2024 (9) TMI 724 - AT - Income Tax

Addition of the amounts standing in the names of sundry creditors - creditors have not confirmed the balances standing in the name of the appellant independently - HELD THAT - We note that the confirmations were available with the AO. If he had any doubt regarding balances shown, he could have again verified with the creditors. He has not doubted the closing balances, he has merely observed that the confirmations do not contain PAN of the creditors and therefore genuineness of these creditors remains unverified. The names and address of creditors were available with the CIT(A), therefore he could have verified from the books of account of the creditors by taking appropriate steps. The statute has provided ample powers to the authorities but both the authorities did not do so. As interesting to note that the for the AY 2014-15 for the following AY the order was passed by the AO W-1 on 26.02.2016 after the passing of the order the impugned AY and there is no any whisper or remarks on the opening balance of the creditors. Therefore, we delete the addition. Decided in favour of assessee.

Summary

Issues involved:
1. Addition in respect of sundry creditors
2. Levy of interest under section 234B and 234C

Detailed Analysis:
1. Addition in respect of sundry creditors:
The appeal was filed against the order of the CIT(Appeals) regarding the addition of amounts in the names of sundry creditors due to non-confirmation of balances independently. The AO added Rs. 60,529, Rs. 90,79,528, and Rs. 29,60,099 to the total income based on discrepancies in creditor confirmations. The assessee failed to produce the creditors for examination, leading to the additions. The FAA deleted the addition towards non-verification of debtors but confirmed the addition towards creditors. The appellant argued that the creditors' confirmations were filed in the remand proceedings, and the AO did not doubt their genuineness. The appellant cited various judgments to support their case. The DR contended that the assessee failed to substantiate the entries in the books of account with evidence. The ITAT upheld the addition of Rs. 60,529 due to lack of evidence supporting the entries. However, regarding the creditors who did not respond to notices, the ITAT noted that confirmations were filed with the AO, and the genuineness of creditors was not verified due to the absence of PAN details. The ITAT found that the authorities did not take necessary steps to verify the balances and deleted the additions of Rs. 90,79,528 and Rs. 29,60,099. Ground Nos. 2.1 to 2.3 were partly allowed.

2. Levy of interest under section 234B and 234C:
The AO and CIT(A) confirmed the levy of interest under sections 234B and 234C. However, the judgment did not provide detailed analysis or findings regarding this issue.

In conclusion, the ITAT partly allowed the appeal of the assessee concerning the addition in respect of sundry creditors. The judgment highlighted the importance of providing supporting evidence for entries in books of account and emphasized the need for authorities to verify creditor balances thoroughly.