AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 841
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....with Appellant during the assessment proceedings. 2. Because Ld. CIT(A) was erred on facts and law while sustaining the addition of Rs. 17,22,831/- without appreciating the facts, sales to these debtors were already accounted for as income and part of trading transaction and assessed to tax. Therefore, such alleged additions having roots of business trading transactions has resulted double addition in the hands of assessee. 3. Because Ld. CIT(A) was erred on facts and law while sustaining the addition of Rs. 17,22,831/- when initial onus was shifted by appellant to Revenue by way of providing requisite information and addition was made solely on enquiry on the back of assessee. 4. Because Ld. CIT(A) was erred on facts and law and against the law of natural justice while sustaining the addition of Rs. 17,22,831/- relating to nine parties, out of which notice was served to six parties and notice to 03 sundry debtors unserved, however appellant was not provided any opportunity have it say. 5. Because Ld. CIT(A) was erred on facts and law while sustaining the / addition whereas assessment order is itself bad in law, being without jurisdiction since a....
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.... Act asking the assessee to explain the huge increase in percentage of cash received from debtors for sale, in financial year 2016-17 as compared to financial year 2015-16 and why it should not be presumed that the assessee had inflated his cash receipts so as to account for the cash deposits in SBNs into his bank account. It is stated in the assessment order that subsequently, the assessee provided a list containing names and addresses of 867 debtors, from whom he had realized the debt in cash during financial year 2016-17. The Assessing Officer issued summons u/s 131 of the Act to 14 of these debtors, to check the creditworthiness of the party and genuineness of the transactions. She noted that out of the above, only five parties had confirmed the transactions, three summons had returned unserved and no response had been received in response to six summons that had been served. From the same, the Assessing Officer concluded that the cash receipts from debtors, as claimed by the assessee, were fictitious, inflated and not reliable. She observed that wrong information about the debtors and other cash receipts had been provided by the assessee, the assessee had not produced his book....
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....fy such information before drawing any adverse view on the same. If the Assessing Officer was not satisfied with the information or the evidences provided by the assessee, she should have recorded her dissatisfaction in the order. She further pointed out that the addition on unconfirmed creditors or debtors cannot be made if books of account are audited and sales and purchase are not doubted. Reliance was placed on the judgment of Amritsar Bench of the Tribunal in the case of Asian Cements Pathankot vs. Addl. CIT, I.T.A. No.241/ASR/2016, in which it was held that addition cannot be made on unconfirmed sundry debtors if the books of account are audited and the trading results are not disturbed by the Assessing Officer because in any case the assessee will be the loser in case of the denial of the debtor. The learned CIT(A) held that the doubts raised by the Assessing Officer for making credit sales to the customers was fallacious argument as it is purely a business decision of the assessee. She held that the addition made on the basis of average of cash realization was not a cogent basis, as the average derived by the Assessing Officer pertained to the normal business environment an....
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....the Assessing Officer. The Assessing Officer had taken up 14 cases on a sample basis (amounting to a debt of Rs. 22,20,000/-) and upon failure to serve summons on three of these debtors and no response from six of these debtors, had proceeded to add back the entire amount of Rs. 1,35,00,000/- deposited by the assessee by extrapolating his results on to the entire sundry debtors. It was submitted that the same was patently unjustified and the failure on the part of the nine persons to respond to summons could not be a justification to add back the entire amounts deposited in the bank account on account of the proceeds received from 867 debtors. The learned A.R. further submitted that even this fact of enquiry had not been informed to the assessee in the show cause of 17/12/2019 and the Assessing Officer did not inform the assessee as to why he was taking adverse inference. It was submitted that the Assessing Officer had not rejected the books of account. The learned A.R. also invited our attention to Instruction No. 20 of 2015 of the CBDT and drew our attention to para 4 of the same, wherein it was stated that where the Assessing Officer proposes to make additions or disallowance, t....
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....him had never been doubted and books had not been rejected. In the circumstances learned A.R. submitted that the learned CIT(A) was justified in deleting the additions made by the Assessing Officer. However, the learned A.R. pointed out that having relied on the judgment of ITAT, Amritsar Bench in the case of Asian Cement, Pathankot vs. Addl. CIT, I.T.A. No.241/ASR/2016, the learned CIT(A) was not justified in sustaining the addition relating to nine debtors. The learned A.R. submitted that in the case of Asian Cement (supra), the Tribunal had held that in that case, the books of account were audited and sales and purchases were not doubted. Even if the sundry debtors had not confirmed the balance in their account, then also the assessee would only be loser. Therefore, in their opinion, the addition could not be sustained on account of sundry debtors. 7. Responding to the arguments of learned A.R., learned Departmental Representative Shri Amit Kumar, (hereinafter known as "learned D.R.") pointed out that the assessee had only provided the details of 867 debtors at the fag end of the assessment period and Assessing Officer had taken a sample for verification. The Assessing Office....
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....ous customers to effect purchases and there was no reason to draw any adverse inference from the same. Learned A.R. placed reliance on the judgment of Hon'ble Allahabad High Court in the case of CIT vs Pashupati Nath Agro Food Products Pvt. Ltd., I.T.A. No.165 of 2010 and CIT vs. Pancham Dass Jain [2006] 205 CTR (All) 444. 9. We have considered the rival arguments and the facts of the case. It is seen that in the assessment year 2016-17, the assessee had a gross profit of Rs. 5,48,88,256/- on total turnover of Rs. 30,97,02,605/- while in the assessment year 2017-18, the assessee had a gross profit of Rs. 6,16,45,728/- on turnover/sales of Rs. 27,37,49,748/-. Thus, the gross profit rate for the present assessment year was more than the gross profit rate of the previous assessment year. We also observe from the charts reproduced in the assessment order, that the practice of making sales on credit and subsequent realization from debtors, is something that has been followed by the assessee over the entire period of the last two years. In financial year 2015-16, the assessee realized a sum of Rs. 2,78,23,547/- by way of cash from debtors, whereas in the financial year 2016-17, th....
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....sbelieve the entire amount realized from sundry debtors, without affording the assessee an opportunity to demonstrate that the said debts were genuine. It appears that the Assessing Officer did not offer this opportunity. Hence, the failure to serve the summons upon some sundry debtors and failure to obtain reply from other sundry debtors, cannot in itself be the basis to disallow the debt due from them, let alone extrapolating these results to the entire population of sundry debtors to disallow all the debts stated to be received from them, without making any enquiries into them and particularly when five of the debtors had confirmed the credit purchases and repayment of debt. The Assessing Officer has submitted that the assessee did not produced the books of account before him, but we observe that the assessee had produced sufficient documentation to enable the Assessing Officer to conduct further inquiry with regard to the veracity of the sundry debtors and that the Assessing Officer did not conduct these enquiries. Therefore, the Assessing Officer could not have disallowed the sundry debtors on the basis of tax sample study without calling into question the purchases, sales or ....