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2022 (6) TMI 469 - AT - Income TaxReopening of assessment u/s 147 - addition of 100% creditors as unproved creditors - HELD THAT - We find that the requisite material papers were filed by the assessee and placed before the CIT(A) in the appellate proceedings, but there was no reasons recorded by the CIT -A on rejecting the material information which goes to the roots of the case. Prima facie we find that the additions made by the AO is not supported with any valid reasons except on assumptions and presumptions as the amounts are being carry forwards from earlier years. The Ld.AR submissions are realistic and duly supported by the material information having evidenceial values. We considering the facts, circumstances, provisions of law are of the opinion that the creditors are trade creditors and the payments are made by the assessee in F.Y. 2014-15 cannot be doubted and the revenue has also accepted the payments. Accordingly, we set aside the order of the CITA) on this disputed issue and direct the AO to delete the addition. Addition @ 0.55% of closing balances of creditors and debtors as bogus - HELD THAT - As relying on assessee own case 2022 (1) TMI 1255 - ITAT MUMBAI disallowance of creditors @.55% of the total value is absolutely based upon the surmise and conjectures. If the AO is not satisfied about the books of the assessee,he can reject the same and make an estimate of the income based upon industry trend or past record of the assessee. No such exercise has been done by the AO. This is fatal to the assesseement here. More ever, outstanding creditors which are trade creditors can be added only under the provisions of section 41(1) of the Act. No case has been made out that section 41(1) has been invoked and there is disallowances as per provisions of section 41(1). Hence we set aside the orders of the authorities below and direct that the addition in this regard should be deleted. - Decided in favour of assessee.
Issues Involved
1. Confirming the addition of creditors as unproved. 2. Reassessment proceedings not based on new material facts. 3. Burden of proof regarding genuineness of creditors and debtors. 4. Opportunity of being heard and reasonableness of the assessment. 5. Purchase and sale transactions not within a specific group. 6. Debtors and creditors arising from purchases and sales during the year. 7. Acceptance of genuine purchases but unproved creditors. 8. Examination and verification of creditors in the original order. 9. Addition not made under any specific section of the Income Tax Act. Detailed Analysis 1. Confirming the Addition of Creditors as Unproved The CIT(A) confirmed the addition of 100% creditors totaling Rs. 19.85 crores as unproved creditors. The assessee argued that the creditors were genuine and provided necessary documentation, including bank statements, ledger confirmations, and invoices. The Tribunal found that the AO's addition was based on assumptions and lacked valid reasons. The Tribunal directed the AO to delete the addition, recognizing the creditors as trade creditors with payments made in the subsequent financial year. 2. Reassessment Proceedings Not Based on New Material Facts The assessee contended that the reassessment proceedings were not based on any new material facts. The Tribunal noted that since the merits of the case were decided in favor of the assessee, the issue of reassessment proceedings became academic and was left open. 3. Burden of Proof Regarding Genuineness of Creditors and Debtors The assessee claimed to have discharged the burden of proving the genuineness of creditors and debtors, submitting all necessary explanations and documentary evidence. The Tribunal found that the AO did not provide any substantial evidence to rebut the assessee's claims. The Tribunal held that the creditors were genuine and directed the AO to delete the addition. 4. Opportunity of Being Heard and Reasonableness of the Assessment The assessee argued that the AO made an exorbitant addition and passed a high-pitched order without providing an opportunity to be heard. The Tribunal found that the requisite material papers were filed by the assessee and placed before the CIT(A), but there were no recorded reasons for rejecting this information. The Tribunal set aside the CIT(A)'s order, finding the AO's actions unreasonable. 5. Purchase and Sale Transactions Not Within a Specific Group The assessee argued that the purchases and sales were with different entities and not within a specific group. The Tribunal acknowledged that the transactions were genuine and that the assessee provided substantial evidence to prove the same. 6. Debtors and Creditors Arising from Purchases and Sales During the Year The assessee provided details showing that the creditors and debtors materialized from purchases and sales made during the year and were settled within six months. The Tribunal found the explanations and evidence provided by the assessee to be satisfactory and directed the deletion of the addition. 7. Acceptance of Genuine Purchases but Unproved Creditors The assessee contended that the creditors could not be unproved when the purchases were accepted as genuine. The Tribunal agreed, noting that the creditors were trade creditors and the payments were made in the subsequent financial year. 8. Examination and Verification of Creditors in the Original Order The assessee argued that the original order under section 143(3) was passed after examination and verification of the creditors. The Tribunal found that the reassessment did not bring any new material facts and that the original assessment's findings should stand. 9. Addition Not Made Under Any Specific Section of the Income Tax Act The assessee argued that the addition was not made under any specific section of the Income Tax Act, making the addition bad in law. The Tribunal did not specifically address this issue but directed the deletion of the addition based on the merits of the case. Conclusion The Tribunal allowed the appeals filed by the assessee, setting aside the CIT(A)'s orders and directing the AO to delete the additions. The Tribunal found that the reassessment proceedings were not based on new material facts and that the assessee had provided sufficient evidence to prove the genuineness of the creditors and debtors. The Tribunal emphasized the need for valid reasons and substantial evidence when making such additions.
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