IT APPEAL NO. 579 (MDS.) OF 2014
[ASSESSMENT YEAR 2009-10]

DR. O.K. NARAYANAN, VICE-PRESIDENT 
AND VIKAS AWASTHY, JUDICIAL MEMBER

Dr. Anitha Sumanth, Advocate for the Appellant. 
Guru Bhashyam, Jt. CIT for the Respondent.

ORDER

The order of the Bench was delivered by

Vikas Awasthy, Judicial Member - The appeal has been filed by the assessee assailing the order of the Commissioner of Income-tax (Appeals)-II, Coimbatore, dated December 23, 2013 for the assessment year 2009-10.

2. The assessee is in the business of manufacturing and export of hosiery garments. The assessee filed his return of income for the assessment year 2009-10 on March 25, 2011 declaring income of Rs. 8,61,110. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") was issued to the assessee on August 29, 2011. During the course of scrutiny assessment, the Assessing Officer observed that the assessee has shown sundry creditors to the tune of Rs. 1,73,86,730. To verify the genuineness of the creditors, the Assessing Officer issued letters to the following parties :

3. Out of the above said 7 creditors, the letters issued to 5 parties were returned undelivered with the endorsement "no such person". In respect of one of the sundry creditors, i.e., M/s. Espee Fabrics, the assessee furnished the account details, which were verified to be genuine by the Assessing Officer. In respect of following 4 parties, the Assessing Officer made addition under section 68 as unproved creditors :

4. Aggrieved by the assessment order dated December 30, 2011, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), vide impugned order, dismissed the appeal as the assessee was not able to furnish confirmations from any of the parties to support his claim.

5. Now, aggrieved by the order of the Commissioner of Income-tax (Appeals), the assessee has come in second appeal before the Tribunal.

6. Dr. Anitha Sumanth, Advocate, appearing on behalf of the assessee, submitted that the assessee could not furnish confirmation letters before the Assessing Officer and the Commissioner of Income-tax (Appeals) as they did not give sufficient opportunity of hearing to furnish the confirmation letters. Only one opportunity was granted by the Commissioner of Income-tax (Appeals). Now, the assessee has got confirmation letters from all the sundry creditors in support of his claim. Learned counsel for the assessee further submitted that the authorities below have erred in making addition of Rs. 79,08,671 under section 68 and have erred in not considering opening balance of Rs. 47,07,189.25 as on April 1, 2008. Learned counsel also placed on record the copies of confirmation letters in the form of additional evidence.

7. On the other hand, Shri Guru Bhashyam, Joint Commissioner of Income-tax, representing the Department, vehemently supported the order of Commissioner of Income-tax (Appeals). The learned Departmental representative contended that the assessee had not furnished confirmation letters from the concerned creditors either before the Assessing Officer or before the Commissioner of Income-tax (Appeals). No reason whatsoever has been given by the assessee as to why confirmation letters were not filed before the authorities below. The learned Departmental representative pointed out that the Assessing Officer had given five opportunities to produce evidence in support of his claim but the assessee did not produce any document or confirmation letter before the Assessing Officer. Even before the Commissioner of Income-tax (Appeals), the assessee did not file confirmation letters from the concerned parties. In order to support his submissions, the learned Departmental representative placed reliance on the decision of the hon'ble Gujarat High Court in the case of Fairdeal Filaments Ltd. v. CIT [2008] 302 ITR 173 and the decision of the Agra Bench of the Tribunal in the case of Shivangi Steel (P) Ltd. v. Asstt. CIT [2014] 147 ITD 166/42 taxmann.com 393. The learned Departmental representative prayed for dismissing the appeal of the assessee.

8. We have heard the submissions made by the representatives of both sides and have perused the orders of authorities below. Learned counsel for the assessee has filed petition for admission of additional evidence under rule 29 of the Income-tax (Appellate Tribunal) Rules. The assessee has filed additional evidence in the form of confirmation letters from the concerned parties. Learned counsel has contended that the addition under section 68 has been made only for the reason that the assessee could not produce confirmation letters from the concerned creditors. The assessee despite his best efforts, could not contact the parties for obtaining confirmation letters. The Assessing Officer had sought confirmation letters from 7 creditors. However, only three parties could be verified at the time of assessment proceedings. Accordingly, the Assessing Officer made addition in respect of the remaining unproved creditors. Now, in support of the claim, the assessee has placed on record confirmation letters from the concerned parties along with the registration certificates issued by the Commercial Taxes Department to the creditors.

9. The learned Departmental representative has opposed additional evidence sought to be brought on record by the assessee. In support, the learned Departmental representative placed reliance on the decisions of the hon'ble Gujarat High Court and Agra Bench of the Tribunal. In the case of Fairdeal Filaments Ltd. (supra), the assessee failed to show that sufficient opportunity was not granted by the authorities below. The hon'ble High Court observed that both the appellate authorities had concurrently concluded that sufficient opportunities were granted to the assessee. The Tribunal declined to admit additional evidence under rule 29 of the Income-tax (Appellate Tribunal) Rules, as the assessee was non-co-operative, negligent and recalcitrant. The hon'ble High Court in the background of these facts, declined to reverse the findings of the Tribunal.

10. In the case of Shivangi Steel (P.) Ltd. (supra), the assessee was non-cooperative and did not attend assessment proceedings. The Assessing Officer was constrained to make assessment under section 144 of the Act. Even in the first appellate proceeding the assessee sought large number of adjournments but did not produce any document.

11. Whereas, in the present case, a perusal of the records shows that the Assessing Officer had granted five hearing opportunities to the assessee. The assessee had provided the addresses of creditors as available in his records. It is not the case of Revenue that the assessee has not cooperated or is negligent in prosecuting his case. It is a case where the assessee could not get confirmation letters in time from creditors. It is alleged that the first appellate authority has not granted sufficient opportunity to the assessee to file confirmation letters. Thus, the case law on which the learned Departmental representative has placed reliance are distinguishable on facts itself.

12. Be that as it may, now the assessee has placed on record confirmation letters from the creditors. We are of considered opinion that in order to verify the genuineness of confirmation letters, the matter needs a revisit to the Assessing Officer. Accordingly, we remit the issue back to the file of the Assessing Officer to decide the issue afresh after verifying the veracity of the confirmation letters and considering the opening balance of the creditors.

13. The impugned order is set aside. The appeal of the assessee is allowed for statistical purpose.

The order pronounced in the open court on July 16, 2014.