TaxTMI 
TaxTMI 
2015 (4) TMI 864
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.... facts of the case as noted by ld CIT(A) is as that the assessee company is a civil contractor engaged in the construction of a project for Patni Computer Ltd. at Noida, during the Financial Year under consideration. The assessee has shown sundry creditors of Rs. 16,11,74,448/- as on 31.03.2009 which inter alia includes M/s Nitesh Enterprises, 2941, Kucha Mal Dass, Sita Ram Bazar, Delhi-l10006 and M/s Shri Ram Traders, 904, Gali Beri Wali, Kucha Pati Ram Sita Ram Bazar, Delhi -110006 showing credit balances of Rs. 4,01,03,113/- and Rs. 3,47,89,508/- respectively. 5. The AO in his scrutiny assessment has observed that the assessee could not furnish confirmation from certain sundry creditors namely M/s. Nitesh Enterprises and M/s Shri Ram Traders. The AO has taken note that the assessee company was not having any transaction with these creditors during the financial year under consideration, however the amount due to them Rs. 7,48,92,621/- is reflected as outstanding. AO in order to verify the existence of the said liability and genuineness of the credit deputed an inspector to verify from these companies as to whether the amount is outstanding on the close of the financial year a....
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.... So in such a scenario, according to the AO it is the case of cessation liability which the assessee has not offered for taxation though he was bound to do so and therefore section 41(1) was attracted and the AO observed that where a debt due from the assessee was foregone by the creditors in the later year, it can be taxed u/s 41(1) and he relied upon the decision in the case of CIT Vs. Manohar Bandhu (1984) 148 ITR 108 (Bombay) and made an addition of Rs. 7,48,92,621/- to the total income of the assessee. 7. Aggrieved by the said additions made by the AO, the assessee preferred an appeal before the ld CIT(A) who was pleased to delete the same. Aggrieved by the said deletion of the ld CIT(A) the revenue is before us. 8. The ld Sr. DR, Shri Parwinder Kaur contended that there were number of sundry creditors reflected by the assessee and there was no transaction whatsoever with the said firms in the instant assessment years. The AO had made enquiries through the inspector of the department who had physically gone to the address of the said firms and has given the report that there was no such firms exists. The AO confronted the assessee with the said report of the inspector an....
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....wal and had furnished their mobile numbers also. And the ld AR pointed out that the assessee company has made payments to the said parties in the succeeding financial years through account payee cheques and RTGS and pointed to Page 100 to 104 of the bank statement of UCO Bank of the assessee and stated that the said payment was made to the parties six months before from the assessment order was passed and this fact was brought to the knowledge of AO. And, according to the ld AR, since the amount outstanding was credited to the creditor's account and this was known to the AO and so in his remand report, the AO has not made any adverse observation about the veracity of such a claim made by the assessee. According to him since the amount due to the sundry creditor M/s Nitesh and Sri Ram were credited in the account of the said sundry creditors by transaction though bank, the question of fastening the addition invoking section 41(1) is legally not warranted and therefore the ld CIT(A) rightly after taking consideration of all the evidence that have been furnished before the AO and after considering the remand report has made the deletion after appreciating the evidence furnished by the....
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....eipt of the report assessing officer issued show cause notice dated 05.12.2011 to the appellant and asked the appellant to produce these parties for verification of the liability and genuineness of the transaction. In reply to the show cause notice appellant furnished that it had made purchases of material from M/s Nitesh Enterprises and Shri Ram Traders. It has also given details of the person with whom the enquiry is to be made. The appellant has furnished fresh address of these parties for conducting enquiries on the new address. However, the appellant shown his inability to produce said parties for verification. Considering the above the assessing officer added the sundry credit balance standing in the name of Nitesh Enterprises and M/s Shri Ram Traders of Rs. 4,01,03,113/- and Rs. 3,47,89,508/- respectively u/s 41(1) of the IT Act. During the course of appellate proceeding the appellant had filed written submissions along with paper book wherein he has furnished name and address and PAN of the parties in the cases where sundry creditor balance were more than 10,00,000/- outstanding. The appellant has also filed copy of confirmation of M/s Nitesh Enterprises and M/s Shri Ram....
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....nts made to the said information along with the paperbook and submission made by the appellant was forwarded to the assessing Officer vide this office letter dated 12.04.2012 for verifying the contention of the appellant and for examination and conducting enquiries with reference to the payments made by the appellant to the said parties. The assessing officer after conducting enquiries and examination of the information submitted by the appellant submitted his remand report vide his letter dated 23.04.2012. In the remand report the assessing officer has reiterated the observations made in the assessment order. As regards the payments made through bank accounts to the sundry creditors M/s Nitesh Enterprises and M/s Shri Ram Traders, the assessing officer has stated that payment to creditors have been made by a/c payee cheques and the appellant has file copies of bank statements and same was examined by the assessing officer. It is seen from the evidences filed in the paper book and the copies of the bank statements filed by the appellant during the course of appellate proceedings that appellant has discharged its onus by filing confirmation, PAN, Name of the proprietor and fresh ....
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....n 91 (SC) has held that in order to apply section 41(1), the following points are to be kept in view: (1) in the course of the assessment for an earlier year, allowance or deduction has been made in respect of trading liability incurred by the assessee; (2) subsequently, a benefit is obtained in respect of such trading liability by way of remission or cessation thereof during the year in which such event occurred; (3) in that situation the value of benefit accruing to the assessee is deemed to be the profit and gains of business which otherwise would not be his income; (4) such value of benefits is made chargeable to income-tax as the income of the previous year wherein such benefit was obtained. So AO can resort to section 41(1) only if the liability of the assessee can be said to have ceased finally without the possibility of reviving it. On the facts and circumstance of this case, we have to examine whether the ld CIT(A) was justified in coming to the conclusion that the trading liability of the assessee had not ceased finally during the year in question. 11. We find that vide a letter dated 15.12.2011, the assessee has produced bills of M/s. Nitesh Enterprises dated 29.08.20....
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.....2011, itself the assessee has clearly brought to the knowledge of the AO that payment for the goods supplied by the said sundry creditors have been remitted in their respective accounts. However, we find it strange that in the assessment order and even in remand report the AO states that the assessee has not furnished the correct address, PAN details etc whereas to the contrary we find that assessee has in fact furnished the correct address though mistake was inadvertently made which cannot be termed as a deliberate mistake, because we find that in the bills of the firms and address given in the website of the Government of Delhi, department of taxes the address was that given by the assessee at the first instance, but later we find vide letter dated 15.12.2011, the assessee brought to the knowledge of the AO, the changed correct address, and PAN No. So the finding of the fact on these issues by the AO is incorrect, whereas we find that the ld CIT(A) who has plenary, co-terminus and co-extensive power of the AO, after forwarding all the contentions and documents furnished by the assessee before him and after perusing the remand report has found the AO to wrongly stated that assess....
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....e Sundry Creditors. The confirmation of accounts from 01.04.2008 to 31st March 2009 dated 01st April 2009, were we find the seal of the sundry creditor, signed/ initiated on behalf by both the Sundry Creditor M/s Nitesh Enterprises and Shri Ram Traders along with their PAN No. is annexed at Page 90 and 91 of PB. Documents annexed to P.92 to 94 pertain to consultancy charges paid to Architectural Design Service. As per the index of the Paper Book of the assessee, serial No.6 are the replies dated 25.08.2011, 02.11.2011, 15.11.2011, 05.12.2011 and 15.12.2011 filed along with annexures before the AO during the assessment proceeding numbered as Page 43 to 94. As per the certificate appended below the Index of the said Paper Book the AR of the assessee Shri Akshat Jain, ACA, has certified that serial No.2 to 9 were on record of the AO. Since the document i.e. confirmation of accounts from 01.04.2008 to 31St March 2009 figure in serial No.6, prima facie it can be inferred that the said document was placed before the AO. However the ld DR vehemently contended that the said document was placed for the first time before the ld CIT(A) during the appellate proceedings. Be that as it may be, e....
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.... will reveal that the outstanding payments to the aforesaid sundry creditors for the instant Assessment Year, stands credited to their respective bank accounts by bank transfer before 28.04.2010 i.e. six months before the impugned addition made by the AO, though it was brought to his knowledge as stated above, that payments have been made. In the remand report of the AO, he states after perusal of the aforesaid bank statement evidencing account payee transfer of amount to their respective bank account, that appellant has filed copies of bank statements and same was examined. (Para 1.7 Page 112) (Remand Report 109 to 113 of PB). So the ld CIT(A) has rightly concluded in the light of the aforesaid evidence that sundry credit balance in the name of Nitesh Enterprises and Shri Ram Traders were genuine credit balance for purchase of material by the assessee and the liability in the name of such parties have been duly discharged by the assessee by making payment through RTGS i.e. a/c payee cheques. Moreover, it is an undisputed fact that the assessee has not written off the amount to the credit of the profit and loss accounts and the outstanding liabilities were still in existence which ....
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....egard to various expenses claimed, like consultancy expenses and maintenance expenses of Rs. 10,83,931/- and the assessee could not justify travelling expenses of Rs. 20,02,000/-, so he rejected the books of accounts of the assessee and estimated the profit @ 8 % of the gross receipts. In the remand report dated 23.04.2012 also he reiterated the reason for invoking section 145 of the Act and justified his action. In respect to the AO's contention that books of accounts were not produced by the assessee before him, we find that for the reasons given below the said factual finding is incorrect and wrong. The ld CIT(A) has rightly observed in the impugned order in Page 49 Para 6.3 that AO has clearly observed in the assessment order at Page 2 that Shri Ankush Jain, FCA of the assessee company attended and books of accounts and other relevant documents details as required by him has been filed, perused and placed on record. Further when we peruse the paper book page 83 which is the letter of the assessee dated 15.12.2011 to the AO, it is clearly mentioned that the assessee is producing complete books of accounts along with bills and vouchers of assessee company asked by him for verific....