2018 (8) TMI 666 - AT - Income Tax

Additions u/s 68 - genuineness of creditors - Additions solely on account of non service/ reply of notice sent to them u/s 133(6) and the report of the Inspector - It is the contention of the ld AR that various documents in support of the purchase transactions were duly submitted during the course of assessment proceedings were not considered by the AO and even during the appellate proceedings, the ld CIT(A) has not taken cognizance of the said documents. Held that - There is no finding which has been recorded by the lower authorities examining these documents so submitted by the assessee in support of his purchase transactions. Further, we note that there seems to be some confusion on the correct address of these two concerns and their proprietors and as a result, the notices issued by the AO u/s 133(6) were not complied with and even the Inspector could not locate their business premises. In the entirety of facts and circumstances of the case, we deem it appropriate that the matter is remanded back to the file of the AO to examine the same afresh, after providing reasonable opportunity to the assessee. - the appeal filed by the assessee is allowed for statistical purposes.

Issues:

1. Addition of ?19,30,214 as non-genuine sundry creditors by the Assessing Officer.
2. Confirmation of the addition by the ld. CIT(A) and the grounds for the decision.
3. Arguments presented by the assessee challenging the addition.
4. Failure of lower authorities to consider evidence supporting purchase transactions.
5. Confusion regarding the correct addresses of the concerns and proprietors.
6. Remand of the matter back to the Assessing Officer for fresh examination.

Issue 1: Addition of Non-Genuine Sundry Creditors:

The Assessing Officer proposed an addition of ?19,30,214 due to non-traceability of two creditors, M/s Blue Bird Overseas and M/s Madhav Krishna Jewellers. The AO considered the outstanding amounts as non-genuine, citing lack of verification and absence of actual business activities by the creditors. The AO highlighted the common practice of issuing sales vouchers by bogus entities in the Gems and Jewellery business.

Issue 2: Confirmation of Addition by ld. CIT(A):

The ld. CIT(A) upheld the addition, emphasizing that the appellant failed to prove the genuineness of the sundry creditors despite the purchases being accepted. The CIT(A) noted discrepancies in the credit balances and highlighted instances where the appellant could not substantiate the claims of genuine transactions. The CIT(A) concluded that the addition was justified based on the facts and circumstances of the case.

Issue 3: Assessee's Challenge to the Addition:

The assessee contended that the lower authorities confirmed the addition solely based on non-service of notices and the Inspector's report, disregarding evidence supporting the purchases. The assessee provided various documents, including purchase bills, certificates of registration, confirmations, and PAN cards, to establish the genuineness of transactions. Additionally, payments were made via account payee cheques, further validating the transactions.

Issue 4: Failure to Consider Supporting Evidence:

Both the AO and the ld. CIT(A) allegedly failed to acknowledge the documentary evidence submitted by the assessee. The appellant argued that despite furnishing proof of exports related to the purchases, the authorities did not address or analyze the documents provided, leading to an unjustified addition.

Issue 5: Confusion Regarding Addresses and Notices:

There was confusion regarding the correct addresses of the concerns and their proprietors, leading to non-compliance with notices issued under section 133(6). The Inspector's inability to locate the business premises added to the ambiguity surrounding the case.

Issue 6: Remand of the Matter:

The Appellate Tribunal remanded the matter back to the Assessing Officer for a fresh examination, emphasizing the need to reevaluate the evidence provided by the assessee and to clarify the discrepancies regarding addresses and notices. The Tribunal allowed the appeal for statistical purposes, indicating a procedural victory for the assessee.

This detailed analysis covers the key issues addressed in the legal judgment, providing a comprehensive understanding of the case and the decisions made by the authorities involved.

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