TAHIRNAQSH MOHD YUSUF MEMON,VADODARA vs. THE ACIT, CIRCLE-3(1), VADODARA

ITA 1286/AHD/2024Status: DisposedITAT Ahmedabad13 October 2026AY 2016-179 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that the AO required an explanation for the increase in sundry creditors. While the assessee provided tax audit reports and financial statements, specific party-wise details for the increase were not initially furnished. Before the CIT(A), party-wise details and confirmations were provided. The AO pointed out discrepancies in confirmations, primarily due to signatures by the accountant. The assessee admitted this was an inadvertent error and faced difficulty in obtaining fresh signatures. The Tribunal found that the increase in sundry creditors pertained to trade creditors from purchases and expenses. The genuineness should be examined through underlying transactions, purchase bills, invoices, transport documents, goods receipt records, and evidence of subsequent payments. The AO did not examine these aspects, and the assessee did not furnish complete supporting material. The Tribunal relied on the Gujarat High Court decision in Principal Commissioner of Income-tax v. Ambe Tradecorp (P.) Ltd. for the principle that supporting material and repayment of loans are crucial. For the loan addition, the Tribunal acknowledged that repayment is a relevant circumstance but needs examination in context with the loan's nature, lender's identity, book entries, and supporting evidence. The Tribunal restored both issues to the AO for fresh examination, directing the AO to provide the assessee an opportunity to furnish documentary evidence, verify payments, and examine discrepancies in confirmations. The addition of Rs. 4,00,51,024/- and Rs. 31,37,500/- were allowed for statistical purposes.

What were the facts?

The assessee, Tahirnaqsh Mohd Yusuf Memon, filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2016-17. The Assessing Officer (AO) noted a significant increase of Rs. 4,00,51,024/- in sundry credit balances and a fresh loan of Rs. 31,37,500/-. The AO treated these amounts as unexplained and added them to the assessee's income, completing the assessment at Rs. 4,65,19,720/-. The assessee's appeal to the CIT(A) was dismissed. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT). The assessee is engaged in transportation and retail trading.

What were the issues?

1. Whether the CIT(A) erred by not granting an adequate opportunity of being heard to the assessee? 2. Whether the CIT(A) erred in confirming the AO's addition of Rs. 4,00,51,024/- on account of unexplained sundry creditors, specifically concerning the genuineness of creditors for goods/expenditure/capital goods, under Section 68 of the Income Tax Act, 1961? 3. Whether the CIT(A) erred in confirming the AO's addition of Rs. 31,37,500/- on account of an unexplained unsecured loan, specifically concerning the identity, creditworthiness, and genuineness of the loan creditor, under Section 68 of the Income Tax Act, 1961? Assessee's Contentions: - The AO did not specifically ask for confirmations or evidence for sundry creditors. The increase was due to trade creditors for purchases and expenses, and the AO accepted the trading results. Details were furnished to the CIT(A), and a remand report was sought. The AO rejected confirmations due to inadvertent signatures by the accountant, which was clarified with an affidavit. The assessee argued that evidence was rejected without inquiry or opportunity to rectify defects. The loan of Rs. 31,37,500/- was squared up during the year, as evident from the tax audit report. Revenue's Contentions: - All confirmations were signed by the accountant, admitted by the assessee, who also stated difficulty in obtaining supplier signatures later. The assessee did not provide evidence of subsequent payments. The AO rightly treated the sundry credit balance as unexplained and bogus. Even if the loan was repaid, the assessee needed to prove the identity, creditworthiness, and genuineness of the lender, which was not done.

Which sections of the Income-tax Act were involved?

Section 68,Section 234A,Section 234B,Section 234C,Section 234D,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: SHRI NARENDRA PRASAD SINHA & SHRI SANJAY KUMAR

For Appellant: Shri Mohit Balani, AR
For Respondent: Dr. Darsi Suman Ratnam, CIT-DR
Hearing: 24.09.2026Pronounced: 13.10.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal has been filed by the Assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 30.04.2024 for the Assessment Year (A.Y.) 2016-17 in the proceeding u/s 143(3) of the Income Tax Act [hereinafter referred as “the Act”].

2.

The brief facts of the case are that the assessee had filed his return of income for A.Y 2016-17 on 17.10.2016 declaring income of Rs.33,31,200/-. The case was selected for complete scrutiny under CASS. The assessee is engaged in the business of transportation and Tahirnaqsh Mohd Yusuf

The order continues below.

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