Income Tax Appellate Tribunal - Kolkata
Manmohan Lal Mohata, Kolkata vs Ito, Wd-35(4), Kolkata, Kolkata on 30 August, 2017
आयकर अपील
य अधीकरण, यायपीठ - "D" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL
KOLKATA BENCH "D" KOLKATA
Before Shri Waseem Ahmed, Accountant Member and
Shri S.S.Viswanethra Ravi, Judicial Member
ITA No.1383/Kol/2014
Assessment Year:2007-08
Manmohan Lal Mohata बनाम / Income Tax Officer,
55, Ezra Street, 5 t h Floor, V/s . Ward-35(4), Kolkata
Kolkata-700 001
[PAN No.ADXPM 7330 F]
अपीलाथ /Appellant .. यथ /Respondent
अपीलाथ क ओर से/By Appellant Shri Subash Agarwala, Advocate
यथ क ओर से/By Respondent Shri Arindam Bhattacharya, Addl. CIT-DR
सन
ु वाई क तार
ख/Date of Hearing 28-06-2017
घोषणा क तार
ख/Date of Pronouncement 30-08-2017
आदे श /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-XX, Kolkata dated 07.03.2014. Assessment was framed by ITO Ward-35(4), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide his order dated 29.12.2009 for assessment year 2007-08. The grounds raised by the assessee per its appeal are as under:-
"1) For that the Ld. CIT(Appeals) was grossly erred in confirming the addition of Rs.2,57,739/- being Closing Balance of Sundry Creditors, as ungenuine treating the same as income chargeable u/s 41(1) of the Income Tax Act, 1961, when all the relevant documents were submitted before him and were duly available before Ld. A.O in remand proceedings.
2. For that the Ld. CIT(Appeals) was grossly erred in confirming the addition of Rs.1,21,443/- as bogus Sundry Creditors for alleged difference in Closing Balances when appellant duly reconciled the difference in the ledger and same were duly made available to Ld. A.O in remand proceedings.
3. For that the Ld. CIT(Appeals) was grossly erred in confirming the addition of Rs.1,46,864/- as bogus Sundry Creditors for alleged difference in Closing Balances ITA No.1383/Kol/2014 A.Y. 2007-08 M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 2 when appellant duly reconciled the difference in the ledger and same were duly made available to Ld. A.O in remand proceedings.
4. I crave leave to add, alter, amend or withdraw any grounds of appeal on or before the date of hearing."
Shri Subash Agarwal, Ld Advocate appeared on behalf of assessee and Shri Arindam Bhattacharya, Ld. Departmental Representative represented on behalf of Revenue.
2. The first issue raised by assessee in Ground No.1 is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the addition of Rs.2,57,739/- under the provisions of section 41(1) of the Act on account of non-genuineness of sundry creditors.
3. Briefly stated facts are that the assessee is an individual and engaged in the business of electrical goods. The assessee in the year under consideration has shown certain sundry creditors in his balance-sheet. Out of the sundry creditors, the assessee failed to furnish the details as desired by the AO in respect of following parties:
Eastern Electric Corporation Rs.18,227/-
Electronics India Rs.49,930/-
Jhawar Trading Agency Rs.49,450/-
KG Electro-Power(P) Ltd. Rs.23,688/-
S. V. Enterprise Rs.71,694/-
Vasco Trading Co. Rs.44,750/-
Rs.2,57,739/-
5. The AO during assessment proceedings directed the assessee to furnish the copies of the ledgers in respect of the aforesaid parties for the year ending on 31st March 2007, 31st March 2008 and 31st March 2009 in order to ascertain the genuineness of the parties. The AO was of the view that in case the assessee has made payment to these parties in the subsequent years then the genuineness of the parties would get established but the assessee failed to furnish the same to the AO. Therefore, in the absence of documentary evidence, the AO treated the amount of sundry creditors of Rs.257739/- as income chargeable u/s 41(1) of the Act. Accordingly, the AO disallowed the same and added to the total income of the assessee.
6. Aggrieved assessee preferred an appeal to Ld. CIT(A). The assessee before the Ld. CIT(A) made submissions which can be summarised as under:
ITA No.1383/Kol/2014 A.Y. 2007-08M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 3
i) The assessee at the time of assessment furnished the list of all the sundry
creditors but in respect of aforesaid six parties, the address was missing. Accordingly, the AO in his letter dated 10th December 2009 demanded from the assessee to furnish the addresses in respect of six and fixed the date of hearing on 15.11.2009. On the date of hearing, the assessee personally appeared and forwarded the addresses in respect of aforesaid six parties which were duly noted by the AO in some papers.
ii) The assessee at the time of assessment furnished the details of purchases exceeding Rs.50,000/- to the AO. In the case of S. P. Enterprises, one of the party as discussed above, the necessary details of purchases and payments were duly furnished but the AO has treated the same as in-genuine sundry creditor and added to the total income of the assessee. The AO has made the addition in mechanical manner without referring necessary materials available on record.
iii) The assessee also furnished the copies of the ledgers in respect of aforesaid six parties for the year ended on 31st March 2007, 31st March 2008 and 31st March 2009 along with the copies of purchase bills for the year ended as on 31st March 2007.
iv) The registration numbers such as VAT, CST were duly mentioned on the bills of the parties. Therefore, the identity of sundry creditors cannot be doubted.
v) All the payments were made to the aforesaid six parties through banking channel in subsequent years.
However, the Ld. CIT(A) disregarded the contentions of the AO by observing as under:
"5. Ground no. (i) relates to contention of the appellant against addition made by the AO u/s. 41(1) of the I.T. Act. The fact of the case is that the AO to verify the genuineness of the sundry creditors asked the appellant to give present whereabouts of those 6 persons who had been shown as sundry creditors. However, no such details or other relevant details were filed even during the remand proceedings; none of the parties were produced for verification to substantiate the appellant's claim. Even the appellant could not explain the relevant transactions with the supporting details/documents. Under these circumstances, I find that primary onus was on the appellant to substantiate his claim with the supporting documents and to get verified the transaction by producing the relevant parties. Since, the appellant failed to do so and thereby, failed to prove that the liability shown in his books of account was ITA No.1383/Kol/2014 A.Y. 2007-08 M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 4 genuine and further the liability was still existed. There was no present whereabouts of the so-called creditors available with the appellant. In view of the facts and circumstances of the case as discussed above, i do not find any infirmity in the order of the A.O., hence, appeal on this ground is dismissed."
Being aggrieved by this order of Ld. CIT(A) assessee is in second appeal before us.
7. The Ld. AR before us filed a paper book comprising of pages from 1 to 113 and reiterated the submissions made before the Ld. CIT(A). The Ld. AR also drew our attention on the copies of the ledgers in respect of aforesaid six parties which are placed on Pages 29 to 59 of the paper book. The Ld. AR further submitted that all payments to the aforesaid six parties were made through banking channel in the subsequent years.
7.1 The Ld. AR also submitted that a notice was sent by the AO to all the six parties to furnish the necessary details vide letter dated 04.09.2012 wherein it was requested to submit the necessary details by 14.09.2012. Thus, it is clear that only 10 days' time was given to respond to the queries of the AO. Out of the 10 days' time, some time will definitely be used in the notice given to the parties, therefore, reasonable opportunity was not provided by the AO at the time of remand proceedings. Therefore, the allegation of the AO in the remand proceedings that none of the party replied to the queries raised in connection with the proceedings is not correct. The copies of the notices are placed on Pages 91 to 95 of the paper book. 7.2. The Ld. CIT(A) also submitted that the liability in respect of aforesaid six parties is very much reflected in the Balance Sheet and the same is not ceased to exist. Therefore, the same cannot be treated as income of the assessee under the provisions of section 41(1) of the Act until and unless it is written back in the books of accounts. In this connection, the Ld. AR relied on the order of this Co-ordinate Bench in the case of Opto Audio Electronics Products Pvt. Ltd. vs. ITO in ITA No.592/Kol/2008 for the A.Y 2002-03 vide order dated 25.05.2012 wherein it was held as under:
"4. We have heard the rival contentions and gone through facts and circumstances of the case. We find that assessee has disclosed sundry creditors to the extent of Rs.15,34,818/- as on 31.03.2002. The AO required assessee to file complete name and addresses and on the given address notice issued by AO u/s 133(6) of the Act returned unserved. According to AO, as assessee is unable to prove the liability he added a sum ITA No.1383/Kol/2014 A.Y. 2007-08 M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 5 of Rs.2,78,261/- as bogus liability on account of cessation of liability without mentioning provision of section 41(1) of the Act. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO. Aggrieved, now assessee is in appeal before us. We find that it is not the case of revenue that it is a case of existing liability and assessee has not made any write off of all liabilities in its books of accounts and it is a fact that the sundry creditors are carried forward from earlier years and not arising or accrued during the relevant assessment year. In such circumstances whether AO can make addition on account of cessation of liability whether the same exists or not as per the books of accounts of accounts the liability exists and he has not made any write off of the same. Once the liability exists in the books of assessee and the creditor has right to claim over the same as per law, AO could not make addition on account of cessation of liability by invoking provision of section 41(1) of the Act. This issue has been settled by the Hon'ble Apex Court in the case of CCIT Vs. Kesaria Tea Co. Ltd. (2002) 254 ITR 434 (SC), wherein it is held that provision made towards purchase tax liability was allowed in earlier years and such provision was written back in a subsequent year under the impression that the dispute as to purchase tax liability was finally settled with the dismissal of the special leave petition in some other case, even though other issues bearing on the eligibility of purchase tax still remained. On these facts, it has been held that the unilateral act on the part of the assessee by way of writing off the liability in its accounts did not necessarily mean that the liability ceased in the eye of law. Hence, the provisions of section 41(1) were not attracted. Hence, respectfully following the judgment of Hon'ble Apex Court and going through the facts of the present case, we are of the view that once the assessee has not made any write off of creditors in its books of accounts, the amounts cannot be treated as cessation of liability u/s.41(l) of the Act. Hence, we allow this issue of assessee's appeal.
5. Similar are the circumstances in the case of cessation of liability of M/s. ARC Infotech Private Limited amounting to Rs.95,610/-. As the assessee could not substantiate the sundry creditor ARC Infotech Private Limited which was outstanding as on 31.03.2002 the AO made the addition but assessee has never made any write off of this liability in its books of account. Similar are the facts in the present issue as in the above issue of sundry creditors, hence taking a consistent view we delete this addition.
6. As regards to the liability of Rs.54,918/- on account of commission payable to Shri Narendra Kumar Duggar, it is also a fact that this liability is outstanding and it pertains to financial year 1997-98 relevant to A.Y.1998-99 and this liability does not pertain to the relevant assessment year 2002-03. The facts are exactly identical to the facts of the first issue of sundry creditors. Hence taking a consistent view, we delete this addition."
7.2 It is undisputed fact that the corresponding purchases made from the aforesaid six parties have been duly accepted by the AO in the assessment proceedings and, therefore, there can be no addition on account of these creditors without rejecting the corresponding purchases from the parties.
ITA No.1383/Kol/2014 A.Y. 2007-08M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 6
8. Similarly, the Ld. AR also relied on the order of Hon'ble ITAT, Kolkata Bench in the case of ITO vs. Tarun Kumar Dey in ITA No.226/Kol/2010 for the A.Y 2006- 07 wherein it was held as under:
"8. After hearing the rival submissions, on careful perusal of the material available on record, we are of the view that the assessee has been continuously showing the amounts as liability in the balance sheet and the Assessing Officer has not brought any material on record to show that payments were actually made to the creditors in the subsequent years. These payments were found recorded in the books of account of the assessee. Therefore, we are of the view that provisions of section 41(1) are not applicable to the facts of the present case. Thus, we find no infirmity in the order of the learned Commissioner of Income-Tax(Appeals) in deleting the additions made by the Assessing Officer. We uphold the order of the Learned Commissioner of Income- Tax(Appeals)."
On the other hand, the Ld. DR submitted that the AO in its remand report has given very clear finding that none of the party has appeared in response to the notice issued for the verification of sundry creditors. The Ld. DR submitted that it is not clear whether the requisite details as filed by the assessee in the form of paper book were furnished before the AO at the time of remand proceedings. Therefore, it was submitted that the issue needs to be verified by the AO and, accordingly, requested to restore the issue to the file of AO for fresh adjudication.
9. We have heard the rival contentions and perused the material available on record. The issue in the present case revolves to the treatment made by the AO for sundry creditors as income of the assessee under the provisions of section 41(1) of the Act. The AO was of the view that none of the party has appeared to prove the genuineness. Therefore, the addition was made. The view taken by the AO was also confirmed by the Ld. CIT(A).
9.1 Now the issue before us arises for adjudication so as to whether the amount of sundry creditors can be treated as income under the provisions of section 41(1) of the Act. At the outset, we find that the liabilities in respect of six parties are very much reflecting in the Balance-Sheet of the assessee and, the same cannot be disturbed without disallowing the corresponding purchases. The provisions of section 41(1) of the Act can only be invoked when the liability in respect of sundry creditors has been written back by the assessee in its books of accounts. None of the Authority below has recorded the finding that the amount of sundry creditors has been written back by the ITA No.1383/Kol/2014 A.Y. 2007-08 M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 7 assessee. Therefore, we conclude that the liability has not been written back by the assessee in its books of accounts. Thus, the order of Hon'ble ITAT in the case of Opto Audio Electronics Products Pvt. Ltd. (Supra) and Tarun Kr. Dey (Supra) are squarely applicable to the instant facts of the case. After having reliance on the aforesaid orders, we are of the view that no addition on account of sundry creditors in the instant case can be made under the provisions of section 41(1) of the Act. 9.2 We also find that the Ld. CIT(A) has clearly recorded all the submissions made by the assessee at the time of hearing in his order but he has not commented on his submissions made by the assessee. The Ld. CIT(A) has confirmed the order of AO without referring the materials submitted by the assessee at the time of hearing and no defect of whatsoever has been pointed out by him in the submission made by the assessee.
9.3 We also find that the AO at the time of remand report has not considered all the materials furnished to him such as copies of the purchase bills, ledgers of the parties, details of payments etc. Thus, we conclude that the remand report is not based on the materials available on record and just confirmed the disallowance on account of non- appearance of the parties. In our considered view, the AO in its remand report should have given sufficient opportunities to the assessee and should have considered all the materials submitted by the assessee.
9.4 In view of above, we have no hesitation in deleting the addition made by the lower authorities as discussed above. Thus, the grounds of appeal of the assessee are allowed.
10. The second issue raised by assessee in this appeal is that the Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of Rs.1,21,443/- on account of difference in the closing balance of the sundry creditors.
11. The assessee in the year under consideration has shown outstanding amount as credit balance as on 31.03.2007 as detailed under:
Sl. No. Name of the Party Amount (in Rs.)
1. M/s. Bengal Engineering Industries 86,762/-
2. M/s. Industrial Switch Gear & Cable 56,156/-
ITA No.1383/Kol/2014 A.Y. 2007-08
M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 8
The Inspector of Income Tax was deputed to verify the aforesaid credit balance shown by the assessee who in-turn submitted as under:
Sl. No. Name of the Party Amount (in Rs.)
1. M/s. Bengal Engineering Industries Nil
2. M/s. Industrial Switch Gear & Cable 21475/-
From the above, the AO observed the difference of Rs.1,21,443/- and accordingly treated as bogus sundry creditors. The AO disallowed the same and added to the total income of the assessee.
12. Aggrieved assessee preferred an appeal before Ld. CIT(A). The assessee before the Ld. CIT(A) submitted as under:
i) It is nowhere mentioned in the order sheet maintained by the AO for the deputation of the Inspector to verify the aforesaid sundry creditors.
ii) The information obtained by the Inspector of the Income Tax was not confronted to the assessee and, therefore, the addition cannot be sustained.
The assessee further submitted that the difference is arising between the amount shown by the assessee and shown by the party in its books of accounts is on account of opening balance in case Bengal Engineering Industries. As per the assessee, the opening balance was shown for Rs.1,52,783.84/- whereas the debit balance shown by the party is of Rs.68,311.92/- thus the difference of Rs.84,471.92/- was observed by the AO.
12.1 Similarly, the assessee submitted the cash receipt shown by the party for Rs.2,290/- is a unilateral account shown by the party. As such, the assessee has not paid any amount of cash for Rs.2,290/-. Thus the total difference of Rs.86,792/- (opening balance difference of Rs.84,472/- + cash payment difference of Rs.2,290/-) is liable to be deleted.
12.2 Similarly, the assessee submitted in respect of M/s. Industrial Switch Gear & Cable that the difference of Rs.29,681/- was arising on account of difference to the opening balance. It was also submitted that no payment has been made by the assessee to the party for Rs.5,000/- whereas the party has shown receipt of Rs.5,000/- from the ITA No.1383/Kol/2014 A.Y. 2007-08 M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 9 assessee. In view of above, the assessee submitted to the Ld. CIT(A) that the addition made by the AO is liable to be deleted. However, the Ld. CIT(A) has disregarded the contention of the assessee by observing as under:
"6. Ground no. (ii) relates to addition of Rs.1,21,443/- made by the AO. The fact of the case is that the AO found that the appellant showed M/s. Bengal Engineering Industries and M/s. Industrial Switch Gear and Cable as sundry creditors with the balances of Rs.86,762/- and 56,156/- respectively. On verification, it was found that M/s. Industrial Switch Gear and Cable had shown an amount of Rs.21,475/- receivable from the appellant and M/s. Bengal Engineering Industries had shown nil. The appellant filed his submission/rejoinder. After going through the same, I find that he submitted that the difference was coming from opening balances and even otherwise the balances were god cleared in the subsequent year. In view of the fact that the appellant also agreed to certain extent that there was difference in balances shown by the appellant as well as the above parties. The facts clearly show that the liability to the extent of Rs.1,21,443/- was no longer existed during the year, therefore, the AO was justified to make such addition."
Being aggrieved by this order of Ld. CIT(A), assessee came in second appeal before us.
13. The Ld. AR before us submitted that the assessee is never made payment in cash to the party. The Ld. AR further submitted that the information obtained by the AO from the parties was never confronted for the examination. In this regard, the Ld. AR has submitted the copy of the order sheet maintained by the AO which is placed on pages 25 to 27 of the paper book. The Ld. AR in support of his claim submitted that all the payments were made through banking channels. The ld. AR has submitted the copies of the letter of the party wherein the payment through bank reflected. The copies of the ledgers were placed on pages 60 to 62 of the paper book. The Ld. AR in respect of M/s. Industrial Switch Gear and Cable Co. has submitted that the ledger copy maintained by the party for the assessee is not legible and requested to restore the matter to the file of AO for fresh adjudication. On the other hand, the Ld. DR requested the Bench to restore the grounds of appeal to the file of AO for fresh adjudication.
14. We have heard the rival contentions and perused the materials available on record. The issue in the instant case relates to the amount of difference shown by the assessee and the parties. The difference was observed by the AO in response to two parties as details under:
ITA No.1383/Kol/2014 A.Y. 2007-08M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 10 Sl. No. Name of the Party
1. M/s. Bengal Engineering Industries
2. M/s. Industrial Switch Gear & Cable The difference was observed by the AO from the report of Inspector deputed to verify the balances of the aforesaid parties. The view taken by the AO was upheld by the Ld. CIT(A).
15. Now, the issue for over adjudication before us arises so as to whether the difference as observed by the lower authorities amounts to bogus sundry creditors. In this regard, we find that the sundry creditors have been shown by the assessee against the purchases of the goods. The order of lower authorities is silent about the purchases made by the assessee corresponding to the difference in the amount of sundry creditors as discussed above. It transpires that the lower authorities had accepted the purchase of the goods and no defects has been pointed out in the purchases claimed by the assessee.
15.1 From the copies of the ledger of M/s. Bengal Engineering Industries, we find that the entire payment was paid through banking channel as evident from the copies of the ledger which are placed on pages 60 to 62 of the paper book. The Ld. DR has not brought anything contrary to the arguments advanced by the Ld. AR. Therefore, we do not find any reason to uphold the order of lower authorities. However, from the copy of the ledger furnished by M/s. Bengal Engineering Industries, we find that an amount of Rs.2,289.60/- was paid through cash but from the records of the assessee, we find that no such cash payment has been made to the party. Thus, it is clear that the addition was made by the AO on the basis of third party information which was not cross-verified by the AO to the assessee. This act of the AO is against the principle laid down by the Hon'ble Apex Court in the case of Andaman Timber Industries vs. CCE, CA No. 4228 of 2006 (SC) (2015)127 DTR (SC) 241 wherein it was held:
"Not allowing the assessee to cross-examine the witness by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee ITA No.1383/Kol/2014 A.Y. 2007-08 M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 11 was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the awe. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them."
We rely in the judgment of Hon'ble jurisdictional High Court in the case of Bangodaya Cotton Mills Ltd. vs. CIT (2009) 21 DTR 200 (Cal). In the said case the Hon'ble jurisdictional High Court held as under:-
"AO having made the impugned addition simply on the basis of some letters seized from a third party in the absence of any corroborative evidence and without issuing summons to the concerned person or making him available for cross-examination, the order passed by the Tribunal upholding the addition is set aside and the matter is remanded back to the AO to consider the matter afresh."
Again the Hon'ble jurisdictional High Court in the case of Eastern Commercial Enterprise (1994) 210 ITR 103 (Cal) at page 111:-
"Cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence, both oral and documentary, so that he can prepare to meet the case against him. This necessarily also postulates that he should cross-examine the witness hostile to him."
In view of above, the addition made by the lower authorities in respect of M/s. Bengal Engineering Industries is hereby deleted.
15.2 Now, coming to the addition made by the AO in respect of Industrial Switch, Gear and Cable. At the outset, we find that the copes of ledger was not legible. Therefore, it was requested to restore back to the file of the AO. The Ld. DR raised no objection if the matter restored back to the AO for fresh adjudication in accordance with law. Hence, we restore the addition made by the AO in respect of Industrial Switch, Gear and Cable for fresh adjudication in accordance with law after giving ITA No.1383/Kol/2014 A.Y. 2007-08 M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 12 reasonable opportunity of being heard to the assessee. It is pertinent to note that the assessee should cooperate in the assessment proceedings as discussed above. Hence, this ground of appeal of the assessee is partly allowed for statistical purposes.
16. The last issue raised by assessee in Ground No.3 is that Ld. CIT(A) erred in confirming the order of AO by sustaining the addition of Rs.1,46,894/- on account of difference in the closing balance of sundry creditors. The assessee has shown following credit balances as on 31st March 2007:
Sl. No. Name of the Party Amount (in Rs.)
1. Dhiraj Trading Co. 95,210/-
2. Arkay Enterprises 53,326/-
On confirmation u/s 133(6) of the Act it was revealed that M/s. Dhiraj Trading Co. has shown credit balance of Rs.1642/- only and R. K. Enterprises has shown nil balance. Therefore, the AO treated this sum of Rs.146894/- (95210 - 1642 + 53326) as bogus sundry creditors and accordingly, the AO disallowed the same by adding to the total income of the assessee.
17. Aggrieved assessee preferred an appeal before the Ld. CIT(A). The assessee before the Ld. CIT(A) submitted in respect of Dhiraj Trading Co. submitted the reconciliation statement which is as under:
Difference is opening Balance 55,911.80
Cheque payment made by appellant
wrongly debited on other parties A/c 35,000.00
Cash receipt shown by party on 10.08.06
but not shown by the appellant. 2,656.68
Amount added by Ld. A.O 93,568.48
Thus, the assessee submitted that the difference as observed by the AO cannot be added to the total income of the assessee in respect of Dhiraj Trading Co.
Similarly The assessee before the Ld. CIT(A) in respect of Arkay Enterprises submitted the reconciliation statement which is as under:
ITA No.1383/Kol/2014 A.Y. 2007-08M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 13
Difference is opening balance 55,911.80
Cheque payment made by appellant wrongly 35,000.00
debited in other parties A/c
Cash receipt shown by party on 10.08.06 but not 2,656.68 shown by the appellant.
Amount added by Ld. AO 93,568.48 The assessee further submitted that he was maintaining the three different ledgers of Arkay Enterprises. If all the ledgers reconciled than a difference of Rs.767.31 is arising which is on account of opening balance. Thus the assessee submitted that the difference as observed by the AO cannot be added to the total income of the assessee in respect of Arkay Enterprises. However, the Ld. CIT(A) has disregarded the contention of the assessee by observing as under:
"7- Ground no. (iii) relates to addition of Rs.1,46,894/-. The fact of the case is that the AO further found on verification that M/s Dhiraj Trading Co. had shown an amount of Rs.1,642/- receivable from the appellant whereas M/s Arkay Enterprises had shown nil balance to be receivable. I find from the facts and copies of ledger accounts filed by the appellant in both the cases that the AO was justified to make such addition as the liability to that extent was ceased to exist, hence, appeal on this ground is dismissed."
Being aggrieved by this order of Ld. CIT(A), assessee is in second appeal before us.
18. The Ld. AR before us reiterated the submissions made before the ld. CIT(A). The Ld. AR stated that in case of Dhiraj trading company drew our attention on pages 68 and 69 of the paper book where the ledger copy of the party in the books of the assessee and ledger of the assessee in the books of the party were placed. Similarly the ld. AR in case of Arkay Enterprises drew our attention on pages 72 to 74 of the paper book where all the three copies of the ledgers were placed. On the other hand, the Ld. DR requested the Bench to restore the grounds of appeal to the file of AO for fresh adjudication.
19. We have heard the rival contentions and perused the material available on record. The issue in the instant case relates to the amount of difference shown by the assessee and the parties as discussed above. At the outset, we find that the ld AR has ITA No.1383/Kol/2014 A.Y. 2007-08 M.L. Mohata Vs. ITO Wd-35(4) Kol. Page 14 reconciled the figures of both the parties as discussed above except a minor difference of Rs. 767.31 in case of Arkay Enterprises. All the reconciliation statements are placed in the paper book on pages 68 to 78 of the paper book. The ld DR has not brought anything on record against the arguments advanced by the ld AR. Therefore, we are inclined to delete the addition made by the lower authorities except for a sum of Rs.767.00 which has not been reconciled by the AR. Hence this ground of appeal of the assessee is partly allowed.
20. In the result, appeal of assessee stands partly allowed for statistical purpose.
Order pronounced in open court on 30/08/2017
Sd/- Sd/-
( या%यक सद'य) (लेखा सद'य)
(S.S.Viswanethra Ravi) (Waseem Ahmed)
Judicial Member Accountant Member
*Dkp-Sr.PS
)दनांकः- 30/08/2017 कोलकाता / Kolkata
आदे श क त
ल प अ े षत / Copy of Order Forwarded to:-
1. अपीलाथ /Appellant-Manmohan Lal Mohata, 455, Ezra Street, 5th Fl, Kolkata-01
2. यथ /Respondent-ITO, Ward-35(4), Aayakar Bhawan, Poorva, 110, Shanti Pally, Kolkata-107
3. संब,ं धत आयकर आय-
ु त / Concerned CIT 4. आयकर आय-
ु त- अपील / CIT (A)
5. .वभागीय %त%न,ध, आयकर अपील य अ,धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड2 फाइल / Guard file.
By order/आदे श से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील य अ,धकरण, कोलकाता