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2011 (9) TMI 134 - AT - Income TaxUnexplained sundry creditors - genuineness of sundry creditors - small time karigars, doing job works of finishing and polishing from their homes located in Roorkee and nearby villages - Held that:- The AO was supposed and required to apply his mind to the issue and thereby considering the applicability of the provisions of section 68 of the Act. In the peculiar facts and circumstances, when the trading results have been accepted, thereby also accepting the purchases made, in our opinion, the applicability of the provisions of section 68 is entirely suspect. The same ought not to have been applied in a mechanical manner. In view of the decision of the Supreme Court in the case of ‘CIT vs. Smt. P.K. Noorjahan’ (1997 -TMI - 5738 - SUPREME Court), The assessing officer has to take into account the overall facts. Accordingly, in the case of the assessee the overall facts need to be considered. The amount outstanding being credit on account of purchases which have been exported by the assessee, it is not mandatory that in the absence of verification of the creditors, the same need to be added statutorily. - it is a fit case not to make any addition by invoking the deeming fiction of Section 68 in respect of the sundry creditors, despite the fact that the assessee could not supply the addresses of these creditors. Denial of deduction under Section 80 HHC in respect of the addition made on account of the creditors. - Held that:- This issue is squarely covered by the judgment of the Hon’ble Calcutta High Court in the case of ‘CIT vs. Margaret’s Hope Tea Co. Ltd.’ (1990 -TMI - 21166 - CALCUTTA High Court), wherein, on similar facts it has been held that addition on account of cash credit under Section 68 will go to add to the business income. - The creditors in the assessee’s case represented purchases. This was evident from the list of creditors, as also the observations of the Tribunal and the findings of the Sales Tax Department. That being so, there was no reason for the benefit of section 80HHC of the Act being not allowed to the assessee. - Decided in favor of assessee.
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