Money cannot be treated as 'Unaccounted' merely because of Non-Response from Creditors: ITAT deletes Penalty [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench, while deleting penalty under section 271(1)(c) of the Income Tax Act, 1961 has held that the money cannot be treated as ‘unaccounted’ merely because of non-response from the creditors solely because of non-response from the creditors.

The assessee, Royal Rubber Works is a partnership firm. For the assessment year under dispute, the assessee filed its return of income on 30.09.2015 declaring income of Rs.2,67,730/-. In course of assessment proceeding, the Assessing Officer, on examination of the balance-sheet of the assessee, found that the assessee has shown sundry creditors of Rs.88,97,485/-. Noticing this, the Assessing Officer called upon the assessee to provide the complete details of sundry creditors along with confirmed copy of ledger account. As the assessee failed to prove the genuineness of the sundry creditors and the same remained unverifiable, the Assessing Officer added back the amount of Rs.34,34,837/- and initiated penalty.

A bench of Shri Saktijit Dey, Judicial Member and Dr. B.R.R. Kumar, Accountant Member observed that the addition based on which the Assessing Officer imposed penalty under section 271(1)(c) of the Act was on account of sundry creditors.

“While deciding the quantum appeal of the assessee, the Tribunal has deleted the major part of the addition, accepting assessee’s submission that such amount was not credited in the books of account during the year. Addition of Rs.3,43,289/- was sustained only on the ground that it was credited to the books of account during the year,” the Tribunal said.

“Before us, learned counsel for the assessee has submitted that the Assessing Officer has accepted the sales and purchases. He has further submitted that subsequently the amount was repaid. Thus, considering the quantum of addition sustained by the Tribunal and also the fact that assessee has paid back the amount to the creditors, we are of the view that the assessee cannot be accused of furnishing inaccurate particulars of income. Merely because no reply was received from the creditors, it cannot be presumed that they are non-genuine. Accordingly, we delete the penalty imposed under section 271(1)(c) of the Act,” the Tribunal observed.

To Read the full text of the Order CLICK HERE

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