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of <h1>Appellant's failure to prove trade creditor transactions leads to addition of unexplained cash credit.</h1> The ITAT Visakhapatnam upheld the CIT(A)'s decision regarding the assessment year 2010-11. The appellant failed to prove the genuineness of trade creditor ... Additions towards trade creditors u/s 68 - assessee has not proved the genuineness of the transactions - Held that:- On perusal of the records, we find that when ITI caused enquiries, the creditors have denied any business transaction with the assessee. Therefore, the basic requirement of genuineness of the transaction is absent. Though, the assessee claims that he has furnished confirmation letters before the A.O. as well as CIT(A), no such findings were recorded in the orders of the lower authorities. Even before us, the assessee failed to furnish evidences in the form of confirmation letters for having confirmed the creditors. Merely stating that he has filed confirmation letters would not sufficient compliance of the provisions of section 68 of the Act. The A.O. categorically stated that the creditors have denied the transaction with the assessee. Therefore, it is abundantly clear that the assessee has not proved the genuineness of the transactions. Once, the assessee failed to prove the initial burden casts upon him, by furnishing identity, genuineness of the transaction and credit worthiness of the creditors, the addition made by the A.O. u/s 68 of the Act should sustain. Therefore, we are of the opinion that the A.O. has rightly made the additions. The CIT(A), after considering the explanation of the assessee, upheld the A.O. order. We do not find any error or infirmity in the order of the CIT(A). - Decided against assessee Additions towards adhoc disallowance of expenditure - Held that:- The A.O. made 15% disallowance of expenditure under the head freight charges, loading charges and coolie charges. The A.O. was of the opinion that the assessee could not furnished bills & vouchers in support of the expenditure claimed under these heads. The CIT(A) after considering the explanations furnished by the assessee restricted the additions to ₹ 30,000/-. The fact remains same even before us. The assessee has not filed any evidence to counter the findings of the facts recorded by the CIT(A). Therefore, we are of the opinion that the CIT(A) has rightly restricted the additions to ₹ 30,000/- and we do not see any reason to interfere in the order of CIT(A). - Decided against assessee Issues involved: Appeal against CIT(A) orders for assessment year 2010-11 - Trade creditors genuineness and expenditure disallowance.Analysis:Issue 1: Trade creditors genuinenessThe assessee, engaged in the business of running a rice mill, filed returns for 2010-11 with total income of Rs. 3,91,520. The Assessing Officer (A.O.) noted trade creditors of Rs. 64,93,080 and directed an inquiry by the Inspector of Income-Tax (ITI) to verify genuineness. ITI reported that 6 creditors denied transactions with the assessee, leading to an addition of Rs. 8,54,752 as unexplained cash credit under section 68 of the Income-Tax Act. The CIT(A) upheld the A.O.'s decision, stating the transactions lacked genuineness due to cash dealings and close relationships between farmers and millers. The appellant contended that farmers confirmed transactions through letters, but the lower authorities dismissed this evidence. The ITAT found the appellant failed to prove the genuineness of transactions, as creditors denied dealings and confirmation letters were not adequately presented. Upholding the CIT(A)'s decision, the ITAT rejected the appellant's arguments.Issue 2: Expenditure disallowanceThe A.O. disallowed 15% of expenditure on freight, loading, and coolie charges due to lack of supporting bills and vouchers. The CIT(A) reduced the disallowance to Rs. 30,000 after considering the appellant's explanations. The ITAT found no evidence presented by the appellant to challenge the CIT(A)'s decision. Consequently, the ITAT upheld the CIT(A)'s order on the expenditure disallowance. Both appeals (ITA Nos. 417 & 418/Vizag/2013) were dismissed by the ITAT, affirming the CIT(A)'s orders. The judgment was pronounced on 5th Feb'16.This detailed analysis covers the issues of trade creditors' genuineness and expenditure disallowance, providing a comprehensive overview of the legal judgment delivered by the ITAT Visakhapatnam.
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