IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `C' : NEW DELHI
BEFORE SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM
ITA No.3381/Del/2011
Assessment Year : 2008-09
ITO, Vs. Inderjeet Kaur,
Ward-2, Prop. M/s Babbar Jewelers,
Sonepat. 76, Jamaipura,
Sonepat.
PAN: ABOPK6571H
(Appellant) (Respondent)
Appellant by : Ms Anima Barnwal, Sr. DR
Respondent by : Shri K. Sampath, Advocate
Date of hearing : 23.10.2015
Date of pronouncement : 23.10.2015
ORDER
PER R.S. SYAL, AM:
This appeal by the Revenue is directed against the order
passed by the CIT(A) on 18.04.2011 in relation to the assessment
year 2008-09.
2 ITA No.3381/Del/2011
2. The first ground is against the deletion of addition of
Rs.40,25,234/- made by the AO on account of `Sundry creditors'.
3. Briefly stated, the facts of the case are that the assessee is
engaged in the business of purchase and sale of gold jewellery.
Sundry creditors to the tune of Rs.40,20,234/- were shown in the
accounts. On being called upon to furnish their details, the
assessee submitted the details, which have been reproduced on
pages 5 and 6 of the assessment order. The assessee stated that
these were not the creditors in the strict sense, but, the customers
who sold their old ornaments. In support of the genuineness of
these credits, the assessee submitted that the jewellery purchased
from them was sold to her sole customer, namely, M/s Nikki
Jewellers House, from whom the payment was stuck up. The
assessee submitted that the amount was received from M/s Nikki
Jewellers House and then paid to these customers in the
immediately succeeding year. The AO has recorded that despite
giving adequate opportunity to produce these creditors, the
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assessee could produce only three persons, namely, Smt. Murti
Devi, Smt. Joginder Kaur and Shri Satpal, whose statements were
recorded on different dates. The AO noticed that they were
persons of no means and, hence, the assessee's contention of
having purchased gold jewellery from them, was not acceptable.
Resultantly, he made addition of the said sum which came to be
deleted in the first appeal.
4. We have heard the rival submissions and perused the relevant
material on record. It is an admitted position that the assessee sold
the jewellery purchased from these persons to M/s Nikki Jewellers
House, from whom payment was delayed. On receipt of the
amount from M/s Nikki Jewellers House, the assessee immediately
settled the accounts of these customers. The ld. CIT(A) has
recorded that all the sundry creditors were produced before the AO
on 7.10.2010, but, they were sent back by the Officer on the
pretext that his health did not permit to take statement of more than
two persons in a single day. Shri Darshan Singh, husband of the
4 ITA No.3381/Del/2011
assessee stated these facts on affidavit before the ld. first appellate
authority. A copy of such affidavit is available on record which
divulges that all the creditors were taken to the office of the AO in
pursuance of his directions, on 7.10.2010, but the Officer refused
to examine them. The ld. DR has not controverted these findings
recorded in the impugned order with any cogent material. The
three persons who were examined by the AO duly admitted that
they had sold their jewellery to the assessee. The AO has doubted
the genuineness of transactions with them by holding that they
were persons of no means. When we peruse the details of amounts
appearing against these persons, it is found that the same ranged
between Rs.1 lac to Rs.2 lac. The fact that confirmation from all
the creditors were filed along with the affidavit filed by the
assessee's husband averring their production before the AO who
refused to examine and other attending circumstances go to prove
the genuineness of the transactions of purchase of gold jewellery
by the assessee from them. Immediate payment could not be made
to these persons because the receipt from M/s Nikki Jewellers
5 ITA No.3381/Del/2011
House, the sole buyer of the assessee, was held up. Considering the
entirety of the facts under consideration, we are of the considered
opinion that the ld. CIT(A) was justified in deleting this addition.
This ground is not allowed.
5. Ground No.2 is against the deletion of addition of
Rs.14,19,200/- (correct amount given in the revised grounds) on
account of unsecured loans. The facts apropos this ground are that
the assessee had shown unsecured loans amounting to Rs.14.19 lac
from friends and relatives. On being called upon to produce these
persons, the assessee submitted that a sum of Rs.11,14,926/-
represented brought forward unsecured loans and only a sum of
Rs.3,04,270/- was on account of transaction undertaken during the
year with Smt. Amarjeet Kaur, who sold jewellery to the assessee
for which confirmation was filed. The AO observed that in the
return of income for the A.Y. 2007-08, there was no balance of
unsecured loans. He, therefore, made addition of Rs.14,19,200/-,
which came to be deleted in the first appeal.
6 ITA No.3381/Del/2011
6. Having heard the rival submissions and perused the relevant
material on record, we find that there cannot be any addition under
section 68 in respect of brought forward balances. Section 68
contemplates the addition in respect of amounts received during
the year which are not properly explained by the assessee to the
satisfaction of the AO. Here is a case in which the assessee
contended before the AO that a sum of Rs.11.14 lac represented
brought forward balances, but, the AO did not find any closing
balances of unsecured loans in the return for the immediately
preceding year. The ld. AR did not readily have the balance sheet
of the preceding year to amplify his contention about such brought
forward balances. In our considered opinion, this fact is of utmost
importance which requires examination at the AO's end. We,
therefore, set aside the impugned order and send the matter back to
the file of AO for deciding this issue afresh as per law, after
allowing a reasonable opportunity of being heard to the assessee.
In case it is found that unsecured loans amounting to
7 ITA No.3381/Del/2011
Rs.11,14,926/- were brought forward balances from the last year,
then, no addition should be made for this amount in the current
year. In the otherwise situation, the AO is free to examine the
genuineness of these credits as per law. While examining this
issue of the opening balances, the AO will also examine the
assessee's contention about the sale of jewellery by Smt. Amarjeet
Kaur during the year for a sum of Rs.3.04 lac. This ground is,
therefore, allowed for statistical purposes.
7. The last effective ground is against the deletion of addition of
Rs.3 lac on account of excessive salary paid to employees and
Rs.63,000/- on account of salary payable for the month of March,
2008. The assessee debited a sum of Rs.7,56,000/- as salary paid
to the persons whose names have been incorporated on page 9 of
the assessment order. In addition to that, the assessee claimed
deduction for a sum of Rs.2,00,000 paid to outside `karigars'. The
assessee also created a provision of Rs.63,000/- towards salary
payable at the end of the year. The AO required the assessee to
8 ITA No.3381/Del/2011
produce the persons to whom such salary of Rs.7,56,000/- was paid
and also the persons to whom a sum of Rs.2 lac was paid. In the
absence of the production of such employees/karigars, the AO
made an ad hoc disallowance of Rs.3 lac on account of excessive
salary paid to its employees and outside `karigars'. He further
made disallowance of Rs.63,000/- representing provision for salary
payable for the month of March, 2008. The ld. CIT(A) deleted the
additions. The Revenue is aggrieved against the deletion of this
addition.
8. After considering the rival submissions and perusing the
relevant material on record, we observe that the assessee paid a
salary of Rs.7.56 lac to its employees and Rs.2 lac to outside
`karigars.' The assessee furnished person-wise details to whom
salary payments were made and also payment to `karigars.' The
assessee expressed inability to produce these persons because the
business itself was closed down on 27.7.2009 and, thereafter, it
was difficult to locate them. In our considered opinion, the amount
of salary paid to the assessee's employees and charges to outside
9 ITA No.3381/Del/2011
`karigars' is reasonable in the facts and circumstances of the
instant case as the further corroboration by producing them for
personal examination was not possible due to the closure of
business. As such, the ad hoc disallowance of Rs.3 lac made by the
AO is held to be rightly deleted. As regards the remaining amount
of Rs.63,000/-, we find that this was a provision created by the
assessee towards salary for March, 2008 which was paid in April,
2008, which does not require disallowance. We, therefore, uphold
the impugned order on this count. This ground fails.
9. In the result, the appeal is partly allowed for statistical
purposes. stand dismissed.
Decision pronounced in the open Court on 23rd Oct., 2015.
Sd/- Sd/-
(SUCHITRA KAMBLE) (R.S. SYAL)
JUDICIAL MEMBER ACCONTANT MEMBER
Dated, 23rd October, 2015.
dk
10 ITA No.3381/Del/2011
Copy forwarded to: -
1. Appellant :
2. Respondent :
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
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