AI Drafter 
TaxTMI 
TaxTMI 
2021 (8) TMI 153
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....se and in Law, the CIT(A) was justified in deleting the addition made by the Assessing Officer under section 41(1) of the Income-tax Act, 1961 amounting to Rs. 5,46,13,189/- as the case was covered by Explanation to section 41(1) of the IT Act" ? 2. Whether on the facts and circumstances of the case and in Law, the CIT(A) was justified in deleting the addition made by the Assessing Officer under section 41(1) amounting to Rs. 5,46,13,189/-, without appreciating the fact that the creditors were confirmed in response to notice u/s 133(6) that the liabilities were not existing in their books of accounts during the relevant AY 2015-16"? 3. Whether on the facts and circumstances of the case and in Law, the CIT(A) was justified ....
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....the addition made by the Assessing Officer under section 41(1) of the IT Act ignoring the fact that under the mercantile system of accounting, once the liabilities are ceased to exist in the books for AY 201516, the provisions of section 41(1) are attracted for the relevant AY 2015-16 itself rather than in AY 2016-17 as claimed by the assessee in its Affidavit"? 7 The appellant prays that the order of CIT(A) on the above grounds be set aside and that of Assessing Officer be restored. 8 The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 2. The Brief facts of the case are that the assessee company is engaged in the business of trading activities in pharmaceutical and inter....
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....ly from the creditors referred at Para 4.4 of the assessment order. The A.O. has examined the submissions and dealt on the provisions of Sec. 41(1) of the Act to treat the outstanding liabilities as the income chargeable to tax and issued show cause notice to the assessee. Whereas, in compliance to the notice the assessee has filed a letter on 10.11.2017 referred at Para 4.6 of the assessment order with the details of sundry creditors payable including expenses and other liabilities outstanding for more than 3 years as per the books of accounts, and relied on the judicial decisions. The assesse has filed additional explanations on 15-11-2017. 4.Whereas, the A.O. find that the assessee in the financial year 2015-16 relevant to A.Y.2016....
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.....2019 on the disputed issue referred at page 17 Para 3.1.3 of the CIT(A) order on the provisions of Sec. 41(1) of the Act and the details of the parties whose credit balances have been added by the A.O. The CIT(A) relied on the submissions and affidavit filed by the assessee along with the statements of sundry creditors. The Ld.CIT(A) has dealt on the submissions, provisions of law and facts from Para 3.1.7 to 3.1.11 of the order and relied on the ratio of decisions of Hon'ble supreme court, Honble High Court and Hon'ble Tribunal referred at page 38 Para 3.1.12 to 3.1.19 of the order and has deleted the addition and allowed the assessee appeal. Aggrieved by the CIT(A) order, the revenue has filed an appeal before the Honble Tribunal. 6. ....
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....idered the overall facts and relied on the judicial decisions and granted relief to the assessee. At this juncture, we considered it appropriate to refer the observations of the CIT(A) at page 58 Para 3.1.20 to 3.1.22 of the order which is read as under; "3.1.20 It is also found here that the AO in this case has not conducted even the proceedings u/s 133(6) in a proper manner. For example, he has not levied any penalty on any party for having not complied with the notice u/s 133(6) issued by him. In fact, it seems like he has not even initiated any penalty proceedings u/s 133(6) in any of the cases. This clearly shows that he has proceeded to conduct the proceedings u/s 133(6) in a half-baked and incomplete manner. He also does ....
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....O some basis for making additions in respect of the so-called unproved creditors. In the absence of any such exercise having been done by the AO to make huge additions of Rs. 5,46,13,189/- is more an exercise in vanity than we deserved attempt at finding out a real case of tax evasion. 3.1.21. Keeping in view the details discussion above of the facts and circumstances of the matter as well as the prevailing legal opinion on the matter, it is hereby held that no addition can be made solely on the basis of non-compliance of notices u/s 133(6). There has to be compulsorily some more evidence other than mere non compliance to sustain such a huge addition. As a result, the addition made of Rs. 5,46,13,189/- cannot be sustained. ....