2015 (10) TMI 2250 - ITAT DELHI

Addition made of the closing balance of the sundry creditors - Held that:- The assessee during the course of assessment proceedings furnished the confirmation of outstanding balance obtained from the said parties but those parties could not be produced for the reason that a prolonged litigation was going on and the parties were absconding. However, the assessee furnished the details of their bank account wherein the payment made by the assessee in the subsequent year was credited. The assessee also furnished copy of its bank Account No. 27971 with Bank of Rajasthan to substantiate that the payments were made to the parties in question, through account payee cheques. In the present case, it is an admitted fact that the purchases made from the parties in whose names, balances were outstanding have been accepted but the AO only doubted the genuineness the outstanding balance at the year end in the name of those parties for the reason that those were not produced before him.

The assessee vide letter dated 30.07.2012 written to the AO during the course of remand proceedings informed that the confirmation of the said nine parties are filed before the Hon'ble CIT(A)and bank statement of the assessee for the year under consideration, perusal of which clearly reveals that all the payments were made to the parties through regular banking channel .

In the present case, when the purchases from the parties were accepted and the sales made out of those purchases were not doubted, the payments outstanding in the name of those parties were accepted in the subsequent year than there was no reason to doubt the genuineness of the outstanding balance. Moreover, in the present case, the books of account were duly audited by the independent Auditor, those books were accepted by the AO and all the trading results except the outstanding balance in the name of 9 parties to the extent of ₹ 3,57,17,506/- were accepted. In our opinion, the AO at the same time cannot blow hot and cold from the same wind pipe. In the instant case, the AO accepted the trading results and the explanation for fall in the G.P rate furnished by the assessee, so there was no reason for doubting the outstanding balance in the name of sundry creditors when the purchases made from them were duly accepted as genuine. In our opinion, the ld. CIT(A) was not justified in confirming the addition made by the AO.

There was no cessation of the liability and even the payment made to the creditors in the subsequent year was not doubted, so there was no occasion to make the addition by considering the creditors as bogus for the year under consideration particularly when the purchases from the same creditors were considered by the AO as genuine and even the payments made to them for the amount outstanding at the end of the year under consideration was not doubted in the subsequent year. We, therefore, are of the confirmed view that the addition made by the AO and sustained by the ld. CIT(A) was not justified - Decided in favour of assessee.