2010 (1) TMI 822
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....l income of Rs.6.06 lakhs which was processed u/s 143(1) of the Act. Subsequently, the business premise of the assessee was subjected to an action u/s 133A of the Act on 12.3.07. Consequent to survey, the assessee was called upon to furnish a ROI by issuance of a notice u/s 148 of the Act. In compliance, the vide his communication dt: 30.8.07 informed that the ROI already furnished be considered as return filed in response to the said notice. During the course of assessment proceedings, the assessee was required to furnish confirmation letters of sundry creditors and also certain details. After due consideration of the assessee's contentions, some of the confirmation letters of the creditors furnished, etc., the AO, for the exhaustive reasons given in the impugned assessment order, had concluded the assessment by making additions to the tune of Rs.65,08,910/- as under:- (i) Brought forward creditors balances treated as cessation of trading liability u/s 41(1)of the Act Rs. 50,09,199 (ii) Current creditors u/s 68 of the Act Rs. 14,99,711 Disenchanted with the stand of the AO, the assessee had approached the ld. CIT(A) for relief. Duly considering the forceful contentions of t....
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....iability in those cases either. Unfortunately, merely stating it as such does not make it so. The appellant does not seem to have led any evidence to back up this claim either. Moreover, at the appellate stage, the appellant also contended that the provisions of s.68 were applicable only in respect of 'loan creditors' and not 'trade creditors' and the AO had erroneously resorted to the provisions of s.68 in respect of these. I am unable to agree with this argument of the appellant either. While no doubt the heading of the section is 'Cash Credits', the language of the section is unambiguous in that it refers to 'any sum found credited in the books of an assessee' maintained for any previous year in respect of which 'the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer satisfactory'. When the section itself does not make any distinction regarding the nature of the sum credited, I am of the considered opinion that it is immaterial whether the sum credited is with reference to loans or supplies. The appellant's argument in respect of current creditors is therefore not acceptable either.....
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..../-. Thus, the assessee was required to furnish as to why the said discrepancies and those who have not confirmed their credit balances to the tune of Rs.65,08,910/- (35,33,289 + 29,75,621) should not be added back to his income? The assessee came up with a reply that:- (a) to qualify for inclusion or addition of any income, investments or credit, such income, investment or credit should accrue or arise during the period from 1.4.04 to 31.3.05; (b) although the business income was considered u/s 28, certain special item of income or investment or credit were brought to tax under specified section of the Act. It was not clear as to under which head the impugned amount would be brought to tax; (c) the sundry creditors were only 'trade creditors' and not 'cash creditors'. 'Trade creditors' represent persons who have supplied goods and to whom the assessee had not paid purchase consideration at the end of the relevant assessment years; (d) if at all the said amount is to be assessed it should be assessed u/s 68 of the Act; and (e) by applying the provisions of s.68, the so called 'credit' should pertain to 'that previous year' i.e., previous year ended on 31.3.05 and, hence, any cr....
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....xist at the end of the accounting year under dispute and rightly added the said liabilities, which had ceased to exit. 8. With respects, we have perused the case laws, on which the assessee has relied on, as under:- (i) Punjab Distilling Industries Ltd. vs. CIT - (1959) 35 ITR 519 (SC) The issue before the highest judiciary of the land was that whether, the collections by the assessee company described in its accounts as "empty bottle return security deposits" were income assessable under section 10 of the Income-tax Act., for which, the finding of the Hon'ble Court was 'Yes' for the reason that the amounts paid to the appellant and described as "Empty Bottles Return Security Deposit" were trading receipts and therefore income of the appellant assessable to tax." In essence, the finding is relevant only as to the applicability of s.41(1). In that case, the refund of a security deposit will not attract this sub-section unless it is in the nature of a trading liability. With due respects, we would like to point out that in the instant case, the assessee had not established that it was not a trading liability and, thus, the ruling of the Hon'ble Apex Court is distinguishable. (ii....
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....Held thus at para 10 of its judgement:- "So far as the last question of law is concerned, we are of the opinion that the A.O. has a right to inquire about the correctness of the entry shown by the assessee. Even if the AO had accepted the credit entries shown by the assessee for the previous assessing years, there is no prohibition for the Assessing Officer to call upon the assessee to prove the existence of such credits and to confirm whether the credit shown in the entries are really in existence or not. When the A.O. has found that such entries are incorrect, when an opportunity was given to the assessee to prove such entries, when the assessee has failed to prove the same inspite of giving an opportunity for the AO, we are of the opinion that all authorities were justified in holding that the amount of Rs.13,03,008/- as an unproved credit. In the circumstances, we have to answer the question No.3 against the assessee". 12. In the instant case, we are of the firm view, as stated earlier, assessee had at no point of time even tried to reconcile the difference in brought forward balances or produced any purchase bills, etc. despite the number of opportunities given and the ample....