TaxTMI 
TaxTMI 
2008 (7) TMI 617
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....nd the addition may please be deleted." 2. The Assessing Officer asked the assessee to prove the genuineness of the following sundry creditors :- S. No. Name of the party Amount 1. M/s. Ambey Rice and General Mills, Mandi Guru Har Sahai, Khanna 310,239.75 2. M/s. Badinpur Rice and General Mills. Village Bandinpur, PO Mandi. Gobindgarh 293,300.00 3. M/s. Bhagwati Trading Co., Grain Market, Panipat 40,531.34 4. M/s. Bharat Rice Mill, V & PO Bapoli, Distt. Panipat 100,061.35 5. M/s. Giani Ram Anil Kumar, New Grain Market, Panipat 4,099,716.33 6. M/s. Jai Pal Ravinder Kumar, Grain Market, Matlauda, Panipat 4,665,402.71 S. No. Name of the party Amount 7. M/s. Malwa Agro Industries, Samrat 351,670.92 8. M/s. Shri Vardhman Rice Industries Pvt. Ltd. 570,696.45 9. M/s. Suleman Security and Grain Merchant 2,518,200.00 10. M/s. Hari Chand Roshan Lal Jain, GT Road, Panipat 167,410.20 Total 13,117,229.05 Or say Rs. 1,31,17,230 3. The assessee did not file confirmations from above sundry creditors except one i.e., of M/s. Shri Vardhman Rice I....
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....nd they have not received sale proceeds even in subsequent years. The Assessing Officer stated that since sales were found to be made to non- existent parties, inquiry made with respect to sundry creditors also reveal that they were not existing and assessee could not file confirmations despite repeated requests, therefore, addition was to be made to the income of the assessee. In the further submissions the assessee submitted before the CIT(A) that the assessee had complied with all the requirements of Assessing Officer, but no proper opportunity was provided. It was submitted that the liabilities of assessee are existing and company is making all efforts to pay them and no addition could be made under section 68 as no amount was received by the assessee. Considering these submissions, the CIT(A) has upheld the addition under section 41(1) with the following observations :- "I have considered the contentions of the appellant, the reasons given by the Assessing Officer for the said disallowance and the material on record. In the course of appellate proceedings the appellant company was again given an opportunity for giving complete details in respect of the credit balances shown....
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....2 2002-03 Remarks Bhagwati Trading Co. (P. 23-28) - 70531 - 50531 50531 40531 Confirmation enclosed Bharat Rice Mills (P. 15-16) - - - 97061 100061 100061 Confirmation enclosed PAN : AABFB2620G (P. 29) Giani Ram Anil Kumar (P. 29-36) 4146006 4136006 4134716 4099716 4099716 4099716 Confirmation enclosed PAN AABFG4121H Jaipal Ravinder Kumar (P. 37-42) 5868902 5608902 5208902 4705402 4665402 4665402 Confirmation enclosed Malwa Agro Industries (P. 43-45) - - - 351670 351670 351670 Suleman security (P. 46-48) - - 2518200 2518200 2518200 2518200 Hari Chand Roshan Lal Jain (P. 49-52) - 167410 167410 167410 167410 167410 Confirmation enclosed PAN : AAAJH8561P Total 12546529 Difference of Rs. 5 is due to paise. 6. Referring to above chart it was pleaded that in respect of none of the parties any sum was credited during the year under consideration as the balances of their account represented opening balances. He refer-red to the relevant pages of the paper book to substantiate such co....
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....iew was affirmed again by the Supreme Court in the case of Chief CIT v. Kesaria Tea Co. Ltd. [2002] 254 ITR 434 wherein their Lordships have also considered the earlier decision of Hon'ble Supreme Court in the case of CIT v. T.V. Sundaram Iyengar & Sons Ltd. [1996] 222 ITR 344 and it was observed that the factual metrics and provisions of law considered therein was entirely different. Further reference was made to the decision of Madras High Court in the case of CIT v. Tamilnadu Warehousing Corpn. [2007] 292 ITR 310 wherein addition was made under section 41(1) in respect of Group Gratuity Scheme shown on the credit side in the balance sheet on the ground that the liability with regard to that had ceased to exist and it was held by the Hon'ble Madras High Court that assessee having continued to show the amount payable under the Group Gratuity Scheme as liability in the balance sheet even after surrendering the scheme, the same is not assessable under section 41(1). Further reference was made to the decision of Allahabad High Court in the case of CIT v. Willard India Ltd. [2007] 164 Taxman 1 wherein similar proposition was laid down that unilateral act of the assessee debto....
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....n is not a matter which can be decided by considering the assessee's case alone but it is a matter which has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act." 11. In view of the above observations of Hon'ble Supreme Court, in the absence of creditor, it cannot be concluded by the Department that the debt is barred and has become unenforceable more particularly when the assessee is a limited company whose accounts are accessible to general public. In the case of Sugauli Sugar Works (P.) Ltd. (supra) the assessee had credited the amount which was added to its income under section 41(1) of the Act, but in the case of the assessee such amount has not even been credited to the Profit & Loss Account. Thus, the case of the assessee is on sound footing than the case of the assessee in that case. Therefore, on the ground of exp....