2019 (10) TMI 711 - AT - Income Tax

Addition u/s 68 - unexplained credit - HELD THAT - The premise of the addition made by the Assessing Officer was that certain balances do not match with the accounts of the creditors. Now when the difference has been reconciled and balance has been explained and accounts got tallied, then where is the question of drawing any adverse inference. Even if in the first instance the balance was not tallying with the accounts of the creditors, then also, how the authenticity and credibility of third party accounts is given more precedence to the assessee s account when assessee has shown purchase bill wise details and corresponding sale and stock, matching with the bank accounts and entire transaction is through cheque. If the books accounts alongwith purchase and sales have not been doubted then account of sundry creditors cannot be doubted when there is running account and all the purchase have been settled either in this year or in subsequent year. Bogus purchases - ld. counsel before us has categorically pointed out that the assessee vide submission dated 17.09.2018 had specifically stated before the Ld. CIT (A) that all the bills of purchase and sales were available which were also produced before the Assessing Officer and same can also be produced once again if so desired for necessary verification. He especially drew our attention to the letter written to the Ld, CIT (A). Despite such a categorical averment, and without any such verification of the material on record, the addition has been confirmed. Addition on account of M/s. Arcotech Ltd . - assessee during the course of assessment proceedings had filed ledger account of the said party from which certain balance outstanding were noted by the Assessing Officer. At the fag end he had tried to send notice u/s. 133(6) to the said creditor but the response could not be received by the AO till the completion of the assessment. However, in the remand proceedings again inquiry was conducted by the Assessing Officer and the confirmations along with bank statements, ITR s and ledger account was received in response to notice u/s 133(6) and after verification he found that the credit balance have been reconciled or is matching with the books of account of the assessee. The assessee had also stated that bills of purchase and sales were available and are tallying with the accounts. Thus, when accounts and the amount stands reconciled and purchases are not in doubt, then no adverse inference can be drawn on the basis of finding given in the assessment proceedings that balance could not be reconciled. Under these circumstances, we do not find any reason as to how addition could be made or confirmed. Similarly, with regard to the A.V. Infraprojects Pvt. Ltd. and M/s. Progressive Alloys India Pvt. Ltd. also similar confirmations with the ledger account, bank statements, ITRs etc. have been received and Assessing Officer has found that the balance shown by the party and the assessee are tallying and all the transactions are matching from the bank statement. Thus, under these circumstances, no addition could have been made. Otherwise also, if the amount represents purchases made by the assessee on credit that does not mean that provision of Section 68 are attracted, if on inquiry made in the remand proceedings there is no adverse material against the assessee. Thus, no addition can be made. Accordingly, the additions made by the Assessing Officer and confirmed by the Ld. CIT (A) are directed to be deleted.

Summary

Issues Involved:

1. Addition of ?15,29,13,896/- on account of difference in credit balance with M/s. Arcotech Limited.
2. Addition of ?25 lacs on account of difference in credit balance with M/s. A.V. Infraprojects Pvt. Ltd.
3. Addition of ?3,15,25,170/- being amount of additional credit balance in the account of M/s. Progressive Alloys India Pvt. Ltd.
4. Deletion of unexplained credit of ?1,40,92,683/- of M/s. Metal Impex.

Detailed Analysis:

1. Addition of ?15,29,13,896/- on account of difference in credit balance with M/s. Arcotech Limited:

The Assessing Officer (AO) made an addition of ?15,29,13,896/- due to the absence of confirmation from M/s. Arcotech Limited. However, during the remand proceedings, the AO received confirmation from M/s. Arcotech Limited, which matched the credit balance in the assessee's books. Despite this, the CIT (A) confirmed the addition, reasoning that the matching of individual entries had no evidentiary value. The Tribunal found this reasoning flawed, noting that the accounts and balances had been reconciled and verified, and thus, no adverse inference should have been drawn. The Tribunal directed the deletion of this addition.

2. Addition of ?25 lacs on account of difference in credit balance with M/s. A.V. Infraprojects Pvt. Ltd.:

The AO added ?25 lacs due to an unsigned and unstamped confirmation from M/s. A.V. Infraprojects Pvt. Ltd. In the remand proceedings, a duly signed and stamped confirmation was received, and the credit balances tallied. Despite this, the CIT (A) confirmed the addition, citing variations in dates. The Tribunal found that the accounts were matching and all transactions were verified through bank statements. Therefore, the Tribunal directed the deletion of this addition.

3. Addition of ?3,15,25,170/- being amount of additional credit balance in the account of M/s. Progressive Alloys India Pvt. Ltd.:

The AO added ?3,15,25,170/- due to incomplete details in the confirmation from M/s. Progressive Alloys India Pvt. Ltd. During the remand proceedings, a detailed confirmation was received, and the credit balances matched. Despite this, the CIT (A) confirmed the addition, stating that purchase bills were not provided. The Tribunal noted that the AO had verified the transactions and found them genuine. Therefore, the Tribunal directed the deletion of this addition.

4. Deletion of unexplained credit of ?1,40,92,683/- of M/s. Metal Impex:

The AO added ?1,40,92,683/- due to a discrepancy in the credit balance with M/s. Metal Impex. The discrepancy was due to the timing of cheque payments, which were issued on 31.03.2015 but cleared in April/May 2015. The CIT (A) deleted this addition after verifying the bank statements and reconciling the accounts. The Tribunal upheld this deletion, noting that the accounts were reconciled and the transactions were genuine.

Conclusion:

The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal. The Tribunal found that the AO's additions were based on discrepancies that were later reconciled and verified through confirmations and bank statements. The Tribunal emphasized that the genuineness of transactions was established, and no adverse inference should have been drawn. The Tribunal directed the deletion of all additions made by the AO.