TaxTMI 
TaxTMI 
2018 (11) TMI 644
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....f the Act dated 14.9.12 as well as u/s 142(1) of the Act were duly served upon the assessee. During the course of assessment proceedings learned Assessing Officer (In short 'Ld.A.O') confronted the assessee with the impounded documents which contains the name of persons along with amount shown as credit receipt and total of these details placed at Annexure-BI, BI2 was at Rs. 6,02,895/-. It was pleaded by the assessee that the farmers gives advance in the start of the day and if no transactions are taken up during the day these amounts are refunded back. Some parts of the details appearing in the impounded documents were entered into the books of accounts. Ld.A.O was not convinced and unmatched credit entries were added to the income of the assessee at Rs. 6,02,895/-. Addition u/s 41(1) of the Act was also made for sundry creditors totaling to Rs. 4,27,723/- which were outstanding for more than 3 years. Disallowance of expenses of Rs. 80,000/- was made on ad-hoc basis. Income assessee at Rs. 19,73,708/-. 3. Aggrieved assessee preferred appeal before Ld. CIT(A) and partly succeeded. 4. Aggrieved assessee is now in appeal before the Tribunal raising following grounds of appeal; ....
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.... amount is refunded and no entry is recorded. The addition amount of Rs. 6,02,895 is of the farmers with whom the transactions did not materialize and hence token amount was refunded. [AD Page 5, 1st Para and PB 86 - 87] 3. Ld. AO failed to take cognizance of the statement of Shri Sunil Patidar, partner of assessee firm, recorded under oath u/s 133 of the Act on 10.03.2011. In this statement, in response to question no. 7 the nature of the entries recorded in the loose papers impounded in the course of survey is explained as under - For BI-1:These papers pertain to transactions entered with farmers and traders for amounts recovered and received. For BI-2:These papers pertain to transactions entered with farmers for booking of potato seeds and hammali. For BI-3:These papers also pertain to transactions entered with farmers for booking of potato seeds and hammali. The above explanation was also submitted before Ld. lTD (Technical) in response to notice u/s 133A(3). [refer PB 92] 4. Ld. AO erred in not considering the explanation given and the above referred response of the partner of assessee firm, in proper perspective and procee....
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....It was submitted before Ld. CIT{A} that the addition, if at all to be made, should be of the peak i.e. Rs. 2,90,346 as arrived at Page 12 of BI - 1. [CIT(A) Page 5] 10. Reliance is placed on following judicial precedents for the submissions made in relation to Peak Credit which are reproduced in the order of Ld. CIT{A}. 11. Assessee prayed that considering the above mentioned facts and circumstances of the case and the applicable law, addition if any to be made should be computed as per peak credit, which amounts to Rs. 2,90,346. 8. Per contra the Departmental Representative vehemently supporting the orders of lower authorities. 9. We have heard rival contentions and perused the records placed before us. Ld.A.O made addition of Rs. 6,02,895/- by making total of credit entries appearing in the impounded documents which were not entered into the books of accounts. It is pleaded by the Ld. Counsel for the assessee that the assessee being commission agent and in this type of business there is a regular practice that farmers give token money in anticipation of the possible business transaction during the year. 10. We have perused the impounded documents appear....
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....e unresolved business disputes with these creditors and hence no confirmation letters could be furnished. Details of the same are as under - [AO Pg 6 Para 1] Sr. No Name of Creditor Amount (Rs.) Current status 1 Dilipji Kheda 4,578 Deleted by CIT{A}, Dept. not in appeal 2 Om Shree Traders 1,50,756 Deleted by CIT{A}, Dept. not in appeal 3 Kartik Traders 2,72,389 In appeal before Hon'ble ITAT vide Ground No.3 13. On appeal before Ld. CIT(A), addition made to the extent of Rs. 1,55,334 (i.e. of Dilipji Kheda Rs. 4,578 and Om Shree Traders Rs. 1,50,756) was deleted and balance of Rs. 2,72,389 of Kartik Traders was sustained. 14. It was submitted before Ld. CIT(A) that the liability of Kartik Traders existed as payable in the books of assessee and the liability never ceased. 15. It was submitted that provisions of section 41(1) would apply in a case where some benefit has been received in respect of the trading liability and there has been remission or cessation of liability during the previous year relevant to the assessment year under consideration. 16. It was also submitted before Ld. CIT(A)....
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....ion, no addition can be made u/s 41(1) of the Act. At the same time, it is not the allegation of the Assessing Officer that creditors were not genuine or that no expenditure was accounted for in respect of such transactions. Accordingly, addition made by the Assessing Officer u/s 41(1) was not justified. As per our considered view, in respect of any trade creditors appearing in the books of accounts, the onus is on the assessee to prove that they genuinely existed as at the end of the year and for which the assessee is required to file their confirmations .... " [emphasis supplied] Considering the above facts and circumstances of ~ submissions made, documents on record, applicable law and judicial precedents, appeal of the assessee may please be allowed by deleting additions sustained by Ld. CIT(A)." 13. Per contra the Departmental Representative vehemently supporting the orders of lower authorities. 14. We have heard rival contentions and perused the records placed before us. Assessee is aggrieved with the addition of sundry creditor namely M/s Kartik Traders having outstanding balance of Rs. 2,72,389/- made by the Ld.A.O u/s 41(1) of the Act treating it as cessatio....