2022 (11) TMI 658

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.... the AO in respect of sundry creditors namely Mr. Dip Sharma [Prop. Anurag Packaging & Maa Kamakhya Packaging]. and Mr. Alok Sonthalia, [Prop. Shree Balajee Packaging]. The Ld. CIT(A') has failed to appreciate that these creditors failed to comply with the provisions u/s. 131 of the I.T. Act, 1961. (iii) On the facts and circumstances of the case the Ld. CIT(A) is not justified in facts as well as in law that, the sundry creditor namely Mr. Dip Sharma [Pro Anurag Packaging & Maa Kamkhya Pakaging] did not file his ITR except for A.Y. 2011-12. Even in the A.Y. in which he had filed his return of income i.e. A.Y. 2011-12 he has not shown any details of his sundry debtors. (iv) The appellant craves leave to add, alter or amend any or all of the appeal before or during the course of appeal. 3. Brief facts of the case as culled out from records are that the assessee is engaged in carrying on business in manufacturing of BOPP Self Adhesive Tapes, Paper Core etc. Income at Rs. 19,320/- in return filed on 30.09.2015 declared after claiming deduction under chapter VI of Rs. 10,73,120/-. Case selected for limited scrutiny followed by serving of notices u/s. 143(2) & 142(1) of the Act....

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.... section u/s. 41(1) of the Act are not applicable in the present case as the assessee has shown the creditors as liabilities in the books and the transactions are being carried out. Reference also made to the paper book containing 79 pages, which includes copies of ledger confirmations, tax audit report and the decisions relied on by the assessee. 8. We have heard the rival contentions and perused the material placed before us. The main grievance of the revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 2,91,57,521/- made by the ld. AO u/s. 41(1) of the Act under the fact that after conducting necessary enquiry the alleged sundry creditors failed to comply of the notice u/s. 131(1) of the Act and the sundry creditors, M/s. Anurag Packaging & M/s. Maa Kamakhya had not filed I.T Returns. 9. We notice that alleged additions of Rs. 2,91,57,321/- made in respect of following sundry creditors:- S. No. Name of sundry creditor Amount 1 M/s. Anurag Packaging 104,24,883 2 M/s. Maa Kamakhya Packaging 93,43,452 3 Alok Sonthalia 93,89,187 10. The provisions of section 41(1) of the Act, invoked by the ld. AO reads as follow:- Section 41(1): 41.(1) Whe....

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....ion by observing that the liability of alleged sundry creditors had ceased to exist in the case of assessee. There is a cessation of liability in case of outstanding of above sundry creditors. The assessee has relied on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Sugrauli Works (P) Ltd. (1999) 236 ITR 518/152 CTR 46 (SC), The Hon'ble Court held: "11. In our opinion, for considering the taxability of amount coming within the mischief of S. 41(1) of the Act, the system of accounting followed by the assessee is of no relevance or consequence. We have to go by the language used in s. 41(1) to find out whether or not the amount was obtained by the assessee or whether or not some benefit in respect of trading liability by way of remission or cessation thereof was obtained by the assessee and it is in the previous year in which the amount or benefit, as the case may be, has been obtained that the amount or the value of the benefit would become chargeable to income tax as income of that previous year. 12. We fully agree with the view taken by the Division Bench in C.I.T. v. Rashmi Trading (1977) Tax IR 520 Gujarat (Supra) that the only meaning that can be a....

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....Sonthalia (husband of the assessee) is concerned, we find that Mr. Alok Sonthalia is husband of the assessee. There is an opening balance of Rs. 94,92,586.87 and almost monthly payment of Rs. 9,400/- is made and the liability is payable to him. Alok Sonthalia being genuine sundry creditor/loan, which the ledger account suggests, we find that no addition was called for u/s. 41(1) of the Act for the credit balance appearing in the name of Alok Sonthalia and to this extent, the finding of the ld. CIT(A) is confirmed. 15. As regards the other two creditors namely, M/s. Maa Kamakhya Packaging & M/s. Anurag Packaging (Prop. Dip Sarma) are concerned, we find that there is a credit balance of Rs. 93,43,452/- and Rs. 1,04,24,883/- respectively. Certain observations are made by the ld. AO that both the concerns are bogus and the proprietor has no creditworthiness to deal with this transaction. As per the inspector's report, who was sent for spot enquiry by the ld. AO, Dip Sarma is proprietor of both the concerns having total turnover of at least Rs. 2 crores and above. He also observed that Dip Sharma is an auto van driver, who has no business premise/office and at the address on record....