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TMI Blog2022 (6) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... THAT:- As relying on assessee own case [ 2022 (1) TMI 1255 - ITAT MUMBAI] disallowance of creditors @.55% of the total value is absolutely based upon the surmise and conjectures. If the AO is not satisfied about the books of the assessee,he can reject the same and make an estimate of the income based upon industry trend or past record of the assessee. No such exercise has been done by the AO. This is fatal to the assesseement here. More ever, outstanding creditors which are trade creditors can be added only under the provisions of section 41(1) of the Act. No case has been made out that section 41(1) has been invoked and there is disallowances as per provisions of section 41(1). Hence we set aside the orders of the authorities below and direct that the addition in this regard should be deleted. - Decided in favour of assessee. - I.T.A No.797/Mum/2020 And I.T.A No.798/Mum/2020 - - - Dated:- 23-5-2022 - Shri M. Balaganesh (Accountant Member) And Shri Pavan Kumar Gadale (Judicial Member) For the Assessee : Shri. Madhur Agrawal And Ms. Veena Purohit. AR For the Department : Shri. Ajay Chandra .DR ORDER PER: PAVAN KUMAR GADALE (JM): These are the appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;the Act') without giving an opportunity to the Appellant of being heard and acted unreasonably. 5.0 Ground No.5: Purchase sale transactions are not on rotational pattern and not within specific group On the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in law and in facts of the case failed to appreciate that the purchases for the year under appeal were Rs.80.52 crores turnover of Rs.81.01 crores are with different entities not within a specific group. 6.0 Ground No.6: Debtors Creditors- Purchases Sales of the year under appeal On the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in law and in facts of the case failed to appreciate that the creditors of Rs.50.17 crores and debtors of Rs. 50.29 crores materialized from the purchases and sales made during the year under appeal and creditors paid within six months on receipt from the debtors/sale realization. 7.0 Ground No.7: Creditors cannot be unproved when purchases have been accepted as genuine On the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in law and in facts of the case failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoice copies are also furnished to substantiate the transactions of purchases with the sundry creditors .Subsequently, the A.O. found that the assessee has closing balance of sundry creditors of Rs. 50,17,58,864/- and debtors of Rs.50,29,07,962/- and the assessee was asked to file the justification of creditors debtors and the assessee has filed details with reasons on 06/12/2018 referred at page 3 Para 5 of the order. The AO dealt on the list of sundry creditors and sundry debtors and the explanations on the transactions and settlement of sundry debtor s receivables and sundry creditors payable in the financial year. Finally the AO found that the assessee could not substantiate the genuineness of high value transactions in the bank account in respect of these parties and made addition of closing sundry creditors payable in respect of 4 parties aggregating to Rs.19,85,40,189/- and assessed the total income of Rs.20,21,05,2150/- and passed the order u/s 143(3) r.w.s. 147 of the Act dated 28/12/2018. 6. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the assessee has filed the grounds of appeal challenging the validity of assessment and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business from the earlier years. Since for various business reasons, trade practices and financial constrains the outstanding amounts could not be cleared immediately and were paid/cleared in the FY 2014-15. 9. We find that the requisite material papers were filed by the assessee and placed before the CIT(A) in the appellate proceedings, but there was no reasons recorded by the CITA) on rejecting the material information which goes to the roots of the case. Prima facie we find that the additions made by the AO is not supported with any valid reasons except on assumptions and presumptions as the amounts are being carry forwards from earlier years. The Ld.AR submissions are realistic and duly supported by the material information having evidenceial values. We considering the facts, circumstances, provisions of law are of the opinion that the creditors are trade creditors and the payments are made by the assessee in F.Y. 2014-15 cannot be doubted and the revenue has also accepted the payments. Accordingly, we set aside the order of the CITA) on this disputed issue and direct the Assessing officer to delete the addition. 10. Since we have decided on the merits of the case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case, the Hon'ble CIT(A) has erred in law and in facts of the case failed to appreciate that the creditors of Rs.28.54 crores and debtors of Rs.28.13 crores materialized from the purchases and sales made during the year under appeal and creditors paid within six months on receipt from the debtors/sale realization. 6.0 Ground No.6: Creditors Debtors cannot be bogus when Purchases Sales have been accepted as genuine On the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in law and in facts of the case failed to appreciate that the creditors debtors cannot be bogus when purchases sales have been accepted as genuine in the assessment order passed under section 1 43(3) r.w.s 1 47 of the Act. 13. The assessee has filed the return of income for A.Y. on 30-10-2013 with the total income of Rs.9,31,300/- and the assessment was completed u/s 143(3) of the Act with the assessed total income of Rs.35,57,070/-. Whereas the AO has issued a notice u/s 148 of the Act on the same reasons as dealt by us in the above paragraphs. Whereas in the A.Y.2013-14, the Assessing officer (A.O.) has estimated the addition considering both cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , perused the materials on record. The Ld.AR submitted that the CIT(A) has erred in confirming the addition @ 0.55% of closing balances of creditors and debtors as bogus irrespective of the fact that the creditors are being carried forward to subsequent assessments year and paid. We find the Honble Tribunal in ITA no 796 804/Mum/2020 .A.Y.2011-12 2012-13 vide order dated 06-01-2022 has dealt on identical issue and deleted the addition and observed at Page 5 Para 7 of the order , which is read as under: 7. I have heard both the parties and perused the records. I find that the disallowance of creditors @.55% of the total value is absolutely based upon the surmise and conjectures. If the AO is not satisfied about the books of the assessee,he can reject the same and make an estimate of the income based upon industry trend or past record of the assessee. No such exercise has been done by the AO. This is fatal to the assesseement here. More ever, outstanding creditors which are trade creditors can be added only under the provisions of section 41(1) of the Act. No case has been made out that section 41(1) has been invoked and there is disallowances as per provisions of section 41(1). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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