TaxTMI 
TaxTMI 
2019 (1) TMI 217
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....nces of the assessee. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in not deleting the addition of Rs. 37,95,928/- fully as made by Ld. AO on account of sundry creditors and sustaining the same to the extent of Rs. 22,73,232/- and passing the impugned assessment order is illegal, bad in law, void ab initio, unjustified, contrary to facts & law and based upon recording of incorrect facts and finding, without giving adequate opportunity of hearing, in violation of principles of natural justice and the same deserves to be quashed. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A, 234B and 234C of Income Tax Act, 1961. 4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other." 3. The assessee is having income from trading business. Returned declaring an income of Rs. 1,35,750/- was filed on 30.09.2009 which was processed u/s 143(1) of the Income Tax Act, 1961. The case was selected for scrutiny and ....
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....some of the additions but sustained the balance 6 creditors. The Ld. AR submitted that the impugned liabilities are very much payable by the assessee as to when demanded and unless it is demanded, these are bound to be shown as outstanding. The very fact that these liabilities are appearing in the balance sheet is strong acknowledgement of the dates payable by the assessee as held in the case of CIT vs. Tamil Nadu warehousing Corporation, 292 ITR 310 (Mad.). In case of Ambica Mills vs. CIT 54 ITR 167 (Guj.) it is held that liability shown in the balance sheet is a clear case of acknowledging the liability of such liability cannot be treated to have ceased so as to attract Section 41(1) of the Act. The Ld. AR further submitted that being so, where is the question of holding the said liabilities as ceased to exist, more so when assessee herself is acknowledging the liabilities to be paid? How can a third party that too a quasi-judicial authority hold in the absence of any material that the liability is not payable by the assessee? Therefore, the Ld. AR submitted that the addition made on the basis of the presumption does not have either factual or legs to stand. The Ld. AR submitted ....
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....ficer has not established with evidence that the liability in respect of the above outstanding balances has ceased to exist. The Assessing Officer has gone on presumption and that too by placing the burden wrongly on the shoulders of the assessee. Section 41(1) does not envisage any such presumption of cessation and fix the incidence of tax thereon. In the absence of any material having been brought on record to establish that the deduction was claimed or credit balance has been remitted, addition cannot be made u/s 41(1) in view of the following decisions : i. Steel and General Mills Co. Ltd. vs. CIT 96 ITR 438 (Del) ii. CIT vs. Nathubhai Desha Bhai 130 ITR 238 (MP) iii. Liquidator, Mysore Agencies P. Ltd. vs. CIT 114 ITR 853 (Karn) iv. K.V.Moosa Koya & Co vs. CIT 175 ITR 120, 124 (Ker) v. CIT vs. Pranlal P Doshi 201 ITR 756 (Guj) 7. The Ld. AR submitted that the Assessing Officer failed to establish that cessation if at all has happened, has happened in the year under appeal as held by Delhi Bench of Tribunal in the case of Madan Lal Brothers. After all, liability to tax can be fixed in the year to which it pertains and to no other year. Liability to tax any ceased lia....
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....hbors reported that no such concerns are available at the given addresses nor their whereabouts could be located. During the remand proceedings details of confirmations filed were examined and PAN was again found to be wrong by the AO, so identity of the creditor remains profusely doubtful, creditworthiness and genuineness of transaction also not proved in absence of any evidence. As regards to M/s. S.B.Industries - Rs. 4,00,351, the Ld. DR submitted that notice was issued u/s 133(6) but not complied with both the times, even during remand proceedings confirmation could not be furnished by the assessee, other corroborative evidences also not produced. As regards to M/s. Vee Kay Enterprises - Rs. 3,31,285, the copy of A/c of the assessee in their books reflected Nil balance. This sundry creditor denied of having any transaction between him and the assessee since 2005. It is corroborated by the inquiry conducted by the Inspector wherein it was informed by Sh. Vinod Bansal that M/s. Vee Kay Enterprises did not have any debtor named M/s. Loknath Narang. The Ld. DR relied upon the following case laws : 1. Konark Structural Engineering (P) Ltd. vs. DCIT [2018]96 taxmann.com255 (SC) K....
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....fits chargeable to tax. 41. (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 some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to incometax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first- mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof,....
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.... cessation by the assessee, for the respondent-assessee had not written off the outstanding amount of Rs. 2,61,72,160/- payable to M/s. P.T. Polysindo. This is also not a case where benefit in any form or in cash was received by the respondent-assessee. Hence the first part of Clause (a) to Section 41(1) of the. Act, would not apply. 8. Whether the debt had ceased to exist, was forfeited, or was extinct or whether there was remission in whole or part, would normally be a question of fact, unless there was cessation or remission by operation of law. When it comes to facts, the conduct and understanding of the parties is relevant and important. For the conduct would reveal existence or extinction and forfeiture of the liability. 9. Non-payment of outstanding liability which is admitted and acknowledged as due and payable by an assessee does not indicate remission or cession of liability. When an assessee suffers losses, payments and debts due including those due to financial institutions are not paid. Delay or nonpayment, even when the Assessing Officer is of the opinion that likelihood of payment was remote as business has stopped, would by itself not denote and mean cessation....