Additions on Account of Unexplained Cash Credits Unsustainable Without Independent Verification: ITAT Deletes Addition of ₹3.03 Cr [Read Order]

The Income Tax Appellate Tribunal (ITAT) Chandigarh Bench has held that additions on account of unexplained cash credits cannot be sustained in the absence of independent verification by the Assessing Officer (AO), granting substantial relief by deleting additions aggregating to ₹3.03 crore.

The assessee Medisys Universal Pvt. Ltd. which carried out its business of selling health supplements online had been levied with additions such as ₹3.03 crore for sundry creditors ₹29.95 lakh as unexplained loan and rejection of expenses incurred on rent by the AO.

However, the AO raised doubts over the genuineness of sundry creditors like Geeta Enterprises, Ganesh Medical Store and Delhivery Couriers for failure to provide complete documents along with mismatch of PAN number and addresses.

It has been asserted by the assessee that they have supplied all the required documents for verification. It has been claimed by the assessee that the transactions were genuine and undertaken in course of normal business, with proper documentation. The revenue has depended on these inconsistencies to levy the additions.

The Bench comprising Rajpal Yadav (Vice President) and Manoj Kumar Aggarwal (Accountant Member) observed that the AO failed to conduct any independent enquiry to disprove the evidence submitted by the assessee.

The Tribunal upheld the deletion of additions relating to Geeta Enterprises and Ganesh Medical Store noting that minor issues such as address mismatch or common premises cannot invalidate genuine transactions.

The Tribunal ruled that where the assessee furnishes primary evidence such as confirmations PAN, GST details, financial statements and demonstrates transactions through banking channels the onus cast upon it stands discharged. In such cases additions merely based on suspicion of technical discrepancies or lack of further enquiry by the AO are unsustainable.

Further, the Tribunal deleted the addition relating to Delhivery Couriers, recognizing it as a running business account settled through banking channels. The addition of ₹29.95 lakh was also deleted accepting the assessee’s explanation regarding its business model and associated entity transactions.

Accordingly, the Revenue’s appeal was dismissed while the assessee’s appeal was partly allowed.

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