IN THE HIGH COURT OF DELHI AT NEW DELHI 
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  04.01.2011 
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 Present:       Ms. Sonia Mathur, Advocate for the appellant/Revenue. 
 None for the respondent. 
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 +ITA No.2079/2010 
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 The assessee herein is in the business of exports, inter alia, 
 handicraft items.  In the return filed by the assessee for the Assessment Year 
 2005-06, the assessee had returned the income of `30,50,208.  In this return, he 
 had shown sundry creditors of `1,73,83,755.  According to the assessee, it had 
 purchased handicraft items from these creditors, which were exported.  The 
 Assessing Officer (AO) directed the assessee to furnish the confirmation of 
 accounts from the sundry creditors showing balance above `2,00,000.  According 
 to the AO, the assessee could furnish details only to the extent of `31,62,522. 
 In these circumstances, for the balance amount of `1,42,21,233, since the 
 assessee could not substantiate its claim, addition to this effect was made in 
 the assessment order. 
 It is clear from the above that the AO primarily made addition of 
 `1,42,21,233 under Section 68 of the Income Tax Act in absence of evidentiary 
 proof. 
 Aggrieved by the order of the AO, the assessee filed an appeal 
 before the CIT(A) and furnished additional evidence at the appellate stage.  It 
 was, inter alia, stated that all these sundry creditors were small time traders 
 and belonged to Jaipur and Jodhpur in Rajasthan.  The assessee also submitted 
 that these creditors were illiterate traders and most of them were from 
 unorganized sectors and many of them did not have Permanent Account Numbers 
 allotted to them.  They only operate bank account in which they deposit the 
 cheques received from various parties including from the assessee and carry on 
 their business.  The bills, etc. received from these creditors/traders were also 
 submitted. 
 Admitting this additional evidence, the CIT (A) called for remand 
 report of the AO.  The AO, after verification of the documents supplied by the 
 assessee including the ledger accounts, inter alia, stated that the transactions 
 were ?verifiable from the copy of ledger submitted?.  However, on the ground 
 that the assessee had not submitted the required confirmation from these 
 creditors, the AO contended that the addition made was proper.  The CIT(A) 
 analyzed the evidence produced by the assessee along with the Remand Report 
 submitted by the AO.  He found that there were basically two types of sundry 
 creditors, viz.: 
 1) From whom purchases are being made continuously and payments have been made 
 in subsequent year by way of account payee cheques a fact which has been 
 verified by the AO as per the Remand Report. 
 2) The second category is those creditors from whom one time purchase was made 
 during the year under appeal and whose payment is still outstanding and no 
 further purchases have been made from them. 
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 A finding of fact recorded by the CIT (A) that the most of the 
 creditors belong to the first category which means that the payments were made 
 by way of account payee cheques and this fact was verified by the AO even in the 
 Remand Report.  This significant fact would clearly prove that the transactions 
 with those creditors were genuine and they were not the bogus creditors.    In 
 respect of the second category of creditors, the CIT(A) found that their 
 genuineness was also established inasmuch as the assessee had submitted the 
 copies of bills of most of these creditors; these were properly printed bills 
 with proper addresses; some dealers are described on the bills to be 
 manufacturers of wooden items and some are described to be suppliers of 
 handicraft items; some bills relate to marble manufacturing activities and the 
 bills show the addresses of some villages in Rajasthan.  After examining these 
 bills in depth, the CIT(A) arrived at a finding of fact that these creditors are 
 also genuine.  On this basis, the CIT(A) allowed the appeal and deleted the 
 addition. 
 The Income Tax Appellate Tribunal (in short ?the ITAT?) has 
 confirmed the order of the CIT (A) thereby dismissing the appeal of the Revenue. 
 The only argument which is raised by the learned counsel for the Revenue is that 
 the ITAT has not commented upon the second category of creditors and has gone by 
 the only fact that the payments were made through account payee cheques, which 
 observation would be confirmed to the creditors of first category. 
 That may be so, it is because of this reason we have gone through 
 the judgment of the CIT (A) in detail and finding of fact is plausible, after 
 due application of mind and on the basis of documents produced by the assessee 
 before it.  We, therefore, find that no question of law arises.  This appeal is 
 accordingly dismissed. 
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 A.K. SIKRI, J. 
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 M.L. MEHTA, J. 
 JANUARY 04, 2011 
 pmc 
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