Vimal Mishra Vs ITO (ITAT Varanasi)
Ad-hoc Addition on Sundry Creditors Deleted — Estimation at 10% Held Unsustainable
The Varanasi SMC Bench of the ITAT allowed the assessee’s appeal and deleted the addition of ₹3.38 lakh made on account of alleged unverifiable sundry creditors.
The Assessing Officer had made an ad-hoc disallowance at 10% of total sundry creditors without identifying any specific bogus creditor or pointing out defects in the books. The CIT(A) mechanically confirmed the addition.
The Tribunal observed that:
- The addition was based purely on surmises, guesswork, and estimation, without any factual foundation;
- No specific creditor was held to be non-genuine by the AO or CIT(A);
- No legal provision was properly invoked or examined to justify such estimation; and
- Ad-hoc disallowances cannot be sustained in the absence of concrete findings.
Holding that the lower authorities failed to provide any rational or legal basis for the 10% estimation, the ITAT set aside the CIT(A)’s order and directed deletion of the entire addition. Accordingly, the assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT VARANASI
(A) This appeal vide I.T.A. No.110/VNS/2024 has been filed by the assessee for assessment year 2014-15 against impugned appellate order dated 18/06/2024 (DIN & Order No.ITBA/NFAC/S/250/2024- 25/1065716083(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. The grounds raised by the assessee are as under:
“1. Because, the Ld. Commissioner of Income Tax (Appeals) was not justified and confirmed the addition merely on the ground that the appellant has not filed original copy of creditors, though all the transaction has been made through cheque. As mentioned in the order as well as the submissions of the appellant and has wrongly confirmed the addition3,38,492.00, on the estimate basis @10% of sundry creditors Rs 3384929.00
2. Because, the Ld. Commissioner of Income Tax (Appeals) was not justified to consider the documents which has duly been submitted along with submissions and invoice no., date and payment details has already mentioned and also submitted the confirmatory statement of account duly signed by the party.
3. Because, the appellant craves for a right to raise any additional ground during the course of hearing of the case.
4. Because the order passed by the Ld. Commissioner of Income Tax Appeal to confirm the action of the Assessing officer is erroneous, bad in law and on facts and is liable to be deleted.”
(B) The facts of the case, in brief, are that the assessee is an individual and filed his return of income on 03/11/2024 declaring total income of Rs.18,85,380/-. The Assessing Officer completed the assessment and passed assessment order under section 143(3) of the I. T. Act on 20/12/2016 and determined the total income of the assessee at Rs.22,23,872/- (rounded off to Rs.22,23,870/-) and made an addition of Rs.3,38,492/- on account of unverifiable sundry creditors. Being aggrieved, the assessee filed appeal in the office of learned CIT(A). Vide impugned appellate order dated 18/06/2024, the assessee’s appeal was dismissed by the learned CIT(A). Now the assessee is in appeal before the Income Tax Appellate Tribunal.
