A sundry creditor can either be true or false ; there cannot be any ad-hoc disallowance

IN THE INCOME TAX APPELLATE TRIBUNAL
“A” BENCH, AHMEDABAD
(through web-based video conferencing platform)

BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT
AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
ITA No. 1688/Ahd/2019
Assessment Years : 2015-16
Shri Girishbhai Ranchodlal
Maliwad,
61, Fertilizer Park, Nizampura,
Vadodara-390002
PAN : ACJPM 5021 C

vs

The Dy. Commissioner of
Income-tax,
Circle 1(3),
Vadodara-390007

Assessee by : None
Revenue by : Shri S.S. Shukla, Sr DR

Date of Hearing : 28/09/2021

Date of Pronouncement: 04/10/2021

O R D E R

The brief facts of the case are that the assessee is an individual. He has filed his return of income on 29.09.2015 declaring total income of Rs.51,92,900/-. The assessee, at the relevant time, was engaged in the business of civil construction as a contractor and sub-contractor in the name and style of M/s. Engineering Builders. The case of the assessee was selected for scrutiny assessment and notice under Section 143(2) of the Act was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the Assessing Officer that the assessee has shown total sundry
creditors of Rs.2,89,83,434/-. The learned Assessing Officer has further observed that the details of sundry creditors exceeding the amount of Rs.5 lakhs were called for.

2. Appeal to the learned CIT(A) did not bring any relief to the assessee. The learned CIT(A) has specifically examined these three cases individually and recorded the findings. For the sake of reference, we take note of the finding recorded by the learned CIT(A) for one of the creditors namely Globe Trade.

3. There cannot be any ad-hoc disallowance @ 25%. If the Assessing Officer was not satisfied with the information supplied by those creditors, he should have investigated further and should have reached on a firm conclusion that the claim made by the assessee is bogus one. If M/s. Globe Trade has worked for the assessee and an outstanding balance of Rs.10,84,952/- is remained to be paid, then how the 25% can be termed as non-genuine. The learned Assessing Officer has placed reliance on the decision of the ITAT in the case of Vijay Proteins Ltd. Vs. ACIT (supra) which is altogether a different case. In that case, the assessee company was engaged in the business of producing edible oils, oil cakes etc.

4. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 4th October 2021 at Ahmedabad.

Please find attached the enclosed file for the full judgement