2018 (4) TMI 1994 - AT - Income Tax

Addition u/s 68 - addition of entire sundry creditors transacted during the year by merely verifying only 8 parties out of the total sundry creditors - HELD THAT - Before us, Legal heir of Assessee has filed an affidavit wherein it is inter alia submitted that Madhusudan Banshilal Dhoot was under treatment since 2010-2011 because of which he could not furnish necessary documents/details before Authorities below and he expired on 08.05.2012 and after his death, business is closed. Before us, AR submitted that in the earlier year and subsequent year, additions on account of unexplained creditors u/s. 68 has been made to the extent of 10% of purchases. The aforesaid contention of the Ld. AR and legal heir of the Assessee has not been controverted by Revenue. We also find that CIT(A) has passed an ex-parte order. In a normal situation, we would have remitted the issue back to the file of CIT(A) to pass a de-novo speaking order. However, in the peculiar facts of the present case, we are of the view that remitting the mater back to CIT(A) would result into multiplicity of proceedings. we are of the view that in the present case to prevent multiplicity of proceedings, interest of justice shall be met if the addition is restricted to 10% of the total purchases. Appeal of the assessee is partly allowed.

Summary

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.