TaxTMI 
TaxTMI 
2011 (9) TMI 134
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....by the assessee read as follows:- "1. The ld. CIT(A) has erred both in law and facts of the case in not appreciating the facts, i.e., a. That the addition was on account of sundry creditors who were only small time karigars who do assembling/finishing/polishing from their homes, spread in Roorkee and nearby villages. They were not registered or maintained any books of account or were maintaining any credit/cash memos. The only source of their identification was the receipt given on our vouchers, which contained name, complete address, amount and description of item supplied. They had no bank account and always accepted the payment in cash. All the records were burnt and there was no evidence or any identification to identify them or to prove the credit balances particularly when there were three or four suppliers like Mohd. Salim, Javed, Anil, etc. b. That in the subsequent year most of the creditors were paid as huge cash was withdrawn for the purpose. c. That after sometime we had almost changed our nature of business, had established our factory at Noida, UP, and had no contact as such with the creditors. d. That almost entire stock shown at the ....
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....essee grossly failed to produce any material evidence in support of genuineness of the transaction. 7. In the impugned order, the CIT(A) observed that as per the order of the ITAT, the assessee was duty bound to furnish complete addresses of the creditors and could hope to get relief only if it furnished the same to the AO. It was further observed that it was logical to hold that the amount in respect of the remaining 55 sundry creditors should be treated as unexplained and deemed to be the assessee's income. He, therefore, directed to quantify the figures of these creditors and treat the addition to that extent as confirmed. 8. As regards the 20 remaining creditors, the ld. CIT(A), considering the regular business dealings of creditors with assessee, loss of books in fire and confirmations filed by the assessee, held that it would not be appropriate to treat such creditors as non-genuine and directed the AO to quantify such creditors and treat the addition to that extent as deleted. 9. As such, on remand from the Tribunal, the AO, vide order dated 12.3.2004, inter alia, made an addition of Rs. 37,99,907/- observing that out of 75 sundry creditors, the asses....
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....per APB page 98, as on 31.3.2001 and 31.3.2002, the major creditors stood paid off. 12. The learned counsel for the assessee has further submitted that since the trading results have been accepted, the purchases made obviously stand accepted too; and that therefore, no addition could have been made. 13. The learned counsel for the assessee has also contended that the ld. CIT(A) has failed to consider that the creditors represented purchases and there was no reason not to allow the benefit u/s 80HHC of the Act to the assessee. 14. We have heard the parties and have perused the material on record. Undeniably, the addition of Rs. 37,99,907/- was on account of sundry creditors. These, as per the stand of the assessee, were only small time karigars, doing job works of finishing and polishing from their homes located in Roorkee and nearby villages. Admittedly, they were not registered, nor were maintaining any books of account. Their income being below the prescribed limit, no Income Tax returns were being filed. So to say, they did not have any record from which to confirm the transactions. The records of the assessee were burnt in the fire which broke out in the assess....
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....1/-, sundry debtors of Rs.19,37,520/- and closing stock of Rs.39,25,000/-. This clearly demonstrates that on the one hand the assessee has liability towards these creditors and on the other hand it has assets in the form of advances to suppliers, debtors, stock, etc. Had these creditors being not genuine, the assessee could have squared up or not shown these advances to suppliers, etc. Accordingly, the overall circumstances also do not suggest that any adverse inference should be drawn against the assessee. Further, as per the provisions of Section 68 of the Act, it is not mandatory that in case the assessee fails to satisfy the assessing officer about the outstanding credits, the same are mandatorily required to be added as income of the assessee. Section 68 gives a discretion to the assessing officer, as can be seen from its provisions, which read as under:- "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax....
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....facts of the assessee, it is a fit case not to make any addition by invoking the deeming fiction of Section 68 in respect of the sundry creditors, despite the fact that the assessee could not supply the addresses of these creditors. All the facts and circumstances of the case, including that of destruction of books of accounts, old period, petty karigars, advances to the suppliers, debtors and the closing stock, and particularly the fact that all these creditors have been paid off in the subsequent year and the return for that year has been accepted by the department clearly show that in the case of the assessee it is not necessary to add these creditors. 22. Ground No. 2 of the assessee's appeal is regarding the denial of deduction under Section 80 HHC in respect of the addition made on account of the creditors. The CIT(A) has denied the deduction in respect of the addition on account of the so called sundry creditors on the ground that as per the provisions of Section 80 HHC, it is only the income derived by the assessee from the export of such merchandise which is eligible and the addition on account of creditors cannot be considered as income derived from the exports. T....