the addition made by the AO as unexplained cash credit amounting to Rs. 25,12,367/- and secondly the Revenue is aggrieved by the deletion of the addition made as unexplained investment amounting to Rs. 38,17,302/-.
The assessee is a trader in Metal and Alloy. The return for the year was selected for scrutiny assessment. During the course of the scrutiny assessment proceedings, the Assessing Officer found certain creditors outstanding in the balance sheet. The assessee was asked to explain the same in the light of the provisions of Sec. 68 of the Act. The assessee could only submit the copy of ledger account in the books of the assessee but no confirmations were filed. The AO issued notices u/s. 133(6) of the Act. The notices were returned by the postal authorities for want of proper addresses. The AO was of the firm belief that the assessee could not discharge the onus cast upon it and proceeded by making an addition of Rs. 25,12,367/- u/s. 68 of the Act.
3.1. Proceeding further, the AO examined the purchases. The assessee was asked to substantiate the purchases for supporting documentary evidences. On receiving no plausible reply, the AO made an addition of Rs. 30,17,302/- u/s. 69 of the Act as unexplained purchases holding that the assessee has made purchases in cash outside its books.
Aggrieved by these two additions, the assessee carried the matter before the Ld. CIT(A).
4.1. In so far as cash creditors are concerned, it was explained that the closing balances in the creditor’s account happen to be the opening balances and there are no new credit entries during the year under consideration. The Ld. CIT(A) after verification was convinced that provisions of Sec. 68 are not applicable on the facts of the case and directed the AO to delete the addition of Rs. 25,12,367/-.
4.2. In so far as the addition on account of unexplained purchase is concerned, it was explained that all the payments have been made through banking channels, relevant documentary evidences were furnished. After considering the facts and the submissions and the related documentary evidences, the Ld. CIT(A) was convinced that the inference drawn by the AO cannot be justified unless and until it is corroborated by sufficient documentary evidences brought on record. On the contrary, the Ld. CIT(A) was convinced that the payments have been made to the parties through banking channels. The impugned additions were deleted.
Aggrieved by this, the Revenue is before us.
The Ld. Departmental Representative supported the findings of the AO.
The Ld. Counsel for the assessee reiterated what has been stated before the lower authorities.
After giving a thoughtful consideration to the orders of the authorities below, we find that undisputedly the credit balances added by the AO u/s. 68 of the Act happen to be the opening balances in the respective accounts of the creditors. As there is no new credit entry found, we accept the findings of the Ld. CIT(A) that the additions cannot be made u/s. 68 of the Act. We, therefore, decline to interfere. Ground No. 1 is dismissed.
In so far as addition on account of unexplained purchase is concerned, we find that the findings of the Ld. CIT(A) are based upon the documentary evidences in the form of purchase bill/invoice and also on the finding that all the payments have been made through bank channels. In our considered opinion, even if the new addresses of the parties were not made available to the AO, nothing prevented the AO to verify the genuineness of the transactions from the banking as the payments have been made through banking channels. In our understanding of the facts, the assessee has discharged the onus cast upon it and the additions have been deleted by the Ld. CIT(A) by a well reasoned and researched order, therefore, no interference is called for. Ground No. 2 is also dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court at the time of hearing on 4th January, 2016.