2014 (12) TMI 174

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....d" in cases of some creditors. (iii) Whether on the facts and circumstances of the case the learned CIT(A) was justified in law and on facts, in deleting the addition without appreciating that the A.O. had brought on record the facts and circumstances which prove that creditworthiness of the creditors was not established by the assessee and onus of providing genuineness of these creditors was not discharged. (iv) Whether on the facts and circumstances of the case the learned CIT(A) was justified in law and on facts, in not appreciating that the creditors were not able to prove the satisfactorily their creditworthiness and facts such as absence of PAN or IT Details, ignorance regarding their own business lead to the addition. The appellant craves to amend or add any one or more grounds of appeal. 3. The brief facts of the case are that during the year, the assessee declared gross profit of 6.07% as against the gross profit rate of 3.24% in the preceding year. In the balance sheet as on 31.03.2007, the sundry creditors were shown at Rs. 2,43,53,058/- on the liability side as against the total turnover of Rs. 7,29,13,391/- and gross purchases of Rs. 7,12,76,587/-. The A.O.....

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.... had returned unserved and the assessee was using modus operandi of bogus creditors to introduce his unaccounted money in his books of accounts. Hence, the A.O. added the entire amount of Rs. 1,02,82,924/-, shown as sundry creditors, as unexplained cash credit u/s 68 of the Act. 4. Before the learned CIT(A), the assessee made the submissions and after appreciating the submissions made by the assessee, the learned CIT(A) vide paras 6 to 6.4 (pages 11 to 16 ), deleted the addition of Rs. 1,02,82,924/-. 5. As regards the Revenue's appeal, the learned DR, Sh. Tarsem Lal (J.C.I.T.) argued that making of payments by having channels does not prove the genuineness of the credit and relied upon the decision of Hon'ble Supreme Court in the case of 'CIT Vs. P. Mohanakala', reported in 291 ITR 278, where it has been held that transaction made through banking channels itself is of no consequence. The confirmations filed by the assessee with regard to the creditors were identically worded. But the learned CIT(A) has not appreciated the same. He pointed out the defects in the statement of Sh. S.A. Wani taken by the A.O. and submitted that identity of remaining 13 creditors was not establish....

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..... With regard to 2 parties, i.e., Sh. Haji Gulam Qadir Darzi and Sh. Shafat Ahmad Wani, they were two new suppliers during the impugned year and the assessee did not have the dealings with these two suppliers in the preceding year but had the dealings in the following year, where the purchases have been made and the payments have been made through account payee cheques. The learned counsel for the assessee argued that almost all the payments have been made through account payee cheques on different dates against the purchases made from such creditors, is not a dispute which has been raised by the A.O. The A.O. has treated rest of the 13 creditors as bogus by extrapolation on the strength of statement of Sh. S.A. Wani, is totally unjustified and not permissible under the law. If the A.O. had doubt about the credentials of about 13 creditors, he could have made the inquiry further or should have asked the assessee to produce them. In the absence of such exercise, the finding of the A.O. to treat all the 13 creditors as bogus on the basis of the statement of Sh. S.A. Wani is arbitrary and based on presumption for which no addition can be made. If the creditors are not income tax asses....

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.... which 14 letters returned back unserved for which the list is available at page 2 & 3 of the A.O.'s order. The A.O. confronted to the assessee that complete addresses were not available, to which the assessee replied that in a city like Srinagar, it is very difficult to trace a person without his nick name or business, etc. Accordingly, he requested the A.O. to serve the notices through notice server but instead the A.O. confronted the assessee vide order-sheet dated 24.08.2009, that the onus lies on the assessee to establish the genuineness of the creditors and accordingly the assessee was asked to furnish name, address, and PAN on the copy of account. The assessee submitted the confirmation along with copies of account in the case of 12 creditors and confirmation with regard to the two creditors. There is no doubt to the fact that none of the parties is having PAN. In this regard, the arguments made by learned DR is that it is necessary that each parties should have the PAN cannot be held correct, since as per Income-tax Act, it is only, when the income of a person exceeds the limit as prescribed the person is required to file Income Tax Return under Section 139(1) of the Act. A....