2019 (6) TMI 1226 - HC - Income Tax

Addition made on account of unverifiable purchase - Addition made on account of unverified sundry creditors - assessee is in business of trading in waste paper - estimated income based on NP of turnover - HELD THAT - The finding recorded by the CIT(A) came to be affirmed by the Tribunal stating that no reason to interfere with the findings and conclusion arrived by the CIT(A) in directing the AO to estimate NP @ 2% of total URD purchases as this view has been consistently adopted and followed by the Department from AY 2006-07 to 2008-09 and for AY 2009-10 same view has been uphold and confirmed by the Tribunal in assessee's own case order dated 27.05.2016 (supra). We do not find any error, much less an error of law, said to have been committed by the Tribunal in passing the impugned order. We see no good reason to disturb the same.

Summary

Issues:
1. Addition made on account of unverifiable purchase
2. Addition made on account of unverified sundry creditors

Issue 1: Addition made on account of unverifiable purchase

The Tax Appeal under Section 260A of the Income Tax Act, 1961 was filed by the Revenue against the order passed by the Appellate Tribunal for the Assessment Year 2010-2011. The income was assessed, with additions made on account of unverified purchases, unverified sundry creditors, and unverified unsecured loan. The CIT(A) partly allowed the appeal, directing the Assessing Officer to adopt 2% of the net profit for the purpose of addition instead of disallowing 15% of the purchase. The Appellate Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal. The Tribunal held that no further addition on account of trade creditors/sundry creditors could be made, especially when the assessee had to receive a higher amount from the paper mills. The Tribunal directed the Assessing Officer to delete the addition made. The Revenue contended that the Tribunal erred in interpreting Section 68 of the Act and in directing the deletion of the addition. However, the Court found that the questions raised were not substantial questions of law but rather mixed questions of law and fact. The CIT(A)'s decision regarding the addition made on unverifiable purchases was upheld by the Tribunal, and the Court found no error in the Tribunal's decision.

Issue 2: Addition made on account of unverified sundry creditors

Regarding the unverified sundry creditors, the Assessing Officer treated the entire amount as cash credit, adding it back to the total income of the assessee under Section 68 of the IT Act. The CIT(A) upheld this addition, stating that the appellant failed to provide confirmations from the sundry creditors and did not furnish complete addresses or other necessary details. The Tribunal, however, allowed the appeal filed by the assessee, stating that since the CIT(A) had already made an addition of net profit at 2% of the turnover, no further addition on account of sundry creditors could be justified. The Tribunal found that the Assessing Officer was incorrect in making the addition under Section 68 of the Act. The Revenue argued that the assessee failed to prove the genuineness of the sundry creditors' transactions, as required by Section 68. The Revenue contended that the Tribunal should not have disturbed the findings. The Court, after considering the arguments and materials on record, found that the questions raised were not substantial questions of law and affirmed the Tribunal's decision regarding the addition made on unverified sundry creditors.

In conclusion, the High Court dismissed the Appeal, upholding the decisions of the Tribunal on both issues raised by the Revenue. The Court found no errors of law in the Tribunal's decisions and concluded that the questions raised were not substantial questions of law but rather mixed questions of law and fact.