Kumari Sumi Jabbar(Rep By Mrs.Asuma ... vs Assessee

The Income Tax Officer, Ward- Vs. Kumari Sumi Jabbar, 1(3), Trivandrum. A.J. Hospital, Kazhakoottam, Thiruvananthapuram-695 582. [PAN: AIKPJ 3231C] (Revenue-Appellant) (Assessee-Respondent)

Revenue by Shri K.K.John, Sr.DR Assessee by None-application filed for hearing on merit.

Date of hearing 05/02/2015 Date of pronouncement 12/02/2015

ORDER

Per CHANDRA POOJARI, Accountant Member:

This appeal filed by the Revenue and the Cross Objection filed by the

assessee are directed against the order dated 28-08-2014 passed by the CIT(A),

Trivandrum for the assessment year 2008-09.

2. Inspite of service of hearing notice, none appeared on behalf of the

assessee nor any adjournment letter was filed before this Tribunal. However,

the assessee has filed a letter dated 13-01-2015 requesting the Tribunal to pass

the order based on merit after considering the Cross Objection. 2 I.T.A. No.466/Coch/2014

& C.O. No.47/Coch/2014

3. The first ground raised by the Revenue is with regard to deletion of

addition of Rs.9 lakhs out of Rs. 10 lakhs lumpsum addition made by the

Assessing officer.

4. The brief facts of the case are that the assessee had filed return of

income for the assessment year under consideration on 08/09/2008 returning

income of Rs.2540/-. Subsequently, assessment was completed u/s. 143(3) on

29/12/2010 determining the total income at Rs.29,76,950/- and lump sum

addition of Rs.10,00,000/- was made since the assessee had not produced bills

and vouchers or any supporting documents for the expenses debited in the profit

and loss account for verification and another addition of Rs.19,74,404/- was

made u/s. 68 of the I.T. Act as the assessee again had failed to offer explanation

about the nature and source for the credits appearing in the balance sheet under

the head sundry creditors while relying on the decision of the Supreme Court in

the case of CIT vs. P.Mohanakala reported in 161 Taxman 169.

5. Before the CIT(A), it was submitted that the assessee is a minor girl of 11

years old and after her father's death, she believed that her auditor would be

taking care of her tax matters and only after the assessment order was received,

she came to know that her representative was ill and had not presented her case

properly. The assessee submitted that due to reasons beyond her control, the 3 I.T.A. No.466/Coch/2014 & C.O. No.47/Coch/2014 assessee and her mother, the legal representative of the assessee could not

produce the confirmation letters from the creditors and all the claims made in the

return were rightly supported by bills and vouchers.

6. The CIT(A) found that the expenses debited in the profit and loss account

were all properly vouched and there was no instance of default. According to

the CIT(A), the expenses were duly supported by bills and vouchers. Hence, the

CIT(A) was of the view that the addition should not have been made. However,

considering the lapse on the part of the assessee in responding to the hearing

fixed on 27/12/2010 and also the circumstances under which lump sum addition

was made, the CIT(A) restricted the addition to Rs.1 lakh which is just below

0.5% of the total expenditure debited minus depreciation to which the assessee

is entitled for. In view of the above, the addition of Rs.10,00,000/- was

restricted to Rs.1,00,000/-. Against this, the Revenue is in appeal before us.

The assessee filed Cross objection in C.O. No.47/Coch/2014 supporting the order

of the CIT(A) on this issue.

7. The Ld. DR submitted that the assessee was not cooperating with the

lower authorities in not producing the requisite documents in support of the

claim of the assessee. Hence, the Assessing officer had no other option but to

make adhoc addition of Rs.10 lakhs. However, the CIT(A) admitted certain fresh

evidence in the course of the appellate proceedings and without calling for the 4 I.T.A. No.466/Coch/2014 & C.O. No.47/Coch/2014 remand report from the Assessing officer, he decided the issue and hence, there

is violation of provisions of Rule 46A of the I.T. Rules.

8. After hearing the Ld. DR, in our opinion, admittedly in this case, the

assessee was not cooperating with the Assessing officer inspite of giving hearing

opportunities to the assessee on various dates, namely, 09/11/2009,

11/06/2010, 29/09/2010 and 08/11/2010. Finally, summons was issued to the

assessee vide notice dated 02/12/2010 for her personal appearance before the

Assessing officer on 10/12/2010. However, there was neither any appearance

nor any reply from the assessee. On 14/12/2010, the assessee's authorized

representative appeared before the Assessing officer and filed copies of profit

and loss account and balance sheet for the period ended 31/03/2008 and the

Assessing officer asked for vouchers and bills for expenses claimed and bank

statements for which the assessee asked for time. Accordingly, the case was

adjourned to 17/12/2010. Once again on 17/12/2010, none appeared before the

Assessing officer on that date also. However, the assessee's authorized

representative appeared on 23/12/2010 and the Assessing officer requested the

authorized representative to file confirmation letters from the creditors and the

case was adjourned to 27/12/2010. However, there was no response from the

assessee. Hence, the Assessing officer made the lumpsum addition of Rs.10

lakhs.

5 I.T.A. No.466/Coch/2014

& C.O. No.47/Coch/2014 8.1 Before the CIT(A), the assessee produced ledger, cash book, bank book

and other registers along with the bills and vouchers for the year under

consideration for verification. The CIT(A) randomly verified the expenses

debited in the profit and loss account and found that they were all properly

vouched and there was no instance of default. According to the CIT(A), the

expenses were duly supported by bills and vouchers. At the same time the

CIT(A) sustained the addition of Rs.1 lakh out of the total expenditure of Rs.10

lakhs. This finding of the CIT(A) is contradictory in nature. He should have

pinpointed the expenses which are not supported by vouchers and bills and then

sustain the addition to the extent of expenditure unsupported by bills and

vouchers. Hence, in our opinion, it is proper to remit this issue back to the file of

the Assessing officer for fresh consideration with a direction to the assessee to

place necessary bills and vouchers in support of the expenditure claimed by the

assessee. Accordingly, this issue is remitted back to the file of the Assessing

officer for fresh consideration. This ground of the Revenue as well as the Cross

Objection is allowed for statistical purposes.

9. The next ground is with regard to deletion of addition of Rs.19,74,404/-

by invoking the provisions of section 68 of the I.T. Act.

10. The brief facts of the case are that a sum of Rs.19,74,404/- was shown as

sundry creditors for which the Assessing officer called for confirmation letters 6 I.T.A. No.466/Coch/2014 & C.O. No.47/Coch/2014 from the assessee. However, the assessee having failed to file the confirmation

letters within the stipulated time, the Assessing officer invoked the provisions of

section 68 and brought to tax the said amount of Rs.19,74,404/- treating the

same as unexplained cash credits. For this, he relied on the decision of the

Supreme Court in the case of CIT vs. P. Mohanakala reported in 161 Taxman

169.

11. Before the CIT(A), the assessee's authorized representative stated that

these sundry creditors were nothing but concerns from where medicines and

consumables were purchased by the assessee who was running a small size

hospital. It was submitted that they were trade creditors and the amount shown

as outstanding was the amount remaining payable at the end of the year ands

still they continued to be their suppliers of medicines, etc. It was also submitted

that due to reasons beyond their control, the assessee could not produce the

confirmation letters for verification of the Assessing officer within the stipulated

time. It was submitted that the provisions of section 68 cannot be considered

against regular trade creditors and thereby should not have been invoked.

12. Before the CIT(A), the assessee's authorized representative furnished the

list of account copies of 10 sundry creditors whose outstanding balance was over

Rs.50,000/- for verification. The CIT(A) found that the transactions were duly

supported by bills and vouchers and the payments were made only by cheques 7 I.T.A. No.466/Coch/2014 & C.O. No.47/Coch/2014 and what was not paid at the end of the year alone was shown as outstanding

which the Assessing officer had wrongly treated as cash credits. According to

the CIT(A), such outstanding balance should not have been considered by the

Assessing officer for invoking the provisions of section 68. The CIT(A) observed

that the Assessing officer should have carried out enquiry independently instead

of asking the assessee to file the confirmation letters more particularly when the

assessee claimed that they were their trade creditors. The CIT(A) observed that

the decision of the Supreme Court cited supra is not applicable to the assessee's

case as the said decision was not on trade creditors but on gift received from

NRI. Accordingly, the CIT(A) held that the Assessing officer was not justified in

making the addition u/s. 68 of the I.T. Act and deleted the addition of

Rs.19,74,404/-. Against the deletion of addition, the Revenue is in appeal before

us. The Cross Objection filed by the assessee is in support of the order of the

CIT(A).

13. We have heard the Ld. DR. The finding given by the CIT(A) is not proper.

The provisions of sec. 68 are also applicable to trade credits. Whenever any

credit appear in the books of accounts of the assessee in the relevant

assessment year it is incumbent upon the assessee to place necessary evidence

so as to prove the identity and creditworthiness of the parties and genuineness

of the transactions. Being so, without satisfying the above ingredients, the

CIT(A) observed that the provisions of sec. 68 are not applicable to the trade 8 I.T.A. No.466/Coch/2014 & C.O. No.47/Coch/2014 credits. In our opinion, it is proper to remit the entire issue to the file of the

Assessing officer with a direction to the assessee to prove the identity and

creditworthiness of the parties and genuineness of the transactions. With this

observation, we remit the issue back to the file of the Assessing officer for fresh

consideration. This ground in Revenue appeal is partly allowed and the ground

in Cross Objection filed by the assessee is dismissed.

14. In the result, the appeal filed by the Revenue as well as the Cross

Objection filed by the assessee is allowed for statistical purposes

Pronounced in the open court on 12-02-2015

sd/- sd/-

(N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Kochi Dated: 12th February, 2015 GJ Copy to:

1. Kumari Sumi Jabbar, A.J. Hospital, Kazhakoottam, Thiruvananthapuram-695

582.

2. The Income Tax Officer, Ward-1(3), Trivandrum.

3. The Commissioner of Income-tax(Appeals), Trivandrum.

4. The Commissioner of Income-tax, Trivandrum.

5. D.R., I.T.A.T., Cochin Bench, Cochin.

6. Guard File.

By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin 9 I.T.A. No.466/Coch/2014 & C.O. No.47/Coch/2014