2014 (4) TMI 28 - AT - Income Tax

Deletion made on account of bogus liabilities AO made the additions on the ground that these relate to opening balances whereas on the contrary the two parties have confirmed nil balance. - Held that - From the order of the AO, it is clearly emerges that there was litigation between assessee and KLCI - there appears to be a confusion as to in whose accounts the cheques issued by the above persons were credited i.e. whether it was M/s Greentex Mining Co. or Kabini Mineral Co. - The assessee claims that there is intermixing of entries which has not been properly verified by the lower authorities - The assessee has not filed any paper book to demonstrate the actual position - the reluctance of KLCI in providing information is obvious - What type of disputes were there is neither looked into nor emerge from the record - the books of both proprietary concerns of the assessee are to be considered and reconciliation of accounts is to be carried out - both the creditors are genuine parties having business transactions with the assessee thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Revenue.

Summary

Issues:
- Deletion of additions of bogus liabilities made by the Assessing Officer
- Treatment of opening balances as unexplained expenditure
- Verification of transactions and balances with creditors

Analysis:
1. The appeal was against the order of CIT(A) relating to A.Y. 2008-09, where the Assessing Officer disallowed liabilities claimed by the assessee on account of sundry creditors. The CIT(A) partly allowed the appeal by deleting certain additions, leading to the revenue's appeal.

2. The Assessing Officer contended that the creditors' balances were not confirmed and were treated as unexplained expenditure. The CIT(A) observed that no transactions took place between the assessee and the parties in question during the relevant year. The CIT(A) deleted the additions, stating that the balances were opening balances carried forward as closing balance.

3. The Tribunal noted that there were litigations and confusions regarding the creditors' accounts. The lower authorities did not properly verify the intermixing of entries claimed by the assessee. The Tribunal set aside the matter for the assessing officer to re-examine after thorough verification of accounts and reconciliation of transactions.

4. The Tribunal found that the CIT(A) did not adequately consider the disputes and intermixing of entries claimed by the assessee. The matter was remanded back to the assessing officer for a fresh decision after proper verification and reconciliation of accounts.

5. Ultimately, the revenue's appeal was allowed for statistical purposes only, emphasizing the need for thorough verification and proper examination of accounts before making additions based on unexplained expenditures or liabilities.

This comprehensive analysis highlights the key issues, arguments, and the Tribunal's decision, emphasizing the importance of proper verification and reconciliation in tax assessments.