2015 (7) TMI 446 - AT - Income Tax

Unexplained investment made in the capital and un-proved sundry creditors - CIT(A) deleted addition in assessment completed under section 143(3) read with section 263 - Held that - On account of unexplained investment in the capital, it is observed that although, source of the said capital was claimed by the assessee to be the funds received from HUF, the same was not substantiated by the assessee before the A.O. by furnishing relevant documentary evidence and details. A perusal of the impugned order of the Ld. CIT(A) also shows that the explanation of the assessee as regards the source of capital being the funds received from HUF was accepted by him merely on the basis of the submission of the assessee that the HUF is regularly assessed to tax without there being any documentary evidence to support and substantiate the claim of the assessee that the amount of ₹ 5,32,930 was actually received from the HUF and that the same was duly reflected in the accounts of HUF. As rightly contended by the learned D.R., the HUF is a separate entity, different from the assessee and therefore, the onus is on the assessee to explain the source of capital claimed to be funds received from the HUF on evidence. The Ld. Counsel for the assessee at the time of hearing before us has not disputed this position. He, however, has contended that one more opportunity may be given to the assessee to establish the receipt of funds from HUF on evidence. Thus we consider it fair and proper and in the interest of justice, to give such opportunity to the assessee and since the learned D.R. has also not raised any objection in this regard, we restore this issue to the file of the A.O. for deciding the same afresh. - Decided in favor of revenue for statistical purposes. Addition on account of unproved creditors - Held that - The Ld. CIT(A) treated the said creditors as proved relying on the details filed by the assessee for the first time before him showing that the balances outstanding as on 31st March, 2007 against the concerned creditors were paid in the subsequent years through cheques or DDs. As rightly pointed out by the learned D.R. from the relevant portion of the impugned order of the Ld. CIT(A), finding in this regard was given by the Ld. CIT(A) only in respect of 5 creditors out of the 13 creditors and that too without giving any opportunity to the A.O. to verify the claim of the assessee made before him for the first time that the relevant sundry creditors having been fully paid in the subsequent years, the existence of the said creditors was proved. Ld. Counsel for the assessee has also not been able to dispute this position clearly evident from the impugned order of the Ld. CIT(A). We, therefore, agree with the contention of the learned D.R. that this issue is required to be sent back to the A.O. for giving him an opportunity to verify the claim of the assessee from the relevant facts and figures that the entire amount in question payable to the 13 creditors was actually paid by the assessee in the subsequent years showing the existence of the said creditors on 31st March, 2007. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
- Unexplained investment made in the capital
- Un-proved sundry creditors

Unexplained Investment in Capital:
The appeal was filed by the Revenue against the Order of the Ld. CIT(A) deleting additions made by the A.O. on account of unexplained investment in the capital and un-proved sundry creditors. The assessee, engaged in trading granite slabs, declared a loss in the return of income for the year. The A.O. found the assessment erroneous and prejudicial to revenue interests, leading to a fresh assessment under section 263. The assessee failed to provide details of 13 creditors and the source of investment in the capital. The Ld. CIT(A) deleted both additions based on explanations provided by the assessee, mentioning the investment from HUF and the clearance of sundry creditors' balances in subsequent years.

Un-proved Sundry Creditors:
The Ld. CIT(A) deleted the addition made by the A.O. on account of unproved sundry creditors, citing that the balances were cleared in subsequent years through various payment methods. The Revenue, aggrieved by this decision, raised multiple grounds challenging the deletion of additions. The Tribunal observed that while the Ld. CIT(A) accepted the explanations provided by the assessee, there was a lack of verification by the A.O. regarding the payments made to the creditors. Consequently, the matter was sent back to the A.O. to verify the claims made by the assessee and to provide an opportunity for further examination. The A.O. was directed to ensure a thorough assessment, with the assessee's cooperation.

Conclusion:
The Tribunal allowed the Revenue's appeal for statistical purposes, sending both issues back to the A.O. for re-assessment. The decision highlighted the importance of substantiating claims with evidence and the need for thorough verification by tax authorities to ensure accurate assessments.