The assessee was engaged in the business of trading of imported goods. The Assessing Officer (AO) made an addition to the assessee’s income under section 68 of the Income Tax Act, 1961, on account of unexplained sundry creditors. The AO based his addition on the grounds that the assessee had not furnished the confirmation letters from the creditors, that some of the creditors had not responded to the notices issued under section 133(6) of the Act, and that one of the creditors had not supplied any goods to the assessee and the payment to it was made in subsequent years.

The Tribunal held that the CIT(A) had correctly appreciated the facts and the evidence regarding the payment and that the AO had not brought any material on record to prove that the creditor in question was not genuine. The Tribunal further held that the absence of reply from the Creditors did not entitle the AO to treat the Creditors as bogus without bringing any evidence on record to prove that the payables were not indeed required to be paid. The Tribunal also held that the CIT(A) had made a reasonable and fair enquiry into the genuineness of the additional information submitted by the assessee, and that the AO had not rebutted the same. The Tribunal finally held that no addition could be made on the outstanding balance pertaining to a creditor, as the assessee had discharged its onus of proving the identity, creditworthiness and genuineness of the transaction, and that the balance Creditors were also genuine and verifiable.  (AY. 2016-17.)