DCIT Central-1 , Bhopal V. M/s. Orchid Bio Tech (P) Ltd, Indore

ITSSA 208/Ind/2019

AI Insights

The case involves two appeals by the Revenue against M/s Orchid Bio-Tech Pvt. Ltd. concerning the deletion of additions made under section 68 of the Income Tax Act, 1961, by the CIT(A). The additions pertained to unexplained cash credits, sundry creditors, and unexplained cash deposits in bank accounts. The Tribunal found that the CIT(A) had correctly appreciated the evidence and circumstances, leading to the conclusion that the additions were unjustified. The Tribunal noted that the AO had not properly verified the documents and had not issued necessary notices, which led to the dismissal of the Revenue's appeals.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122588 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-11-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 17-09-2019
• Other Referred Cases: R.B. Mittal (246 ITR 283), CIT v. Ritu Anurag Aggarwal - IT Appeal No. 325 of 2008, CIT Vs. Pancham Dass Jain (2006) 205 CTR (All.) 444, YFC Projects (P) Ltd. Vs. DCIT (Del) 134 TTJ 167, ACIT vs. Han Singar Gutkha (P) Ltd. (2008) 9 DTR 604(Trib.), JCIT vs. Mathura Dass Ashok Kumar (2006) 101 TTJ (All), CIT Vs. Smt. P.K. Noorjehan (1999) 237 ITR 570, Continental Carbon India Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Earning of tax free income; Set aside
• Section: 131; 68; 69; 142(1); 205; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER IT(SS)As No.204 & 208/Ind/2019 Assessment Years: 2012-13 DCIT, Central-1, Bhopal Vs. M/s Orchid Bio-Tech Pvt. Ltd., Sumit Nema, Advocate, Flat No.303, Princess Vally, S\ South Tukoganj, Nath Mandir Road, Next to Hotel Princess Place, Indore. PAN: AAACO7302C (Appellant) (Respondent) Assessee by : Shri Sumit Nema, Sr. Advocate & Shri Gagan Tiwari, AR Revenue by : Shri P.K. Mishra, CIT, DR Date of Hearing : 18.11.2022 Date of Pronouncement : 10.02.2023 ORDER PER C.M. GARG, JM: This appeal filed by the assessee are directed against the order dated 27.06.2019 of the CIT(A)-3, Bhopal relating to Assessment Year 2012-13. 2. The ld. Representatives of both the sides drew our attention to the grounds of appeal and other appeal records and submitted that due to inadvertent mistake, the Revenue has filed two identical appeals raising identical three grounds. Therefore, IT(SS) No.204/Ind/2019 for AY 2012-13 may kindly be adjudicated and subsequent appeal, i.e., IT(SS)A No.208/Ind/2019 for AY 2012-13, raising identical grounds may IT(SS)A Nos.204 & 208/Ind/2019 2 kindly be disposed of accordingly. The grounds raised by the Revenue read as under:- “On the facts and in the circumstances of the case, the Ld CIT (A)-3 has erred in:- 1. On the fact and in the Circumstances of the case the Ld. CIT (A] has erred in deleting the addition of Rs. 3,47,68,170/- made by the A.O. on account of unexplained cash credit u/s 68 of the Income Tax Act, 1961. 2. On the fact and in the Circumstances of the case the Ld. CIT [A] has erred in deleting the addition of Rs. 1,80,64,252/- made by the A.O. on account of unexplained sundry creditors u/s 68 of the Income Tax Act, 1961. 3. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 5,68,000/- made by the A.O. on account of unexplained cash deposits in bank account u/s 69 of the Income Tax Act, 1961.” 3. Apropos Grounds No.1, the ld. CIT-DR, drawing our attention to para 6 to 6.3 of the assessment order, submitted that the balance sheet of the assessee revealed that the assessee has squared up some of the creditors during the relevant financial period, however, the assessee did not submit any detail along with documentary evidences in this regard. The ld.CIT-DR further pointed out that the AO categorically noted and observed that the assessee company has not establish the identity and credit worthiness of the creditors and genuineness of the transaction. He further submitted that the onus of establishing identity and credit worthiness of the creditors and genuineness of the transactions was on the assessee which has not been discharged by way of proper explanation and supporting documentary evidence in the form of postal address, PANs, confirmations, copy of the returns and copy of the bank statements of the creditors. Therefore, the AO was right in invoking the provisions of section 68 in view of the judgement of the Hon’ble Andhra Pradesh High Court in the IT(SS)A Nos.204 & 208/Ind/2019 3 case of R.B. Mittal (246 ITR 283) wherein it was opined that the onus lie on the assessee to prove the identity and credit worthiness of the creditor and genuineness of the transaction, failing which the cash credit is assessable in the hands of the assessee u/s 68 of the Act. The ld.CIT-DR submitted that while dealing with ground No.2 of the assessee, the ld.CIT(A) has considered irrelevant facts and circumstances without dislodging the contention of the AO, therefore, the impugned first appellate order may kindly be set aside and the order of the AO may be restored. 4. Replying to the above, the ld. Sr. Counsel of the assessee, drawing our attention towards para 6.3 of the first appellate order, submitted that the AO proceeded to make the addition in the hands of the assessee on account of sundry creditors without appreciating the relevant documentary evidence and other facts and circumstances which was rightly considered and appreciated by the ld.CIT(A). The ld. Sr. Counsel submitted that during AY 2012-13, the assessee received loan from five different individuals/companies out of which Nipun Agency was not covered under the search operation. However, the assessee submitted all the relevant documentary evidences in the form of confirmation letter, ITR, balance sheet, regarding credit from Mr. Brajendra Sharma which was rejected by the AO only by doubting the signature of the assessee on the confirmation letter. The ld. Sr. Counsel submitted that in this situation, when the AO was not satisfied then, he could have called Mr. Brajendra Sharma by invoking the provisions of section 131 or 133(1) of the Act and, without undertaking any such exercise, he proceeded to make addition in the hands of the assessee. The ld. Sr. counsel submitted that the AO ignored the very fact that the creditor Mr. Brajendra Sharma for AY 2012-13 has shown profit of more than Rs.3 crores from partnership firm M/s S.R. Ferro Alloys Jhabua as a share which was IT(SS)A Nos.204 & 208/Ind/2019 4 exempt from income u/s 10(2A) of the Act. Therefore, the same was not included in the return of income. 5. Regarding another creditor Neetu Sharma, the ld. Sr. Counsel submitted that she has also shown exempt income out of her share of profit amounting to Rs.3,61,18,410/- which is more than ten times of the impugned amount of Rs.35 lakhs given to the assessee company and the ld.CIT(A), after verifying all the relevant documentary evidence such as confirmation, return of income, balance sheet along with bank statement of Mrs. Neetu Sharma, rightly concluded that this transaction of loan was and needs to be deleted as unsustainable. Regarding Nikita Multitrade Pvt. Ltd., the ld. Sr. Counsel submitted that as per remand report of the AO, the returned income of this company for AY 2012-13 was Rs.30,25,400/- where the amount of loan given by it to the assessee was Rs.15 lakh only. He further submitted that the AO of the assessee and lender company was the same and it was the AO to cross verify the documents from the lender company to make such an allegation that the lender company has less income, to lend less amount to the assessee company. The ld. Sr. Counsel strenuously contended that the loan amount was repaid by the assessee company during FY 2012-13 pertaining to AY 2013-14 which also clearly shows that the unsecured loan was genuine and rightly deleted by the ld.CIT(A). 6. Regarding loan from Dr. Sudhir Sharma of Rs.67,45,170/-, the ld. Sr. Counsel explained that as per remand report, the income of Dr. Sudhir Sharma was Rs.32,71,269/- and he also received exempt income as share of profit from M/s S.R. Ferro Alloys amounting to Rs.3,60,75,076/- which was claimed to be exempt u/s 10(2A) for AY 2012-13 and the exempt income was not included in the return of IT(SS)A Nos.204 & 208/Ind/2019 5 income. Therefore, the amount of loan given to the assessee company is less than 1/5 of the total earnings of Dr. Sudhir Sharma which cannot be doubted in view of the position that the assessee submitted copy of the return of income along with bank statement, confirmation, etc., and the loan was repaid during subsequent FY 2012-13 pertaining to AY 2013-14 which also supports the conclusion of the CIT(A) that the loan was genuine. 7. Regarding loan from Nipun Agencies, the ld. Sr. Counsel submitted that the income of Nipun Agencies was drawn at Rs.1,91,64,380/- by the respective AO, for AY 2010-11, therefore, the identity and credit worthienss along with source is self speaking from the assessment order for AY 2010-11. The ld. Sr. Counsel also submitted that the entire loan was repaid by the assessee to M/s Nipun Agencies which also supports the claim of the assessee that the unsecured loan from Nipun Agencies is a genuine transaction. 8. The ld. Sr. counsel finally submitted that the ld.CIT(A) rightly appreciated the relevant documentary evidence which successfully discharged the onus lay on the shoulders of the assessee as per the requirement of section 68 of the Act. Therefore, the addition made by the AO was rightly deleted by the ld. First appellate authority. Hence, the first appellate order may kindly be upheld by dismissing the ground No.1 of the Revenue. On careful consideration of the above submissions, first of all, we note that the ld.CIT(A) has granted relief to the assessee with the following observations:- “6.3. Ground No. 2for AYs2012-13& 2013-14:- Through these grounds of appeal, the appellant has challenged the addition of Rs. 3,47,68,170/- A.Y. 2012-13 and Rs. 2,55,100/- in A.Y. 2013-14 on account of unexplained cash credit u/s 68 of the IT Act.In A.Y. 2012-13, the IT(SS)A Nos.204 & 208/Ind/2019 6 appellant has received loans from five different individual/company. Out of which four person/company has been covered under this search itself and the assessment was made by the same learned AO. a) Brajendra Sharma \ - Rs 1,19,70,000/- b) Neetu Sharma - Rs35,00,000/- c) Nikita Multitrade Pvt. Ltd. - Rs 15,00,000/- d) Dr. Sudhir Sharma - Rs.67,45,170/- e) Nipun Agencies - Rs.1,80,00,000/- (not cover under search) Brajendra Sharma - Rs 1,19,70,000/- :- The Assessing officer in his remand report has mentioned that the confirmation letter, ITR and Balance Sheet duly being submitted by the Appellant but has very surprisingly doubted the signature of Shri Brajendra Sharma mentioning that “ On verification of confirmation letter it can not be certified whether it is signed by Shri Brajendra Sharma” Shri Brajendra Sharma was covered under search and the assessing officer had several and ample opportunity to get verified signature of Mr. Brajendra Sharma by either calling him personally or by verifying any document signed and submitted by him which the AO has failed or avoided for any reason known to him during the assessment proceeding and also at the time of remand proceedings. The assessing officer has further mentioned in his remand report that income of Mr. Brajendra Sharma was Rs. 29,71,130/- where as the loan given by him Rs. 1,19,70,000/-. The Appellant has submitted entire Balance Sheet of Mr. Brajendra Sharma alongwith Bank Statement. The AO has failed to verify the papers ie income tax return and computation of lender MrBrajendra Sharma where he has shown exempt income U/s 10(2A) ie Profit from the partnership firm S R Ferro Alloys Jhabua were his share of profit was amounting to more than Rs 3,00,00,000/- for the AY- 12-13. The Share of Profit of the firm is exempt income not included in the returned income which is taxable. Further the AO of the Appellant company and the AO of the Lender was same and it was on the part of the AO to cross verify from the documents of the lender to make such an allegation that the lender has less income but has lend more amount to the Appellant company. Thus the Appellant has discharged the onus lies upon him to prove the source of credit. Further it is very surprising to note that a person who is covered under search, in spite of this fact Department itself doubted the credit worthiness of the person who was subject to search by the department itself. The Unsecured loan of Rs 1,19,70,000/- from Brijendra Sharma to Appellant company, was repaid by the appellant company in the AY 13-14 which clearly depict that this unsecured loan was genuine and needs to be deleted as unexplained. IT(SS)A Nos.204 & 208/Ind/2019 7 Neetu Sharma -Rs 35,00,000/-. Smt. Neetu Sharma was covered under search and the assessing officer had passed high peach assessment order of SmtNeetu Sharma which demonstrate her creditworthiness. The assessing officer has further mentioned in his remand report that income of Mrs. Neetu Sharma was Rs. 2,55,546/- where as the loan given by her Rs. 35,00,000/-. The Appellant has submitted entire Balance Sheet of Mrs. Neetu Sharma alongwith Bank Statement. The AO has failed to verify the papers ie income tax return and Computation of tax of lender MrsN eetu Sharma where she has shown exempt income from the firm U/s 10(2A) i.e. Profit from the firm S R Ferro Alloys Jhabuawhere she was partner and her share of profit was 16.67% amounting to Rs 3,61,18,410/- for the AY- 12-13. The Share of Profit of the firm is exempt income not included in the returned income which is taxable. Further the AO of the Appellant company and the AO of the Lender was same and it was on the part of the AO to cross verify from the documents of the lender to make such an allegation that the lender has less income but has lend more amount to the appellant company. Thus the Appellant has completed the onus lies upon him to prove the source of credit. Further it is very surprising to note that a person who is covered under search, in spite of this fact Department itself doubted the credit worthiness of the person who was subject to search by the department itself. The Unsecured loan of Rs35,00,000/- from Smt. Neetu Sharma to Appellant company, was from her share of income from the firm which clearly depict that this unsecured loan was genuine and needs to be deleted as unexplained. Nikita Multitrade Pvt. Ltd. - Rs 15,00,000/-. Nikita Multitrade Pvt. Ltd. was covered under search and the assessing officer had passed high peach assessment order of Nikita Multitrade Pvt. Ltd. which demonstrate its creditworthiness. The assessing officer has further mentioned in his remand report that income of Nikita Multitrade Pvt. Ltd. was Rs. 30,25,400/- where as the loan given by it Rs. 15,00,000/-. The Appellant has submitted entire Balance Sheet of Nikita Multitrade Pvt. Ltd. alongwith Bank Statement, return of income and computation of tax. Further the AO of the Appellant company and AO of the Lender Company was same and it was on the part of the AO to cross verify from the documents of the lender Company to make such an allegation that the lender Company has less income but has lend more amount to the appellant company. Thus the Appellant has discharged the onus lies upon him to prove the source of credit. Further it is very surprising to note that a person who is covered under search, in spite of this fact Department itself doubted the credit worthiness of the person who was subject to search by the department itself. With respect to Unsecured loan of Rs 15,00,000/- from Nikita Multitrade Pvt. Ltd that the Appellant company has repaid the entire loan to Nikita Multitrade Pvt. Ltd. in the AY 13-14 which clearly depict that this unsecured loan was genuine and needs to be deleted as unexplained. IT(SS)A Nos.204 & 208/Ind/2019 8 Dr. Sudhir Sharma - Rs 67,45,170/-: the Assessing officer in his remand report has mentioned that the confirmation letter and ITR duly being submitted by the Appellant but has very surprisingly doubted the signature of DrSudhir Sharma mentioning that “ On verification of confirmation letter it can not be certified whether it is signed by DrSudhir Sharma”. Dr. Sudhir Sharma was also covered under search and the assessing officer had passed high peach assessment order of Dr. Sudhir Sharma which demonstrate his creditworthiness. The assessing officer has further mentioned in his remand report that income of Dr. Sudhir Sharma was Rs. 32,71,269/- where as the loan given by him Rs. 67,45,170/. The Appellant has submitted Return of income,Computation and entire Balance Sheet of Dr. Sudhir Sharma alongwith Bank Statement. The AO has failed to verify the papers i.e. Return of income and income tax computation of lender DrSudhir Sharma where he has shown exempt income from the firms U/s 10(2A) i.e. Profit from the firm S R Ferro Alloys Jhabua were his share of profit was 16.67% amounting to Rs 3,60,75,076/- for the AY- 12-13.The Share of Profit of the firm is exempt income not included in the returned income which is taxable. Further the AO of the Appellant company and the AO of the Lender was same and it was on the part of the AO to cross verify from the documents of the lender to make such an allegation regarding less income and lending more amount to the Appellant company. Thus the Appellant has completed the onus lies upon him to prove the source of credit. Further it is very surprising to note that a person who is covered under search, in spite of this fact Department itself doubted the credit worthiness of the person who was subject to search by the department itself. With respect to Unsecured loan of Rs 67,45,170/- from Dr. Sudhir Sharma that the Appellant company has repaid the entire loan to Dr. Sudhir Sharma in the AY 13-14 which clearly depict that this unsecured loan was genuine and needs to be deleted as unexplained. Nipun Agencies - 1,80,00,000/-:- In case of Nipun Agencies that though the Assessing officer has mentioned that the Appellant Company has submitted confirmation letter and Bank Statement of Nipun agencies in his remand report but has failed to appreciate the fact that the Appellant has submitted.The assessment order of Nipun Agencies for the A.Y. 2010-11 passed on 31/03/16 by Income Tax Officer, Ward - 6(3), Kolkata where in the income was assessed to Rs. 1,91,64,380/- by the department itself with respect to identity, source and creditworthiness of the Nipun Agencies is being proved by providing the assessment order where Rs. 1,91,64,380/- added in the income of the Nipun Agencies. With respect to Unsecured loan of Rs 1,80,00,000/- from Nipun Agencies that the Appellant company has repaid the entire loan to Nipun Agencies | IT(SS)A Nos.204 & 208/Ind/2019 9 which clearly depict that this unsecured loan was genuine and needs to be deleted as unexplained. Therefore the AO is not justified in addition Rs. 3,75,44,170/- on account of unexplained cash credits. Therefore, the addition amounting to Rs. 3,75,44,170/- in A.Y. 2012-13 is Deleted. With respect of the addition of Rs. 2,55,100/- in A.Y. 2013-14 the appellant has failed to prove the genuineness of the loan by not providing any confirmation letter from the lender. Therefore, the AO is justified in addition to the amount of Rs. 2,55,100/- in the total income of the appellant. Therefore, the addition of Rs. 2,55,100/- in A.Y. 2013-14 is Confirmed. Therefore, the appeal on these grounds for A.Y. 2012-13 is Allowed and for A.Y. 2013-14 is Dismissed.” 9. In view of the above observations, first of all, we may point out that from the assessment order, we observe that the AO noted that the assessee has not made compliances of the notices u/s 143(2) of the Act. Para 2 and 3 of the assessment order reveals that the AO issued notice dated 23.09.2014. Before proceeding to make addition on account of creditors and invoking the provisions of section 68, the AO has not issued any show cause notice to the assessee and recorded a conclusion that the identity and credit worthiness of creditors and genuineness of the transaction could not be established by the assessee, hence, the same are treated as unexplained creditors u/s 68 of the Act. 10. From the relevant part of the first appellate order, as reproduced hereinabove, we further note that the ld. CIT(A) firstly considered the submissions of the assessee and reproduced the same in para 5 of the first appellate order. Thereafter, he adjudicated the grounds of the assessee agitated in Form No.35. From para 6.3, we observe that Shri Brajendra Sharma, Smt. Neetu Sharma and Dr. Sudhir Sharma were receiving profit from M/s S.R. Ferro Alloys Jhabua which was exempt u/s 10(2A) of the Act in addition to taxable income shown in the return of income and this fact was not considered by the AO. In the case of Shri Brajendra Sharma, the total income IT(SS)A Nos.204 & 208/Ind/2019 10 during the relevant AY 2012-13 was Rs.3,29,71,130/- and the amount of loan given by him to the assessee was Rs.1,19,70,000/-. Thus, we safely gather that the amount of loan given to the assessee by Shri Brajendra Sharma was approximately 35-40% of his total income. We may also point out that the AO of the assessee and lender Shri Brajendra Sharma was the same and he had sufficient opportunity to verify the identity, credit worthiness of creditors and genuineness of the transaction and without such exercise the AO proceeded to invoke the provisions of section 68 of the Act. In view of the above, we are in agreement that the findings recorded by the CIT(A) that the assessee has discharged the onus lay upon him to prove the source of credit by submitting confirmation, balance sheet along with bank statement for AY 2012-13 of Shri Brajendra Shrama and the Department cannot be allowed to doubt the credit worthiness of the person who is earning and disclosing the income in the relevant financial period more than 2.5 times of loan amount given to the assessee. 11. Regarding Smt. Neetu Sharma, the loan of Rs.35 lakhs was given to the assessee and this creditor received share of profit of Rs.3,61,18,410/- which was exempt u/s 10(2A) of the Act and since the share of profit was exempt, therefore, he only declared taxable income of of Rs.2,55,246/-. Keeping in view the amount of loan of Rs.35 lakh and income of Mrs. Neetu Sharma amounting to Rs.3,63,73,956/- including the amount of exempt income u/s 10(2A) of the Act the amount credit is less than 10% of the total income accrued to her during AY 2012-13. The assessee has submitted confirmation, copy of the return of income, balance sheet along with bank statement and return of income, then the ld.CIT(A) rightly concluded that when the AO of the assessee and the AO of the lender was the same it was the AO to cross IT(SS)A Nos.204 & 208/Ind/2019 11 verify the documents to make such allegation that lender has less income, but, has lent more money to the assessee. 12. Regarding Dr. Sudhir Sharma, similar factual situation lies as the amount was Rs.67,45,170/- and he declared taxable income at Rs.32,71,269/- and exempt income u/s 10(2A) of the Act amounting to Rs.3,60,75,076/- which is more than four times of total amount of loan given by Dr. Sudhir Sharma to the assessee. In this case also the AO of the assessee company and lender was the same despite the fact that he doubted the identity and credit worthiness of the lender and genuineness of the transaction and the ld.CIT(A) rightly appreciated the facts of the case supported by the copy of the return of income, confirmation, balance sheet, bank statement and computation of income of Dr. Sudhir Sharma and, thereafter, concluded that when a person who is covered under search, the Department itself doubted the credit worthiness of the person who was subjected to search by the Department, therefore, the conclusion drawn by the ld.CIT(A) is correct and justified. Regarding the amount of loan of Rs.1,80,00,000/- from M/s Nipun Agencies, the ld.CIT(A) noted that as per assessment order for AY 2010-11 passed on 31.03.2016 by ITO, Kolkata, the income has been assessed at Rs.1,91,64,380/- which supports the identity, source and credit worthiness of the creditor and since the assessee company as repaid the entire loan to Nipun Agencies, the unsecured loan has to be held as genuine and needs to be deleted as unexplained. It is a peculiar feature of present case that the amount of loan from Shri Brajender Sharma, M/s Nikita Multitrade Pvt. Ltd., Dr. Sudhir Sharma was repaid during subsequent AY 2013-14 and this fact has not been controverted by the AO in the remand report or by the ld.CIT-DR during the arguments before this Bench. In view of the foregoing, we reach to a logical conclusion that the ld.CIT(A) IT(SS)A Nos.204 & 208/Ind/2019 12 was right in deleting the addition made by the AO u/s 68 of the Act by allowing ground No.2 of the assessee for AY 2012-13. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the findings arrived at by the ld.CIT(A). Therefore, we uphold the same. Consequently, ground No.1 of the Revenue is dismissed. Ground No.2 13. The ld. CIT-DR, drawing our attention towards para 7 to 7.4 of the assessment order, submitted that the assessee has not made compliance of notice u/s 142(1) of the Act and could not establish the identity and credit worthiness of the creditors and genuineness of the transaction, therefore, the onus lay on the shoulders of the assessee u/s 68 of the Act was not discharged. Therefore, the AO had no alternative, but, to invoke the provisions of section 68 of the Act treating the same as unexplained sundry creditors. Further, drawing our attention towards the relevant part of the first appellate order, the ld.CIT-DR submitted that the relief has been granted to the assessee without any justified reason and basis, therefore, the order of the AO may be restored by setting aside the impugned first appellate order. 14. Replying to the above, the ld. Sr. Counsel submitted that the amount of Rs.1,80,64,252/- represented the closing balance of sundry creditors as per audited books of account which was added by the AO, and, at the same time, the purchases made and payments made to the said creditors through account payee cheque was accepted as genuine by the AO. The ld. Sr. counsel submitted that all the documentary evidences filed by the assessee clearly establish the genuineness of the transaction of purchase of goods from such creditors which cannot be doubted in view IT(SS)A Nos.204 & 208/Ind/2019 13 of the a very important fact that the closing balance of the said creditors was duly discharged during the succeeding assessment year by making payments of outstanding amount through banking channels. The ld. Sr. Counsel also pointed out that as there was no case for disallowance of corresponding purchases, no addition could have been made in the hands of the assessee u/s 68 of the Act because the purchases and trading results have been accepted by the AO. The ld. Sr. Counsel strongly supported the first appellate order and submitted that the addition has rightly been deleted by the ld.CIT(A) on justified basis and reasoning, therefore, the first appellate order may kindly be upheld by dismissing the ground No.2 of the Revenue. 15. On careful consideration and on careful perusal of the assessment as well as the first appellate order, we observe that the ld.CIT(A) has granted relief to the assessee with the following observations and findings:- “6.4 Ground No. 2 for A.Y.2011-12; Ground No. 3 for AY 2012-13:- Through these grounds of appeal, the appellant has challenged the addition of Rs. 1,08,59,520/- in A.Y. 2011-12 &Rs. 1,80,64,252/- in A.Y. 2012-13 on account of unexplained sundry creditors u/s 68 of the IT Act.The appellant contends that the revenue has failed to appreciate the basic fact that the sum of Rs. 1,08,59,520 and Rs. 1,80,64,252/- represented closing balance of sundry creditors as per audited books of accounts of the appellant, which was added by the AO, whereas, purchases made and payments made to the said creditors through account payee cheques were accepted as genuine by the AO. All the documentary evidences filed by the appellant established the genuineness of the transaction of purchase of goods from such creditors. The appellant argued the closing balance of such creditors was duly - discharged in the succeeding year through verified banking channels. As there was no case for disallowance for corresponding purchases, no addition could be made under Section 68 in as much as it is not in dispute that the creditors outstanding related to purchases and the trading results were accepted by the AO. It is an admitted fact that the purchases made from the parties in whose names, balances were outstanding have been accepted but the AO only doubted the genuineness of the outstanding balance at the year end in the name of those parties for no reason whatsoever. The books of IT(SS)A Nos.204 & 208/Ind/2019 14 account were duly audited by the independent Auditor. Hence the AO was not justified in making the addition. Regarding applicability of provisions of section 68, the appellant has brought substantial material on record to show that these are sundry creditor for purchases and have been duly paid in subsequent years and that part of the purchases from the very parties were already accepted by the Assessing Officer. The Assessing Officer has not appreciated the facts of the case in its entirety. This is a case, where the books are not outrightly rejected, there is no adverse inference drawn regarding quantum of purchases or sales and even the purchase accounts of the sundry creditors have not been disturbed. The fact that the appellant maintained regular books of account including stock register is also not negated. The Assessing Officer had not disallowed the purchases from those creditors nor the trading results were disturbed. In CIT v. Ritu Anurag Aggarwal - IT Appeal No. 325 of 2008 dated 22/7/2009, dealing with section 68 of the IT Act in a similar case, the Hon’ble Delhi High Court observed '....Proceeding on this basis, the IT AT observed that the sales, purchases as well as gross profits as disclosed by the assessee have been accepted by the Assessing Officer. Once this is accepted, we are of the opinion that the approach of the IT AT was correct inasmuch as the Assessing Officer did not consider this aspect while making additions of the sundry creditors under section 68 of the Income Tax Act. As there was no case for disallowance for responding purchases, no addition could be made under section 68 inasmuch as it is not in dispute that the creditors' outstanding related to purchases and the trading results were accepted by the Assessing Officer.' The action shows gross ad hoc approach of the AO who failed to notice that all these credits are not by way of loan or advance but they were day to day outstanding balances of the suppliers of the appellant from which appellant made day to day purchases of raw material. The parties were in existence in earlier years and subsequent years. The appellant has proved the existence of parties and the fact that the amount was in credit because all the purchases which are entered in the stock register and debited to P&L A/c. The AO accepted the stock register and allowed the expenditure on account of purchases cannot make any addition qua the trade creditors. In this case identity of the supplier and genuineness of purchasers is established and is accepted by the AO, by upholding the books of account and following record: (a) stock register; (b) consumption based on such purchases have been accepted; IT(SS)A Nos.204 & 208/Ind/2019 15 (c) utilization has not been disturbed; (d) sales have been accepted (e) The assessee's purchases with the suppliers have been accepted. Consequently it cannot be held that appellanthas failed to discharge prima facie onus for proving the purchases as genuine. The AO unfortunately adopted contradictory standard on one hand, all the purchases are accepted and allowed as expenditure in P&L A/c, but the amount payable to suppliers on the basis of very same credit purchases is being disallowed because AO could not serve the notice. The whole approach adopted is grossly mistaken which has put the appellant in repeated litigation. The appellant’s payments against the purchases are through bank statements, which were explained before AO with evidence about clearance of cheques by bank statements, under these circumstances, no question can be raised on the financial implications of the transactions as they stand proved on these facts. The appellant filed all the relevant documents showing the genuineness of the quantity of purchases and that of the supplier and the fact that the transactions were entered into relevant books and record during the normal course of business of the assessee, has not been disputed. The appellant filed bank accounts, confirmation, copy of ledger accounts for all the years, copies of purchase bills, PAN nos. of suppliers, their Vat registration etc. which proves the genuineness of the transactions beyond doubt. Further, the perusal of bank account of the appellant and the ledger accounts show that the payments to the suppliers have been duly made by cheque in due course of the business. The AO has nowhere been able to point out a single defect in the books of account. The sales, purchases and trade results shown by the appellant have been accepted by the AO without question. (v) Reliance is placed on following case laws: (a) CIT Vs. Pancham Dass Jain (2006) 205 CTR (All.) 444 (b) YFC Projects (P) Ltd. Vs. DCIT (Del) 134 TTJ 167 (c) ACIT vs. Han Singar Gutkha (P) Ltd. (2008) 9 DTR 604(Trib.) (d) JCIT vs. Mathura Dass Ashok Kumar (2006) 101 TTJ (All) (e) CIT Vs. Smt. P.K. Noorjehan (1999) 237 ITR 570. (vi) The Delhi ITAT while dealing with somewhat similar facts in ITA 5269, 5270, 5271, 5242 & 5513/D/10 in the case of Continental Carbon India Ltd has held “In view thereof, we hold that the additions made in the case of the asses see u/s 68 of the Act ought to be deleted in all these years. In our view the I. T. Act does not cast absolute burden on the assessee, sec. 68 cast a preliminary burden, which, in our view, has been duly discharged by the assessee by filing the confirmations, bank statements, invoices and IT(SS)A Nos.204 & 208/Ind/2019 16 transport details of supplies and goods. The identity of the purchaser is accepted by the department in one year or the other subsequent year. The genuineness of the purchases emerge from the fact that all the goods purchased by the assessee on credit. Purchases have not been disputed by the department in P&L a/c by allowing same as expenditure to the assessee. Therefore, assessee has discharged its onus to file evidence for genuineness of suppliers. The issue of creditworthiness will not be applicable in this case as the credit balances are due to purchases made by the assessee from these suppliers. Therefore, the discharge of burden of creditworthiness is implicit from these facts. Looking from any angle, the assessee cannot be held to be liable for any non-discharge of onus. In these circumstances, the additions cannot be made only because the departmental authorities failed to exercise their power and duties for serving and enforcing the summons. In the entirety of facts and circumstances of the case and the evidence produced by the assessee, the additions made u/s 68 on account difference in balances or non- receipt of reply to summons etc. cannot be made in the hands of the assessee. All these additions in the years before us are deleted. Corresponding asses see's grounds in A.Y. 2003-04 and 2005-06 are allowed and that of revenue dismissed. ” In view of these facts and in view of the aforesaid judicial matrix the addition qua trade creditors deserves to be deleted.Therefore the AO is not justified in addition Rs. 1,08,59,520/- in A.Y. 2011-12 and Rs. 1,80,64,252/- in A.Y. 2012-13 on account of unexplained sundry creditors u/s 68 of the IT Act to the total income of the appellant. Therefore, the addition amounting to Rs. 1,08,59,520/- in A.Y. 2011-12 and Rs. 1,80,64,252/- in A.Y. 2012-13is Deleted. Therefore, the appeal on these grounds is Allowed.” 16. First of all, we may point out that the alleged sundry creditors pertains to the purchases made by the assessee and the purchases and trading results have been accepted by the AO without any dispute. In the present case, the closing balance of such creditors has been picked up by the AO for invoking the provisions of section 68 and the closing balance of such sundry creditors was duly discharged during the succeeding financial period through banking channels by the assessee company. These facts have not been controverted neither by the AO during the remand proceedings nor by the ld.CIT-DR during hearing before us. The AO failed to appreciate the facts of the case in its totality and in a situation where books of IT(SS)A Nos.204 & 208/Ind/2019 17 account are not outrightly rejected, no adverse inference can be drawn regarding the quantum of purchases and sales and the purchase accounts of sundry creditors cannot be doubted or disturbed without any positive adverse material against the assessee to dislodge the genuineness of the purchases and to doubt the identity and credit worthiness of the sundry creditors and credit worthiness of the transaction. In this case, the identity of the sundry creditors/supplier and genuineness of the purchases has been established by way of furnishing audited books of account and by supporting bills and vouchers along with stock register consumption based on said purchase, reutilization and the AO has also accepted the sales and there should be no sales without purchases, therefore, assessee’s purchases with suppliers/sundry creditors have also been accepted by the AO. In this situation, we are not in agreement with the findings arrived by the AO that the assessee has failed to discharge prima facie onus of proving the purchases as genuine along with identity and credit worthiness of the sundry creditors and genuineness of the transactions of purchase. Per contra, the ld.CIT(A) rightly noted that the AO unfortunately adopted contradictory standard on the one hand all purchases has been accepted and allowed as expense in the P&L Account and the amount payable to suppliers/sundry creditors on the basis of very same credit purchases was disallowed because the AO could not serve notice of such sundry creditors. The ldl.CIT(A), after considering the facts and circumstances granted relief to the assessee. We are in agreement with the findings of the ld.CIT(A) that when the assessee has filed bank account, confirmations, copy of ledger account, copy of purchase bills, PANs, VAT registration, etc., then, the identity and credit worthiness of the creditors and genuineness of the transaction has to be held as beyond doubt. This fact has not been disputed by the Department that the IT(SS)A Nos.204 & 208/Ind/2019 18 payments to the suppliers have duly been made through cheque in due course of business and the closing balance, which was picked up by the AO for making addition u/s 68 was discharged by the assessee during subsequent financial period by making payments through banking channel. In this situation, the ld. CIT(A) has followed the judgement of ITAT Delhi in the case of Continental Carbons India Ltd. (supra) and deleted the addition made by the AO u/s 68 of the Act. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the findings given by the ld.CIT(A). Therefore, we uphold the same. Ground No.3 17. Apropos ground No.3, the ld.CIT-DR submitted that the assessee failed to explain the source of cash deposit in the bank account of Rs.5,68,000/- for AY 2012- 13, therefore, the same was rightly treated as undisclosed income of the assessee and when the assessee has not submitted cash book for verification, then, the AO had no alternative, but, to invoke the provisions of section 68 and treating the same as unexplained investment. The ld.CIT-DR pointed out that the ld.CIT(A) has ignored the findings arrived at by the AO while granting relief to the assessee. Therefore, the first appellate order may kindly be set aside and the order of the AO may be restored. 18. Replying to the above, the ld. Sr. Counsel submitted that the assessee submitted the entire cash book before the AO and the AO, in his remand report, has not identified the amount which are not found recorded in the cash book of the assessee. The ld. Sr. Counsel vehemently pointed out that the entire books of account of the assessee are duly audited by the competent auditor and balance sheet and all other financial statements are tallied properly. He further submitted that the assessee submitted the schedule of cash balance of Rs.48,401/- as on 31.03.2012 and IT(SS)A Nos.204 & 208/Ind/2019 19 also submitted the cash book where the said amount was appearing. The cash deposited to the bank was duly recorded in the cash book for FY 2011-12 pertaining to AY 2012-13, therefore, the ld.CIT(A) has rightly deleted the addition made by the AO u/s 68 of the Act. 19. On careful consideration of above, first of all we may point out that the ld.CIT(A) has granted relief to the assessee with the following observations and findings:- “Ground No. 4 for A.Y. 2012-13; Ground No. 3 for AY 2013-14:- Through these ground of appeal, the appellant has challenged the addition of Rs. 5,67,000/- in A.Y. 2012-13 and Rs. 5,76,800/- in A.Y 2013-14 on account of unexplained cash deposit in bank account.The assessing officer has made addition of Rs.5,68,000/- in A.Y. 2012-13 and Rs 5,76,800/- A.Y. 2013-14 on account of Cash deposited in Bank on various date. In the F.Y.2011-12 the appellant had Cash balance Rs 48,401/- as on 31/3/12. The appellant has submitted entire Cash Book and the Assessing officer in his remand report has not identified the amount which are not found recorded in the Cash Book of the Appellant. The entire books of the appellant is duly audited and the Balance sheet of all the years were tallied. The appellant has regular business in both these years.The appellant submitted the schedule of cash balance of Rs 48,401/- in balance sheet as on 31/03/12 and also submitted the cash book as on 31/03/2012 where in the same cash balance of Rs. 48,401/- is appearing. Thus this proves that the cash deposited in bank has duly being recorded in the books of Accounts. Thus this proved that cash deposited in Bank of Rs. 5,68,000/- has duly being recorded in Book of Accounts for the F.Y. 2011-12. In the F.Y.2012-13 the appellant had cash balance Rs. 97,591/- as on 31/03/2013. The appellant submitted the schedule of cash balance of Rs 97,591/- in balance sheet as on 31/03/13 and also submitted the cash book as on 31/03/2013 where in the same cash balance of Rs. 97,591/- is appearing. Thus this proves that the cash deposited in bank has duly being recorded in the books of Accounts. Thus this proved that cash deposited in Bank of Rs. 5,76,800/- has duly being recorded in Book of Accounts for the F.Y. 2012-13. The addition made by the Assessing officer by applying provision of Section 69. The provision of Section 69 where in the addition could be made for investment which are not recorded in the books of account. How IT(SS)A Nos.204 & 208/Ind/2019 20 addition could be made u/s 69 where as in the case of the Appellant, the entire amount has duly been recorded in the books of account as verified from the closing balance of Cash Book and Balance Sheet being tallied with each other. Therefore, the AO is not justified in making addition on account of unexplained cash deposit in bank account. Therefore, the addition made by AO amounting to Rs 5,68,000/- in the AY 2012-13 and Rs 5,76,800/- in the AY 2013-14 is Deleted. Therefore, the appeal on these grounds is Allowed.” 20. In view of the above, when the assessee has submitted cash book for relevant financial period 2011-12 during remand proceedings and no defect or deficiency has been pointed out by the AO therein, then, no inference can be drawn against the assessee for making unexplained investment by way of depositing cash to the bank account. The ld. CIT-DR could not dislodge the findings of the ld.CIT(A) that the impugned amount of Rs.5,68,000/- was duly recorded in the books of account for AY 2011-12 pertaining to AY 2012-13. Therefore, we are unable to see any valid reason to interfere with the findings given by the ld.CIT(A). Thus, we uphold the same. Accordingly, ground No.3 of the Revenue is also dismissed. 21. In the result, the appeal filed by the Revenue in IT(SS)A No.204/Ind/2019 is dismissed. IT(SS)A No.208/Ind/2019 22. We find, this appeal has been filed by the Revenue for AY 2012-13 against the same order of the CIT(A) and on similar grounds of appeal as in ITA No.204/Ind/2019 which we have decided in the earlier part of this order. Hence this is a duplicate appeal which has been filed by the Revenue by oversight. Therefore, this appeal requires no further adjudication. This appeal is disposed of accordingly. IT(SS)A Nos.204 & 208/Ind/2019 21 Order pronounced u/r 34(4) of the Income-tax (Appellate Tribunal) Rules, 1963 on 10.02.2023. Sd/- Sd/- (BHAGIRATH MAL BIYANI) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 10 th February, 2023. dk Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Date 1. Draft dictated on 20.01.2023 2. Draft placed before the author 24.01.2023 3. Draft placed before the other Member 4. Approved Draft comes to the Sr.PS/PS 5. Order uploaded on 6. File sent to the Bench Clerk 7. Date on which file goes to the Head Clerk. 8. Date on which file goes to the AR 9. Date of dispatch of Order.