2023 (3) TMI 964 - AT - Income Tax

Addition u/s 41(1) - liability due in assessee s books for the past 3 years to be ceased - AO in order to verify the genuineness of the trade payables and purchases sought information from the parties and issued notices u/s 133(6), but these notices were returned unserved - HELD THAT - As evident from the record that the assessee could not produce any of the parties with which it had transactions of purchases and trade payables during the year and sought further time to comply with the said directions. However, since the time period of completing the assessment was getting expired, the AO proceed to complete the assessment on the basis of material available on record. As per the assessee, as the notices issued u/s 133(6) of the Act were returned unserved, therefore, it tried to file the details, as sought, before the AO. In this regard, reference was made to the letters filed before the AO. It is further evident that without considering the details/evidence filed by the assessee, the AO treated the liability due in assessee s books for the past 3 years to be ceased and made the addition u/s 41(1) - the purchase transaction and sundry creditors were treated as bogus by the AO, and the addition was made in hands of the assessee. As various details filed by the assessee, as noted above, were not examined by the AO and the learned CIT(A) deleted the addition, inter-alia, on the basis of such documents without calling for any remand report on the same from the AO, therefore, we deem it appropriate to remand the matter to the file of AO for de novo adjudication - Appeal by the Revenue is allowed for statistical purposes.

Summary

Issues:
- Challenge to the impugned order dated 24/12/2018 under section 250 of the Income Tax Act, 1961 for the assessment year 2014-15.
- Deletion of additions made under sections 41(1), 69C, and 68 of the IT Act.
- Failure to appreciate replies to notices issued under section 133(6).
- Discharge of onus cast upon the assessee.
- Proper conduct of proceedings under section 133(6) by the Assessing Officer.
- Verification of genuineness of trade payables, purchases, and sundry creditors.

Detailed Analysis:

1. Addition under Section 41(1):
The Assessing Officer (AO) added Rs.11,84,48,419 to the total income of the assessee under section 41(1) of the Act, considering the liability to have ceased. However, the learned CIT(A) allowed the appeal, stating that section 41(1) was not applicable due to the debt being time-barred. The AO did not conduct proceedings under section 133(6) properly, leading to the deletion of this addition.

2. Addition of Bogus Purchases under Section 69C:
An addition of Rs.11,90,33,194 on account of bogus purchases was made by the AO under section 69C. The learned CIT(A) held that the parties had indeed replied to the AO, establishing the genuineness of the transactions. The addition was deleted based on this finding, as the identity and creditworthiness of the parties were not in doubt.

3. Addition of Unexplained Cash Credit under Section 68:
The AO added Rs.22,20,12,982 as unexplained cash credit under section 68 due to lack of satisfactory evidence regarding the sundry creditors. The learned CIT(A) allowed the appeal, stating that confirmation-ledger statements were submitted, discharging the assessee's prime onus. The addition was deemed unsustainable merely on suspicion.

4. Remand for Further Adjudication:
The Tribunal remanded the matter to the AO for de novo adjudication after examining the details filed by the assessee. The AO did not consider the evidence submitted by the assessee, leading to the deletion of additions without a remand report. The assessee was given the opportunity to furnish additional details and produce witnesses in support of its claim.

5. Conclusion:
The appeal by the Revenue was allowed for statistical purposes, emphasizing the need for a thorough examination of evidence and proper conduct of proceedings under the Income Tax Act. The matter was remanded to ensure a fair assessment based on all relevant information and to provide the assessee with a chance to substantiate its claims.