2020 (1) TMI 993 - AT - Income Tax

Bogus sundry creditors - addition u/s 68 - CIT(A) accepted the additional evidences restricting part addition - whether sufficient opportunity to AO to rebut the evidences so filed given or not? - HELD THAT - CIT(A) has categorically observed that the confirmation was also filed with the A.O. vide letter dated 9.1.2015. It is also transpired from the records that the Ld. CIT(A) had sought remand report from the A.O. in respect of additional evidences filed by the assessee. Therefore, it cannot be concluded that the confirmations were filed first time before the Ld. CIT(A) and no opportunity was granted to the A.O. for rebutting the same. From the records, it is clear that the A.O. was given sufficient opportunity to rebut the evidences so filed. Under these facts, we see no reason to interfere with the finding of the Ld. CIT(A) and the same is hereby affirmed. The grounds raised by the revenue are dismissed.

Issues Involved:
1. Deletion of addition on account of bogus sundry creditors.
2. Failure to furnish bank statements and confirmations of creditors.
3. Acceptance of additional evidence under Rule 46A of the Income Tax Rules, 1962.

Issue-Wise Detailed Analysis:

1. Deletion of Addition on Account of Bogus Sundry Creditors:
The revenue contested the deletion of ?1,65,01,885/- by the CIT(A) on the grounds of bogus sundry creditors. The Assessing Officer (A.O.) had made an addition of ?1,81,29,128/- for unexplained creditors. The A.O. issued notices under section 133(6) of the Income Tax Act, 1961, to verify the sundry creditors, but many letters were returned unserved, and no confirmations were provided by the assessee. The A.O. treated these creditors as non-genuine and added the amount to the total income of the assessee. The CIT(A) partly allowed the appeal, sustaining an addition of ?16,27,243/- and deleting the rest. The CIT(A) observed that the assessee had filed confirmations and other details during the assessment and appeal proceedings, which were examined during the remand proceedings. The A.O. confirmed that the creditors had received payments in subsequent years, and the bank accounts from where payments were made were also verified. Thus, the CIT(A) found no justification for the addition in respect of 23 sundry creditors out of 30. However, for three creditors, no confirmations were filed, and an addition of ?16,27,243/- was sustained.

2. Failure to Furnish Bank Statements and Confirmations of Creditors:
The A.O. noted that the assessee failed to furnish bank statements and confirmations of creditors during the assessment, remand report proceedings, and before the CIT(A). The A.O. argued that the onus of proving the identity, genuineness, and creditworthiness of sundry creditors and the genuineness of purchases lies with the assessee. The CIT(A) admitted additional evidence, including confirmations from creditors, and found that the assessee had provided sufficient details to substantiate the genuineness of the creditors. The CIT(A) observed that the A.O. had examined the additional evidence during the remand proceedings and confirmed the genuineness of the creditors. Therefore, the CIT(A) concluded that no addition could be sustained for the creditors where confirmations were filed.

3. Acceptance of Additional Evidence Under Rule 46A:
The revenue argued that the CIT(A) erred in accepting additional evidence under Rule 46A, as the assessee's case did not fall under any of the four circumstances mentioned in Rule 46A of the Income Tax Rules, 1962. The CIT(A) admitted the additional evidence, including confirmations from creditors, and remanded the matter to the A.O. for examination. The A.O. examined the additional evidence and confirmed the genuineness of the creditors. The CIT(A) relied on various case laws to justify the admission of additional evidence, stating that it is the duty of the appellate authority to consider all relevant evidence necessary for arriving at a proper conclusion. The CIT(A) found that the additional evidence was crucial for deciding the appeal and admitted it in the interest of justice.

Conclusion:
The CIT(A) admitted additional evidence and partly deleted the addition made by the A.O. on account of bogus sundry creditors. The CIT(A) found that the assessee had provided sufficient details and confirmations to substantiate the genuineness of the creditors. The A.O. examined the additional evidence during the remand proceedings and confirmed the genuineness of the creditors. The CIT(A) sustained an addition of ?16,27,243/- for three creditors where no confirmations were filed. The Tribunal found no reason to interfere with the findings of the CIT(A) and dismissed the appeal filed by the revenue. The order was pronounced in the open court on 22.01.2020.

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