ACIT 25(1), MUMBAI vs. DINANATH M. DABHADE, MUMBAI

BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. (Assessment Year:2008-09) ACIT - 25(1), Mumbai – 400 051 Appellant Vs. Shri Dinanath M. Dabhade Prop. Of M/s Hemant Mechanical Industries, 21, Jatin Industrial Estate, 3rd Carter Road, Borivali (E), Mumbai - 66 Respondent PAN: AABPD9536H अपीलाथ� क� ओर से /By Appellant : Shri Vivek Anand Ojha, D.R. ��यथ� क� ओर से/By Respondent : Shri Ashwin S. Chhag, A.R. सुनवाई क� तार�ख/Date of Hearing : 07.10.2015 घोषणा क� तार�ख/Date of Pronouncement : 28.10.2015 ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by Revenue against the order of Commissioner of Income-Tax (Appeals)-35, Mumbai, dated 10.02.2013 for A.Y. 2008-09 on following grounds:

A.Y. 08-09 [ACIT vs. Shri Dinanath M. Dabhade] Page 2

“(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made on account of Sundry Creditors of Rs.40,44,486/- made by the A.O., even though the assessee was not able to substantiate the claim either at the time of assessment proceedings nor at the time of remand proceedings. (ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made on account of Sundry Creditors of Rs.40,44,486/- made by the AO., by stating that since the sales made to these parties have been accepted, the purchases cannot be treated as bogus, inspite of the fact that the liability cannot be accepted unless confirmed by the third party as this is a case of cessation of liability u/s 41(1) of the I.T. Act, 1961 and taxable as his income.”

i) M/s Classic Enterprises ii) M/s I.T International iii) M/s Asna Enterprises A.Y. 08-09 [ACIT vs. Shri Dinanath M. Dabhade] Page 4 iv) M/s Yashobhoomi v) M/s Om Enterprises

However, the assessee has failed to furnish the third party confirmation and vide order-sheet entry dated 19.11.2012 has submitted that these parties have closed their business and furnishing of third party confirmation could not be made.

As far as other liabilities, the assessee has provided documentary evidence for the same.

As far as unsecured loans are concerned, it is seen that the loans pertained to earlier years and not pertained to the impugned A.Y.”

During post remand proceeding, stand of assessee has been that above parties had actually closed their business and hence, obtaining confirmations from parties were not possible. However, he submitted that in case the purchases were bogus, then Assessing Officer could not have placed reliance on sales made, as assessee was a trader and hence materials purchased were sold by assessee. The copies of bank statements reveal that bank payments were made to creditors. Thus, it was stated on behalf of assessee that even though, no confirmations could be provided, transactions in creditors’ ledger had been explained. In this background, after considering the remand report of Assessing Officer and assessee’s submissions, CIT(A) observed that unsecured loan and other liabilities had been explained by assessee and they did not pertain to A.Y. 2009-10. In view of this, in respect of creditors, assessee had clearly explained the transactions A.Y. 08-09 [ACIT vs. Shri Dinanath M. Dabhade] Page 5 reflecting in creditors’ accounts during year. Under the facts and circumstances, CIT(A) was justified in observing that purchases could not be treated as bogus. Accordingly, creditors could not be treated as unexplained, even if, confirmation could not be provided at relevant point of time. Accordingly, he rightly directed the Assessing Officer to delete the addition of Rs.40,44,686/-. Same is upheld.

Pronounced in the open Court on this the 28th day of October, 2015.