04 November 2011
Dear Colleagues, MR.A.had purchased goods from few parties in fy07.08.But because of dispute, he did not pay money for two years & paid money in f.y.09.10 The amount stand payable to the above suppliers as on 31.3.09 Now income tax scrutiny assessment of MR.A.for ay 09.10 is going on & AO has sent notice u/s 133(6) to them. But two parties’ address have changed & notices have returned undelivered. The assessee is trying to trace the parties, but not in a position to trace them What he has got is purchase bills, all the payment were through account payee cheques which is Appearing in bank statement. Querry: Can A.O. add the amount payable to both parties as at 31.03.09? my pleas with AO ia that there is Purchase bill,there is payment through account payee cheque,simply because supplier is not traceable, why the same should be added please guide regards c.a.paesh zatakia 9833855518
05 November 2011
The AO cannot add the balance in sundry creditors simply because the the party is not traceable. There is supporting bills for purchasing the goods and the payments to the party has been made through account payee cheques. If the balance is still payable and appearing in the books for a long period and the creditor is not responding to the AO's letter the AO's contention may be accepted. Write a letter to him with a copy of the bank statement and copy of the purchase bills. If the purchased items are sold by the party show the evidence of the same to the AO. If he consider the purchase is not genuine and disallowing the expenditure or adding the balance of sundry creditors, point out to him that there cannot be corresponding sale income from the particular purchase also
You produce the bills of the creditors as well as the relevant bank statements showing the payment entries. . When you give PAN No of creditor to the department, it has got facility to search such assessees. . The credit entry and its subsequent payment details , are if produced, then it can not be treated as an unexplained credit without verifying the bank entries. It may further be requested to the AO to verify the Bank Transactions also, which can easily be done by the AO. . The onus of the assessee has yet not been completely discharges so he should inquire about the parties by contacting - 1. Banks 2. In case assessee in VAT,through Sales Tax Office 3. Other parties engaged in the similar trade as of the assessee.
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