2014 (11) TMI 380 - AT - Income Tax

Addition of unexplained cash credits u/s 68 Facts and evidences not properly appreciated by CIT(A) - Held that - CIT(A) accepted assessee s claim on mere face value without supporting evidence only on the reason that assessee has made payments through crossed-cheques to M/s Sainatheswara Traders, Hyderguda, which proves the fact of transaction being carried out by assessee with that party - While coming to such conclusion though the CIT(A) has observed that AO has verified all the cheques and found that except an amount of ₹ 3,78,467 rest of the amount is credited to the account of M/s Sainatheswar Traders - the conclusion drawn by CIT(A) is not correct - assessee apart from submitting that it has entered into purchase and sale transaction with M/s Sainatheswara Traders, Hyderguda has failed to produce any corroborative evidence to prove either the existence of M/s Sainatheswara Traders, Hyderguda or the fact that Mr. Manoj Kumar Jain is either proprietor or partner of the concern or in any way related to M/s Sainatheswara Traders, Hyderguda - There is also no documentary evidence to show that payments made to Mr. Manoj Kumar Jain is at the instruction of M/s Sainatheswar Traders - no bills and vouchers have been produced to prove either the purchase from M/s Sainatheswara Traders, Hyderguda or sale to them - even the assessee has not produced the quantitative details of purchase and sales effected by it during the year - the conclusion drawn by CIT(A) cannot be accepted as it is without proper appreciation of facts and evidences thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication Decided in favour of revenue.

Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Addition by CIT(A):
The solitary issue in the appeal by the Department is regarding the deletion by the Commissioner of Income Tax (Appeals) [CIT(A)] of an addition of Rs. 1,79,85,435 made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961.

Facts of the Case:
The assessee, a company engaged in the business of purchase and sale of pesticides, filed its return of income for the assessment year (AY) 2005-06. During the assessment proceedings, the AO noticed credits against certain creditors and requested the assessee to furnish details of sundry creditors, including their addresses, the quantity and value of goods supplied, and confirmation letters. The assessee provided the details and confirmation letters but failed to furnish the quantity and value of goods supplied by each creditor. The AO found discrepancies in the confirmation letters from M/s Agastya Agro Ltd. and discovered that the amount outstanding from the assessee was shown as Rs. 80,55,239 in the scrutiny assessment of M/s Agastya Agro Ltd., whereas the assessee had shown an additional amount of Rs. 1,79,85,435 as credit in the name of M/s Agastya Agro Ltd.

Assessee's Explanation:
The assessee explained that the amount of Rs. 1,79,85,435 was actually due to M/s Sainatheswara Traders, Hyderguda, and not M/s Agastya Agro Ltd. The discrepancy was due to a mistake in furnishing the list of creditors and confirmation letters. The assessee claimed that the amount was paid to M/s Sainatheswara Traders in subsequent years, and submitted an account copy of M/s Sainatheswara Traders for the subsequent years.

AO's Findings:
The AO, in his remand report, found that the alleged cheque payments were made to one Mr. Manoj Kumar Jain, not M/s Sainatheswara Traders. The AO concluded that the credit of Rs. 1,79,85,435 remained unexplained as the assessee failed to identify the creditor, the genuineness of the transaction, or the creditworthiness of the creditor.

CIT(A)'s Decision:
The CIT(A) deleted the addition by holding that the purchases from M/s Sainatheswara Traders were genuine. The CIT(A) noted that the assessee had made purchases from the said concern, and the payments were made through cheques, reducing the balance to nil. The CIT(A) concluded that the credits could not be treated as unexplained.

Department's Argument:
The Department argued that the assessee failed to produce any evidence to prove the credits in the name of M/s Sainatheswara Traders during the assessment proceedings and remand. The Department contended that the CIT(A) was not justified in deleting the addition without corroborative evidence.

Assessee's Argument:
The assessee reiterated that the amount of Rs. 1,79,85,435 was due to M/s Sainatheswara Traders and not M/s Agastya Agro Ltd., and that the payments were made through crossed-cheques. The assessee argued that the CIT(A) had examined the facts and found the transactions with M/s Sainatheswara Traders to be genuine.

Tribunal's Analysis:
The Tribunal observed that the assessee failed to produce any confirmation letter or details regarding M/s Sainatheswara Traders during the assessment proceedings. The assessee also did not furnish any corroborative evidence to prove the existence of M/s Sainatheswara Traders or the fact that Mr. Manoj Kumar Jain was related to the said concern. The Tribunal found that the CIT(A) accepted the assessee's claim without proper supporting evidence. The Tribunal concluded that the CIT(A)'s decision was not based on a proper appreciation of facts and evidence.

Tribunal's Decision:
The Tribunal set aside the order of the CIT(A) and remitted the matter back to the AO to grant another opportunity to the assessee to establish its case by producing corroborative evidence. The AO was directed to conduct necessary inquiries and afford a fair opportunity to the assessee to substantiate its claim. The appeal of the revenue was allowed for statistical purposes.

Conclusion:
The Tribunal remanded the case back to the AO for a fresh examination, directing the assessee to produce corroborative evidence to substantiate its claim regarding the credit of Rs. 1,79,85,435. The AO was instructed to conduct necessary inquiries and decide the issue in accordance with the law.

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