TaxTMI 
TaxTMI 
2017 (2) TMI 560
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....er its proprietary concern M/s R.K. Timber & Co. The assessee for the year under consideration filed her return of income dated 27.10.2004 showing total income of Rs. 39,300/- and subsequently case was selected for scrutiny and assessment was completed u/s 143(3) of the Act at a total of Rs. 50,52,750/- vide order dated 29.12.2006 after making certain additions / disallowances to the total income of assessee. 3. It was observed at the time of hearing that Ground No.1 to 7 is interconnected. Therefore, they are clubbed together to pass a consolidate order for the sake of convenient. The issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of Rs. 36,11,230/- u/s 41(1) of the Act on account of seizure of current liability. In the original assessment, AO in his order vide dated 29.12.206 held that the trading liability of Rs. 45,66,426.21 has ceased to exist. Therefore, AO treated the same as income of assessee under the provision of Sec. 41(1) of the Act. The matter was carried before Ld. CIT(A) who confirmed the order of Assessing Officer after giving relief in part. 4. Thereafter the appeal wa....
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....essee has shown the payment through bearer cheque failed to furnish the evidence in support her claim that the payment was made to those parties. iv) It is not disputed that the aforesaid amount represents the trading liability and reflecting in balance-sheet since AYs 1996-97. In view of above, AO opined that assessee herself has withdrawn the cash from bank and liability has ceased to exist in assessee's book. Accordingly, AO invoked the provision of Sec. 41(1) of the Act and added the amount of Rs. 45,66,425/- to the total income of assessee. 6. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas as submitted that bank officers in their reply has nowhere mention that the bearer cheque issued to the parties were used by assessee herself as cash withdrawn from the bank. The assessee also submitted that a sum of Rs. 9,55,195/- was paid to the parties through account payee drafts and in this regard necessary details were furnished before AO. The assessee also submitted that the creditors for Rs. 26,27,186/- were reflecting in the balancesheet of the relevant assessment year. Therefore, the same cannot be held as ceased to exist. The payment to these creditors was p....
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....tors of Rs. 9,55,195/- where the payments were made through account payee drafts. I find from the assessment orders of the AO that the assessee has consistently claimed to have made payments of Rs. 9,55,195/- by account payee drafts. For, she had submitted in course of the original assessment proceedings that payment of Rs. 41,415/- to Mahaveer Traders and Rs. 1,44,821/- to Mahaveer Timbers during the relevant year was made by account payee draft; and further, that payment of Rs. 3,17,902/- to M/s P Bocha and Rs. 4,51,056/- to M/s Raiesh Timber was also made in the subsequent year by account payee draft (copy of the drafts was enclosed). These facts have been acknowledged by the AO at page 7 of his original assessment order. Again, the submission was reiterated in course of the subsequent assessment proceedings and all the relevant details were also produced which has been acknowledged by the AO at page 3 of his re- assessment order. But, the contention of the assessee has neither been disputed nor disproved by the AO. In fact, the AO has simply ignored the submissions of the assessee. In course of the appellate proceedings, the Ld AR reiterated that payments totalling to Rs. 9,55,....
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.... of the Act and he vehemently relied on the order of Authorities Below. 8. We have heard rival contentions of both the parties and perused the materials available on record. From the foregoing discussion, we find that liability was reflecting in the books of account of assessee which were not confirmed by the AO u/s 133(6) of the Act. Therefore, AO opined that the current liability has ceased to exist and liable for tax u/s 41(1) of the Act. The view taken by AO was subsequently confirmed by Ld. CIT(A) after giving partly relief to assessee. Now the issue before us arises whether the liability of assessee has ceased to exist in the books of account in the facts and circumstances of the case. At this juncture, it is important to produce the provision of Sec. 41(1) of the Act. (1) where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obtained whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or s....