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Addition of sundry debtors

puja kumari (1 Points)

06 March 2024

in which section sundry debtors are
added in income of the assessee

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3 Replies

RAJA P M ("Do the Right Thing...!!!") (127921 Points)
Replied 06 March 2024

Is this Debtors...?? or Creditors...??

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Yasaswi Gomes new (Finance ) (4492 Points)
Replied 06 March 2024

The treatment of sundry debtors in the income of an assessee depends on the specific circumstances. Let’s explore the relevant sections of the Income Tax Act:

Section 68:
- Section 68 deals with unexplained cash credits.
- If an assessee has sundry debtors (i.e., amounts receivable from customers or clients), and these debtors are unable to provide satisfactory explanations for the credits in their accounts, the Assessing Officer (AO) may invoke Section 68.
- Under this section, the AO can add the unexplained cash credits to the assessee’s income.
- However, recent decisions by the Income Tax Appellate Tribunal (ITAT) have clarified that Section 68 does not empower the AO to make additions related to sundry debtors/advances to growers.
Section 69C:
- Section 69C pertains to income from undisclosed sources.
- If the sundry credits (including debtors) are not adequately proved by the assessee, the AO can make additions under this section.
- However, the genuineness of the sundry creditors must be examined as a question of fact.

In summary, while Section 68 was traditionally used for such additions, recent legal interpretations suggest that it may not apply to sundry debtors. The specific circumstances and evidence play a crucial role in determining the treatment of these debtors in an assessee’s income. Always consult a tax professional for personalized advice. 📊💼