2018 (12) TMI 1520 - HC - Income Tax

Addition as amount paid to Sundry creditors - documents could not be produced - Held that - It is not clear as to why the documents, which were produced before the CIT(A), were not produced before the Assessing Officer, though the assessee was represented by a Chartered Accountant as its AR. Furthermore, the CIT(A) does not state as to on account of whose illness, the documents could not be produced. In any event, as pointed out by us earlier, no exercise has been done for correlating the document, its validity and genuineness and to consider to what extent the assessee has explained the case. Thus, a half baked enquiry has resulted in an erroneous order passed by the CIT(A). Thus, we are of the clear view that the order passed by the Tribunal, confirming the order passed by the CIT(A), calls for interference. The appeal filed by the Revenue is allowed. Consequently, the order passed by the Tribunal as well as the Commissioner of Income-tax (Appeals)-V, Chennai are set aside and the matter is remanded to the Assessing Officer for fresh consideration, who shall consider the confirmation vouchers placed before him by the assessee and make a thorough verification and redo the assessment under the said head in accordance with law. - Decided in favour of the Revenue.

Summary

Issues:
- Whether the Income Tax Tribunal was right in deleting the additions of 1.59 crores under the head Sundry creditors without affording fair and proper opportunity to the department for verifications of the documents filed?
- Whether the Income Tax Tribunal was right in upholding the orders of CIT(A) without extending time for verification of the documents filed at the appellate stage or remanding back the issue to the lower authority for verification?

Analysis:
1. The appeal was filed by the Revenue under Section 260A of the Income-tax Act, 1961 against the order of the Income-tax Appellate Tribunal Chennai Bench 'D' dated 18.06.2010 for the assessment year 2004-05.

2. The substantial questions of law raised in the appeal were related to the deletion of additions made by the Assessing Officer under the head Sundry creditors. The Assessing Officer added a sum of ?1,59,44,769/- to the total income of the assessee due to lack of details and proof for the transactions.

3. The CIT(A) allowed the assessee to file some documents and details, and upon receiving a remand report from the Assessing Officer, noted that enquiries were not carried out thoroughly due to time constraints. The CIT(A) concluded that no addition on account of Sundry creditors could be sustained at that stage for lack of time for further verification.

4. However, the High Court found the CIT(A)'s finding to be erroneous and perverse. The Court stated that the CIT(A) should have undertaken a thorough examination of the documents and transactions to determine their genuineness before deleting the entire addition. The Tribunal's confirmation of the order without assigning reasons was also criticized.

5. The Court referred to a previous decision but found it distinguishable from the current case. It highlighted the lack of correlation between the documents produced before the CIT(A) and the Assessing Officer, emphasizing the need for a comprehensive verification process.

6. Consequently, the Court allowed the appeal filed by the Revenue, setting aside the orders of the Tribunal and CIT(A), and remanded the matter to the Assessing Officer for fresh consideration. The Assessing Officer was directed to conduct a thorough verification of the confirmation vouchers and redo the assessment under the said head in accordance with the law.

This detailed analysis of the judgment highlights the issues raised, the arguments presented, and the High Court's decision to remand the matter for a fresh assessment based on proper verification procedures.