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Facts
The assessee's appeal was against the CIT(A)'s order which confirmed additions made by the Assessing Officer. The additions pertained to cash deposited in a bank account and sundry creditors appearing as a significant percentage of total purchases.
Held
The Tribunal held that cash deposits, when duly reflected in the audited books of account and explained with reference to recorded transactions, cannot be added as unexplained. Similarly, additions based on the proportion of sundry creditors to total purchases, without rejecting the books of account or disproving the identity/genuineness of creditors, are unsustainable.
Key Issues
Whether additions for cash deposits and sundry creditors are valid without rejection of books of account and specific evidence to disprove genuineness.
Sections Cited
250
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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: DR. B.R.R. KUMAR, VICE-MS SUCHITRA RAGHUNATH KAMBLE
O R D E R
PER DR. B.R.R. KUMAR, VICE-PRESIDENT:
This appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as “Ld. CIT(A)”] dated 31.07.2024, under section 250 of the Income-tax Act, 1961 [in short “the Act”] for the Assessment Year 2016-17.
Ground No.2: 2. The Assessing Officer made addition of Rs.15,12,000/-, being cash deposited in HDFC Bank account as unexplained money for want of documentary evidence. The Ld. CIT(A) confirmed the addition observing that the assessee had not furnished supporting evidence during assessment as well as appellate proceedings.
Before us, the assessee has filed a detailed chart explaining the source of cash deposits, which is placed at Page 69 of the paper book, demonstrating that the deposits were out of cash received from partners, creditors and earlier withdrawals, all duly recorded in the audited books of account. The same are reproduced as under:
Priteshkumar Vikrambhai Patel Asst. Year : 2016-17 - 2–
These details were not found to be incorrect or false by the Revenue. It is a settled position of law that where cash deposits are duly reflected in regular books of account and explained with reference to recorded transactions, addition cannot be sustained. In absence of rejection of books of account, the impugned addition is unsustainable. Accordingly, the addition of Rs.15,12,000/- is deleted.
Priteshkumar Vikrambhai Patel Asst. Year : 2016-17 - 3– 5. Before us, the assessee has submitted the list of sundry creditors and also the repayment of amount in the sundry creditors at page 73 and 74 of the paper books, which is reproduced as under:
Priteshkumar Vikrambhai Patel Asst. Year : 2016-17 - 4–
Ground No.3: 6. The AO made addition on the ground that sundry creditors constituted around 64% of total purchases and that the assessee failed to furnish documentary evidence. The Ld. CIT(A) confirmed the addition observing that identity and genuineness of creditors were not established.
Since the sundry creditors have been proved, and the payments have already been made, no addition on the grounds that there has been 64% of rise of the purchases are outstanding. The addition was made on the ground that sundry creditors constituted around 64% of total purchases and that the assessee failed to furnish documentary evidence. The Ld. CIT(A) has confirmed the addition made by Assessing Officer.
Priteshkumar Vikrambhai Patel Asst. Year : 2016-17 - 5– 8. In view of the facts and circumstances of the case, we find that the additions made by the Assessing Officer are not supported by any cogent material. The cash deposits are duly explained with reference to the audited books of account and supporting details placed on record. Similarly, the addition on account of sundry creditors is based merely on presumption, without rejection of books of account or bringing any adverse evidence to disprove the identity or genuineness of the creditors. Once purchases are accepted, corresponding trade creditors cannot be treated as unexplained. Accordingly, the additions confirmed by the Ld. CIT(A) is deleted.
In the result, the appeal of the assessee is allowed. The order is pronounced in the open Court on 23.01.2026.