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2018 (2) TMI 1876 - HC - Income TaxDisallowances of 25% of total unverifiable sundry Creditors - bogus creditors - HELD THAT - This is a case where the Commissioner of Income Tax (Appeals) and the Tribunal correctly limited the additions to 25% following the judgment of this Court in case of Vijay Proteins Ltd vs Commissioner Of Income Tax reported in 2015 (1) TMI 828 - GUJARAT HIGH COURT Counsel for the Revenue however submitted that in case of N.K. Industries Ltd. v. Dy. C.I.T. 2016 (6) TMI 1139 - GUJARAT HIGH COURT , this Court had confirmed the addition of the entire amount. This was however a case where the entire purchases were found to be bogus which would have the effect of increasing the profit of the assessee by corresponding figure - Tax Appeal is dismissed.
Issues:
1. Whether the Income Tax Appellate Tribunal's decision to restrict the disallowances of unverifiable sundry Creditors is justified? 2. Whether the addition made by the Assessing Officer of the entire amount of outstanding creditors is valid? 3. Whether the Commissioner of Income Tax (Appeals) correctly limited the additions to 25%? 4. Comparison of different judgments regarding the treatment of unverifiable creditors. Issue 1: The Revenue appealed against the Income Tax Appellate Tribunal's decision to restrict the disallowances of unverifiable sundry Creditors. The Tribunal had limited the additions to 25% of the total addition on accounts of bogus creditors. The Revenue contended that the decision of the Ld Commissioner of Income tax (Appeal) was unjustified, especially considering a previous decision by the Hon'ble Apex Court in a different case. Issue 2: The Assessing Officer had made an addition of the entire outstanding amount of creditors, amounting to ?2.71 crores. The Assessing Officer doubted the genuineness of the transactions, suspecting that the assessee might have used unaccounted money to make purchases and then procured bogus bills to cover up the sales. Consequently, the entire amount was added to the total income of the assessee. Issue 3: In the appeal, the Commissioner of Income Tax (Appeals) restricted the additions to 25% of the profit element. Both sides appealed to the Tribunal on this matter. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to limit the additions to 25%, citing a judgment of the Court in a similar case. Issue 4: The judgment discussed the treatment of unverifiable creditors in different cases. The Counsel for the Revenue highlighted a case where the entire amount was added, contrasting it with the present case where the additions were limited to 25%. The judgment referred to the importance of distinguishing cases where entire purchases were found to be bogus, leading to an increase in the profit of the assessee. In conclusion, the Tax Appeal was dismissed, affirming the decision of the Commissioner of Income Tax (Appeals) and the Tribunal to restrict the additions to 25% in this case, based on relevant legal precedents and considerations.
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