2023 (9) TMI 469 - AT - Income Tax

Revision u/s. 263 - CIT setting aside the assessment framed u/s. 143(3) on the issue of non-verification of sundry creditors - HELD THAT - We noted that the AO has not made any enquiry regarding the cash credits as pointed out by the PCIT in his order. Admittedly, there are cash credits as on 31.03.2015 and assessee has filed names only. The assessee has not filed address, assessment details, PAN number or the source of deposit. Hence, we find no infirmity in the revision order passed by PCIT with direction to AO to verify these sundry creditors according to law. Therefore, we affirm the revision order passed by the PCIT and dismissed the appeal of assessee.

Summary

Issues:
The judgment involves the issue of condonation of delay in filing an appeal and the issue of setting aside the assessment due to non-verification of sundry creditors.

Condonation of Delay:
The appeal was barred by limitation by 382 days, but the delay was condoned based on the extension of the limitation period by the Hon'ble Supreme Court. The delay was only 2 days beyond the extended period, and the appeal was admitted after considering the reasons provided by the assessee.

Non-Verification of Sundry Creditors:
The PCIT set aside the assessment due to the AO's failure to verify the genuineness of sundry creditors amounting to Rs. 2,28,92,649. The PCIT also noted non-reconciliation of closing stock and opening stock, directing the AO to reframe the assessment after necessary verification. The PCIT found the assessment to be erroneous and prejudicial to the revenue's interest, exercising powers u/s 263 of the Act.

Assessee's Contentions:
The assessee, engaged in wholesale business, had filed its return of income for the relevant assessment year. The AO had made adjustments to the profit rate based on the issue of low gross profit. However, the PCIT raised concerns about the verification of sundry creditors and non-reconciliation of stock, leading to the revision of the assessment.

Judgment:
The Tribunal affirmed the PCIT's revision order, noting that the AO had not adequately verified the cash credits related to sundry creditors. The assessee failed to provide essential details to prove the genuineness and creditworthiness of the creditors. As a result, the appeal of the assessee was dismissed, and the PCIT's direction to the AO to conduct proper verification was upheld.

Conclusion:
The Tribunal upheld the PCIT's decision to set aside the assessment due to non-verification of sundry creditors, emphasizing the importance of thorough verification in such cases. The judgment was pronounced on 12th July 2023 at Chennai.