TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 46
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.... unsecured loan and sundry creditors. However, she did not furnish the ledger account of sundry creditors and unsecured loan but furnished outstanding balances of sundry creditors on her letter head. On being asked by the Assessing Officer to furnish the ledger account of sundry creditors and unsecured loan the assessee replied that a fire broke out in the office of the assessee and computer and relevant documents and office record consisting of cash book, ledger, vouchers etc were destroyed on 25.06.2013. However, information for audit was provided earlier to the CA for Tax Audit. It was accordingly submitted that it is difficult to provide remaining information regarding expenses claimed in the P & L account. 3. The Assessing Officer issued notice u/s. 133 (6) to the creditors as per address given by the assessee. However, all such notices were returned back unserved by the postal authority with the remarks "No Such Address". The Assessing Officer, therefore, inferred that all the creditors shown by the assessee are not genuine. Since the confirmations from the creditors filed by the assessee are on the assessee's own letter head without PAN number and TIN number of the creditor....
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....ition has been made. Relying on various decisions it was submitted that the addition made by the Assessing Officer is uncalled for and liable to be deleted on account of the following reasons :- (i) There was no evidence to show cessation of liability. (ii) Assessee still shows the liability in its books of accounts which itself is prima facie evidence that the liability exists. (iii) The transaction of purchase, if regarded as bogus then there is no liability in law and hence the question of applying section 41 (1) will not arise for consideration. (iv) The sums in question has been repaid in the subsequent assessment years thereby rendering the theory of cessation of liability not sustainable. 8. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the addition of Rs. 1,56,26,811/- made by the Assessing Officer by observing as under :- 6.3.1 "The Assessing Officer noted that Assessee has shown creditors amounting to Rs. 2,01,85,243/- in the balance sheet as on 31.03.2013. The Assessing Officer asked the Assessee to explain the sundry creditors with the documents, bills & vouchers. The Counsel of the Assessee only furnished t....
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....41(1) of the l.T. Act. The Assessing Officer has only remarked that creditworthiness of the creditors does not appear to be genuine. On careful consideration of the facts of the case, it may be seen that the creditors appear to be related to the trading activity. But it is not the case that the Assessee has obtained whether in cash or m any other manner any amount in respect of the expenditure by way of remission or cessation of liability. When the Assessee could not prove the genuineness of the creditors related to trade, the logical interence would be claim of bogus liability as a result of inflated purchases / no purchases during the Financial Year under consideration. The Assessee has not established by any evidence that the creditors in respect of which debit entries were made in the Profit & l.oss Account, belong to earlier Financial Years. The Assessing Officer has not made the addition u/s 68 calling for distinction between a trade liability or capital liability. The decisions cited by the Ld. AR, as may be seen, are distinguishable on facts, hence, cannot be relied on to deliver the judgment in this case. Accordingly, the addition is t confirmed and the ground is dismissed....
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....f the case, the learned CIT (A) has erred both in facts and in law in passing the order without giving assessee a reasonable opportunity of being heard which is clear violation of the principle of natural justice 3. On the facts and circumstances of the case, the learned CIT (A) has erred in both the facts and in law by not admitting the additional evidence produced by the appellant. 4. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law by confirming the addition on account of unexplained creditors of Rs. 1,50,26,811/-. 5. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law by confirming the disallowance of expenses of Rs. 2,72,087/- which is claimed and allowable as per the provisions of the Act. 11. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A) in sustaining the addition of Rs. 1,50,26,811/- on account of unexplained creditors and sustaining the disallowance of expenses of Rs. 2,72,087/-. 12. So far as the addition of Rs. 1,50,26,811/- on account of unexplained sundry creditors is concerned the Ld. Counsel for the assessee drew the attention of the....
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....bsequent assessment year, therefore, theory of cessation of liability is not sustainable. He submitted that the Assessing Officer in the instant case has made the addition by just taking the difference of opening creditors and closing creditors and not party wise. 16. Referring to the decision of Hon'ble High Delhi Court in the case of CIT Vs. Victor Electrodes Ltd, the Ld. Counsel for the assessee drew the attention of the bench to para 9 of the order and submitted that there is no legal obligation on the part of the assessee to produce the director and failure to produce them cannot be a ground for making the addition when various other details were produced and the Assessing Officer did not make any attempt to summon the directors. The order of the Tribunal deleting the addition was accordingly upheld. 17. Referring to the decision of Hon'ble Bombay High Court in the case of CIT Vs. Nikunj Exim Enterprises Pvt Ltd. 372 ITR 619, he submitted that where sales are supported by purchases and payments made through banks merely because suppliers had not appeared before the Assessing Officer, the purchases could not be rejected as bogus. 18. Referring to the decision of Hon'ble Del....
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.... - Total 51,58,432 2,01,85,243 1,57,22,050 23. Similarly, the Assessing Officer made addition of Rs. 6,80,218/- being 25% of the expenses except bank interest and bank charges for want of details. We find the Ld. CIT(A) confirmed the addition of Rs. 1,50,26,811/- on account of unexplained creditors and restricted the disallowance of expenses to Rs. 2,72,087/- being 10% of such expenses, the reasons for which has already been reproduced in the preceding paragraphs. 24. So far as the addition on account of sundry creditors is concerned we find the Assessing Officer made the addition on the ground that the credit worthiness of the creditors does not appear to be genuine since the notices issued u/s 133 (6) were returned unserved and the assessee failed to produce the parties for his examination. We find the Ld. CIT(A) upheld the action of the Assessing Officer the reasons of which has already been reproduced in the preceding paragraphs. It is the submissions of the Ld. Counsel for the assessee that the Assessing Officer has not made any addition on account of Krishna Agri Science. Further the addition has been made simply on the basis of difference of opening and closing ba....
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....ligation on the assessee to produce some director or other representative of the applicant-companies before the Assessing Officer. Therefore/ failure of the assessee to produce them could not, by itself, have justified the additions made by the Assessing Officer, when the assessee had furnished documents, on the basis of which, the Assessing Officer, if he so wanted, could have summoned them for verification. No attempt was made by the Assessing Officer to summon the directors of the applicant-companies. The addresses of these companies must be available on the share applications, memorandum and articles of association and their income-tax returns. If the Assessing Officer had any doubt about identity of the share applicants, he could have summoned the directors of the applicant-companies. No such attempt was, however, made by him. Therefore, the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, in our view, were justified in holding that the identity of the share applicants and the genuineness of the transactions had been established by the assessee. For the reasons given in the preceding paragraphs, no substantial question of law arises for our conside....
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....he sundry creditors. The assessee did not submit the confirmation letters, but wrote to the Assessing Officer that it was not aware of the present whereabouts of the creditors after a lapse of four years and whatever addresses were available with the assessee had been "'given by the suppliers at the time when it purchased paddy from them. The Assessing Officer rejected the assessee's explanation and added the amount in question to the assessee's taxable income under section 68. On appeal, the Commissioner (Appeals) held that the assessee's conduct clearly showed that the liabilities shown in the sundry creditors' account in its books did not exist. In this view of the matter, he held that the liabilities/credits had ceased to exist and, therefore, the addition made by the Assessing Officer was justified but he confirmed the same under section 41(1). On further appeal, the Tribunal held that the applicability of section! 68 was ruled out since no fresh amounts Were credited in the accounts of the creditors during the relevant accounting year. The Tribunal further found that the amounts payable to the sundry credits were not credited to its profit and loss accoun....