TMI Blog2015 (3) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... s were accepted. Whether there is incriminating material or not, Assessing Officer's addition per se is not correct on facts itself. - Decided against revenue. Unexplained credits - Held that:- Assessee did not give any information when these amounts were adjusted or returned. In the absence of these details, we are unable to give any finding, whether the amounts can be considered as cash credits or trade credits. Therefore, issue of examining these amounts are restored to the file of Assessing Officer to examine in respective assessment years and determine whether they can be treated as unexplained cash credits. Assessing Officer's order did not specify the details of credit. Therefore above analysis is based on the details filed by assessee. Assessing Officer is directed to examine the amounts that were considered for addition and exclude trade credits from purview of cash credits. If assessee has furnished any mode of receipt/mode of adjustment or repayment of the amounts and confirmations from the said parties, then Assessing Officer can make necessary enquiries to examine whether they are genuine or not. With these observations, the issue of examining the credits w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taiah And Shri Saktijit Dey JJ. For the Appellant : Shri Sunil Kumar Jain, AR For the Respondent : Shri Rajat Mitra, DR ORDER Per Bench : In this batch of appeals, there are assessee's appeals for Assessment Years (AYs) 2003-04 to 2006-07 2009-10, whereas Revenue's appeals are for AYs. 2003-04 to 2005-06 only. Since common issues are involved, these are considered together and disposed-off by this common order. 2. We have heard the Ld.Counsel and Ld.DR in detail and called for details also in the course of hearing. After considering the Paper Books placed on record and submissions by assessee, issues are decided as under. 3. Briefly stated, assessee is a private limited company engaged in manufacturing of decorative laminated sheets. It has filed returns originally and consequent to search and seizure operation in the group cases, proceedings u/s. 153A of the Income Tax Act (Act) were initiated against assessee. As seen from the assessment order, even though search proceedings were conducted on 29-01-2009, in response to notice u/s.153A (date of issue not mentioned in the order) assessee filed returns on 12-11-2010. Even though the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was asked to furnish the details of Sundry Creditors of ₹ 32,37,070/-, assessee vide his letter dt.09-12- 2010 submitted that the list of Sundry Creditors assessment year wise with comparison to last year balances and the creditor's full address and telephone numbers will be submitted within a week. Vide letter dt.24-12- 2010, assessee furnished the creditor's full address and telephone numbers as Annexure-I. Assessing Officer was of the opinion that assessee furnished information only for AY.2009-10 (which was accepted by the Assessing Officer) but did not furnish information for the relevant assessment years. Accordingly, he treated the Sundry Creditors as unexplained investment and made respective additions. 6. Before the Ld.CIT(A), assessee furnished written submissions, complete details which were submitted before AO and contended that these were not considered by the Assessing Officer. The Ld.CIT(A) after considering the observations of the Assessing Officer, deleted addition by stating as under: 4.4 The observations of the Assessing Officer and the written submissions of the appellant are perused. As could be seen from the gist of the information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year are confirmed by the said parties. On the basis of the said information that are brought on the record and facts of the case, I am of the considered opinion that there is no ground for the Assessing Officer to treat the entire closing balance of sundry creditors as unexplained credits, that too in a search related assessments like the case of the appellant for the year under reference. Several judicial authorities held that routine and general disallowances, in absence of material found at the time of search, cannot be made in assessment completed u/s 153A. It was also held that, when no incriminating material is found during the course of search, the Assessing Officer cannot make any addition on issues which have already been considered.Accordingly, it is held that the addition of ₹ 32,37,070 made by the Assessing Officer on account of treating the sundry creditors as unexplained credits/unexplained investment, is not sustainable. Hence, this ground of appeal is treated as allowed . 7. We have considered the rival contentions and perused the details available on record. We agree with the observation of the Ld.CIT(A) that the methodology adopted by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the opening balances which was not considered by the Assessing Officer and as such the entire closing balance was treated as unexplained credits on the premises that, the appellant has not furnished any information related to the said creditors. From the information brought on record, the closing balance of the creditors against advances, include the opening balance of ₹ 5,42,733 which have been credited with the further advances obtained during the year to the tune of ₹ 22,69,553 and debited with an amount of ₹ 16,80,828 being the amounts squared up or sales made to the parties for the year under reference. In the strict parlance of the language of sec.68, the credits that appear in the books of the assessee during the relevant year alone can be treated as unexplained credits if the appellant fails to explain the transaction to the satisfaction of the: Assessing Officer. In this case, such fresh credits are to the extent of ₹ 22,69,553 which could have been examined from the point of view of unexplained credits by the Assessing Officer, in case of failure of the assessee to explain them, as against treating the entire closing balance of the creditors as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its are trade credits and there is no need to take them as cash credits. We have asked for the ledger copies of all the parties, account-wise and assessee has furnished the same. As can be seen from the details, the credits from M/s.Goyal Traders are trade credits which are adjusted towards sales in AY.2003- 04 and 2004-05. Likewise, the credits in the case of M/s.Victory Plywood are also adjusted towards sales and there are purchase credits also. Therefore, both credit and debits in this account pertain to assessee's trade transactions. Likewise in the case of M/s.Glory Paper in AYs.2003-04 to 2005-06. Similarly, in the cases of M/s.Goyal Timber Technique, M/s.Bakelite Hylam Limited, M/s.Dhanalaxmi Paper, M/s.Sunita Commercial (P) Ltd., M/s.Ambika Hydraulics. These are of trade transactions and the advances arose as part of trade. To that extent, assessee contention that trade credits cannot be considered as cash credits has to be accepted. Moreover these advances were subsequently got adjusted also. There is no merit in order of Assessing Officer and CIT(A) in confirming the same as these are not cash credits per se. 10.1 However, in the case of M/s.Shalimar Plywood assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re genuine or not. With these observations, the issue of examining the credits which are not adjusted in the trade either during the year or later year is restored to the file of the Assessing Officer. Balance of the credits which are trade credits stands deleted, modifying order of the CIT(A) to that extent too. In the result, assessee's grounds are allowed partly for statistical purposes. Assessing Officer should give due opportunity to assessee to furnish necessary information/confirmations to the extent of the credits available on the above issue. 11. The next issue for consideration in AY.2006-07 is with reference to the commission received to the extent of ₹ 26,61,915/-. On the basis of the TDS certificates issued by M/s.Amit Commercial Cooperation and M/s.C.J. Chemicals Private Limited, Assessing Officer was of the opinion that the commission received by assessee to an extent of ₹ 26,61,915/- was not accounted for in AY.2006-07. It seems Assessing Officer has not given any opportunity to assessee before making addition. Before the Ld.CIT(A), assessee explained that assessee has received advance from the above parties in the financial year 2005-06 and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the month of February and March and complete details of Mr. Ramesh Kumar are not known. Therefore, the Additional CIT expressed doubt about the genuineness of the claim. In the absence of complete details, the Ld.CIT(A) on examination of the reports, made further enquiries and found that assessee maintained bank account with IOB, Secunderabad and bank extract indicated that amounts have been encashed by the recipient in cash, except on one occasion on 24-03- 2009, therefore, he has confirmed the disallowed as under: 5.5 In response to the same, the appellant has furnished certain information including the bank account extract of the appellant maintained with Indian Overseas Bank, R.P.Road Branch, Secunderabad bearing account no.043202000003073. As could be seen from the bank account extract for the period under reference, the appellant has made the following amounts vide the bearer cheque with the cheque numbers indicated which have been encashed by the recipient in cash, except on one occasion. The details are as under; S.No. Date Cheque No. Narration Code Amount(debit) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction is not doubtful. The cash payments also attract the provisions of sec.40A(3) of the I.T.Act, 1961, since the same were met for the purported expenses/purchases. However, it may be relevant to note that the payment of ₹ 2,08,280 was paid by cheque as per the indication in the bank account that has been cleared on 25.3.2009. Thus, based on the information that has been brought on the record, the claim of the appellant for expenditure to the tune of ₹ 28,97,889 is not an allowable expenditure and as such the same is confirmed out of the total disallowance of ₹ 31,06,169 made by the Assessing Officer. Though the Assessing Officer has made the disallowances, on prima facie suspicion, the major portion of the so called expense representing the fuel charge, in the form of purchase of paddy husk from a single party, that too by raising bills on a single day and discharged the liability by payments in cash, conclusively proves the fictitious nature of expenses booked in the books of accounts of the appellant. Accordingly, the major portion of the additions made by the Assessing Officer as represented by cash payments, are confirmed and the appellant gets only a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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