If the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner.

The assessee has filed this appeal against the order of CIT(A)-1, Bhubaneswar, dated 11.08.2017 for the A.Y.2013-2014, on the following grounds of appeal :-

1. That the order passed by the learned Commissioner of Income Tax (Appeals) - 1 as well as the order of assessment passed by the learned Income Tax Officer, Ward-l(l), Bhubaneswar without valid reason and without considering the facts of the case is illegal and arbitrary and liable to be quashed.

2. That the addition of Rs. 1,42,04,290/- to the total income on the ground that sundry creditors without considering the facts of case and nature of business is illegal and arbitrary.

3. That the addition of Rs.28,50,000/- to the total income towards advance from parties without considering proper facts and circumstances is illegal.

4. That the order of assessment as well as order of appeal is otherwise bad in law and not maintainable, since the appellant deprived from the benefit of natural justice and reasonable opportunity of being heard.

5. That the appellant begs to urge further grounds to be raised at the time of hearing.

2. Subsequently, the assessee has also filed additional grounds of appeal which read as under :-

6. "For that service of notice U/s. 143 (2) of the IT. Act alleged to have been made on 04/09/2014 against the assessee appellant is denied since was not serviced in time by the Respondent department and the objections raised before the Id.AO and Id.CIT (A) were not considered or recorded in passing orders and therefore the order has to be quashed.

7. For that amount of Sundry Creditors added automatically without application of judicious mind amounting to Rs. 1,42,05,240/- disclosed in the Balance Sheet as on 31/03/2013 in fact it was brought forwarded from the closing balance of the preceding period that is from 31/03/2012 at Rs. 1,25,24,747/- but the differential amount stood at Rs. 16,79,493/- could have been considered instead of inflating the account by making said addition.

8. For that addition of Rs.28,50,000/- shown as advance from parties and in fact the same was inflated without considering the previous closing balance stood at Rs.25,50,000/- so differential amount could have been properly confronted and addition made on the entire amount is liable to be deleted.

Other grounds will be urged at the time of hearing.

3. Further the assessee has filed additional grounds which read as under :-

9. For that the Notice as issued U/s. 143(2) of the I.T. Act under the seal and signature of the Id. Income Tax Officer, Ward-2(2) Bhubaneswar alleged to have been made on 04.09.2014, but subsequently the issue of Order of Assessment vide dt.21.03.2015 by the id. ITO, Ward-l(l), Bhubaneswar is without any jurisdiction, otherwise bad in law and nothing has been spelt out in the Order sheets and therefore the issue of notice and passing of the order are disputed and not enforced as well as to sustain in the facts of the case. Hence to be quashed.

10. For that the copies of the Order Sheets supplied to the Appellant had nowhere stated the date on which the order of Assessment was passed U/s. 143(3) of the I.T. Act. Therefore the Appellant further disputes the jurisdiction as well as irregularities made violating the provisions of the statute.

11. For that the Appellant having filed the return of Income disclosing the total income at Rs. 15,69,920/- was beyond the jurisdiction of the Id. Income Tax Officer to adjudicate and pass orders and therefore the Order of Assessment as made by the Id. ITO, Ward-l(l) has to be quashed being without jurisdiction.

12. For that the Assessment completed as well as the orders of the forum below having been disputed are liable to be quashed and vacated.

13. For that the issue of notice and service of notice being two separate elements under the statute then mere issue if not served within the statutory period then cannot be enforced superseding the statutory mandates. Therefore the matter brought to the notice of the appellant as alleged on 15.05.2015 is also barred by limitation. Therefore the filing of return on 29.09.2013 then within six months from the end of the year, if the notice is not issued or served and brought to the knowledge beyond the time is also barred by limitation, hence the order of assessment has to be quashed and vacated.

14. For that the appellant since brought the issues before the Hon'ble Bench and copies of the order supplied at the instance of the Hon'ble Bench found that there is neither any systematic orders and I issue thereof made within the scope of the statute and therefore the Assessment made beyond jurisdiction has to be quashed in the facts of the case.

Other grounds may be allowed to be made at the time of hearing.

PRAYER

It is therefore prayed that the Additional Grounds of Appeal filed may graciously be entertained and the order of Assessment passed has to be quashed and vacated on the facts of the case, and may be permitted to argue in the matter along with Original Grounds and Additional Grounds submitted till the date, and For this act of kindness, the appellant as in duty bound shall ever pray.

4. Brief facts of the case are that the assessee is a company engaged in the business of installation of 3G telecommunication systems and also trading and manufacturing of fly ash bricks during the F.Y.2012- 2013 relevant to the A.Y.2013-2014, filed its return of income on 01.10.2013 disclosing total income of Rs.15,59,920/-. The return was processed u/s.143(1) of the Act on 18.04.2014. The case was selected for scrutiny and statutory notices were issued to the assessee on 04.09.2014 was duly served on the assessee. Subsequently another statutory notice was issued to the assessee. In response to the notices, Shri Alok Das, FCA, Authorised Representative of the assessee appeared and furnished some details which were placed on record but the ld. AR could not furnish all details of requirements. He also submitted a written submission on 09.03.2016, despite all queries were not furnished and the AO issued show cause notice vide letter dated 22.02.2016 and 04.03.2016, in response to which the assessee partly replied to the above notices. Accordingly, the AO completed the assessment by making certain additions. On perusal of the financial statements, it was noticed that there was a sundry creditors of Rs.1,42,05,240/-. In this regard, the AO asked the name and address of the sundry creditors along with their ledger accounts for further verification, which were furnished by the assessee. From the list of the sundry creditors it was found that there was two creditors which were belonging to China. Out of the balance creditors, the AO issued notice u/s.133(6) of the Act to the sundry creditors for confirmations of accounts and some of the creditors replied in which he noted that the assessee is showing credit balance in his books, whereas such parties were showing Nil balance or submitted from the details and some of them did not respond. From the alleged sundry creditors it was noticed by the AO that it was the duty of the assessee to reconcile the balances shown in his books of accounts. In this regard, the assessee was also asked to explain the differences but the assessee submitted that “the assessee has closed down his operations for financial crisis. So under such circumstances it is very difficult on our part to produce the information asked by your office.” Thus, the assessee requested to do the assessment on the basis of documents without any adverse inference. Accordingly, the AO made addition of Rs.1,42,05,240/-. On further perusal of the financial statements the AO noticed that the assessee has shown Rs.28,50,000/- under the head advances from parties in the liability side of the balance sheet. In this regard, the assessee was asked vide letter dated 22.02.2016 but the assessee did not submit any reply. Accordingly, the AO made addition of Rs.28,50,000/- to the total income of the assessee and further the AO made addition of Rs.72,97,992/- under the head salary and wages outstanding.

5. Feeling aggrieved from the order of AO, the assessee appeared before the CIT(A)., however, the CIT(A) after considering the submissions of the assessee, sustained the first two additions made by the AO and gave relief of Rs.72,97,992/- made on account of salary & wages shown in the current liabilities.

6. Aggrieved further from the above order of CIT(A), assessee is in appeal before the Income Tax Appellate Tribunal.

7. Ld. AR of the assessee, firstly, challenged the legal grounds regarding non-service of the notice u/s.143(2) of the I.T.Act, 1961 issued by the department. Ld. AR submitted that the noticed has been issued by the ITO, Ward-2(2), Bhubaneswar but subsequently the assessment order was passed by the ITO Ward-1(1), Bhubaneswar without jurisdiction and he also submitted that the order-sheet supplied by the I.T. Department in which it is not clear as to when the order was passed. Further the ITO Ward-1(1), Bhubaneswar has not issued further fresh notice u/s.143(2) for change of the incumbency and it was also objected by the ld. AR that the notice u/s.143(2) of the Act, never served to the assessee and this issue was raised before the AO as well as CIT(A) but both the revenue officers did not take any cognizance in this regard and there is no any deliberation in the order passed by them. He further submitted that for taking the jurisdiction under the Income Tax Act, merely issuance of notice is not sufficient, it should have been served to the assessee within the time frame as per the Income Tax Act, which is lack in this case, therefore, the entire order is bad in law. He has filed paper book containing pages No.1 to 146.

8. Further in regard to the merits of the case, he referred to the financial statements for the financial year 31.03.2012 and 31.03.2013 and there was an opening balance of sundry creditors as on 01.04.2012 was Rs.1,25,24,747/- (approx) and the closing balance for the year ending 31.03.2013 is 1,42,05,241/- (approx), therefore, the opening balance for the financial year should not be added by the AO and he also submitted that books of the assessee is showing credit balance which has never been paid to the creditors. The assessee is not liable for the balances shown by the creditors. He has not controlled over them that what they were entering in his books of accounts. The assessee’s books of accounts have been audited regularly and the audit report has been accepted by the AO. No any discrepancy has been found by the Assessing Officer during the course of assessment proceedings. Further in respect of advances from the parties of Rs.28,50,000/-, ld. AR submitted that there was an opening balance of Rs.25,50,000/- and it has been increased only Rs.3 lakhs. The assessee has taken only fresh advance from the parties of Rs.3 lakhs only and the rest balance carried forward from the last financial year. To support of his contentions, ld. AR relied on the following judgments :-

i) Smt. Ranjana Mohapatra, ITA No.431/CTK/2018, order dated 25.07.2019;

ii) Smt. Sudha Loyalka, ITA No.399/Del/2017, order dated 18.07.2018;

iii) M/s Gulf Steel & Minerals, ITA No.57/Ran/16, order dated 04.05.2018;

iv) CIT Vs. Gitsons Engineering Co., Tax Case(Appeal) No.825 of 2013, order dated 16.09.2014(Madras High Court); and

v) Paradeep Parivahan Pvt. Ltd., ITA No.461/CTK/2017, order dated 26.07.2019

9. On the other hand, ld. DR relied on the orders of authorities below and he addressed first to the legal issue raised by the assessee. In this regard, ld. DR submitted that the Authorised Representative of the assessee appeared before the AO and did not object regarding issuance and service of notice and the ld. AR of the assessee appeared from time to time and filed details information before the AO. There is no emanating from the record of the AO as well as the CIT(A) that the assessee had taken any objections regarding service of the notice before the AO or before the CIT(A). He relied on the judgment of Hon’ble Supreme Court in the case of CIT Vs. Laxman Das Khandelwal, [2019] 108 taxmann.com 183 (SC) and according to which the assessee participated in the assessments and appeared from time to time before the AO and there is evidence regarding issuance of the notice u/s.143(2) of the Act, dated 04.09.2014, which is clear from the order- sheet before the Tribunal. He also referred to the comments sent by the ITO Ward-1(1), Bhubaneswar. As per the comments received from the AO the letter sent by dispatch No.6181 dated 12.09.2014 which has not been returned unserved. Therefore, it would be presumed that the letter sent for selection of scrutiny u/s.143(2) of the Act has been duly served to the assessee and participated in the assessment proceedings. He further submitted that notice sent to the assessee by ITO Ward- 2(2), Bhubaneswar and assessment was completed by Ward-1(1), Bhubaneswar. The notice generated through online on the basis of address mentioned in the PAN Data Base of the assessee. It has never been changed till date by the assessee in his PAN Data Base. The assessment has rightly been completed by the jurisdictional AO and the jurisdiction has also not been objected by the assessee at any stage of the assessment proceedings as well as in the appellate proceedings.

The movement of PAN in the system of the department and order issued by the competent authority was produced in the shape of paper book. There is no any evidence also regarding objections raised by the assessee as stated. In regard to merits of the case, he relied on the orders of authorities below and submitted that the assessee could not justify the difference observed by the AO during the course of assessment proceedings. It was the duty of the assessee if any liability disclosed is appearing in the financial statements, he should justify with the relevant documents which cannot be substantiated by the AO. Therefore, the order of the CIT(A) should be restored.

10. Further, the ld. CITDR has filed two paper books containing page Nos.1 to 26 and 1 to 16, respectively and submitted that necessary compliances have been made by the revenue authorities before completing the assessments, therefore, in this regard, the objection made by the assessee deserves to be dismissed.

11. After hearing both the sides and perusing the entire material available on record and the orders of authorities below and the case laws cited by both the sides, first we have to decide the legal issue raised by the assessee by way of additional grounds. At the outset of hearing, ld. AR submitted that the order passed by the AO is without jurisdiction because the notice u/s.143(2) of the Act was not served to the assessee. In this regard, it has been observed from the order-sheet produced by the CIT DR that the order has been issued on 04.09.2014 for fixing the case for hearing on 13.10.2014 which has been duly dispatched to the assessee on 12.09.2014 as per the Dispatch No.6181, Office of the Additional CIT/JCIT, Range-2, Bhubaneswar and it has not been returned unserved. It is also clear from the assessment order that the assessee has appeared from time to time before the AO, which is clear from the order-sheet produced by the CIT DR and the assessee has never raised any objection regarding service of notice and jurisdiction of the AO before the AO as well as before the CIT(A). It is also clear from the record that the assessee has raised this issue first time before us, however, the documents which were produced before us, did not speak that the assessee has raised this issue before the lower authorities. However, the ld. CIT DR has produced sufficient evidences for substantiating the case in favour of Revenue and we are in agreement with the documents produced by the ld. CIT DR regarding legal issue raised by the assessee. In this regard, the CIT DR has relied on the judgment of the Hon’ble Supreme Court in the case of Laxman Das Khandelwal (supra) and submitted that from the record of the department, there should be emanated from the record of the department that the notice has been issued. The assessee will not get benefit of Section 292BB of the Act. In this regard, the Hon’ble Supreme Court in para 6 to 9 has held as under :-

“6. The question, however, remains whether Section 292BB which came into effect on and from 01.04.2008 has effected any change. Said Section 292BB is to the following effect:—

"292BB. Notice deemed to be valid in certain circumstances.— Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was –

(a) Not served upon him; or

(b) Not served upon him in time; or

(c) Served upon him in an improper manner:

Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment."

7. A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete answer.

On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid.

8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Hotel Blue Moon's case (supra). The issue that however needs to be considered is the impact of Section 292BB of the Act.

9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.”

Respectfully following the above decision of Hon’ble Supreme Court, we dismiss the legal grounds raised by the assessee in the form of additional ground challenging the issuance of notice u/s.143(2) of the Act by the AO as well as the ground No.1 raised by the assessee in the grounds of appeal filed in Form 36.

12. On merits of the case, with regard to addition of Rs.1,42,04,290/- relating to sundry creditors, there was an opening balance of Rs.1,25,24,747/- (approx) as on first date of the financial year in the books of the assessee and the closing balance is Rs.1,42,05,241/- (approx) On further perusal of the assessment order, the AO has doubted the genuineness of the sundry creditors which could not be proved by the assessee at the time of assessment as well as at the appellate stage and we further notice that the assessee has shown cost of raw material consumed of Rs.2,50,70,322.18 and he has shown also revenue from operations of Rs.4,09,10,036.44 and there is also closing stock of raw materials as well as of the work-in-progress and finished goods. From the order of AO, we find that the AO has accepted the cost of raw material consumed, work-in-progress and finished goods as well as revenue from operations but the AO has not accepted the current liabilities appeared in the books of the assessee. Without the purchases, how the manufacturing process can be done and sales can be made. If there was not genuine or bogus creditors credited by the assessee the effect must be given on the financial statements prepared by the assessee. But the AO has one-sided taken view that the purchase is bogus. This view of the AO is not correct and our view is supported by the decision of the coordinate bench of the Tribunal in the case of Smt. Sudha Loyalka ITA No.399/Del/2017, order dated 18.07.2018, wherein the Tribunal has observed as under :-

“6. After hearing both the parties and perusing the entire material on record, we find that the only effective issue in the present appeal is against the addition of Rs.3,50,94,758/- made by A.O. and confirmed by Ld. CIT(A) on the ground that closing credit balances of 26 parties could not verified. The above addition included a sum of Rs. 5,50,000/- made by AO vide page 16 of the assessment order in the name of Erica Enterprises P Ltd. This difference is due to the cheque issued but not presented for payment. The A.O. has given the list of 26 parties under two heads i.e. one list of 20 suppliers aggregating to Rs. 2,78,20,495/- i.e. where notices were issued u/s 133(6) but were received back undelivered with the remarks that no such firm/left/ koi jankari nahin / not related / wrong address etc. given at page 3-4 of the assessment order and six suppliers aggregating to Rs. 67,24,263/- in respect of which though notices were served but confirmations were not received given at page 13-14 of the assessment order. We further find that Ld. CIT (A) has confirmed the addition vide discussion made at page 25-30 of the appeal order. These amounts added are the closing credit balances of the suppliers as on 31.3.2012 which is evident from PB 42- 66. In our considered opinion, the sustaining of impugned addition is not justified due to the following reasons:-

i). It has not been mentioned either by A.O or by Ld. CIT(A) as to under which section of the Income Tax Act, these closing credit balances appearing as on 31.03.2012 could be added. Therefore, non-mentioning the precise provision of law makes the impugned addition bad in law.

ii) If addition has been made u/s 68, such could not be added and that too of this much of amount as there was no sum received from these parties & that too during the year under appeal which is evident from the copies of account of these parties enclosed in the paper book at PB 42-66 which would show that either there were opening credit balances or were purchases.

iii). After perusing the PB Pg. 42-66 and PB Pg. 144, we find that purchases from these parties were aggregating to Rs 1,90,88,538/- and it has been held in the following judicial decisions that credit on account of purchases cannot be added u/s 68.

Addition under section 69 - Unexplained investment in purchases - Purchases made by assessee having been properly recorded in books of account and supported by authenticated purchase bills / vouchers for which payments were made through banking channels, and sales against these purchases are not doubted, addition under section 69 was not justified merely because suppliers could not be located and were not produced for examination - RAJESH P. SONI VS. ACIT 100 TTJ 892 (AHD 'D').

Section 68 cannot be applied for taxing unconfirmed sundry creditors - CIT vs. Vardhman Overseas Ltd (2012) 343 ITR 0408 (Del). Income-Cash credit-Credit purchases-Provisions of s. 68 are not attracted to amounts representing purchases made on - credit- Tribunal- has recorded a categorical finding of fact based on appreciation of materials and evidence on record that the AO has accepted the purchases, sales as also the trading result disclosed by the assessee-It has also recorded a finding that the two amounts in question represented the purchases made by the assessee on credit-Therefore, addition of said amounts could not be made under s. 68 (COMMISSIONER OF INCOME TAX vs. PANCHAM DASS JAIN 74 CCH 0623 (All HC) Income-Cash credit-Credit purchases-Provisions of s. 68 are not attracted to amounts representing purchases made on credit -Astt. CIT vs. Har Singar Gutkha (P) Ltd. 9 DTR 604(Lucknow) Construction business-Trade purchases-Assessing Officer rejecting books while deciding purchase transactions not genuine but relying on return accepting profit-Assessing Officer ought to have proceeded under section 144-Addition under section 68 not justified-Income-tax Act, 1961, ss. 68, 144, 14S(3)-Amitabh Construction P. Ltd. vs. Addl. CIT 335 ITR 523 Glharkltand) (PARA 11-15 OF THE DECISION) Income from undisclosed sources-Addition under s. 69C-Purchases not verifiable- Alleged suppliers did not appear before the AO in response to summons issued under s. 131 despite repeated opportunities-AO treated the purchases from the said parties as non-genuine and made addition of that amount under s. 69C and also applied proviso to s. 69C-Not justified- Once sales were made by the assessee obviously purchases were made- Therefore, purchases could not be treated as unexplained expenditure and addition thereof could not be made under s. 69C or by invoking proviso to s. 69C - Nisraj Real Estate & Exports (P)) Ltd. vs. Asstt. CIT 31 DTR 456(JP 'A') CASH CREDIT-Failure by creditors to participate in inquiry and furnish accounts-Does not mean that creditors lacked identity-No material to show that amounts advanced by creditors in reality represented money belonging to assessee-Sums cannot be treated as cash credits-Income-tax Act, 1961-CIT v. CHANDELA TRADING CO. P. LTD. 372 ITR 68 (Cal) Income from undisclosed sources-Addition-Alleged bogus purchases-AO was not justified in making the disallowance of purchases made by the assessee merely due to non-filing of confirmation from suppliers especially when assessee has filed certificate from the bank indicating the facts that cheques issued by it were cleared and no defect in the books of account was pointed out by AO-YFC Projects (P) Ltd. vs. Dy. CIT 46 DTR 496 (Del. 'I')

iv). We note that Opening balances amounting to Rs. 1,60,19,598/- (PB 144) (PB 42-66) which is evident from copies of account of these parties enclosed in the paper book at PB 42-66 is not justified on the ground that when assessee has not claimed any expense to that extent during the year under appeal, where is the question of making disallowance of such amount?

v). If addition has been mentioned u/s 41(1), ingredients of section 41(1), the burden of proof which is resting on revenue in view of the following judicial decisions has not been discharged. 6.1 There is no evidence that the liability has ceased to exist and that too in the year under appeal. The very fact these amounts are being shown as payable in the balance sheet of the assessee go to establish that there was no cessation of the liability as held in the following judicial decisions: -

6.2 Impugned liabilities are very much payable by the assessee as and when demanded and unless it is demanded, these are bound to be shown as outstanding. The very fact that these liabilities are appearing in the balance sheet is a strong acknowledgement of the debts payable by the assessee as has recently been held in the case of CIT vs Tamilnadu Warehousing Corporation 292 ITR 310(Mad). It has also been held in the case of Ambica Mills Ltd vs CIT 54 ITR 167 (Guj) that liability shown in the balance sheet is a clear case of acknowledging the liability and such liability cannot be treated to have ceased so as to attract section 41(1). That being so, where is the question of holding the said liabilities as ceased to exist, more so when assessee herself is acknowledging the liabilities to be paid? How can a third party that too a quasi - judicial authority hold in the absence of any material that the liability is not payable by the assessee? Therefore, the addition made on the basis of the presumption does not have either factual or legal lags to stand. Reliance is also placed on the decision of Sita Devi Juneja 325 ITR 593(P&H).

6.3 It is settled law by umpteen number of decisions including the decision of the apex court in the case of Sugauli Sugar Works vs CIT 236 ITR 518(SC) that the cessation of the liability can be done not by the unilateral act but it can certainly be so by the bilateral act. So long as the appellant is recognizing her liability to pay to these creditors, where is the question of a quasi judicial authority to intervene & to say on behalf of sundry creditors or on behalf of the appellant that amount is not payable by the assessee? Here there is not even unilateral act, let alone the bilateral act, Therefore also, action of AO in holding the liabilities ceased to exist may please be reversed.

6.4 Even in law, the addition is not sustainable for more than one reason. Section 41(1) of the Act is a deeming fiction according to which an amount which does not have any trace of income is treated as income liable to suffer the brunt of tax. Therefore, as per the established canons of law, the burden to prove that a particular amount falls within the four corners of section 41(1) is on the shoulder of the Assessing Officer without which the addition cannot be made and if made is liable to be deleted. 6.5 The first pre-requisite for the applicability of section 41(1) is there must be a trading liability in respect of which the deduction has been claimed and allowed and burden to prove the twin conditions to the effect of the above facts, it goes without saying, is on revenue. There is not even an iota of whisper as to whether the impugned creditors were in respect of trading liability for which any deduction was ever claimed and allowed and if allowed, in which year was it allowed so on so forth. This is evident from a plain reading of the assessment order. Therefore, Ld. A.O. miserably failed to discharge the said burden in view of the following decisions and therefore this addition is liable to be deleted on this Short ground alone. There could very well be the possibility of the loan creditors or advances from the business constituents under the head of sundry creditors for which there could never be any claim of deduction having been allowed. 6.6 The A.O. has not established with evidence that the liability in respect of the above outstanding balances has ceased to exist. AO has gone on presumption and that too by placing the burden wrongly on the shoulders of the assessee. Section 41(1) does not envisage any such presumption of cessation and fix the incidence of tax thereon. 6.7 In the absence of any material having been brought on record to establish that the deduction was claimed or credit balance has been remitted, addition cannot be made u/s 41 (1) in view of the following decisions:

• Steel and General Mills Co. Ltd vs ClT 96 ITR 438(Del) • CIT vs Nathubhai Desha Bhai 130 ITR 238 (MP) • Liquidator, Mysore Agencies P Ltd vs Cl'I' 114 ITR 853(Karn) • K.V. Moosa Koya & Co vs CIT 175 ITR 120,124(Ker) • CIT vs Pranlal P Doshi 201 ITR 756(Guj) 6.8 The third burden which was on A.O. was to establish that cessation if at all has happened, has happened in the year under appeal. After all, liability to tax can be fixed in the year to which it pertains and to no other year. Liability to tax any ceased liability in a particular year does not depend on the action of A.O. in selecting a case in scrutiny of that year. Merely because A.O. chose to enquire about the creditors in this year and if assessee fails to establish the existence of the liability in this year (even if it is so assumed) then also it cannot be said that the liability ceased to exist only in this year and not before. Nobody can be permitted to fix the year of taxability by a conscious design or omission, be he an assessee or an Assessing Officer. Therefore, viewed from any angle, the addition made by A.O. is liable to be deleted.

6.9 Moreover, sales made by the assessee have been accepted and also the purchase have been accepted by the sales tax authorities and so much so purchase input tax credit has been given as is evident from sales tax returns at PB 18-41 and sales tax assessment order at PB 135.

6.10 Even assuming that purchase could not be got verified, the fact that the sales have been accepted such sales obviously could not have been made without purchases. Therefore, in such situation G.P. Rate of the earlier years can act as a guide as held in judicial decisions including 355 ITR 290 (Guj) PB 17 is the copy of G.P. chart of various years. 6.11 We note that PB 136-143 is the copy of profit and loss account and trading account of earlier years together with assessment orders u/s 143(3) in which G.P. at the rate of 3.52%,4.13%, 2.99%, 2.~9%, 2.60%,2:21 %, 1.88% for Financial years 2007-08, 2008-09, 2009-10, 2010-11, 2012- 13, 2013-14, 2014-15 respectively has been accepted (PB 17). 6.12. Without prejudice to above, the assessee's sale was Rs. 6.21 Crores as is evident form profit and loss account enclosed at PB 13 and assessed income is at Rs. 3.54 Crores as is evident from the last page of the assessment order which would constitute 56% of the sale which is impossible and against all norms.

7. In view of above discussions, it is clear that the transactions were not bogus and therefore, the case laws relied upon by the Ld. DR are not applicable in this case. As far as case law relied upon by the Ld. CIT(A) as well as relied by the Ld. DR during the hearing i.e. La Medica 250 ITR 575(Del), we note that Hon'ble High Court has specifically noted in this decision that this was not the case of the assessee at any stage prior to the Hon'ble High Court whereas in this case, this was the plea taken by assessee before Ld. CIT(A) that if sale has been accepted, purchases must have been made. How can there be sale without purchases? Hence this decision does not apply.

8. In the background of the aforesaid discussions and respectfully following the aforesaid decisions, we are of the opinion that the Authorities below are not justified in making / sustaining the addition in dispute. Accordingly, the total addition of Rs.3,50,94,758/- made by the AO and confirmed by the Ld. CIT(A) is hereby deleted. On careful perusal of the above observations of the Tribunal, we find that the issue involved in the present case of the assessee is squarely applicable to it. Respectfully following the same, we delete the addition made by the AO and confirmed by the CIT(A) on account of unexplained sundry creditors. Thus, ground No.2 of appeal of the assessee is allowed.

13. With regard to ground No.3, we find that the AO has made addition of Rs.28,50,000/- for want of non-compliance by the assessee during the course of assessment proceedings. After careful consideration of the rival submissions, we noticed from the financial statements for the relevant financial year 2012-2013 at page No.65 of the paper book under Note No.11 after current liabilities there is appearing of advance from parties of Rs.28,50,000/- and there is also opening balance of Rs.25,50,000/- for the current financial year i.e. only exceeded Rs.3 lakhs exceeded. During the course of hearing, ld. AR of the assessee submitted that no any fresh advances have been taken from the parties, therefore, as per our considered opinion, Rs.25,50,000/- is relating to the financial year ended 31.03.2012, which cannot be added in this current assessment year under the scrutiny proceedings. Therefore, the assessee gets relief of Rs.25,50,000/- and Rs.3 lakhs is upheld. This ground No.3 of the appeal of the assessee is partly allowed.

14. With regard to ground No.4, on perusal of the assessment order and the documents filed by the ld. CIT DR before us, we find that the assessee has been given ample opportunity to substantiate its claim. Therefore, there is no question that the assessee has not been given any opportunity of being heard before the authorities below. Accordingly, ground No.4 is dismissed.

15. In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 01/09/ 2020.