2017 (12) TMI 120 - AT - Income Tax

Unexplained sundry creditors - Held that - The difference in the sundry creditors worked out by the Ld.CIT(A) and the assessing officer was neither reconciled nor explained by the Ld.DR. there was difference in the quantum. The CIT(A) worked out the difference at ₹ 3,32,11,900/- whereas as per AO it worked out to ₹ 2,78,36,901/-. Purchase of capital goods was first taken up by the assessee before CIT(A) but the same was not explained before the AO and not considered by the AO. All the above difference and issues required to be verified from the assessee s books of accounts and to be cross verified from the creditors books of accounts which exercise was not done by the AO because of non cooperation from the assessee. Therefore, we are of the considered opinion that the entire issue needs to be remitted back to the file of AO to make the detailed verification and decide the issue a fresh on merits. Accordingly we remit the matter back to the file of the AO with a direction to examine the entire issue and consider the issue afresh on merits. Estimation of income and the additions u/s 41(1) - Held that - We have set aside the order of the CIT(A) Since the issue with regard to the estimation of income is interlinked with the addition made by the AO u/s 41(1), we are of the considered opinion that the estimation of income also required to be remitted back to the file of the AO and decide the issue afresh on merits after considering the submissions made by the assessee. Accordingly, we remit the entire assessment to the file of the AO for denovo consideration.

Issues Involved:
1. Addition of sundry creditors amounting to ?4,44,30,750/- in the name of Tolia Overseas Pvt. Ltd.
2. Addition of ?1,21,82,232/-.
3. Estimation of income at 2% on total turnover.
4. Application of Section 41(1) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Addition of Sundry Creditors Amounting to ?4,44,30,750/- in the Name of Tolia Overseas Pvt. Ltd.:
The AO added ?4,44,30,750/- to the assessee's income, arguing that the transaction related to the subsequent assessment year and not the year under consideration. The AO relied on the confirmation letter from Tolia Overseas Pvt. Ltd., which accounted for the transaction on 23.04.2007. The CIT(A) deleted this addition, stating that the liability had not ceased to exist and thus could not be taxed under Section 41(1) of the Income Tax Act. The Tribunal noted that the assessee did not produce adequate evidence to establish the purchase during the year under consideration. The Tribunal remitted the matter back to the AO for detailed verification and fresh consideration on merits.

2. Addition of ?1,21,82,232/-:
The AO added ?7,22,67,651/- as unexplained creditors, including the ?4,44,30,750/- related to Tolia Overseas Pvt. Ltd. The CIT(A) upheld the addition of ?1,56,54,669/- for which no confirmation was filed and deleted the remaining balance. The Tribunal observed discrepancies in the sundry creditors' amounts and noted that the assessee did not produce books of accounts to substantiate claims. The Tribunal remitted the issue back to the AO for detailed verification and fresh consideration.

3. Estimation of Income at 2% on Total Turnover:
The AO estimated the income at 2% on the total turnover of ?101,23,02,244/-, amounting to ?2,02,46,040/-, due to non-production of books of accounts and relevant details. The CIT(A) confirmed this estimation. The Tribunal noted that the issue of estimation is interlinked with the addition under Section 41(1). Therefore, the Tribunal remitted the issue back to the AO for fresh consideration on merits.

4. Application of Section 41(1) of the Income Tax Act:
The AO invoked Section 41(1) to tax the unexplained creditors, arguing that the liabilities had ceased to exist. The CIT(A) found this legally untenable and deleted the addition related to Tolia Overseas Pvt. Ltd. but upheld the addition for the amount without confirmation. The Tribunal observed that the AO did not verify the books of accounts due to non-cooperation from the assessee. The Tribunal remitted the entire issue back to the AO for detailed verification and fresh consideration.

Conclusion:
The Tribunal remitted the entire assessment back to the AO for de novo consideration, directing the AO to examine the issues afresh on merits and verify the books of accounts. The assessee is required to cooperate and submit the necessary information to the AO. The appeals of both the assessee and the revenue were allowed for statistical purposes.

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