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TMI Blog2016 (11) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase or payments made to creditors. Assessee filed confirmatory letters of balances of all creditors, who have been paid off in subsequent years. The confirmatory letters filed by assessee include the confirmatory letters of the two creditors whose statements have been recorded by Assessing Officer. The two creditors, whose statements were recorded, were not allowed to be cross-examined by assessee. - Decided in favour of assessee - ITA. No.472/Lkw/2011, C.O. No.14/Lkw/2012 - - - Dated:- 9-9-2016 - SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER For The Revenue : Shri James Kurian, Sr. D.R. For The Assessee : Shri S. N. Soparkar, A.R. ORDER PER SHAILENDRA KUMAR YADAV, J.M: These two appeals of which one is filed by Revenue and the other appeal i.e. Cross Objection by assessee are against the order of CIT(A)-II, Lucknow, dated 14.05.2011 for A.Y. 2008-09. 2. In ITA No.472/Lkw/2011, Revenue has filed the appeal on following ground: 1. The Ld. Commissioner of Income Tax (Appeal)-II, Lucknow has erred in law and on fact in failing to appreciate that notices u/s 133(6) issued the sundry creditors at the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and placed on file. Books of account were also produced, examined and test checked . After recording the above observation and accepting the books of account, the ld ITO has added the amount of sundry creditors appearing on the liability side of the Balance Sheet amounting to ₹ 158,55,454.00 without appreciation the following facts before him and the facts applicable in this line of Business. That the assessee is maintaining regular books of account and get his accounts audited u/s 44AB of the Act and the same were accepted by the ld ITO . That the assessee is a trader in chiken garments and purchases the goods from the local karigars and sell it to outstation customers of delhi, Mumbai, Banglore etc. The payments from the parties are received through account payee cheaques. That the purchase from the karigar were properly recorded in the purchase register showing the name of the Karigar, quantity, rate, total amount of purchase duly verified by the said karigar with his signature. The ld ITO had accepted the whole of purchase recorded in the books of account. That the assessee is maintaining quantitative tally of all its stock and is also evidenced fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shri Sultan Ahmad, Shri Javed son of Shri Jabir Ali and Shri Nafees. Letter u/s.133(6) of the Act sent to Shri Nafees was received back unserved because the said person had left for Saudi Arab. Statements of other two creditors were recorded by Assessing Officer at the back of assessee which is violation of principles of natural justice. On the basis of certain discrepancies noted by Assessing Officer in their statements, he added back to the income of assessee entire sundry creditors on the basis of inquiries conducted in two creditors. 6.1 CIT(A) examined the issue whether Assessing Officer was justified in adding back all the creditors on the basis of enquiries from two creditors only. Confirmed copies of accounts of all sundry creditors were filed before the Assessing Officer during the course of assessment proceedings on 25.10.2010. The modus-operandi of assessee was that the purchases of chikankari items were made from karigars and suppliers on credit basis. Cash payments of amounts not exceeding ₹ 20,000/- were made from time to time as most of the suppliers were village based and most of them do not have bank accounts and also do not keep any books of accounts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Aslam Hazi - 1456872 513500 943372 943372 4 Asraf 382251 - 10100 281251 281251 5 Ayub 546144 84877 139500 491521 491521 6 Chandrika 520061 21447 74800 466708 466708 7 Gufran - 1472145 487600 984545 984545 8 Gulam Meena 419905 - 82000 337905 337905 9 Iqbal - 1255141 355100 900041 900041 10 Javed - 1483464 363000 1120464 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5582023 20254231 9980800 15355454 15827639 6.3 In assessee's trade, as per the practice prevalent in local market, local artisans supply chiken work material on credit. Whenever the material is purchased from them, the purchase is recorded in the purchase register, wherein the details of material including the design number, number of pieces, total consideration and signature of the supplier are recorded. These purchases were further recorded in the account of Karigar and the details of material are accounted for in stock register. After that the goods are sold to customers from the stock of goods in hand. The payments to Karigars account of purchases are made in installments on realization of sale proceeds. This is a regular cycle of payment-sale-Receipt of Payment and Payment to Karigars. It was found evident from the aforesaid cycle and the table reproduced above that the creditors added by Assessing Officer amounting to ₹ 1,58,55,454/- in the sixth column, include purchases of ₹ 2,02,54,231/- in the third column, which are shown in the profit and loss account. These ..... X X X X Extracts X X X X X X X X Extracts X X X X
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