2023 (5) TMI 363 - AT - Income Tax

Validity of Assessment 144 - as argued AO as violated due procedure of law and passed a non speaking order in the present case - HELD THAT:- As gone through the assessment order, and we find that before making various additions/disallowances, AO had issued show cause notice to the assessee, considered the reply filed by the assessee, and thereafter proceeded to make various additions based on the material evidences and submissions filed whatever by the assessee before him. Assessee was unable to point out any instance of the AO having passed the order in violation of law, without affording any opportunity of hearing to the assessee. We agree with the ld.CIT(A) that there is no infirmity in the action of the AO in passing the assessment order u/s 144 of the Act,.

We find that there has been no miscarriage of justice in the present case, because, as is evident from the appellate order of the ld.CIT(A) that whatever additional evidences the assessee sought to present for pleading its case, were all entertained and admitted by the ld.CIT(A) while deciding the assessee’s appeal.

There cannot be any grievance to the assessee to the exparte order passed by the Ld.AO, since the assessee has been heard by the appellate authority to its complete satisfaction, after considering all evidences and submissions filed by the assessee. No merit in the ground raised by the assessee challenging passing of assessment order under section 144 - Decided against assessee.

Disallowance of loss on sale of grey cloth - grey cloth was purchased at a higher rate and sold at a lower rate on the same day, that the transactions taking place between the same parties appeared to be a modus operandi adopted by the assessee to claim fabricated bogus loss - HELD THAT:- As per the list of the parties whom the sales were made, the same were also supplied by the assessee to AO, as is evident from the remand report, and as noted above, no infirmity was pointed out by the AO and the information furnished by the assessee regarding the sale transactions with respect to grey-cloth. Therefore, all in all, as noted except for doubting on account of the fact that goods were purchased and sold on the same day at a loss, the AO had no other material on hand to doubt the genuineness or the veracity of the transactions, which otherwise was suitably established by the assessee with all evidences, which were examined and found to be in order by the AO in his remand report.

We hold that there is no basis for disallowing the loss to the assessee and the disallowance so made is therefore directed to be deleted - Decided in favour of assessee.

Unreconciled difference in the outstanding balance - Reason for difference in the outstanding balance of the parties as per the assessee’s books of accounts and as per the balance of the assessee in the books of accounts of the said parties, was clearly discernible from the ledger accounts filed to the AO and the ld.CIT(A), who we find, have not cared to go through the same before holding that the balances were not reconciled by the assessee.

We hold that evidences filed by the assessee clearly brought out the reasons for difference in the outstanding balance, and the Revenue authorities having not been able to see through the evidences and accounts, which were placed before him, have erred in holding that the differences are unreconciled. The addition, therefore, made on this basis and confirmed by the ld.CIT(A), we hold, is not sustainable as per the facts of the case, and we direct the deletion of the addition - Decided in favour of assessee

Addition on account of purported cessation of liability of sundry creditors - HELD THAT:- As facts by itself did not establish that any benefit had accrued to the assessee on account of cessation of liability on this count. Firstly the fact that the liability on account of these parties had ceased to exist cannot be established merely by the fact that the balance outstanding had remained unclaimed for last three years, and as long as the assessee reflecting this amount as outstanding for payments, there could be no case for cessation of liability. The issue is squarely covered by the decision of CIT Vs. Bhogilal R. Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT] - addition made on account of cessation of liability as per the provisions of section 41(1) is directed to be deleted - Decided in favour of assessee.

Addition made on account of bogus sundry creditors - HELD THAT:- As clearly beyond doubt that these sundry creditors balance did not pertain to any transaction during the year, but were all outstanding balances of preceding year. Holding these balances to be bogus, can only mean and as has held by the ld.CIT(A) also that there were in fact no transactions entered with these parties, and transaction if any entered were of sham/bogus. Since the transactions were entered into in the preceding year the addition, if any, could have been made holding them to be bogus in he said year only. There cannot be case of treating the outstanding balance as bogus and making the addition of the same.

Set off carry forward of business loss of earlier years - HELD THAT:- No facts have been brought to our notice regarding the brought forward loss of earlier years claimed to be set off by the assessee in the impugned year. Even otherwise, since all the additions have been deleted by us, the assessee is restored back to the returned loss and therefore there remains no case for claiming any set off of brought forward loss. Thus, the ground raised by the assessee is no longer relevant, and dismissed accordingly.