Tax Tribunal: Appeal partially allowed, relief on sundry creditors & advances, upheld addition. Assessee's other grounds dismissed.

The Tribunal partially allowed the appeal, deleting the addition of Rs. 1,42,04,290/- for sundry creditors and providing relief of Rs. 25,50,000/- for advances from parties, while upholding Rs. 3,00,000/-. Other grounds raised by the assessee were dismissed. The order was pronounced on 01/09/2020.

---

---

Issues Involved:
1. Validity of the order passed by the CIT(A) and the Income Tax Officer.
2. Addition of Rs. 1,42,04,290/- to the total income on account of sundry creditors.
3. Addition of Rs. 28,50,000/- to the total income towards advances from parties.
4. Alleged deprivation of natural justice and reasonable opportunity of being heard.
5. Service and jurisdiction of notice under Section 143(2) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed by CIT(A) and the Income Tax Officer:
The assessee contended that the orders passed by the CIT(A) and the Income Tax Officer were without valid reason and consideration of the facts, making them illegal and arbitrary. The Tribunal examined the records and found that the assessment and appellate orders were passed following due process and were not arbitrary or illegal. Therefore, the ground challenging the validity of the orders was dismissed.

2. Addition of Rs. 1,42,04,290/- on Account of Sundry Creditors:
The AO made an addition of Rs. 1,42,04,290/- to the total income, doubting the genuineness of sundry creditors. The Tribunal noted that the assessee had an opening balance of Rs. 1,25,24,747/- and a closing balance of Rs. 1,42,05,241/-. The AO had accepted the cost of raw materials, work-in-progress, and finished goods but doubted the current liabilities. The Tribunal observed that without purchases, the manufacturing process and sales could not occur. The Tribunal cited the case of Smt. Sudha Loyalka, where it was held that credit on account of purchases cannot be added under Section 68. Consequently, the Tribunal deleted the addition made by the AO and confirmed by the CIT(A) regarding unexplained sundry creditors.

3. Addition of Rs. 28,50,000/- towards Advances from Parties:
The AO made an addition of Rs. 28,50,000/- due to non-compliance by the assessee. The Tribunal found that the financial statements showed an opening balance of Rs. 25,50,000/- and an increase of Rs. 3,00,000/- in the current financial year. The Tribunal concluded that the addition of Rs. 25,50,000/- from the previous financial year could not be added in the current assessment year. Therefore, the Tribunal provided relief of Rs. 25,50,000/- and upheld the addition of Rs. 3,00,000/-.

4. Alleged Deprivation of Natural Justice and Reasonable Opportunity of Being Heard:
The assessee claimed that they were deprived of natural justice and a reasonable opportunity of being heard. The Tribunal reviewed the assessment order and documents and found that the assessee was given ample opportunity to substantiate their claims. Hence, this ground was dismissed.

5. Service and Jurisdiction of Notice under Section 143(2) of the Income Tax Act:
The assessee challenged the service and jurisdiction of the notice issued under Section 143(2). The Tribunal examined the order-sheet and found that the notice was issued on 04.09.2014 and dispatched on 12.09.2014, which was not returned unserved. The assessee had appeared before the AO and participated in the proceedings without raising any objections regarding the service of notice or jurisdiction. The Tribunal referred to the Supreme Court judgment in CIT Vs. Laxman Das Khandelwal, which stated that participation in proceedings implies deemed service of notice. Therefore, the Tribunal dismissed the legal grounds challenging the issuance of notice and jurisdiction.

Conclusion:
The appeal was partly allowed. The Tribunal deleted the addition of Rs. 1,42,04,290/- related to sundry creditors and provided relief of Rs. 25,50,000/- for advances from parties, upholding only Rs. 3,00,000/-. The other grounds raised by the assessee were dismissed. The order was pronounced in the open court on 01/09/2020.

---