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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI B.R. BASKARAN & SHRI VIKAS AWASTHY
आदेश /O R D E R
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
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.
The Revenue is aggrieved by the decision of the Ld. CIT(Appeals)
in granting relief in respect of following issues:-
2 I.T.A. No. 441/Mds/2014
(a) Addition relating to unproved credits : ` 8,74,256/- (b) Addition relating to unexplained investment : ` 27,50,075/-
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.
Accordingly, the Assessing Officer treated the amount outstanding
in the name of following creditors as income of the assessee:-
S.No. Name of the Creditor Amount ` 1,99,500 1. World Leather Links 2. Nazlin Enterprises ` 1,53,750 3. SSV Enterprises ` 3,25,000 ` 1,47,342 4. A.S. Leathers 5. MAS Leathers ` 1,04,350 ` 2,49,889 6. Musarath Trading Company 7. United Manufacturers ` 5,37,779 8. Thabasiya Tanning Industries ` 4,71,101 ` 3,75,160 9. Nadeem Leathers 10. Nadeem Prime Tanners ` 3,71,700 ` 3,56,407 11. Zanoor International TOTAL ` ` ` 32,91,974 `
It is pertinent to note that the assessee in his reply dated 4.2.2013
admitted the above said amount as his income since he could not
persuade the creditors to confirm the balance outstanding.
3 I.T.A. No. 441/Mds/2014 3. The A.O. also noticed that the assessee has purchased an
immovable property in Bangalore along with his brother. The
assessee submitted that the said property was purchased by his
brother and his name was included in the document for sentimental
reasons. Since the assessee’s brother was computing his income
under Section 44AD of the Income-tax Act, 1961 (in short 'the Act')
and since he did not have Balance Sheet, the assessee agreed to
offer 50% of the cost of the property as his income. Accordingly, the Assessing Officer assessed `27.50 lakhs as income of the
assessee towards unaccounted investment.
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.
4 I.T.A. No. 441/Mds/2014
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
5 I.T.A. No. 441/Mds/2014 the extent of `24.17 lakhs on the reasoning that the said amount
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
6 I.T.A. No. 441/Mds/2014 fault of him and accordingly submitted that the Ld. CIT(Appeals)
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.
7 I.T.A. No. 441/Mds/2014 9. The next issue relates to addition on account of investment
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.
Accordingly, we do not find any infirmity in the order of Ld
CIT(Appeals) on this issue also and accordingly uphold the same.
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 I.T.A. No. 441/Mds/2014 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.
Order pronounced on the 22nd day of January, 2015 at Chennai.
Sd/- sd/- (�वकास अव�थी) (बी.आर. बा�करन) (VikasAwasthy) (B.R. Baskaran) �या�यक सद�य/Judicial Member लेखा सद�य/Accountant Member
चे�नई/Chennai, �दनांक/Dated, the 22nd January, 2015.
Kri.
9 I.T.A. No. 441/Mds/2014
आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-VII, Chennai-34 4. आयकर आयु�त/CIT-III, Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.