Section 41(1) v/s 68/69

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Mohit (Querist)
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13 August 2024 If the sundry creditors (old carried forward from previous years in AUDIT REPORT) are added back to income during the survey and offered to income under PGBP and IFOS for AY 2018-19 (the year of the survey). What will be the section of inclusion will it be under 41(1) or 68/69 of income tax.

Dhirajlal Rambhia online

Dhirajlal Rambhia online

(Expert)
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15 December 2024 If sundry creditors are offered back to income due to cessation of liability and have been written off in the accounts, they would typically fall under Section 41(1). If there is an absence of evidence supporting their legitimacy or existence, leading to them being treated as unexplained credits, then Section 68 could apply. The specific circumstances surrounding each case will ultimately determine which section is appropriate for inclusion. It is crucial to note that if purchases related to these creditors are accepted as genuine by the assessing officer (AO), then adding back these creditors under Section 68 may not be justified, as there would be no basis for treating them as unexplained.