2009 (7) TMI 1247 - HC - Income Tax

Appeal dismissed where sales, purchases and gross profit accepted; no addition under Section 68 for sundry creditors

DELHI HC upheld ITAT/CIT(A) findings and dismissed the appeal, holding no substantial question of law arose. Although the assessee failed to produce ... Disallowance of sundry creditors u/s 68 - veracity and genuineness of sundry creditors - assessee failed to produce the books of accounts, entries sales and purchase bills in support of his case - HELD THAT:- This finding of AO remained undisturbed before the CIT(A) as well and has been accepted by the ITAT. Proceeding on this basis, the ITAT observed that the sales, purchases as well as gross profits as disclosed by the assessee have been accepted by the Assessing Officer. Once this is accepted, we are of the opinion that the approach of the ITAT was correct inasmuch as the Assessing Officer did not consider this aspect while making additions of the sundry creditors under Section 68 of the Income Tax Act. As there was no case for disallowance for corresponding purchases, no addition could be made under Section 68 inasmuch as it is not in dispute that the creditors outstanding related to purchases and the trading results were accepted by the AO. We are, therefore, of the opinion that no substantial question of law arises for consideration in this case. The appeal is accordingly dismissed. Issues Involved:The issues involved in the judgment are the disallowance of sundry creditors under Section 68 of the Income Tax Act and the subsequent appeal process.Disallowance of Sundry Creditors under Section 68:The assessee's return for the Assessment Year 2001-02, declaring an income of &8377; 4,10,544/-, was processed under Section 143(1)(a) and selected for scrutiny. The Assessing Officer doubted the genuineness of sundry creditors of an amount of &8377; 1 lakh and above, as they were not income tax assesses and lacked PAN numbers. The Assessing Officer disallowed the sundry creditors and added the amount to the assessee's income under Section 68. The CIT(A) upheld this decision, but the ITAT allowed the assessee's appeal, noting that the trading results were not disturbed and the purchases from the creditors were not disallowed. The ITAT found that the sales, purchases, and gross profits disclosed by the assessee were accepted by the Assessing Officer, leading to the conclusion that no addition could be made under Section 68 as the trading results were accepted.Appeal Process:The ITAT's decision was challenged in this appeal. The Tribunal's observation that the sales, purchases, and gross profits as disclosed by the assessee were accepted by the Assessing Officer was upheld. The ITAT's approach was deemed correct as there was no case for disallowance of corresponding purchases, and it was acknowledged that the outstanding creditors related to purchases and the trading results were accepted by the AO. Consequently, the court found that no substantial question of law arose for consideration in this case and dismissed the appeal.