IN THE ITAT DELHI BENCH ‘E’
Assistant Commissioner of Income-tax
versus
Nirula Handicrafts Bazar (P.) Ltd.
IT APPEAL NO. 3886 (DELHI) OF 2012
[ASSESSMENT YEAR 2008-09]
Date of pronouncement – 12.10.2012
ORDER
A.N. Pahuja, Accountant Member
This appeal filed on 27.07.2012 by the Revenue against an order dated 30.03.2012 of the ld. CIT(A)-XVI, New Delhi, raises following grounds :
“1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the amount of Rs. 45,76,244/- on account of disallowance of creditors made by the A.O. due to non submitting of confirmation, which was surrendered by the assessee during the assessment proceedings.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that the assessee filed additional evidence under Rules 46A regarding confirmation of 23 creditors of Rs. 45,76,244/- during appellate proceedings but A.O. in its remand report has submitted that the assessee company has shown inability to furnish further confirmations during the assessment proceedings and case was decided on merits and material available on record.
3. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal.”
2. Facts, in brief, as per relevant orders are that e-return declaring income of Rs. 51,71,338/- filed on 28.09.2008 by the assessee, engaged in exports of carpets, handicrafts etc., was revised on 28.3.2009,declaing income of Rs. 1,81,76,221/-.Thereafter, the return selected for scrutiny with the service of a notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) issued on 18.08.2009. During the course of assessment proceedings, the Assessing Officer [AO in short] asked the assessee to submit complete details, name and address of sundry creditors exceeding Rs. 80,000/- each along with their confirmations as also the amount outstanding on 31.03.2008. On the basis of details obtained from the assessee, the AO issued a notice u/s 133(6) of the Act to 32 parties, of which 5 notices were returned back unserved with the remarks ‘incomplete’ address or ‘left without address’. In 22 cases, confirmations were received while in 5 cases, no reply was received. To a further query by the AO, seeking remaining confirmations with the request to produce the relevant persons, the assessee replied vide letter dated 24.12.2010 as under :-
“Your Honour vide order sheet entry dated 13.12.2010 has asked the assessee to file confirmation in respect of sundry creditors balances outstanding in the books of accounts exceeding Rs. 80,000/-. As required, the assessee has tried to obtain the confirmation from such parties, but due to shortage of time, non availability of concerned persons, distance and climatic condition in the case of UP, Punjab, Kashmir etc., small weavers, small artisan, small time traders belongs to cottage industries could not be contacted. Your Honour will appreciate that from the list of sundry creditors, most of the parties are small weavers based at Srinagar, Kashmir also and they visit our shop two to three times in a year or so. Due to bad weather at Kashmir now, they could not be contacted, and in other cases non-availability of concerned persons etc. Notwithstanding above difficulty, the assessee could manage to file confirmation in respect of 122 parties exceeding Rs. 80,000/- where the balances outstanding worked out to Rs. 1,68,19,565/-. As per list enclosed, confirmation in respect of 23 parties could not be filed owning to time constraint, non availability of concerned persons etc. The amount of balances outstanding in respect of 23 parties where confirmations could not be filed works out to Rs. 45,76,244/-.
To buy peace, to avoid undue hardships, litigations and due to non-filing of confirmation in respect of enclosed parties, we hereby offer for taxation Rs. 45,76,244/- in respect of 23 parties subject to the condition that no penalty proceedings u/s 271(1)(c) of Act or prosecution proceedings or any adverse view should be taken against the assessee company.”
2.1 Since the assessee expressed its inability to furnish further confirmations nor produced the creditors for cross-examinations and ultimately offered the amount to tax to the extent of Rs. 45,76,244/-,the AO while relying upon the decision in Sumati Dayal v. CIT [1995] 214 ITR 801 accepted the offer of the assessee and added the amount of Rs. 45,76,244/- to tax.
3. Despite surrender of amount before the AO, the assessee preferred appeal before the ld. CIT(A) and submitted additional evidence in the form of confirmations of the 23 persons, in terms of Rule 46A of the Income Tax Rules, 1962 on the ground that the confirmations could not be filed due to shortage of time and non allowability of opportunity by the AO against the principles of natural justice. The ld. CIT(A) admitted additional evidence under rule 46A(1)(b) of the IT Rules 1962 while mentioning that the assessee was prevented by sufficient cause from filing the confirmations of all the sundry creditors exceeding Rs. 80,000/- each and deleted the addition, after having a remand report of the AO and comments of the assessee thereon, holding as under :-
“As discussed above, the Assessing Officer made an addition of Rs. 45,76,244/- to the income of the appellant on account of 23 sundry creditors exceeding Rs. 80,000, outstanding as on 31.03.2008, for non-production of their confirmations by the appellant before the finalization of the assessment proceedings. On going through the submissions of the appellant as well as the copies of correspondence between the appellant and the AO, submitted before me, it is observed that initially the Assessing Officer asked the appellant to furnish confirmations of sundry creditors ‘above practical limits’. It has been submitted that in view of the large number of sundry creditors (approximately 550), the Assessing Officer was requested by the appellant to raise the cut-off limit of sundry creditors whose confirmations were to be filed. The Assessing Officer enhanced the limit to Rs. 50,000/- and then to Rs. 80,000/-. The appellant furnished before the AO. confirmations of as many as 302 parties, including sundry creditors as on 31.03.2008 below the limit of Rs. 80,000/- prescribed by the AO confirmations of 122 sundry creditors above Rs. 80,000/- were filed and confirmations of 23 parties to whom amounts payable exceeded Rs. 80,000/-remained to be filed on 24.12.2010 by the appellant for the reason that most the these parties were from outside Delhi, mainly from Jammu & Kashmir,, being small traders belonging to the unorganized sector. It has been submitted that owing to the shortage of time provided by the Assessing Officer to file the confirmations of so many parties (many of them located outside Delhi in Jammu & Kashmir) and also because of the extreme cold conditions in Jammu & Kashmir at that time of the year, confirmations of all the creditors above Rs. 80,000/- could not be obtained by the appellant for filing before the AO. Accordingly, I am of the view that the appellant was prevented by sufficient cause from filing the confirmations of all the sundry creditors exceeding Rs. 80,000/- in the time provided by the AO and that the case of the appellant is covered by Rule 46(1)(b). The additional evidence filed before me by way of confirmation of these 23 sundry creditors is being, therefore, admitted. Since confirmations of 23 sundry creditors totaling to Rs. 45,76,244/- were filed during the course of appellate proceedings for the first time, the matter was remanded to the AO who vide letter dated 14.07.2011 has sent his report. The appellant has submitted rejoinder to the same as follows :-
