TaxTMI 
TaxTMI 
2019 (5) TMI 853
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..... According to the AO, the assessee has failed to give supporting documentary evidence i.e. copy of ITR, capital account, Balance Sheet, bank statement to prove the creditworthiness, identity and genuineness of the sundry creditors which is shown as payable in the audit report. According to AO, the assessee also failed to produce cash book, ledger, bilty, registered log book etc. and in the absence of books of account and relevant documents it could not be verified the veracity of the outstanding shown as creditors in the Balance Sheet and, therefore, the AO made an addition of Rs. 78,22,863/- on account of unexplained payable sundry creditor u/s. 68 of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved, the assessee is before us. 4. We have heard rival submissions and gone through the facts and circumstances of the case. It was brought to our notice that during the assessment proceedings the assessee has explained not only before the AO but also before the JCIT, Range-1 that the outstanding amount of Rs. 78,22,863/- is in respect of outstanding liability shown in respect of freight payable as on 31.03.2014....
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....e proceeds. In either case, when called upon, the assessee is bound to explain the nature and source of the amounts credited. There may be a few exceptions to this general rule. For example, in the case of credit purchases, the account of the supplier is credited with the amount payable. In such a case, where the purchase is allowed as expenditure, it may not be possible for the Assessing Officer to again call upon the assessee to prove the nature and source of the credit, for the reason that the purchase itself was allowed as expenditure only on being satisfied that it was a genuine purchase on credit. Implicitly, the nature and source of the amount credited has also to be taken as having been explained satisfactorily. Another possible argument can be that in such a case, the amount credited is not a cash credit in the sense that some monies have been received by the assessee, but the credit represents a mere liability payable by the assessee in future. Under accounting principles, a liability can only be brought into account by making a credit entry in the books of account in favour of the person to whom the money is payable. Thus, there is marked difference between a credit repr....
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.... "This finding of AO remained undisturbed before the CIT(A) as well and has been accepted by the ITAT. Proceeding on this basis, the ITAT observed that the soles, purchases as well as gross profits as disclosed by the assessee have been accepted by the Assessing Officer. Once this is accepted, we are of the opinion that the approach of the ITAT was correct inasmuch as the Assessing Officer did not consider this aspect while making additions of sundry creditors under Section 68 of the Income Tax Act. As there was no case for disallowance for corresponding purchase, no addition could be made under Section 68 inasmuch as it is not in dispute that the creditors outstanding related to purchases and the trading results were accepted by the AO. We are, therefore, of the opinion that no substantial question of law arises for consideration in this case. The appeal is accordingly dismissed. " 7. We also rely on the decision of the Hon'ble Allahabad High Court in the case of CIT -vs.- Pancham Das Jain (205 CTR 444) wherein it was held as under: 6. We have heard Sri Shambhoo Chopra, learned standing counsel for the revenue. 7. He submitted that as the respondent-assessee....
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....r. It has been categorically recorded by the Tribunal that the provisions of Section 68 of the Act u)ere clearly not attracted to the amount representing purchases made on credits. Further the trade creditors in the earlier gears i.e. assessment years 2007-08 and 2008-09 stood accepted in scrutiny assessments. Thus, the genuineness of expenses under consideration could not be doubted. The relevant findings recorded by the Tribunal in this regard read thus:- "Having heard the rival contentions in the light of the material available on record, it is seen that in para-3 of the assessment order, the AO observed that the assessee had shown numerous sundry creditors along with details as was available from the examination of the assessee's books of account vis-a-vis his balance sheet. The assessee is a road contractor. He received material for the construction of the road. The amounts in question represented purchases made on credits. The provisions of Section 68 of the Act are clearly not attracted to amount representing purchases made on credits, as is also held in 'CIT Vs. PanchamDass Jain', 205 CTR 444 (All). The assessee raised this issue by Way of written submi....
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....e that the AO noted that after receiving direction from the JCIT, Range-1, Jodhpur he asked the Ld. AR in respect of certain details about bilty charges received by the assessee. According to the AO, it was asked specifically asked as to whether bilty charges is inclusive in the receipt from the company or whether it is collected separately from the truck owners. According to AO, the Ld. AR of the assessee failed to give reply on this issue and the written reply given by the assessee was found inadequate and improper and taking note that the assessee failed to give the list of bilty received amount of Rs. 11,55,100/-, the AO estimated the bility charges received during year at 2% of Rs. 11,70,63,030/- which comes to Rs. 23,41,260/- and since the assessee has already declared bilty charges of Rs. 11,55,100/- the difference of Rs. 11,86,160/- on account of showing low biltly charges was added in the hands of the assessee. Aggrieved, the assessee preferred appeal before the Ld. CIT(A), who was pleased to delete the same. Aggrieved, the revenue is before us. 12. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO had asked th....