Pradeep Sawhney Vs ITO (ITAT Delhi)
ITAT Delhi held that the revenue can bring expenditures incurred in earlier years to be taxed in subsequent years if it is proved that the expenditure incurred was bogus.
Facts- The assessee has shown creditors of Rs.1,54,67,677/-. AR of the assessee was asked to file confirmation from all 35 creditors as shown in the balance sheet. AR of the assessee filed confirmation from only 7 creditors, total amount for which confirmation has filed is only Rs.45,84,804/-. No confirmation has filed for the balance amount of Rs.1,08,82,873/- by the assessee during the course of assessment proceedings. However, notice u/s 133(6) of the Income Tax Act, 1961 was also issued to some of the parties but the same were received back. Hence, the balance amount for which confirmation has not received/filed is hereby added back to the declared income of the assessee.
Aggrieved, the assessee filed appeal before the ld. CIT(A). The ld. CIT(A) examined the issue at length in detail and confirmed the addition made by the AO. Being aggrieved, the present appeal is filed.
Major issue raised here is whether revenue can bring the expenditure incurred in the earlier years to be taxed in the subsequent years.
Conclusion- We hold that the revenue can bring the expenditure incurred in the earlier years to be taxed in the subsequent years if it is proved that the expenditure incurred was bogus and the revenue can deem the liabilities ceased as time went by taking into consideration, the period of non-payment of dues and the intention to pay the dues.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal has been filed by assessee against the order of ld. CIT(A)-12, New Delhi dated 26.11.2015.
2. Following grounds have been raised by the assessee:
“1. That the learned Commissioner of Income Tax (Appeals) -XII [‘CIT(A)’] erred in upholding the disallowance made by learned Assessing Officer (‘A O’) for non-providing confirmations of outstanding balances of sundry creditors amounting to Rs. 1,08,82,873/-.
2. That the ld. CIT(A) erred in upholding disallowance made by AO on account of advances received from customers amounting to Rs.2,63,142/-.
3. That the ld. CIT(A) erred in upholding disallowance made by AO on account of car expenses and depreciating amounting to Rs.29,729/- by holding the same to be personal expenses.”
Sundry Creditors:
3. For the sake of completeness and ready reference, the entire order of the Assessing Officer pertaining to addition made on account of sundry creditors is as under:
“As per balance sheet, the assessee has shown creditors of Rs.1,54,67,677/-. AR of the assessee was asked to file confirmation from all 35 creditors as shown in the balance sheet. AR of the assessee filed confirmation from only 7 creditors, total amount for which confirmation has filed is only Rs.45,84,804/-. No confirmation has filed for the balance amount of Rs.1,08,82,873/- by the assessee during the course of assessment proceedings. However, notice u/s 133(6) of the Income Tax Act, 1961 was also issued to some of the parties but the same were received back. Hence, the balance amount for which confirmation has not received/filed is hereby added back to the declared income of the assessee.”
4. Aggrieved, the assessee filed appeal before the ld. CIT(A).
5. The ld. CIT(A) examined the issue at length in detail and confirmed the addition made by the AO.
6. During the hearing before us, the ld. AR, Sh. Gautam Jain vehemently argued that the sundry creditors were the purchases of earlier years and, if at all, they are treated to be taxable incomes, they should have been taxed in the earlier years. It was argued that having accepted the purchases and the trading results as genuine in the earlier years, the revenue cannot choose to tax the amount in the subsequent years. It was argued that being the old creditors, the assessee could not get the confirmations owing to absence of business transactions in the subsequent years. It was argued that the revenue could not discharge its onus of proving the creditors as bogus and no notices u/s 131 inspite of the request of the assessee were issued to the parties. It was argued that assessee cannot be prejudiced if the parties do not comply to the notices issued by the revenue and it is for the revenue to take necessary action for non-compliance. The ld. AR relied on the orders of ITAT in the case of ACIT Vs. Foot Mart Retail India Pvt. Ltd. in ITA No. 4278/Del/2019, order dated 31.05.2022, Sudha Loyalka vs. ITO in ITA No. 399/Del/2017, Indersons Leathers (P) Ltd. vs. Addl. CIT Jalandhar 114 ITD 242 (Amritsar), CIT vs. Smt. Sita Devi Juneja 325 ITR 593 (P & H), Kaps Advertising vs. ITO 11 ITR (T) 113 (Del), Pr. CIT vs. Matruprasad C Pandey 377 ITR 363 (Guj) and CIT vs. Alvares & Thomas394 ITR 647 (Kar).
7. On the other hand, the ld. DR relied upon the order of the CIT(A).
8. Heard the arguments of both the parties and perused the material available on record.
9. We find that Assessing Officer has made an addition of Rs.1,08,82,873/- on account of Sundry Creditors as Appellant could not get the confirmation of the parties. Appellant has submitted that he could not obtain the confirmation as they are very old creditors.
10. The Appellant has submitted the list of Sundry Creditors disallowed before the ld. CIT(A) which is as under:
