INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged bogus creditors -

Since assessee had not filed any details and/or explanation by establishing the identity proof of the sundry creditors, their creditworthiness and the genuineness of the transaction and produced relevant books of account from which it could have been verified, more particularly the party ledger accounts, the claim made on account of sundry creditors was treated by AO as bogus and added to the total income of the assessee for the assessment year 2014-15. CIT(A) deleted the addition. Held: Sundry creditors were authorized representative of assessee and acting on behalf of assessee for procuring paddy. Affidavit was filed by the assessee in which he had categorically undertaken that he was doing only customs-milling for M/s. Orissa State Civil Supplies Corporation Ltd. (OSCSC Ltd.) besides working also as agent of MARKFED, NAFED, NCMSL, PACS and FCI. Assessee was not purchasing paddy directly. He was doing customs milling only. In these circumstances, there should be no creditors for purchase of paddy. The creditors were mentioned by assessee in his reports, who have filed undertaking in which they have categorically stated that they were authorized representatives but received paddy from the paddy purchase centre and for milling from joint custody and maintenance and to deliver the resultant CMR in the RRC/FCI on behalf of assessee. On perusal of the ledger copy of the creditors shown by assessee the narration was with regard to labour charges, loading, unloading, banking and netting expenses and freight inward and outward expenses. CIT(A) has co-terminus power as per the sections provided under the IT Act. He should have called the creditors for their truthness and examined the issue. From the above observations, assessee had provided details of the creditors, which should have been examined by both the authorities below but they did not do so for proving the genuineness of the creditors. The assessee discharged his onus as cast upon him and the duty stands shifted on the revenue authorities for the verification of the genuineness of the creditors, which they are lack in this case. In the second round of proceedings before the AO, he could have exercised his powers for presence of the creditors and verification of the genuineness of the transactions done with the creditors but did not do so. Accordingly, the ground raised by the Revenue was dismissed and the issue was, therefore, decided in favour of assessee.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 68

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