Sundry Creditors arising out of Hawala-Linked Bogus Purchases: Income Tax Treatment 

Rajesh G. Jain Vs ITO (ITAT Mumbai) Sundry creditors arising out of Bogus purchases (Hawala Transactions) and remaining outstanding as at the year-end  cannot be added to the Total Income u/s 68  as Cash credits. Such creditors can be added u/s 41(1) only as Income to include benefit due to Remission or Cessation of Liability by way of writing off such liability in his accounts.  Relevant part of the ITAT Mumbai D Bench Order dated 29-12-2023 “178. ….. There may be a few exceptions to this general rule. For example, in the case of credit purchases, the account of the supplier is credite...