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ITO, Ward-3 (4) , Hapur Versus Jai Mata Timber

2017 (1) TMI 949 - ITAT DELHI

Unverifiable sundry creditors - AO was of the view that since sundry creditors did not respond to his notices, therefore, these are not genuine and he made the addition - Held that:- No merit in ground of the Revenue’s appeal. The ld. first appellate authority has recorded a finding of fact that sundry creditors doubted by the AO are genuine. The assessee has produced evidence exhibiting repayment of alleged amounts to these concerns. The findings of the AO is not based on any concrete evidence. .....

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y the assessee. As gone through the finding of the AO also which has been extracted above, but, there is no clear-cut finding discernible from the order of the AO. Therefore,no reason to interfere in the finding of the ld.CIT(A). - Decided in favour of assessee - Addition on account of interest corresponding to the amounts outstanding against debtors - Held that:- No merit in this ground of appeal because there is no decision at the end of the AO to assume notional interest income and, the .....

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against the order of the ld. CIT(A) dated 20th August, 2015. The grounds of appeal taken by the Revenue read as under:- 1. The Ld OT(A) has erred in law as well on facts in deleting the addition of ₹ 14,29,235/- made by the A.O. on account of unverifiable sundry creditors. 2. The Ld CIT(A) has erred in law as well as on facts in deleting the addition of ₹ 32,38,796/- in respect of cash payments made to the parties splitting the amount to below ₹ 20,000/- in violation of provis .....

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s a very brief order running into two pages only. In order to appreciate the facts on all these issues, I would like to take note of the discussion made by the Assessing Officer which reads as under:- ASSESSMENT ORDER Assessee Firm e-filed its return of income on 29/09/2010 declaring total income ofRs.20,680/-. Return was processed u/s 143(1) by CPC. Case selected for scrutiny. Notice u/s 143(2) was issued on 28/09/2011 and duly served. Further notice u/s 142(1) was issued on 29/05/2012 & 01 .....

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s namely M/s Jai Mata Timber & Plywood, Gzb and M/s Sonu Sports Industries, Meerut. Credit amount against these stands ₹ 7,33,115/- and ₹ 6,96,120/- respectively. Confirmation letters sent on the address given by the assessee were sent in the case of M/s Jai timbers & plywood, GZB, it was received unserved with remarks of empty plot. In the case of M/s Sonu Sports Industries, Meerut, letter was served but reply not received. Vide order sheet entry dated 27/02/2013, assessee w .....

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e assessee produced in support but in the absence of stock register neither quantity of purchases could be verified nor correct G.P. could be verified. In view of these facts, sundry credit amount of ₹ 7,33,115/- and ₹ 6,96,120/- total at ₹ 14,29,235/- is treated as unexplained liability and added to the income of the assessee. . [Addition: ₹ 14,29,23S/-] Further there is purchase of ₹ 23,66,713/- from M/s Jai Timber & Plywood, Gzb and ₹ 49,51,320/- from M .....

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05,200/- to M/s Sona Sports Ind. Meerut. In these cases neither any expenses for daily or alternate day collection shown, nor payment of interest. When there are balance available with the assessee on the day mere payment of ₹ 20,000/- or less is not acceptable. In view of the fact that assessee has made cash payment of ₹ 16,33,596/- to M/s Jai Timber &. Plywood Gzb. and ₹ 16,05,200/- to M/s Sona Sports Ind. Meerut in violation of the provisions u/s 40A(3) of the LT.Act,196 .....

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ld debtors of ₹ 22,53,582/- which comes to ₹ 2,70,460/-. [Addition: ₹ 2,70,460/-] Penalty proceedings u/s 271(1) (C) of I.T. Act; 1961 for the concealment of income are being initiated separately The income of the assessee is computed as under: Income Returned ₹ 20,680/- Add: Towards unexplained liability discussed as above. ₹ 14,29,532/- Add: Towards unexplained expenditure discussed as above. ₹ 32,38,796/- Add: Towards unverifiable old debtors discussed as a .....

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tiated separately. 3. As far as the first issue is concerned, the Assessing Officer was of the view that since sundry creditors did not respond to his notices, therefore, these are not genuine and he made the addition. On appeal, the ld. First appellate authority has considered this aspect and observed that the assessee has made repayment of these loans by a/c payee cheque in the next year and they cannot be doubted. The brief findings recorded by the first appellate authority in this connection .....

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editor cannot be a ground for making addition of ₹ 14,29,235/-. The AO has not brought any adverse material evidence on record to suggest that the aforesaid sundry creditors were bogus. Rather, the fact on record is that the outstanding closing balance in respect of M /s Jai Timber Plywood, Ghaziabad at ₹ 7,33,115/- and in respect of M/s Sonu Sports, Meerut at ₹ 6,96,120/- have been paid in the subsequent years through cheues. Thus, in the light or the above facts, it is held t .....

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y concrete evidence. Therefore, the first ground of appeal is rejected. 5. As far as the second issue is concerned, a perusal of the assessment order would indicate that it is specifically not discernible as to how the ld. AO has made the disallowance. He made a discussion of the purchases. In the opening line of third para on page 3, he observed that the assessee has not made payment of more than ₹ 20,000/- in cash on a single day. In spite thereof, he made the disallowance of total purch .....

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the relevant provisions of the Act.Section 40A(3) of the Act says - Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. Thus, section 40A(3) is applicable where the payment for any expenditure or aggregate payment is made to a person in a day othe .....

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,000/- in a day. If there is no payment exceeding ₹ 20,000/- in a day, there is no violation of section 40A(3) of the Act, so there is no question of any circumvention of the provisions. It is observed that the appellant has copy of accounts of M/s Jai Timber & Plywood, Ghaziabad and M/s Sonu Sports Industries, Meerut. From the perusal of such copies of account it is gathered that no payment exceeding ₹ 20,000/- in a day has been made by the appellant. The fact on record is that .....

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ng cash payments on day to day basis and on alternate day. Further, according to the AO when there was cash balance available with the appellant on the day, the payment of ₹ 20,000/- or less was not acceptable. However, such inference is not backed by any adverse material evidence on record to establish that the appellant had made cash payments exceeding ₹ 20,000/- in a day in violation of provisions of section 40A(3) of the Act. The appellant has debited the amount of ₹ 99,165 .....

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