TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 1009
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....cumstances 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, vide show cause notice of assessing officer dated 07.11.2016, the assessee was ....
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....e 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 concluded that sundry creditors are in the form of cash credit. The Ld. Counsel pointed out that the creditors were duly recorded in the books of accounts and assessee fi....
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....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 for remand report However, the Assessing Officer did not submit his remand report to the Ld. CIT(A), therefore Ld. CIT(A) by using co- terminus power has adjudicated the issue. Therefore, ma....
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....ising 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 ITA No.1420/AHD/2014, dated 13.12.2017, wherein it was held as follows: "8. We have given a thoughtful consideration to the orders of the authorities below. It is true that the assessee did not f....
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....e 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 evidence on record that the AO had accepted the purchases, sales as also the trading result disclosed by the assessee. It had recorded a finding that the two amounts represented the purchases made by the assessee on credit and, therefore, the provisions of s. 68 could not be attracted in the present case. The view taken by the Tribunal on this issue is sustainable inasmuch as, on the basis of the findings rec....
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....e 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 otherwise. In other words, it is only the verification of sarees that are brought for sale by the Karigars at the shop of the saree dealers which is relevant and not the Karigar themselves. It is for this reason that even the CBDT felt that after the sales (made out of purchases from Karigars) are found to be verifiable, it is not necessary that there should be an insistence for producing the Karigars. The instructions like this....
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....rought 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 the purchases have been held to be genuine and accepted as such, the credits that remained outstanding in such account cannot be treated to have remained unexplained. The balance appearing in this account, which included the disputed addition also is the sum total of purchases that remained unpaid at the end of the year. As the genuineness of such purchases has not been disputed, rather the same has been accepted, the credit....
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.... 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 facts and circumstances, we delete the addition. 18. In the result, ground No.1 raised by the assessee is allowed. 19. Ground No.2 raised by the assessee relates to enhancement of assessment by Rs. 1,20,442/- on account of expenditure under section 40A(3) of the Act. 20. At the outset, Ld. Counsel submitted that the addition under section 40A(3) of the Act to the tune of Rs. 1,20,442/- was not made by the Assessing Officer. However, the L....
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....e 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 regards the question as to whether the provisions of section 50C can be invoked in respect of the lease hold property, this issue is no longer res integra. There are several decisions of this Tribunal including the case of DCIT vs. Tejinder Singh (supra), Atul G. Puranik vs. ITO [132 ITD 499 (Mum Trib)] in support of the proposition. Hon'ble Delhi High Court in the case of CIT vs. Shri Kishan Das - ITA No.64 of 2014, judgement dated 10.02.2014, has approved this school of th....