TaxTMI 
TaxTMI 
2021 (2) TMI 664
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....he Income Tax Act, 1961 (for short the 'Act'). 2. Brief facts of the case are that the assessee a partnership firm working as civil contractors and engineers, filed its return of income for the assessment year under consideration declaring total income of Rs. 1,71,48,704/-. The AO passed assessment order u/s 143 (3) of the Act and determined the total income of the assessee at Rs. 3,81,92,220/- , inter alia making addition of Rs. 1,88,96,549/-, treating the sundry creditors as bogus and Rs. 17,94,574/- u/s 40A (3) of the Act. The assessee challenged the assessment order before the CIT(A). The Ld. CIT(A) after hearing the assessee, deleted the aforesaid additions made by the AO. Against the said order, the revenue has filed the present ap....
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..... 1 and 2, the revenue has challenged the action of the Ld. CIT (A) in deleting the addition of Rs. 1,88,96,549/- made by the AO u/s 41 (1) of the Act. The Ld. Departmental Representative (DR) submitted before us that the Ld. CIT (A) has erred in deleting the addition in question without appreciating the fact that the assessee has not brought anything on record to show that the creditors have been following up for payments due to them. The Ld. DR further submitted that the Ld. CIT (A) has failed to refer the additional evidence produced by the assessee under Rule 46A of the Income Tax Rules, to AO for verification. The Ld. DR further pointed out that in some of the cases, the creditors have filed civil suits for recovery against the assesse....
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.... to make disallowance u/s 41(1) of the Act. Hence, there is no infirmity in the order passed by the Ld. CIT (A) to interfere with. 6. We have heard the rival submissions and perused the material on record in the light of the rival contentions. The Ld. CIT (A) has deleted the addition made by the AO holding as under:- "4.2.2 I have gone through the submissions of the appellant along with the views enumerated by the AO in his Order and have come to the understanding that there is weight in the argument and reasoning given by the Ld. AR. It is incorrect on the part of the AO to assume that the liabilities of sundry creditors stand cancelled or that the liabilities of the creditors are not genuine. If a debt becomes time barred, it ....
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....y the section. Therefore, the High Court was right in holding that the assessee 's unilateral entry in the accounts transferring the amount to the capital reserve account would not bring the, matter within the scope of section 41." 4.2.3 The Ld. AR stated that in spite of submitting the details of the payments made to the sundry creditors as appearing in the books as on 31st March 2013 along with details of payments being made to the sundry creditors in the subsequent years, the AO disallowed a sum of Rs. 1,88,96,549/- u/s. 41(l). If the A.O. had any doubt about the credit balances of the creditors he should have issued notices u/s. 133(6) and called the details of the outstanding balances which has not been done. It shows that....
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....n courts for recovery, the appellant has shown documentary evidence towards their settlement in the subsequent years both to the AO as well as at the appellate stage. The sundry creditors cannot be said to be bogus or that the liability payable by the appellant to the sundry creditors has been extinguish. Hence, the disallowance made of Rs. 1,88,96,549/- u/s. 41(1) is against the provisions of law and is therefore deleted. The ground of appeal no.2 is Allowed." 7. The Ld. CIT (A) has considered the plea of the assessee that since it had furnished the details of payments made to the sundry creditors appearing in the books as on 31st March, 2013, the AO should have issued notices u/s 133 (6) and called the details of the outstanding balanc....
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....ame. 9. We have perused the material on record in the light of the rival contentions of the parties. The Ld. CIT (A) has deleted the addition holding that the opening and closing balance of the sundry creditors remain intact through of the years. Observations of the Ld. CIT (A) are as under: "4.3 The ground of appeal No. 3 relates to disallowance of cash payment above Rs. 20,000/- in the financial year 2012- 2013 amounting to Rs. 17,94,574/- u/s 40A(3). The Ld. A.R. has submitted that the A.O. has disallowed the credit balances of 24 parties to whom it is alleged that payments are made in cash. The Ld. A.R. has placed a tabulation sheet incorporating the opening balances of sundry creditors as on 01.04.2012 and as on 31.03.2013.....