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sundry creditor trated as bogus

(Querist) 20 February 2011 This query is : Resolved 
As for individual the income tax officer has passed an order for sundry creditors trating as bogus as I have aleready paid the payment by cheque and the same has reflected in bank statment but Incoem tax officer has issue the summon to crediotrs and he has left the premises and on the basis of same the income tax officer has raised the demand buth we have filed an appeal what is the view
M.V.GIRI (Expert) 20 February 2011
You have to prove the genuiness of creditors and his whereabouts. Otherwise it is treated as unexplained creditors.try to prove the credit balance with documents
Rajesh Thakker (Expert) 21 February 2011
Burden of proof to prove the genuiness of the creditors according to sec 68 is upon assessee. When you had submitted confirmation letters from your creditors, you have to declare their last perfect addresses. Moreover, you have to state in confirmation letter that they are fully capable to lend money to you. In other words, you have to state their source of income into confirmation letter.
The assessment stage is important stage to produce all the facts. If you produce new fact before the CIT Appeal, then you have to seek permission of the CIT Appeal.
soumitra basu (Expert) 15 March 2011
Accoding to supreme court judgment what is apparant that is real. Merely non appearance in response to summon does not automatically prove that the creditors are ingenuine. You have a solit ground to argue that you paid the balance in cheque. I think you may win in appeal. There are lot of case reference in favour of you. Cite them. Moreover, you should further argue that if it proves that creditors are ingenuine then only net profit rate has to be applied not the entire creditors since you have purchased the goods, sold the same and as such there was profit.

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