TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 899
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....rials recovered during the same, proceedings under Section 158BC read with Section 158BD of The Income Tax Act, 1961 (in short, 'the Act') were initiated by the respondent. Pursuant to the same, notice dated 19.03.2004 was issued calling upon the assessee firm to file their return of income for the block period between 1997-1998 to 2002-2003, upto 31.03.2003. Upon receipt of the same, by a reply dated 30.04.2004, the assessee sought extension of time to file their return, which was not acceded to. Finally, they filed their return on 20.12.2004 admitting a total income of Rs. 1,02,00,000/- during the block period upto 31.03.2003. After examining the statement of the Managing Director of the assessee firm, the documents recovered during the search and also the return filed by the assessee firm on 20.12.2004, the respondent, by the assessment order dated 21.07.2005, determined the total and undisclosed income of the assessee firm at Rs. 1,85,47,438/- and levied tax and surcharge thereon. 3. Aggrieved by the order of assessment passed by the Assessing Officer, the assessee firm filed an appeal before the Appellate Authority, wherein, it was contended on the side of the assesse....
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.... judgment to ignore the fact that the two trade liabilities in respect of S&S Engineers & Contracts and M/s. Sri Amman Trading Co., have been written off in the regular books of accounts for financial year 2002-2003 and the same is offered to tax in the return of income for financial year 2003-04 is not genuine.... 5.4 The provision of liability clearly shows that it is for the assessee to decide as to when the cessation of liability occurred and in which previous year he has to write it off. In the appellant's case the two trade liabilities were treated by the assessee to have cessation and that the cessation of liability has occurred in the financial year 2002-2003. There is no reason to dispute the assessee's judgment that cessation of liability in respect of two concerns had occurred in the financial year 02-03. Since the two liabilities have been written off in the year 02-03 and has been offered to tax under Section 41 (1) in the return of income u/s.139 there is no justification for treating these two trade liabilities as undisclosed income. Nevertheless in respect of the other two trade liabilities totalling to Rs. 1,56,776/- it is reasonable to hold that cessatio....
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....al is right in law in holding that the amount of Rs. 11,14,466/- represented "undisclosed income" of the assessee for the purpose of Chapter XIV B of the Income Tax Act? 8. The learned counsel for the appellant submits that the assessing officer completed the assessment proceedings by determining the total and undisclosed income of the assessee at Rs. 1,85,47,438/-. Out of the amount determined by the assessing officer, the appellant / assessee is aggrieved by the addition made towards certain outstanding credits over a period of time amounting to Rs. 11,14,465/- payable to the dealers namely (i) M/s. S&S Engineers and Contracts to the tune of Rs. 8,27,914/- (ii) M/s. Sriram Sales & Suppliers for Rs. 1,33,716/- (iii) M/s.Sri Amman Trading Company for Rs. 1,29,776/- and (iv)Modern Packers for Rs. 23,060/-, which amounts were treated as income under Section 41(1) of the Act. The assessing officer concluded so, based on the entries reflected in the books of accounts maintained by the appellant / assessee. According to the learned counsel, the said amounts were withheld due to poor performance of the contractor and/or there was a dispute between the said traders and the appellant as r....
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....d for taxation in the return filed by them, the same were not already written off in their books of accounts maintained upto 31.03.2003. Therefore, the assessing officer, on careful examination of the materials placed, came to the conclusion that the static credit balances shown as liabilities outstanding are no longer held so, in the absence of any confirmatory letters from the said parties. According to the learned counsel, when a particular amount payable to a party during the course of business is not paid and withheld, the same has to be included in the income of the assessee and is taxable. In this context, the learned counsel relied on the decisions of this Court in R.Rangasamy v. Deputy Commissioner of Income Tax, Central Circle III [264 CTR 410 (Madras)] and the Patna High Court in Commissioner of Income Tax, Central, Patna vs. Harsh Kochar [(2016) 69 Taxmann.com 322 (Patna)] and submitted that if, based on the materials seized during search, additions are made by the Assessing Officer, such determination cannot be said to be arbitrary and hence, the Tribunal has rightly held that when certain trade liabilities of the assessee incurred in the normal course of business are ....
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....rdingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. Explanation 1.-For the purposes of this sub-section, the expression "loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof" shall include the remission or cessation of any liability by a unilateral act by the first-mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in hi....
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....he Act, as undisclosed income and hence, the said provision is not applicable to the facts of the present case. 15. We find that the Tribunal after careful analysis of the materials, has held that only after the search, the assessee came forward and offered two of the four amounts for taxation as liability no longer in existence in the return filed for the financial year 2002-03; and that, it was not the case of the assessee that these sums were already written off in the books upto 31.03.2003. Further, it was pointed out by the Tribunal that the assessing officer made the additions by holding that the static credit balances shown as liabilities outstanding are no longer held so, in the absence of any confirmatory letters from the said parties and hence, the same are forming part of the undisclosed income of the block period. After holding so, the Tribunal rejected the contention of the assessee and set aside the order of the appellate authority and thereby restored the order of the assessing officer. 16. In R.Rangasamy case, mentioned above, on the side of the Revenue, it was held by this court that the filing of returns by the assessee after the date of search and before issuan....