Failure to controvert evidence with respect to Sale against Advance amount received from Trade Creditors by ITD: ITAT deletes addition [Read Order]

The Two member bench of Income Tax Appellate Tribunal ( ITAT ) of Mumbai while deleting the addition made by the assessing officer held that the Income Tax Department failed to controvert evidence with respect to sale against advance amount received from trade creditors.

The Assessee Hiral Exports  after filing the return of the Income the assessment was completed. Subsequently, assessing officer in consequence to order under Section 263 passed by the Pr.CI assessed the total income at Rs.42,69,510/- under Section 143(3) r.w.s 263 of the Income Tax Act by making addition of Rs.40,82,500/- due to payment made by M/s Vishal Gems under section 68 of the Income Tax Act as unexplained.

During the proceedings the AO pointed out that Vishal Gems was shown as an unsecured loan instead of trade creditors in the A.Y. 2011-12. The assessee argued that because of wrong grouping made by the accountant it was shown as unsecured loan instead of trade creditors because of technical error.  However, the AO has not agreed with the submission of the assessee. Therefore,the explanation of the assessee was rejected and the amount of Rs.40,82,500/- was added to the total income of the assessee under Section 68 of the Income Tax Act.

Aggrieved by the order assesee filed appeal before the CIT(A). The CIT(A) has dismissed the appeal of the assessee

During the adjudication Bharat Kumar, the counsel for assessee relied upon the letter of confirmation of accounts relating to Vishal Gems & Jewels submitted that assessee has made sales to the said party and after receiving the payment the closing balance was Rs.43,60,500/- as on 31.03.2022.Also the sale was made to the said party against amount received in advance from the said party.

Lieder Panicker, Department representatives supported the order of lower authorities.

It is observed that lower authorities have failed to controvert the relevant supporting evidences furnished by the assessee that they have made sales to the Vishal Gems & Jewel against the advance amount received by them from that concern and there was no unsecured loan obtained by the assessee from that concern.

Therefore the bench comprising  Rahul Chadhary, ( Judicial Member ) and Amarjit Singh,( Accountant Member ) deleted the addition made under Section 68 of the Income Tax Act, 1961.

To Read the full text of the Order CLICK HERE

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