TMI Blog2020 (9) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT DR regarding legal issue raised by the assessee. We dismiss the legal grounds raised by the assessee in the form of additional ground challenging the issuance of notice u/s.143(2) of the Act by the AO as well as the ground No.1 raised by the assessee in the grounds of appeal filed in Form 36. Addition to sundry creditors - HELD THAT:- From the order of AO, we find that the AO has accepted the cost of raw material consumed, work-in-progress and finished goods as well as revenue from operations but the AO has not accepted the current liabilities appeared in the books of the assessee. Without the purchases, how the manufacturing process can be done and sales can be made. If there was not genuine or bogus creditors credited by the assessee the effect must be given on the financial statements prepared by the assessee. But the AO has one-sided taken view that the purchase is bogus. This view of the AO is not correct and our view is supported by the decision of the coordinate bench of the Tribunal in the case of Smt. Sudha Loyalka [ 2018 (7) TMI 1892 - ITAT DELHI] - we delete the addition made by the AO and confirmed by the CIT(A) on account of unexplained sundry cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o filed additional grounds of appeal which read as under :- 6. For that service of notice U/s. 143 (2) of the IT. Act alleged to have been made on 04/09/2014 against the assessee appellant is denied since was not serviced in time by the Respondent department and the objections raised before the Id.AO and Id.CIT (A) were not considered or recorded in passing orders and therefore the order has to be quashed. 7. For that amount of Sundry Creditors added automatically without application of judicious mind amounting to ₹ 1,42,05,240/- disclosed in the Balance Sheet as on 31/03/2013 in fact it was brought forwarded from the closing balance of the preceding period that is from 31/03/2012 at ₹ 1,25,24,747/- but the differential amount stood at ₹ 16,79,493/- could have been considered instead of inflating the account by making said addition. 8. For that addition of ₹ 28,50,000/- shown as advance from parties and in fact the same was inflated without considering the previous closing balance stood at ₹ 25,50,000/- so differential amount could have been properly confronted and addition made on the entire amount is liable to be deleted. Other groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts of the case. Other grounds may be allowed to be made at the time of hearing. PRAYER It is therefore prayed that the Additional Grounds of Appeal filed may graciously be entertained and the order of Assessment passed has to be quashed and vacated on the facts of the case, and may be permitted to argue in the matter along with Original Grounds and Additional Grounds submitted till the date, and For this act of kindness, the appellant as in duty bound shall ever pray. 4. Brief facts of the case are that the assessee is a company engaged in the business of installation of 3G telecommunication systems and also trading and manufacturing of fly ash bricks during the F.Y.2012-2013 relevant to the A.Y.2013-2014, filed its return of income on 01.10.2013 disclosing total income of ₹ 15,59,920/-. The return was processed u/s.143(1) of the Act on 18.04.2014. The case was selected for scrutiny and statutory notices were issued to the assessee on 04.09.2014 was duly served on the assessee. Subsequently another statutory notice was issued to the assessee. In response to the notices, Shri Alok Das, FCA, Authorised Representative of the assessee appeared and furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions of the assessee, sustained the first two additions made by the AO and gave relief of ₹ 72,97,992/- made on account of salary wages shown in the current liabilities. 6. Aggrieved further from the above order of CIT(A), assessee is in appeal before the Income Tax Appellate Tribunal. 7. Ld. AR of the assessee, firstly, challenged the legal grounds regarding non-service of the notice u/s.143(2) of the I.T.Act, 1961 issued by the department. Ld. AR submitted that the noticed has been issued by the ITO, Ward-2(2), Bhubaneswar but subsequently the assessment order was passed by the ITO Ward-1(1), Bhubaneswar without jurisdiction and he also submitted that the order-sheet supplied by the I.T. Department in which it is not clear as to when the order was passed. Further the ITO Ward-1(1), Bhubaneswar has not issued further fresh notice u/s.143(2) for change of the incumbency and it was also objected by the ld. AR that the notice u/s.143(2) of the Act, never served to the assessee and this issue was raised before the AO as well as CIT(A) but both the revenue officers did not take any cognizance in this regard and there is no any deliberation in the order passed by them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice and the ld. AR of the assessee appeared from time to time and filed details information before the AO. There is no emanating from the record of the AO as well as the CIT(A) that the assessee had taken any objections regarding service of the notice before the AO or before the CIT(A). He relied on the judgment of Hon ble Supreme Court in the case of CIT Vs. Laxman Das Khandelwal, [2019] 108 taxmann.com 183 (SC) and according to which the assessee participated in the assessments and appeared from time to time before the AO and there is evidence regarding issuance of the notice u/s.143(2) of the Act, dated 04.09.2014, which is clear from the order-sheet before the Tribunal. He also referred to the comments sent by the ITO Ward-1(1), Bhubaneswar. As per the comments received from the AO the letter sent by dispatch No.6181 dated 12.09.2014 which has not been returned unserved. Therefore, it would be presumed that the letter sent for selection of scrutiny u/s.143(2) of the Act has been duly served to the assessee and participated in the assessment proceedings. He further submitted that notice sent to the assessee by ITO Ward-2(2), Bhubaneswar and assessment was completed by Ward-1( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction regarding service of notice and jurisdiction of the AO before the AO as well as before the CIT(A). It is also clear from the record that the assessee has raised this issue first time before us, however, the documents which were produced before us, did not speak that the assessee has raised this issue before the lower authorities. However, the ld. CIT DR has produced sufficient evidences for substantiating the case in favour of Revenue and we are in agreement with the documents produced by the ld. CIT DR regarding legal issue raised by the assessee. In this regard, the CIT DR has relied on the judgment of the Hon ble Supreme Court in the case of Laxman Das Khandelwal (supra) and submitted that from the record of the department, there should be emanated from the record of the department that the notice has been issued. The assessee will not get benefit of Section 292BB of the Act. In this regard, the Hon ble Supreme Court in para 6 to 9 has held as under :- 6. The question, however, remains whether Section 292BB which came into effect on and from 01.04.2008 has effected any change. Said Section 292BB is to the following effect:- 292BB. Notice deemed to be valid in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. Respectfully following the above decision of Hon ble Supreme Court, we dismiss the legal grounds raised by the assessee in the form of additional ground challenging the issuance of notice u/s.143(2) of the Act by the AO as well as the ground No.1 raised by the assessee in the grounds of appeal filed in Form 36. 12. On merits of the case, with regard to addition of ₹ 1,42,04,290/-relating to sundry creditors, there was an opening balance of ₹ 1,25,24,747/- (approx) as on first date of the financial year in the books of the assessee and the closing balance is ₹ 1,42,05,241/- (approx) On further perusal of the assessment order, the AO has doubted the genuineness of the sundry creditors which could not be proved by the assessee at the time of assessment as well as at the appellate stage and we fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 book at PB 42-66 which would show that either there were opening credit balances or were purchases. iii). After perusing the PB Pg. 42-66 and PB Pg. 144, we find that purchases from these parties were aggregating to ₹ 1,90,88,538/- and it has been held in the following judicial decisions that credit on account of purchases cannot be added u/s 68. Addition under section 69 - Unexplained investment in purchases - Purchases made by assessee having been properly recorded in books of account and supported by authenticated purchase bills / vouchers for which payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 DTR 496 (Del. 'I') iv). We note that Opening balances amounting to ₹ 1,60,19,598/- (PB 144) (PB 42-66) which 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? v). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 impugned creditors were in respect of trading liability for which any deduction was ever claimed and allowed and if allowed, in which year was it allowed so on so forth. This is evident from a plain reading of the assessment order. Therefore, Ld. A.O. miserably failed to discharge the said burden in view of the following decisions and therefore this addition is liable to be deleted on this Short ground alone. There could very well be the possibility of the loan creditors or advances from the business constituents under the head of sundry creditors for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 constitute 56% of the sale which is impossible and against all norms. 7. In view of above discussions, it is clear that the transactions were not bogus and therefore, the case laws relied upon by the Ld. DR are not applicable in this case. As far as case law relied upon by the Ld. CIT(A) as well as relied by the Ld. DR during the hearing i.e. La Medica 250 ITR 575(Del), we note that Hon'ble High Court has specifically noted in this decision that this was not the case of the assessee at any stage prior to the Hon'ble High Court whereas in this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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