TaxTMI 
TaxTMI 
2020 (4) TMI 331
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....in law and on facts by upholding the decision of the CIT (A) on deletion of addition of Rs. 4,14,60,245/- made on account of inflated current liability in the books of account? [C] Whether the Appellate Tribunal had erred in law and on facts by upholding the decision of the CIT (A) on deletion of addition of Rs. 3,08,000/- made on account of cessation of liability u/s.41(1) of the I.T. Act, 1961?" 2. The assessment year is 2009-2010 and the corresponding accounting period is the previous year 2008- 2009. 3. The assessee is engaged in the business of manufacturing of HDPE/PP Woven Sacks & Jacquard Woven Labels, trading of Fabrics & Labels. The assessee filed its return of income on 27th September, 2009 declaring total loss of Rs. 6,46,33,478/-. The assessment proceedings under section 143(3) of the Act came to be completed on 16th December, 2011, determining assessed loss at Rs. 1,09,64,913/- making the following disallowances: (i) Rs. 1,16,65,245/- on account of suppression of stock, (ii) Rs. 4,14,60,245/- on account of inflated current liability, (iii) Rs. 3,08,000/- under section 41(1) of the Act, and (iv) Rs. 2,35,075/- on account of expenditure not incurred for busi....
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....plained investment can be made as there was no suppression of income by not disclosing the stock to the bank. The Commissioner (Appeals) further noted that there was no finding to the effect that the stock was not available with the assessee and held that the Assessing Officer was not justified in making the addition on this account and directed him to delete such addition. The Commissioner (Appeals) further recorded that the other component of addition was on account of difference in valuation of stock. After considering the submissions made on this issue, the Commissioner (Appeals) noted that the stock statement furnished to the bank was in connection with hypothecation of goods which has been given by the assessee as it had taken some loan from the bank. The stock was not pledged with the bank authorities and bank authorities had not physically verified the stock mentioned in the statement filed before them. The Commissioner (Appeals) further noted that the books of accounts maintained by the assessee were regularly audited and the Assessing Officer had not found any defect with reference to the books of account or details of production. The assessee had also explained that the ....
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.... sundry creditors of Rs. 4,88,49,006/- and called upon the assessee to show cause as to why such amount should not be added to the income. 12. During the course of assessment proceedings, on verification of Schedule 11 of current liabilities and provisions, it was noticed by the Assessing Officer that sundry creditors are shown at Rs. 2,44,11,803/- and other liabilities of Rs. 2,09,08,451/- and thus, total liability is shown at Rs. 4,53,20,254/- whereas in its books of accounts the assessee had shown Rs. 38,60,000/-. The Assessing Officer therefore, found that in the books of account the assessee had shown excess liability of Rs. 4,14,60,254/- and during the assessment proceedings, the assessee had not furnished any reason for the difference of liability between the bank and books of accounts and thus, added an amount of Rs. 4,14,60,254/- to the total income of the assessee. 13. Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals) who deleted the addition. The revenue carried the matter in the appeal before the Tribunal, but did not succeed. 14. As can be seen from the order passed by the Commissioner (Appeals), before the Commissioner (Ap....
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.... of current liabilities, the Assessing Officer has not pointed out any defect during the assessment proceedings and was of the view that before placing reliance on the statement furnished to the bank, the Assessing Officer ought to have pointed out the defects/infirmities in the current liabilities and the provisions shown by the assessee in its balance sheet. The Tribunal took note of the fact that the Commissioner (Appeal) has given a finding that the creditors shown by the assessee in its books of account exist in the books of account and that the learned DR for the revenue had not disputed this finding of fact. The Tribunal, accordingly, did not find any reason to disturb the findings recorded by the Commissioner (Appeal) and dismissed the ground of appeal. 17. Thus, the Tribunal upon perusal of the material on record has found as a matter of fact that there were no defects in the items of current liabilities shown by the assessee in its balance sheet. In the light of the fact that the conclusion arrived at by the Tribunal is based upon concurrent findings of fact recorded by it upon appreciation of the material on record, no question of law can be said to arise out of the sai....
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....r had also not established that the liabilities had ceased to exist with no chance of revival of the claim by the creditors in future. Placing reliance upon the decision of this court in the case of Commissioner of Income Tax v. Nitin S. Garg, (2012) 71 DTR (Guj.) 73 as well as in the case of Commissioner of Income Tax v. Silver Cotton Mills Company Limited, (2002) 254 ITR 728 (Guj.), the Commissioner (Appeals) set aside the addition made by the Assessing Officer. 21. The Tribunal, in the impugned order, has observed that there is no dispute as regards the fact that the liabilities in question were not written off in the books of accounts of the assessee and was of the view that the same cannot be treated as income under the provisions of section 41(1) of the Act on account of cessation of liabilities. 22. Sub-section (1) of section 41 of the Act provides that where any allowance or deduction had been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year the assessee has obtained whether in cash or other manner whatsoever any amount in respect of such loss or expenditure or some ....