Kaushal Pravinkumar Shah Vs ITO (ITAT Ahmedabad)
Purchases Accepted, Creditors Questioned: ₹11.20 Crore Addition Sent Back for Examination
Trade Creditors Cannot Be Examined in Isolation
The Ahmedabad Bench of the Income Tax Appellate Tribunal restored an assessment involving a substantial addition towards sundry creditors to the Assessing Officer for fresh examination. The Tribunal observed that where liabilities represent genuine purchases and the purchases themselves have been accepted, the corresponding trade creditors cannot be treated as unexplained cash credits under Section 68.
The order concerned an assessee whose returned income of ₹19.40 lakh had been assessed at approximately ₹11.63 crore, principally because the increase in sundry creditors was treated as unproved. The Tribunal found that the Assessing Officer had not doubted the purchases, sales or trading results and had not rejected the books.
However, the Tribunal did not finally delete the additions. It directed a fresh examination of all relevant material, with an opportunity for the assessee to produce supporting evidence.
Non-Compliance Leads to Substantial Additions
The assessee, proprietor of M/s Appar Chemicals, filed his return on 26 October 2023, declaring total income of ₹19,40,180.
During scrutiny, the assessee failed to comply with the assessment proceedings. The Assessing Officer completed the assessment at ₹11,63,20,636, making several additions and disallowances.
