2022 (9) TMI 697 - AT - Income Tax

Addition of bogus sundry creditors - difference so far as purchases and payments of the current years - admission of additional evidences by CIT - revenue is against the order of Ld. CIT(A) violating the provisions of Rule 46A of the I.T. Rules ,1962 by accepting ledger accounts of the assessee which were never produced by the assessee during the assessment proceeding - CIT(A) allowed the appeal of the assessee by noting that the differences in the accounts of the sundry creditors were only in the opening balances which did not pertain the assessment year under appeal and coming from earlier years - HELD THAT - As addition was made in respect of two parties who were sundry creditors the details whereof are given hereinabove and there were difference in the opening balances as per the assessee s books of account vis a vis the details as supplied by the sundry creditors in response to notices issued u/s 133(6) of the Act. CIT(A) has not admitted any additional evidences but only the ledger copies which were part of books of accounts and were produced before the AO. CIT(A) has deleted the addition on the ground that earlier years differences can not be added in the current year which appeared to be correct position of law considering the various case laws relied by the Ld. CIT(A). - Decided against revenue.

Summary

Issues:
1. Violation of Rule 46A of the I.T. Rules, 1962 by accepting ledger accounts not produced during assessment proceedings.
2. Deletion of addition of Rs. 1,70,77,128/- as bogus sundry creditors due to differences in opening balances.

Analysis:
1. The appeal by the revenue challenged the order of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The first issue raised was regarding the violation of Rule 46A of the I.T. Rules, 1962, as the Assessing Officer (AO) was not given the opportunity to examine ledger accounts of the assessee that were not produced during assessment proceedings. The second issue was the deletion of an addition of Rs. 1,70,77,128/- as bogus sundry creditors due to differences in opening balances compared to information received from creditors under section 133(6) of the Act.

2. During assessment proceedings, the AO requested the assessee to provide copies of sundry creditors and prove their genuineness. The assessee submitted ledger account copies with addresses. The AO also sent notices under section 133(6) of the Act to the creditors to verify genuineness. Differences in opening balances for two parties were found, leading to additions to the assessee's income.

3. In the appellate proceedings, the Ld. CIT(A) allowed the appeal, noting that the differences in the creditors' accounts were only in opening balances from earlier years and did not relate to the current assessment year. Transactions during the current year showed no discrepancies. The Ld. CIT(A) held that differences in opening balances could not be added in the current year and deleted the additions based on legal precedents.

4. The ITAT, after considering the arguments and the appellate order, upheld the decision of the Ld. CIT(A). No additional evidence was admitted, and the additions were deleted based on the principle that differences from earlier years cannot be added in the current year. Reference was made to a similar decision by a Coordinate Bench in favor of the assessee, supporting the dismissal of the revenue's appeal.

5. The ITAT dismissed the appeal of the revenue, following the decision of the Coordinate Bench and upholding the order of the Ld. CIT(A). The appeal was dismissed on both grounds, affirming the deletion of the additions. The judgment was pronounced on 1st September 2022.