Outstanding Balances cannot be treated as 'Bogus' when Payment made through Banking Channels: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the outstanding balances cannot be suspected as bogus when the payments to parties were made through banking channel.

During the relevant year, the Assessing Officer, while concluding the assessment proceedings against the assessee, Imran Mohammed Iqbal, treated balances relating to sundry creditors as bogus by observing the fact that the liability in the case of M/s. Prakash Gold had been carried forward from assessment year2014-15 and thereafter there was no transaction in the said account. The balances in the case of Aarti Jewelers pertained to purchases of Gold made during the impugned year. Both these balances were held to be bogus entries and addition made to the income of the assessee.

A bench of Ms. Annapurna Gupta , Accountant Member and Shri T.R. Senthil Kumar, Judicial Member noted that “the outstanding balance relating to M/s. Prakash Gold amounting to Rs. 12,05,026/-, the addition having been made finding it to be bogus, since the consistent finding of fact is that the transaction was entered into by the assessee with the said party not in the impugned year but in earlier year i.e in A.Y. 2014-15 ,the addition in any case could not have been made in the impugned year but only in the year in which the liability arose i.e. A.Y. 2014-15. Therefore the addition on account of outstanding liability pertaining to Prakash Gold amounting to Rs. 12,05,026/- is directed to be deleted.”

Noting that the party cannot said to be ingenuine, the Tribunal held that “As for the liability on account of M/s. Aarti Jewelers, the ld. Counsel for the assessee has contended that the said liability was discharged in the succeeding years through banking channels. Copy of the ledger account of the parties was also placed before us.”

Shri S. N. Divetia appeared for the assessee.

To Read the full text of the Order CLICK HERE

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