2015 (10) TMI 2758 - AT - Income Tax

Addition towards unpaid sundry creditors treated as bogus - HELD THAT - Revenue has failed to controvert the findings of the learned CIT(A) in respect of 16 creditors which have been accepted by learned CIT(A) as genuine, therefore we find no merit in the appeal of the revenue. In respect of five creditors which were held to be non-genuine, we hold that certain more facts need to be brought on record to decide the issue, therefore, after hearing both the sides, we restore this issue to the file of the AO to decide de novo. The assessee shall provide correct addresses of these five creditors and the AO will verify whether these concerns are showing outstanding in their books of accounts against the assessee. Whether the creditors are genuine or not. After considering all these, AO shall decide the issue as per law. Revenue s appeal is dismissed and the assessee s appeal is allowed for statistical purposes.

Summary

Issues:

1. Disallowance of unpaid sundry creditors treated as bogus by the Assessing Officer.
2. Restriction of the addition made by the Assessing Officer on account of sundry creditors.

Analysis:

1. The judgment pertains to cross appeals filed by the assessee and revenue regarding the disallowance of unpaid sundry creditors treated as bogus by the Assessing Officer. The Assessing Officer added the total amount outstanding from 21 three-year-old creditors to the income of the assessee. The learned CIT(A) granted partial relief by upholding the disallowance in respect of five parties due to the absence of explanation regarding the genuineness of the transactions. The learned CIT(A) sustained the addition of &8377; 10,73,727/- for these five creditors. Both sides appealed against this decision with the revenue questioning the confirmation of the addition and the assessee challenging the restriction of the total addition made by the Assessing Officer.

2. After hearing both parties, the Appellate Tribunal found that the learned CIT(A) had granted partial relief to the assessee after considering submissions and explanations. The Tribunal noted that the revenue failed to dispute the findings of the learned CIT(A) regarding 16 creditors accepted as genuine. Therefore, the Tribunal dismissed the revenue's appeal. However, concerning the five creditors deemed non-genuine, the Tribunal held that more facts needed to be presented to decide the issue conclusively. As a result, the Tribunal remanded this specific issue back to the Assessing Officer for a fresh determination. The Assessing Officer was instructed to verify the correct addresses of these five creditors and examine if these concerns showed outstanding amounts in their books against the assessee to ascertain the genuineness of the creditors. The Tribunal directed the Assessing Officer to decide the issue based on the verified information and in accordance with the law.

3. Ultimately, the Tribunal dismissed the revenue's appeal and allowed the assessee's appeal for statistical purposes. The judgment was pronounced in open court on 5th October 2015.