M/S. GRAIN PROCESSING INDUSTRIES (INDIA) PVT. LTD.,,KOLKATA vs. ITO, WARD 12(2),, KOLKATA

ITA 3282/KOL/2025Status: DisposedITAT Kolkata28 September 2026AY 2016-20176 pages
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What were the facts?

The assessee, M/s Grain Processing Industries (India) Pvt. Ltd., filed an appeal against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for Assessment Year 2016-17. The revenue is the respondent. The Assessing Officer (AO) made additions totaling Rs. 62,32,826/- in respect of sundry creditors, Rs. 16,87,577/- under Section 41(1) for ceased liabilities, Rs. 31,315/- for personal expenses, and Rs. 1,99,258/- as notional interest on loans and advances. The CIT(A) confirmed these additions. The assessee's appeal before the Tribunal challenged these confirmations.

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 62,32,826/- in respect of sundry creditors was not sustainable. The Tribunal noted that the assessee made substantial purchases and payments, and the outstanding creditors were genuine, supported by evidence. The AO's action of treating them as bogus without proper verification was deemed incorrect. Consequently, the CIT(A)'s order was set aside, and the AO was directed to delete the addition. Regarding the Rs. 16,87,577/- addition under Section 41(1), the Tribunal found that the AO wrongly invoked the provision as there was no remission or cessation of liability, and the creditors were duly shown in the balance sheet. Relying on various Supreme Court and High Court decisions, the Tribunal set aside the CIT(A)'s order and directed deletion of the addition. For the Rs. 31,315/- addition towards personal expenses, the Tribunal held that the AO's disallowance of 20% was based purely on surmises and presumptions without any basis, and no defect in the evidence filed by the assessee was pointed out. The addition was set aside. Lastly, concerning the Rs. 1,99,258/- notional interest, the Tribunal found the AO's action of treating advances to suppliers and security deposits as non-genuine and applying notional interest to be ridiculous and based on estimation and surmises. The order of the CIT(A) was set aside, and the AO was directed to delete the addition. Ground No. 6 was dismissed as not pressed.

What were the issues?

1. Whether the addition of Rs. 62,32,826/- on account of sundry creditors is justified, turning on the genuineness of the creditors and the AO's verification process. 2. Whether the addition of Rs. 16,87,577/- under Section 41(1) of the Income Tax Act, 1961, is sustainable, concerning the cessation of liability. 3. Whether the addition of Rs. 31,315/- representing 20% of motor car, telephone, and general expenses as personal expenses is valid, considering the basis of the disallowance. 4. Whether the addition of Rs. 1,99,258/- as notional interest on loans and advances is justified, based on the AO's treatment of these advances and the lack of interest income. Assessee's contentions: The assessee argued that the sundry creditors were genuine, supported by available evidence, and that substantial payments were made. Regarding the Section 41(1) addition, the assessee contended that the liability had not ceased. For personal expenses, the assessee argued the addition was based on surmises. For notional interest, the assessee argued the addition was made on estimation and surmises without proper basis. Revenue's contentions: The revenue, through the AO and implicitly supported by the CIT(A)'s orders, contended that the sundry creditors were not satisfactorily substantiated, the liabilities had ceased, a portion of expenses were personal, and notional interest was applicable on non-interest-bearing advances.

Which sections of the Income-tax Act were involved?

Section 41(1),Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA

Before: SHRI RAJESH KUMAR & SHRI PRADIP KUMAR CHOUBEY

For Appellant: Shri S. Jhajharia, FCA
For Respondent: Shri Ambrish Mishra, Sr. DR
Hearing: 13.08.2026Pronounced: 28.09.2026

PER RAJESH KUMAR, ACCOUNTANT MEMBER:

This appeal preferred by the revenue is against the order of the learned Commissioner of Income Tax (Appeals),National Faceless Appeal Centre, Delhi(hereinafter referred to as the “ld.CIT(A)”], dated 04.11.2025 for Assessment Year (AY) 2016-17. 2. The only issue raised by the assessee in Ground Nos.1 and 2 is against the confirmation of addition of Rs.62,32,826/- by ld. CIT(A) as made by the Assessing Officer (In short, ‘the AO’) in respect of sundry creditors.

3.

The facts of the case in brief are that during the assessment proceedings, the AO noted that the assessee had made ce

The order continues below.

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