Assessee’s AO cannot question Creditor’s Income Tax Return instead he should inquire with creditor’s AO

CIT Vs. Dataware Pvt. Ltd. (Calcutta High Court)

Assessee’s AO cannot question Creditor’s Income Tax Return instead he should inquire with creditor’s AO

The assessee  company received  share application money of Rs. 1 Crore from M/s. Harrington Traders Pvt. Ltd. (hereinafter referred  to as the creditor). During the assessment proceedings the assessee company submitted the confirmation letter of the creditor, details of the transaction, namely, its PAN etc. to the  Assessing  Officer during the second round of assessment proceeding. As per direction of the Tribunal below the Assessing Officer made enquiries from the creditor, who entered appearance and provided the details of their PAN, source of income, and confirmed the fact of giving the money to the Assessing Officer.The Assessing Officer,however, instead of making enquiry from the Assessing Officer of the creditor as to whether the return submitted by the creditor has been accepted he himself arrived at the finding that the procurement of money by the creditor was not genuine and added the amount to the income of the assessee.

On Appeal by the Assessee Honourable Kolkata High Court held  Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence.So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established.

IN THE HIGH COURT AT CALCUTTA
COMMISSIONER OF INCOME TAX, KOLKATA- III

Vs

M/S. DATA-WARE PRIVATE LIMITED

ITAT No. 263 of 2011
GA No. 2856 of 2011

Date : 21st September, 2011.

The Court : This appeal is at the instance of the Revenue and is directed against order dated 13^th May, 2011, passed by the Income Tax Appellate Tribunal, ^`A’ Bench, Kolkata, in ITA No. 783/Kol./2010 relating to assessment year 2001-02, by which the Tribunal has dismissed the appeal preferred by the Revenue.