2020 (7) TMI 395 - AT - Income Tax

Reopening of assessment - doubt on realization of debtors - As submitted assessee could not furnish the required details due to sad demise of her husband who looked after the business and the entire financial transactions - HELD THAT - Normally, in India, it is an accepted practice that husband looks after the business and financial transactions of the wife. AO also has not disputed this fact - though the assessee has stated that the information was also available with the auditor, the auditor has withdrawn the case from representation and the business was discontinued and the accountant also has left the job. Apart from the above, the building where the records were stated to be maintained was sold away and records were destroyed. All the above reasons appear to be convincing reasons for non-submission of the details. In the instant case, the AO has neither examined the auditor who had represented the case earlier and also did not dispute the fact that the financial transactions were looked after by her husband. In addition the Ld.Pr.CIT as well as the AO has called for the details after the lapse of six years from the end of relevant assessment year. All the above reasons appear to be genuine and convincing for non-submission of the details. Thus, we hold that the reasons explained by the Ld.AR are the convincing reasons for non-submission of the details. Therefore, in our considered opinion the case needs to be decided as per the information available in the statement of affairs A.Y. 2007-08 - contention of the assessee that the realization of debtors was from the outstanding balance appears to be correct. The AO has neither doubted the opening balances of debtors and the closing balances of debtors and the reduction of outstanding debtors. Therefore, there is no reason to suspect the realization of debtors, hence, there is no case for making the addition. Accordingly, we set aside the order of the Ld.CIT(A) and delete the addition made by the AO. The appeal of the assessee is allowed . A.Y.2008-09 - Since the advances were reduced as at the end of the year, the same clearly shows that the source for investment was realisation of advances from land advances and other debtors. Therefore, there is no reason to suspect the source of investment and the cash flow, hence, there is no case for making the addition. Accordingly, we set aside the order of the Ld.CIT(A) and delete the addition made by the AO. The appeal of the assessee is allowed

Summary

Issues involved: Stay applications for demands, Addition made by the Assessing Officer representing advances recovered by the assessee, Confirmation of AO's order by CIT(A), Non-furnishing of details of debtors, Genuineness of realization of debtors, Arguments by both parties, Consideration of facts by ITAT, Decision on appeals for A.Y. 2007-08 and A.Y. 2008-09.

The judgment involves the assessee filing stay applications for demands of ?10,65,483 for A.Y.2007-08 and ?69,80,469 for A.Y.2008-09, which were dismissed as not pressed. The appeals were against the orders of the CIT(A) related to additions made by the AO representing advances recovered by the assessee. The assessment was set aside by the Principal CIT for redetermination due to non-furnishing of debtor details. The CIT(A) upheld the AO's order, leading to the assessee appealing before the ITAT.

The ITAT considered the explanations provided by the assessee regarding the non-furnishing of debtor details. The assessee cited the demise of her husband, who managed the business, as the reason for not having the necessary information. The ITAT found the reasons convincing, noting the difficulties faced by the assessee in providing the details due to various circumstances, including the unavailability of records and lack of cooperation from the auditor. The ITAT concluded that the case should be decided based on the available information in the financial statements.

For A.Y. 2007-08, the ITAT analyzed the statement of affairs and found that the reduction in outstanding debtors supported the assessee's claim of realization of debtors, leading to the deletion of the addition made by the AO. Similarly, for A.Y. 2008-09, the ITAT observed the liquidation of advances and debtors, indicating the genuine source of investment, resulting in the deletion of the addition. Consequently, the ITAT dismissed the stay applications and allowed the appeals for both assessment years, pronouncing the order in June 2020.