2018 (7) TMI 1892 - AT - Income Tax

Addition on sundry creditors not proved as genuine - closing credit balances of 26 parties could not verified - If addition has been mentioned u/s 41(1), ingredients of section 41(1), the burden of proof which is resting on revenue in view of the following judicial decisions has not been discharged? - HELD THAT:- Failure by creditors to participate in inquiry and furnish accounts - Does not mean that creditors lacked identity - No material to show that amounts advanced by creditors in reality represented money belonging to assessee - Sums cannot be treated as cash credits - CIT v. CHANDELA TRADING CO. P. LTD. [2014 (11) TMI 409 - CALCUTTA HIGH COURT] Income from undisclosed sources-Addition-Alleged bogus purchases - AO was not justified in making the disallowance of purchases made by the assessee merely due to non-filing of confirmation from suppliers especially when assessee has filed certificate from the bank indicating the facts that cheques issued by it were cleared and no defect in the books of account was pointed out by AO.

We note that Opening balances which is evident from copies of account of these parties enclosed in the paper book at PB 42-66 is not justified on the ground that when assessee has not claimed any expense to that extent during the year under appeal, where is the question of making disallowance of such amount?

If addition has been mentioned u/s 41(1), ingredients of section 41(1), the burden of proof which is resting on revenue in view of the following judicial decisions has not been discharged.

There is no evidence that the liability has ceased to exist and that too in the year under appeal. The very fact these amounts are being shown as payable in the balance sheet of the assessee go to establish that there was no cessation of the liability. - Decided in favour of assessee