AI Drafter 
TaxTMI 
TaxTMI 
2019 (5) TMI 1767
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....cts in deleting the addition of Rs. 4,14,60,245/- made on account of inflated current liability in the books of accounts, without properly appreciating the facts of the case and the material brought on record. 3. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs,3,08,000/- made on account of cessation of liability u/s41(l) of the IT. Act., without properly appreciating the facts of the case and the material brought on record. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to hax/e upheld the order of the Assessing Officer. 5. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and th~t of the Assessing Officer may be restored to the above extent. The issue raised by the Revenue in ground no 1 is that the Ld. CIT (A) erred in deleting the addition made by the AO amounting to Rs. 1,16,65,245/- on account of suppression of closing stock 2. Briefly stated facts are that the assessee is a company and engaged in the business of manufacturing of HDPE/PP woven sacks & jacquard woven labels, trading of fabrics & labels. The assessee in the year under consideration has shown closing s....
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....ubmitted any evidence to prove that the stock submitted to the bank included the stock received up to 15-04-2009. As per letter by the assessee to the bank on 13-04-2009, the details of stock statement and book debts was as on 31-03-2009. 2) The assessee admitted in his submission that the stock of liner, PP Granules and masterbatch are not included in the stock statement given to the bank amounting to Rs. 3,63,296/- and Rs. 25,97, 610/- and 2,24,918 respectively. 3) If these amounts are not included in the stock statement submitted to the bank, the difference in the amount will increase by Rs. 31,85,824/-. In view of the above, the AO worked the value of the difference amounting to Rs. 1,16,65,245/- and added to the total income of the assessee on account of suppression of stock. 3. The aggrieved assessee preferred an appeal before the Ld.CIT (A). The assessee before the Ld.CIT (A) submitted as under: 1) It never submitted to the AO that the stock shown in the stock statement furnished to the bank includes the purchases up to 15-04- 2009. 2) Regard the stock lying at silisva unit; it was submitted that some error occurred while collecting ....
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.... 6. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates to the difference in the value of closing stock shown in the books of accounts as on 31st March 2009 viz a viz value of the stock furnished to the bank as on 31st March 2009. The sole basis of making the impugned addition was the stock statement furnished to the bank. As such the AO has not disputed the purchases and sales declared by the assessee in its books of accounts which were duly admitted in the assessment proceedings. Similarly, we note that the books of accounts of the assessee were subject to excise and VAT department, an audit under Companies and Income Tax Act and no discrepancy of whatsoever was pointed out by the AO during the assessment proceedings. 6.1 The stock shown by the assessee in its books of accounts is the result of purchases and sales made during the year under consideration. As such, we are of the view that the value of the closing stock cannot be disturbed without pointing out any defect in purchases and sales. 6.2 We also find it important to refer to the judgment of Hon'ble Gujarat High Court in case ....
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....und that sundry creditor shown is of Rs. 2,44,11,803/- and other liabilities of Rs. 2,09,08,451/- only. There was no reconciliation statement of the current liabilities shown in the books and statement furnished to the bank was filed. Therefore it is clear that the assessee inflated the books of account by current liabilities of Rs. 4,14,60,254/- only. Thus the AO made the addition to the total income of the assessee. 8. The aggrieved assessee preferred an appeal before the Ld. CIT (A). The assessee before the Ld.CIT (A) submitted as under: 1) All the details of the current liabilities were furnished in schedule 11 of current liabilities and provisions of the financial statements. 2) All the details relating to purchasing, sundry creditors were already furnished during the assessment proceedings. 3) The AO had also conducted inquiries from the creditors by issuing notice u/s 133(6) of the Act and no discrepancy was noted by him. 4) The creditors shown in the statement furnished with the bank was to avail more credit facility from the bank. The creditors were shown in the round figure and on estimate basis without any name of the creditors i....
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....p;24,411,803 14,277.032 Advance receved from Cutomers 746,223 1,231,565 Statutory Liabilites 872,863 1,566,321 Creditors for Capital Goods 5,769,666 2,038,977 Other Liabilities 20,908,451 17,640,040 Provision for Expenses 2,338,034 1,477,865 Provision for Tax 409,000 580,000 55,456,040 38,811,800 12.3 The AO in respect of the above items of the current liabilities has not pointed out any defect during the assessment proceedings. In our considered view the AO before making any reliance on the statement furnished to the bank was to point out the defects/infirmities in the current liabilities and the provisions shown by the assessee in its balance sheet. We also note that the learned CIT (A) has given a finding that the creditors shown by the assessee in its books of accounts exist in the books of accounts. The learned DR for the Revenue has not disputed this finding of the learned CIT (A). In view of the above, we do not find any reason to disturb the finding of the learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. The issue raised by the Revenue in the ground no. 3 is that the....
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.... learned DR before us vehemently supported the order of the AO. 17. On the contrary, the learned AR before us reiterated the submissions as made before the learned CIT (A). The learned AR before us vehemently supported the order of the learned CIT (A). 18. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute to the fact that the liabilities as discussed above were not written off in the books of accounts of the assessee. Accordingly, in our considered view, the same cannot be treated as income under the provisions of section 41(1) of the Act on account of the cessation of liabilities. 18.1 Regarding this we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of CIT versus Babul Products Private Ltd reported in 96 Taxmann.com 82 wherein it was held as under: "3. Now so far as proposed question no.(b) is concerned, the same is squarely covered against the revenue in view of the decision of the Hon'ble Supreme Court in the case of Commissioner v. Mahindra & Mahindra Ltd. [2018] 93 taxmann.com 32/255 Taxman 305. The factual matrix, which came to be considered by....