2021 (2) TMI 1057 - AT - Income Tax

Addition u/s 69B relating to difference in sundry debtors - difference between the debtors statement obtained from the Bank by the AO and the debtors balances outstanding as per balance sheet - CIT-A deleted the addition - HELD THAT - In the instant case, no exercise or no effort was made by the AO to elicit the correctness of the sundry debtors balances given to the bank. On clarification sought by the AO, the assessee had explained the difference stating that the list of debtors with inflated balances was furnished to the bank for better credit facilities and the practice is prevalent in business community. The explanation appears to be correct, since, no other corroborative evidence is available to disprove the submission of the assessee. Though the list of sundry debtors obtained from the bank is source of information, the same cannot be a conclusive proof without having corroborative evidence to treat the difference as income. Assessee has provided the list of debtors, produced the books of accounts and all the necessary details were made available to the AO with ledger extracts and no difference was found in the outstanding balance of the debtors. There were no sales outside the books of accounts, there were no purchases found to have been made outside the books of accounts and not even a single defect was found by the AO in the books of accounts. Therefore, there is no reason to suspect the correctness of the balances outstanding as per the books of accounts. We cannot appreciate the attitude of the assessee to submit the inflated balances to the bank to obtain the better credit facilities, the same cannot be treated as undisclosed income as provided u/s 69B of the Act without the supporting evidence. In the instant case there is no dispute that the assessing officer has made the addition purely on the information obtained from the bank and balances of sundry debtors were never verified independently by the AO causing necessary enquiries. There was no other corroborative evidence to support the sundry debtors balances list given to the bank. The sundry debtors balances in balance sheet are in agreement with the books of accounts. No reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Accordingly, the appeal of the revenue is dismissed.

Summary

Issues:
Condonation of Delay, Addition u/s 69B of the Act, Deletion of Addition by CIT(A), Additional Evidence Submitted, Burden of Proof on Revenue, Comparison of Debtors Statement, Relevant Case Laws Considered.

Condonation of Delay:
The appeal was filed by the revenue with a delay of 30 days, citing administrative reasons and election duties. The delay was condoned after the Assessing Officer filed a petition, and the appeal was admitted as the Assessee did not object.

Addition u/s 69B of the Act:
The Assessing Officer made an addition of ?2,39,17,297 under section 69B of the Income Tax Act, 1961, due to a difference in sundry debtors. The Assessee explained that inflated balances were submitted to the bank for better credit facilities, and the CIT(A) deleted the addition based on similar precedents.

Deletion of Addition by CIT(A):
The CIT(A) deleted the addition made by the AO, citing precedents and the Assessee's explanation regarding the practice of inflating stock and debtors for loan purposes.

Additional Evidence Submitted:
The Assessee submitted confirmation letters before the CIT(A), which the Revenue argued were additional evidence under Rule 46A of the Income Tax Rules, requesting a remit back to the AO.

Burden of Proof on Revenue:
The Revenue argued that the CIT(A) should have made necessary inquiries before deleting the addition, emphasizing the burden of proof on the Revenue to show undisclosed income.

Comparison of Debtors Statement:
The AO made the addition based on the difference between the debtors statement from the bank and the balance sheet, without independent verification. The Tribunal found no reason to interfere with the CIT(A)'s decision, as the balances in the books of accounts were found to be correct.

Relevant Case Laws Considered:
The Tribunal cited relevant case laws where similar issues of inflated statements for bank loan purposes were considered, emphasizing that mere differences between bank statements and books of accounts do not automatically indicate undisclosed income.

This detailed analysis covers the issues raised in the legal judgment delivered by the Appellate Tribunal ITAT VISAKHAPATNAM, providing a comprehensive overview of the arguments presented and the Tribunal's decision on each issue.