2021 (8) TMI 272 - AT - Income Tax

Addition u/s 68 or 41 - unexplained credits in the books of account of assessee - reopening of assessment initiated - credit entry in the name of M/s. Shiv Craft p HELD THAT - Authorities did not make any adverse comment on the conclusion of sale in F.Y.2011-12 - CIT(A), as observed that it is inconceivable that any trade creditor will make payment of ₹ 3.45 lacs and would not confirm the transaction and this arises doubt as to the genuineness of the transaction. It is a mere doubt without any substance to conclude that there were any unsecured loans, much less from M/s. Shiv Craft. It is only because the Assessing Officer did not receive any confirmation, the Assessing Officer had taken stand that this particular entry of ₹ 3.45 lacs relates to unsecured loans whereas in respect of other similar transactions, the Assessing Officer believed those to be sale transactions and the receipt of advance amounts towards such sales. CIT(A), however, noted that copy of DVAT-31 was filed with the Sales Tax Department reflecting the names of the parties to whom sales were made during the quarter ended on 30.09.2011 during the F.Y. 2011-12, resulting in nil balance; and the copy of ledger account duly confirmed by M/s. Shiv Craft alongwith name, address and APN for the A.Y. 2009-10, 2010-11, 2011-12 and 2012-13 already submitted before the Assessing Officer. On the face of all these details furnished, there was ample opportunity for the Assessing Officer to verify whether this was a real sale transaction or a transaction of unsecured loan. Mere suspicion cannot be a basis to make addition when there are sufficient evidence on record to disprove such a suspicion or at least affording a ground for verification. In the circumstances, we find that the conclusion of facts reached by the authorities below have no factual basis to sustain. We, therefore, delete the addition. - Decided in favour of assessee.

Summary

Issues:
1. Addition u/s. 41 instead of u/s. 68 of the Income Tax Act.
2. Non-representation of the appellant.
3. Verification of unexplained credits in the books of account.
4. Dispute regarding the genuineness of a transaction.
5. Adequacy of evidence to disprove suspicion.

Analysis:

1. The issue arose when the Assessing Officer made an addition u/s. 41 of the Income Tax Act instead of u/s. 68. The CIT(A) directed proceedings u/s. 147, resulting in an addition of ?3.45 lacs as unexplained credits. The appellant contended that the sum was a sale advance, supported by ledger accounts and confirmations. The Tribunal noted the Assessing Officer's error and deleted the addition, emphasizing the need for correct classification under the Act.

2. The absence of representation by the appellant led to a decision based on available records. The Tribunal highlighted the appellant's responsibility to ensure proper service of notices, emphasizing the importance of active participation in legal proceedings to safeguard one's interests.

3. The case involved verifying unexplained credits in the books of account. The Tribunal observed that suspicion alone cannot justify additions when concrete evidence contradicts it. The appellant provided substantial evidence, including ledger accounts and confirmations, to establish the genuineness of the transaction, leading to the deletion of the addition.

4. A dispute arose regarding the genuineness of the transaction, with the CIT(A) expressing doubts about a trade creditor making a payment without confirmation. However, the Tribunal found the appellant's evidence, such as DVAT-31 filings and confirmed ledger accounts, to be sufficient to dispel doubts and establish the transaction as a genuine sale, not an unsecured loan.

5. The adequacy of evidence to disprove suspicion was a crucial aspect. The Tribunal emphasized that mere suspicion without factual basis cannot warrant additions. The appellant's detailed submissions and supporting documents effectively countered suspicions, leading the Tribunal to conclude that the authorities' findings lacked a factual basis, resulting in the deletion of the addition.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of accurate classification under the Income Tax Act and the necessity of substantial evidence to disprove suspicions and support claims in legal proceedings.