2019 (4) TMI 760 - AT - Income Tax

Additions u/s 68 - unexplained credit - HELD THAT - There was an outstanding credit balance in the name of M/s Noble Cashew Industries as on 31.03.2011 in the books of the assessee. On verification of the books of accounts of the creditor, it is found that there was no balance outstanding against the assessee, which indicates that the credit balance shown in the books of the assessee is bogus. During the appeal hearing, the AR could not place any evidence to prove the genuineness of the outstanding either before the CIT(A) or before the Tribunal. Therefore we do not find any reason to interfere with the order of the CIT(A) and the same is upheld. The appeal of the assessee on this ground is dismissed. Bogus expenditure - HELD THAT - The assessee failed to provide any evidence or ledger extracts to prove the identity of the creditor and the genuineness of the outstanding. Though non-furnishing of account copies does not lead to addition, it is incumbent upon the assessee to prove the genuineness of the outstanding creditors. Since the assessee failed to furnish any primary evidence with regard to the identity, genuineness and the existence of the said creditor, we uphold the order of the CIT(A). Accordingly, the appeals of the revenue as well as of the assessee on this issue are dismissed. Addition of un-reconciled balances in the accounts of four sundry creditors - HELD THAT - There were differences in outstanding balance of the creditors accounts vis- -vis the assessee. The assessee has furnished the reconciliation and the CIT(A) has verified the accounts and satisfied with regard to the correctness of the balances. Since the CIT(A) has satisfied with regard to the correctness of the out standings and the differences were duly reconciled, we do not see any reason to interfere with the order of the CIT(A) and the same is upheld. Accordingly, Ground of the Revenue are dismissed. Addition on account of credit balance in the name of Rajkumar Impex Pvt. Ltd - HELD THAT - Having accepted the purchases and the payments were made through cheques, there is no reason to suspect the purchases. The AO without reconciling the account, made the addition. Further in case of trade creditors, if there is a bogus purchase, the AO is required to make addition u/s 37(1), but not u/s 68 of the Act. Similarly, if the AO suspects that the payments are made outside the books of accounts, the AO is free to make the addition, but no such evidence was brought on record by the AO. In the instant case, Rajkumar Impex Pvt. Ltd. is a trade creditor and the AO has accepted all the purchases and the payments which were made through cheques and no evidence was brought on record that the assessee has made the payment outside the books of accounts. Hence, there is no reason to make the addition, accordingly, the appeal of the CIT(A) is upheld and the appeal of the revenue is dismissed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961.
3. Unexplained credit balances in various creditors' accounts.
4. Additions towards unexplained sundry creditors.
5. Disallowance under Section 40(a)(ia) of the Income Tax Act.
6. Additions towards unexplained cash deposits.
7. Reconciliation of differences in creditors' accounts.
8. Application of Rule 46A of the Income Tax Rules.

Detailed Analysis:

1. Delay in Filing the Appeal:
The assessee received the order from the Commissioner of Income Tax (Appeals) [CIT(A)] on 08.05.2018 and was required to file the appeal by 07.07.2018. The appeal was filed on 24.07.2018, resulting in a delay of 17 days. The delay was attributed to medical reasons, specifically jaundice and hypertension. The Tribunal, after hearing both parties, found the reasons satisfactory and condoned the delay.

2. Additions Made by the AO Under Section 68:
The AO made several additions to the assessee's returned income for the Assessment Year (A.Y.) 2011-12, including excess credit balances and unexplained credit balances. These additions were contested by the assessee before the CIT(A), who partly allowed the appeal. The Tribunal upheld the CIT(A)'s decision regarding the unexplained credit balance in the case of M/s Noble Cashew Industries, as the assessee failed to provide evidence to support the outstanding balance.

3. Unexplained Credit Balances in Various Creditors' Accounts:
The AO made additions for unexplained credit balances in several creditors' accounts. The CIT(A) deleted some of these additions after verifying the ledger extracts and finding the transactions genuine. However, the Tribunal dismissed the assessee's appeal on this issue as no arguments were made during the hearing.

4. Additions Towards Unexplained Sundry Creditors:
The AO added amounts related to unexplained sundry creditors, which the assessee did not contest before the CIT(A). The Tribunal dismissed these grounds as not pressed, as no arguments were made during the appeal hearing.

5. Disallowance Under Section 40(a)(ia):
The AO disallowed amounts related to shipping and delivery charges under Section 40(a)(ia). The assessee did not contest these disallowances before the CIT(A), and the Tribunal dismissed these grounds as not pressed.

6. Additions Towards Unexplained Cash Deposits:
The AO added an amount of ?1,00,000 as unexplained cash deposits. The assessee did not contest this addition before the CIT(A), and the Tribunal dismissed this ground as not pressed.

7. Reconciliation of Differences in Creditors' Accounts:
The AO made additions for differences in creditors' accounts, which the assessee reconciled during the appeal before the CIT(A). The CIT(A) allowed the appeal for most creditors after verifying the reconciliations. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not gather evidence to prove the outstanding credits were bogus.

8. Application of Rule 46A of the Income Tax Rules:
The revenue objected to the CIT(A) not giving the AO an opportunity to verify the additional evidence as per Rule 46A. The Tribunal dismissed this ground, stating that the CIT(A) is empowered to make independent inquiries under Section 250(4) of the Income Tax Act and decide the appeal without referring the issue to the AO.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions on various issues, including the deletion of certain additions and the reconciliation of creditors' accounts. The appeals of both the revenue and the assessee were dismissed, and the cross objections filed by the assessee were deemed infructuous.