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TMI Blog2019 (11) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... he computation of income in place of the income assessed by the A.O., unless the order of the A.O. is patently unsustainable in law. Our view is supported by the decision of Hon ble Delhi High Court in the case of CIT Vs. International Travel House Limited, [ 2010 (9) TMI 347 - DELHI HIGH COURT] as held that the Pr. CIT does not have unfettered power to initiate proceeding by revision, re-examining the matter and directing fresh enquiry on his own whim for change or having a different view - Commissioner has been conferred with a quasi-judicial power and the same is hedged with limitations and, therefore, it has to be exercised within the parameters of the provision. When the Commissioner is himself not able to form an opinion, he cannot direct another inquiry by the Assessing Officer under section 263 of the Act. In the instant case, the Pr.CIT himself is not sure as to whether the addition can be made u/s.68 or u/s.41(1). Accordingly, we hold that the Pr. C.I.T. was not justified in setting aside the assessment order to the A.O. for passing fresh assessment order after making further inquiries/verifying the matters afresh - Decided in favour of assessee. - ITA No.200/CTK/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. But the facts of the case cited above and that of the appellant are different, as because in that case there was existence of books accounts which was produced before the AO, which the AO declined to rely upon. However in the present case there is complete absence of books of accounts and hence estimation was done by the AO. Therefore, for application of section 68, there is requirement of presence of books of accounts, which is not there in the case of appellant. 5. That the Appellant craves leave to add, alter, amend, modify, substitute, delete and or rescind all or any of the Grounds of Appeal on or before the final hearing, if necessity so arises. The Appeal may be allowed justice rendered. 2. Brief facts of the case are that the assessee engaged in the business of executing civil contracts works and hiring of machinery and filed his return of income on 30.10.2013 declaring total income of ₹ 28,90,580/-. Upon issuance of statutory notices, the assessee produced audit report u/s.44AB in Form No.3CB and 3CD along with the audited balance sheet and profit and loss account for the relevant previous year. During the course of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Or, u/s. 288A ₹ 28,97,770/- Assessed u/s. 143(3} of the Income Tax Act, 1961 on a total income of ₹ 28,97,770/-. Calculation sheet for tax and interest payable by the assessee is attached herewith, issued demand notice and copy of the order to the assessee. 3. Thereafter the Pr.CIT invoking provisions of Section 263 of the Act directed the AO to make fresh assessment as the assessment order lacks detailed enquiry causing erroneous and prejudicial to the interest of Revenue after observing as under :- 15. In the light of the above discussion, there is no iota of doubt that the impugned assessment order is not based on detailed enquiry expected of a Revenue Officer. In the light of the above discussion, it is held that the assessment order u/s.143(3) dated 22.03.2016 passed by the AO is erroneous and prejudicial to the interest of revenue. Hence, the same is set aside. The AO is directed to frame a fresh assessment order after proper collection and appreciation of facts and due application of law and as per the observations made herein below : i. With regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 (of 1922 Act) after rejecting the books of account of the assessee as unreliable. 4. Feeling aggrieved from the above order of Pr. CIT, the assessee is in appeal before the Income Tax Appellate Tribunal. 5. Ld. AR, at the outset, did not press ground No.1, accordingly, we dismiss the same as not pressed. And, ground No.5 is general in nature, which does not require any adjudication. 6. The assessee has raised ground Nos.2,3 4 against the direction of Pr. CIT to AO to make fresh assessment. In this regard, ld. AR submitted that the detailed list of sundry creditors with address provided to the Pr. CIT as well as the AO at the time of hearing which indicates that the sundry creditors relate to the earlier assessment year and after considering these details the AO has completed the assessment by estimating the profit after rejecting the books of accounts of the assessee u/s 145 (3) of the Act. Ld. AR also submitted that when the books of accounts of the assessee has been rejected by the AO in absence of cash book, the Pr. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided audit report u/s.44AB in Form No.3CB and 3CD along with audited balance sheet and profit and loss account for the relevant previous year. The assessee also produced expenses ledger, bill register and statement of bank accounts in support of the accounts filed with the audit report. However, in absence of cash book, the AO rejected books of accounts u/s.145(3) of the Act and framed the assessment after estimating the gross profit of the assessee invoking provisions of Section 144 of the Act as noted in para 3 of the assessment order. However, the Pr. CIT invoking the provisions of Section 263 of the Act directed the AO to decide on the chargeability of unexplained cash credit of ₹ 2,69,16,055/- in the form of sundry creditors for raw material and expenses , to income tax as the income in addition to the returned income of the assessee for assessment year concerned u/s.68 or 41(1) of the I.T.Act. From perusal of the assessment order it is clear that the AO has rejected the books of accounts of the assessee as the assessee could not produce the cash book and estimated the gross profit of the assessee, meaning thereby the return income of the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to disallow the corresponding purchases similar to the amount of bogus sundry creditors, which in our opinion, the Pr.CIT, ignoring the alternative remedy, to strengthen his view ought to have directed the AO as to on what basis to proceed further if he finds that the order of AO is erroneous and prejudicial to the interest of revenue. In the present case, once the gross profit has been estimated by the AO after considering all the details produced by the assessee during the course of assessment proceedings, in our opinion, the Pr. CIT was himself confused in directing the AO to make addition u/s.68 or 41(1) of the Act. To support our view, we would like to place reliance on the order of coordinate bench of the Tribunal in the case of M/s Gulf Steel Minerals, ITA No.57/Ran/2016, A.Y.2010-2011, order dated 04.05.2018, wherein the Tribunal has observed as under :- 3. We find that the issue in hand is covered in favour of assessee by the above said order of the Co-ordinate Bench, ITAT, Kolkata. Relevant portion of said order are reproduced herein below:- 10. The assessee has shown sundry creditors in its books of account for ₹ 6,24,70,34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine then the sundry creditors cannot be treated as bogus. vii) Regarding applicability of provisions of section 68, I find that the appellant has brought substantial material on record to show that these are sundry creditor for purchases paid in subsequent years and that part of the purchases from the very parties were already accepted by the Assessing Officer. Evidently, the creditors were held to be bogus on the ground that enquiry letters under sec. 133(6) of the Act were received back unserved with the remarks 'not known' leaving the Assessing Officer to conclude ITA No.57/Ran/16 that the appellant has failed to discharge his onus of proving the capacity of the creditors and genuineness of the transactions. Apparently, in my opinion, the Assessing Officer has not appreciated the facts of the case in its entirety. This is a case, where the books are not outrightly rejected, there is no adverse inference drawn regarding quantum of purchases or sales and even the purchase accounts of the sundry creditors have not been disturbed. The act that the assessee maintained regular books of account including stock register is also not negated. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the considered view that the sundry creditors of ₹ 4,29,02,130/- cannot be treated as bogus sundry creditors and cannot be added to the income of the appellant. Accordingly, the impugned addition made by the AO is hereby directed to be deleted and thus, these grounds of the appeal of the appellant are allowed. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 12. Before us Ld. DR vehemently relied on the order of AO whereas Ld. AR submitted that the AO has made further addition of ₹ 4,29,02,130/- from Sundry Creditors. It is submitted that these creditors stood in the books of the company and the amount was never written off. The purchases of goods from these parties have been accepted to be genuine. There was no evidence to suggest that no liability to sundry creditors was payable. The details of these Sundry creditors were filed. The AO has also accepted that the payments to these parties were made by bearer cheques. However, as per the AO that payment by bearer cheques causes a serious doubt that sundry creditors did not exist. Simply because the AO doubted the said sundry creditors even though accepti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO for making the addition of the sundry creditors without disallowing the purchases is based on wrong interpretation of Income Tax Laws. The sundry creditors can be added as income under section 41(1) of the Act once it is written off in the books of accounts. In the instant case the same has not been written off and very much reflecting in the books of the assessee. Therefore in our considered view the sundry creditors reflecting in the books of accounts cannot be disallowed and added to the total income of the assessee. In the instant case, the balances of many of the sundry creditors were outstanding coming from earlier years. Payments were made to some or the creditors during the year. The said payments have been accepted by the AO which means genuinity of the payments to these creditors as well as the genuinity thereof till last year have not disputed by the AO. In the instant case the firstly the AO has not specifically invoked the provisions of section 41 (1). Further in any case no such addition can be made u/s 41. In this connection we are putting our reliance in the judgment in the case of DSA Engineers. In the case of DSA Engineers v. ITO 30 SOT 31 (Mum-Trib), the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that the liability existed since tile assessee had shown the liabilities outstanding in its balance sheet. Therefore, there was no occasion to treat the said amount as taxable under section 41 (1) and if department intends to assess the same by applying the provisions of section 41 (1), then the onus will be on the revenue to show that the liability which is appearing in the balance sheet has ceased finally and there is no possibility of the revival of the liability. Hence, addition could not be sustained under section 41(1). The said judgment of the Tribunal was confirmed by Delhi High Court on 23-12-2011 In the case of National Insulated Cable Co. v. ITO ITA No. 421/Del/2011 dt. 8-7-2011 (Del 'E'-Trib) it was held that the fact that the creditors were old creditors brought forward from earlier years has not been disputed by the department. These creditors have not been introduced during the year under consideration. There is no evidence or material on record to establish that the assessee liability to pay the amount to the creditors have been ceased during the year under consideration. Further, the amount payable to these credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner (Appeals) that the credit balance appearing in the accounts of assessee, did not pertain to the year under consideration, under these circumstances, the assessing officer was not justified in making the impugned addition u/s 68 and as such no fault could be found with the order of the Tribunal which had endorsed the decision of Commissioner (Appeals). In Mahabir Prasad Prem Chand Jain v. ITO (1988) 40 Taxman 35 (Del- Trib )(Tax Mag), it was held that amounts found in the books of assessee were in existence much prior to the beginning of the accounting period corresponding to the relevant assessment year and the same could not, therefore, be treated as the income of assessee earned during the relevant previous year. In Nuchem Ltd. v. Dy. CIT (2004) 87 TTJ (Del-Trib) 166, it was held that revenue had failed to prove that the amounts were credited to the books of account of the assessee in the year under consideration. These amounts were brought forward from earlier years and it is settled law that the addition under section 68 could be made only if the amount was credited in the accounts of the assessee in the relevant financial year. In Shri Vardhman Overseas Ltd. v. Asstt. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble High Court has held that the Pr. CIT does not have unfettered power to initiate proceeding by revision, re-examining the matter and directing fresh enquiry on his own whim for change or having a different view. It was also held by the Hon ble High Court that the Commissioner has been conferred with a quasi-judicial power and the same is hedged with limitations and, therefore, it has to be exercised within the parameters of the provision. When the Commissioner is himself not able to form an opinion, he cannot direct another inquiry by the Assessing Officer under section 263 of the Act. In the instant case, the Pr.CIT himself is not sure as to whether the addition can be made u/s.68 or u/s.41(1) of the Act. Accordingly, respectfully following the judicial precedent as discussed above as well as the factual aspects of the case, we hold that the Pr. C.I.T. was not justified in setting aside the assessment order to the A.O. for passing fresh assessment order after making further inquiries/verifying the matters afresh. Accordingly, we quash the impugned order passed by the ld. C.I.T. u/s.263 of the Act. Thus, the grounds No.2,3,4 raised by the assessee challenging the directions gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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