2019 (5) TMI 853 - AT - Income Tax

Addition of unexplained payable sundry creditors - as alleged identity, creditworthiness and genuineness of the transactions had not been proved during assessment proceedings - HELD THAT - We note that there is a difference between credit representing a liability payable by the assessee and a credit representing monies received from another person. It is because of this distinction a liability which arises as a consequence of any purchase resulting in a corresponding credit to the account of the supplier cannot be added u/s. 68 We note the entire turnover on transportation of ₹ 11,70,63,030/- has been accepted by the AO as genuine, so question of addition of the sum of ₹ 78,22,863/- which represented the liability to pay the truck owners by assessee cannot be added u/s. 68. Therefore, we do not find any infirmity in the order of the CIT(A) and we agree that section 68 was wrongly invoked in the present case in respect of the outstanding liability payable by the assessee to the truck owners. - dismissed ground of appeal of the revenue. Addition on account of showing low bilty charges - assessee failed to produce any books of account - HELD THAT - Assessee had already declared bilty charges which is 0.98% of the total receipt. As brought to our notice that in the previous assessment year 2013-14 when the freight receipt was ₹ 8,.10,32,496/- bilty charges was ₹ 8,65,025/- which was 1.06% whereas in this assessment year 2014-15 freight receipt was ₹ 11,70,63,030/- bilty charges was reflected by the assessee at ₹ 11,55,100/- which is 0.99%. The assessee has produced all the books of account etc. without finding any defect or irregularities therein, the AO ought not to have gone for estimation of income, without rejecting the books as per the procedure prescribed u/s. 145(3) read with sec. 144 and, therefore, the action of the AO was arbitrary in nature and so vitiated, therefore, the action of the CIT(A) who after due verification made by him does not require any interference from our part and, therefore, we confirm the action of CIT(A) and dismiss this ground of appeal of revenue.

Issues Involved:
1. Deletion of addition on account of unexplained payable sundry creditors.
2. Deletion of addition on account of showing low bilty charges.

Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Payable Sundry Creditors

Brief Facts:
During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had submitted only a list of sundry creditors amounting to ?78,22,863/- as payable in the audit report. However, the AO found that the assessee failed to provide supporting documentary evidence such as copy of ITR, capital account, Balance Sheet, bank statement, etc., to prove the creditworthiness, identity, and genuineness of these sundry creditors. Consequently, the AO added ?78,22,863/- as unexplained payable sundry creditors under Section 68 of the Income Tax Act.

Assessee’s Argument:
The assessee explained that the outstanding amount was in respect of freight payable as on 31.03.2014 and not in the form of credits or loans. The amount represented liabilities to truck owners for transportation services, and the assessee acted as a conduit for disbursing freight payments. Detailed records including names, truck numbers, PAN of truck owners, and payment dates were provided during the assessment proceedings.

Tribunal’s Findings:
The Tribunal noted that the transaction between the assessee and the truck owners was a liability arising from trade transactions. The Special Bench of the Tribunal in Manoj Agarwal Vs DCIT (113 ITD 377) clarified that Section 68 does not apply to liabilities arising from genuine trade transactions. The Tribunal also relied on judicial precedents from the Hon’ble Delhi High Court in CIT vs. Ritu Anurag Agarwal (2009) and the Hon’ble Allahabad High Court in CIT vs. Pancham Das Jain (205 CTR 444), which held that Section 68 is not applicable to trade creditors when purchases and sales are accepted as genuine.

Conclusion:
The Tribunal confirmed the order of the CIT(A) deleting the addition of ?78,22,863/- under Section 68, as the amount represented genuine trade liabilities to truck owners.

2. Deletion of Addition on Account of Showing Low Bilty Charges

Brief Facts:
The AO, acting on directions from the JCIT, questioned the assessee about the bilty charges and whether they were inclusive in the receipt from the company or collected separately from truck owners. The AO found the assessee’s response inadequate and estimated bilty charges at 2% of the total receipts, resulting in an addition of ?11,86,160/-.

Assessee’s Argument:
The assessee argued that bilty charges were inclusive in the receipt from the company and had already declared bilty charges of ?11,55,100/-. The assessee produced books of account during the assessment proceedings, which were also verified by the JCIT.

Tribunal’s Findings:
The Tribunal noted that the CIT(A) had verified the assessment records and confirmed that bilty charges were inclusive in the receipt from the company. The Tribunal observed that the AO made an arbitrary addition without rejecting the books of account as per the procedure prescribed under Section 145(3) read with Section 144 of the Act. The Tribunal also noted that the bilty charges declared by the assessee were consistent with the previous assessment year.

Conclusion:
The Tribunal upheld the CIT(A)’s order deleting the addition of ?11,86,160/- on account of low bilty charges, finding the AO’s action to be arbitrary and without basis.

Final Order:
The appeal of the Revenue was dismissed, and the order pronounced in the open court on 10th May 2019 confirmed the deletion of both additions made by the AO.

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