2020 (9) TMI 824 - HC - Income Tax

Addition u/s 68 - genuineness of the transactions - HELD THAT - AO should have considered the material produced before him, which have also been enclosed herein. On a specific question being asked to the learned counsel for the revenue - whether the bills referred to hereinabove have been produced before the assessing officer, it is submitted that he does not have complete information with regard to the same. On considering these four bills, we are of the view that if the same were placed for consideration before the assessing officer, then he may have come to a different conclusion than what he has arrived at. We also do not notice that the assessing officer has referred to any of these bills, as produced by the appellant. We are of the view that it would be just and appropriate to direct the assessing officer to reconsider the matter afresh by considering these four bills, which are produced herein by the appellant as well as the material already placed before the assessing officer for consideration. Appeal is allowed

Summary

Issues:
Dispute over disallowance of creditor balances under section 68 of the Income-tax Act, 1961.

Analysis:
The appellant, a manufacturer of electromagnetic equipment, filed an income tax return for the financial year 2005-06. Following a notice under section 143(2) of the Income-tax Act, the appellant was asked to provide details regarding balance confirmation of creditors with closing balances exceeding ?50,000. The appellant complied, but balances related to four creditors were disallowed under section 68, resulting in a demand notice for ?72,999. Subsequent appeals before the Commissioner of Income-tax and the Income-tax Appellate Tribunal were unsuccessful, leading to the current appeal.

The main issue revolved around whether the appellant had fulfilled the obligation to establish the genuineness of the creditors as required by section 68 of the Income-tax Act. The appellant's counsel argued that the assessing officer erred in disallowing the balances, asserting that sufficient evidence existed to prove the genuineness of the transactions. The appellant provided bills and ledger accounts for the disputed creditors, contending that the transactions were genuine and supported by documentation.

In contrast, the revenue's counsel disputed the appellant's claims, arguing that the appellant had not satisfactorily proven the genuineness of the transactions. Despite the revenue's stance, the court found that the assessing officer should have considered the evidence presented by the appellant, including the bills and ledger accounts. The court noted that the assessing officer had not referenced the bills provided by the appellant and concluded that a different outcome might have been reached if the bills were considered.

Ultimately, the court allowed the appeal, setting aside the Income-tax Appellate Tribunal's order and remanding the matter back to the assessing officer. The assessing officer was directed to reconsider the case, taking into account the four bills submitted by the appellant and all relevant material already presented. The court emphasized the importance of a fresh assessment based on a comprehensive review of the evidence to ensure a just outcome in accordance with the law.