TaxTMI 
TaxTMI 
2022 (10) TMI 685
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....creditors of Rs.15,81,908/-. 2. In spite of issue of notice fixing the date of hearing on several dates none appeared on behalf of the assessee nor any adjournment was moved. We disposed off the appeal on hearing the Ld. DR on merits of the addition/disallowance made by the Assessing Officer. 3. With regard to ground nos. 1 to 3 of grounds of appeal of the Revenue i.e. deletion of addition made u/s 68 of the Act in respect of unsecured loans from directors and promoters is concerned we observe that in the course of assessment proceedings the assessee was required to furnish the details of unsecured loans in respect of various parties listed out by the Assessing Officer in the assessment order at page 2 including loan from directors and pr....
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.... been taken in earlier years and standing in the books of account of the appellant in the present year have been seen. It was also submitted by the appellant that during the course of assessment proceedings also the entire details of unsecured loans were furnished to the Assessing Officer extract from the submission of the appellant is under: - "That during the course of assessment proceedings, the appellant company was asked to submit the details of unsecured loans given and received during the year. The appellant company categorically explained that during the year under assessment they have not so far received any fresh unsecured loans either from the directors, promoters or from other persons if any, as there appears to be the opening....
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....al year for which income is being assessed. Once an amount is being credited in the books the next issue is a reasonable explanation for the amounts credited is required to be furnished by the assessee. It is only when the assessee fails to furnish a reasonable explanation for the amount in his books can Section 68 be invoked. Thereafter an amount credited is treated as income of the assessee (in the year in which such amount is credited). In the present case the addition fails on very first requirement of Section 68. No amount has been credited in the year under reference and therefore no addition can be made u/s 68 in respect of these accounts. The addition therefore of Rs.1,39,51,852/- is therefore deleted." 5. On perusal of the Ld. CIT....
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.... reference to static creditors which have been added back u/s 41(1). The AO in his order has noted that the appellant had no intention to clear the balance of creditors outstanding in the books and there was no effort of recovery from the said creditors. These creditors were outstanding for a period of more than 3 years in the hands of the appellant company. Consistent legal position in this regard is that an addition u/s 41(1) can be made only when the amount have been written off by the appellant company in its books of accounts. The judgment of Delhi High Court in Vardhaman Overseas Ltd. 343 ITR 401 is basically clear on this account. The operative part of the judgment is quoted hereunder: "11. The question before us is limited to the ....
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....fy that Explanation 1 which was inserted w.e.f. 01.04.1997 is not attracted to the present case since there was no writing off of the liability to pay the sundry creditors in the assessee's accounts. Therefore, as rightly pointed out by the Ld. Standing Counsel for the Income Tax Department, the question has to be considered de hors Explanation 1 to Section 41(1). When we do so, what we find from clause (a) is that in order to invoke the section, it must be first established that the assessee had obtained some benefit in respect of the trading liability which was earlier allowed as a deduction. There is no dispute in the present case that the amounts due to the sundry creditors had been allowed in the earlier assessment years as purchase pr....
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....ounsel. ................. 16. In our opinion, the judgment of the Supreme Court in CIT vs. Sugauli Sugar Works (P) Ltd. (supra) is a complete answer to the contention of the Ld. Standing Counsel. In the case before the Supreme Court for a period of almost 20 years the liability remained unpaid and this fact formed the basis of the contention of the Revenue before the Supreme Court to the effect that having regard to the long lapse of time and in the absence of any steps taken by the creditors to recover the amount, it must be held that there was a cessation of the debts bringing the case within the scope of Section 41(1). In the case before us, the identical contention has been taken on behalf of the Revenue, though the period for which....