9911796707
TMI Blog2023 (8) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... ons towards trade creditors u/s 68 of the Act, hence we delete the addition. AO has disallowed sundry creditors on estimated basis, at the rate of 25% of the sundry creditors without rejecting the books of accounts of the assessee. As per assessing officer, an individual creditor is true up to 75% level and untrue up to 25% level, which is unheard practice because a purchase bill issued by creditor cannot be bogus for 25% and true for 75% level, particularly when books of accounts are not rejected and purchases made from the said creditor has not been treated as bogus. CIT(A) has decided the issue on merit based on the evidences submitted by assessee and the material on record and therefore order passed by ld CIT(A) cannot be treated as an ex parte order, hence matter cannot be remitted back to the file of the ld CIT(A) (for second inning) for fresh adjudication, as contended by ld DR for the Revenue. Hence, considering these facts and circumstances, we delete the addition. Enhancement of assessment by CIT(A) - expenditure u/s 40A(3) - Revenue submitted that Ld. CIT(A) has co-terminus power as that of the AO and therefore has right to enhance the assessment - HELD THAT:- We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tune of Rs. 2,15,88,066/-. During the course of assessment proceeding, no evidence has been filed or produced by the assessee to prove the genuineness of such trade creditors. Therefore, vide show cause notice of assessing officer dated 07.11.2016, the assessee was specifically asked to furnish documentary evidence in respect of aforesaid creditors. In response, assessee submitted copy of Income Tax Return and audit report. However, Assessing Officer rejected the contention of the assessee and observed that in the absence of any details, the genuineness of the alleged creditors cannot be verified. Therefore, Assessing Officer made an addition of Rs. 53,97,017/- [being 25% of total creditors of Rs. 2,15,88,066/-] to the total income of the assessee treating the same as unexplained cash credit under section 68 of the I.T. Act. 6. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the addition made by the Assessing Officer. During the appellate proceedings, the assessee has submitted additional evidences, which were sent by ld CIT(A) to the assessing officer to verify them and submit the remand report to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer has discussed and analyzed the sundry creditors which are linked with purchases and concluded that sundry creditors are in the form of cash credit. The Ld. Counsel pointed out that the creditors were duly recorded in the books of accounts and assessee filed the confirmations containing the PAN number and address, and since these creditors belong to the purchases made by the assessee and the assessing officer did not consider the purchases as bogus, then how can the creditors alone should be bogus without treating the purchases as bogus. The purchases made by the assessee, were not considered bogus by the Assessing Officer, therefore Assessing Officer should not have made addition under section 68 of the Act in respect of creditors under the head cash credit. Therefore, addition made by Assessing Officer is on wrong footing. 10. The Ld. Counsel also submitted that it is not a typographical error in the assessment order that section 68 has been written by Assessing Officer in hurry. The Assessing Officer has discussed the aforesaid sundry creditors carefully in the context of section 68 of the Act as unexplained cash credit, and then made addition, which is not justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional evidences, which were remitted back to the file of the Assessing Officer for remand report However, the Assessing Officer did not submit his remand report to the Ld. CIT(A), therefore Ld. CIT(A) by using co- terminus power has adjudicated the issue. Therefore, matter may be remitted back to the file of the ld CIT(A) for fresh adjudication as Ld. CIT(A) should not have adjudicated the issue by using co-terminus power. Besides, Ld. DR submitted that the assessee has not been able to explain the genuineness and creditworthiness of the sundry creditors and therefore the Assessing Officer has rightly made the addition. 12. Per contra, the Ld. Counsel submitted that since the assessee has submitted additional evidences and which was remitted back to the file of the Assessing Officer for taking remand report, however Assessing Officer has not submitted any remand report, therefore it is not a mistake on the part of the assessee. The assessee has produced relevant materials and evidences during the appellate proceedings, therefore his matter should be adjudicated. The assessee has produced the relevant documents and evidences during the appellate proceedings which is remitted back t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ITAT, Ahmedabad in the case of DCIT vs Rasikbhai Ramjibhai Raval, in ITA No.1420/AHD/2014, dated 13.12.2017, wherein it was held as follows: "8. We have given a thoughtful consideration to the orders of the authorities below. It is true that the assessee did not file all the details of expenditure during the course of assessment proceedings. It is equally true that all the necessary details were furnished before the CIT(A) who had called for a remand report from the Assessing Officer. Once the details have been furnished and transmitted to the Assessing Officer, and the same were examined by the CIT(A), we do not find any reason to interfere with the findings of the CIT(A). Ground no.1 is accordingly dismissed. 9. We find that the additions were made in respect of the following cash creditors: S. No. Name, Address & P.A. No. (if available) Amount taken or accepted Whether squared up or not Maximum of amount outstanding Amount repayment (1) Arvindbhai Kantidas Parmar Address: N.A., Pan No.: N.A. 300,000 Yes 348,000 648,000 (2) Chaturbhai M. Raval: Address: N.A., PAN No.: N.A. Nil No 30,497/- Nil (3) Gujarat Laxmi M.K.S.M. Ltd. Address: N.A., PAN No.: N.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two amounts represented the purchases made by the assessee on credit and, therefore, the provisions of s. 68 could not be attracted in the present case. The view taken by the Tribunal on this issue is sustainable inasmuch as, on the basis of the findings recorded by it that these two amounts represented purchases made by the assessee on credit and the purchases and sales having been accepted by the Department, the question of addition of the said two amounts under s. 68 did not arise inasmuch as the provisions of s. 68 would not be attracted on the purchases made on credit." 18. The assessee relied upon the decision of the coordinate bench of ITAT, Visakhapatnam in the case of Surya Earth Moving Vs. ITO Ward-4, Rajahmundry in ITA No.316/Vizag/2009 dated 25.10.10. The coordinate bench of this Tribunal, under similar circumstances held that amount represents purchase on credit, provisions of section 68 of the Act cannot be applied. The relevant portion of the order is reproduced hereunder: "We have heard the rival submissions and carefully perused the record. The main objection of the assessee is that the trade credits cannot be added as unexplained credits under section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Karigar themselves. It is for this reason that even the CBDT felt that after the sales (made out of purchases from Karigars) are found to be verifiable, it is not necessary that there should be an insistence for producing the Karigars. The instructions like this, although may not be capable of being treated as having binding effect, nonetheless they lay down necessary guidelines for completion of assessment in a particular line of trade. This logic is applicable with all its force in the present case. Necessity to have the addresses of the Karigars may arise only for the purposes of making enquiries from the Karigars, so far as the assessment of the same dealers is concerned. If such a verification is not required to be made, in view of the regular system of accounting followed by the assessee as per the practice prevalent in this trade, one fails to understand as to why non- furnishing of addresses should be made an issue by the AO for making addition and that too on selective basis. Further, 15 Purjas value of which has been treated as bogus liability, do contain full particulars of the Karigars. Annex. A itself has got a column "Names and Addresses of the Karigars&quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned unexplained. The balance appearing in this account, which included the disputed addition also is the sum total of purchases that remained unpaid at the end of the year. As the genuineness of such purchases has not been disputed, rather the same has been accepted, the credits stand fully explained and no adverse inference is called for either on facts or in law. Thus, on a consideration of totality of facts and circumstances of the case, as have been discussed above, the liability aggregating Rs. 1,05,800 as has been shown against 15 Purjas/Karigars could not be treated as bogus liability. The CIT(A) has rightly deleted the addition and no interference in the same is called for." 20. Considering the facts and circumstances of this case and also following case laws cited above, we are of the view that no additions can be made u/s 68 of the Act, towards trade creditors when genuineness of the purchases are not doubted. In the present case on hand, the A.O. has not doubted the genuineness of the purchases. The A.O. made additions toward trade creditors for the simple reason that the creditors have not confirmed the transactions with the assessee. Therefore, we are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhancement of assessment by Rs. 1,20,442/- on account of expenditure under section 40A(3) of the Act. 20. At the outset, Ld. Counsel submitted that the addition under section 40A(3) of the Act to the tune of Rs. 1,20,442/- was not made by the Assessing Officer. However, the Ld. CIT(A) has enhanced the assessment and made a fresh addition during the appellate proceedings without giving notice to the assessee for enhancement of assessment, therefore addition so made by the Ld. CIT(A) of Rs. 1,20,442/- under section 40A(3) of the Act for making enhanced addition, is not sustainable in the eye of law. 21. On the other hand, Ld. DR for the Revenue submitted that Ld. CIT(A) has co-terminus power as that of the Assessing Officer and therefore has right to enhance the assessment. 22. After giving our thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. Counsel, we find that the issue involved in the second ground of appeal of assessee, is no longer res integra. The question as to whether the ld CIT(A) can enhance the assessment without giving notice to the assessee, was considered by various judicial forums across India, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including the case of DCIT vs. Tejinder Singh (supra), Atul G. Puranik vs. ITO [132 ITD 499 (Mum Trib)] in support of the proposition. Hon'ble Delhi High Court in the case of CIT vs. Shri Kishan Das - ITA No.64 of 2014, judgement dated 10.02.2014, has approved this school of thought and inter alia observed as follows :- "3. It is contended on behalf of the Revenue that the Tribunal fell into error because Section 50C does not make any distinction between properties of one kind and the other and that so long as the state authorities prescribed a different rate than the one involved in the transaction, such prescribed rate would be deemed the rate for the application for Section 50C. Contending that the distinction made in the present case between the fresh leasehold rights and the consideration payable and the residual rights was unjustified, it was argued that such difference is artificial and unsound. Learned counsel relied upon the decision of the Tribunal in Arif Akhatar Hussain v. ITO ITA/543/Mum/2010 to submit that even leasehold rights such as the present one, which comprehended entitlements in respect of land, building and other interest would fall within Section 50C and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g enhancement of income regarding reduction in the cost of acquisition without putting assessee to notice in this respect. We, therefore, uphold the plea of the assessee. In this view of the matter and the addition having been deleted on merit, grievance of the Assessing Officer is rendered academic and does not call for any adjudication. The direction with which the matter was set aside to the file of the Assessing Officer anyway stands deleted.
9. The only other point raised in Revenue's appeal is with respect to grant of partial relief on the basis of deeming provision of section 50C of the Act but the entire addition having been deleted, the partial relief is rendered academic. The appeal filed by the Revenue is thus dismissed as infructuous.
10. In the result, while appeal of the assessee is allowed, appeal of the Revenue is dismissed."
23. Therefore, respectfully following the binding judgment of the Co-ordinate Bench in the case of Sureshchandra Parekh (supra), we allow ground no. 2 raised by the assessee.
24. In the combined result, appeal filed by the assessee is allowed
Order pronounced on 30/03/2023 by placing the result on the Notice Board. X X X X Extracts X X X X X X X X Extracts X X X X
|
