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May 11, 2022

Amounts received in previous years cannot be added in succeeding years.

by CA Shivam Jaiswal in Income Tax

Amounts received in previous years cannot be added in succeeding years.

Facts and Issue of the case

The grounds raised by the assessee reads as under:

  1. The order passed u/s.250 on 29.06.2019 for A.Y.2016-17 by CIT(A)-6, Abad, ex-parte and upholding addition aggregating to Rs.25,0,3,321/- as bogus purchases is wholly illegal, unlawful and against the principles of natural justice.
  • The Ld. CIT(A) has grievously erred in law and or on facts in not appreciating the appellant was prevented by sufficient cause from complying to the alleged notices of hearing. The CIT(A) ought to have allowed sufficient opportunity to the appellant to comply with the notices of hearing. Hence, he may be allowed to produce additional evidence and it may be admitted.
  • The Ld. CIT(A) has grievously erred in law and on facts in upholding that the purchases aggregating to Rs. 25,0,3,321/-   from Aarti Jewellers and , Prakash Gold as bogus purchases and thereby making an addition of Rs. 25,0,3,321.
  • That in the facts and circumstances of the case as well as in law, the Id. CIT(A) ought not to have upheld the purchases aggregating to Rs. 25,0,3,321/- from Aarti Jewelers and Prakash Gold as bogus purchases and thereby confirming an addition of Rs. 25,0,3,321.
  • Without prejudice to above, the impugned addition is highly excessive and calls for substantial reduction.

Ground no. 1 and 2 it was stated before us by the ld. Counsel for the assessee were general in nature and are therefore not being dealt with by us. Ground no. 3 to 5, ld. Counsel for the assessee stated related to addition made of Rs. 25,03,321/- on account of outstanding balances of two parties M/s. Aarti Jewelers and M/s. Prakash Gold held to be bogus. The assessment order reveals that the said two parties were included in the list of current liabilities which included sundry creditors and advances as under:

Aarti Jewelers   Rs. 12,98,295/-
Prakash Gold    Rs. 12,05,026/-.

These were noted to be balances relating to sundry creditors by the A.O. who had also noted the fact that the liability in the case of M/s. Prakash Gold had been carried forward from assessment year2014-15 and thereafter there was no transaction in the said account. The balances in the case of Aarti Jewelers pertained to purchases of Gold made during the impugned year. Both these balances were held to be bogus entries and addition made to the income of the assessee.

Observation of the court

Considering the above facts, vis-à-vis the outstanding balance relating to M/s. Prakash Gold amounting to Rs. 12,05,026/-, the addition having been made finding it to be bogus, since the consistent finding of fact is that the transaction was entered into by the assessee with the said party not in the impugned year but in earlier year i.e in A.Y. 2014-15 ,the addition in any case could not have been made in the impugned year but only in the year in which the liability arose i.e. A.Y. 2014-15. Therefore the addition on account of outstanding liability pertaining to Prakash Gold amounting to Rs. 12,05,026/- is directed to be deleted. As for the liability on account of M/s. Aarti Jewelers, the ld. Counsel for the assessee has contended that the said liability was discharged in the succeeding years through banking channels. Copy of the ledger account of the parties was also placed before us.

Conclusion

The Court  allowed  the  appeal of the Assessee.

Imran-Mohammed-Iqbal-Vs-ITO-ITAT-Ahmedabad

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