TaxTMI 
TaxTMI 
2014 (3) TMI 332
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.... cloth on job work basis. It was noted by the AO that the assessee had shown following three creditors as outstanding in the books of account. "Sundry Creditors for Goods Rs.72,690/- Sundry Creditors for Others Rs.90,350/- Sundry Creditors for Capital Goods Rs.35,83,568/-" 4. On perusal of balance sheet, it was noted by the AO that under the head "sundry creditors for goods" there was a list of few parties and the amount outstanding was Rs.72,690/-. Likewise, under the head "sundry creditor for capital goods" there was a list of parties and the outstanding amount was Rs.35,83,568/-. It was also noted by the AO that in A.Y. 2002-03 an amount of Rs.1,72,392/- was added back in the total income of the assessee. In respect of the amount of Rs.35,83,658/-, the assessee has informed that the list along with addresses of those creditors had been furnished. It was also informed that the said amount was treated as a capital receipt being those sundry creditors were related to the capital goods by invoking the provision of Section 41(1) of IT Act. The assessee's request was that although it was added in the P & L A/c but not to be taxed in the hands of the assessee. According to AO, ....
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.... notice proposing to add them u/s.41(1) the assessee itself stated that in the return for A.Y. 2009-10 it will offer them suo moto. Considering the fact that there has been no movement in almost all the creditors for last 7 to 10 years and considering that only in two cases there is movement long back and there as been no movement from F.Y. 2003- 04 onwards, I agree with the AO that the conduct of the appellant itself shows that these liabilities have ceased. The addition made by the AO is therefore, confirmed and this ground of appeal is dismissed." 5. On behalf of the assessee, learned AR, Mr. Mehul R. Shah appeared and at the outset informed that the decision of Hon'ble Bombay High Court pronounced in the case of Nector Beverages (supra); as relied upon by AO; was later on overruled by the Hon'ble Apex Court titled as Nector Beverages, 314 ITR 314 (SC), wherein it was held that in its very nature depreciation is neither a loss nor an expenditure, nor a trading liability referred in Section 41(1) of IT Act. He has pleaded that although the business activity had stopped but the assessee has accepted the liability by showing the same in the books of account. 6. From the s....
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....0-91 to 1998-99 (when section 41(2) stood deleted) in relation to an item of any depreciable asset which did not exceed Rs.5,000 in cost for which depreciation had been allowed under Section 32(1)(ii) at 100 per cent., the Department is not entitled to tax the sale proceeds of that asset as business income under Section 41(1)." 7.1. Our attention has also been drawn on the "notes of account" prepared by the assessee for the accounting period ended on 31st of March, 2010 wherein as per note no.5 it was provided as "the Board of Directors of the company has decided to transfer the Creditors for Capital Goods amounting to Rs.35,83,568/- to Capital Reserve Account at their meeting held on 27.08.2010". The appellant has, therefore, tried to demonstrate that in subsequent year the requisite entry in the books of account have been made but that was being a capital receipt; hence, the amount was transferred to capital reserve account. Our attention has also been drawn on a decision of ITAT 'A' Bench Ahmedabad pronounced in the case of Sri Vishnu Anant Mahajan bearing ITA No.3002/Ahd/2009 for A.Y. 2006-07, order dated 21.09.2012 wherein the observation as quoted was as under: "Com....
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....T Act along with certain case laws and thereafter taxed the same after assigning following reasons: "Despite giving special opportunities vide various notices as detailed supra, the assessee-company completely failed to furnish even the confirmations form these two Directors of the Assessee-company, Other documents/evidences as requested vide these notice(s) were also not furnished at any stage during the assessment proceedings. The assessee company submitted merely figure work vide two submissions wherein it had submitted that the old demand outstanding were paid by the Directors on behalf of the assessee company during the FY 2005-06 relevant to the A.Y. 2006-07 which as considered in the books of accounts of the assessee company in the FY 2006-07 relevant to AY 2007-08 and did not submitted any of the evidences requested. Under these circumstances, it can be very well inferred that the aggregate sum of the credits as appearing the books of accounts at Rs.19,00,000/- remains un-explained as none of the conditions to consider particular cash credits to be explained and listed above are satisfied in the instant case. Accordingly, a sum of Rs.19,00,000/- is added back to the total ....
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.... Mehul R. Shah has placed reliance on the explanation submitted to the Revenue Authorities; relevant portion is extracted below: "Although the payments were made by two creditors in the F.Y. 2005- 06 but adjustment entry in the books of accounts of assessee company was made on 01.04.2007 crediting the account of Jalan Synthetics and Shri Mahendrakumar Agarwal by sum of Rs.11,00,000/- and Rs.8,00,000/- respectively and debiting the account of Advance IT Appeal A/c. During the year under consideration, assessee received refund of Rs.6,86,113/- which was credited in the bank account of the assessee on 10.02.2007. Out of sum of Rs.6,86,113/-, the sum of Rs.4,05,000/- was paid to Shri Anilkumar Jalan and Rs.2,74,445/- was paid to Shri Mahendrakumar Agarwal as they have paid the income tax liability from their own funds. Accordingly the reverse entry was made debiting the account of Shri Anilkumar Jalan and Shri Mahendrakumar Agarwal and crediting the account of Advance IT Appeal A/c. In succeeding year also the refund of Rs.11,80,822/- was issued to assessee out of the payment made by above two directors. This refund was also distributed among these two directors by issuing cheques to ....