2020 (9) TMI 1275 - AT - Income Tax

Addition of sundry creditors outstanding at the close of the A.Y under consideration - assessee vehemently stated that the creditors are outcome of the purchases made from them and the Assessing Officer has not drawn any adverse inference in so far as total purchases are concerned - HELD THAT - Power of the CIT(A) are co terminus to that of the A.O and therefore he should have examined the transaction if he wanted to invoke the provisions of Section 68 of the Act. Failing which the action of the CIT (A) cannot be upheld. The contention of the DR that fresh opportunity should be given to the CIT (A) to examine the transaction does not have any force. As no merit in the addition made by the Assessing Officer and sustained by the ld.CIT(A). accordingly direct the Assessing Officer to delete the impugned addition. - Decided in favour of assessee.

Summary

Issues:
Sustaining addition of sundry creditors outstanding, Computation method by Assessing Officer, Confirmation of additions by CIT(A), Acceptance of sales figures and purchases, Applicability of Section 68 of the Income Tax Act.

Analysis:
The appeal involved a dispute regarding the addition of Rs.7,99,173 out of sundry creditors outstanding at the close of the Assessment Year (A.Y.) 2015-16. During scrutiny assessment proceedings, the Assessing Officer issued notices under section 133(6) of the Income Tax Act to various parties, with some confirming transactions and others not responding. The Assessing Officer devised a formula to extrapolate findings to all outstanding creditors, resulting in an addition of Rs.11,86,168. The CIT(A) confirmed additions for three creditors, despite the appellant's contentions. The appellant argued that purchases were genuine as accepted by the Assessing Officer, and sales were made from these purchases, thus no addition should be made under section 68 of the Act. The Tribunal cited relevant case laws emphasizing that if sales are made from purchases, purchases cannot be termed as bogus, and liabilities payable by the assessee cannot be added under section 68. Additionally, a previous decision authored by the Tribunal Member highlighted the need for thorough examination of transactions before invoking Section 68. Based on these precedents, the Tribunal directed the Assessing Officer to delete the impugned addition, ultimately allowing the appeal of the assessee in ITA No. 3520/DEL/2019.