TaxTMI 
TaxTMI 
2015 (4) TMI 830
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....AT has erred in law and on facts in restoring the ground relating to giving the benefit of telescoping effect to the addition of Rs. 56,96,641/- made under Section 41(1) and Rs. 11,01,381/- under Section 68 of the Act against the addition of unexplained labour charges of Rs. 25,65,634/-? (C) Whether in the facts and circumstances of the case, the learned ITAT has erred in law and on facts by restoring the grounds raised by assessee to the file of CIT(A) for deciding afresh on the issues of- (i) The addition of Rs. 25,65,634/- being 15% of the labour charges legitimately incurred and debited to the profit and loss account and confirmed by the CIT(A); (ii) The CIT(A) giving the benefit of telescoping of the additions of Rs. 56,96,645/- and Rs. 11,01,381/- against the addition of Rs. 25,65,634/-? [3.0] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 17/10/2014 passed by the learned Tribunal in ITA No.362/Ahd/2011 for the Assessment Year 2007-08, the revenue has preferred Tax Appeal No.193/2015 with the following proposed substantial questions of law; (A) Whether in the facts and circumstances of the case, the learned ITAT has erred in law in restorin....
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.... LIST OF SUNDRY CREDITORS 2006-2007 No. Name Year since pending /payable Amount 1 H.R. Enterprise 02-03 644282 2 Jay Construction 02-03 45213 3 Rane Builders 02-03 63808 4 Rent received in advance Not furnished 217350 5 Sharddha Construction 04-05 1297477 6 Sigma Electricals 05-06 836805 7 S J Communication 02-03 255509 8 S J Communication 02-03 1324825 9 Torrent Communication 01-02 110277 10 Deversh Associates 01-02 856099 TOTAL 5651645 The assessee was asked to furnish complete identity, creditworthiness of the creditors. However, the assessee failed to furnish any details regarding the above. The Assessing Officer found that some of the balances were pending from F.Y. 2001-2002 and 2002-2003. As the assessee failed to produce the address, PAN number and conformation of the aforesaid parties, the Assessing Officer found that the aforesaid amount of Rs. 56,51,645/- was no longer payable and the payment has reached at cessation stage and, therefore, longstanding sundry creditors amounting to Rs. 56,51,645/- was treated as no longer payable / cessation of liability under Section 41(1) of the Act and the same was....
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....king the addition of Rs. 25,65,634/-, being 15% of the labour charges is concerned, the learned Tribunal restored the issue to the file of the learned CIT(A) with a direction to decide the same afresh in accordance with law and after providing reasonable opportunity of hearing to the assessee. Consequently, the learned Tribunal also disposed of the appeal preferred by the revenue / allowed the appeal preferred by the revenue for statistical purpose. [4.4] Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the learned Tribunal in ITA No.190/Ahd/2011 and ITA No.362/Ahd/2011 for the Assessment Year 2007-08, the revenue has preferred the present Tax Appeals with the aforesaid proposed substantial questions of law. [5.0] Shri Varun Patel, learned advocate appearing on behalf of the revenue has vehemently submitted that the learned Tribunal has materially erred in deleting the addition of Rs. 56,96,645/- made by the Assessing Officer confirmed by the learned CIT(A) under Section 41(1) of the Act. [5.1] It is submitted that in the present case during the course of the assessment proceedings, the Assessing Officer observed certain liabilities (sundr....
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.... impugned judgment and order passed the learned Tribunal. [6.1] At the outset, it is required to be noted that the Assessing Officer made the addition of Rs. 56,96,645/- invoking Section 41(1) of the Income Tax Act by doubting certain sundry creditors amounting to Rs. 56,96,645/- appearing in the balance sheet of the assessee since past several years. However, it is required to be noted that as such those sundry creditors mentioned in the balance sheet of the assessee were shown as sundry creditors since past several years from the relevant assessment year and at no point of time earlier the Assessing Officer doubted the creditworthiness and / or identity. In any case the addition on the aforesaid ground under Section 41(1) of the Act cannot be made unless and until it is found that there was remission and / or cessation of the liability that too during the previous year, relevant to the assessment year in question, there cannot be any addition invoking the provision of Section 41(1) of the Act. Identical question came to be considered by the Division Bench of this Court in the case of Nitin S. Garg (Supra) and in the similar set of facts and circumstances of the case when the add....
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.... 2007-08 which was the year under consideration. It is undoubtedly a curious case. Even the liability itself seems under serious doubt. The Assessing Officer undertook the exercise to verify the records of the so called creditors. Many of them were not found at all in the given address. Some of them stated that they had no dealing with the assessee. In one or two cases, the response was that they had no dealing with the assessee nor did they know him. Of course, these inquiries were made ex parte and in that view of the matter, the assessee would be allowed to contest such findings. Nevertheless, even if such facts were established through bi-parte inquiries, the liability as it stands perhaps holds that there was no cessation or remission of liability and that therefore, the amount in question cannot be added back as a deemed income under section 41(c) f the Act. This is one of the strange cases where even if the debt itself is found to be nongenuine from the very inception, at least in terms of section 41(1) of the Act there is no cure for it. Be that as it may, insofar as the orders of the Revenue authorities are concerned, the Tribunal not having made any error, this Tax Appeal....