D IN INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND TANEJA, SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER I.T.A. No.2374/Mum/2013 (Assessment Year : 2009-10) Dy.Commissioner of Income Shri Devshankar Mourya 120, Tax -22(3), Vs. Shiv Centre, Plot No.72, Tower No.6, 3rd floor, Sector-17, Vashi, Vashi Railway Stn.Complex, Navi Mumai-400703 Vashi, Navi Mumbai-400703 (Appellant) ( Respondent) PAN/GIR No. : ACRPM4775D Appellant by Shri Shri B S Bist Respondent by None Date of Hearing : 28.09.2016 Date of Pronouncement : 28.09.2016 O R D E R Per Sanjay Garg, Judicial Member: Present appeal has been preferred by revenue against order of ld.CIT(A)-33, Mumbai-, dated 28.1.2013 for assessment year 2 ITA No.2374/ Mum/2013 2009-10. revenue is aggrieved against action of ld.CIT(A) in deleting addition of Rs.3,51,39,888/- which was made by AO under section 41(1) of Income Tax Act, 1961 on account of cessation of liability. 2. Facts of case are that during assessment proceedings AO observed that sundry creditors for amount of Rs.3,51,39,388/- were outstanding. When asked to explain, assessee explained that he was engaged in business of fabrication, erection and contract work for factory erection and installation. That these sundry creditors were in relation to purchases made by assessee. Due to shortage of funds, he could not make payment to said parties. On being asked to file confirmations, assessee filed confirmation of almost all sundry creditors. But AO found that PAN of all creditors were not mentioned on confirmation letters. He, therefore, assumed that assessee had made false signatures on creditors confirmation letters. He also made observation that if signatures on creditors confirmation letters would found forged on letter then prosecution may be lodged against assessee. He on this account assumed that creditors were not genuine creditors but they exist in books of account only to book bogus expenses. He further found that creditors were outstanding for many years. Accordingly, added sundry creditors amounting to Rs.3,51,39,388/- in total income of assessee under section 41(1) of Act. 3 ITA No.2374/ Mum/2013 3. Being aggrieved by above order, assessee preferred appeal before ld. CIT(A). Before ld. CIT(A), assessee furnished details of all 113 sundry creditors and claimed that said creditors had supplied him various materials like, cement, hardware and spares, steel and pipes, consumables purchase, cement suppliers, valves, flange and fittings suppliers, sand and brick suppliers, fabrication and welding material suppliers, paints suppliers, vessels and pump suppliers, fuel and gas suppliers etc. He further submitted that out of said 113 creditors, some were reputed parties like M/s ACC Ltd, M/s Avery India Ltd, M/s Bombay Paints Ltd, M/s City Bank Gold International Card, M/s Orbit Corporation etc., whose identity was not doubtful and that they were regularly supplying materials to assessee. It was also submitted that in respect of certain parties, legal proceedings were also going on. Further, in subsequent years, payments to certain parties had also been made. That purchases made from parties were debited to profit and loss account and have never been doubted by AO. assessee could not pay to these creditors because of crunch /paucity of funds but liability of assessee still exists. ld.CIT(A) after considering submissions of assessee asked assessee to furnish PAN/sales tax Numbers of all creditors and also to furnish particulars of payments made to them in respective years through banking channels. assessee accordingly furnished confirmation from 29 parties and further supporting documents like bills and vouchers in respect of 57 4 ITA No.2374/ Mum/2013 parties. assessee also submitted details of payments made in subsequent years in respect of 48 parties. ld. CIT(A) called for remand report in this respect from AO. AO submitted his remand report against which assessee also filed his reply. After considering all details of creditors and evidences in respect of material supplied like PAN/CST No./TAN No./VAT TIN No and in case of some parties; Agency Identity No. and Service Tax No., details of bills and vouchers etc., ld.CIT(A) divided list of creditors into two parts. In first part, he placed creditors whose details were given and also confirmation were filed and it was held that there were no reasons to disbelieve outstanding liability of assessee against these creditor. He observed that AO had not conducted necessary inquiry in this respect and held that creditors as bogus merely on assumption, which was not justified. 4. In second category, he placed creditors where no confirmations were filed by assessee during appellate proceedings before ld. CIT(A), however, confirmations were filed from those creditors during assessment proceedings. Ld. CIT(A) observed that AO had disbelieved said creditors only on assumption. He did not make necessary inquiry even during remand proceedings. AO did not choose to ascertain if payment shown as made by cheques to all these parties were genuine or otherwise. He noted from remand report that AO simply commented in remand report that confirmation filed by assessee were made during course of scrutiny 5 ITA No.2374/ Mum/2013 proceedings also and hence verification in this regard was not necessary. ld. CIT(A) observed when assessee had filed necessary details like PAN, TAN, VAT,CST Nos. including identity of parties was established; even assessee had furnished bills and vouchers, then, in absence of any inquiry made by AO, it cannot be held that same were bogus creditors. Even assessee had made payment through banking channel which could have been ascertained by AO. He further observed that out of total 113 creditors, assessee filed confirmation list along with bills and vouchers in respect of 99 sundry creditors and in case of remaining 14 creditors details of payments made have been given. Hence, considering facts and circumstances of case, ld. CIT(A) held that as assessee has admitted his liability towards sundry creditors and when identity of creditors was also established, assessee has also explained nature of credits which was towards purchases made by assessee from these parties and necessary details like bills and vouchers were also furnished and hence under these facts and circumstances of case, there was no cessation of liability. He accordingly deleted additions so made by AO u/s 41(1) of Act. 5. After considering rival submissions and in view of well reasons and detailed order of ld. CIT(A), we do not find any merit in appeal of revenue and same is accordingly dismissed. 6 ITA No.2374/ Mum/2013 6. In result, appeal of revenue is dismissed. above order was pronounced in open court on 28th Sept, 2016. 28 Sept,2016 ht Sd/- Sd/- Sd/- Sd/- (ASHWANI TANEJA) TANEJA) (SANJAY GARG) GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: 28 Sept,2016 ht . . ./ SRL , Sr. PS Copy of Order forwarded to : Copy 1. Appellant 2. Respondent. 3. CIT(A)- concerned 4. CIT concerned 5. DR, ITAT, Mumbai concerned 6. Guard file. BY ORDER, (Asstt. Registrar) ITAT, Mumbai Dy.Commissioner of Income-tax -22(3), Navi Mumbai v. Devshankar Mourya