TaxTMI 
TaxTMI 
2023 (11) TMI 755
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....editors of Rs. 3,66,31,437/-, and mentioned that the AO has not carried out verification of this quantum increase of sundry creditors which were liable to disallowed u/s. 68 of the IT Act and treating the same as unexplained cash credits is unwarranted, unjustified and bad in law. 3. The Hon'ble Principal Commissioner of Income Tax, Central, Ahmedabad has erred in Newly Added Sundry Creditors are treated as unexplained Cash Credit u/s. 68 of the I T Act, 1961 is totally unwarranted, unjustified and bad in law. 4. The Hon'ble Principal Commissioner of Income Tax, Central, Ahmedabad has erred during the course of Assessment Proceedings, the Assessing Officer has verified each and every details and passed the order even though the Hon'ble Principal Commissioner of Income Tax, Central Ahmedabad has wrongly mentioned the facts in body of order and set aside the Speaking order passed by Assessing Officer is treated as erroneous and prejudicial to interest of the revenue within the meaning of section 263 of the I T Act, it is totally wrong, unwarranted, unjustified and bad in law. Your applicant reserves the right in addition or alteration in the gro....
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....essee from the facts emanating from the order passed by the ld.Pr.CIT under section 263 of the Act, only two notices were issued to the assessee during the course of revisionary proceedings and both the notices were issued when COVID-19 pandemic was at its peak in March 2021. Undoubtedly it was virtually impossible for any response to be filed to the notice issued. The impugned order was passed thereafter without even giving a fair opportunity of hearing to the assessee, which is in gross violation of the principles of natural justice. 7. The Hon'ble Apex Court in the case of Sona Builders vs UOI 251 ITR 197(SC) has held that orders passed in violation of principles of natural justice have to be set aside and cannot be restored back for hearing afresh. The Hon'ble court held that having regard to the statutory limit within which appropriate authority has to Act and his failure to act in conformity with the principles of natural justice, the matter cannot be remanded for reconsideration and has to be set aside. Section 263 of the Act also places a limitation for passing orders under the section in sub clause (2) to section 263 of the Act, being within two years from the en d of t....
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....6,31,437/-. However, the AO has not carried out verification of this quantum increase of sundry creditors which were liable to be disallowed u/s 68 of the IT. Act treating the same as unexplained cash credits in the absence of supporting corroboratory evidence to prove the identity, genuineness and creditworthiness of new sundry creditors." 11. The ld.counsel for the assessee contended that, on the contrary, the AO had conducted due inquiry during the assessment proceedings raising specific queries relating to the sundry creditors to which due response has been filed by the assessee. He pointed out that vide notice issued under section 142(1) of the Act dated 28.4.2017, the AO had asked the assessee to furnish complete names and address of all the sundry creditors as appearing in its balance sheet as at the end of the impugned year i.e. as on 31.3.2015 in a specific format. Our attention was drawn to relevant notice placed before us at PB Page No.10. Thereafter, he pointed out that the assessee submitted response to the same vide his letter dated 27.6.2017 giving complete details of all the sundry creditors including their names, addresses, PAN and complete details of transactio....
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....nt of these sundry creditors. The ld.Pr.CIT has not pointed out as to why more inquiry needed to be conducted regarding sundry creditors. There is no reason given by him as to why the sundry creditors reflected by the assessee needed to be doubted. There is no financial analysis done by the ld.Pr.CIT leading to create a doubt regarding existence of this quantum of sundry creditors. Except for stating that huge sundry creditors were outstanding as at the end of the year, there is no basis given for stating so. There is no comparison of the turnover of the assessee or of the purchases made by the assessee with the outstanding creditors; there is no finding by the ld.CIT(A) that considering low volume of operation conducted by the assessee, the extent of sundry creditors outstanding is too huge so as to cast a doubt on the existence of such outstanding sundry creditors as at the end of the year. No exercise worth its name has been carried out by the ld.Pr.CIT so as to justify the need for further inquiry to be done regarding the sundry creditors. 14. The Hon'ble Delhi High Court in the case of CIT vs Sunbeam Auto Ltd. (Delhi), [2010] 189 Taxman 436 (Delhi) while dealing with issue ....
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....t was not sustainable in law. In view of the above discussion, we hold there is no error found by the Ld.PCIT in the order of the AO so as to justify the revisionary order passed u/s 263 of the Act. The order passed under section 263 of the Act is set aside. 16. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 17th November, 2023 at Ahmedabad. ============= Document 1 4. I have carefully considered the facts of the case. The fact is that there is addition of new sundry creditors of Rs.3,66,31,437/-, which the AO ought to have enquired for its genuineness. In the absence of supporting documentary evidence, these increase of sundry creditors were liable to be disallowed u/s 68 of the I.T. Act. During the revision proceedings u/s 263 also, despite sufficient opportunities given to the assessee, reply with respect to the supporting corroboratory evidence to prove the identity, genuineness and creditworthiness of new sundry creditors is conspicuous by absence. During the course of assessment proceedings the assessee had submitted only name, address, PAN and amount of sundry creditors and no proof regarding genui....