Lack of proper opportunity to explain Bogus Creditors: ITAT Remits Matter with One more Opportunity [Read Order]

The Rajkot Bench of the Income Tax Appellate Tribunal (ITAT) remitted the matter back to the Commissioner of Income-tax (Appeals) [CIT(A)] with one more opportunity to explain his case noting the lack of proper opportunity to explain Bogus Creditors, expenditure disallowance and inflated expenditure.

Shri Subhas Hansaraj Nandu (assessee), an individual engaged in the transportation of vitrified tiles, sanitary ware, and marbles under the name M/s Swastik Transport, filed a Return of Income (ROI) for the Assessment Year (AY) 2014-15 declaring a total loss of Rs. 30,91,308.

The AO made total additions of Rs. 1,17,05,219 for various reasons, including addition of Rs. 72,204 on account of inflated creditors, addition of Rs.22,42,679 on account of cessation of liability and addition of Rs.69,20,103 on account of bogus/unexplained creditors.

The addition also included disallowance of interest expenses of Rs.47,33,073 and addition of Rs.51,500 on account of the difference in receipts between the books of account and Form 26AS of the Act.

Aggrieved by the AO's order, the assessee appealed to the CIT(A). The CIT(A) dismissed the appeal. Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT.

The assessee's counsel argued that the AO had made the addition for inflated creditors without providing a proper opportunity to reconcile the difference , and for bogus creditors without considering the submitted confirmations and without providing a proper opportunity of being heard.

The two-member bench, comprising Dr. Arjun Lal Saini (Accountant Member) and Dinesh Mohan Sinha (Judicial Member) observed that the assessee regularly maintained audited Books of Account.

The tribunal observed that the AO had issued a notice under Section 133(6) and received account confirmations, finding differences, but no opportunity was given to the assessee to explain the case.

The Tribunal held that the assessee deserved one more opportunity to explain the case before the CIT(A). The Tribunal set aside the order of the CIT(A) and directed the CIT(A) to examine the documents filed by the assessee and provide an opportunity to the assessee to explain the case as per law. The appeal filed by the assessee was allowed for statistical purposes

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates