IN INCOME TAX APPELLATE TRIBUNAL BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI N. K. PRADHAN, AM ITA No.4643/Mum/2012 (A.Y:2009-10) Income Tax Officer 25(1)(2), Vs. Sri Ajit Ramdas Chaudhary, Room No.204, 2nd Floor, Building B-10, Neel Kamal, S. V. No.C-11, Pratyakshakar Bhavan, Road, Dahisar (East), Bandra Kurla Complex, Bandra Mumbai 400 068 (East), Mumbai 400 51 PAN:AAGPC 4173N Appellant .. Respondent Appellant by .. Sri N. Ravi Ramachandran, Sr. DR Respondent by .. Sri Sri K. Shivaram, AR Date of hearing .. 13-10-2016 Date of pronouncement .. 13- 10- 2016 ORDER PER MAHAVIR SINGH, JM: This appeal by Revenue is arising out of order of CIT (A)-35, Mumbai in appeal No.CIT (A)35/ITO 25(1)(2)/IT.428/11-12 dated 26-04-2012. Assessment was framed by ITO, Ward -25(1)(2), Mumbai for assessment year 2009-10 vide his order dated 29-12-2011 u/s 143(3) of Income Tax Act, 1961 (hereinafter Act ). 2. only issue in this appeal of Revenue is against order of CIT (A) deleting addition of un-proved creditors appearing in his books of accounts. For this, Revenue has raised following ground:- (i) On facts and in circumstances of case and in law, Ld. CIT (A) erred in deleting addition of Rs.2,67,45,632/- under section 68 of I.T. Act, 1961 without appreciating fact that assessee had failed to prove creditors appearing his books of accounts. 3. Briefly stated facts are that assessee is proprietor of M/s. Ajit Enterprises. During financial year 2008-09 relevant to this assessment year 2009-10, net sales of year was Rs.4,21,87,209/- and corresponding purchases was Rs.3,80,50,737/-. As on 31-03-2009, sundry debtors 2 ITA No.4643/Mum/2012 outstanding was at Rs.2,95,11,183/- as against outstanding sundry creditors at Rs.3,04,27,454/-. AO during assessment proceedings noticed that there is discrepancy in account of sundry creditors and according to him these are not verifiable in view of fact that notices issued u/s 133(6) of Act were either not served or reply not received back from following parties:- Sr. Name of Party As per Assessee As per reply to Difference No. To notice u/s 133(6) 1. Rohan Enterprises 27,52,153 Reply not received 27,52,153 2. to Z Digital Prints 2,22,390 Reply not received 2,22,390 3. Crown Sales Corporation 1,53,25,040 Reply not received 1,53,25,040 4. Vin International 6,53,435 6,44,999 8,436 5. V3 Enterprises 84,37,613 Left 84,37,613 Total 2,67,45,632 According to Assessing Officer, assessee could not prove these sundry creditors with documentary evidences and moreover, in regard to supplier namely V3 Enterprises is hawala party providing accommodation entries in view of information available on website of Sales Tax Department. Accordingly, he added sundry creditors as bogus/un-proved amounting to Rs.2,67,45,632/-. Aggrieved, assessee preferred appeal before CIT (A). 4. CIT (A) deleted addition by observing in Para 3 of his appellate order as under:- 3. I have carefully considered findings of Assessing Officer and submissions of appellant. It is apparent that Assessing Officer has considered Net Profit from trading activity of Appellant in arriving at Total Income, thereby accepting purchase, sales and resultant profit. Further, Appellant has produced documentary evidence in form of ledger accounts and confirmations in respect of all but one Creditor. These were filed by Appellant before Assessing Officer prior to his passing Order, but same were not considered and no reasons given for not taking cognizance thereof. Assessing Officer has pointed out that as Appellant has dealings with parties listed by Sales tax Department as suspicious dealer and shown huge amounts of credit against such party, entire difference as pointed out totaling to Rs.2,67,45,632/- was added to total income of Appellant as unproved Creditors. Appellant has produced ledger accounts, confirmations and also bank statements to substantiate subsequent payments to Creditors and has thus discharged onus cast on him to prove Creditors. corresponding sales are to reputed parties 3 ITA No.4643/Mum/2012 and this fact has also not been considered by Assessing Officer. Further, no addition can be made in hands of Assessee on basis of suspicions of third party. Even so, there is no rationale to consider that all Creditors in respect of Purchases made, to be unproved Creditors, merely because one of them is listed in website of Sales Tax Department as suspicious dealer. Assessing Officer has accepted Purchases, Sales and resultant profit from Appellant s trading activities. Appellant has furnished ledger accounts, confirmations and bank statement to substantiate subsequent payments and has thus discharged onus cast on him. mere suspicion of third part with respect to one of parties is not ground for addition to Total Income. In circumstances, application of provision of Section 68 is uncalled for. case laws relied upon by Appellant also supports his claim. Assessing Officer is directed to delete addition made to Total Income of Appellant on account of unproved Creditors. ground of appeal is allowed. Aggrieved, Revenue is in appeal before us. 5. Before us, learned Sr. DR argued that assessee failed to produce any evidence to prove these creditors and moreover, assessee is unable to reconcile stock position to prove that goods were moved in and moved out. He argued that CIT (A) erred in deleting addition only on one premise that sales are not doubted by AO or party has proved that subsequently payment has been made to creditors. In view of these arguments, learned Sr. DR urged Bench to restore matter back to AO. On other hand, learned Counsel for assessee relied on order of CIT (A) and he carried us through documents and evidences filed in assessee s paper book consisting of pages 1 to 147. 6. We have heard rival contentions and gone through facts and circumstances of case. Before us, learned Counsel for assessee filed copy of confirmation of V3 Enterprises, Rohan Enterprises, Vin International and Crown Sales Corporation. But, assessee could not file confirmation of to Z Digital Prints. assessee also filed copy of ledger account showing payments made to these parties subsequently along with bank statement. Before us, learned Counsel for assessee explained that assessee during assessment proceedings for assessment year 2011-12 filed complete balance confirmation of creditors and AO has accepted confirmation as well as 4 ITA No.4643/Mum/2012 outstanding credit balances in same party. learned Counsel for assessee also drew our attention to audited accounts wherein complete reconciliation of stock statement is filed in respect to purchases as well sales. We find that assessee is able to prove that these creditors have been paid subsequently during financial year 2010-11 relevant to assessment year 2011- 12 and AO during course of scrutiny assessment u/s 143 (3) of Act has accepted this position. We also find that assessee has made payments to these creditors and to prove same, assessee also filed copy of bank statement of these parties along with confirmation in his paper book. We also find that AO could not disprove sales made by assessee and in absence of purchase; sales could not have been effected. But here, we want to crave out one exception that assessee is unable to file any confirmation in respect of one party viz. to Z Digital Prints from whom assessee had made purchases to extent of Rs.2,22,390/- and to this extent, addition is confirmed in absence of any evidence. In view of above facts and circumstances, we partly confirm order of CIT (A) confirming deletion of sundry creditors except in case of to Z Digital Prints for amount of Rs.2,22,390/-. 7. In result, appeal of Revenue is partly allowed. Order pronounced in open court on 13-10-2016. Sd/- Sd/- (N. K. PRADHAN) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 13-10-2016 Lakshmikanta Deka/Sr.PS 5 ITA No.4643/Mum/2012 Copy of Order forwarded to: 1. Appellant 2. Respondent. 3. CIT (A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER, Assistant Registrar ITAT, MUMBAI Sr. Particulars Date Initials Member No. Concerned 1 Dictation given on 13/10/16 LK Deka JM 2 Draft placed before author 14/10/16 3 Draft proposed/placed before second Member 4 Draft discussed/approved by Second member 5 Approved Draft comes to Sr.PS 6 Kept for pronouncement on 7 File sent to Bench Clerk 8 Date on which file goes to Head Clerk 9 Date of dispatch of Order Income-tax Officer-25(1)(2), Mumbai v. Ajit Ramdas Chaudhary