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Mere Failure on part of Assessee to furnish Complete details of Sundry Creditors is not a Sole Ground for Assessment: ITAT Kolkata

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In DCIT v. M/s. SPML CISC (JV), the ITAT Kolkata ruled that failure on the part of the assessee to furnish the complete details of sundry creditors alone is not a sufficient ground for completing assessment.

The assessee, a joint venture between two companies, failed to furnish the complete details of sundry creditors as required by the Assessing Officer during the assessment proceedings. The AO completed assessment by rejecting the books of accounts of the assessee and and estimated the income of the business of execution of works contract by applying a higher Gross Prof it rate of 5.15%.On appeal, the first appellate authority quashed the order and therefore, the revenue preferred an appeal before the Tribunal.

The bench noted that the Books of Accounts were rejected merely on ground that the assessee has not furnished the complete details of sundry creditors.

The bench further noticed the decision of the Guwahati High Court in the case of Madnani Construction Corporation Pvt. Limited wherein the Court held that the failure of the assessee to give details of the sundry creditors may be a ground for raising suspicion, but suspicion alone is not enough for invoking the powers of best judgment.

“Moreover, the relevant details as sought by the Assessing Officer in respect of sundry creditors were completely furnished by the assessee before the ld. CIT(Appeals) and after having satisfied with the reasons explained by the assesee for not furnishing the same before the Assessing Officer during the course of assessment proceedings, the ld. CIT(Appeals) admitted the same on record and allowed relief to the assessee by relying on the same.”

“Even otherwise the defect as pointed out by the Assessing Officer regarding the failure of the assessee to furnish the complete details of sundry creditors not being material or sufficient enough to justify the rejection of books of account maintained by the assessee as held by the Hon’ble Guwahati High Court in the case of Madnani Construction Corporation P. Limited (supra), we are of the view that the ld. CIT(Appeals) is fully justified in deleting the addition made by the Assessing Officer by estimating the income of the assessee from the business of execution of works contract by applying higher G.P. rate of 5.15%”

Read the full text of the order below.

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