Tribunal upholds deletion of trade liabilities & bilty charges additions under Section 68

The Tribunal confirmed the deletion of an addition of Rs. 78,22,863/- under Section 68, as it represented genuine trade liabilities to truck owners. Additionally, the Tribunal upheld the deletion of an addition of Rs. 11,86,160/- on account of low bilty charges, finding the AO's action arbitrary and without basis. The appeal of the Revenue was dismissed, and the deletions made by the AO were confirmed in the final order pronounced on 10th May 2019.

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Issues Involved:
1. Deletion of addition on account of unexplained payable sundry creditors.
2. Deletion of addition on account of showing low bilty charges.

Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Payable Sundry Creditors

Brief Facts:
During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had submitted only a list of sundry creditors amounting to Rs. 78,22,863/- as payable in the audit report. However, the AO found that the assessee failed to provide supporting documentary evidence such as copy of ITR, capital account, Balance Sheet, bank statement, etc., to prove the creditworthiness, identity, and genuineness of these sundry creditors. Consequently, the AO added Rs. 78,22,863/- as unexplained payable sundry creditors under Section 68 of the Income Tax Act.

Assessee’s Argument:
The assessee explained that the outstanding amount was in respect of freight payable as on 31.03.2014 and not in the form of credits or loans. The amount represented liabilities to truck owners for transportation services, and the assessee acted as a conduit for disbursing freight payments. Detailed records including names, truck numbers, PAN of truck owners, and payment dates were provided during the assessment proceedings.

Tribunal’s Findings:
The Tribunal noted that the transaction between the assessee and the truck owners was a liability arising from trade transactions. The Special Bench of the Tribunal in Manoj Agarwal Vs DCIT (113 ITD 377) clarified that Section 68 does not apply to liabilities arising from genuine trade transactions. The Tribunal also relied on judicial precedents from the Hon’ble Delhi High Court in CIT vs. Ritu Anurag Agarwal (2009) and the Hon’ble Allahabad High Court in CIT vs. Pancham Das Jain (205 CTR 444), which held that Section 68 is not applicable to trade creditors when purchases and sales are accepted as genuine.

Conclusion:
The Tribunal confirmed the order of the CIT(A) deleting the addition of Rs. 78,22,863/- under Section 68, as the amount represented genuine trade liabilities to truck owners.

2. Deletion of Addition on Account of Showing Low Bilty Charges

Brief Facts:
The AO, acting on directions from the JCIT, questioned the assessee about the bilty charges and whether they were inclusive in the receipt from the company or collected separately from truck owners. The AO found the assessee’s response inadequate and estimated bilty charges at 2% of the total receipts, resulting in an addition of Rs. 11,86,160/-.

Assessee’s Argument:
The assessee argued that bilty charges were inclusive in the receipt from the company and had already declared bilty charges of Rs. 11,55,100/-. The assessee produced books of account during the assessment proceedings, which were also verified by the JCIT.

Tribunal’s Findings:
The Tribunal noted that the CIT(A) had verified the assessment records and confirmed that bilty charges were inclusive in the receipt from the company. The Tribunal observed that the AO made an arbitrary addition without rejecting the books of account as per the procedure prescribed under Section 145(3) read with Section 144 of the Act. The Tribunal also noted that the bilty charges declared by the assessee were consistent with the previous assessment year.

Conclusion:
The Tribunal upheld the CIT(A)’s order deleting the addition of Rs. 11,86,160/- on account of low bilty charges, finding the AO’s action to be arbitrary and without basis.

Final Order:
The appeal of the Revenue was dismissed, and the order pronounced in the open court on 10th May 2019 confirmed the deletion of both additions made by the AO.

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