Addition u/s 68 for unexplained creditors not sustainable when trading results are accepted

10 comments Wednesday, November 16, 2011

Delhi ITAT has held in the following case that where trading results are accepted no addition u/s 68 for unexplained sundry creditors can be made. In this case the assessee could not give the address of creditors nor was able to get the creditors standing in his balance sheet verified, due to the fact that his books of accounts were destroyed in fire and also because of the fact that the creditors were small time karigars who were unregistered with sales tax department and have not filed their return of income due to their income being below the exempted limit. The Tribunal held that when trading results i.e sale and purchases have been accepted then there is no reason why addition for corresponding creditors should be made.
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