2023 (1) TMI 703 - AT - Income Tax

Addition of sundry creditors - controversial statements given by the 7 sundry creditors in the statement recorded from them on oath - HELD THAT - The Ld. AR could not justify as to why the Ld. AO questioned only 7 creditors out of the total 69 creditors where the sample is not proportionate to the total amount of outstanding creditors. It is also seen from the order of the Ld. AO that the 7 creditors has given standard replies as argued by the Ld. DR which cannot be relied upon. The onus is on the assessee to prove that the creditors are genuine with supporting evidences and confirmation from creditors. In the instant case, the assessee has failed to produce convincing replies with cogent evidences even for the random sample selected by the Ld. AO. AO is being directed to verify the 69 creditors with regard to outstanding payables from all the sundry creditors and provide one more opportunity to the assessee following the principles of natural justice. Accordingly, we remit the matter back to the file of the Ld. AO and allow this ground no.2 for statistical purposes. Allowance of telescoping against the cash deposits - HELD THAT - We are of the considered view that the Ld. CIT(A) has rightly considered the telescoping benefit and therefore we find no infirmity in the order of the Ld. CIT (A) on this issue and hence, this ground raised by the Revenue is dismissed.

Summary

Issues:
- Appeal against the order of the Learned Commissioner of Income Tax (Appeals)
- Assessment under section 143(3) r.w.s 263 of the Income Tax Act, 1961
- Verification of genuineness of creditors and cash deposits
- Telescoping benefit for undisclosed income

Analysis:
1. The appeal was filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) concerning the assessment under section 143(3) r.w.s 263 of the Income Tax Act, 1961 for the Assessment Year 2012-13. The case involved scrutiny of the assessee's income from agro products, focusing on sundry creditors and capital gains consideration discrepancies. The Principal Commissioner of Income Tax set aside the original assessment order and directed a re-assessment based on discrepancies found, leading to the final assessment of total income at Rs. 1,96,91,452.

2. The main contention revolved around the genuineness of creditors and cash deposits. The Principal Commissioner directed the Assessing Officer to verify the creditors' details and the correlation between paddy transactions and land ownership submitted by the creditors. The Commissioner of Income Tax (Appeals) partly allowed the appeal, deleting the addition of unexplained sundry creditors and allowing telescoping of certain cash deposits. The Revenue appealed against this decision.

3. The Revenue raised concerns regarding the reliability of confirmation letters from creditors and the lack of evidence regarding land ownership or lease. The Departmental Representative argued that the standard replies from creditors were insufficient to establish genuineness. Conversely, the assessee's representative defended the confirmation letters and sought to sustain the telescoping benefit.

4. The Tribunal found that the assessee failed to provide convincing evidence for the genuineness of creditors, especially for the random sample selected by the Assessing Officer. The Tribunal directed the Assessing Officer to verify all creditors and provide the assessee with a fair opportunity to substantiate the outstanding payables, emphasizing the principles of natural justice.

5. Regarding the telescoping benefit for undisclosed income, the Tribunal upheld the Commissioner of Income Tax (Appeals) decision, concluding that the assessee was eligible for telescoping the undisclosed income from the sale of husk against unexplained cash deposits. The Tribunal dismissed the Revenue's appeal on this issue.

6. The Cross Objection raised by the assessee faced a delay in filing, which was attributed to a family emergency. The Tribunal condoned the delay and proceeded to adjudicate the Cross Objection. However, upon review, the Tribunal found the grounds in the Cross Objection to be supportive in nature, rendering the adjudication infructuous, leading to the dismissal of the Cross Objection.

7. In conclusion, the Tribunal partly allowed the Revenue's appeal for statistical purposes and dismissed the Cross Objection filed by the assessee as infructuous. The judgment was pronounced on the 16th of November, 2022.