2024 (2) TMI 700 - AT - Income Tax

Unverified sundry creditors - only reason of the rejection of sundry creditors was that the sundry creditors have not made any response in relation to the issuance of notice or process of verification of the Revenue - HELD THAT - The assessee is registered under the West Bengal VAT Act, 2003/CST Act, 1956. There is no such enquiry done by the Revenue or any negative comment was received from the indirect tax authority related to purchase of the goods. There is no such significant effort that inquiry was done from the end of the VAT Authority also. There is no discrepancy in the purchase of goods or payment. Only the opening balance was added to the total income of the assessee. In our considered view that the assessee is protected from the coherent evidence like that all payments, purchase bill, VAT Registration, Return of VAT Act, 2003, confirmation of parties and reply of parties in persuasion of notice u/s. 133(6) of the Act. DR has agitated the point of non-verification of parties. But verification of parties not only concentrated by non- compliance of notice u/s. 133(6) or inspection conducted by the Inspector of revenue. The purchase and sales of assessee during impugned assessment year are accepted by the ld. AO. DR is not able to bring any contrary order of earlier years where the sundry creditors or purchase are rejected by the ld. AO. Only for the cross verification u/s 133(6) is in dispute, cannot the good reason for rejection of sundry creditors - thus entire addition is unjustified considering the submission of the assessee, which were filed before both the lower authorities. Decided in favour of assessee.

Summary

Issues:
The judgment involves issues related to the assessment proceedings under section 143(2) of the Income Tax Act, 1961, focusing on the verification of sundry creditors and the subsequent addition of the opening balance of sundry creditors to the total income of the assessee.

Grounds of Appeal:
The assessee raised multiple grounds of appeal, challenging the order of the ld. Commissioner of Income Tax (Appeals) (CIT(A)) for the assessment year 2013-14. These grounds included contentions regarding the alleged lack of response or submission, the disregard of documentary evidence, violation of principles of natural justice, and unjust treatment by the Assessing Officer in adding back the amount under the head of Sundry Creditors.

Assessment Proceedings and CIT(A) Order:
The assessment proceedings were initiated under section 143(2) of the Act, with a focus on verifying the sundry creditors. The ld. Assessing Officer added back the opening balance of the sundry creditors to the declared income due to non-verification, resulting in a significant amount. The assessee appealed to the ld. CIT(A), who rejected the grounds based on the absence of response from the sundry creditors regarding the verification process.

Arguments and Evidence:
During the hearing, the ld. A.R. vehemently argued that the assessee had submitted all relevant documents to the Assessing Officer, emphasizing compliance with the assessment proceedings. The A.R. highlighted the issuance of notices and the challenges faced by the assessee in responding within the stipulated time frame. Additionally, the A.R. presented various documents, including replies to notices under section 133(6), to support the genuineness of the sundry creditors.

Tribunal's Decision:
After considering the submissions and records, the Tribunal found that the lack of verification was not solely the fault of the assessee but also due to the Revenue's negligence. The Tribunal noted that the assessee had provided substantial evidence, such as purchase bills, VAT registration, and replies to notices, indicating the legitimacy of transactions. The Tribunal referred to a previous order in the assessee's case and concluded that the addition of the entire amount of sundry creditors to the income was unjustified. As a result, the Tribunal set aside the CIT(A)'s order and quashed the addition.

Conclusion:
The appeal filed by the assessee was allowed by the Tribunal, overturning the addition of the opening balance of sundry creditors to the total income. The Tribunal emphasized the importance of proper verification procedures and the need for substantial evidence before making such additions.