2012 (11) TMI 472 - AT - Income Tax

Bogus creditors - CIT(A) deleted the addition - Held that - Balances of sundry creditors appearing in the balance sheet could not have been assessed as income in the hands of the assessee without proving them to be non-genuine. There is no finding of the AO that the assessee has paid these creditors out of unaccounted money or the balance shown in the balance sheet as sundry creditors were fictitious entries. Assessee has submitted before the CIT(A) that these balances consisted of earlier years balances also but the AO has not made further inquiries in the matter by issuing summons etc. to the creditor parties to verify the genuineness or otherwise of balances in the trade accounts - addition made was rightly deleted by the CIT(A) - in favour of assessee.

Summary

Issues:
1. Addition of Rs.22,00,476 on account of bogus creditors.
2. Dismissal of the CO by the assessee for non-appearance.

Analysis:
1. The appeal by the Revenue challenged the deletion of the addition of Rs.22,00,476 made on account of alleged bogus creditors for the assessment year 2006-2007. The Revenue contended that the assessee failed to comply with the show cause notice and did not prove the genuineness of the creditors. The learned DR argued that the AO provided ample opportunity to the assessee to substantiate the creditors' authenticity but the assessee remained non-cooperative. The AO observed that the creditors were shown in the balance sheet without furnishing the required details. However, the ITAT found that the creditors were related to goods purchased and trade creditors, emphasizing that without proving them as non-genuine, they could not be assessed as income. The CIT(A) held that the AO did not justify the addition without proving the creditors as non-existent or bogus. The ITAT confirmed the CIT(A)'s decision, noting the lack of further inquiries by the AO to establish the creditors' authenticity.

2. The CO by the assessee was dismissed due to non-appearance despite multiple opportunities and failure to provide reasons for the absence. The ITAT inferred that the assessee was not interested in pursuing the CO and cited a precedent to dismiss the CO for want of prosecution. Consequently, both the Revenue's appeal and the assessee's CO were dismissed, upholding the CIT(A)'s decision to delete the addition of Rs.22,00,476 on account of alleged bogus creditors for the assessment year 2006-2007.