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2023 (8) TMI 1009
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....llowed expenditure u/s. 40A(3). 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in enhancing the addition without issuing any Show Cause Notice as required by law. 4. It is therefore prayed that addition made by assessing officer and confirmed by CIT (A) may please be deleted. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 3. Now, we shall take these grounds of appeal, one by one. 4. Ground no.1 raised by the assessee relates to addition of Rs. 53,97,017/- on account of unexplained credit under section 68 of the Act. 5. The facts of the case which can be stated quite shortly are as follows: The assessee before us is a partnership firm. During the assessment proceedings, the assessing officer, on perusal of the Balance Sheet and part of the return of income filed by the assessee, noticed that assessee had shown sundry creditors to the tune of Rs. 2,15,88,066/-. During the course of assessment proceeding, no evidence has been filed or produced by the assessee to prove the genuineness of such trade creditors. Therefore....
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....ing Officer containing name, address and PAN number of the following persons: (i) Gautam paper Udhyog (vide paper book page nos. 22 to 23) (ii) Namashkar Exim (Sumeet garg - HUF) (vide paper book page no.24) (iii) Gopal Creation (vide paper book page no.25) (iv) Sai Baba Engineering (vide paper book page no.26) (v) Somnath Textile Pvt. Ltd. (vide paper book page no.27) The copy of Income Tax Returns was also furnished by the assessee in respect of above creditors during appellate proceedings. The Ld. Counsel contended that if the Assessing Officer wants to make further enquiry, he could have issued notice under section 133(6) of the Act to the concerned persons to verify the genuineness of the transactions and identity, however, the Assessing Officer has failed to do so. 9. The Ld. Counsel also pointed out during the assessment proceedings, the Assessing Officer made the addition in respect of the sundry creditors under section 68 of the Act, as unexplained cash credit, which is wrong. During the assessment proceedings, the assessing officer has discussed and analyzed the sundry creditors which are linked with purchases and conclud....
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....rchases, sales as also the trading result disclosed by the respondent-assessee. It had recorded a finding that the aforesaid two amounts represented the purchases made by the assessee on credit and, therefore, the provisions of section 68 of the Act could not be attracted in the present case. We fully agree with the view taken by the Tribunal on this issue, inasmuch as, on the basis of the findings recorded by it that these two amounts represented purchases made by the respondent-assessee on credit and the purchases and sales having been accepted by the department, the question of addition of the aforesaid two amounts under section 68 of the Act did not arise inasmuch as the provisions of section 68 of the Act would not be attracted on the purchases made on credit. 9. We, accordingly, answer the question referred to us in affirmative, i.e., in favour of the assessee and against the revenue. There will be no order as to costs." 11. On the other hand, Learned Departmental Representative (ld. DR) for the Revenue submitted that although during the appellate proceeding, the assessee submitted additional evidences, which were remitted back to the file of the Assessing Officer....
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....the assessing officer for his examination and to send the remand report thereon. However, the Assessing Officer failed to send remand report, therefore Ld. CIT(A) has adjudicated the issue by exercising his co-terminus power. We note that section 68 of the Act does not cover up the cases of purchases made on credit from the creditors. We note that finding recorded by the assessing officer in his order is wrong inasmuch as, these creditors represented purchases made by the assessee on credit and the purchases and sales having been accepted by the department, the question of addition of the amounts which are linked with purchases, does not arise under section 68 of the Act. We note that Assessing Officer has made the addition under section 68 of the Act in respect of the sundry creditors after making a detailed analysis, and on appeal by assessee, ld CIT(A) confirmed the action of the assessing officer. Therefore, the conclusion reached by the Assessing Officer by treating the sundry creditors (which are linked with purchases) is bad in law and for that reliance can be placed on the judgment of Co-ordinate Bench of ITAT, Ahmedabad in the case of DCIT vs Rasikbhai Ramjibhai Raval, in ....
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....creditors" and with whom the assessee has done some contract business including supply of labourers on contractual payments. We find that tax has been deducted at source as per the provisions of law. 11. On given facts, we do not find this to be a fit case for the additions under section 68 of the Act. The second ground of the Revenue is dismissed." 15. On the identical and same issue, our view is fortified by the judgment of Co-ordinate Bench of ITAT, Visakhapatnam in the case of DCIT vs M/s. Vijay Agro Produces Ltd., in ITA No. 508/Vizag/2014, dated 29.07.2016, wherein it was held as follows: "17. It is pertinent to discuss the case laws relied upon by the assessee. The assessee relied upon the decision of Hon'ble High Court of Allahabad in the case of Panchamdas Jain (2006) 156 Taxman 507. The Hon'ble Allahabad High Court, under similar circumstances held that additions cannot be made towards trade creditor's u/s 68 of the Act as unexplained credits, when purchases are accepted as genuine. The relevant portion of the order is reproduced hereunder; "The Tribunal has recorded a categorical finding of fact based on appreciation of materials and evidenc....
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....of the Act towards trade creditors. The relevant portion of the order is extracted as under: "All the purchases made by the assessee wherever the same have been made from the Karigars are supported by the 'Purjas' issued by it. Such 'Purjas' were found to be duly entered in 'Jama Jakar Bahi', which is a part of records kept by the assessee regularly to record its purchases from Karigars. In the financial records also, entries of the purchases of sarees have duly been made on the basis of primary records. The purchases recorded in this manner have been accepted in toto without any kind of controversy whatsoever. After the purchases of sarees supported by the 'Purjas' have been accepted, any further verification about the Karigars in whose favour such Purjas' have been issued is really not necessary; the reason being that it is the Karigar who come to the saree dealers and offers his stock for being dealt with by the same dealers. The dealers also have no occasion to feel concerned about the names and addresses of such Karigars as purchases from them are made on "credit and that too after due approval of the same through inspection and oth....
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....that Purjas themselves as also contents thereof have got great evidentiary value. If payment against the 'Purja' is recorded in the books of account, then the liability in relation to such 'Purja' has to be treated as genuine unless of course some material is brought on record that the assessee has actually made payment against the same which is not recorded. In the present case, no such material having been brought on record, it could not be said that the liability is bogus. Even at the cost of repetition, it is stated that bogus liability presupposes two things, firstly, there is a liability incurred and secondly such liability has been discharged without being recorded in the books of account. As no such material is available on record, the liability in question cannot be said to be bogus so as to attract any addition on this score. It also appears that the AO has treated the liability to be of 'cash credit' in nature and that is why he felt anxious to have the identities of the creditors established. In this respect, first of all, credits 'in the sundry creditors (Udhar Khareed) Khata' are referable to the purchases of sarees made on credit basis. As....
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....tors and their income tax returns containing PAN number and their addresses were there before the ld CIT(A). Therefore, we are of the view that the A.O. was not correct in making additions towards trade creditors u/s 68 of the Act, hence we delete the addition. 17. We note that Assessing Officer has disallowed sundry creditors on estimated basis, at the rate of 25% of the sundry creditors of Rs. 2,15,88,066/-, without rejecting the books of accounts of the assessee. As per assessing officer, an individual creditor is true up to 75% level and untrue up to 25% level, which is unheard practice because a purchase bill issued by creditor cannot be bogus for 25% and true for 75% level, particularly when books of accounts are not rejected and purchases made from the said creditor has not been treated as bogus. We note that Ld. CIT(A) has decided the issue on merit based on the evidences submitted by assessee and the material on record and therefore order passed by ld CIT(A) cannot be treated as an ex parte order, hence matter cannot be remitted back to the file of the ld CIT(A) (for second inning) for fresh adjudication, as contended by ld DR for the Revenue. Hence, considering these f....
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....ncome assessed by the Assessing Officer was further enhanced by Rs. 2,05,987 by the ld. CIT(A) by making disallowance of revenue expenditures claimed by the assessee on the ground that no business activity was undertaken by the assessee during the impugned assessment year. The ld. CIT(A) has not mentioned anywhere in his order with regard to the notice of enhancement ever served upon the assessee. Provisions of section 251(2) of the Act categorically says that the Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Therefore, it is incumbent upon the ld. CIT(A) for affording a reasonable opportunity of showing cause against enhancement to the assessee. If he fails to afford an opportunity to the assessee, enhancement made by him is not sustainable in the eyes of law. In the light of these facts, enhancement made by the ld. CIT(A) is not sustainable as it was done without issuing a show cause against enhancement to the assessee. We, therefore, find no merit in the additions. Accordingly, we delete the same. 7. As regard....
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....transfer by way of compulsory acquisition under any law of capital asset being land, building or any right in the land or building...................... ?. Section 50C, on the other hand, talks of, transfer by assessee of a capital asset being land or building or both. The contrast in language, given that Section 50C is a specific provision, which seeks to enact a presumption is significant. The valuation of the concerned State agency or the government that the cost of the land is, in the circumstances, higher, is determinative. We notice that in the present case, there has been no such valuation. That apart, the Tribunal adopted an approach which, with respect, appears to be correct, in that it took note of the proportionate transfer of leasehold rights for 54 years. If the Revenue's contentions were to be conceded, then in the given facts of case, if the leasehold rights for residual period of 3 or 4 years were to be valued at par with the cost of acquisition of the full tenure of the lease of 90 years, absurd and anomalous results would ensue." 8. In view of the above discussion, both the grievances of the assessee indeed deserve to be upheld. Neither the learned CIT(A)....