Sunil Bansal Vs ITO (ITAT Delhi)
Once Sales & Purchases Accepted, Creditor Balance Can’t Be Taxed- ITAT Delhi Deletes ₹1.03 Cr Sundry Creditor Addition:
Assessee, proprietor of Bansal Sales Corporation engaged in wholesale trading of iron & steel, filed return declaring income of ₹8.67 lakh. During scrutiny, AO noticed sundry creditors of ₹8.82 crore. Notices issued u/s 133(6) to major creditors – JBG Trading Co., S.S. Trading Co. & Shree Ram Traders – were either returned unserved or not complied with. Inspector deputed by AO also failed to trace them. AO held that genuineness of purchases worth ₹1.03 crore (difference between opening & closing creditors) was not proved & added the amount to income.
CIT(A) sustained the addition, holding that assessee failed to establish genuineness of creditors as PAN details were inconsistent & Inspector reported non-existence of parties.
Assessee’s Arguments:
- Correct figure of opening creditors was ₹8.59 crore, not ₹7.79 crore considered by AO/CIT(A). Reconciliation including advances to suppliers showed no such difference of ₹1.03 crore.
- Confirmations, PAN, VAT registration, sales tax records, ledger copies & bank statements of all three creditors were furnished.
- Purchases were duly recorded & payments made through banking channels.
- AO himself accepted sales of ₹36.60 crore & corresponding purchases; without purchases such sales could not exist.
- Relied on CIT Vs. Usha Stud Agricultural Farms Ltd. (Delhi HC), CIT Vs. Shree Rama Multi Tech Ltd. (Guj HC) & other rulings to argue that once purchases are accepted, creditor balances cannot be added merely due to non-response.
Tribunal’s Findings:
- AO mechanically added the difference between opening & closing balances without examining full ledgers.
- Assessee had purchased during the year ₹1.29 crore from JBG Trading, ₹3.10 crore from SS Trading & ₹7.70 crore from Shree Ram Traders, with payments made & confirmations obtained. Closing balances remained, but transactions were genuine.
- With sales of ₹36.60 crore & accepted purchases of ₹36.99 crore, rejection of part of creditors was illogical.
- If AO doubted genuineness, he should have rejected entire purchases, not only differences in balances.
- Addition was grossly unjustified & unsustainable.
- Addition of ₹1.03 crore deleted; appeal of Assessee allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
