Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (2) TMI 791 - ITAT MUMBAI

2016 (2) TMI 791 - ITAT MUMBAI - TMI - Addition on account of difference in debtors and creditors - information called by the AO u/s 133(6) of the Act directly from the selling/purchasing parties with respect to the account of the assessee appearing in their books of accounts - CIT(A) deleted the addition - Held that:- The CIT(A) has allowed the appeal on the ground that the AO should have summoned these parties as well the assessee and recorded their statement on oath and allowed the cross-exam .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r considered view the interest of justice will be best served , if the matter is restored to the file of the AO to denovo determination of the issue with respect to differences in the books of accounts of the assessee with respect to sale/debtors and purchases/creditors vis--vis balances as appearing in the books of the purchasing/selling parties , with the direction to AO to grant proper and adequate opportunity as per law , to the assessee to explain the differences in sale/debtors and purcha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of brokerage expenses amounting to ₹ 1,19,089/- were incurred by the assessee in the preceding year and expenses were booked by the assessee in its books of accounts in the preceding year while due taxes has been deducted at source in the relevant assessment years and paid to the credit of the Revenue and the balances are appearing in Schedule G to the audited accounts as creditors as opening balance as at 01-04-2008 and the AO has merely taken the figure from schedule G that has been a sc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

booked as expenses in those years and in the current assessment year, the amounts are taken by the AO from the opening balance of sundry creditors as on 01-04-2008 as per schedule G to the audited accounts and hence in our considered view no disallowance is called for u/s. 40(a)(ia) of the Act read with Section 194H of the Act as these brokerage expenses of ₹ 1,19,089/- pertains to the brokerage expenses of the earlier years. We, therefore, uphold and sustain the orders of the CIT(A) in w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rned Commissioner of Income Tax (Appeals)- 35, Mumbai ( CIT(A) for short) dated 10.01.2013 for the assessment year 2009-10. 2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Tribunal are as under: (i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 45,03,226/- on account of difference in debtors and creditors by holding that the AO has not gone through the process of cross examination of vari .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

spite of the facts that assessee maintains separate accounts for debtors and creditors and hence reconciliation should also have been separate for both the accounts. (iii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance u/s. 194H r.w.s 40(a)(ia) on account of brokerage amount is inclusive of c/f balance of earlier years without appreciating the fact that if even if it is so, the assessee was not able to substantiate his claim of sun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

proceedings u/s 143(3) of the Income Tax Act,1961(Hereinafter called the Act ) read with Section 143(2) of the Act, the learned assessing officer (hereinafter called the AO ) observed that there are differences in the balance of sale and purchase made by the assessee and accordingly there are differences in the debtors and creditors with respect to the books of accounts maintained by the assessee vis-à-vis balance appearing in the books of selling/purchasing parties from whom the enquirie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

7; 34,39,002/- Differences on account of Bogus Purchases/Creditors as alleged by the AO a) Synthetic Colour Chem. ₹ 10,64,224/- Total ₹ 45,03,226/- Sale by assessee Name of the Party Sale as per assessee Purchase as per assessee Difference Remarks Adarsh Chemicals(Sec) 19,14,643/- 19,14,643/- Nil Assessee shown the debtors of ₹ 14,17,101/- as against party confirmed that they have received full payment. Hence entire amount of Rs.14,73,101/- as treated as bogus debtors. Vardhama .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Therefore, the excessive debtors shown by the assessee of ₹ 6,55,963/- is to be added to the total income of the assessee. Purchases as per assessee Name of the party Sale as per assessee Purchase as per party Difference Remarks Synthetic Colour Chem 99,74,097/- 94,54,897/- 5,14,260/- Assessee shown the creditor of ₹ 15,78,484/- as against party shown the balance payable of ₹ 5,14,260/-. Therefore, the difference between two of ₹ 10,64,224/- has been treated as bogus cre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on as in the opinion of the AO the same has to be reconciled with the bank statement and concrete information to be provided to the department of all sale/purchase and debtors/creditors parties and arrived upon the concrete accounts as per mercantile system followed by the assessee. Thus, the AO disallowed the entire amount of ₹ 45,03,226/- being differences in the sale/purchases and consequently in Debtors/Creditors between the balances as appearing in the ledger account of the assessee a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

educted TDS of ₹ 5936/- and for the balance 36 parties , the assessee has hidden the payment on account of brokerage paid and included in the list of creditors to whom the amount is payable. The AO observed that there are ten parties to whom the brokerage amount of above ₹ 5000/- is paid / payable and the AO held that the assessee has not deducted TDS on brokerage of ₹ 1,19,089/- u/s. 194H of the Act for the rest of the parties and the disallowance was made of ₹ 1,19,089/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

4,490/- 10. Viral Jasani 15,548/- Total 1,19,089/- 4. Aggrieved by the assessment orders dated 28.12.2011 passed u/s 143(3) of the Act by the AO, the assessee filed the first appeal before the CIT(A) and submitted that the assessee has given all the details to reconcile the balances and proper opportunity was not given to the assessee to explain its stand. The assessee submitted that as the AO was proposing to rely on the confirmations obtained from third parties, the assessee had a right to cro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in accepting the facts that, cheques issued by the parties on 31/03/2009, accounted by the party in their books of account, obviously appear in assessee's book in the subsequent month i.e. in the next financial year. The assessee has submitted the subsequent year statement with reconciliation of two parties and the said statement are tallying with assessee's account. Reconciliation statement is already submitted. However, in case of Adarsh Chemicals(Secundarabad) we brought to your hono .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

arty ,which has not been received by the assessee. Also from the Bank statement of the assessee, it can be can ascertained that the assessee has not received the amount from the said party Further, the additions could not be made towards unrecorded transactions in the books of the assessee simply relying on the entries found in the books of third party i.e. assessee's customer. Once the assessee has denied the transactions and the statement relied upon by the revenue department does not disc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l stand, it is found that the AO did not examine and analyse the various entries in the ledger account, which was produced by the appellant before the A.O. during the assessment stage. I have also taken into consideration the Reconciliation Chart given by the appellant. The CIT(A) observed that the AO has not examined and analysed the various entries in the ledger account which was produced by the assessee before the AO during the course of assessment proceedings . The CIT(A) referred to the rec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to purchases/creditors. The CIT(A) held that the AO has not gone through the process of cross examination of various parties. The CIT(A) held that the AO has made additions based on one sided version and taken adverse view. The CIT(A) held that the AO should have summoned the above parties and the assessee, recorded their statement / disposition on oath and allowed the cross examination before arriving at the adverse conclusion and hence the addition made by the AO of ₹ 45,03,226/- was del .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

total outstanding balance including the carried forward balance of earlier year s on which TDS was deducted in the relevant year s and there is no brokerage expense of ₹ 1,19,089/- incurred during the assessment year on which TDS was deductible. The CIT(A) observed that the TDS was deducted and TDS returns were filed on the relevant brokerage expenses incurred during the assessment year and the addition made by the AO was deleted vide orders dated 10.01.2013. 5. Aggrieved by the orders of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

issued u/s. 133(6) of the Act directly from the sale/purchase parties vis-à-vis balances appearing in the books of accounts of the assessee. The Ld. DR submitted that no cross examination was asked by the assessee before the AO or the CIT(A) . While on the other hand, the ld. counsel of the assessee submitted that these addition of ₹ 45,03,226/-were made on account of debtors/creditors while the sale and purchase are duly included in the books of accounts of the assessee and it has .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sions as made before the authorities below. The ld. Counsel of the assessee submitted that these amounts of ₹ 1,19,089/- are opening balances as per schedule G in the audited accounts in the sundry creditors and TDS was duly deducted in the relevant years and hence, there was no requirement of deduction of TDS on these old outstanding payments during the assessment year as it has already suffered TDS in preceding years while with respect to brokerage expenses incurred during the year which .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

respect to the account of the assessee appearing in their books of accounts. The AO observed that there is a total difference of ₹ 45,03,226/- with respect to four parties in the said accounts. The AO asked the assessee to reconcile the debtors and creditors along with the sale and purchase in its books of accounts vis-à-vis account balance as appearing in the books of selling/purchasing parties. The assessee relied upon the ledger accounts maintained as part of books of accounts by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee as part of books of accounts and insisted before the AO that the books of accounts maintained by the assessee are correct. As per the facts as emerging from the orders of the authorities below, the assessee never asked for the cross examination before the AO or before the CIT(A). The assessee has contended before the CIT(A) , that it submitted the reconciliation before the AO which was not considered by the AO but the same has been disputed by the Revenue before us that no such reconcilia .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as well the assessee and recorded their statement on oath and allowed the cross-examination to the assessee before drawing adverse inference against the assessee but as per the facts as emerging from the orders of the authorities below, the assessee has not asked for the cross examination before the AO and the CIT(A) and rather the assessee has submitted before the AO that its accounts are correct.No such evidence has been brought on record by the assessee before us to substantiate that the asse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in his books of accounts as well the balance amount of ₹ 36,815/- reflected the difference in the opening balance while in the instant case the assessee is insisting that its ledger accounts in the books of accounts reflect correct balances while in our considered view the differences need to be duly reconciled and the primary onus is on the assessee to reconcile the difference which needed to be discharged by the assessee. In our considered view the interest of justice will be best served .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee vis-à-vis balance as appearing in the books of accounts of the purchasing/selling parties in accordance with the principles of natural justice as enshrined in doctrine of audi alteram partem. The appeal of the Revenue with respect to this ground is allowed for statistical purposes. We order accordingly. With respect to the second issue of the disallowance of ₹ 1,19,089/- u/s. 40(a)(ia)of the Act read with Section 194H of the Act , we have observed from the orders of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version