Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. Annapurna Gupta & Shri TR Senthil Kumar
Appellant by : Shri Samir Bhuptani, A.R. Respondent by : Shri S. S. Rathi, Sr. D.R. Date of hearing : 30-03-2022 Date of pronouncement : 06-04-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals), Jamnagar, (in short referred to as CIT(A)), dated 22-05-2018, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2015-16
The grounds raised
by the assesse read as under:
1. Addition of Rs. 6,2351- on account of difference in closing balance of Jalaram Cotton & Protiens Ltd, Rajkot, sundry creditor (i.e. Closing balance of Rs.48,559/- less confirmation provided of Rs. 42,324/-),without considering the details submitted along with evidentary proof that the same was due to rate difference and discount given by above said creditors.
Page No 2 Bajariya & Co. vs. ITO 2. Addition of Rs. 3,806/- on account of difference in closing balance of Jitendra Trading Co., Rajkot, sundry creditors (i.e. closing balance of Rs. 1,66,872/- less confirmation provided of Rs. 1,63,066/-, without considering the details submitted along with evidentary proof that the same was due to rate difference and discount given by above said creditors.
3. Addition of Rs. 43,589/- of Shree Ram Proteins, Sundry creditors for want of confirmation without appreciating the fact and other material available on record.
As is evident from the above, the solitary grievance of the assessee is with regard to addition made to his income of the sundry creditor balances either on account of difference in the amounts mentioned in the confirmations filed by the creditors as opposed to that reflected in the books of the assessee or on account of no confirmation filed by the assessee.
We have heard both the parties. We have also gone through the order of the authorities below. We have noted from the assessment order that out of total sundry creditors of Rs.6,49,916/- of the assessee, addition of Rs. 53,630/- has been made on account of unconfirmed balances pertaining to the following parties as detailed at para 5 of the order as under: 5. The reply of the assessee dated 25/09/2017 in regard to show cause notice dated 15/09/2017 were received. The AR of the assessee produced detailed confirmations in some creditors, however the confirmation of some creditors were not submitted, which are as below. Sr, Name of the sundry creditors Amount No, 1 Jalaram Cotton & Protiens Ltd. Rajkot 6235 (48559-42324) 2 jitendra Trading Co., Rajkot {166872- 3806 183066} 3 Shree Ram Proteins 43589 Total 53630 Page No 3 Bajariya & Co. vs. ITO
In view of the above the addition of Rs 53630/- in regard to sundry creditors are made.
Before the Ld.CIT(A) the assessee explained the reason for the difference in balance as relating to discount given and had also explained the balance outstanding with respect to Shree Ram Proteins of Rs.43,589/- as pertaining to its last bills of the year, which were paid off by banking channels in the next year and also that the assessee had a running account with it. The submissions of the assessee to the above effect are reproduced at para 4 of the CIT(A)’s order. But we find that the Ld.CIT(A) gave no consideration to the same. Ld.CIT(A) upheld the addition holding as under at para 5 of his order: 5. The assessment order u/s, 143(3) of the Act of the AO and the; submission of the appellant as reproduced in earlier paragraphs of this appeal order have been considered. The grounds of appeal of the appellant are reproduced in initial paragraph of this appeal order. With regard to grounds of appeal of the appellant, its submission as reproduced in earlier paragraph of this appeal order is not found to be acceptable. With regard to addition of Rs, 45,113/-, the appellant failed to provide confirmation of the creditor despite the opportunity given to it. Further the appellant could not explain the differences of Rs, 6,235/-in closing balance of Jalaram Cotton and Protins Ltd, and difference of Rs, 3,806/- in closing balance of Jitendra Trading Company, Considering these facts, the entire addition of Rs, 53,660/- (i.e. Rs. 45,113 + Rs. 6,235 + Rs, 3,806/-) as made by the AO In the assessment order u/s. 143(3) of the Act IB hereby confirmed. Thus the grounds of appeal of the appellant as reproduced, in initial paragraph of this appeal order are dismissed.
6. Before us, Ld.counsel for the assessee filed submissions in writing explaining each of the balance of creditors as under: 2.0 Ground wise submission The appellant is engaged in the business of trading of food grains (Kirana). The appellant had filed return of income declaring total income of Rs.. 1, 47,61 2/-. Copy of the return of income, computation of income and audit report are attached herewith (12-45) In the assessment proceedings Id. AO made three additions detailed as under: Sr.No. Description Amount Rs. 1 Account on account of difference between 6,235/- closing balance as per books of account vis- à-vis contra account of creditor Jawahar Page No 4 Bajariya & Co. vs. ITO and sons 2 Account on account of difference between 3806 closing balance as per books of account vis- à-vis contra account of creditor Jitendra Trading Co. 3 Addition of closing balance of creditor 45,389/- shree Ram Proteins for want of confirmation. The assessment order has been upheld by Id. CIT(A). Being aggrieved, the appellant is in appeal before Hon'ble ITAT 2.1 Ground No. 1: Addition of Rs. 6,235/-. 2.1.1 Facts of the case: The appellant is purchasing goods from M/s. Jawahar & Sons (in the assessment order by clerical mistake it has been typed as Jalaram Cotton & Proteins) throughout the whole year and is having running account with closing credit balance of Rs.. 42,324/-. Copy of the ledger account is attached herewith ( 46-51). Ld. AO called for the contra account u/s. 133(6) of the act and noted that the closing balance in the said account was Rs..48,559/-. Copy of the contra account is attached herewith ( 52 -55____). The difference of Rs..6,235/- (Rs..48,559- Rs..42,324) has been worked out and has been added in the total income of the appellant. During the course of the assessment proceedings Id. AO compared the closing balance as per the books of account of the appellant with the contra account called from the creditor viz. Jawahar & Sons (in the assessment order, by clerical mistake, it has been printed as Jalaram Cotton & Proteins) u/s. 133(6) of the act. The difference of sum of Rs..6,235/- was worked out as under: Description Amount Rs. Closing balance as per contra account of 48,559/- Jawahar & sons Closing balance as per books of account 42,324/- Difference 6235 2.1.2 The addition has been upheld by Id. CIT(A). 2.1.3 Submission before Hon'ble ITAT: 2.1.3.1. Ld. AO did not refer the contra account properly. Actually the contra account was showing two balances one on credit side and another on debit side, detailed as under: Sr.No. Description Amount Rs. 1 Amount receivable balance (Debit balance) 68,559/- Dr. 2 Amount payable balance (Credit balance) 26,776/- Cr Net closing balance 41,783/- Dr. The balance is also cross-verifications under: Sr.No. Description Amount Rs. 1 Total of debt transactions in contra account 8,91,322/- 2 Total of credit transactions in contra 8,49,539/- account Page No 5 Bajariya & Co. vs. ITO Net closing balance 41,783/- Dr. 2.1.3.2 Ld. AO considered the balance of debit side only and that too with misunderstanding the sum of f.68,559/- as Rs. 48,559/-. 2.1.3.3 The balance on both the sides of the ledger was also with a purpose that payments of 9,295/- (05/02/2015) and Rs..17,481/-(16/03/2015) aggregating to Rs..26,776/- were made by the appellant in duplication. 2.1.3.4 In view of the above the actual difference is worked-out at Rs..541/- only (Rs..41,783 – Rs. 42,324/-). The addition should, therefore, be restricted to Rs.541/- only. 2.2 Ground no. 2- Addition of Rs. 3806/- 2.2.1 Facts of the case: Ld. AO compared the contra account of creditor M/s. Jitendra Trading Co. with the closing balance of the said creditor appearing in the audit report of the appellant. Copy of ledger account and contra account are attached herewith ( 56-60____). The comparison reveals following difference in the closing balance: Description Amount Rs. Closing balance as per books of account 1,63,066/- Closing as per contra account of Jitendra 1,66,672/- Co. Difference (-) 3806 Ld. AO made the addition of difference amount of Rs..3,806/-. 2.2.2 The addition has been upheld by the CIT(A). 2.2.3 Submission before Hon'ble ITAT: It is humble submission of the appellant that the addition is unwarranted as the difference is on negative side and not on positive side. The appellant has shown credit balance of the creditor lesser which means that the appellant has claimed lesser expenditure and hence more income has been offered for tax. Thus the addition is unwarranted. However, the difference is also reconciled as under: Date As per As per Difference Remarks creditor appellant 31/12/2014 0 1 (-) 1 Appellant credited discount income
21/02/2015 45,712 42,919 (-) 2,793 Appellant has debited purchase with lesser amount (i.e. net of discount) and also made the payment of lesser amount only on 13/03/2015. In other words the appellant has offered income to that extent by debiting purchase with lesser amount. The assessee has taken rate of ₹.786/- of Oil as against the amount of ₹.862/- Page No 6 Bajariya & Co. vs. ITO adopted in the bill. Copy of the invoice is attached herewith (______68_________). b e a 31/03/2015 0 1,012 (-) 1,012 Appellant credited discount income p p Total… (-) 3,806 r e ciatbe appreciated from the above table that the difference represents the discount income. Thus, the appellant has actually offered the said amount for tax and hence addition of the same is not warranted as it has already been offered for tax. The addition amounts to double taxation of the same sum. 2.3 Ground no. 3- Addition of Rs. 45,389/- 2.3.1 Brief facts: The appellant is having a running account with M/s. Shree Ram Proteins. During the year under consideration the appellant had made total purchases from the said creditors of fRs.2,61,002/- and made total payment of Rs..2,17,413/- and therefore there was closing balance of ?.43,589/-. Copy of the ledger account is attached herewith ( 69-74 }. During the assessment proceedings Id. AO asked for the confirmation of M/s. Shree Ram Proteins. The appellant sent a request letter dated 31/07/2017 to Shree Ram Proteins through courier. Copy of the letter along with courier report of the same are attached herewith ( 77-78 ). However, the creditor did not send the confirmation and Id. AO, therefore, made the addition of the closing balance of R..45,389/- for want of the confirmation from the creditor. 2.3.2 Ld. CIT(A) has upheld the addition. 2.3.3 Submission before Hon'ble 1TAT: While making the addition Id. AO completely ignored following aspects of the case: 2.3.3.1 The appellant is having running account with the said creditors with total purchase of Rs..2,61,002/- and payment of Rs..2,17,413/- leaving closing balance of Rs.43,589/-. The closing balance represents following unpaid bills: Date Amount Rs. Bill N. 20/03/2015 34,935 1441 30/03/2015 8654 1456 Total 43,589 Copies of above invoices are attached herewith ( 75-76 ). Thus, the transactions are done in ordinary course of business and they are normal transactions supported by the reasonable and convincing history. The outstanding bills are for very small period of 11 days and 1 day. Thus, none of the bills is long outstanding. 2.3.3.2 All the payments to the creditor were made through banking channel only. 2.3.3.3 The closing balance of Rs.43,589/- has been cleared by the appellant in subsequent month viz. April-2015 only, detailed as under: Date Amount Rs. Cjheques no. 10/04/2015 34,935 20725 15/04/2015 8654 20731 Page No 7 Bajariya & Co. vs. ITO Total 43,589 Copy of the ledger account for the AY 2016-17 with bank statement of the relevant period are attached herewith ( 79-86 ). Thus, the entire closing balance as of 31/03/2015 has been paid by the appellant within 15 days only. In this connection, it is submitted that when the payment of the outstanding amount has been made, that too through banking channel only, the genuineness of the transactions is undisputedly established. In this connection, reliance is placed on the following decisions: Reliance is placed on the decision of Shyam Sunder Jajodia (26 SOT 541) - Del-ITAT (120-128) It is true that assessee has proved the identity of the payer and genuineness of the transaction but creditworthiness of the creditor is not proved. No evidence has been filed in that connection. On query, -whether this amount has been repaid or adjusted against any purchases made by the creditor during the year or in the subsequent period, the assessee expressed his inability. If it is repaid subsequently, then it can show that this amount must have been taken from M/s. A Plastics. It will rule out the possibility of introduction of assessee 's own money through M/s. A Plastics. Therefore, this issue is set aside to the file of the AO for verification and readjudication. In the result, this ground of appeal is allowed for statistical purposes. [Para 15] 2.3.3.4 Moreover, it is also submitted that the addition cannot be made on the sole basis of the non-availability of the confirmation from the creditor. It may kindly be appreciated that the appellant had made all possible efforts but it was not in the hands of the appellant to arrange the same otherwise without co-operation of the creditor. If the creditor chose to not to supply the copy of the contra account from his books there is no resource and authority available to the appellant to force the creditor to issue the same. The appellant can only request and which has been done so far in this case. However, Id. AO is duly empowered, for such cases and circumstances, to issue notice u/s. 133(6) of the act and compel the creditor to furnish the required details. Ld. AO did not exercise this option and made the addition without appreciating the genuine problem of the appellant and other material which clearly establish the genuineness of the transactions. In view of the above submission the appeal of the appellant may kindly be allowed
7. Briefly put it was explained ,pointing out from necessary documents, that the balance unreconciled/unconfirmed either pertained to discount given by the assessee shown to be reflected in its books ,or was on account of figures in the confirmation being misread and the balance whose confirmation was not filed at all was explained to be genuine by pointing out from the books of the assessee that the creditor had a running account with the assessee, the outstanding bills pertained to the last few bills which were paid off by banking channels in the next year and did not remain outstanding for a very long period.
Page No 8 Bajariya & Co. vs. ITO 8. Considering all of the above, we are not in agreement with the lower authorities that the impugned unconfirmed balances warranted any addition to the income of the assessee.
8.1 It is not denied that that the assessee had filed confirmations of all its creditors totalling in all to Rs.6,49,916/-except one M/s Shree Ram Proteins of Rs.43,589/-. With respect to the creditors whose balance did not tally, amounting in all to Rs 10,043/-(6235 + 3808) the Ld.Counsel for the assessee has gone out of his way to explain the minor difference as pertaining to discounts given or there being no difference at all in the case of M/s Jawahar and Sons, the confirmation filed by the creditor having been misread with respect to the figures stated therein. The differences have been explained in detail with reference to the bills to which the discounts pertain or the specific entry of discount given by the assessee and also by pointing out the misreading of figures in the confirmation of the creditor by the AO.
In view of the same ,considering that the assessee had confirmed the majority of the balances of creditors outstanding and the addition made being very small and the assessee having explained the same also, we see no reason for making addition on account of the same.
9.2 With respect to the addition of balance pertaining to M/s Shree Ram Protein on account of absence of confirmation of the same by the creditior, we find that the assessee has sufficiently discharged his onus of proving the genuineness of the same by pointing out that it is a running account, the balance pertains to last few bills of the creditors which were outstanding for less than a month and payment was made by banking channels in subsequent years. Merely because Page No 9 Bajariya & Co. vs. ITO the creditor fails to file /give a confirmation of the same, which is beyond the control of the assessee, the balance cannot be said to be ingenuine considering the aforesaid evidences filed by the assessee, which have remained uncontroverted by the Revenue. We therefore hold that there was no reason for making addition on account of the said balance also.
In view of the above, we direct that the entire addition made on account of uncomfirmed creditors balances amounting in all to Rs.56,630/- be deleted.
Ground of appeals No.1-3 are allowed.
In effect appeal of the assessee is allowed.