2018 (3) TMI 1305 - AT - Income Tax

Assessment to the best satisfaction u/s 144 - non-production of the books of account - Held that - Neither the A.O. nor the Ld. CIT(A) could verify any of the issues related to the Profit & Loss Account balance sheet and trading account in the absence of non-production of the books of account. The assessee in the appeal hearing explained that the rice mills is closed and the assessee is suffering from losses and the representative who has to take care of the tax matters has not attended before the Assessing Officer. The correctness of the expenditure is required to be verified from the books of account. Therefore we are of the considered opinion that the entire assessment should be remitted back to the file of the Assessing Officer to re-do the assessment de novo. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Appeal against order passed by Ld. CIT(A)-3, Hyderabad for A.Y. 2012-13 regarding unproved sundry creditors leading to addition of unexplained liability.

Detailed Analysis:
1. The Assessing Officer (A.O.) found outstanding sundry creditors in the balance sheet of the assessee, leading to an addition of unproved creditors as unexplained liability due to lack of response from the assessee.
2. Assessee failed to provide bank account details, ledger account of sundry creditors, and audit report during the assessment proceedings before the A.O. and CIT(A).
3. The CIT(A) considered submissions made by the assessee, remand report of the A.O., and forwarding comments of the Addl. CIT, concluding that the Assessing Officer rightly taxed the outstanding creditors as unexplained liability due to lack of evidence.
4. Assessee appealed to the Tribunal citing errors in the CIT(A)'s order, arguing that the addition represents amounts payable to agricultural farmers against the purchase of paddy, supported by evidence from the Agricultural Market Committee.
5. During the appeal hearing, the assessee argued that the closing stock and sundry creditors' amounts align, supported by certificates from the Agricultural Market Committee, urging the Tribunal to delete the addition.
6. The Tribunal noted the absence of books of account and relevant documents before the A.O. and during the appeal hearing, leading to the decision to remit the assessment back to the A.O. for re-evaluation after verifying all details and production of necessary information by the assessee.
7. The Tribunal allowed the appeal for statistical purposes, setting aside the orders of lower authorities and directing the assessee to cooperate with the A.O. for completing the assessment.

This judgment highlights the importance of providing necessary documentation and evidence to substantiate outstanding liabilities, emphasizing the need for cooperation with tax authorities during assessments to ensure a fair and accurate determination of tax liabilities.