2020 (4) TMI 857 - AT - Income Tax

Addition under the head sundry creditors - AO treated 20% of the unproved credits - HELD THAT - Assessee himself has stated before the AO as well as the Ld.CIT(A) that the difference was due to unaccounted sales. The assessee has taken different argument before the ITAT stating there were mistakes in the order of Ld.CIT(A) with regard to unaccounted sales, which is nothing but an afterthought and argued that the assessee is taking inconsistent stand before the CIT(A) and ITAT, hence no credence to be given to the argument of the Ld.AR with regard to submission of factual mistakes. The assessee thought that estimation of gross income would be beneficial to him on unaccounted sales, therefore, submitted before the Ld.CIT(A) that the difference was due to unrecorded sales or the inflation of purchases and stock for bank loan purposes. When the Ld.CIT(A) has given a clear finding that the assessee failed to produce the purchases book, stock register etc to verify the purchases or the unaccounted sales, the assessee has taken a different stand before the ITAT and argued that the difference was not related to purchase and sales and it was due to the amounts received and the supplies made to the creditor. In any case there was a difference in creditors account which was shown excess credit balance and in the absence of proper reconciliation and the source the entire difference of credit balance required to be brought to tax. Hence argued that no interference is called for in the order of the Ld.CIT(A). Enhancement of income by the CIT(A) - objection of the assessee that the CIT(A) has enhanced the assessment without giving the enhancement notice - HELD THAT - AO made the addition of ₹ 47,64,594/- under the head unproved sundry creditors and the Ld.CIT(A) confirmed the addition of ₹ 25,50,000/-, thus given part relief to the assessee. Since there was no enhancement of addition made by the AO, there is no case for giving enhancement notice, hence the order passed by the Ld.CIT(A) is within the law. In addition to the above, the Ld.CIT(A) has accepted the written submissions and forwarded the same to the AO. The remand report was furnished to the assessee, calling his objections. As per the remand report, there was a difference of ₹ 25,50,000/- in respect of sundry creditor, M/s Sri Venkateswara Iron Corporation, for which the assessee was given opportunity to explain difference, thus the Ld.CIT(A) has followed all formalities adhering to the principles of natural justice, thus, there is no violation of law. Therefore, we dismiss the ground of the assessee on this issue. Unaccounted sales - as per assessee certain sale transactions might not have been reflected in the books of accounts as such transactions might have been included in the closing stock itself - HELD THAT - Before us, the Ld.AR advanced argument stating that there was a factual mistake in the order of the Ld.CIT(A) and the difference was due to payments received. The argument of the assessee is inconsistent and not acceptable without proper reconciliation. The assessee has furnished the account copy for the period 15.06.2013 to 30.10.2013 with brought forward balance, but has not furnished the complete account. However, it is undisputed fact there was a difference of ₹ 25,50,000/- which the assessee has over stated as at the end of the year under consideration and it is the obligation of the assessee to reconcile the difference and explain the reasons for difference with documentary proof. During the appeal hearing, the assessee was asked to explain the difference and reconcile the difference for which the Ld.AR could not offer any explanation. Therefore, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Assessment of gross profits @5.58% on the difference amount - In the absence of proper reconciliation and evidence for purchase and sales and sources thereof, estimation of gross profit on the unreconciled difference is correct, hence, we dismiss the grounds raised by the assessee for estimation of gross profit. Assessee appeal dismissed.

Summary

Issues Involved:
Appeal against addition under 'sundry creditors'; Enhancement of income by CIT(A); Factual mistakes in CIT(A) order; Reconciliation of difference in credits; Assessment of gross profit on difference amount.

Issue 1: Addition under 'sundry creditors'
The AO added unproved sundry creditors to the income as confirmations were not provided. The CIT(A) confirmed the addition of a specific amount after considering submissions and a remand report. The appellant argued against the CIT(A)'s decision, claiming the addition was enhanced without notice. However, the Tribunal found no enhancement by the CIT(A) and upheld the decision, stating all formalities were followed.

Issue 2: Enhancement of Income by CIT(A)
The appellant contended that the CIT(A) should have sustained a lower addition or remitted the issue for further verification. The CIT(A) had confirmed the addition after considering explanations and evidence provided. The Tribunal determined that no enhancement was made by the CIT(A) and dismissed the appellant's arguments.

Issue 3: Factual Mistakes in CIT(A) Order
The appellant alleged factual errors in the CIT(A) order regarding the nature of the difference in credits. The Tribunal reviewed submissions made by the appellant during assessments and appeals, noting inconsistencies in explanations provided. The Tribunal upheld the CIT(A)'s decision based on the lack of proper reconciliation and evidence presented by the appellant.

Issue 4: Reconciliation of Difference in Credits
The appellant failed to reconcile the difference in credits before the authorities despite opportunities provided. The Tribunal emphasized the appellant's obligation to explain discrepancies with supporting documentation. As the appellant could not provide a satisfactory explanation, the Tribunal upheld the CIT(A)'s decision regarding the addition under 'sundry creditors.'

Issue 5: Assessment of Gross Profit on Difference Amount
The appellant suggested assessing gross profits on the difference amount without sufficient evidence for sales and sources of purchases. The Tribunal rejected this argument due to the lack of proper reconciliation and evidence, upholding the CIT(A)'s decision and dismissing the appeal.

In conclusion, the Tribunal dismissed the appellant's appeal against the addition under 'sundry creditors,' emphasizing the importance of providing accurate explanations and evidence to support claims during assessments and appeals.