No Addition Permitted In Respect Of Sundry Creditors, Once Purchases & Payments By Taxpayer Not Disputed: Mumbai ITAT
Pankaj Bajpai
6 Feb 2024 7:29 AM GMT
On finding that payment and purchase made by the assessee is not disputed by AO, the Mumbai ITAT directed the AO to delete the addition on sundry creditors.The Member of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and B.R. Baskaran (Accountant Member) observed that “Since in the present case the purchases made by the assessee and the payment made during the year have not...
On finding that payment and purchase made by the assessee is not disputed by AO, the Mumbai ITAT directed the AO to delete the addition on sundry creditors.
The Member of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and B.R. Baskaran (Accountant Member) observed that “Since in the present case the purchases made by the assessee and the payment made during the year have not been disputed by the AO in respect of the parties shown as sundry creditors, we are of the view that the addition in respect of the balance sundry creditors is not sustainable”. (Para 17)
As per the brief facts of the case, during the assessment proceedings the assessee was asked to prove the identity, creditworthiness, and genuineness of the transaction with the parties which are appearing as sundry creditors in its balance sheet. The AO noted that these parties are not included in the list of Hawala parties of the Sales Tax Department, Mumbai. In absence of proof of identity, genuineness, and creditworthiness of these parties as appearing in the balance sheet, the AO made an addition to the total income of the assessee as unexplained sundry creditors.
The Coram found that from the perusal of the ledger account of these parties in the books of the assessee, he made the purchases during the year and also made the payment. Accordingly, the balance outstanding was shown as sundry creditors in its balance sheet, which was added by the AO.
Therefore, the Bench observed that it cannot be disputed that the addition of outstanding trade creditors has been made under section 68 of the Act, as these parties did not respond to notices issued under section 133(6) of the Act and the assessee also could not furnish the confirmation from these parties.
Relying on the decision in case Manoj Agarwal v/s DCIT, [2008] 113 ITD 377 (Delhi), the Bench observed that the AO cannot make an addition of trade creditors under section 68 of the Act when the purchases made during the year and payments made during the year have been accepted.
Therefore, while allowing the assessee's appeal, the ITAT directed the AO to delete the addition in respect of sundry creditors.
Counsel for Appellant/ Taxpayer: Lalit Munoyat
Counsel for Respondent/ Department: Mahita Nair
Case Title: Rajesh G. Jain verses Income Tax Officer
Case Number: ITA no.150/Mum/2022
