“trade creditors”

Cash Credits & Unexplained ItemsSection 68Section 68238 judgments

The decision most relied on for trade creditors is Orient Trading Co. Ltd. v. CIT (49 ITR 723), cited in 123 judgments on BharatTax.

Leading authorities on trade creditors

Orient Trading Co. Ltd. v. CIT

49 ITR 723 · 1963 · High Court

123

citing judgments

When a cash credit is found, the assessee discharges the initial burden by proving the identity of the creditor and the genuineness of the transaction, shifting the burden to the Revenue. The assessee is not required to prove the source of the creditor's funds (source of source).

CIT v. Korlay Trading Co. Ltd.

232 ITR 820 · 1998 · High Court

122

citing judgments

To discharge the onus under Section 68, an assessee must establish the identity of the creditor, the genuineness of the transaction, and the creditworthiness of the creditor. Merely providing basic documentary evidence or a file number is insufficient; each credit entry requires a separate, detailed explanation.

CIT v. Gotan Lime Khaniz Udyog

256 ITR 243 · 2002 · High Court

citing judgments

The mere rejection of an assessee's books of account under Section 145(3) does not automatically warrant an addition to the returned income. The Assessing Officer must consider the books alongside historical data and other collected material after confronting the taxpayer.

CIT v. Shri Vardhman Overseas Ltd.

343 ITR 408 · 2012 · High Court

citing judgments

An addition under Section 68 cannot be made for genuine sundry creditors or trade payables merely carried forward from previous assessment years if there is no fresh credit in the relevant assessment year. Section 41(1) does not apply to acknowledged outstanding liabilities without actual remission or cessation.

Aravali Trading Co. v. ITO

8 DTR 199 · 2008 · High Court

citing judgments

An assessee discharges their onus under Section 68 for cash credits by proving the identity of the creditor, the genuineness of the transaction, and the creditor's creditworthiness. The assessee is not required to prove the source of the creditor's funds ('source of source'), unless evidence suggests the money originated from the assessee itself.

552 (SC) Zaveri Diamonds v. CIT 11-12 3

118 Taxmann.com 166 · 2020 · High Court

citing judgments

The court considers the evidentiary value of unaudited books and loose papers when assessing income, particularly concerning trade creditors and their verification.

Chief CIT v. Kesaria Tea Company Limited

254 ITR 434 · 2002 · Supreme Court

citing judgments

For Section 41(1) of the Income Tax Act to apply, the mere expiry of the limitation period does not constitute cessation of liability; there must be an explicit act by the creditor, such as a release or admission of write-off, confirming that the liability has ceased without the possibility of revival.

Hindustan Tea Trading Co. Ltd. v. CIT

263 ITR 289 · 2003 · High Court

citing judgments

Under Section 68, the assessee discharges the initial onus by producing sufficient material and explanation for cash credits. Once material is provided, the Assessing Officer must conduct a proper and thorough inquiry into it, as a half-hearted inquiry or overlooking materials is impermissible.

Judgments citing trade creditors

Assistant Commissioner of Income Tax 4(3)(1), Mumbai vs. M/S.Taurian Iron and Steel Company Private Limited, Mumbai

In the result, appeal of the Revenue is dismissed

ITA 5890/MUM/2017[2011-12]Status: DisposedITAT Mumbai24 Apr 2023AY 2011-12

Bench: Amit Shukla () & Ms. Padmavathy S. ()

Section 14ASection 41Section 41(1)

erred in directing the AO to delete the addition made u/s 41(1) of Rs.1,53,46,999/- towards trade creditors as assessee has not furnished any documentary evidence to establish that the said creditors were actually been paid subsequently." 4. "On the facts and in the circumstances ... dismissed. Addition under section 41(1) of the I.T Act, 1961: 5. During the course of assessment proceedings, the Assessing Officer sought details of trade creditors where the credit amount is greater than Rs.5 lakhs. The Assessing Officer made the addition under section 41(1) for the reasons that

DCIT, New Delhi vs. M/S. Tikonainfinet Ltd., New Delhi

In the result, the appeal of the Revenue is dismissed

ITA 4658/DEL/2016[2010-11]Status: DisposedITAT Delhi24 Apr 2023AY 2010-11

Bench: Dr. Brr Kumar & Ms. Astha Chandraasstt. Year: 2010-11

For Appellant: Shri Akshay Shah, CAFor Respondent: Shri H.K. Chaudhary, CIT-DR

Section 143(3)Section 35ASection 37(1)Section 41(1)

been made even in the years in which the corresponding expenditure was claimed u/s 37(1). 7.4 Moreover, the amount involved pertains to Sundry Trade Creditors of large number. Individual amounts were not very large. Expecting an assessee to file copies of income tax return of Trade Creditors ... impugned addition by holding that the creditors were bogus. In our opinion the Ld. AO 7 was not justified in treating the entire trade creditors as bogus when majority of them were well-established public sector undertakings or limited companies e.g. BSNL, MTNL, Bharti Airtel Ltd., HCT Info-systems

Vijay Anandbhai Chavda, Gondal vs. The Principal Commissioner of Income Tax-1, Rajkot

In the result, the order passed by the PCIT u/s 263 of the Act is hereby dismissed

ITA 117/RJT/2022[2017-18]Status: DisposedITAT Rajkot21 Apr 2023AY 2017-18

Bench: Ms. Annapurna Gupta (Accountant Member), Shri Siddhartha Nautiyal (Judicial Member)

For Appellant: Shri Vimal Desai, A.RFor Respondent: Shri Shramdeep Sinha, CIT-D.R

Section 115BSection 144Section 263Section 68

therefore cannot be taxed under section 68 of the Act. Further, the assessee also placed reliance on several decisions which have held that trade creditors being trading liabilities cannot be taxed u/s 68 of the Act. The Counsel for the assessee further submitted before PCIT that increase in balance ... setting aside the assessment order. In our considered view the assessee has been able to demonstrate the fact that the amounts represented opening balances / trade creditors. Further, various Courts and Tribunals have held that the same cannot be the subject matter of additions

Passion Commodities Pvt Ltd, Kanpur vs. DCIT Central Circle-1, Kanpur

In the result, the assessee’s appeal is allowed

ITA 295/DEL/2020[2012-13]Status: DisposedITAT Delhi13 Apr 2023AY 2012-13

For Appellant: Shri Rajeev Saxena, AdvocateFor Respondent: Shri B.K. Singh, Sr. DR

Section 127Section 127(2)Section 143(2)Section 143(3)

make any efforts during remand proceedings. 3 ITA No.295/Del./2020 (iii) Adhoc addition of Rs.88,78,000/- @20% of the total trade creditors of Rs.4,43,92,951/- whose details were furnished along with PAN and addresses were provided despite this AO did not make any efforts during remand proceedings

Shri Raj Kumar ( M/S Radhika Sales Corp ), Amritsar vs. Income Tax Officer Ward- 3 (3), Amritsar

In the result, the appeal of the assessee bearing ITA No

ITA 195/ASR/2022[2017-18]Status: DisposedITAT Amritsar11 Apr 2023AY 2017-18

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 143(3)Section 145(3)Section 250oSection 68

been rejected by (Karnataka) assessing authority, same books of account could not be CIT, Belgaum v. relied upon in an addition on account of trade creditors Bahubali and also for arriving at closing stock - Held, yes [Para 15] NeminathMuttin [In favour of assessee] 2. [2014] 42 Section

Vkm Logistics P.Ltd, New Delhi vs. ITO, Ward-26(4), New Delhi

In the result, appeal of the assessee is dismissed

ITA 7457/DEL/2019[2015-16]Status: DisposedITAT Delhi11 Apr 2023AY 2015-16

Bench: Shri G.S. Pannu, Hon’Ble & Shri Challa Nagendra Prasadआ.अ.सं/.I.T.A No.7457/Del/2019 िनधा"रणवष"/Assessment Year: 2015-16 बनाम Vkm Logistics P. Ltd., Ito 611, Pragati Tower, Vs. Ward 26(4) Rajinder Place, New Delhi. New Delhi. Pan No. Aakcs4517M अपीलाथ" Appellant ""यथ"/Respondent

Section 131Section 142(1)Section 143(2)Section 144Section 271(1)(b)Section 68

difference in receipts as per ITR and as per 26-AS and also the addition u/s 68 of the Act in respect of trade creditors. The grounds raised by the assessee are dismissed. 6. In the result, appeal of the assessee is dismissed. Order pronounced in the open court

Arun Kumar Palawat, Jaipur vs. Pr CIT, Jaipur-1, Jaipur

In the result, this appeal of the assessee is allowed

ITA 144/JPR/2022[2017-18]Status: DisposedITAT Jaipur11 Apr 2023AY 2017-18

Bench: SHRI SANDEEP GOSAIN (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member)

For Appellant: Shri R.K. Bhatra (CA) &For Respondent: Shri Ajey Malik, CIT D/R

Section 139Section 142(1)Section 143(1)Section 143(2)Section 143(3)Section 263

wherein it has been held that “assessee was asked by the AO to file the details of trade creditors which are shown in the name of agriculturalist. In the reply, assessee filed written submission enclosing the list of creditors. Thus, the AO made the inquiry

Diya Fabrics, Surat vs. Income Tax Officer, Ward 1(2)(1), Surat

In the result, while appeal of the assessee is allowed, appeal of the Revenue is dismissed

ITA 355/SRT/2022[2014-15]Status: DisposedITAT Surat30 Mar 2023AY 2014-15

Bench: Shri Pawan Singh, Jm & Dr. A. L. Saini, Am आयकर अपील सं./Ita No.355/Srt/2022 "नधा"रण वष"/Assessment Year: (2014-15) (Physical Hearing) Diya Fabrics, Vs. The Ito, 1418, Kohinoor Market, Ring Road, Ward-1(2)(1), Surat. Surat – 395002. (Appellant) (Respondent) "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aajfd3658A

Section 40A(3)Section 68

During the course of assessment proceeding, no evidence has been filed or produced by the assessee to prove the genuineness of such trade creditors. Therefore, vide show cause notice of assessing officer dated 07.11.2016, the assessee was specifically asked to furnish documentary evidence in respect of aforesaid creditors. In response ... find that inadvertently the tax auditor has treated the aforementioned persons under the head “unsecured loan” whereas, in fact, all the above persons are “trade creditors” and with whom the assessee has done some contract business including supply of labourers on contractual payments. We find that tax has been deducted

M/S. Mega Aims, Bharuch vs. ITO, Ward-1(3), Bharuch

In the result, appeals filed by the Revenue (ITA Nos

ITA 751/SRT/2018[2014-15]Status: DisposedITAT Surat30 Mar 2023AY 2014-15

Bench: Shri Pawan Singh, Jm & Dr. A. L. Saini, Am आयकर अपील सं./Ita Nos.722 To 723/Srt/2018 Assessment Years: (2013-14 To 2014-15) (Physical Hearing) The Dcit, Circle-1, Vs. M/S. Mega Aims, Bharuch. B-1, Gokuldham Complex, Dahej By – Pass Road, Bharuch. "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aaqfm1615F (Appellant) (Respondent) आयकर अपील सं./Ita Nos.750 To 751/Srt/2018 Assessment Years: (2013-14 To 2014-15) M/S. Mega Aims, Vs. The Acit, Circle-1, B-1, Gokuldham Complex, Dahej By – Bharuch. Pass Road, Bharuch. "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aaqfm1615F (Appellant) (Respondent) Shri Ashish Pophare, Cit(Dr) Appellant By Respondent By Shri P. M. Jagasheth, Ca Date Of Hearing 23/02/2023 Date Of Pronouncement 30/03/2023

Section 142(1)Section 143(2)Section 143(3)

account of assessee had been rejected by assessing authority, same books of account could not be relied upon in an addition on account of trade creditors and also for arriving at closing stock. Therefore, we do not agree with the plea taken by ld DR for the Revenue

M/S. Mega Aims, Bharuch vs. ACIT, Circle-1, Bharuch

In the result, appeals filed by the Revenue (ITA Nos

ITA 750/SRT/2018[2013-14]Status: DisposedITAT Surat30 Mar 2023AY 2013-14

Section 142(1)Section 143(2)Section 143(3)

Deputy Commissioner of Income Tax, Bharuch Circle-1, Bharuch vs. M/S. Mega Aims, Bharuch

In the result, appeals filed by the Revenue (ITA Nos

ITA 723/SRT/2018[2014-15]Status: DisposedITAT Surat30 Mar 2023AY 2014-15

Section 142(1)Section 143(2)Section 143(3)

Deputy Commissioner of Income Tax, Bharuch Circle-1, Bharuch vs. M/S. Mega Aims, Bharuch

In the result, appeals filed by the Revenue (ITA Nos

ITA 722/SRT/2018[2013-14]Status: DisposedITAT Surat30 Mar 2023AY 2013-14

Section 142(1)Section 143(2)Section 143(3)

DCIT, New Delhi vs. M/S Rampgreen Solutions Pvt. Ltd., (Erstwhile Vcostomer Services India Pvt. Ltd), New Delhi

In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed

ITA 1618/DEL/2016[2011-12]Status: DisposedITAT Delhi24 Mar 2023AY 2011-12

Bench: Shri G. S. Pannua N D Shri Challa Nagendra Prasad

Section 143(3)Section 144C(5)Section 14ASection 234ASection 271(1)(c)Section 92C

interest rate. He computed the working capital adjustment as under: "a) Compute the average of opening and closing balance of inventories, trade debtors/ receivables, trade creditors/ payable of both the tested party and the comparables on revenue account. b) Work out the net working capital ratio (in pecentage) after dividing

M/S. Rampgreen Solutions Pvt. Ltd., Delhi vs. DCIT, New Delhi

In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed

ITA 1404/DEL/2016[2011-12]Status: DisposedITAT Delhi24 Mar 2023AY 2011-12

Bench: Shri G. S. Pannua N D Shri Challa Nagendra Prasad

Section 143(3)Section 144C(5)Section 14ASection 234ASection 271(1)(c)Section 92C

ACIT, Circle-2, Alwar vs. Sewa Steel Pvt. Ltd., Bhiwadi

In the result, the appeals of the Revenue are partly allowed

ITA 573/JPR/2017[2012-13]Status: DisposedITAT Jaipur13 Mar 2023AY 2012-13

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihy la-@ITA No.573& 181/JP/2017 fu/kZkj.ko"kZ@AssessmentYear : 2012-13& 2013-14 The ACIT Circle-2, Alwar cuke Vs. M/s. Sewa Steel Pvt. Ltd. E-90-C, Industrial Area, Tijara Bhiwadi, Distt. Alwar (Raj) LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCS 4307 D vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksjls@Revenue by: Shri Laxman Singh, Addl. CIT fu/kZkfjrh dh vksjls@Assesseeby : None lquokbZ dh rkjh[k@Date

For Appellant: NoneFor Respondent: Shri Laxman Singh, Addl. CIT fu/kZkfjrh dh vksjls@

Section 43(1)

that the same did not represent any investment. The balance remained in any of the bank account was nothing but the liability of the trade creditors. It was explained that in a running business, it is never possible that on a particular date all the liabilities of the trade creditors

Vikas Dugar, Jaipur vs. ACIT, Cen Circle-2 Jaipur, Jaipur

In the result the appeal filed by the assessee is allowed

ITA 27/JPR/2023[2013-14]Status: DisposedITAT Jaipur06 Mar 2023AY 2013-14

Bench: The Actual Hearing Of The Case.”

For Appellant: Shri Surendra Sha (C.A.)For Respondent: Smt Monisha Choudhary (Addl. CIT) a

Section 133(6)Section 143(3)Section 148

assessee has discharged its obligations casted upon it under section 68, no addition could have been made u/s 68 in respect of trade creditors amounting to Rs 1930214.00 It is well settled that the provisions of section 41(1) can be invoked only when trading liability incurred by the assessee ... channels. Thus, no addition can be made u/s 41(1) as well. 2.7 The basis on which AO added the credit balances of 2 trade creditors was solely on account of non-service/reply of notices sent to them u/s 133(6) of the Act which was in utter disregard

Orissa Chrome Export & Mining Company Pvt. Ltd., Bhubaneswar vs. ACIT, Circle-1(2), Bhubaneswar

In the result, appeal of the assessee is partly allowed for statistical purposes

ITA 4/CTK/2020[2014-15]Status: HeardITAT Cuttack22 Feb 2023AY 2014-15

Bench: Before S/Shri George Mathan, Judicial & Arun Khodpia & Arun Khodpia & Arun Khodpiaassessment Year : 2014-15 Orissa Orissa Chrome Chrome Export Export & & Vs. Acit, Circle Acit, Circle-1(2), Mining Company Pvt Ltd., A Mining Company Pvt Ltd., A- Bhubaneswar Bhubaneswar 65/1, 65/1, Nayapali, Nayapali, Bhubaneswar Bhubaneswar Pan/Gir No. Pan/Gir No.Aaaco 4389 B (Appellant (Appellant) .. ( Respondent Respondent) Assessee By : Shri P.R.Mohanty, Ar P.R.Mohanty, Ar Revenue By : Shri Suresh Shivanand Shivanandan, Cit Dr Date Of Hearing : 22/0 02/2023 Date Of Pronouncement : 22/0 /02/2023 O R D E R Per Bench This Is An Appeal Filed By The Assessee Against The Order Of The Ld This Is An Appeal Filed By The Assessee Against The Order Of The Ld This Is An Appeal Filed By The Assessee Against The Order Of The Ld Cit(A) -1, Bhubaneswar, 1, Bhubaneswar, Dated17.9.2019 In Appeal No. In Appeal No.0344/16-17 For The Assessment Year Assessment Year 2014-15. 2. Shri P.R.Mohanty, Ld Ar Appeared For Th Shri P.R.Mohanty, Ld Ar Appeared For The Assessee & Shri S E Assessee & Shri Suresh Shivanandan, Ld Cit Dr Appeared For The Revenue. , Ld Cit Dr Appeared For The Revenue.

For Appellant: Shri P.R.Mohanty, ARFor Respondent: Shri Suresh Shivanand

Assessment Year : 2014-15 claim in respect of sundry creditors treated as bogus by the Assessing Officer clearly shows that these are not trade creditors. As these are not trade creditors, the decision relied upon by ld CIT DR in the case of of Suresh Kumar T Jain(supra) could ... some years. The Assessing Officer has consequently questioned the existence of the liability and has made the disallowance. A liability, which is not a trade creditor but shown in the balance sheet of the assessee, is clearly an acceptance by the assessee that the liability does exist. This being

Shri Rajkot District Cooperative Bank Ltd., Rajkot-Gujarat vs. The Pr. Commr. of Income Tax-1, Rajkot-Gujarat

In the result, appeal of the assessee is dismissed

ITA 123/RJT/2016[2011-12]Status: DisposedITAT Rajkot15 Feb 2023AY 2011-12

Bench: Smt.Annapurna Gupta & Shri T.R. Senthil Kumarassessment Year :2011-12 Shri Rajkot District Cooperative Vs. Pr.Cit, Rajkot-1 Bank Ltd. Rajkot. ‘Jilla Bank Bhavan’, Kasturba Road Opp: Chaudhari High School Rajkot. Pan : Aaaar 0564 K 0 अपीलाथ"/ (Appellant) "" यथ"/(Respondent) Assesseeby : Shri S.N. Soparkar, Ld.Ar Revenue By : Shri Shramdeep Sinha, Ld.Cit-Dr सुनवाई क" तार"ख/Date Of Hearing : 17/11/2022 घोषणा क" तार"ख /Date Of Pronouncement: 15/02/2023

For Appellant: Shri S.N. Soparkar, ld.ARFor Respondent: Shri Shramdeep Sinha, ld.CIT-DR

Section 143(3)Section 263Section 36

reply by the assessee to which the attention of the Court was invited is not sufficient. We find that with regard to the trade creditors, copies of their account books were filed vide letter dated 9th of November, 2010; that is all. There is no application of mind ... Assessing Authority with regard to the genuineness of the credit entries including that of trade creditors. Reference was made by the learned counsel for the respondents to the assessment order for the assessment year which is enclosed in the connected writ petition (has been dismissed on 15th

M/S. B.C.Bhuyan Constructions Pvt. Ltd., Bhubaneswar vs. DCIT, Circle-2(1), Bhubaneswar

In the result, both the appeals of the assessee stand partly allowed

ITA 446/CTK/2017[2010-11]Status: DisposedITAT Cuttack19 Jan 2023AY 2010-11

Bench: Before S/Shri George Mathan, Judicial & Arun Khodpia & Arun Khodpia & Arun Khodpiaassessment Year :2010-2011 2011

For Appellant: S/Shri P.C.Sethi/Ashok Kumar Moharana, ARsFor Respondent: Shri M.K.Gautam, CIT DR/Shri S.C.Mohanty, Sr DR

disallowance of the sundry creditors is not permissible insofar as out of the total disallowance of Rs.3.11 crores, Rs.2.42 crores related to the trade creditors and the balance was in respect of the statutory dues, which have been paid before the due date of filing of the return ... credits is a figure appearing in the balance sheet and the assessee had not been able to show that said sundry creditors were actually trade creditors. 7. In reply, ld AR drew our attention to pages 166 to 167 of PB, which were the details of the sundry creditors representing

DCIT, Corporate Circle-1(1), Bhubaneswar vs. M/S. B.C.Bhuyan Constructions Pvt. Ltd., Bhubaneswar

In the result, both the appeals of the assessee stand partly allowed

ITA 439/CTK/2017[2010-11]Status: DisposedITAT Cuttack19 Jan 2023AY 2010-11

Bench: Before S/Shri George Mathan, Judicial & Arun Khodpia & Arun Khodpia & Arun Khodpiaassessment Year :2010-2011 2011

For Appellant: S/Shri P.C.Sethi/Ashok Kumar Moharana, ARsFor Respondent: Shri M.K.Gautam, CIT DR/Shri S.C.Mohanty, Sr DR