AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 1541
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....ating income ought to have allowed the statutory claim of depreciation of Rs. 33,89,415/- which was allowed by the AO. Enhancement of income is without considering the law and facts of the case. 4. Because the CIT(A), Aligarh has grossly erred in law in sustaining the addition of Rs. 1,98,983/- on account of Income Tax refund received by the assessee without properly appreciating the facts and circumstances of the case. 5. Because the CIT(A), Aligarh has grossly erred in law in sustaining the addition of Rs. 13,88,945/- on account of Trade Tax refund received by the assessee without properly appreciating the facts and circumstances of the case. 6. Because in any view of the matter the impugned order to the extent making and sustaining the addition is bad on facts and in law. 7. That the appellant craves leave to add, alter, amend or withdraw any ground of appeal. In ITA No.251/Agra/2017/A.Y.2012-13 the assessee has raised the following grounds: 1 That the Ld. CIT(A)-Aligarh had grossly erred in law in imposing penalty of Rs. 27,91,325 without properly appreciating the facts and circumstances of the case. 2 That thepenalty order as had been passed by the CIT(A) is void ....
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....f 8% and made enhancementof Rs. 90,33,314/- against trade creditors treating cessation of liability assessable under section 41(1) of the Act. The Ld. CIT(A) also withdrew claim of Depreciation amounting to Rs. 33,89,415/- as was separately allowed by the AO. 6. The Ld. Counsel for the assessee submitted that the authorities below, while estimating the income by applying the profit rate at 8% by rejecting the books of account and estimating the income have completely ignored the procedure laid down u/s 145(3) read with sec 144 of the Act , contending that when provisions of sec. 145(3) of the Act are invoked, the assessment has to be completed as per the procedure laid down in the sec. 144 of the Act, which mandates that the AO shall complete the assessment of the assessee on the basis of material gathered by him. He further submitted that the power to make best judgment assessment is not an arbitrary power, it is an assessment based on best judgment of the AO i.e, wisdom. It must be based on some relevant material and should be in a logical manner, so that when it the impugned order is put to test on the ground of arbitrariness it should withstand the test of appeal and should n....
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....te of 8%. 10. We have heard the parties, perused the records in the light of precedents. It is an undisputed fact that books of account were rejected by invoking provisions of Section 145(3) of the Act, such rejection was upheld in first appeal by the Ld CIT(A). The assessee has not objected to the rejection of the books of account. However, the fact remains that neither the authorities below has specified circumstances under which it could have been presumed that the reported rate of profit is low nor has cited any comparable case, in support, for application of "high profit rate" on gross total receipt. The past history of the assessee as furnished vide PBP-111 which is backed by Audit Reports of all such years (PBP-112-150) which position when tabulated emerges as under: Assessment Year Turnover inclusive FDR Interest Net Profit Net Profit in (%) 2010-11 15,79,72,464/- 84,13,469/- 5.32 2011-12 8,09,56,392/- 43,83,160/- 5.41 2012-13 15,26,42,919/ - 86,31,209/- 5.65 2013-14 2,15,46,367/- 11,37,654/- 5.25 11. In view of the precedents referred above, there is a consistency in judicial opinion that after rejection of books of accounts, income is to be com....
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....esh Prasad, Farrukhabad. 2. Shri Brijesh Shukla Shri Ram Kumar Shukla 4,23,810/- Bhaisan Nagla P.O. Munder, Hardoi 3. Shri Divya Prakash Shukla Late Raja Ram Shukla 92,072/- 4/12, Palariya, Farrukhabad. 4. Shri Ramendra Shukla Late Divya Prakash Shukla 3,31,267/- Palariya, Farrukhabad. 5. Shri Vinay Shukla Late Raja Ram Shukla 2,74,485/- Palariya, Farrukhabad. 6. Shri Vipin Shukla Shri Ram Prakash Shukla 3,46,549/- Keshav Nagar, Chaurasi, Farrukhabad. Thus, it is seen that out of total sundry creditors of Rs. 1,09,15,621/- only sundry creditors to the extent of Rs. 18,82,207/- have been confirmed and hence, it is reasonable to hold that liability in respect of other creditors amounting to Rs. 90,33,414/- has ceased to exist. The appellant has denied the cessation of liability on the ground that these creditors have been paid in the subsequent years. However, no evidences has been furnished in this regard. In the given facts, it is reasonable to hold that the liability pertaining to sundry creditors of Rs. 90,33,414/- ceased to exist and the same deserves to be added to the total income in accordance with the provisions of section 41(1)....
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....the Ld CIT(A) cannot be held justified in falling back to the same books of accounts for making disallowance on the alleged ground that liability shown in the Books of Accounts allegedly ceased to exist. 18. Per contra, the Ld Sr. D.R submitted that the Ld CIT(A) was quite justified in enhancing the income to the extent of Rs. 90,33,414/-and such an action is founded on the fact that upon postal enquiry undertaken by the AO out of 33 creditors six of them confirmed, 21 creditors have not responded to AO's Letter and 6 Letters remained unserved, returned with postal remark of incomplete address or old address.He also placed reliance to the Judgment by the Hon'ble Allahabad High Court in the case of 'CIT Vs M/s G.S Tiwari & Company', ITA No. 5 of 2008. 19. Since, theaddition has been made under section 41(1) of the Act;accordingly, it will bepertinent to discuss the provisions of the said section. As per theprovisions of section 41(1) addition can be made towards remission orcessation of liability, if the following conditions are fulfilled. "Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred b....
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....tion in respect of cessation of trading liabilities without considering the fact that the assessee has not been benefited by remission or cessation of such trading liability because he has not written off any amount in his books unilaterally. In fact, there is no reference in the order of the AO to the expression remission or cessation of liability. The contention of the counsel was that the trading liability under the head Sundry Creditors in the name of the creditor parties was proved and verifiable with reference to the Balance Sheet of the assessee and therefore, the same cannot be treated as cessation of liability under section 41(1) of the Act. 8. We find that the Id. CIT(A) has deleted similar disallowance in the assessee's own case for the assessment year 2008-09 in Appeal No. 185/C1T(A)- 1/ Agra/ITO-2(3)/Agra/2010-11 dated 25.10.2012 (PB 75-78), wherein he has held as under - "4.5 I have considered the discussion made by the AO in the There is also force in the argument of the Id. AR that it is for the assessee to declare the remission of the liability as his income after he receives the information about such remission of liability and it is not for the AO to decid....
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....e is not a ground to conclude that there was cessation of the liability because cessation of the liability has to be cessation in law, of the debt to be paid by the assessee to the creditor. The debt is recoverable even if the creditor has expired, by the legal heirs of the deceased creditor. Under the circumstances, in the present case, it can hardly be said that the liability had ceased. If the liability had not ceased or the benefit was not taken by the assessee in respect of such trade liability, the conditions precedent were not satisfied for invoking section 41(1) of the Act. [Para 9] 10. The judgment relied upon by the CIT(A) and the Id. DR are distinguishable on facts. The Id. counsel in his written synopsis has explainedthat in the cases relied by department, all the necessary documentary evidences were brought on record to the effect of proof and verification of the trading liability for invoking provisions of section 41(1) of the Act where as in the present case, no documentary evidence were brought on record to the effect of proof and verification of cessation of trading liability. Thus, the conditions precedents were not satisfied for invoking section 41(1) of the ....
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....bilities ceased during the assessment year 2012-13. If the parties choose not to appear or did not respond or even did not come forward in compliance to Letter by the AO does not prove that the trade creditors have either given up there claim in favour of the assessee or such creditors were not in existence so as to invoke provisions of section 41(1) of the Act. It is also a settled position that there is no bilateral act of the assessee and the creditors, which indicates that the said liabilities have ceased to exist. In the absence of any bilateral act, the said liabilities could not have been treated to have ceased. 23. Perusal of the order passed by the Ld CIT(A) reveals that the conditions mentioned under section 41(1) of the Act are not fulfilled in the instant case. Remission and cessation have been presumed merely on the ground that when at the instance of the Ld. CIT(A) postal enquiry was undertaken by the AO in which out of total thirty-three creditors, six creditors have confirmed their balances,twenty one creditors did not respond to the enquiry letter of the AO and in respect of six creditors letters issued by the AO returned un-served with postal remark of incomplete....
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....e balances of creditors were not known to the assessee, the Hon'ble High Court also found that even no single detail from the books of accounts was furnished by the assessee in fifteen month. On the aforementioned facts the Hon'ble High Court held that though the assessee consistently stated that the creditors are genuine but at no point of time assessee took a stand that sundry creditors are referable to business income which is determined on estimate basis. Hence, the Hon'ble High Court held that assessee failed to establish that the unexplained sundry creditors were referable to the business income. In the referred case no question of addition under section 41(1) was present for consideration and therefore, the case is not an authority in the facts of the case on hands where addition under section 41(1) of the Act is made. The case is further distinguishable as in the referred case assessee sought telescoping of Net Profit determined on estimate basis against sundry creditors, whereas in the case on hands no such plea was ever taken. In the case under consideration there is no finding that the creditors appearing in the balance sheet are other than trade creditors. In view of th....