Assessee's appeal partly allowed, section 68 addition reduced from entire sundry creditors to 10% of purchases

The ITAT PUNE allowed the assessee's appeal partly, reducing the addition under section 68 from the entire sundry creditors amount to 10% of total purchases. The assessee had died during proceedings and could not provide necessary documentation due to illness. The Revenue had verified only 8 out of total creditors but added the entire amount. Considering the assessee's death, business closure, and consistent 10% additions in other years, the ITAT restricted the addition to prevent multiplicity of proceedings rather than remanding to CIT(A) who had passed an ex-parte order.

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Issues:
Delay in filing the appeal for condonation, addition of sundry creditors under section 68 of the Income Tax Act, 1961.

Delay Condonation Issue:
The appeal arose from the Commissioner of Income Tax (Appeal)-I, Pune's order for the assessment year 2008-09. The delay in filing the appeal was 1052 days, attributed to the demise of the individual handling the business and subsequent difficulties faced by the legal heir in managing the affairs. The legal heir filed an affidavit explaining the circumstances leading to the delay. The Tribunal, after considering the submissions, condoned the delay, emphasizing the importance of substantial justice over technicalities.

Sundry Creditors Addition Issue:
The case involved the addition of sundry creditors amounting to Rs.1,23,78,401 under section 68 of the Income Tax Act. The Assessing Officer raised concerns about the genuineness of the creditors as the total creditors exceeded the turnover. Upon verification, it was found that most creditors denied any transactions with the assessee. The CIT(A) upheld the addition, leading to the appeal. The legal heir explained the difficulties faced due to health issues and subsequent demise of the individual managing the business. The Tribunal, considering the circumstances and past practices of allowing 10% disallowance on purchases, upheld the addition but restricted it to 10% of the total purchases, amounting to Rs.12,37,840. The Tribunal partially allowed the appeal based on these considerations.

Conclusion:
The Tribunal addressed the delay in filing the appeal by condoning it in the interest of substantial justice. Regarding the addition of sundry creditors, the Tribunal upheld the addition but limited it to 10% of the total purchases, considering the peculiar circumstances and past practices. The appeal was partially allowed based on these findings.

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