M/s. S. R. Formulation (P) Ltd., Bhopal V. The Dy Cit Central-1, Bhopal

ITSSA 210/Ind/2019

AI Insights

The case involves cross appeals by the Revenue and the Assessee against the order of the CIT(A)-3, Bhopal, concerning the Assessment Year 2012-13. The Revenue challenged the deletion of additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, which pertained to unexplained cash credits and sundry creditors. The Assessee, M/s. S.R. Formulation Pvt. Ltd., contested the additions made by the AO, which were partially upheld by the CIT(A). The Tribunal examined the submissions, evidence, and the legal provisions applicable, ultimately deciding to uphold the CIT(A)'s decision in most respects but confirming the addition related to the loan from M/s Avansham Mines due to insufficient evidence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122625 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-11-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 23-09-2019
• Other Referred Cases: CIT vs. Ritu Anurag Aggarwal, CIT vs. Pancham Dass Jain, Continental Carbon India Ltd. vs. DCIT, JCIT vs. Mathura Dass Ashok Kumar, CIT vs. Smt. P.K. Noorjehan
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Search and seizure; Principle of natural justice; Earning of tax free income; Assessment record; Set aside
• Section: 142(1); 133(6); 205; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH: DB : INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER IT (SS) A No.201/Ind/2019 Assessment Year: 2012-13 The DCIT (Central)-1, Bhopal, (MP) 462011 vs. M/s. S.R. Formulation Pvt. Ltd. Sumit Nema Advocate, Flat No. 303, Princess Vally, South Tukoganj, Nath Mandir Road, Next to Hotel, Princess Place, Indore (M.P) 452001 PAN AAPCS0102H (Appellant) (Respondent) IT (SS) A No.210/Ind/2019 Assessment Year: 2012-13 M/s. S.R. Formulation Pvt. Ltd. Sumit Nema Advocate, Flat No. 303, Princess Vally, South Tukoganj, Nath Mandir Road, Next to Hotel, Princess Place, Indore (M.P) 452001 PAN AAPCS0102H vs. The DCIT (Central)-1, Bhopal, (MP) 462011 (Appellant) (Respondent) For Revenue : Shri P.K. Mishra, CIT(DR) For Assessee : Shri Sumit Nema, Sr. Advocate Shri Gagan Tiwari, ARs IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 2 of 29 Date of Hearing : 18.11.2022 Date of Pronouncement : 10.02.2023 ORDER PER CHANDRA MOHAN GARG, J.M. These above captioned cross appeals have been filed by the Revenue and Assessee against the order of Ld. CIT(A)-3, Bhopal order dated 27.06.2019 relating to Assessment Year 2012-13. Revenue appeal in IT (SS) A No.201/Ind/2019 for A.Y. 2012-13 2. The grounds are raised by the revenue read as under:- 1. On the fact and in the Circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs. 3,04,36,695/- made by the A.O on account of unexplained cash credit us 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. 1,55,81,203/- made by the A.O on account of unexplained sundry creditors u/s 68 of the Income Tax Act, 1961. 3. Apropos ground no. 1 the learned CIT(DR) supporting the assessment order submitted that in para 6.3 the Assessing Officer considered the issue in details along with reply of assessee and IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 3 of 29 thereafter found that the assessee has not made compliance of the notices u/s. 142(1) of the Act, not submitted any detail of the creditors and copies of their complete postal address, PAN number, ITR, Bank Statement and confirmations till finalization of assessment proceedings. The Ld. CIT(DR) also submitted that the creditors namely Dr. Sudhir Sharma, Smt. Neetu Sharma, M/s. Nikita Multitrade and M/s. S.R. Fello Alloys were being assessed by the Assessing Officer and copies of ITR were also available with the A. but the assessee could not filed any confirmation given by said creditors during the course of assessment proceedings. The Ld. CIT(DR) submitted that on perusal of the balance sheet the AO noted that the assessee has squared up some of said creditors during the year, however the assessee had not submitted any detail along with documentary evidences in this regard. Therefore, the A.O. was right invoking provision of section 68 of the Act and treating the unexplained cash credit in the hands of assessee. The Ld. CIT(DR) also pointed out that the Ld. CIT(A) has granted relief to the assessee without any basis therefore impugned the first appellate order may kindly be set aside by restoring that of the AO. IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 4 of 29 4. Replying to the above the learned senior counsel of the assessee submitted that the Assessing Officer passed assessment order without any proper verification and considering the submissions of the assessee therefore the Ld. CIT(A) was right in deleting the addition by rightly appreciating the facts of the case and documentary evidence filed by the assessee on this issue. The learned senior counsel was also pointed out that all the creditors/lenders viz. Dr. Sudhir Sharma, Smt. Neetu Sharma, M/s. Nikita Multitrade and V.R Sharma were being assessed by the same Assessing Officer who was having all details of creditors showing their identity, capacity, creditworthiness and genuineness of the transaction but the AO ignored the same and proceeded to make addition u/s. 68 of the Act in the hands of the assessee which was rightly deleted by the Ld. CIT(A) being unsustainable, therefore impugned first appellate order may kindly be upheld by dismissing the ground of Revenue. IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 5 of 29 5. On the careful consideration of above submissions first of all we note that the Ld. CIT(A) has granted relief to the assessee with following observations and findings:- 6.2 Ground No. 2 for AYs2011-12 to 2013-14:- Through these grounds of appeal, the appellant has challenged the addition of Rs. 20,00,000/- in A.Y. 2011-12, Rs. 3,16,36,695/- in A.Y. 2012-13 and Rs. 65,25,000/- in A.Y. 2013-14 on account of unexplained cash credit u/s 68 of the IT Act. In the A.Y. 2011- 12, 2012-13 and 2013-14, the Appellant has received loans from six different individual/company. Out of which five person/company has been covered under this search itself and the assessment was made by the same AO. a) Sudhir Sharma - Rs 1,09,75,000/- b) Neetu Sharma - Rs 1,57,50,000/- c) Nikita Multitrade Pvt. Ltd. -Rs 77,36,695/- d) V.R. Sharma Rs 10,00,000/- e) S.R. Ferro Alloys -Rs 15,00,000/- f) Avansham Mines -Rs 12.00.000/- (not cover under search) 6.2.1 Shri Sudhir Sharma(Rs. 20,00,000/- in A.Y. 2011-12. Rs. 65,00,000/- A.Y. 2012-13 and Rs. 44,75,000/- A. Y. 2013-14):- The Appellant has given PAN of the lender Shri Sudhir Sharma. The Assessing officer who was assessing officer of the Appellant was also the assessing officer of Shri Sudhir Sharma for search case and in the assessment order of Shri Sudhir Sharma he has accepted the loans given by Shri Sudhir Sharma to S R Formulation. Apart from this, the AO had passed assessment order of Shri Sudhir Sharma which demonstrates his creditworthiness. The Appellant has submitted Return of IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 6 of 29 income, Computation and entire Balance Sheet of Dr. Sudhir Sharma. The assessing officer in his remand report has mentioned that the confirmation letter, IT and Computation of Tax duly being submitted by the Appellant but has very surprisingly doubted the signature of Shri Sudhir Sharma mentioning that " On verification of confirmation letter it can not be certified whether it is signed by Shri Sudhir Sharma" Sudhir Sharma was covered under search and the learned assessing officer of the Appellant was also the AO of Sudhir Sharma wrt to search case and AO had several and ample opportunity to get verified signature of Mr. Sudhir Sharma by either calling him personally or by verifying any document signed and submitted by him during the course of personal hearing of Sudhir Sharma which the assessing officer had failed or avoided for any reason known to him during the assessment proceeding and also at the time of remand proceedings. The AO has failed to verify the papers ie Return of income and income tax computation of lender DrSudhir Sharma where he has shown exempt income from the firms Us 10(2A) i.e. Profit from the firm S R Ferro Alloys Jhabua were his share of profit amounting to Rs 93,85,612/- for the AY 2011-12,Rs 3,60,75,076/- for the AY 2012-13. The assessing officer has accepted the receipt of the loan and considered it as deemed income of the Appellant. The assessing officer has further mentioned in his remand report that income of Mr. Sudhir Sharma was Rs. 32,71,269/- where as the loan given by him Rs. 65,00,000/-. 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 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 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 IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 7 of 29 of the person who was subject to search by the department itself. Therefore, the additions made by AO amounting to Rs.20,00,000/- in A.Y. 2011-12, Rs. 65,00,000/- A. Y. 2012-13 and Rs. 44,75,000/- A.Y. 2013-14 are Deleted. 6.2.2 Smt. Neetu Sharma Rs. 1,52,00,000/- in A. Y. 2012-13 &Rs. 5,75,000/-in A.Y. 2013-14:-Smt. Neetu Sharma was covered under search and the assessing officer of the Appellant was also AO of Neetu Sharma wrt to search case. The AO has passed assessment order of SmtNeetu Sharma which demonstrate her creditworthiness. The assessing officer has mentioned in his remand report that Mrs. Neetu Sharma has given the loan of Rs. 1,52,00,000/-. The AO has failed to verify the papers i.e. income tax return and Computation of tax of lender Mrs Neetu Sharma where she has shown exempt income from the firm Us 10(2) i.e. Profit from the firm S R Ferro Alloys Jhabua where 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 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. Therefore, the addition made by AO amounting to Rs. 1,52,00,000/- in A.Y. 2012-13 &Rs. 5,75,000/- in A.Y. 2013-14 is Deleted. 6.2.3 M/s Nikita Multitrade Pvt. Ltd. Rs. 77,36,695/- A. Y. 2012-13:-M/sNikita Multitrade Pvt. Ltd. was covered under search and the assessing officer had passed the assessment order of Nikita Multitrade Pvt. Ltd. which demonstrate its creditworthiness. The assessing officer has further mentioned in IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 8 of 29 his remand report that income of Nikita Multitrade Pvt. Ltd. was Rs. 30,25,400/- whereas the loan given by it is Rs. 77,36,695/- . The Appellant has submitted entire Balance Sheet of Nikita Multitrade Pvt. Ltd. alongwith Bank Statement. 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 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. Therefore, the addition made by AO amounting to Rs. 77,36,695/- in A. Y. 2012-13 is Deleted. 6.2.4 M/s V. R. Sharma - 10,00,000/- in A. Y. 2012-13 M/s V. R. Sharma was also covered under this search. The assessing officer has mentioned in his remand report that V. R. Sharma has given the loan of Rs. 10.00,000/-. The Appellant has submitted ROI, Computation of Income and the entire Balance Sheet of V. R. Sharma which clearly demonstrate the fund flow from where he has given loan to the Appellant. 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. Therefore, the addition made by AO amounting to Rs. 10,00,000/- in A. Y. 2012-13 is Deleted. IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 9 of 29 6. On careful consideration of rival submissions, observations and stand of the AO and findings recorded by the Ld. CIT(A) first of all we note that undisputedly rather admittedly all four loan creditors/lenders Dr. Sudhir Sharma, Smt. Neetu Sharma, M/s. Nikita Multitrade and M/s. V.R Sharma were covered under the same search and seizure operation and due to centralisation of cases all were under the assessment jurisdiction of same Assessing Officer. In this situation, we safely presume that the Assessing Officer of present assessee was having all the relevant and required details of said four creditors showing their identity, PAN number, copy of ITR and other relevant documents such as books of accounts and bank statement etc. The main ground taken by the Assessing Officer for invoking provision of section 68 of the Act, and treating the amount of cash credit from said four creditors was that the assessee did not respond to the notices u/s. 142(1) of the Act and the did not file confirmation and other relevant documents showing capacity and creditworthiness of the creditors and genuineness of the transactions. From vigilant perusal of the relevant part of the first appellate order on this issue, we further IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 10 of 29 note that the Assessing Officer in his remand report noted that Dr. Sudhir Sharma has given loan of Rs. 65 lakhs during relevant financial year and the Assessing Officer has passed assessment order in the case of Dr. Sudhir Sharma with successfully demonstrates his creditworthiness as in the return of income and Income Tax computation of said lender it was clear that he has shown exempt income u/s. 10(2A) of the Act from the firm M/s. S. R Ferro Alloys Jhabua amounting to Rs. 3,60,75,076/- for A.Y. 2012-13 in addition to his taxable income. We are in agreement with the contention of the Ld. Senior counsel that the amount of loan Rs. 65 lakhs is more than 5 times of income of Rs. Sudhir Sharma as per return of income which includes exempt income of Rs. 3,60,75,076/- for A.Y. 2012-13. In this situation Ld. CIT(A) was right in holding that the appellant has discharged the onus lies upon him to prove the source of said credit as per requirement section 68 of the Act. IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 11 of 29 7. Regarding loan of Rs. 1,52,00,000/- from Smt. Neetu Sharma the Ld. CIT(A) noted that the AO has failed to verify the relevant papers i.e. Income Tax Return, computation of income wherein she has shown the exempt income from the firm M/s. S. R Ferro Alloys Jhabua amounting to Rs. 3,61,18,410/- which was exempt u/s. 10(2A)of the Act. The Ld. CIT(A) after considering the remand report and documentary evidence filed by the assessee rightly concluded that 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 lent more amount to the appellant company. Per contra, we clearly observe that the amount of loan of Rs. 1,52,00,000/- is approximately 40% share of profit earned by lender Smt. Neetu Sharma and shown as exempt u/s. 10(2A) of the Act, in the computation income amounting to Rs. 3,61,18,410/-. Therefore the identity, capacity of creditworthiness of the lender genuineness of the transaction was successfully established by the assessee discharging the onus lay upon its holders to prove the source of credit. Therefore the Ld. CIT(A) was right in deleting the IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 12 of 29 addition pertaining to loan amount/cash credit from Mrs. Neetu Sharma. 8. When we peruse para 6.2.3 (supra) of the order of Ld. CIT(A) then we clearly find that the Assessing Officer in the remand report mentioned that the income of M/s. Nikita Multitrade Pvt. Ltd. was Rs.30,25,400/- whereas the amount of loan given by it was Rs. 77,36,695/-. The Ld. CIT(A) considered the entire documentary evidence submitted by the assessee in form of, balance sheet, bank statement, copy of PAN etc and thereafter noted that the appellant has completed the onus lay upon him to prove the source of credit. The Ld. CIT(A) also noted that the AO of appellant company and lender company M/s. Nikita Multitrade Pvt. Ltd. was the same and in spite of this fact the AO doubted the creditworthiness of the person who was subject to search. On the basis of foregoing discussion we are of the view that near the AO in the assessment order or in the remand report nor the Ld. CIT(DR) during hearing before us could not controvert or dislodge the findings arrived by the Ld. CIT(A) in any manner. Therefore, we are inclined to hold IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 13 of 29 that there is no ambiguity perversity or any valid reason to interfere with the findings arrived by the Ld. CIT(A) and thus we uphold the same. 9. Regarding fourth lender/creditor M/s. V. R Sharma, from the first appellate order para 6.2.4 it is clearly discernable that the assessee had submitted copies of return of income, computation of income entire balance sheet which clearly demonstrated the fund flow from where he has given loan to the appellant. Thus the appellant has discharged the onus lay upon his shoulder to prove the source of credit. With these observations the Ld. CIT(A) also noted that in spite of the fact that the AO doubted the creditworthiness of the person who was subject to search by the department itself. 10. On this issue at the cost of repetition we may point out that the Assessing Officer mad addition u/s. 68 of the Act by alleging that the assessee did not filed confirmations and other relevant documents of the lenders/creditors. The Assessing Officer omitted to considered a vary glaring facts that all the lenders were under his IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 14 of 29 jurisdiction as all were part of search and seizure operation along with the assessee and being assessed by the same Assessing Officer. In such a situation Assessing Officer was having or the relevant documentary evidence pertaining to these four creditors/lenders in the relevant assessment records. Therefore the Assessing Officer kept aside the relevant documentary evidence and did not invoked provision u/s. 133(6) or 133(1) to call the lenders for verification and examination. In this situation the Ld. CIT(A) rightly called the remand report from the AO on the explanation documentary evidences submitted by the assessee and even in the remand report the Assessing Officer could not bring out or dig out any positive adverse material dislodging the capacity and creditworthiness of the creditors and genuineness of the transactions. Therefore we are unable to see any ambiguity perversity or any other valid reason to interfere with the findings arrived by the Ld. CIT(A) and thus we uphold the same. IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 15 of 29 11. Accordingly ground no. 1 of revenue for A.Y. 2012-13 is dismissed. 12. Apropos ground no. 2 the Ld. CIT(DR) submitted that the assessee has not been established the identity and creditworthiness of the creditors and genuineness of the transaction entered into books of accounts therefore the AO was right in making additions u/s. 68 of the Act treating the same and unexplained sundry creditors. The Ld. CIT(DR) also pointed out that the sundry creditors Dr. Sudhir Sharma and Smt. Neetu Sharma were being assessed by the same AO and copies of ITR’s were available with him but no confirmation was given by the assessee during the course of assessment proceedings. The Ld. CIT(DR) also submitted that in response to show cause dated 07.11.2013 the assessee was asked to and required to furnish names, complete addresses, copies of ITR’s, bank account along with confirmations of all the creditors but the assessee did not submitted any specific reply in this regard. Therefore the AO was right in making addition which was deleted by IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 16 of 29 the Ld. CIT(A) without any cogent reason therefore impugned first appellate order may kindly be set aside by restoring that of the AO. 13. Replying to the above the learned senior counsel of the assessee vehemently the supporting first appellate order submitted that the Assessing Officer made additions without allowing due opportunity of hearing to the assessee and without considering the relevant documentary evidence which was before him as the creditors were also assessed by the same Assessing Officer and all the details for relevant A.Y. 2012-13 was available with the A.O in the assessment records of sundry creditors which was under his jurisdiction. The learned senior counsel drawing our attention towards para 6.3 of first appellate order submitted that the books of accounts were duly audited by the independent auditor and the assessee maintained regular books of accounts including stock register and other ledgers and balance sheet. The learned senior counsel placing on judgment of Hon’ble Delhi High Court in the case of CIT vs. Ritu Anurag Aggarwal – IT Appeal No. 325 of 2008 dated 22.07.2009 submitted that no addition could have been IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 17 of 29 made u/s. 68 of the Act where it is not in dispute that the creditors outstanding relating to purchases and trading results by excepted by the AO. The learned senior counsel also submitted that in the present case identity of supplier/trade creditors and genuineness of the purchases was properly established and accepted by the AO, and the books of accounts such as stock register, consumption base purchases, utilisation and sales along with assessee purchases with the suppliers have been accepted by the AO without any dispute. In such a situation, the Assessing Officer is not validly empowered to make addition on account of trade creditors therefore the Ld. CIT(A) was right in deleting the addition. The learned senior counsel was also placed reliance on various judgments including judgment of Hon’ble Allahabad High Court in the case of CIT vs. Pancham Dass Jain (2006) 205 CTR 444 (All.) and order of ITAT Delhi Bench in the case of Continental Carbon India Ltd. in ITA No. 5269/Del/2010 and other related appeals and submitted that the additions made u/s. 68 of the Act on account difference and balances and non receipt of reply of summons cannot be made in hands of the assessee. When the purchases have not been disputed IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 18 of 29 by the AO and the P & L account has been accepted by the AO allowing the amount of purchases shown therein. 14. On careful consideration of rival submission we note that the Ld. CIT(A) has granted relief to the assessee with following observations and findings:- 6.3 Ground No. 3 for AYs 2011-12 to 2013-14:- Through these grounds of appeal, the appellant has challenged the addition of Rs.1,32,720/- in AY. 2011-12, Rs. 1,55,81,203/- in A.Y. 2012- 13 and Rs. 24,56,740/- in AY. 2013-14 on account of unexplained sundry creditors us 68 of the IT Act. The appellant contends that the AO has failed to appreciate the basic fact that the sum of Rs. 1,32,720 and Rs. 1,55,81,203/- represented closing balance sundry creditors as per audited books of accounts of the assessee, 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 appellantestablished 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 the outstanding balance at the year end in the name of those IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 19 of 29 parties for no reason whatsoever. Moreover the books of account were duly audited by the independent Auditor. 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. Apparently, the Assessing Officer has not appreciated the facts of the case in its entirety. This is a case, where the books are not out rightly 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 assessee 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 ITAT observed that the sales, purchases as well as gross profits as disclosed by the assessee have been accepted by the Assessing Officer. 4. Once this is accepted, we are of the opinion that the approach of the ITAT 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 IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 20 of 29 but they were day to day outstanding balances of the suppliers of the assessee 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. AO having 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; (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 appellant has 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 O could not serve the notice. The whole approach adopted is grossly mistaken which has put the assessee in repeated litigation. The appellant's payments against the purchases are through bank statements, which were explained before the AO with evidence about clearance of cheques by bank statements, under these circumstances, no question can be raised on the financial IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 21 of 29 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 appellant 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 assessee 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 assessee have been accepted by the AO without question. Reliance is placed on following case laws: (a) CIT Vs. PanchamDass Jain (2006) 205 CTR (All.) 444 (b) YFC Projects (P) Ltd. Vs. DCIT (Del) 134 TTJ 167 (c) ACIT vs. Han SingarGutkha (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. 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 assessee us 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 IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 22 of 29 preliminary burden, which, in our view, has been duly discharged by the assessee by filing the confirmations, bank statements, invoices and transport details of supplies and goods. The identity of the purchaser is accepted by the department in one vear 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 alc 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 us 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 assessee's grounds in A.V. 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 making addition on account of unexplained sundry creditors to the total income of the appellant. Therefore, the addition made by AO amounting to Rs.1,32,720/- in A.Y. 2011-12, Rs. 1,55,81,203/- in A.Y. 2012- 13 and Rs. 24,56,740/- in A.Y. 2013-14 are Deleted. Therefore, the appeal on these grounds is Allowed. IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 23 of 29 15. The Ld. CIT(DR) could not dislodge the findings that the AO merely added the amount of sundry creditors u/s. 68 of the Act treating the same as unexplained creditors in absence of confirmations. Further, from the first appellate order we note that the Ld. CIT(A) firstly noted that the assessee has maintained proper books of accounts and get them audited and the AO has accepted the same without raising any doubt or pointing out any defect therein. The Ld. CIT(A) placing reliance on the judgement of Hon’ble High Court of Delhi in the case of CIT vs. Ritu Anurag Aggarwal recorded a finding that no addition could be made in the hands of assessee u/s. 68 of the Act 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. 16. The Ld. CIT(DR) could not dislodge by way of any supporting material or facts the finding arrived by the Ld. CIT(A) regarding audited books of accounts of the assessee and fact that entire purchases has been recorded by the assessee in the P & L account IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 24 of 29 and AO has accepted the same without any dispute. In this situation we are unable to see any ambiguity perversity or any other valid reason to interfere with the findings arrived by the Ld. CIT(A). Thus we are inclined to hold that the Ld. CIT(A) has rightly deleted the addition made by the A.O. on account of sundry creditors. Accordingly, ground no. 2 of revenue being devoid on merits is also dismissed. IT (SS) A No.210/Ind/2019 of Assessee appeal for A.Y. 2012- 13 17. The grounds are raised by the assessee read as under:- 1. That there is no justification either in law or on facts for the addition of Rs. 12,00,000/- by treating the same as unexplained cash credits us 68 which received by the assessee as loans. 2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that assessee has led complete documentary evidence in support of the unsecured loans from M/s Avansham Mines so as to discharge the onus under section 68 of the Act and therefore, the addition sustained on subjective and arbitrary assumptions that creditworthiness has not been established is contrary to law and hence untenable. 3. That the Ld. CIT(A) has erred in law and on facts in not appreciating that the entire assessment is illegal, void and IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 25 of 29 without jurisdiction and further in not considering that the same is in complete breach of principles of natural justice. 18. The learned senior counsel of the assessee submitted there was no justification either in law or in facts for making addition of Rs. 12,00,000/- by treating the same as unexplained cash credits u/s 68 of the Act which received by the assessee as loans. The learned senior counsel vehemently pointed out that the Ld. CIT(A)has failed to appreciate that the assessee has led complete documentary evidence in support of unsecured loans from M/s Avansham Mines so as to discharge the onus under section 68 of the Act and therefore, the addition sustained on subjective and arbitrary assumptions that creditworthiness has not been established is contrary to law and hence untenable. The learned senior counsel submitted for the said reasons the addition made by the AO and confirmed by the Ld. CIT(A) is not sustainable and hence the same may kindly be deleted. IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 26 of 29 19. Replying to the above the Ld. CIT(DR) took us through the findings recorded by the Ld. CIT(A) in the first appellate order and submitted that the appellant failed to prove the genuineness of the loan from M/s Avansham Mines of Rs. 12 lakh by not providing any confirmation letter from the lender. The Ld. CIT(DR) also drew attention towards assessment and first appellate order and submitted that it was the duty of the assessee to establish the identity, capacity and creditworthiness of the lender to M/s Avansham Mines and genuineness of the transactions which it fail to establish therefore authorities below were right in making addition in hands of assessee. 20. Placing rejoinder to the above the learned senior counsel submitted that the assessee should be allowed to place all documentary evidences on this issue of loan from M/s Avansham Mines and issue may kindly be restored to the file of A.O for proper examination and verification. IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 27 of 29 21. On careful consideration of rival submissions from the assessment as well as first appellate order we note that the Assessing Officer allowed proper opportunity the Assessing Officer issued notices u/s. 142(1) of the Act to the assessee but the assessee did not comply with the same and did not submit relevant documentary evidences. During the first appellate proceedings the assessee submitted relevant documentary evidence before the Ld. CIT(A) and AO was also allowed to submit his remand report and after taking on record reply/rejoinder of the assessee the Ld. CIT(A) has granted major relief to the assessee on this issue but confirmed the addition of Rs. 12 lakh of loan from the M/s Avansham Mines by observing that the appellant failed to prove genuineness of the loan by not providing any confirmation letter and other relevant documentary evidence. Therefore the assessee was allowed opportunity to explain and submit his stand regarding loan from M/s Avansham Mines of Rs. 12 lakh but he could not comply with the requirements of authorities below discharging the onus lay on his shoulder u/s. 68 of the Act to prove identity, capacity, creditworthiness of the creditors/lender and genuineness of the IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 28 of 29 transaction. If any one element out of said element is missing then the tax authorities are entitled to invoke provision of section 68 of the Act by making addition in the hands of assessee. We are unable to see any valid reason to interfere with the findings arrived by the Ld. CIT(A) in this regard. Therefore we uphold the same. Accordingly grounds of assessee on sole issue of unsecured loans from M/s Avansham Mines of Rs. 12 lakh is dismissed. 22. Resultantly appeal of Revenue in IT (SS) A No.201/Ind/2019 and appeal of Assessee in IT (SS) A No.210/Ind/2019 for both A.Y. 2012-13 are dismissed. Order pronounced in the open court on 10.02.2023. Sd/- Sd/- (BHAGIRATH MAL BIYANI) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:10 th February, 2023. NV/- IT (SS) A Nos.201 & 210/Ind/2019 Assessment Years: 2012-13 Page 29 of 29 Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR // By Order // Asstt. Registrar, ITAT, Indore Date 1. Draft dictated on 30.01.2023 2. Draft placed before the author 31.01.2023 3. Draft placed before the other Member .01.2023 4. Approved Draft comes to the Sr.PS/PS .01.2023 5. Order uploaded on .01.2023 6. File sent to the Bench Clerk .01.2023 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.