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Facts
The assessee filed a return of income, and the Assessing Officer made an addition of Rs. 3,38,492 for unverifiable sundry creditors. The CIT(A) dismissed the assessee's appeal, confirming the addition. The assessee then appealed to the ITAT.
Held
The ITAT found that the disallowance was made on an ad hoc basis without justification or specific findings regarding bogus creditors. It directed the Assessing Officer to delete the addition, setting aside the CIT(A)'s order.
Key Issues
The key legal issue was the validity of an ad hoc addition for unverifiable sundry creditors without specific evidence or justification for the estimation.
Sections Cited
Section 143(3)
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Income Tax Appellate Tribunal, VARANASI CIRCUIT BENCH ‘SMC’, VARANASI
Before: SHRI ANADEE NATH MISSHRA
2014-15 against impugned appellate order dated 18/06/2024 (DIN & Order No.ITBA/NFAC/S/250/2024- 25/1065716083(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. The grounds raised by the assessee are as under:
“1. Because, the Ld. Commissioner of Income Tax (Appeals) was not justified and confirmed the addition merely on the ground that the appellant has not filed original copy of creditors, though all the transaction has been made through cheque. As mentioned in the order as well as the submissions of the appellant and has wrongly confirmed the addition
Rs.3,38,492.00, on the estimate basis @10% of sundry creditors Rs 3384929.00
Because, the Ld. Commissioner of Income Tax (Appeals) was not justified to consider the documents which has duly been submitted along with submissions and invoice no., date and payment details has already mentioned and also submitted the confirmatory statement of account duly signed by the party.
Because, the appellant craves for a right to raise any additional ground during the course of hearing of the case.
Because the order passed by the Ld. Commissioner of Income Tax Appeal to confirm the action of the Assessing officer is erroneous, bad in law and on facts and is liable to be deleted.”
(B) The facts of the case, in brief, are that the assessee is an individual and filed his return of income on 03/11/2024 declaring total income of Rs.18,85,380/-. The Assessing Officer completed the assessment and passed assessment order under section 143(3) of the I. T. Act on 20/12/2016 and determined the total income of the assessee at Rs.22,23,872/- (rounded off to Rs.22,23,870/-) and made an addition of Rs.3,38,492/- on account of unverifiable sundry creditors. Being aggrieved, the assessee filed appeal in the office of learned CIT(A). Vide impugned appellate order dated 18/06/2024, the assessee’s appeal was dismissed by the learned CIT(A). Now the assessee is in appeal before the Income Tax Appellate Tribunal.
(C) During the course of hearing none was present on behalf of assessee. In the absence of any representation from assessee’s side, learned Departmental Representative was heard and materials on records were perused. Perusal of records shows that the disallowance has been made on ad hoc basis merely based on surmises, guess work and imagination. No basis of estimation has been provided by either the learned CIT(A) or by the Assessment Year:2014-15 3 Assessing Officer to justify disallowance @10%. No finding has been given by them, to explain how section 47(1) of ITAT, which is the relevant on this issue, has any applicability in the present case. No finding has been given either by the Assessing Officer or by the learned CIT(A) with respect to any specific sundry creditor to show that the sundry creditor on the books of the assessee was/were bogus. In view of the foregoing, the Assessing Officer is directed to delete the addition of Rs.3,38,492/- made on account of sundry creditors. The impugned order of the learned CIT(A) is set aside and the assessee’s appeal is allowed.
(D) In the result, the appeal of the assessee stands allowed.
(Order pronounced in the open court on 05/01/2026)
Sd/. (ANADEE NATH MISSHRA) Accountant Member Dated:05/01/2026 *Singh Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. D.R., I.T.A.T.