2019 (10) TMI 294 - AT - Income Tax

Addition of total advances received from the customers - HELD THAT - Out of the customer advances of 4, 98, 69, 526/- advances accepted by the assessee during the relevant assessment year under consideration was 5, 37, 236/-. The assessee failed to furnish the details called for by the AO. Though the assessee has furnished the account copies the confirmations and other details called for by the AO were not furnished by the assessee and the Ld.AR also fairly conceded for the addition of 5, 37, 236/- therefore we set aside the order of the Ld.CIT(A) and confirm the addition of 5, 37, 236/- out of the total customer advances of 4, 98, 69, 526/-. Accordingly this ground of the appeal of the revenue is allowed. Addition of creditors for advances - HELD THAT - All the credits were adjusted against the sales or related to trade transaction and no cash transaction involved. Though the assessee has furnished the complete details the AO did not cause any enquiry to disprove the evidences produced by the assessee. As observed from the order of the CIT(A) the AO did not make any effort also during the remand stage. Once the assessee furnished the complete details of ledger accounts customer details vouchers and bills and completion certificates of the lifts the burden of the assessee gets discharged and it is for the AO to make necessary enquiries and to prove the genuineness or otherwise. In the instant case inspite of the fact that the books of accounts bills vouchers details and the completion certificates are available the AO did not find any defect in the details furnished by the assessee. Since the assessee has affected the sales and adjusted the sale advances in the subsequent years there is no reason to suspect the genuineness of the trade creditors hence there is no case for making the addition. - Decided in favour of assessee Addition u/s 41(1) - HELD THAT - AO did not make any addition u/s 41(1) of the Act. There is no dispute that the sum of 4, 98, 69, 526/- was not related to the assessment year under consideration and the AO made the addition u/s 68 of the Act. AO is not permitted to make addition of opening balances u/s 68 of the Act. Though the revenue has raised the ground with regard to sustaining the addition u/s 41(1) the assessee has neither admitted the income u/s 41(1) nor the AO made out a case for taxing the creditor u/s 41(1). Therefore the ground raised by the revenue is infructuous hence dismissed.

Issues Involved:
1. Delay in filing Cross Objections (CO) by the assessee.
2. Addition of ?6,79,29,642/- as unexplained income by the Assessing Officer (AO).
3. Deletion of the addition of ?4,98,69,526/- by the Commissioner of Income Tax (Appeals) [CIT(A)].
4. Deletion of the addition of ?1,80,60,116/- by the CIT(A).
5. Consideration of the addition under Section 41(1) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Delay in Filing Cross Objections (CO) by the Assessee:
The assessee filed the CO with a delay of 596 days without a petition for condonation of delay. Consequently, the CO was dismissed in limine.

2. Addition of ?6,79,29,642/- as Unexplained Income by the AO:
During the assessment proceedings, the AO found that the assessee had accepted advances from customers amounting to ?4,98,69,526/- and creditors for advances amounting to ?1,80,60,116/-, totaling ?6,79,29,642/-. The assessee failed to provide details and confirmations for these amounts, leading the AO to treat them as not genuine and added them as unexplained income.

3. Deletion of the Addition of ?4,98,69,526/- by the CIT(A):
The CIT(A) reviewed the bank accounts and books of accounts produced by the assessee, which showed that the advances of ?4,98,69,526/- were opening balances from earlier years, with only ?5,37,236/- accepted during the relevant assessment year. The AO verified these details and found no discrepancies. The CIT(A) concluded that the credits did not pertain to the relevant assessment year and directed the AO to delete the addition of ?4,98,69,526/-. However, the Tribunal confirmed the addition of ?5,37,236/- as the assessee failed to furnish necessary details for this amount.

4. Deletion of the Addition of ?1,80,60,116/- by the CIT(A):
The CIT(A) found that the assessee had reclassified amounts from creditors for advances to advances from customers, sundry debtors, and regular sales. The AO, in the remand report, confirmed that the advances were received through banking channels and were trade credits, not cash credits. The CIT(A) held that the AO made the addition based on surmises and conjectures without proper enquiry and deleted the addition. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided sufficient evidence, including books of accounts, bank statements, and completion certificates, and the AO did not find any defects in these details.

5. Consideration of the Addition under Section 41(1) of the Income Tax Act:
The department argued that the CIT(A) should have considered the addition under Section 41(1) of the Act. However, the Tribunal noted that the AO did not make any addition under this section, and the assessee had not admitted any income under Section 41(1). Therefore, this ground was dismissed as infructuous.

Conclusion:
The Tribunal partly allowed the appeal of the revenue by confirming the addition of ?5,37,236/- and dismissed the CO filed by the assessee. The deletion of the additions of ?4,98,69,526/- and ?1,80,60,116/- by the CIT(A) was upheld. The consideration of the addition under Section 41(1) was dismissed as it was not applicable in this case.

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