TaxTMI 
TaxTMI 
2015 (11) TMI 1364
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....appellant filed return of income for the Assessment Year 2005-06 on 31.10.2005 declaring a loss of Rs. 18,73,988/-. The case was selected for scrutiny under CASS. During the scrutiny assessment proceedings, the Assessing Officer noticed that the ledger account of a creditor M/s Ganesh Overseas showed an opening balance of Rs. 19,67,729/- and credit entries during the year of Rs. 6,14,307/- and Rs. 5,11,744/-, however there were no transactions of sale during the year to justify the opening credit balance and further payments received. The Assessing Officer required the appellant to file a confirmation of the party with address and assessment particulars, which was not produced. The Assessing Officer treated the creditor as bogus and added t....
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....l the First Appellate Authority granted part relief. Aggrieved, the assessee is in appeal before us on the following grounds. "1. The learned CIT(A) has grossly erred on the facts of the case in upholding the addition of Rs. 30,93,780/- as income of assessee while treating the outstanding balance due to M/s Ganesh overseas u/s 41(1) of the Income Tax Act, 1961. 2. The learned CIT(A) has grossly erred on the facts of the case in upholding the addition of Rs. 438348/- out of Rs. 40,77,844/- the outstanding balance of sundry creditors as income of assessee u/s 41(1) of the Income Tax Act, 1961. 3. The learned ClT(A) has grossly erred on the facts of the case in upholding the addition of Rs. 60,000/- salary paid to Sm....
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....bmitted that M/s Ganesh Overseas was a proprietary concern of Mrs. Anitha Sharma, her PAN number was given. It was submitted that the opening balance differences, may be on account of reconciliation differences. It was pointed out that the current year's transactions were confirmed by M/s Ganesh Overseas. 7. The assessee contended that merely because the letter addressed by the Ld.A.O. to M/s Ganesh Overseas, was returned by the postal authorities, no addition can be made of the credit balance by deeming the same as income. The Ld.Counsel argued that the assessee was having dealings with M/s Ganesh Overseas from the year 2002-03 and that it was selling its DEPB licenses and income from such sale was assessed year after year, and the paym....
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....e that the income from sale of DEPB licenses has been offered to tax in earlier years. It is further observed that the appellant claims that its sundry creditors were taken over by M/s Zanelini Apparels Pvt. Ltd. and some of the credit balances have been settled by that company in subsequent years. However for reasons best known to the appellant, the credit balance of Rs. 30,93,780/- in the name of M/s Ganesh Overseas was not taken over with other sundry creditors by the sister company, continued to be carried forward in the books of the appellant, and supposedly remains payable till date. As admitted by the appellant, the business was discontinued 'sometime in September 2004', hence M/s Ganesh Overseas could not have been expecting....
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.... no writing off of liability and only the sub head under which the liability was shown in the accounts books of the assessee was changed. No benefit accrued to the assessee by changing the nomenclature and, therefore, the outstanding credit balance could not be deemed to be profits and gains of the business of the assessee company within the meaning of section 41 of the Act." 7.3. Further the Ld.Counsel for the assessee contended that, "It is a pre requisite condition, before having a recourse to section 41 of the Income Tax Act 1961, that the assessee must have either obtained the benefits in respect of the loss, expenditure or trading liability, incurred earlier by it or it should have received any benefits in respect of such trading l....
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....PAN number of the proprietor M/s Ganesh Overseas, has been furnished by the assessee. The A.O. could have made enquiries on the existence of the party from the concerned A.O. In any event, the assessee has not explained the difference of Rs. 5,73,139/-. The facts have not been brought out clearly by the assessee. The reconciliation statement of the difference in opening balances have not been furnished. The A.O. has also not properly brought out the facts on this issue. Hence we deem it fit to set aside the matter to the file of the Ld.A.O. for fresh adjudication in accordance with law. 9. Ground no.2 is on addition made u/s 41(1) of Rs. 4,83,348/-. The Ld.CIT(A) sustained the addition on the ground that the assessee had not furnished an....