TMI Blog2023 (8) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... towards trade creditors u/s 68 of the Act, hence we delete the addition. AO has disallowed sundry creditors on estimated basis, at the rate of 25% of the sundry creditors without rejecting the books of accounts of the assessee. As per assessing officer, an individual creditor is true up to 75% level and untrue up to 25% level, which is unheard practice because a purchase bill issued by creditor cannot be bogus for 25% and true for 75% level, particularly when books of accounts are not rejected and purchases made from the said creditor has not been treated as bogus. CIT(A) has decided the issue on merit based on the evidences submitted by assessee and the material on record and therefore order passed by ld CIT(A) cannot be treated as an ex parte order, hence matter cannot be remitted back to the file of the ld CIT(A) (for second inning) for fresh adjudication, as contended by ld DR for the Revenue. Hence, considering these facts and circumstances, we delete the addition. Enhancement of assessment by CIT(A) - expenditure u/s 40A(3) - Revenue submitted that Ld. CIT(A) has co-terminus power as that of the AO and therefore has right to enhance the assessment - HELD THAT:- We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, noticed that assessee had shown sundry creditors to the tune of Rs. 2,15,88,066/-. During the course of assessment proceeding, no evidence has been filed or produced by the assessee to prove the genuineness of such trade creditors. Therefore, vide show cause notice of assessing officer dated 07.11.2016, the assessee was specifically asked to furnish documentary evidence in respect of aforesaid creditors. In response, assessee submitted copy of Income Tax Return and audit report. However, Assessing Officer rejected the contention of the assessee and observed that in the absence of any details, the genuineness of the alleged creditors cannot be verified. Therefore, Assessing Officer made an addition of Rs. 53,97,017/- [being 25% of total creditors of Rs. 2,15,88,066/-] to the total income of the assessee treating the same as unexplained cash credit under section 68 of the I.T. Act. 6. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the addition made by the Assessing Officer. During the appellate proceedings, the assessee has submitted additional evidences, which were sent by ld CIT(A) to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained cash credit, which is wrong. During the assessment proceedings, the assessing officer has discussed and analyzed the sundry creditors which are linked with purchases and concluded that sundry creditors are in the form of cash credit. The Ld. Counsel pointed out that the creditors were duly recorded in the books of accounts and assessee filed the confirmations containing the PAN number and address, and since these creditors belong to the purchases made by the assessee and the assessing officer did not consider the purchases as bogus, then how can the creditors alone should be bogus without treating the purchases as bogus. The purchases made by the assessee, were not considered bogus by the Assessing Officer, therefore Assessing Officer should not have made addition under section 68 of the Act in respect of creditors under the head cash credit. Therefore, addition made by Assessing Officer is on wrong footing. 10. The Ld. Counsel also submitted that it is not a typographical error in the assessment order that section 68 has been written by Assessing Officer in hurry. The Assessing Officer has discussed the aforesaid sundry creditors carefully in the context of section 68 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue submitted that although during the appellate proceeding, the assessee submitted additional evidences, which were remitted back to the file of the Assessing Officer for remand report However, the Assessing Officer did not submit his remand report to the Ld. CIT(A), therefore Ld. CIT(A) by using co- terminus power has adjudicated the issue. Therefore, matter may be remitted back to the file of the ld CIT(A) for fresh adjudication as Ld. CIT(A) should not have adjudicated the issue by using co-terminus power. Besides, Ld. DR submitted that the assessee has not been able to explain the genuineness and creditworthiness of the sundry creditors and therefore the Assessing Officer has rightly made the addition. 12. Per contra , the Ld. Counsel submitted that since the assessee has submitted additional evidences and which was remitted back to the file of the Assessing Officer for taking remand report, however Assessing Officer has not submitted any remand report, therefore it is not a mistake on the part of the assessee. The assessee has produced relevant materials and evidences during the appellate proceedings, therefore his matter should be adjudicated. The assessee has prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with purchases) is bad in law and for that reliance can be placed on the judgment of Co-ordinate Bench of ITAT, Ahmedabad in the case of DCIT vs Rasikbhai Ramjibhai Raval, in ITA No.1420/AHD/2014, dated 13.12.2017, wherein it was held as follows: 8. We have given a thoughtful consideration to the orders of the authorities below. It is true that the assessee did not file all the details of expenditure during the course of assessment proceedings. It is equally true that all the necessary details were furnished before the CIT(A) who had called for a remand report from the Assessing Officer. Once the details have been furnished and transmitted to the Assessing Officer, and the same were examined by the CIT(A), we do not find any reason to interfere with the findings of the CIT(A). Ground no.1 is accordingly dismissed. 9. We find that the additions were made in respect of the following cash creditors: S. No. Name, Address P.A. No. (if available) Amount taken or accepted Whether squared up or not Maximum of amount outstanding Amount repayment ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. We have also carefully gone through the copy of ledger account of all the aforementioned creditors. We find that inadvertently the tax auditor has treated the aforementioned persons under the head unsecured loan whereas, in fact, all the above persons are trade creditors and with whom the assessee has done some contract business including supply of labourers on contractual payments. We find that tax has been deducted at source as per the provisions of law. 11. On given facts, we do not find this to be a fit case for the additions under section 68 of the Act. The second ground of the Revenue is dismissed. 15. On the identical and same issue, our view is fortified by the judgment of Co-ordinate Bench of ITAT, Visakhapatnam in the case of DCIT vs M/s. Vijay Agro Produces Ltd., in ITA No. 508/Vizag/2014, dated 29.07.2016, wherein it was held as follows: 17. It is pertinent to discuss the case laws relied upon by the assessee. The assessee relied upon the decision of Hon ble High Court of Allahabad in the case of Panchamdas Jain (2006) 156 Taxman 507. The Hon ble Allahabad High Court, under similar circumstances held that additions cannot be made towards t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT(A). 19. The assessee relied upon the decision of ITAT, Allahabad in the case of JCIT Vs. Mathura Das Ashok Kumar (2006) 101 TTJ 810. The coordinate bench of this Tribunal, under similar circumstances held that additions cannot be made u/s 68 of the Act towards trade creditors. The relevant portion of the order is extracted as under: All the purchases made by the assessee wherever the same have been made from the Karigars are supported by the 'Purjas' issued by it. Such 'Purjas' were found to be duly entered in 'Jama Jakar Bahi', which is a part of records kept by the assessee regularly to record its purchases from Karigars. In the financial records also, entries of the purchases of sarees have duly been made on the basis of primary records. The purchases recorded in this manner have been accepted in toto without any kind of controversy whatsoever. After the purchases of sarees supported by the 'Purjas' have been accepted, any further verification about the Karigars in whose favour such Purjas' have been issued is really not necessary; the reason being that it is the Karigar who come to the saree dealers and offers his stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s written in the Purja), no adverse inference can be drawn in the assessment of the same dealer or any of the aspects of the purchases. This is more so in a case like this where the purchases and sales have been duly accepted. This leads to a conclusion that Purjas themselves as also contents thereof have got great evidentiary value. If payment against the 'Purja' is recorded in the books of account, then the liability in relation to such 'Purja' has to be treated as genuine unless of course some material is brought on record that the assessee has actually made payment against the same which is not recorded. In the present case, no such material having been brought on record, it could not be said that the liability is bogus. Even at the cost of repetition, it is stated that bogus liability presupposes two things, firstly, there is a liability incurred and secondly such liability has been discharged without being recorded in the books of account. As no such material is available on record, the liability in question cannot be said to be bogus so as to attract any addition on this score. It also appears that the AO has treated the liability to be of cash credit' i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the purchases are not doubted. In the assessee s case on hand, the A.O. has not doubted the genuineness of the purchases. We note that in assessee s case the creditors have confirmed the transactions with the assessee. The confirmation of all creditors and their income tax returns containing PAN number and their addresses were there before the ld CIT(A). Therefore, we are of the view that the A.O. was not correct in making additions towards trade creditors u/s 68 of the Act, hence we delete the addition. 17. We note that Assessing Officer has disallowed sundry creditors on estimated basis, at the rate of 25% of the sundry creditors of Rs. 2,15,88,066/-, without rejecting the books of accounts of the assessee. As per assessing officer, an individual creditor is true up to 75% level and untrue up to 25% level, which is unheard practice because a purchase bill issued by creditor cannot be bogus for 25% and true for 75% level, particularly when books of accounts are not rejected and purchases made from the said creditor has not been treated as bogus. We note that Ld. CIT(A) has decided the issue on merit based on the evidences submitted by assessee and the material on record and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fically notice in this regard is unsustainable in law. While doing so, the co-ordinate bench, inter alia, observe d as follows :- 4. Having heard the rival submissions and from a careful perusal of record, we find that undisputedly the income assessed by the Assessing Officer was further enhanced by Rs. 2,05,987 by the ld. CIT(A) by making disallowance of revenue expenditures claimed by the assessee on the ground that no business activity was undertaken by the assessee during the impugned assessment year. The ld. CIT(A) has not mentioned anywhere in his order with regard to the notice of enhancement ever served upon the assessee. Provisions of section 251(2) of the Act categorically says that the Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Therefore, it is incumbent upon the ld. CIT(A) for affording a reasonable opportunity of showing cause against enhancement to the assessee. If he fails to afford an opportunity to the assessee, enhancement made by him is not sustainable in the eyes of law. In the light of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee. We notice that apart from the three Benches, decisions of which have been relied on, the Tribunal also considered the distinction made between Section 50C and 54D(1) which specifically provides that capital gains from, transfer by way of compulsory acquisition under any law of capital asset being land, building or any right in the land or building...................... ?. Section 50C, on the other hand, talks of, transfer by assessee of a capital asset being land or building or both. The contrast in language, given that Section 50C is a specific provision, which seeks to enact a presumption is significant. The valuation of the concerned State agency or the government that the cost of the land is, in the circumstances, higher, is determinative. We notice that in the present case, there has been no such valuation. That apart, the Tribunal adopted an approach which, with respect, appears to be correct, in that it took note of the proportionate transfer of leasehold rights for 54 years. If the Revenue s contentions were to be conceded, then in the given facts of case, if the leasehold rights for residual period of 3 or 4 years were to be valued at par with the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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