TaxTMI 
TaxTMI 
2019 (3) TMI 270
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.... 2. The brief facts of the case are that the assessee company filed its return of income declaring a loss of Rs. 16,02,414/-. During the course of assessment proceedings the Assessing Officer asked the assessee to furnish the details of sundry creditors for year under consideration as well as the preceding two years, which the assessee filed before the Assessing Officer. On examination of the list, the Assessing Officer noticed that there was a credit balance of Rs. 7,62,72,356/- as on 31.03.2010 in the name of Opera Global P. Ltd., a sister concern of the assessee company and being assessed with the same Assessing Officer. The AO further noticed that this amount is not being shown as outstanding in the balance sheet of Opera Global P. Ltd. The Assessing Officer, therefore, asked the assessee to explain this inconsistency. The assessee submitted a reply explaining that this credit is appearing on account of the repayment of secured loan taken by it from SBI and SIDBI to whom payments have been made by Opera Global P. Ltd. on behalf of the assessee company. Being not satisfied with the reply of assessee, the Assessing Officer made addition of Rs. 3,44,26,263/- being the credit duri....
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....tion of Rs. 4,84,53,923/- on account of sundry trade creditors, being static for a long period of time. This amount has not been claimed by the creditors for a long period of time and this amount has become income of the assessee in terms of section 28(iv) read with section 2(24) of the Act. Although the liabilities are pertaining to earlier years the same are being shown as outstanding in the books of the current year. Necessary confirmations from respective creditors are required to be furnish to establish the genuineness of the credit balances. It is always beneficial to the assessee not to right back the credit balances in the profit loss account to avoid tax incidence on such credit amount. The assessee can keep the credit balances in the books and enjoy the same as owner without any liability. Hence, it is to be seen whether the liability shown in the books for decades become income of the assessee. Because of non existing liabilities, the amount of assets as per balance sheet is in excess of over liabilities and thereby the difference is to be taxed as income for the year. In this regard, reliance is made on the following judgments:- 1. CIT vs. TV SundaramIyenger& Sons....
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.... assessee to furnish justification for increase in the credit balance of M/s Opera Global Pvt. Ltd by Rs. 3,44,26,263 during the year under consideration. The assessee explained vide letter dated 08.03.2013 (PB page no 29-31) that M/s Opera Global Pvt. Ltd had made various payments on its behalf which led to the increase in the credit balance. Further, vide letter dated 25.03.2013 (PB page no 62), assessee filed documents in the form of ledger accounts of SBI and SIDBI loan account, details of payment received from M/s Opera Global Pvt. Ltd and bank statement of M/s Opera Global Pvt. Ltd (PB page no 63-101). Perusal of these documents would clearly reveal that M/s Opera Global Pvt. Ltd has repaid the loans to SBI and SIDBI on behalf of the assessee . However, disregarding the submissions made by the assessee, the AO made the addition holding the increase in the credit balance as unexplained credit balance u/s 68 of the Act. 5. The Ld. AR further submitted that it is pertinent to note that the identity cannot be doubted as M/s Opera Global Pvt. Ltd is also an assessee with the same Assessing Officer as stated by the ld. Assessing Officer at para 4 page 2 of the assessment order. Fu....
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....as made addition of Rs. 4,84,53,923/- merely on the basis that the said amount was not claimed by the creditors for a long time and accordingly the same should be added to the income u/s 41(1) of the Act as cessation of trading liability. The Ld. AR submitted that it is pertinent to note that the fact that the balances were standing as creditors and duly reflecting in the balance sheet and the fact that such balances were not written off was not doubted by the ld. AO. Further, the genuineness of the creditors has also not been doubted by the Assessing Officer. It was submitted that when the company still acknowledges its debt and no benefit has accrued to it, addition could not have been made merely because the balances were unclaimed for a long time. The Ld. AR placed reliance upon the judgment of Hon'ble Jurisdictional High Court in the case of CIT Vs Shri Vardhman Overseas 343 ITR 408 (Del.), wherein the Hon'ble Court has held that since the amount payable to the sundry creditors was not credited to assessee's profit and loss account for the year, and as the amount was still shown as outstanding at the end of the relevant year, the provisions of section 41(1) of the Act could n....
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....ilities as on 31.03.2010 as per the list was Rs. 12,24,92,114.64/- which after deduction of debit balance of Opera House Export Pvt. Ltd. i.e. assessee company of Rs. 7,62,72,356.63/- comes to Rs. 4,62,19,758.01/- which is the figure mentioned at first page of the balance sheet as current liabilities. Similarly, as on 31.03.2009 the total of the current liability at paper book page 128 comes to Rs. 8,58,55,902.48/- which after deduction of balance against assessee company of Rs. 4,18,46,093.65/- comes to Rs. 4,40,09,808.83/- which matches with the figure at the front of balance sheet. In view of these facts we are of the view that Assessing Officer was not justified in drawing adverse inference against the assessee. The assessee has led sufficient evidences which are supported by bank statement of Opera Global Pvt. Ltd. and its balance sheet read with the schedules attached thereto. Hence, the CIT(A) was correct in deleting the addition. Accordingly, we uphold the order of the CIT(A) on this score and ground no.1 of the Revenue appeal deserves to be dismissed. 8. Ground No.2 is regarding deletion of addition of Rs. 4,18,46,093/- in respect of the opening balance of Opera Global P....
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....sessee company on being questioned by the AO had given the reasoning as to why these creditors have not been paid so far. It was explained that the company has become sick and it has approached BIFR for restructuring of its liabilities. This, in our opinion, was plausible reason for delay in payment of the creditors. Section 41(1) is applicable when the trade creditors are written off as not payable. In the present case, it is not the case of the assessee that these trade creditors are not payable. It is also not the case of the AO that these creditors have been written off by the assessee. These creditors continue to be payable in the books of accounts of the assessee. The assessee has also explained the reason for the delay in making payment to these creditors. In these circumstances, the assumptions by the AO that these creditors had become income of the assessee cannot be sustained. On the contrary, the circumstances do explain the delay in payment of these creditors. In these facts, provisions of section 41(1) cannot be invoked. Similarly, the contention of the Ld. DR for invoking provision of section 28(iv) is misplaced as section 28(iv) is regarding value of any benefit or ....