ITAT partially allows appeal on unexplained cash credit, emphasizes creditor confirmation through bank accounts.

The ITAT partially allowed the appeal, holding that the addition made by the AO treating sundry creditors as unexplained cash credit was unsustainable for the two appearing creditors as they confirmed transactions through bank accounts. The ITAT directed reevaluation by the AO for the two absent creditors, emphasizing the need for the assessee to present them. The genuineness of transactions confirmed by appearing creditors was upheld, leading to the dismissal of the stay petition and partial allowance of the appeal for statistical purposes.

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Issues:
Appeal against CIT(A) order on treating sundry creditors as unexplained cash credit u/s. 68 of the Income-tax Act, 1961 for AY 2009-10.

Analysis:
The appeal was filed against the CIT(A) order confirming the addition made by the AO regarding four sundry creditors being treated as unexplained cash credit under section 68 of the Income-tax Act. The AO had noticed that the assessee showed five sundry creditors for the purchase of paddy, with two creditors appearing before the AO and confirming the transactions. The AO treated the sundry creditors as unexplained cash credit due to the inability to prove their transactions with the farmers. The CIT(A) upheld the AO's decision but reduced the addition for one deceased creditor. The assessee argued that the two appearing creditors confirmed the transactions, and the issue regarding the other two creditors who were out of station should be re-examined. The DR contended that there was no evidence of the middlemen's transactions with the farmers. The ITAT found that the appearing creditors had confirmed the transactions, received payments by cheque, and provided bank statements. The ITAT held that the addition for the two appearing creditors was unsustainable as the assessee proved the transactions, and the evidence was not rebutted. The issue concerning the two absent creditors was to be sent back to the AO for reevaluation after the assessee had the opportunity to present them.

The ITAT emphasized that when the sundry creditor is identified, responds to the notice, confirms the transaction, and conducts substantial transactions through bank accounts, the genuineness of the balance in the account cannot be questioned. Therefore, the addition made by the AO for the two appearing creditors was deemed unsustainable as the assessee fulfilled the burden of proof. Regarding the two absent creditors, the ITAT decided to restore the issue to the AO for further examination after the assessee had the chance to produce them. The appeal was partly allowed for statistical purposes, and the stay petition was dismissed as withdrawn by the assessee.

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