2023 (12) TMI 29 - AT - Income Tax

Addition by disallowing sundry creditor - despite giving various show cause notices, no detail is furnished - CIT(A) granted relief to the assessee on considering the additional evidence - HELD THAT - AO in his remand report has not disputed about the transaction rather accepted that seller and purchaser party both responded. Assessing Officer in second remand report clearly submitted that they have submitted bank statement (shown some payment in subsequent year) . We also find that neither the sale of assessee was disputed nor the purchase transaction was disputed, the Assessing Officer merely disputed the outstanding balance of sundry creditors. AO has not brought any adverse material to show that the assessee was having wrong credit when the assessee categorically contended that they started business activity in the end of January, 2015. We find that the ld. CIT(A) admitted the additional evidence by considering its nature and veracity and other circumstances. In the present case, the assessee right from the beginning clearly and categorically took their stand that no notice during the assessment was received thus they have no opportunity to file such evidence before the AO. However in the case of CIT Vs Ranjit Kumar Choudhary 2006 (11) TMI 144 - GAUHATI HIGH COURT and N.B. Surti Family Trust 2005 (10) TMI 27 - GUJARAT HIGH COURT the evidences were filed for the first time without disclosing any reason, therefore, in our considered view, the ratio of those decisions are not applicable in the facts of the present case. Pas per our direction, at the time of conclusion of hearing assessee filed confirmation of creditors and the part payment received by them in subsequent assessment year. Such fact is otherwise was accepted by assessing officer in his remand report. Appeal of revenue is dismissed.

Summary

Issues Involved:

1. Admission of additional evidence under Rule 46A.
2. Deletion of addition on account of unexplained outstanding liabilities.
3. Whether the Assessing Officer's order should be upheld or the CIT(A)'s order should be restored.

Summary:

Issue 1: Admission of additional evidence under Rule 46A

The Revenue contended that the CIT(A) erred in admitting additional evidence under Section 46A despite sufficient time and opportunity given to the assessee during the assessment proceedings. The CIT(A) admitted the additional evidence in the interest of principles of natural justice. The Tribunal observed that the assessee claimed they had not received any notice during the assessment and approached the Assessing Officer with documents, which were not accepted. The CIT(A) sought remand reports from the Assessing Officer, who did not dispute the transactions but objected to the admission of additional evidence. The Tribunal found that the CIT(A) admitted the additional evidence considering its nature and veracity and other circumstances, and the ratio of the decisions cited by the Revenue was not applicable in this case.

Issue 2: Deletion of addition on account of unexplained outstanding liabilities

The Assessing Officer added Rs. 3.47 crores as unexplained outstanding liabilities due to non-compliance by the assessee. The assessee argued that their firm was operational for only two months and the credit period varied from 90 to 180 days. The CIT(A) deleted the addition, noting that the outstanding balance was towards Takshila Exim Pvt. Ltd. and that the purchases were genuine and verifiable. The Tribunal found that the Assessing Officer did not dispute the transactions in the remand reports and that the sales and purchases were not doubted. The Tribunal affirmed the CIT(A)'s finding that the addition of outstanding trade creditors as unexplained cash credit was not correct as per law.

Issue 3: Whether the Assessing Officer's order should be upheld or the CIT(A)'s order should be restored

The Revenue argued that the books of account were not verified by the Assessing Officer and requested the matter be restored to the Assessing Officer for fresh adjudication. The Tribunal found that the Assessing Officer did not bring any adverse material to show that the assessee had wrong credit and that the CIT(A) granted relief based on the additional evidence and remand reports. The Tribunal did not find any reason to intervene with the CIT(A)'s findings and affirmed the order, dismissing the Revenue's appeal.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order, and upheld the admission of additional evidence and the deletion of the addition on account of unexplained outstanding liabilities. The Tribunal found no merit in the Revenue's grounds and confirmed that the transactions were genuine and verifiable.