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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per Dr. M. L. Meena, AM:
This appeal, by the Department is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-2, Amritsar (hereinafter referred to as CIT(A)), dated 25.05.2017 in respect of the Assessment Year 2012-13.
2 ITO v. Mukesh Kumar 2. The main issue challenges the issue wherein the Revenue objected to the decision of the Ld. CIT(A) in deleting addition of Rs. 1,77,20,648/- being made on account of ingenuine sundry creditors by admitting additional evidence under Rule 46A of the Income Tax Act and without allowing opportunity to the AO in rebuttal to the rejoinder filed by the assessee on remand report.
Brief facts as per the records are that during scrutiny proceedings, the AO has noted that inspite of giving opportunities to the assessee, he failed to furnish the complete list of sundry creditors along with the names and addresses and the books of account/documents in support. The AO has held that the assessee has nothing to offer in the matter with regard to the sundry creditors and accordingly he treated the extent of Rs. 1,77,20,648/- an increased amount of creditors over the preceding year as unexplained and added back to the return income of the assessee.
4. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A), who has deleted the addition by admitting additional evidence under Rule 46A(1)(c) ITAT Rules by observing as under:
3 ITO v. Mukesh Kumar “Decision:- During the assessment proceedings the AO asked the assessee to furnish the name and addresses of sundry creditors with full details thereof along with books of accounts. In view of non submissions of list and names and addresses of sundry creditors to the tune of Rs 281,17,185/-, the AO made the addition in respect of increased amount of sundry creditors over the preceding year at Rs 177,20,648/-.
During the appeal proceedings the assessee submitted the confirmed copy of account of the assessee in the books of the sundry creditors Bhatia Sales Agency, connector point, Madhusudan International, Vee Zone Impex, Rajiv Arora, Kiran, Gurmeet Singh and Sh Anirudh for the financial year under consideration as additional evidences under Rule 46A of I T Rules, which were admitted under rule 46A(l)(c) of I T Rules for reasons stated above and forwarded to the AO for his report. The AO issued notices under section 133(6) of the Act to six sundry creditors whose response was stated as under-
1 M/s Vee Zone Impex, New Delhi Received back unserved M/s Kan sal Trading Co, Faridkot Reply not received 2. 3. M/s Shree Krishna Plasto, New Delhi Received back unserved 4. M/s Bhatia Sales Agency, New Delhi Received back unserved 5. M/s Madhusudan International, New Delhi Confirmation received on 28-06- 2016 6. M/s Connector Point, New Delhi Confirmation received on 28-06- 2016
In the rejoinder to the remand report the assessee stated that after the date of report under rule 46A, the AO had also received confirmations from two parties namely M/s Vee Zone Impex and Bhatia Sales Agency after the submission of the remand report.
The sundry creditors as on 31-03-2011 were the following- Sr. No. Name of the party Amount 4 ITO v. Mukesh Kumar Marshal Tile 100,000/- 1. 1.
2. New Time Contractor 85 Builders P 118,500/- Ltd 3. Trehan Enterprises 307,950/- 4. Bhatia Sales Corporation 36,62,985/- 5. Madhusudan International 32,40,280/- Cheque outstanding 823,200/- 6.
7. Jai Mata ji Enterprises 20,40,622/- Veenu 63,000/- 8.
9. Bachitar Singh 40,000/- Total 103,96,537/-
After verifying the balance sheet of the assessee as on 31- 03-2011 and 31-03-2012, the following fresh credits during the year in the accounts of M/s Madhusudan International, M/s Vee Zone Impex, M/s Bhatia Sales Agency, and M/s Connector Point were calculated as under-
Name of the Credit Credit balance as Difference being creditor balance as on on 31-OS- 12 (Rs) fresh credits during 31-03-11 (Rs) the year (Rs)
M/s Vee Zone Nil 24,72,647/- 24,72,647/- Impex M/s Bhatia Sales 36,62,985/- 74,43,365/- 37,80,380/- Corporation
M/s 32,40,280/- 115,39,636/- 82,99,083/- Madhusudan International 5 ITO v. Mukesh Kumar M/s Nil 59,82,028/- 59,82,028/- Connector Point Total 205,34,138/-
In the appeal proceedings, the undersigned issue notices u/s 131(1) of the Act upon the following sundry creditors seeking confirmation of the nature of his business transactions with the assessee during F Y 2011-12 and to furnish the confirmed copy of account of assessee in their, books of accounts for the period 01-04-2011 to 31-03-2012.
(i) M/s Vee Zone Impex (ii) M/s Bhatia Sales Agency (iii) M/s Madhusudan International (iv) M/s Connector Point (v) M/s Kansal Trading Co.
In response to notice u/s 131(1) the reply was received from M/s Madhusudan International, M/s Vee Zone Impex, M/s Bhatia Sales Agency, and M/s Connector Point Confirming the debit balance in the account of the assessee in their books of accounts as on 31-03-2012 at Rs 11,539,636/-, Rs 24,72,647/-, Rs 74,43,365/-, and Rs 59,82,020/- respectively.
The AO while making the addition, had deleted the opening credit balances appearing in the accounts of the creditors in the books of the assessee as on 31-03- 2011 .Therefore in view of said confirmation of balances in a/cs of Sundry creditors the addition in respect of fresh credits in the account of M/s Bhatia Sales Agency and M/s Madhusudan International of Rs 37,80,380/- and Rs 82,99,083/- respectively totaling to Rs ( 37,80,380 + 82,99,083 ) = Rs 1,20,79,463/- is deleted.
The credit balances in the account of M/s Vee Zone Impex and M/s Connector Point in the books of assessee as on 31-03-2011 was NIL. In response to notice u/s 131(1) issued by the undersigned the reply/ confirmation was received interalia from M/s Vee Zone Impex, and M/s Connector Point confirming the debit balance in the account of the assessee in their books of accounts as on 31-03-2012 at Rs 24,72,647/-, and Rs 59,82,020/- respectively. Therefore there is also no discrepancy in the credit balances appearing in 6 ITO v. Mukesh Kumar the books of accounts of the assessee as on 31-03-2012 in respect of the said two sundry creditors and accordingly no addition is called for in respect of the fresh credits appearing in the accounts of the said two creditors in the books of accounts of the assessee for the year under consideration and the addition of Rs. 24,72,647/-, and Rs. 59,82,020/- is deleted.
There was no response to the notice u/s 131(1) of the Act issued by the undersigned from M/s Kansal Trading Co and therefore the credit balance in his account as on 31-03-2012 at Rs 100580/- remained unconfirmed. Accordingly the addition of Rs 100580/- is also confirmed.
The remaining creditors of the assessee as on 31-03-2012 and their balances in the books of accounts of the assessee as on 31-03-2011 were as under:-
S Name of the creditors Balance as on 31- Balance as on 31- No 03-2011 03-2012 Bhalla 8s Associates Nil 290,450/- 1. Krishna Plasto Nil 130,968/- 2. 3. Talwinder Singh & Co Nil 32,560/-
Rajiv Arora Nil 26000/- 5. Kiran Nil 32000/- 6. Gurmeet Singh Nil 12000/- 7. Anirudh Nil 31,500/- * Marshal Tiles Nil 23,724/- 8. Total 579,202/-
In the appeal proceedings the appellant had interalia furnished the confirmed copy of accounts of Sh Gurmeet Singh, Sh Anirudh, Sh Rajiv Arora, Smt Kiran in the books of the assessee for the year ended 31-03-2012 confirming the balance as on 31-03-2012 at Rs 12000/-, Rs 31,500/-, Rs 26000/- and Rs 32000/- respectively. However no letter u/s 133(6) of the Act was issued by the AO for confirming the balances in the account of the assessee as per the their books of accounts in respect of the said four creditors, meaning thereby that 7 ITO v. Mukesh Kumar the AO had accepted the genuineness of the credit balances appearing in the accounts of the said creditors in the books of the assessee as on 31-03-2012 totaling to Rs (12000 + 31500 + 26,000 + 32000) = Rs 101,500/-. Therefore the addition of Rs 101,500/- is deleted.
Likewise the AO in the remand proceedings had not issued any notice u/s 133(6) of the Act to the sundry creditors Sri Krishna Plasto, Bhalla 86 Associates, Talwinder Singh 8& Co. and Marshal Tiles whose credit balance in the books of the assessee as on 31-03-2012 stood at Rs 130,968/-, Rs 290,450/-, Rs 32,560/- and Rs 23,724/- respectively to seek their confirmation, meaning thereby that the AO had accepted the genuineness of the credit balances appearing in the accounts of the said creditors in the books of the assessee as on 31-03-2012 totaling to Rs (130,968 + 290,450 + 32560+23724) = Rs. 477,702/-. Therefore the addition of Rs. 477,702/- is deleted.”
The Ld. DR for the department submitted that the assessee failed to explain the genuineness of the sundry creditors with the support of the documentary evidence despite being provided 15 opportunities including show cause notice. He contended that the Ld. CIT(A) has admitted an additional evidences merely on account of loss of the books of account of the assessee on 28.09.2013 and for that copy of FIR was submitted however the Ld. CIT(A) has not mentioned the date of the FIR filed by the assessee whether it was before the passing of the assessment order.
5.1 The DR further submitted that as per the remand report the AO stated out of six parties confirmation was received from two parties in compliance to notice issued u/s 133(6) of the Income Tax Act (CIT(A) page 6). He 8 ITO v. Mukesh Kumar contended that the parties confirmation filed in the rejoinder by the assessee in compliance to remand report have not been confronted to the Assessing Officer namely M/s Vee Zone Impex, M/s Bhatia Sales Agency and Kansal Trading Company Rs. 24,72,647/- Rs. 74,43,365/- and 59,82,020/- respectively with credit balance. He further submitted that the Ld. CIT(A) was required to grant opportunity to the AO in rebuttal by way of calling for a 2nd remand report before accepting the disputed aforesaid sundry creditors where the confirmations have been filed by the assessee before the Ld. CIT(A), in it rejoinder to remand report. This is requested that the matter of examination and the verification of these three creditors M/s Vee Zone Impex, M/s Bhatia Sales Agency and Kansal Trading Company and others may be confronted to the AO to verify the genuineness all these creditors as on 31.03.2011.
None attended for the assessee in spite This an old appeal of of several opportunity given as per record. This is an old appeal pending since 2017 and being heard after hearing the Ld. Dr at length and considering the material on record.
9 ITO v. Mukesh Kumar 7. We have heard both the sides and perused the material available on record. Admittedly, the Ld. CIT(A) has not mentioned the date of the filing of FIR regarding to the loss of books of account of the assessee, the documents to explain the credit balance of the disputant unexplained sundry creditors. It is also fact on record the AO has not granted opportunity in rebuttal to file a rejoinder on the submissions furnished by the assessee subsequent to remand report before the Ld. CIT(A) and the inquiries made by the CIT(A) at his own instance. As per the principles of natural justice, the appellate authority is required to grant an opportunity to the affected parties before taking adverse view.
8. That the observation of the CIT(A) are self contradictory as regards to the books of account of the assessee as on 31.03.2012 because primarily the assessee claims that the books of account of the assessee has been lost and he has filed an FIR to that effect where as the CIT(A) has discussed that there is no discrepancies in credit balances appearing in the books of account as on 31.03.2012 in respect of the two sundry creditors namely M/s Vee Zone Impex and M/s Connector Point, Further, the Ld. Cit (A) ought have allowed an opportunity to the AO to examine these creditors before reversing AO’s finding on the addition of 24,72,647/- Rs. 10 ITO v. Mukesh Kumar 74,43,365/- and 59,82,020/- in particularly. In our view, wherein the confirmations have been received or filed before the Ld. CIT(A) by way of rejoinder to remand report or during the course of inquiry, the Ld. CIT(A) ought to have forwarded the same to the Ld. Assessing Officer for its examination and verification in rebuttal unless, the CIT(A) has invoked/ or used coterminous powers u/s Rule 46A(4) read with 250(4). Under the facts and circumstances, in the presents case, the natural justice demands that the AO ought to have been granted opportunity in rebuttal.
From the above, it is evident that the Ld. CIT(A) has merely failed to grant opportunity to the Assessing Officer to rebuttal to the confirmation filed by the assessee subsequent to the remand report and the inquiries made by the CIT itself without confronting the AO are against the principles of natural justice. We are of the considered view that it is a fit case to be remanded back to the file of the AO on the limited issue to examine and verify the sundry creditors namely M/s Vee Zone Impex, M/s Bhatia Sales Agency and Kansal Trading Company with credit balances Rs. 24,72,647/- Rs. 74,43,365/- and 59,82,020/- respectively with credit balance. The AO shall afford sufficient opportunity of being heard to the assessee. No doubt, 11 ITO v. Mukesh Kumar the assessee shall co-operate in the fresh proceedings before the Assessing Officer.
In the backdrop of the above discussion, the appeal of the department is allowed for statistical purposes in the terms indicated as above.
Order pronounced in the open court on 21.04.2022.