2012 (10) TMI 412 - AT - Income Tax

Tribunal upholds CIT(A) decision on disallowances and additions, stresses importance of evidence

The Income Tax Officer Ward I(3) Erode Versus Smt. Rolex Sugunamary Propx. M/s GR. Leathers

The Income Tax Officer Ward I(3) Erode Versus Smt. Rolex Sugunamary Propx. M/s GR. Leathers - TMI Issues:Appeal against order of CIT(A) regarding disallowance of trade creditors and additions made based on Inspector's report.Analysis:1. The Revenue appealed against the CIT(A)'s order concerning the disallowance of trade creditors and additions made during assessment year 2007-08. The Revenue raised various grounds challenging the CIT(A)'s decision, including the deletion of disallowance on account of unproved trade creditors and observations related to the assessment year 2005-06.2. The CIT(A) deleted the additions made by the Assessing Officer, prompting the Revenue to appeal. The assessee, a leather tanner, filed her return for the assessment year 2007-08, admitting a total income of Rs. 3,98,290. A survey revealed additional income towards unproved trade creditors. The assessment resulted in disallowances and additions, which the CIT(A) later annulled.3. The Tribunal analyzed the disallowances on trade creditors, noting that certain balances were merely opening balances from the previous year and no new amounts were credited during the assessment year. The Tribunal found no evidence to support the parties being bogus, as the Assessing Officer failed to conduct further inquiries.4. Regarding specific trade creditors like Sabari Leather Exports and Oriental Leathers, the Tribunal considered the submissions of the assessee, which included details of purchases, sales bills, and banking transactions to establish the genuineness of the transactions. The Tribunal found the Assessing Officer's lack of scrutiny and evidence insufficient to justify the additions.5. The Tribunal further examined disallowances related to Akshya Leathers, Victory Tanners, and Sai Leathers. The assessee provided evidence such as registration certificates and sales tax orders to refute the ITI reports. The Tribunal concluded that the Assessing Officer's failure to verify details and the presence of substantial evidence supporting the transactions warranted the deletions made by the CIT(A).6. Ultimately, the Tribunal dismissed the Revenue's appeal and the cross objection by the assessee, upholding the CIT(A)'s decision to delete the disallowances and additions. The Tribunal emphasized the importance of thorough investigations and substantial evidence in determining the genuineness of transactions and trade creditors.Judgment:The Tribunal dismissed the Revenue's appeal and the assessee's cross objection, affirming the CIT(A)'s decision to delete the disallowances and additions made during the assessment year 2007-08.