2015 (5) TMI 1256 - AT - Income Tax

Revenue's appeal dismissed as sundry creditors section 68 applies only to current year credits not opening balances

The ITAT Kolkata dismissed the Revenue's appeal in two matters. Regarding sundry creditors, the Tribunal upheld CIT(A)'s deletion of additions, ruling ... Bogus creditors - addition in respect of sundry creditors unexplained - CIT(A) deleted the addition - HELD THAT:- No illegality and infirmity has been committed by the CIT(A) in deleting the addition of sundry creditors, which did not arise during the impugned assessment order in their opening balance from the earlier assessment year 2005-06. As per the provisions of section 68, any amount found credited in the books of assessee can be added in the previous year relevant to the assessment year, in case, the assessee fails to prove the nature and source of such credit, in which these amounts arose are credited. Since the amounts were not credited in the impugned A.Y., therefore, in view of the decision of Sridev Enterprises [1991 (1) TMI 52 - KARNATAKA HIGH COURT] we confirm the order of the CIT(A) deleting the said addition. Bogus purchase - Notice issued u/s 133(6) was sent, which was returned unserved - CIT(A) deleted the addition - HELD THAT:- As noted that in this case the sales shown by the assessee has duly been accepted by the AO. In our opinion, the assessee cannot make the sales until and unless the purchase has been made by the assessee. AO has not rejected the books of accounts but made the addition towards the bogus purchase. The payment has been made to these parties in the subsequent year, which has not been dispatched by the Revenue. It is not a case where the accounts has been rejected or the profit has been estimated. We, therefore, do not find that it is a fit case, which warrants our interference. We accordingly confirm the order of the CIT(A) deleting the addition. Appeal filed by the Revenue is dismissed. Issues:1. Deletion of addition of Rs.29,35,211/- in respect of sundry creditors labeled as bogus creditors.2. Deletion of addition of Rs.29,76,218/- in respect of bogus purchase.Analysis:Issue 1: Deletion of addition of Rs.29,35,211/- in respect of sundry creditors labeled as bogus creditors:The AO added Rs.29,35,211/- as bogus creditors due to sundry creditors' balances carried forward from earlier years. The CIT(A) deleted this addition after considering the submissions and verifying that the amounts were from previous years, not the current year's liability. The ITAT confirmed the deletion, citing Section 68 and the decision in CIT-vs- Sridev Enterprises. The ITAT found no illegality in the CIT(A)'s decision, as the amounts were not credited in the impugned assessment year.Issue 2: Deletion of addition of Rs.29,76,218/- in respect of bogus purchase:The AO added Rs.29,76,218/- for alleged bogus purchases from two parties. The CIT(A) deleted this addition after detailed analysis. It was noted that payments were made in the subsequent year, reflecting in the bank accounts. The CIT(A) considered corroborative evidence provided by the assessee and highlighted that the AO did not establish the purchases were not genuine. The ITAT upheld the CIT(A)'s decision, emphasizing that the sales shown were accepted, and no rejection of accounts or profit estimation was done. The ITAT concluded that interference was unwarranted, confirming the deletion of the addition.In conclusion, the ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s deletions of both the addition of Rs.29,35,211/- in respect of sundry creditors and the addition of Rs.29,76,218/- in respect of bogus purchase.