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Addition of unexplained credit entries recorded in the impounded papers—As perused the impounded documents appearing at BI-1 to BI-3 which pertains to transactions entered into with the farmers with whom the transactions did not materialize and amount was refunded by the by the assessee. In these impounded documents there are credits and debit entries. However this fact is not disputed that the A.O has merely made the addition if the unexplained credit entries without giving any set off of unexplained debit entries appearing in these documents. Complete details of such debit and credit entries were placed before the first appellate authority and they were duly incorporated in the appellate orders of CIT(A). We find that the peak credit is shown at 2,90,346/-. This figure of peak credit has not been controverted by the revenue authorities. In the case of Tirupati Construction Company [2014] [GUJARAT HIGH COURT] has upheld the decision of I.T.A.T Ahmedabad Bench holding that “only peak of debit and credit entries of the seized papers/diary could be assessed as undisclosed income in the hands of the assessee, and there was no justification for adding the entire receipt side of the seized papers” - Thus both the lower authorities erred in confirming the addition of 6,02,895/- being the total of unexplained credit amount appearing in the impounded documents and set off of debit entries appearing in the very same documents should have been given to the assessee. - Decided in favor of assessee. Next ground is related to addition made u/s 41(1) of the Act at 2,72,389/- made by the Ld.A.O and confirmed by the Ld.CIT(A) being the liability outstanding for more than 3 years.
Held that—A.O has merely made addition u/s 41(1) being the creditors pending for payments more than 3 years without providing on record any evidence to prove that the alleged creditor M/s. Kartik Traders is not genuine. In case the information was called for by the revenue authorities from M/s. Kartik Traders and it refused to have any such outstanding liability then would have been the merit for the addition made by AO. However in the instant case the genuineness is not challenged by M/s. Kartik Traders as the credit balance of alleged sundry creditors appears in audited balance sheet. During the financial year 2012-13 the alleged amount has been paid by the assessee as on 31.01.2001 and the outstanding balance is Nil. No merit in the addition confirmed by the first appellate authority u/s 41(1) - decided in favor of assessee.

Shanti Prime Publication Pvt. Ltd.

Section 41, 68 of Income Tax Act, 1961—In the instant case, assessee is in appeal on the following grounds—

Addition of unexplained credit entries recorded in the impounded papers—As perused the impounded documents appearing at BI-1 to BI-3 which pertains to transactions entered into with the farmers with whom the transactions did not materialize and amount was refunded by the by the assessee. In these impounded documents there are credits and debit entries. However this fact is not disputed that the A.O has merely made the addition if the unexplained credit entries without giving any set off of unexplained debit entries appearing in these documents. Complete details of such debit and credit entries were placed before the first appellate authority and they were duly incorporated in the appellate orders of CIT(A).

We find that the peak credit is shown at 2,90,346/-. This figure of peak credit has not been controverted by the revenue authorities. In the case of Tirupati Construction Company [2014] [GUJARAT HIGH COURT] has upheld the decision of I.T.A.T Ahmedabad Bench holding that “only peak of debit and credit entries of the seized papers/diary could be assessed as undisclosed income in the hands of the assessee, and there was no justification for adding the entire receipt side of the seized papers” - Thus both the lower authorities erred in confirming the addition of 6,02,895/- being the total of unexplained credit amount appearing in the impounded documents and set off of debit entries appearing in the very same documents should have been given to the assessee. - Decided in favor of assessee.

Next ground is related to addition made u/s 41(1) of the Act at 2,72,389/- made by the Ld.A.O and confirmed by the Ld.CIT(A) being the liability outstanding for more than 3 years.
Held that—A.O has merely made addition u/s 41(1) being the creditors pending for payments more than 3 years without providing on record any evidence to prove that the alleged creditor M/s. Kartik Traders is not genuine. In case the information was called for by the revenue authorities from M/s. Kartik Traders and it refused to have any such outstanding liability then would have been the merit for the addition made by AO.

However in the instant case the genuineness is not challenged by M/s. Kartik Traders as the credit balance of alleged sundry creditors appears in audited balance sheet. During the financial year 2012-13 the alleged amount has been paid by the assessee as on 31.01.2001 and the outstanding balance is Nil. No merit in the addition confirmed by the first appellate authority u/s 41(1) - decided in favor of assessee.[PATIDAR DINESH KUMAR AND COMPANY VERSUS ITO, 3 (2) , INDORE] [2018] [7] [ITCD Online] [39] [ITAT INDORE]