TaxTMI 
TaxTMI 
2016 (11) TMI 444
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....t the assessee's own money being invested in the business in the grab of creditors." 3. Assessee has filed return of income for A.Y. 2008-09 showing total income of Rs. 1,28,390/-. Assessment was completed by concerned Assessing Officer on income of Rs. 27,18,500/- vide order u/s.143(3) of the Act. Aggrieved by same, matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and CIT(A) granted relief to assessee. 3.1 Assessing Officer made addition of Rs. 1,58,55,454/- by adding back all sundry creditors to the income of assessee. Assessing Officer made above said addition by observing as under: "During the course of assessment proceedings, assessee was asked to give the details of Sundry Creditors. In response to which the assessee submitted the list of sundry creditors. Notices under section 133(6) of the I.T.Act, 1961 were issued so as to verify the sundry creditors. But the notices were received back un-served. Thereafter the assessee has produced two parties out of sundry creditors whose statements were recorded, but they did not agree with their closing balances in the books of accounts of the assessee. Therefor....
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....f the total 25 parties. The letters were retuned back as unserved because of certain reasons. After coming to know this fact, the assessee produced two of the "Karigar" as one was out of India. The ld. "ITO" recorded the statement at the back of the assessee and issued us a show cause notice that why a sum of Rs. 32,33,342/00 should not be added to your income. The said fact had brought to the knowledge of the ld. "ITO"." During appellate proceedings, assessee also filed written submissions which are as detailed in para 5(3) of CIT(A)'s order. As stated above, after considering the same, CIT(A) granted relief to the assessee. 5. Same has been opposed before us on behalf of Revenue inter alia submitting that CIT(A) erred in law and on facts in failing to appreciate that notices u/s.133(6) of the Act issued the sundry creditors at the addresses provided by assessee were returned unserved. Under these circumstances, Assessing Officer was justified in adding back the creditors to the income of assessee as being bogus and as being nothing but assessee's own money being invested in the business in the grab of creditors. So, the order of CIT(A) be set aside and that of Assessing Officer....
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.... adding the amount of sundry creditors to the income of assessee, Assessing Officer has nowhere given any adverse finding with regard to the purchases reflected in the books of accounts of assessee. The sales corresponding to the purchases made from the sundry creditors has also not been doubted. Assessee has shown a turnover/sales of Rs. 1,72,66,610/-. Books of accounts have been maintained during the course of business. The books of accounts have been audited and no discrepancy has been found either by the auditor or by the Assessing Officer on examination. In fact, Assessing Officer has mentioned in paragraph 2 of the assessment order as under: "The assessee produced copy of audit report along with its annexure, copies of bank statement, copies of various ledgers and other relevant documents/details and bills/vouchers which were examined and placed on file. Books of accounts were also produced, examined and test checked." It shows that no adverse inference drawn by the Assessing Officer in so far as the entries in books of accounts are concerned. It shows that the purchases and corresponding sales have been verified by Assessing Officer with no adverse inference. During course....
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....of sale proceeds. This is a regular cycle of payment-sale-Receipt of Payment and Payment to Karigars. It was found evident from the aforesaid cycle and the table reproduced above that the creditors added by Assessing Officer amounting to Rs. 1,58,55,454/- in the sixth column, include purchases of Rs. 2,02,54,231/- in the third column, which are shown in the profit and loss account. These creditors have mostly been paid off in subsequent years as shown in seventh column. Further, sales of Rs. 1,72,66,610/- has been made during the year out of such purchases of Rs. 2,02,54,231/-. When purchase and sales have not been doubted by the Assessing Officer, there was no justification in adding the sundry creditors as unverified. 6.4 Second aspect of issue is that the Assessing Officer recorded statements of two creditors. The Assessing Officer issued a show cause to assessee on the basis of statements of two creditors and added all the sundry creditors to the income of assessee without allowing any opportunity to assessee to cross examine the creditors whose statement were utilized by the Assessing Officer against the assessee. According to settled legal proposition in case Revenue collect....