The case of S R Foils & Tissue P. Ltd., pertaining to the Assessment Year 2011-12, reached a significant conclusion at the Income Tax Appellate Tribunal, Delhi. The company, represented by Ms. Maninder Kaur, Sr.DR, and the JCIT of Circle-22(2), New Delhi, contended over a substantial addition of Rs. 2,75,15,116 made under section 68 of the Income Tax Act, 1961, involving the assessment of sundry creditors.
Initially, the Assessing Officer (AO) added the aforementioned sum to the company’s income, suspecting the genuineness of the sundry creditors following partial responses to notices issued under section 133(6). This decision was overturned on appeal by the CIT(A), who, after reviewing additional evidence and a remand report from the AO, deleted the addition, citing a lack of substantial discrepancy in the company’s documentation and the historical consistency of the creditor accounts.
The Revenue, unsatisfied with the CIT(A)’s decision, escalated the matter to the ITAT. During the proceedings, the JCIT argued based on a CBDT circular, while the company’s counsel highlighted the company’s ongoing liquidation process initiated by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, which impacted the proceedings. The tribunal, considering these factors and the CIT(A)’s findings, affirmed the deletion of the addition.
The tribunal’s decision not only impacts the fiscal responsibilities of S R Foils & Tissue P. Ltd but also sets a precedent on the treatment of sundry creditors and the relevance of insolvency proceedings in tax assessments. This case underscores the complexities of corporate taxation and the importance of clear and consistent documentation in financial dealings.
Assessment of Sundry Creditors Disputed by S R Foils & Tissue P. Ltd for AY 2011-12
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