ITAT sets aside CIT(A) order, rules in favor of assessee.

The ITAT allowed the appeal of the assessee, setting aside the CIT(A)'s order. The Tribunal held that the addition of Rs. 1,06,88,435/- under "Sundry Creditors" was unjustified as the assessee had provided complete details and the Assessing Officer failed to follow proper procedures. Additionally, the rejection of additional evidence by the CIT(A) was deemed unwarranted, as the CIT(A) did not follow principles of natural justice. The appeal was allowed in favor of the assessee on 07/09/2018.

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Issues Involved:
1. Confirmation of addition of Rs. 1,06,88,435/- under the head "Sundry Creditors" to the returned loss of Rs. 26,80,346/-.
2. Non-admission of additional evidence by the CIT(A).

Issue-Wise Detailed Analysis:

1. Confirmation of Addition of Rs. 1,06,88,435/-:

The primary issue in this appeal was the confirmation of the addition of Rs. 1,06,88,435/- to the returned loss of Rs. 26,80,346/- by the CIT(A) as imposed by the Assessing Officer under the head "Sundry Creditors". The assessee, engaged in construction and builder services, had filed its return of income at a loss of Rs. 26,80,346/- for the assessment year 2014-15. During scrutiny, the Assessing Officer asked the assessee to provide complete details of sundry creditors, including addresses and payment modes. The assessee responded with details, attributing the increase in creditors to the full swing of construction activities during the relevant year. Notices under section 133(6) were issued to the creditors, which were served, but only one creditor responded. Consequently, the Assessing Officer added the entire amount of Rs. 1,06,88,435/- to the income, citing non-response from other creditors.

The ITAT found that the assessee had provided complete details of sundry creditors, and the notices under section 133(6) were served, indicating genuine addresses. The Tribunal held that once the assessee has provided such details, the burden shifts to the Assessing Officer to take proceedings under section 133(6) to its logical end. The ITAT referenced judicial pronouncements, including CIT vs. Orissa Corporation Pvt. Ltd., which held that non-response to notices under section 133(6) cannot be held against the assessee if the addresses are genuine. The Tribunal noted that the Assessing Officer did not dispute the purchases made by the assessee, and thus, the question of creditors being non-genuine does not arise.

2. Non-Admission of Additional Evidence by the CIT(A):

The second issue was the non-admission of additional evidence by the CIT(A). The assessee contended that the previous counsel failed to submit all details of sundry creditors during the assessment proceedings, leading to the addition. The assessee sought to file additional evidence, including confirmations from creditors, before the CIT(A) under rule 46A. However, the CIT(A) rejected the additional evidence, stating that the assessee did not satisfactorily explain the reasons for non-production during the assessment proceedings and that sufficient opportunity had been provided.

The ITAT found that the CIT(A) summarily rejected the additional evidence on baseless reasons, which goes against the principles of natural justice. The Tribunal emphasized that rule 46A allows the CIT(A) to admit additional evidence after confronting it before the Assessing Officer. The ITAT concluded that the CIT(A) failed to give a clear finding on the issue and merely accepted the Assessing Officer's version without taking the procedure initiated under section 133(6) to a logical conclusion.

Conclusion:

The ITAT set aside the order of the CIT(A) and allowed the appeal of the assessee. The Tribunal found that the assessee had provided complete details and confirmations from creditors, and the Assessing Officer's failure to follow through with the procedure under section 133(6) could not be held against the assessee. The rejection of additional evidence by the CIT(A) was deemed unwarranted, and the appeal was allowed in favor of the assessee.

Order Pronounced:

The appeal of the assessee was allowed, and the order was pronounced in the open Court on 07/09/2018.

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