2019 (4) TMI 1374 - AT - Income Tax

Unverified purchases u/s 37 - HELD THAT - The assessee has failed to furnish supporting documents to prove the genuineness of sundry creditor. The submission of assessee for making sale and cash payments to it in subsequent FYs. has remained unsubstantiated and is without documentary evidence. It is strange that on one hand that the AR states that there addresses are not available as the creditors are old on the other hand it is claimed that cash payments and sales have been made to them. In the circumstances it was rightly held by the CIT(A) that the AO was justified to make addition of ₹ 10,64,650/-, hence, he confirmed the same as on account of unverified purchases u/s 37 of the Act, which does not need any interference on my part, hence, uphold the action of the Ld. CIT(A) on the issue of dispute and reject the ground raised by the assessee. Unexplained creditors - these creditors have been created on account of purchases made in FY 2008-09 and have been brought forward since then - on one hand the AR states that there addresses are not available as the creditors are old on the other hand it is claimed that cash payments have been made to them - HELD THAT - It is revealed from these facts that the assessee has obtained benefit by cessation of these liabilities as there is no evidence on record to show that these creditors have even made claim to recover the outstanding balances from the assessee. It is not relevant that assessee, has shown these credits payables in its books of account, during the year. The overall facts of the case and surrounding circumstances are enough to show that these credit balances have not been claimed by these creditors and thus there is cessation of liability on this account. In the circumstances, Ld. CIT(A) has rightly held that AO was justified to make additions , hence, he confirmed the same u/s. 41(1) of the Act, which does not need any interference on my part, hence, uphold the action of the Ld. CIT(A) on the issue of dispute and reject the ground no. 2 raised by the assessee.

Summary

Issues:
- Appeal against the Order dated 05.12.2017 of the Ld. CIT(A), Muzaffarnagar for assessment year 2013-14.
- Acceptance of credits without basis.
- Acceptance of sundry creditors without basis.

Analysis:
1. The assessee filed an appeal against the assessment order dated 23.3.2016, where the AO assessed the income at &8377; 16,25,740/-. The Ld. CIT(A) partly allowed the appeal, leading to the current appeal before the Tribunal. The primary contentions revolved around the acceptance of credits and sundry creditors without proper basis.

2. The Ld. counsel for the assessee argued that the Ld. CIT(A) erred in accepting credits of &8377; 10,64,650/- and not accepting sundry creditors of &8377; 4,15,598/- without any valid basis. The counsel submitted a Paper Book with supporting documents to challenge the additions made by the authorities.

3. After hearing both parties and examining the records, the Tribunal noted that the creditor M/s Paras & Company, Agra amounting to &8377; 10,64,650/- was created due to purchases made during the year. However, the assessee failed to provide complete details during assessment proceedings, rendering the claim unverified. The AO found the lack of supporting documents to prove the genuineness of the creditor, leading to the confirmation of the addition by the Ld. CIT(A). The Tribunal upheld this decision, citing unverified purchases under section 37 of the Act.

4. Regarding the additions of &8377; 4,15,598/- concerning M/s Sai Traders, M/s Satish Goyal Depot, and M/s Savitri Coal Depot, these creditors were created based on purchases in FY 2008-09 and carried forward. The lack of complete details and evidence during assessment proceedings left these claims unverified. The Tribunal observed a lack of evidence showing these creditors claimed outstanding balances, indicating a cessation of liability. Consequently, the Ld. CIT(A) rightly confirmed the additions under section 41(1) of the Act, which the Tribunal upheld.

5. Ultimately, the Tribunal dismissed the appeal of the Assessee, affirming the decisions of the Ld. CIT(A) regarding the disputed issues of credits and sundry creditors. The order was pronounced on 18-02-2019, concluding the legal proceedings in this case.