TMI Blog2018 (7) TMI 1892X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is evident from copies of account of these parties enclosed in the paper book at PB 42-66 is not justified on the ground that when assessee has not claimed any expense to that extent during the year under appeal, where is the question of making disallowance of such amount? If addition has been mentioned u/s 41(1), ingredients of section 41(1), the burden of proof which is resting on revenue in view of the following judicial decisions has not been discharged. There is no evidence that the liability has ceased to exist and that too in the year under appeal. The very fact these amounts are being shown as payable in the balance sheet of the assessee go to establish that there was no cessation of the liability. - Decided in favour of assessee - ITA No. 399/Del/2017 - - - Dated:- 18-7-2018 - Shri H.S. Sidhu, JM And Shri Prashant Maharishi, AM Appellant by : Dr. Rakesh Gupta, Adv. Sh. Ashwani Taneja, Adv. Respondent by : Sh. K. Tewari, Sr. DR ORDER Per H.S. Sidhu, J. M. This is an appeal filed by the assessee against the order dated 01.12.2016 of ld. CIT(A)-12, New Delhi for the assessment year 2012-13. 2. The grounds raised in appeal read as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount payable to each of the sundry creditor aggregating to 42 in number. In order to verify the genuineness of creditors, notices u/s. 133(6) of the Act were issued on 22.12.2014 to all the 27 parties as shown in assessment order page no. 2-3 and out of 27 notices issue u/s. 133(6) of the Act, 20 notices were received back with the respective postal remarks that no such firm/left/ koi jankari nahin / not related / wrong address etc., mentioned at page no. 3-4 of the assessment order. The AO has discussed the details thereof in para 3.1 of the assessment order at page no. 3 to 16 in the case of each party by observing that against purchases of ₹ 7,66,74,802/- sundry creditors shown in the balance sheet was at ₹ 6,77,21,342/- which also included retail creditors, control accounts at ₹ 3,48,88,095/-. The AO made the total addition of ₹ 3,50,94,858/- and added the same to the total income of the assessee on account of sundry creditors not proved as genuine and difference in the account of sundry creditors not reconciled and assessed the income of the assessee at ₹ 3,54,46,940/- u/s. 143(3) of the Act vide order dated 18.03.2015. Aggrieved by the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year to prove the claim. Ld. CIT(A) further relied upon the decision of the Hon'ble Punjab Haryana High Court in the case of SG Exports (P H), 336 ITR 2 wherein, it has been held that onus is on the Assessee to prove the fact by producing cogent and convincing evidence including the identity of parties alongwith evidences of payment. There is also no basis in the claim of Assessee that Assessee has maintained complete book of account, books are audited and there are no adverse observations from auditors. It was further observed by the Ld. CIT(A) that Assessing Officer has conducted inquiry and has established that no actual purchases were made from these parties. He further relied upon the Hon 'ble Delhi High Court in the case of Goodyear India Ltd., 246 ITR 116 (Del) wherein it has been held that the broad proposition that once there is tax audit u/s 44AB, AO should not insist upon production of records or details cannot be laid down and merely because an audit report is available, there is no fetter on the power of Assessing Officer to require the Assessee to justify its claim with reference to records, materials and evidence as such power is inherent in an Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee etc. etc. The ld. AR further submitted that lower authorities failed in making aggregate addition of ₹ 3,50,94,758/- on the alleged ground that sundry creditors were not proved as genuine and that too by recording incorrect facts and findings and without observing the principle of natural justice. He further submitted that the lower authorities also wrongly made the addition in dispute on the alleged ground that sundry creditors were not proved as genuine which is bad in law and against the facts and circumstances of the case. 5. On the other hand, the ld. DR relied on the order of the authorities below and he further submitted that the assessee has not proved the genuineness of the sundry creditors. The assessee was also unable to give current address of the creditors and as per Inspector s report, the sundry creditors were not found in existence at the addresses provided. Therefore, the ld. Authorities below were quite justified in making the additions. In support of his contention, Ld. DR submitted that the following decisions may kindly be considered with regard to bogus purchases: 1. N K Proteins Ltd Vs CIT (2017-TIOL-23-SC-IT) where Hon'ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no such firm/left/ koi jankari nahin / not related / wrong address etc. given at page 3-4 of the assessment order and six suppliers aggregating to ₹ 67,24,263/- in respect of which though notices were served but confirmations were not received given at page 13-14 of the assessment order. We further find that Ld. CIT (A) has confirmed the addition vide discussion made at page 25-30 of the appeal order. These amounts added are the closing credit balances of the suppliers as on 31.3.2012 which is evident from PB 42-66. In our considered opinion, the sustaining of impugned addition is not justified due to the following reasons:- i). It has not been mentioned either by A.O or by Ld. CIT(A) as to under which section of the Income Tax Act, these closing credit balances appearing as on 31.03.2012 could be added. Therefore, non-mentioning the precise provision of law makes the impugned addition bad in law. ii) If addition has been made u/s 68, such could not be added and that too of this much of amount as there was no sum received from these parties that too during the year under appeal which is evident from the copies of account of these parties enclosed in the paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said parties as non-genuine and made addition of that amount under s. 69C and also applied proviso to s. 69C-Not justified- Once sales were made by the assessee obviously purchases were made- Therefore, purchases could not be treated as unexplained expenditure and addition thereof could not be made under s. 69C or by invoking proviso to s. 69C - Nisraj Real Estate Exports (P)) Ltd. vs. Asstt. CIT 31 DTR 456(JP 'A') CASH CREDIT-Failure by creditors to participate in inquiry and furnish accounts-Does not mean that creditors lacked identity-No material to show that amounts advanced by creditors in reality represented money belonging to assessee-Sums cannot be treated as cash credits-Income-tax Act, 1961-CIT v. CHANDELA TRADING CO. P. LTD. 372 ITR 68 (Cal) Income from undisclosed sources-Addition-Alleged bogus purchases-AO was not justified in making the disallowance of purchases made by the assessee merely due to non-filing of confirmation from suppliers especially when assessee has filed certificate from the bank indicating the facts that cheques issued by it were cleared and no defect in the books of account was pointed out by AO-YFC Projects (P) Ltd. vs. Dy. CIT 46 D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors, where is the question of a quasi judicial authority to intervene to say on behalf of sundry creditors or on behalf of the appellant that amount is not payable by the assessee? Here there is not even unilateral act, let alone the bilateral act, Therefore also, action of AO in holding the liabilities ceased to exist may please be reversed. 6.4 Even in law, the addition is not sustainable for more than one reason. Section 41(1) of the Act is a deeming fiction according to which an amount which does not have any trace of income is treated as income liable to suffer the brunt of tax. Therefore, as per the established canons of law, the burden to prove that a particular amount falls within the four corners of section 41(1) is on the shoulder of the Assessing Officer without which the addition cannot be made and if made is liable to be deleted. 6.5 The first pre-requisite for the applicability of section 41(1) is there must be a trading liability in respect of which the deduction has been claimed and allowed and burden to prove the twin conditions to the effect of the above facts, it goes without saying, is on revenue. There is not even an iota of whisper as to whether the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been accepted and also the purchase have been accepted by the sales tax authorities and so much so purchase input tax credit has been given as is evident from sales tax returns at PB 18-41 and sales tax assessment order at PB 135. 6.10 Even assuming that purchase could not be got verified, the fact that the sales have been accepted such sales obviously could not have been made without purchases. Therefore, in such situation G.P. Rate of the earlier years can act as a guide as held in judicial decisions including 355 ITR 290 (Guj) PB 17 is the copy of G.P. chart of various years. 6.11 We note that PB 136-143 is the copy of profit and loss account and trading account of earlier years together with assessment orders u/s 143(3) in which G.P. at the rate of 3.52%,4.13%, 2.99%, 2.~9%, 2.60%,2:21 %, 1.88% for Financial years 2007-08, 2008-09, 2009-10, 2010-11, 2012- 13, 2013-14, 2014-15 respectively has been accepted (PB 17). 6.12. Without prejudice to above, the assessee s sale was ₹ 6.21 Crores as is evident form profit and loss account enclosed at PB 13 and assessed income is at ₹ 3.54 Crores as is evident from the last page of the assessment order which would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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