TaxTMI 
TaxTMI 
2016 (2) TMI 791
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....essment proceedings and assessee never ask for cross examination of parties before the Assessing Officer." (ii) "On the facts and the circumstances of the case and in law, the ld. CIT(A) erred in accepting the assessee's authorized representative reconciliation statement produced before him even though debtors and creditors are reconciled together, inspite of the facts that assessee maintains separate accounts for debtors and creditors and hence reconciliation should also have been separate for both the accounts." (iii) "On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance u/s. 194H r.w.s 40(a)(ia) on account of brokerage amount is inclusive of c/f balance of earlier years without appreciating the fact that if even if it is so, the assessee was not able to substantiate his claim of sundry creditors by producing the said parties." (iv) "The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the A.O. be restored." (v) "The appellant craves leave to amend or alter any grounds or add a new ground." 3. The brief facts of the case are that the asse....
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....s shown by the assessee of Rs. 6,55,963/- is to be added to the total income of the assessee. Purchases as per assessee Name of the party Sale as per assessee Purchase as per party Difference Remarks Synthetic Colour Chem 99,74,097/- 94,54,897/- 5,14,260/- Assessee shown the creditor of Rs. 15,78,484/- as against party shown the balance payable of Rs. 5,14,260/-. Therefore, the difference between two of Rs. 10,64,224/- has been treated as bogus creditors shown by the assessee The afore-said differences in the sale/purchase and consequently in the debtors/creditors was confronted to the assessee who was asked by the AO to reconcile the same. In reply before the AO, the assessee relied upon the ledger account maintained by the assessee and stated that these parties have not considered the payments in time or our payment has not been correctly incorporated in their accounts. The AO rejected the contentions of the assessee and made the addition as in the opinion of the AO the same has to be reconciled with the bank statement and concrete information to be provided to the department of all sale/purchase and debtors/credit....
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....the assessee had a right to cross-examine the said third parties relied upon by the AO , which the AO should have granted to the assessee to cross examine these third parties. The assessee also made the submissions before the CIT(A) as under:- "Submissions before the CIT (A) -35 1. The Assessing Office has disallowed a sum of Rs. 34,39,002/-as bogus sales/debtors even after verifying the total sales made by the assessee and the same amount of purchases accounted by the parties in the. same accounting year, and erring in accepting the facts that, cheques issued by the parties on 31/03/2009, accounted by the party in their books of account, obviously appear in assessee's book in the subsequent month i.e. in the next financial year. The assessee has submitted the subsequent year statement with reconciliation of two parties and the said statement are tallying with assessee's account. Reconciliation statement is already submitted. However, in case of Adarsh Chemicals(Secundarabad) we brought to your honors' notice that, the statements submitted to the department is tallying with sales made by us and accounted by them as purchases and not tallying with payme....
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....respect to purchases/creditors. The CIT(A) held that the AO has not gone through the process of cross examination of various parties. The CIT(A) held that the AO has made additions based on one sided version and taken adverse view. The CIT(A) held that the AO should have summoned the above parties and the assessee, recorded their statement / disposition on oath and allowed the cross examination before arriving at the adverse conclusion and hence the addition made by the AO of Rs. 45,03,226/- was deleted by the CIT(A). The CIT(A) relied upon the decision of Hon'ble Supreme Court in the case of Kishanchand Chelaram v. CIT (1980) 125 ITR 713(SC) . The CIT(A) held that these parties are debtors and debtors amount cannot be considered for taxation because it will amount to taxing twice , so this amount cannot be added to the income of the assessee vide orders dated 10.01.2013. Similarly, with respect to the addition of Rs. 1,19,089/-, it was observed by the CIT(A) that this represented the total outstanding balance including the carried forward balance of earlier year's on which TDS was deducted in the relevant year's and there is no brokerage expense of Rs. 1,19,089/- incurred du....
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....eposited with the Revenue. 7. We have considered the contentions of the rival parties, perused the material on record including the case laws. We have observed that there was a difference in the balance of Sale/Debtors and Purchase/Creditors as appearing in the books of accounts of the assessee and information called by the AO u/s 133(6) of the Act directly from the selling/purchasing parties with respect to the account of the assessee appearing in their books of accounts. The AO observed that there is a total difference of Rs. 45,03,226/- with respect to four parties in the said accounts. The AO asked the assessee to reconcile the debtors and creditors along with the sale and purchase in its books of accounts vis-à-vis account balance as appearing in the books of selling/purchasing parties. The assessee relied upon the ledger accounts maintained as part of books of accounts by the assessee and confirmed that the ledger account maintained by the assessee are correct. The CIT(A) deleted the addition holding that the AO should have made further enquires by issuing summons to these four parties as well the assessee and recorded their statement on oath and allowed cross exami....
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.... accounts reflect correct balances while in our considered view the differences need to be duly reconciled and the primary onus is on the assessee to reconcile the difference which needed to be discharged by the assessee. In our considered view the interest of justice will be best served , if the matter is restored to the file of the AO to denovo determination of the issue with respect to differences in the books of accounts of the assessee with respect to sale/debtors and purchases/creditors vis-à-vis balances as appearing in the books of the purchasing/selling parties , with the direction to AO to grant proper and adequate opportunity as per law , to the assessee to explain the differences in sale/debtors and purchase/creditors as appearing in the books of accounts of the assessee vis-à-vis balance as appearing in the books of accounts of the purchasing/selling parties in accordance with the principles of natural justice as enshrined in doctrine of audi alteram partem. The appeal of the Revenue with respect to this ground is allowed for statistical purposes. We order accordingly. With respect to the second issue of the disallowance of Rs. 1,19,089/- u/s. 40(a)(ia....