Ita/157/2002 Of The Commissioner Of Income Tax,Trichur v. Smt.annamkutty Jose,Trichur

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 27TH FEBRUARY 2008 / 8TH PHALGUNA 1929 ITA.No. 157 of 2002() --------------------- ITA.70/COCH/1998 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT: ------------------------------------- THE COMMISSIONER OF INCOME TAX, TRICHUR. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: RESPONDENT: ------------------------ SMT.ANNAMKUTY JOSE, GILSA OLD SPARE PARTS & SCRAP MERCHANT, PATTALAM ROAD, TRICHUR. BY ADV. SRI.P.BALACHANDRAN SMT.PREETHA S.NAIR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 27/02/2008, THE COURT ON 27/02/2008 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &T.R.RAMACHANDRAN NAIR, JJ. .................................................................... .................................................................... Dated this the 27th day of February, 2008. C.R. JUDGMENT C.N.Ramachandran Nair, J. The appeal filed by the Revenue is against the order of the IncomeTax Appellate Tribunal dismissing a department appeal for the assessmentyear 1991-92. We have heard Standing Counsel appearing for theappellant-Revenue and Senior counsel Sri.P.Balachandran appearing for therespondent-assessee. 2. The assessee was a dealer in old spare parts and scraps. In theaccounts for the previous year relevant for the assessment year 1991-92,assessee showed sundry credits of Rs.3,13,318.90. When the assessee wascalled upon to furnish the names and addresses of creditors, the assesseefurnished another balance sheet reducing the sundry credit to Rs.41,718/-.Even in the second round, the assessee did not furnish the names andaddresses of creditors or confirmation letters from them. Since assessee didnot prove the sundry credits, the Assessing Officer made addition. In thefirst appeal, addition was deleted by the appellate authority on the ground that assessee's accountant was not qualified and he has not written theaccounts properly which according to the Commissioner (Appeals) was notdenied by the Assessing Officer. On further appeal, the Tribunal agreedwith the first appellate authority and dismissed the appeal. It is against thatorder this appeal is filed. 3. We are unable to uphold the order of the Tribunal for the simplereason that Tribunal wrongly cast the burden on the department to provesundry credits shown in the accounts of the assesssee. If assessee claimsthe amount as due to the creditors, it is for the assessee to prove the samethrough confirmation letters as and when demanded by the officer. In thiscase admittedly assessee did not furnish even the names and addresses ofsundry creditors. Further, the nature of business is purchase and sale of oldspares and scrap by the assessee. The assessee did not even establish thecase that there is a practice of credit purchase in the nature of business.Even though there is no specific provision in the statute casting burden onthe assessee to prove sundry credits, we feel the principles contained inSection 68 as well as in Section 69(c) are squarely applicable to sundrycredits in the case of a trader. In fact credit purchases are nothing butexpenditure and if sundry credits are not proved by the assessee, additioncan be made by resort to Section 69(c) of the Income Tax Act. We are,therefore, unable to uphold the orders of the Commissioner(Appeals) as well as that of the Tribunal confirming it holding that burden is on theAssessing Officer to prove sundry credits as representing income of theassessee. If the assessee does not prove the transactions, the sundry creditsis to be disallowed which means it has to be added as income of theassessee. We, therefore, allow the department appeal by reversing theorders of the Tribunal and that of the first appellate authority and byrestoring the assessment. well as that of the Tribunal confirming it holding that burden is on theAssessing Officer to prove sundry credits as representing income of theassessee. If the assessee does not prove the transactions, the sundry creditsis to be disallowed which means it has to be added as income of theassessee. We, therefore, allow the department appeal by reversing theorders of the Tribunal and that of the first appellate authority and byrestoring the assessment. 4. The next question raised by the department pertains to addition ofRs.4,000/- which was done based on a sales tax assessment on gross profitaddition. Having regard to the smallness of the amount involved, wedecline to go into the question raised. However, we allow the departmentappeal pertaining to the first question by reversing the order of the Tribunalas well as that of the first appellate authority and by restoring theassessment. C.N.RAMACHANDRAN NAIRJudge pms T.R.RAMACHANDRAN NAIRJudge