2008 (3) TMI 703

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....er in support of its contention that these amounts were the liabilities of earlier assessment year which have been discharged during the relevant assessment year/subsequent year. 3. Briefly stated, the facts of the case are that the assessee company is a private limited company which is in the business of manufacturing and trading of Pan Masala. While framing the assessment, the assessing officer has made following additions under Section 68 of the IT Act, 1961: --------------------------------------------------------------------- R.K. Perfumers Rs. 38,195 --------------------------------------------------------------------- Sharda Kashyap Rs. 7,500 --------------------------------------------------------------------- Sakshi Advertisers Rs. 22,627 --------------------------------------------------------------------- Rollan Packing Rs. 75,500 --------------------------------------------------------------------- Raj Narain Uttam Rs. 2,12,725 --------------------------------------------------------------------- M/s Tanu Enterprises Rs. 87,211 --------------------------------------------------------------------- M/s Avadh Wood Products Rs. 25,70,406 ------------------------....

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....ount of various sundry creditors under Section 68 of the Income Tax Act, 1961. He further submitted that the amounts in question, cannot be treated as cash credit and the addition made on application of Section 68 is wholly illegal. He further submitted that in any case, these amounts are credit balance as on 31-3-2003 appearing in the accounts of various parties and are the sundry creditors from whom the assessee-company had purchased raw material. Learned Counsel for the assessee also drew our attention to the statement showing credit balance in the accounts of various sundry creditors in various years. He further submitted that the credit balances were not on account of any cash credit, rather they represented unpaid liabilities as were outstanding to the suppliers of raw material. It was also stated that these credit balances have been squared up in the subsequent years mostly through account payee cheques/drafts. Learned Counsel for the assessee vehemently argued that all the transactions with these parties have not been doubted but only credit balance as on 31-3-2003 have been questioned but the same cannot be treated as unexplained. Reliance was placed on the decision of Hon....

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....,195. In the case of Sharda Kashyap, the amount of Rs. 7,500 is coming from earlier year and it represented opening balance for this year which cannot be added. It is stated that the said liability has been discharged in the subsequent year. From the above chart it is also, clear that the amount of Rs. 22,627 (Sakshi Advertisers) is coming from earlier years and same represented the opening balance in this year which cannot be added. It is stated that the liability has been squared up by making payment in the subsequent year. There is no material on record to controvert the above fact. As regards the amount of Rs. 87,211, it is stated that the said liability has been squared up in the subsequent year by making payment through cheque. In our view this addition is also not sustainable. It is seen that the Commissioner (Appeal) has also deleted the addition of Rs. 25,70,406 in the case of M/s Avadh Wood Products. It is claimed that no new transaction has taken place during the relevant financial year as the amount of Rs. 25,70,406 is coming from earlier year and no disallowance has been made either in the assessment year 2001-02 or 2002-03. It is al....

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.... of the matter, the decision of Hon'ble Bombay High Court (supra), relied upon by the learned Departmental Representative is not applicable to the facts of the present case. The decision of Tribunal Delhi Bench in the case of Chawla Brass & Aluminium Factory (supra), is also not applicable to the facts of the present case. In the said case, the Tribunal held that in the case of close relatives the burden lies on the assessee to explain satisfactorily the nature and source of the credit. Mere confirmation by the party and fact of receipt of money by cheque in such case is not sufficient to shift the burden to the Revenue. The said decision was rendered in the context of Section 68 of the Income Tax Act, 1961. In the instant case, we have already observed hereinabove that the provisions of Section 68 are not attracted to amounts representing purchases made on credit. Therefore, the decision of Delhi Tribunal relied upon by learned Departmental Representative is not applicable to the facts of the present case. 12. In view of the above, we do not find any infirmity in the findings of Commissioner (Appeal) on this issue and accordingly, we uphold her view. Consequently, we dis....

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....and examined with income from royalty as such Rs. 1,80,000 is accepted. From the above observations of the assessing officer in the case of Shri K.N. Singh Patel, it is clear that he has duly shown this royalty payment in his Income tax return on which he is duly assessed to tax. Learned Counsel for the assessee stated that Shri K.N. Singh Patel has closed his business activities with effect from 1-2-1998 and allowed the use of his brand name "Har Singar" to the assessee for which royalty of Rs. 1,80,000 was payable to him. In our view, the assessing officer was not justified in stating that the payment made to Shri K.N. Singh Patel was unjustified and totally unreasonable. Thus, considering the entire facts of the case and also the material available on record, we hold that the Commissioner (Appeal) has rightly deleted the addition made by the assessing officer. We therefore dismiss this ground of appeal also. 17. Now we will take up ITA No. 574/Luc/2007. Ground No. 1 of the appeal reads as under: 1. On the facts and circumstances of the case, the learned Commissioner (Appeal) erred in law in allowing the relief of Rs. 1,00,000 out of the addition of Rs. 2,06,241 of....