2020 (1) TMI 496 - AT - Income Tax

Rectification of mistake - mistake apparent from record - Addition u/s 68 - Unconfirmed creditors - as per ITAT an opportunity was provided to the assessee during the appellate proceedings and remand proceedings to prove the credit balances, yet the assessee could not produce any documents or confirmation from the creditors,thus confirmed addition - HELD THAT - It can be noticed that the Tribunal has taken a view in this matter after appreciating the orders passed by the tax authorities and considering the documents furnished by the assessee. Hence it cannot fall in the category of mistake apparent from record , as contended by the assessee. Accordingly, we do not find any merit in the petition filed by the assessee and accordingly dismiss the same. - Decided against assessee.

Summary

Issues:
1. Whether the Tribunal can rectify mistakes apparent on the face of the record in an order passed under section 254(2) of the Income Tax Act.
2. Whether the Tribunal correctly adjudicated on the issue of addition of unproved creditors in the case of an assessee acting as a dealer and commission agent in onions.

Issue 1 Analysis:
The Appellate Tribunal, in this case, had to determine whether it had the authority to rectify mistakes apparent on the face of the record in an order passed under section 254(2) of the Income Tax Act. The Tribunal clarified that its power under section 254(2) was limited to rectifying mistakes that were apparent on the face of the record. It emphasized that this power did not extend to reviewing its order under the guise of rectification. The Tribunal's decision was based on established legal principles regarding the scope of rectification under section 254(2) of the Act.

Issue 2 Analysis:
The main issue revolved around the addition of unproved creditors in the case of an assessee who acted as a dealer and commission agent in onions. The Assessing Officer (AO) had added an amount to the assessee's income due to unproved outstanding creditor balances. However, the assessee later provided confirmation letters from all creditors before the Commissioner of Income Tax (Appeals) [CIT(A)], leading to a remand report being called for from the AO. Subsequently, relief was granted based on the confirmation by some creditors. The Tribunal analyzed the facts and contentions of both parties. It noted that the initial onus to prove the credits rested with the assessee under section 68 of the Act. The Tribunal found that the assessee had not produced confirmation letters before the AO but had done so before the CIT(A), leading to a remand report. The Tribunal observed that the AO had taken action by summoning creditors, with only some responding. Consequently, the relief was granted based on the confirmation by the responding creditors. The Tribunal upheld the decision of the CIT(A) in partially sustaining the addition, as the assessee failed to prove the genuineness of all creditors. However, the Tribunal identified a lack of clarity in a specific observation and modified it for accuracy. Ultimately, the Tribunal concluded that the decision was based on a thorough consideration of facts and documents, not constituting a mistake apparent from the record. Therefore, the miscellaneous application filed by the assessee was dismissed.

In conclusion, the judgment addressed the limitations of the Tribunal's rectification powers under section 254(2) of the Income Tax Act and provided a detailed analysis of the issue regarding the addition of unproved creditors in the case of the assessee, ultimately dismissing the application.