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TMI Blog2015 (10) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... further confirmed from the CIT(A)’s order wherein sundry creditors list in case of Yash enterprises and Arihant Corp. there were no outstanding creditors as on 31/3/2004. Even the ld Assessing Officer considered these parties for addition to the tune of ₹ 1,11,715/- in case of Arihant Corp. and ₹ 1,72,435/- in case of Yash Enterprises, which is not justifiable as there was no outstanding balance as on 31/3/2004 in case of above two parties. The ld Assessing Officer made addition in A.Y. 2005-06 as well as A.Y. 2004-05 in case of four parties and in case of Arihant corp. and Yash enterprises, he made addition without any creditors outstanding as on 31.03.2004. Therefore, the ld CIT(A) was not right to confirming the addition between difference in creditors as on 31/3/2003 and 31/3/2004, this increase can be on the basis of further purchase made by the assessee herself. In some of the cases, there is even reduction in outstanding creditors on payment. The Assessing Officer should have collected the information from the creditors directly to verify the outstanding creditors as on 31/3/2004 and should have compared with the assessee’s books of account before making any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed on 10/02/2009. The assessee is a proprietor of M/s Usha Precision Export. During the scrutiny assessment proceedings for A.Y. 2005-06, it was noticed by the Assessing Officer that the balance of sundry creditors related to A.Y. 2004-05 were not tallied and the assessee has not offered any satisfactory explanation in this respect. Therefore, income chargeable to tax amounting to ₹ 28,39,607/- had escaped assessment for the assessment year 2004-05. Therefore, notice U/s 148 of the Act was issued after recording the reasons in compliance to the notice. The ld AR furnished his objection as on 11/8/2011, which was duly disposed by the speaking order passed on 09/12/2011 as per guideline decided by the Hon'ble Supreme Court in the case of G.N.K. Drivesheft (India) Ltd. Vs. I.T.O. (2003) 259 ITR 19 (SC). Thereafter notice U/s 143(2) and 142(1) of the Act were issued. The ld Assessing Officer further held that the assessee s submissions is not acceptable in view of the ld CIT(A) s order dated 18/11/2008 related to A.Y. 2005-06. On page 5 in last para, it stated that Regarding reconciliation of creditors even if the contention of the AR is accepted, balance appearing in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s R.K. Industries. Therefore, income of ₹ 702932/- has escaped assessment. d) In respect of all the three assessees (M/s Arihant Corporation, M/s Sunraj Steel and M/s Yesh Enterprises) no confirmation has been furnished during the assessment proceedings. Therefore, amounts of ₹ 111715/-, ₹ 405705/- and ₹ 172435/- have escaped assessment. e) Thus, the total amount of the closing balance of the creditors of ₹ 28,39,607/- which was not tallied and the assessee has not offered any explanation of this expenditure and the offered explanation by the assessee were not correct. Therefore, income chargeable to tax amounting to ₹ 28,39,607/- has escaped assessment for the A.Y. 2004-05. Therefore, he made addition of ₹ 28,39,607/- in the income of the assessee. 3. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had confirmed the addition by observing as under:- 5.3 I have carefully perused the order of the A.O. and the submissions of the AR the assessment order of the A.O. in 2005-06 and the assessment records of the assessee for A.Ys. 2003-04, 04-05, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04, 2004-05 and 2005-06 it is seen that in all the 3 years the case of the assessee was selected for scrutiny and on order U/s 143(3) was passed. In A.Y. 2003-04 the assessee was showing sundry creditors at ₹ 47,63,209/- in his balance sheet. No details regarding the names of the sundry creditors and the amount is available on records for this A.Y. In A.Y. 2004-05 the sundry creditors have increased from ₹ 47,63,209/- to ₹ 67,70,182/- in the balance sheet that is, an increase of ₹ 20,06,973/-. The details of sundry creditors for A.Y. 2004-05 and A.Y. 2005-06 furnished by the AR during the assessment proceedings is compiled as below: Sundry Creditors Particulars A.Y. 2004-05 A.Y. 2005-06 Differences Advance From Customers 4,96,604.72 7,09,254 2,12,254 Anil Engineering Works 2,00,010.00 15,20,931 13,20,921 Anurag Sales Crop. 8,01,882.00 23,73,278 15,71,396 Arihant Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT(A) did not cover the unexplained addition of sundry creditors of ₹ 23,90,219 in A.Y. 2005-06 alone the increase of ₹ 20,06,973/- in A.Y. 2004-05 not the disallowance U/s 40A(3) of ₹ 10,40,000/-. The AR of the assessee was given an opportunity during the course of appellate proceedings vide ordersheet entry dated 24/08/2012 to give a list of sundry creditors in A.Y. 2003-04 and to bring evidence to substantiate the increase in sundry creditors in A.Y. 2004-05 by way of copies of ledger accounts of the assessee in the books of the sundry creditors. He expressed his inability to do so. Moreover, during the course of assessment proceedings, enquiries were made from M/s Anurag Sales Corporation, M/s P.K. Industries which show a marked discrepancy in the ledger accounts maintained in the books of accounts of the assessee and the corresponding ledger accounts of the assessee in the books of these parties. Thus in absence of any evidence and the inability of the assessee to verify the addition in sundry creditors during this A.Y. as compared to previous A.Y. and the enquiries conducted by the A.O. showing that there are obvious discrepancies indicating in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ₹ 8,01,882/- remains unexplained. In the case of P.K Industries the difference of ₹ 7,02,932/-, in case of Swastik Trading Company the difference of ₹ 2,37,134/-, in case of Sunraj Steels the difference of ₹ 4,05,705/- were unexplained. The AO has not made any addition under section 40A(3) as well as on account of difference in purchase account but only has made trading addition by applying higher net profit rate of 18% as against 7.34% declared by the appellant. After considering the explanation of the AR particularly on fall in g.p./n.p. rate as well as difference in purchase account, ii will be in the interest of the justice if net profit rate of 13.5% is applied on the declared sales of ₹ 4,05,21,730/-. The AO is therefore directed to apply net profit rate of 13.5% on the declared sales as against 18% applied by him. Estimation of the net profit made by the AO at ₹ 72,93,910/- will be reduced to ₹ 54,70,433/-. Thus the appellant gets relief of ₹ 18,23,477/. From the above order of the AO and the CIT(A), it is evident that the trading addition has been made mainly on account of difference in the account of the aforesaid si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assume that this difference pertain to A.Y. 2004-05. The AO has considered this difference in A.Y. 2005-06 and made the trading addition. Thus, when after considering the difference, addition is already made in A.Y.2005-06, making the addition again in A.Y.2004- 05 by considering the same difference has amounted to double addition. In these facts, the reopening of the assessment u/s 147 is bad in law. CIT(A) without considering the same incorrectly observed that assessee has not pressed the ground of section 148. Further, the addition of ₹ 20,06,973/- confirmed by CIT(A) ignoring the fact that the specific parties for which addition is made by AO has already been considered in A.Y. 2005-06 while making the trading addition is incorrect. Hence, the addition confirmed by the CIT(A) be deleted. CIT(A) has observed that sundry creditors as compared to A.Y. 2003-04 has increased by ₹ 20,06,973/- in AY 2004-05 and as compared to AY 2004-05 has increased by ₹ 23,90,219/- in AY 2005-06. He therefore confirmed the addition of ₹ 20,06,973/-. This is incorrect. The verifiability/ unverifiability of sundry creditors can t be considered on overall basis but o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. At the outset, the Ld. DR supported the order of the learned CIT(A). 6. We have heard the rival contentions of both the parties and perused the material available on the record. The ld Assessing Officer found difference in creditors account in case of Anurag Sales Corp. at ₹ 12,71,436/-, in case of Swastik Trading Co. ₹ 3,44,978/-, in case of P.K. Industry, ₹ 7,02,932/-, in case of Arihant Corp. at ₹ 1,11,715/-, in case of Sunraj Steel ₹ 4,05,708/- and in case of Rash Enterprises at ₹ 1,72,435/- while the assessment for A.Y. 2005-06 was made by the Assessing Officer. The total difference in creditors account was found at ₹ 28,39,607/- on that basis the ld Assessing Officer recorded a reason U/s 147 and issued notice U/s 148 for A.Y. 2004-05 by observing that the assessee had purchased raw material from the local market for this purpose and also the assessee had not disclosed fully and truly all material facts for her assessment. The ld AR s contention is that these creditors are coming from earlier years but in absence of any record, it cannot be quantified on the basis of assessment year. The balances as on 31/3/2004 and 31/3/2005 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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