PCIT Vs Ennoble Construction (Karnataka High Court)
Karnataka High Court recently dismissed the appeal filed by the Revenue in the case of PCIT Vs Ennoble Construction, challenging the Income Tax Appellate Tribunal (ITAT) order. The case revolved around the addition of ₹5.89 crore made by the Assessing Officer (AO) under transport creditors for the Assessment Year 2009-10. The AO had questioned the genuineness of transport creditors as the assessee failed to provide supporting documents, citing the seizure of business records by the Central Bureau of Investigation (CBI). The ITAT had ruled in favor of the assessee, leading to the Revenue’s appeal under Section 260A of the Income Tax Act, 1961.
The Revenue argued that the ITAT erred by setting aside the disallowance without properly assessing the creditworthiness of the transport creditors. It relied on precedents such as CIT vs. Usha Stud Agricultural Farms (301 ITR 384) and CIT vs. Prameshwar Bohra (Rajasthan HC) to assert that the onus was on the assessee to prove the identity and genuineness of creditors. The Karnataka High Court, however, observed that the AO had not undertaken necessary inquiries and had instead relied on an ad hoc estimate based on a past assessment year. Furthermore, the court noted that once the AO had accepted similar creditors as genuine in previous years, they could not be questioned anew without fresh evidence.
