2018 (11) TMI 1059 - HC - Income Tax

Addition on account of unexplained trade creditors and expenses - Held that - CIT (Appeals) had examined the evidence and material produced to establish and show identity, nature and genuineness of the expenditure. In respect of four parties, namely, Jyoti Metal (India), M/s Steam Radiators Corp, M/s Committed Cargo Care Private Limited, M/s Nova Home Appliances Private Limited and M/s Chetra Trading LLC, no confirmations were filed during the course of the assessment proceedings and in the appellate proceedings. Contention of the Revenue that the AO was not allowed any opportunity to counter the claim of the assessee during the proceedings before the first appellate authority was rejected, observing that transactions were examined in the next year and were ascertained and found to be genuine and with known parties. Thus, failure to seek remand report of the assessing officer, who had in the next year examined the same issue and had on verification accepted genuineness of the expenditure, would not warrant interference. Revenue has not filed copy of the AO for the Assessment Year 2011-12. Papers or documents which were filed before the CIT (Appeals) or the Tribunal have also not been filed. In the absence of said papers/documents and in view of the factual findings recorded by the CIT (Appeals) and also noticing the short order passed by the assessing officer, we are not inclined to interfere with the factual findings.

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 regarding addition of unconfirmed trade creditors and expenses for Assessment Year 2010-11.

Analysis:
1. The appeal by the Revenue challenged the order of the Income Tax Appellate Tribunal reducing the addition made by the Assessing Officer on account of unconfirmed trade creditors and expenses. The Tribunal affirmed the order of the Commissioner of Income Tax (Appeals) reducing the addition from ?3,17,12,394 to ?28,65,804, deleting ?2,88,46,590. The Revenue argued that the addition was justified under Section 68 of the Act due to the lack of confirmations from trade creditors.

2. The Assessing Officer's order lacked details on invoices, bills, and payment modes to trade creditors, focusing only on outstanding amounts. The Commissioner of Income Tax (Appeals) examined the evidence and found that certain creditors had continuous dealings with the assessee, with payments made in the subsequent year. The addition was upheld for creditors without confirmations, while payments to known parties were deemed genuine. The Commissioner also increased the addition for unsecured loans.

3. The Tribunal upheld the Commissioner's findings, emphasizing the continuous transactions with certain parties and the genuineness of expenditures. The Tribunal rejected the Revenue's argument of lack of opportunity for the Assessing Officer to counter, as transactions were verified in the next year. The Tribunal declined interference due to factual findings and absence of key documents.

4. The Revenue failed to provide the Assessment Order for the subsequent year or key documents filed before lower authorities. Without this evidence and considering the factual findings, the Court dismissed the appeal, upholding the Commissioner's decision. No costs were awarded in the case.