Inadequate verification by Assessing Officer leads to unsustainable addition of credit amount

The Tribunal found that the Assessing Officer did not adequately verify the confirmations and based the decision on assumptions rather than facts. The order upholding the addition of the credit amount from 11 sundry creditors as bogus was deemed legally unsustainable. The case was remanded for proper verification of the confirmations filed by the appellant, with the directive to provide the appellant with an opportunity to be heard. The appeal by the assessee was allowed for statistical purposes.

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Issues:
Validity of the addition made by the Assessing Officer based on the alleged bogus credit of sundry creditors.

Analysis:
The appellant assessee appealed against the order passed by Ld. CIT(A) upholding the addition of a credit amount from 11 sundry creditors as bogus. The case was scrutinized after the income tax return was filed for the Assessment Year 2006-07, and the appellant's claim of sundry creditors was under question. The appellant failed to provide complete information about the creditors despite multiple requests. Some creditors denied having any business transactions with the appellant during the relevant period. The Assessing Officer concluded that the claimed creditors were non-existent and that the liability of the appellant towards them was bogus. The Ld. CIT(A) upheld this decision. The appellant argued that they were not given sufficient time to respond and were not confronted with the confirmations filed by the creditors. The Department contended that most creditors were found to be non-existent or provided stereotyped confirmations, supporting the addition made by the Assessing Officer.

The Tribunal noted that out of the 11 creditors, two denied transactions with the appellant, while the remaining parties did not respond to notices sent during assessment proceedings. The Tribunal observed that the Assessing Officer and the Ld. CIT(A) failed to follow the principles of natural justice by not providing the appellant with an opportunity to produce the creditors for verification. The onus was on the Assessing Officer to disprove the confirmations provided by the appellant, which was not done satisfactorily. The Tribunal criticized the summary dismissal of confirmations as stereotyped without concrete evidence of the creditors' non-existence. It was noted that no efforts were made to serve the notices to the creditors through alternative means. The Tribunal found that the Assessing Officer did not adequately verify the confirmations and based the decision on assumptions rather than facts.

Consequently, the Tribunal held that the order upholding the addition of the credit amount was not legally sustainable. The case was remanded to the Assessing Officer for proper verification of the confirmations filed by the appellant, with a directive to provide the appellant with an opportunity to be heard. The appeal by the assessee was allowed for statistical purposes.

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