The Ahmedabad Bench ITAT has removed the Rs 28.92 lakh addition made against a taxpayer after discovering that the assessing officer cannot consider only the year-end outstanding creditor balances as unexplained while considering the rest of the same transactions as genuine.
The bench of Accountant Member Annapurna Gupta and Judicial Member Suchitra Kamble said that:
“The AO has not made addition of the entire credits on account of the transaction carried out by the said parties, but, only of the outstanding balance of credit as at the end of the year, which means that he has partly accepted as genuine the credit which was repaid during the year, while the balance he has treated ingenuine without assigning any reason for this distinctive treatment.”
The taxpayer had contested the addition after the assessing officer considered outstanding balances of Rs 28.92 lakh in the names of AS Industries, Esskay Steel Industries, and M.J. Rana & Co. as unexplained cash credits, specifying the absence of creditor confirmations, ITR copies, and supporting purchase documents.
The taxpayer had filed ledger accounts, PAN details, and bank statements before the tribunal to exhibit that the outstanding dues, concerning scrap purchases and legal expenses, had been cleared in the subsequent year via banking channels.
The revenue had not contested the subsequent payments, the tribunal observed.
“Even otherwise, we have noted that the assessee had demonstrated to have paid off the entire outstanding balance in the succeeding year which fact that the Revenue had failed to controvert either in their orders below or even before us.”
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Although the tribunal maintained separate additions for the low household withdrawals and freight expenses for failure to deduct tax at source.
| Case Title | Pallavi Nileshbhai Shah Vs. Income Tax Officer |
| Case No. | ITA No. 376/Ahd/2026 |
| For Petitioner | Shri Chetan Agarwal |
| For Respondent | Shri Abhijit |
| Ahmedabad ITAT | Read Order |
