Smt. Shashi Mehta vs. Joint CIT, ITA No.117/Del/2015
In a significant ruling, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has deleted an addition of Rs. 15.75 lakh made by the Assessing Officer (AO) on account of sundry creditors, holding that the assessee successfully established the genuineness of the transactions through confirmations, PAN details, and account payee cheque payments.
Background of the Case
The AO made an addition of Rs. 15,75,770/- by treating sundry creditors as bogus. This was based on the failure of certain creditors to respond to summons issued during the assessment proceedings. The CIT(A), after verifying submissions and remand reports, deleted Rs. 14,76,570/- and sustained Rs. 99,200/- in respect of one creditor.
Revenue’s Argument
The Department argued that the CIT(A)’s findings were contradictory. While acknowledging that purchases might have been inflated, the CIT(A) still deleted the major portion of the addition. The DR emphasized non-compliance of summons by the creditors and requested restoration of the full addition.
Assessee’s Defense
The assessee submitted that:
- All creditors were genuine, supported by confirmations and PAN copies.
- Payments to these creditors were made through account payee cheques in subsequent years.
- No purchases were disallowed, and trading results were accepted by the AO.
- For the creditor M/s Balwinder Singh (Rs. 99,200), fresh confirmation was submitted under Rule 29 of ITAT Rules.
It was further pointed out that in subsequent years (AYs 2012–13 & 2014–15), assessments were completed under section 143(3) without any such additions.
ITAT’s Observations
The Tribunal took note of:
- Partial compliance during assessment and appellate proceedings.
- Fresh evidences (confirmations and payment proofs) under Rule 29 were admitted in the interest of justice.
- The AO’s own remand report acknowledged that payments were made via bank in subsequent years.
- Books were not rejected, and purchases were never doubted.
For M/s Kabir Steel Tubes Pvt. Ltd., whose premises was closed (due to auction), the Tribunal accepted confirmation and PAN details as sufficient.
Ruling
- The ITAT upheld the CIT(A)’s deletion of Rs. 14,76,570/- for four parties.
- Additionally, it deleted the remaining Rs. 99,200/- related to M/s Balwinder Singh, as payments and continued transactions were duly substantiated.
Thus, the entire addition of Rs. 15.75 lakh was deleted.
Key Takeaways
- Mere non-response to summons is not sufficient to treat a creditor as bogus.
- Documentary evidence such as confirmations, PAN details, and cheque payments carry more weight.
- Consistency in treatment of transactions across assessment years strengthens the assessee’s position.
- When purchases are accepted, closing balances of creditors cannot be arbitrarily treated as unexplained liabilities.