2016 (7) TMI 842 - AT - Income Tax

Addition u/s 68 - non producing sundry creditors / parties - CIT(A) deleted the addition stating that the addition was made merely on estimate basis - notice u/s 133(6) - Held that - CIT(A) has passed a well reasoned and speaking order because AO issued notice u/s 133(6) to M/s Star Power Coating and M/s Hari Enterprises which were returned back by the postal authorities due to inadequate address and the notice u/s 133(6) of the Income Tax Act issued to M/s Jai Mata Di Udyog was returned by the postal authorities with the remarks to consult Bahadurgarh meaning thereby the creditors are in existence. I also find that assessee has furnished all other evidences for substantiating its claim before the AO as well as before the Ld. CIT(A) like copy of confirmation alongwith the copies of PAN card of the creditors duly confirmed by them alongwith the other documentary evidence for substantiating the claim of the assessee which the Ld. CIT(A) has mentioned in the impugned order. Therefore CIT(A) has passed a well reasoned order on the basis of the documentary evidences filed by the assessee and rightly deleted the additions in dispute which does not require interference - Decided against revenue

Summary

Issues:
1. Addition of sundry creditors not produced before AO.
2. Addition made on estimate basis without proper documentation.
3. Verification of facts by AO requested.

Analysis:

Issue 1: Addition of sundry creditors not produced before AO
The Revenue appealed against the deletion of an addition of ?34,26,278 due to the failure of the assessee to produce sundry creditors before the Assessing Officer (AO). The AO had issued notices to the creditors for verification, but they were returned unserved. The assessee provided confirmations along with PAN cards of the creditors, bank statements showing payments, and other documentary evidence. The CIT(A) found the AO erred in treating the outstanding credit amount as unexplained cash credit under section 68 of the Income Tax Act. The CIT(A) directed the deletion of the addition, noting the genuineness of transactions with the creditors and the lack of findings by the AO on the transactions' in-genuineness.

Issue 2: Addition made on estimate basis without proper documentation
The second issue involved the deletion of an addition of ?75,000 made by the AO on an estimate basis without proper documentation. The CIT(A) found the addition unjustified as the AO failed to point out any specific unaccounted expenses and made the addition merely on an estimate basis. The CIT(A) directed the deletion of the addition, stating the AO should not sustain the estimated addition without concrete evidence. The appellant rightly claimed deductions under sections 80-C and 80-D, and the AO was directed to allow the deduction of ?1,05,550.

Issue 3: Verification of facts by AO requested
The Tribunal upheld the CIT(A)'s order, emphasizing the well-reasoned decision based on documentary evidence provided by the assessee. The Tribunal noted that the CIT(A) rightly deleted the additions in dispute, as the assessee had substantiated its claims with proper documentation. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision and finding no need for interference. The order was pronounced in the Open Court on 15-06-2016.