ACIT, VELLORE vs. K.SUHAIL AHMED, AMBUR

The Revenue has filed this appeal challenging the order dated 28.10.2013, passed by Ld. Commissioner of Income Tax (Appeals)-VII, Chennai, and it relates to assessment year 2010-11.

We have heard the parties and perused the record. During the course of assessment proceedings, the Assessing Officer noticed that the sundry creditors balance were disclosed at `1.17 Crores in the balance sheet. The Assessing Officer issued summons to all the creditors. Notices sent to some of the creditors were returned unserved and some of the creditors did not respond.

The assessee challenged both the additions in the appeal filed by the CIT(A), even though he had agreed for the said additions. The Ld. CIT(Appeals) noticed that the sundry creditors balance to the extent of `24,17,718/- was outstanding even on 31.03.2008. Accordingly, he took the view that the Assessing Officer was not right in assessing the above said amount in assessment year 2010-11. The Ld. CIT(Appeals) further held that the assessee has discharged his onus by providing all the details relating to creditors and hence the onus got shifted to the A.O. to disprove the claim of the assessee. Since the A.O. failed to discharge the onus placed on him, the Ld. CIT(Appeals) held that the entire addition of `32,91,974/- cannot be sustained.

With regard to the addition relating to investment made in immovable property, the Ld. CIT(Appeals) noticed that the assessee’s brother had sold the property subsequently on 25.01.2012 and has offered the entire amount of short term capital gain arising on the sale of property as his income in his return of income filed for assessment year 2012-13. Accordingly, the Ld. CIT(Appeals) held that the entire property belonged to the assessee’s brother only and accordingly deleted the addition of `27.50 lakhs relating to unexplained investment.

The Ld. D.R. submitted that the assessee had agreed for addition of both the amounts by filing letters before the Assessing Officer and hence he is not entitled to retract from the same. He submitted that the Ld CIT(Appeals) did not consider the above said fact. He submitted that the sundry creditors to the extent of ` 8,74,256/- was not old balance and hence the Ld CIT(Appeals) should have confirmed the addition to that extent. With regard to the addition relating to the investment made in house property, the Ld D.R submitted that the assessee’s brother has failed to prove that he had actually paid the entire consideration.

On the contrary, the Ld.counsel submitted that the Ld. CIT(Appeals) has deleted the addition relating to sundry creditors to was outstanding even on 31.03.2008. He submitted that the Revenue has accepted the relief granted to that extent and it is contesting only the balance amount of `8,74,256/-. The Ld. Counsel submitted that the assessee had furnished all the details to the Assessing Officer and he cannot be found fault with for non- compliance of notices issued to the creditors. He submitted that the liability towards creditors did not cease to exist as on 31.3.2010 and hence the question of assessing the outstanding liability as income of the assessee u/s 41(1) does not arise. In this regard, he placed reliance on the decision of Cochin Bench of the Tribunal rendered in the case of M/s S.N. Spices v ITO (2014) (12) TMI 713 – ITAT Cochin. With regard to addition relating to investment made in immovable property, the Ld.counsel placed reliance on the order of the Ld. CIT(Appeals). With regard to the acceptance given to the Assessing Officer, the Ld. Counsel submitted that the assessee was constrained to agree for the additions since he could not bring the relevant facts to the satisfaction of the Assessing Officer during the course of assessment proceedings. However, before the Ld. CIT(Appeals), the assessee could furnish the relevant details and hence the learned CIT(A) has granted relief. The Ld.counsel submitted that the assessee should not be made to suffer for no was justified in deleting both the additions.

The first issue relates to relief granted in respect of sundry creditors balance. As submitted by the Ld. Counsel for the assessee, the Revenue is contesting the relief granted to the extent of `8,74,256/-. Apparently, the said amount was not related to earlier years. Further, we notice that the Assessing Officer has assessed the above said amount only for the reason that notices issued to the parties remained un-responded. However, the fact remains that the liability towards this credits continued to exist as on 31.3.2010 and the said fact has not been controverted by the Assessing Officer. Hence, in our considered opinion view, there is no question of invoking provisions of Section 41(1) of the Act in respect of these creditors. The fact remains that these creditors represent trade creditors and the assessee has already furnished their addresses. Further, as stated earlier, the addition has been made without making any further enquiry. Hence, in our view, the Ld. CIT(Appeals) was justified in deleting the addition of `8,74,256/-. Accordingly, we uphold the order of the Ld. CIT(Appeals) on this issue. made in the purchase of property in Bangalore. The Ld. CIT(Appeals), after verifying the return filed by the assessee’s brother for the assessment year 2012-13, has given a finding that the assessee’s brother has sold the above said property on 25.01.2012 and has offered the entire amount as capital gain in his hand. Further, we notice that the assessee’s brother has also sent a letter to the Assessing Officer during the course of assessment proceedings wherein he has admitted that he had only purchased the property and further stated that the assessee had not contributed any amount towards the purchase of the property.

The Ld D.R contended that the assessee was not entitled to retract from the admission made during the course of assessment proceedings. The same cannot be, in our considered opinion view, be taken as general proposition of law. In the case of addition relating to immovable property, we have noticed that the subsequent act of assessee’s brother in offering the entire amount of capital gains arising on sale of very same property in his hands, in fact, vindicates the stand of the assessee that he did not 8 contribute any amount. In respect of sundry creditors, the department has accepted the relief granted by Ld CIT(Appeals) to the extent of `24,17,718/-, meaning thereby, the revenue is also accepting the fact that the assessee has agreed for the addition under peculiar circumstances, though the addition was not warranted. Hence in the facts and circumstances of the case, we are of the view that the admission made by the assessee has lost its relevance, since the impugned additions were totally against the facts prevailing on record.

In the result, the appeal filed by the Revenue is dismissed.