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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SHAILENDER KUMAR YADAV,JM & SHRI RAJESH
आदेश / O R D E R PER RAJESH KUMAR, A. M: This appeal by the assessee is directed against the order dated 30/12/2011 of Commissioner of Income Tax (Appeals) 35, Mumbai (Hereinafter called as the CIT(A) ) for assessment year 2009-10. The assessee has raised following additional grounds of appeal:
(A.Y: 2009-10) ACIT Vs. KIRIT B. GADLIYA
“On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in giving relief of Rs.46,86,610/- on the issue of addition made on account of the unexplained sundry credit u/s.69 (Inadvertently mentioned as section 68 in the assessment order) to the assessee without appreciating the fact nothing is outstanding at the end of the year.” 2. “The appellant prays that the order of the ld.CIT(A) on the above grounds be set aside and that of the AO be restored”. 3. “The appellant craves leave to amend or alter any ground or add a new ground”.
The issue raised in both the grounds of appeal is with respect to the addition of Rs.46,86,610/- on account of unexplained Sundry Creditors by the CIT(A). The brief facts are that the assessee is the proprietor M/s. Shri Krishna Travels and Tours and the income of the assessee comprised of income from business and by way of capital gains. During the year the assessee transferred Rs.46,86,610/- being the amount of Sundry Creditors by debiting the sundry creditors account and crediting the capital account of the assessee. The said exercise was undertaken for the banking purpose in order to improve the ratios of the balance-sheet of the assessee as the assessee was in need of funds which were to be borrowed bank finances. Simultaneously, the assessee’s accounted for these creditors in the personal balance sheet which was different from the proprietory concern by debiting capital account and crediting the respective Sundry Creditors Account. These creditors were also repaid subsequently after closing of the year.
3 During the course of assessment proceeding the ld. AO noticed that the assessee introduced capital in his capital account amounting to Rs.52,33,450/- and sought explanation for the same which the assessee replied that Rs.46,86,610/- were (A.Y: 2009-10) ACIT Vs. KIRIT B. GADLIYA transferred from the Sundry Creditors account of Rs.5,46,840/- was on account of capital gain on the sale of property. The ld. AO added Rs.46,86,610/- u/s 68 of the Act on the grounds that the movement the creditors are transferred to the capital account the liability to pay such creditors ceased.
4 Aggrieved by the order the ld. AO, the assessee preferred an appeal before the ld.CIT (A) who after verification of the proof as to payment of these creditors deleted the addition by observing that the assesssee actually discharged these sundry creditors at a later date on the basis of proofs comprising of ledger copies and confirmation from these creditors and further observed that the liability to repay the creditors did not get liquidated by making the book entries.
5 The ld. DR submitted before us that these unexplained Sundry Creditors were wrongly stated to be added to the income of the assessee u/s 68 of the Act instead of 69. The ld. DR further submitted that the movement creditors were transferred out of books by making book entry debiting the sundry creditors account and crediting the capital account of the assessee the liability ceased to exist and therefore, the ld. Counsel prayed for setting aside the order of CIT(A) and restoring the order of ld.AO.
6 The ld. AR on the other hand submitted that the assessee took out sundry creditors out of the business books by making book entry debiting the sundry creditors account and crediting the assessee’s capital account. Simultaneously, these creditors were brought into the personal books of the assessee by debiting capital account and crediting the respective creditors account which were different from the books maintained for the business of such proprietary concern. The ld. Counsel further
(A.Y: 2009-10) ACIT Vs. KIRIT B. GADLIYA submitted that the whole exercised was undertaken in order to improve the business balance-sheet of the assessee so that the bank finances could be arranged. The ld. Counsel further argued that all these sundry creditors were duly discharged at the subsequent dates as were verified and observed by the CIT(A). The proves thereof comprising of ledger copies and confirmation from the creditors were filed before the CIT(A) who rightly deleted the addition after having examined and verifying the matter. Ld counsel for the assessee prayed that with the mere book entries the liability towards sundry creditors did not cease to exist and were subsequently discharged and therefore submitted that the order of CIT (A) to be upheld.
7 We have considered the rival submissions and perused the material on record. We note that the creditors were transferred out of business books of M/s. Shri Krishna Travels and Tours a proprietary concern of the assessee in order to make it more attractive from the bank’s point of view so that the assessee could arrange bank finances to expand his business. We also note that simultaneously these creditors were brought into personal balance sheet of assessee which were being maintained separately from the proprietary concern. It is also clear that these creditors were paid on the later date and the ld. CIT (A) had made observation to this effect after verification of the ledger copies and confirmation of the creditors. The ld. AO nowhere doubted the purchases made by the assessee in the normal course whereby these sundry creditors were incurred. Going by the facts of the case and material on record we are of the opinion that the ld. CIT(A) had rightly deleted the addition and therefore order of CIT(A) is upheld.
We, therefore, dismiss the appeal of the revenue.
(A.Y: 2009-10) ACIT Vs. KIRIT B. GADLIYA In the result, the Revenue’s appeal is dismissed. प�रणामतः राज�व क� अपील� खा�रज क� जाती है । Order pronounced in the open court on Nov. 20th, 2015 Sd/- Sd/- (Shailendra K.Yadav) (Rajesh Kumar) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated :20 .11.2015 Ashwini Gajakosh आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A) 4. आयकर आयु�त / CIT - concerned 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File आदेशानुसार/ BY ORDER,