2019 (4) TMI 363 - AT - Income Tax

Addition on account of difference in the amounts in respect of 7 creditors - notice u/s 133(6) remained undelivered, no confirmation/reply filed - Evidence filed before CIT(A) with application u/r 46A - parly admitted - HELD THAT - According to assessee, the amount in question have been repaid by assessee in subsequent year through banking channel which fact also need verification. It, therefore, appears that the documentary evidences filed on record have not been appreciated by the authorities below and that CIT(A) did not adjudicate upon the issue on merits, therefore, the matter requires reconsideration at the level of the AO. We, accordingly, set aside the orders of the authorities below and restore the matter in issue to the file of Assessing Officer with a direction to re-decide the issue as per Law, by giving reasonable, sufficient opportunity of being heard to the assessee. The assessee is directed to produce sufficient evidences and material on record to prove that the sundry creditors amounts were genuine and that assessee repaid the amounts subsequently through banking channel. The Assessing Officer shall also take into consideration the decisions relied upon by the Learned Counsel for the Assessee above. Appeal of assessee is allowed for statistical process.

Summary

Issues involved:
1. Addition of unexplained sundry creditors based on notice under section 133(6).
2. Challenge of the addition before the Ld. CIT(A) and admission of additional evidences under Rule 46A.
3. Confirmation of additions in the case of two sundry creditors and denial of additional evidences for the rest.
4. Failure to consider documentary evidences by Ld. CIT(A) and lack of detailed findings on merits.
5. Reconsideration of the issue by the Assessing Officer with directions to re-decide the matter.

Detailed analysis:
1. The case involved an addition of ?32,47,203 on account of unexplained sundry creditors by the Assessing Officer based on discrepancies in the accounts of 7 creditors. The Assessing Officer issued notices under section 133(6) to the creditors for confirmation of balances, but no satisfactory responses were received, leading to the addition.
2. The assessee challenged the addition before the Ld. CIT(A) and sought admission of additional evidences under Rule 46A. The Ld. CIT(A) admitted additional evidences for two creditors due to insufficient time for response, but confirmed the additions for these creditors and denied additional evidences for the rest.
3. While the Ld. CIT(A) confirmed the additions for two creditors, the decision was based on remand reports without detailed consideration of the documentary evidences provided by the assessee. The Ld. CIT(A) did not pass orders on merits for the rest of the creditors.
4. The counsel for the assessee argued that documentary evidences including PAN, ledger accounts, invoices, and TDS certificates were submitted to prove the genuineness of the creditors and subsequent repayment through banking channels. The authorities failed to appreciate these evidences and did not provide detailed findings on merits.
5. Consequently, the ITAT directed the reconsideration of the issue by the Assessing Officer, with instructions to re-decide the matter considering the documentary evidences and providing a reasonable opportunity to the assessee to prove the genuineness of the sundry creditors and subsequent repayments. The appeal of the assessee was allowed for statistical purposes.