2015 (3) TMI 799 - AT - Income Tax

Additions of Sundry Creditors - CIT(A) deleted the addition - Held that - We agree with the observation of the Ld.CIT(A) that the methodology adopted by the Assessing Officer prima facie suffers from certain deficiencies. Entire closing balance cannot be treated as un-accounted credits without examining what was received during the year. Moreover, these are all trade credits and arising out of Books of Accounts, out of the running accounts on account of purchases and payments made over a period of time. Further, the closing balances have been confirmed by the parties. In view of this, there is no merit in Revenue's contentions. We uphold the order of CIT(A) and reject the Revenue's contentions in the respective assessment years. Even though Revenue raised as Ground No.5, the issue of not having any incriminating material which Ld.CIT(A) also considered, we are of the opinion that there is no need for adjudicating this issue on legal principles alone when on facts, no addition can be made out of the closing credit balances when purchases/ other transactions were accepted. Whether there is incriminating material or not, Assessing Officer's addition per se is not correct on facts itself. - Decided against revenue. Unexplained credits - Held that - Assessee did not give any information when these amounts were adjusted or returned. In the absence of these details, we are unable to give any finding, whether the amounts can be considered as cash credits or trade credits. Therefore, issue of examining these amounts are restored to the file of Assessing Officer to examine in respective assessment years and determine whether they can be treated as unexplained cash credits. Assessing Officer's order did not specify the details of credit. Therefore above analysis is based on the details filed by assessee. Assessing Officer is directed to examine the amounts that were considered for addition and exclude trade credits from purview of cash credits. If assessee has furnished any mode of receipt/mode of adjustment or repayment of the amounts and confirmations from the said parties, then Assessing Officer can make necessary enquiries to examine whether they are genuine or not. With these observations, the issue of examining the credits which are not adjusted in the trade either during the year or later year is restored to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes. Addition on commission received - Held that - We are of the opinion that there is no dispute with reference to accounting of the commission of ₹ 26,61,915/- in the AY.2007-08, during which year assessee has rendered services and accounted as income. The TDS claim also pertains to AY.2007-08. Considering these facts, we do not see any reason to sustain the addition in AY.2006-07, just because the other parties have deducted TDS on advance amounts paid. In view of this, CIT(A) order stands modified. The addition is deleted from AY.2006-07. - Decided in favour of assessee. Disallowance of fuel charges - Held that - As seen from the information available on record, there is no dispute with reference to the fact that journal entry for the above expenditure was passed on one day for the so called fuel charges and assessee has issued different cheques, which seems to have been encashed on a single day in cash. Assessing Officer also, even though accepted by ringing up the person on phone, did not make any enquiry with reference to the genuineness of the transactions. The reservations of the Additional CIT seems to be somewhat genuine since Assessing Officer did not make proper enquiry. At the same time, CIT(A) also in our opinion is not correct in allowing the amount to the extent of clearance through bank account while disallowing the cash payments. Unless the transaction is proved to be non-genuine, just because the payments were made in cash or is drawn by the said person from the bank, the same cannot be considered as non-genuine. Since Assessing Officer also did not enquire, nor CIT(A) considered it necessary to examine the genuineness of transactions, We are of the opinion that the claim of fuel charges should be enquired afresh. Assessee is directed to furnish the necessary invoices raised, the mode of transport of husk to the factory premises and utilisation of the husk in the process of manufacturing of decorative laminated sheets and the genuineness of the payments to the said party. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Addition of Sundry Creditors
2. Addition of Advances Against Sales
3. Addition of Commission Received
4. Disallowance of Fuel Charges

Detailed Analysis:

1. Addition of Sundry Creditors:
The Revenue's appeals for AYs 2003-04, 2004-05, and 2005-06 involved the deletion of additions made by the Assessing Officer (AO) regarding Sundry Creditors. The AO had treated the closing balances of Sundry Creditors as unexplained investments due to insufficient information provided by the assessee. However, the CIT(A) deleted these additions, stating that the AO's methodology was flawed. The CIT(A) emphasized that the closing balances included opening balances and that the credits during the year should have been examined instead. The Tribunal upheld the CIT(A)'s decision, agreeing that the AO's approach was deficient and that the closing balances, which were confirmed by the parties, could not be treated as unaccounted credits. The Tribunal also noted that no incriminating material was found during the search to justify the additions.

2. Addition of Advances Against Sales:
In the assessee's appeals for AYs 2003-04 to 2006-07, the main grievance was the confirmation of advances received, which the AO treated as unexplained credits. The CIT(A) partially agreed with the AO but directed further verification of fresh credits for the year. The Tribunal examined the ledger copies and found that many of the credits were trade credits adjusted against sales in subsequent years. The Tribunal accepted the assessee's contention that trade credits should not be considered as cash credits. However, for certain amounts where the details of adjustment or repayment were not provided, the Tribunal restored the issue to the AO for further examination to determine whether they were trade credits or unexplained cash credits.

3. Addition of Commission Received:
For AY 2006-07, the AO added Rs. 26,61,915 as unaccounted commission based on TDS certificates. The assessee contended that the commission was accounted for in AY 2007-08 when the services were rendered. The CIT(A) remanded the matter to the AO, who accepted the assessee's explanation. The Tribunal found no reason to sustain the addition in AY 2006-07 since the commission was accounted for in AY 2007-08, and the TDS claim was also made in that year. The Tribunal deleted the addition, modifying the CIT(A)'s order.

4. Disallowance of Fuel Charges:
In AY 2009-10, the AO disallowed Rs. 31,06,169 claimed as fuel charges, suspecting the genuineness of the expenditure. The CIT(A) confirmed the disallowance for Rs. 28,97,889 paid in cash, citing doubts about the genuineness of the transactions. The Tribunal noted that the AO and CIT(A) did not properly examine the genuineness of the transactions. The Tribunal restored the issue to the AO for fresh examination, directing the assessee to provide necessary invoices, transport details, and utilization of the fuel. The Tribunal emphasized that the genuineness of the payments should be verified before making any disallowance.

Conclusion:
The Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals for statistical purposes, directing further verification and examination by the AO on specific issues. The order was pronounced in open court on 11th March 2015.

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