TaxTMI 
TaxTMI 
2018 (3) TMI 1579
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....aw and on facts by travelling beyond the subject matter of assessment order in dispute for forming/to arrive at the decision in the impugned Appeal order. 5. The Learned CIT(A) has erred in law and on facts in not adjudicating the Interest charged U/S 234A & U/S 234 B. 2. The dominant issue involved in above grounds, as also emerges out from the facts of the case, relates to addition of Rs. 2,35,90,226/- made by the Assessing Officer by invoking the provisions of section 68 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') and confirmed by the Ld. CIT(A), treating the above amount, shown payable by the assessee to M/s. Ganesh Trading Co., Kolkata towards credit purchase of Supari, as unexplained cash credits 3. Apropos this issue raised in grounds of appeal, the relevant facts are that the assessee is engaged in the trading business of Kirana Items, including Supari, dry fruits, spices etc. The assessee filed its return of income on 24.11.2014 declaring taxable income at Rs. 9,86,250/-. In the assessment proceedings, the credit balances appearing in the balance sheet of assessee in the name of three sundry creditors, viz., (i) M/s. Jet Road Carriers; (ii) M/s....
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.... of Hon'ble Calcutta High Court in Unit Construction Co. Ltd. Vs JCIT, 260 ITR 189. 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and furnished the written submissions dated 24.04.2017 and 10.07.2017 explaining the legal position and genuineness of Trade creditor of Rs. 2,35,90,226/- in the name of M/s. Ganesh Trading Company and also furnished various documents in support, which we will discuss in the later part of this order. The learned CIT(A) directed the Assessing Officer to issue a commission to verify the credits, in response to which the AO issued a commission to ITO, Ward-1 Imphal to enquire into the transactions made by the appellant with M/s. Ganesh Trading Company, Kolkata. In compliance, the ITO, ward-1, Imphal who happens to be the Assessing Officer of M/s. Ganesh Trading Company, conducted enquiry and recorded the statement of Shri Ashok Kumar Singh Proprietor of M/s. Ganesh Trading Company and submitted his report vide letter dated 16.06.2017 which was forwarded by the Assessing Officer to the ld. CIT(A) vide letter dated 22.06.2017, copies of which along with copy of statement and other evidences are placed at page 48 of the p....
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....our of M/s. Ganesh Trading Co. in suppor of total purchases of Rs. 3,00,90,226/-. (x). Copy of PAN Card of Shri Ashok Kumar Singh, prop. of M/s. Ganesh Trading Company. 5.1 It was submitted on behalf of the assessee that in the statements recorded by ITO, Ward-1, Imphal during enquiry conducted in response to commission issued, the proprietor of M/s. Ganesh Trading Company candidly confirmed the transactions and receipt of sale consideration through banking channel and also furnished supporting evidences which were examined with his bank statement. 5.2 The next contention of the assessee has been that the proprietor of impugned sundry creditor further admitted before the commissioned authority that he had imported the goods from Bangladesh and provided the proforma invoice from the exporter, M/s. Jahan Processing and export Ltd., sale contract, sale bills, challan for local taxes paid against purchases of Supari and bank statement to the ITO Imphal which are placed on record as annexure-5 of the paper book. In presence of appearance of proprietor of the creditor before the enquiring authority and various evidences furnished before him would certainly go to dilute the non-servic....
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....n'ble Assam High Court in Tolaram Daga vs. CIT, 59 ITR 632 wherein it was held that " to require the firm or partner thereof to adduce proof of the sources from which the deposit was made would be placing a burden on the firm which is not required or justified by law". Several other such decisions are relied on by the assessee. 6. Repudiating the contentions of assessee, the ld. DR, on the other hand, strongly supported the orders of the authorities below and further submitted that the AO specifically asked the assessee to produce the creditors from whom purchases were made and also confronted with the non-service of notices u/s. 133(6), but he failed to comply with the directions of the AO. Therefore, the ingredient of section 68 could not be established on the part of assessee. The party in whose name the credit balances were shown by the assessee were not found genuine and the AO rightly made the addition for the balances shown in the name of such sundry creditor. It was further submitted that the adverse comments given by the authorities below against the genuineness of trade creditor, M/s. Ganesh Trading Company were not properly rebutted on behalf of the assessee. Reiteratin....
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....by the sundry creditor before ITO, Imphal goes to establish the business dealings and volume of business of sundry creditor showing his creditworthiness, which cannot be doubted only on the presumptive observation of the AO given in the remand report that such export invoices of M/s. Jahan Processing and Export Ltd. had no nexus with the impugned transaction of their sale with the assessee. Form-C is a declaration Form under the Central Sales Tax Act which is issued by VAT department to the dealers registered under the Central Sales Tax Act. It is further issued by registered dealer or purchaser to the seller in case the purchases are made in the course of interstate Trade or commerce for resale or for use in manufacturing, so as to charge him Sales Tax at prescribed concessional rate of tax and the State Government collects tax from the purchaser when such goods are sold. The assessee has also filed its Sales Tax Returns, on which no comments have been made by the Revenue Authorities. In presence of all these facts supported by cogent evidences, in our considered opinion, it was not incumbent upon the authorities below to doubt the impugned purchases and to disallow the outstandin....
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.... assessee, in the case of PCIT vs. Talbros Engg. Ltd. (supra) and CIT vs. Anil Kumar & Co. (supra), the action o the authorities below is unjustified for making the impugned addition. It is also an undisputed fact that the assessee has declared the corresponding sales out such supari purchased and quantitative details were submitted before the authorities below. The sales were credited to the trading account of the assessee. Therefore, as rightly contended by the ld. Counsel for the assessee, such sale not being possible without any corresponding purchases so made, could not otherwise be treated as bogus without bringing any contrary material on record. It is also observed that the resultant profit derived by the assessee from such purchase and sale of Supari was duly disclosed by the assessee in the trading account, which has not been doubted by the Assessing Officer. Having regard to all these facts of the case, we are of the considered view that the addition made by the Assessing Officer and confirmed by the ld. CIT(A) by treating the trade creditor as unexplained cash credit u/s. 68 of the Act is not sustainable at all. 10. Our view expressed in the preceding para of this orde....
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....hem. We find that the order of the Tribunal is a well reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated 30-04-2010 of the Tribunal." 10.3 On the identical issue, in the decision of Hon'ble ITAT Lucknow Bench (Third Member) in the case of ITO Vs Zazsons Exports Ltd., 153 ITD 1 (TM), the third member concurring with the view of Accountant Member, confirmed the order of the ld. CIT(A) for deleting the similar addition. The Hon'ble Third Member has summarized reasons for deletion of addition as follows : "(a). AO doubted the creditors against the purchases and made the addition of the entire amount outstanding against the purchases, however, he did not point out any mistake in the books of account maintained by the assessee in regular course of business and also not doubted method of accounting employed regularly. (b). The AO did not point out any suppressed sale and inflated purchase. Gross profit rate which was at 12.09% in comparison to the gross profit rate of 9.92% in the preceding year had not been doubted. (c). The AO did not rebut the contention of assessee....