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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW
Before: SHRI ANADEE NATH MISSHRA & SHRI SUBHASH MALGURIA
1. This appeal has been filed by Revenue for assessment year 2014-15 against impugned appellate order dated 12/12/2019 passed by learned Commissioner of Income Tax (Appeals) [“CIT(A)” for short].
2. In this case assessment order dated 27/12/2016 was passed u/s 143(3) of the I. T. Act whereby the assessee’s total income was determined at Rs.3,88,46,700/- (rounded off) as against returned income of Rs.18,79,020/-. In the aforesaid assessment order, various additions under different heads were made against which the assessee filed appeal in the office of learned CIT(A). Vide impugned appellate order dated 12/12/2019, the learned CIT(A) gave partial relief to the assessee. The present appeal has been filed by the Revenue against the order of learned CIT(A) and the Cross Objection has been filed by the assessee. The grounds taken in Revenue’s appeal and the Cross Objection of the assessee are as under:
“1. The CIT(A) has erred in law & on facts of the case in deleting the addition of Rs.1,38,31,516/- in respect of sundry creditors without appreciating the fact that the assessee could not prove the identity, creditworthiness and genuineness of the creditors u/s 68 of the I. T. Act.
2. The CIT(A) has erred in law & on facts of the case in deleting the addition of Rs.1,68,61,600/- without appreciating the fact that the assessee could not establish the identity, creditworthiness and genuineness of the parties and additional
Page 3 of 23 I.T.A.No.170/Lkw/2020 C.O.No.17/Lkw/2023 evidence should have not been admitted as opposed by the Assessing Officer through remand report.”
C.O.No.17/Lkw/2023 “The basic fact and the resultant sufferings on which the case lies is the death of the Assessee, Mukesh Agarwal. This fact was repeatedly brought to the notice of the AO, which he chose to conceitedly brush aside. When the first date of 14" September, 2015 was fixed for hearing, the assessee was in hospital and died on 29" September, 2015 after a prolonged illness. After this great turbulence in the family and business, the business was gradually shifted to his wife Mrs. Mohini Agarwal. This took a long legal process and survival was at stake. The legal heir pleaded repeatedly to provide natural relief, but was deprived of. Law of the land is to provide justice to everyone and is designed with human touch, so Law and its executors cannot be inhuman. This premise was never in consideration during the proceedings of assessment. Now, in Tribunal we have fair chance of being heard and we plead before the Honorable bench to consider the facts and documents despite the fact that many information die with the person they belong to.
The addition of Rs.1,68,61,600/- for unsecured loans taken
1. The addition of Rs.1,68,61,600/- for unexplained Unsecured Loan does not hold any ground. The statement by the AO that this was Assessee's own unexplained money routed through the lender for investing in business for increasing the capital of Assessee." falls flat when we see that out of Rs.1,68,61,600/- taken during the year Rs.1,65,61,600/- was paid back and there is an opening balance of Rs.8,25,000/- in the account of Mr. Akhil Agarwal. Unsecured Loan as on 31.03.2013 was Rs.78,88,048/-, while as on 31.03.2014 outstanding fell down to Rs.19,65,548/-. As a result, there is a decrease of Rs.59,22,500/- in UL during the year. So routing the unexplained money through UL channel is untenable.
2. As regards credit worthiness of lenders, all the documents related to their financial strength and transactions executed
Page 4 of 23 I.T.A.No.170/Lkw/2020 C.O.No.17/Lkw/2023 from bank accounts were produced before the Assessing Officer, which he refused to entertain and take on records.
All the relevant documents are being produced herewith to prove the authenticity of the transactions.
ADDITION OF Rs.1,38,31,516/- FOR SUNDRY CREDITORS
As regards addition of Rs.1,38,31,516/- for sundry creditors, we reiterate that all the creditors are genuine as the same can be verified from the ledger copies submitted; that show the purchase bills and corresponding payments. We have taken the confirmation from them. Moreover, when purchases have increased by Rs.9,50,40,526/- the creditors have increased just by Rs.1,38,31,516/-. These are verifiable and genuine. Therefore, not mentioning the precise provisions of law makes the impugned additions bad in law.
This was well established that Section 68 cannot be applied for taxing unconfirmed sundry creditors - CIT vs. Vardhman Overseas Ltd (2012) 343 ITR 0408 (Del). The A.O. has not established with evidence that the liability in respect of the above outstanding balances has ceased to exist. AO has gone on presumption and that too by placing the burden wrongly on the shoulders of the Assessee.
Sundry Creditors can be added as income u/s 41(1) of the IT Act once there is remission or cessation of liability. Mere fact that these amounts were outstanding and the AO was not satisfied with the documents submitted, the same cannot be a added as income. The parties are in continuation from previous years and were paid in future as per the practice of the business.
This is worth mention here that the Assessee was also scrutinized for the A.Y.2013-14 and all the accounts were scrutinized by the learned AO. When in the preceding year nothing untoward was found, how the same assessee can be projected as culprit for not maintaining proper records. We
Page 5 of 23 I.T.A.No.170/Lkw/2020 C.O.No.17/Lkw/2023 substantiated our submission with the copy of the assessment order passed.
The AO has not disallowed any purchases and all the purchases were found to be genuine, then the corresponding liability of the purchases cannot be fake or bogus not passing the test of genuineness. This gives a valid ground to provide genuineness to our prayer.
6. That the Cross Objector craves the leave to add, modify, amend or withdraw any of the grounds of cross objections at the time of hearing with the permission of the honourable bench and all the above grounds are without prejudice to each other.”
3. In the course of appellate proceedings in Income Tax Appellate Tribunal, a paper book containing the following particulars was filed from the assessee’s side:-
S.No. Particulars 1. ITR Acknowledgement assessment year 14-15 of late Mukesh Agarwal 2. Audited accounts and audit report assessment year 14-15 3. Assessment order u/s 143(3) for assessment year 2013-14 4. Assessment order u/s 143(3) for assessment year 2014-15 5. Form 35 for appeal filed 6. Written submissions before CIT(A) 7. Comments on additional evidence u/r 46A by Assessing Officer 8. Appellate order of CIT(A) dated 12/12/2019 9. Form 36 appeal filed by DCIT before ITAT 10. Death Certificate of Late Mukesh Agarwal 11. Unsecured loan chart and supporting documents 12. Sundry & supporting documents Although the additions were made by the Assessing Officer under various heads, the issue in the present appeal pertains to two additions – addition of Rs.1,38,31,516/- in respect of sundry creditors, and addition of Rs.1,68,61,600/- towards unsecured loans received by the assessee. The Page 6 of 23 I.T.A.No.170/Lkw/2020 C.O.No.17/Lkw/2023 learned CIT(A), in his impugned appellate order, deleted the aforesaid additions. The relevant portion of the order of the learned CIT(A) is reproduced below:
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4. At the time of hearing before us, the assessee was represented by Shri Ashok Seth, learned A.R. for the assessee and Revenue was represented by Shri Mazhar Akram, learned CIT, D.R. Learned A.R. for the assessee placed strong reliance on the impugned order of learned CIT(A) and strongly contended that the additions made by the Assessing Officer were unfair, unjust and high pitched, causing hardship and agony to the widow and legal heir of Late Mukesh Agarwal. He also drew our attention to submissions made along with Cross Objections filed by the assessee, relevant portion of which is reproduced as under:
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5. The learned D.R. for Revenue relied on the order passed by the Assessing Officer. However, he could not bring out any facts or materials for our consideration to assail the impugned order of learned CIT(A). He also could not present us with any decided precedents in support of the additions made by the Assessing Officer. Learned D.R. was unable to show how the impugned order of learned CIT(A) was erroneous, unfair, unjust or lacking any merit having regard to facts and circumstances, applicable law and decided precedents. No case has been made from the side of the Revenue to persuade us to take a view different from the view taken by learned CIT(A) in relation to aforesaid additions of Rs.1,38,31,516/- and Rs.1,68,61,600/- respectively. Therefore, we decline to interfere with the impugned order of learned CIT(A).
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In the result, the appeal filed by the Revenue is dismissed and Cross Objection filed by the assessee is allowed.
(Order pronounced in the open court on 17/12/2024)