Tribunal rules in favor of assessee, directs deletion of disputed addition under Income Tax Act

The Tribunal ruled in favor of the assessee, directing the deletion of the addition made by the ld. AO regarding the sundry creditor balance under section 68 of the Income Tax Act, 1961. The Tribunal found that the creditor balance was for materials supplied for road contract work, confirmed by the supplier, and supported by necessary documents. The erroneous addition under section 68 was deemed unjustified as the purchases were not disputed, leading to the appeal being allowed in favor of the assessee.

---

---

Issues:
- Addition sustained by the ld. CIT(A) regarding sundry creditor balance of Rs. 9,30,625/- u/s 68 of the Income Tax Act, 1961.

Analysis:
1. The appeal arose from the order of the Learned Commissioner of Income Tax(Appeals) against the order passed by the ACIT under section 143(3) of the Income Tax Act for the Assessment Year 2011-12. The only effective ground raised was related to the addition sustained by the ld. CIT(A) concerning the sundry creditor balance under section 68 of the Act.

2. The assessee, an individual contractor, filed the return of income for the assessment year 2011-12, declaring total income of Rs. 1,23,63,670/-. The ld. AO examined the details of sundry creditors filed by the assessee under section 133(6) of the Act. While some creditors confirmed the amount reported by them, one creditor, Mr. Jaharlal Ghosh, did not confirm the closing balance. The ld. AO treated this balance as unexplained cash credit under section 68 of the Act, despite the assessee providing supporting documents and vouchers. The ld. CIT(A) confirmed this addition, leading to the appeal.

3. The Tribunal found that the assessee had provided all necessary details and documents supporting the claims made in the return of income. The balance shown as payable to Mr. Jaharlal Ghosh was for materials supplied for road contract work. The supplier confirmed the supply and the amount receivable from the assessee. The ld. AO incorrectly concluded that the creditor confirmed Nil balance, leading to an erroneous addition under section 68. The Tribunal held that no addition could be made under section 68 for a trade creditor, especially when the purchases were not disputed by the ld. AO.

4. Consequently, the Tribunal directed the ld. AO to delete the addition of Rs. 9,30,625/- made under section 68 of the Act. The grounds raised by the assessee were allowed, and the appeal was allowed in favor of the assessee.

5. In conclusion, the Tribunal ruled in favor of the assessee, directing the deletion of the addition made by the ld. AO regarding the sundry creditor balance under section 68 of the Income Tax Act, 1961.

---