COMMISSIONER OF INCOME TAX, PATNA Vs. RAM BABU ROY, PROP.SHREE RAM ENTERPRISES, KHAJEKALAN, PATNA CITY, PATNA

JUDGEMENT

(1.) RAM Babu Roy happened to be the proprietor of Shree Ram Enterprises, Khajekalan, Patna City and used to derive income from the business of crackers. A search and seizure operation was conducted in the business and residential premises of Ram Babu Roy (hereinafter referred to as the 'assessee ') on 18.10.1995. A notice was issued to him under Section 158BC of the Income -tax Act, 1961 requiring the assessee to file his return of disclosed and undisclosed income. In the present case, we are concerned with the amount pertaining to sundry creditors. As per original books of accounts of the assessee as on 18.10.1995, amount due to sundry creditors has been shown at Rs. 13,70,724.76. However, as per the declared undisclosed income as on 18.10.1995, the amount due to sundry creditors is shown at Rs. 27,56,441.17. Sundry creditors included M/s Mohan Fireworks to the tune of Rs. 9,52,020.00 and M/s Santosh Sharma to the tune of Rs. 4,70,891.16. During the course of hearing, assessee was asked to submit confirmation of accounts of all sundry creditors, but confirmation in regard to the aforesaid two creditors were not submitted. Show cause notice given to the assessee also did not yield any result. Neither the assessee submitted confirmation from the aforesaid creditors nor delivery chalans were filed to prove that those are genuine creditors. During the course of hearing before the Assessing Officer, the assessee did not submit the address of the aforesaid two creditors. Accordingly, the Assessing Officer held that the sundry creditors as on 18.10.1995 will be taken at Rs. 13,33,530.01. Aggrieved by the same as also other additions, assessee preferred appeal before the Patna Bench of the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal '). The Tribunal by the impugned order observed that it was not necessary to make further addition on account of the two sundry creditors, namely, M/s Mohan Fireworks and M/s Santosh Sharma and accordingly ordered for its deletion.

(3.) RELEVANT portion of the judgment of the Tribunal in this regard is as follows: - "The matter has been discussed on page 4 of the assessment order. It mentions that the figure of sundry creditors as on the date of search was originally shown at Rs. 13,71 lacs, but the same had gone upto Rs. 27.56 lacs in view of the undisclosed purchases made by the assessee. Out of these parties, no confirmation was filed from the following 2. parties: - 1. Mohan Fire Works Rs. 7.52 lacs 2. Shantosh Sharma Rs. 4.71 lacs The AR of the assessee pleaded that the parties mentioned above were not co -operating with the assessee. Reference is made to the decision of the Andhra Pradesh High Court reported in 232 ITR 776 that when the books of accounts have been rejected such additions should not be made. Even though the facts of the assessee 'scase are different from the facts before the Andhra Pradesh High Court (supra), it can be said taking the entire facts of the assessee 'scase into consideration that it was not necessary to make a further addition on account of 2 parties mentioned above. Therefore, the addition is deleted."

(4.) THE Commissioner of Income -tax aggrieved by the same has preferred this appeal under Section 260A of the Income tax Act. By order dated 14.11.2003, the appeal has been admitted on the following substantial question of law: - "(i) Whether the assessee has discharged the onus put upon him in respect of the entry of trade creditors in the books of account -