2013 (4) TMI 172 - AT - Income Tax

Unexplained cash credits - unidentified sundry creditors - Held that - Submissions of the assessee are justified to the extent that a sundry creditor was required to be explained on the basis of summons issued u/s.131 when the creditor informed that the total amount owed to Shri Ram Constructions, the assessee. However, the loan creditor had noted a sum owed to one Shri Ram Constructions Pvt. Ltd., which company does not exist was verified and submitted by the assessee. However, the assessee produced the sale vouchers and the money receipts by the loan creditor which tallied insofar as the amount owed by the assessee tallied with a difference of Rs.27 only which required reconciliation between the two parties and not on a non- existing party alone which amount owed was shown at Rs.1,53,578. Incidentally AO has brought to tax the same insofar as the information from the ITO,flowed in respect to the assessee only and not because the Private Limited Company, which never existed, is only a method of acknowledging that the different items sold by M/s.Parvati Agencies, Rayagada was to be acknowledged by the assessee on payment against purchases on account of crusher and otherwise. Thus AO erred in holding a view that the sum of Rs.1,53,551 should be added in the hands of the assessee as unexplained cash credit when AO has accepted the purchases in accordance with the credit given by the assessee to M/s.Parvati Agencies, Rayagada was recorded by M/s.Parvati Agencies, Rayagada in the name of non-existing Pvt. Ltd. Company. In favour of assessee.

Summary

Issues Involved:
Addition of Rs.1,53,551 as difference in sundry creditors.

Detailed Analysis:

Issue 1: Addition of Rs.1,53,551 as difference in sundry creditors
The appeal by the assessee contested the addition of Rs.1,53,551 as a difference in sundry creditors, arguing that it was arbitrary, unlawful, and based on a misinterpretation of facts. The Assessing Officer, during assessment proceedings, obtained information regarding transactions with a specific agency, which showed a discrepancy in the amount owed by the assessee. The assessee failed to explain or reconcile this difference, leading the Assessing Officer to treat it as undisclosed income and include it in the returned income. The first appellate authority upheld this decision, stating that the amount belonged to a different entity and could not be taxed in the hands of the assessee. However, before the Tribunal, the assessee presented evidence showing that the discrepancy arose from amounts owed to both the assessee and another entity, which were accounted for in the assessee's books. The Tribunal found that the discrepancy was only Rs.27, requiring reconciliation between the parties, and not the entire amount of Rs.1,53,551. The Tribunal concluded that the addition of Rs.1,53,551 had no basis and directed the Assessing Officer to delete it, thereby allowing the appeal of the assessee.

This detailed analysis highlights the progression of events leading to the dispute over the addition of Rs.1,53,551 as a difference in sundry creditors. It outlines the arguments presented by the parties, the findings of the authorities, and the final decision of the Tribunal, providing a comprehensive understanding of the legal judgment.