TaxTMI 
TaxTMI 
2022 (12) TMI 493
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....ng 15,44,040 Total 32,61,337 3. That the Ld. CIT(A) erred on facts and in law in confirming the addition aggregating to Rs.76,29,910 u/s 41(1) of I.T. Act on account of cessation of liability of the following: Name of the creditors Credit Balance (Rs.) a) Calm Constructions 38,98,955 b) KD Constructions 19,09,350 c) Sarasan Pillai 5,36,540 d) Sameer Furniture 6,95,250 e) Shree Chakra 5,89,815 Total 76,29,910 4. That the appellant reserves her right to add, amend/modify the grounds of appeal." 3. The present appeal filed by the assessee is time barred by 272 days and an application seeking condonation of delay has been filed by the assessee. Further, the assessee relies on the order of Hon'ble Supreme Court in Suo Motu Writ Petition (Civil No.3 of 2020) dated 08.03.2021 and Miscellaneous Application 665 of 2021 dated 19.07.2021. 4. Ld.CIT DR opposed these submissions and submitted that there is no reasonable cause. 5. Considering the order of Hon'ble Supreme Court wherein Hon'ble Supreme Court in Miscellaneous Application 665 of 2021 (supra) has held as under:- "We also take judicial notice of the fact that the ste....
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....nd submitted various details/information as called by AO, same was examined and placed on record. Thereafter, assessment was framed by the Assessing Officer ["AO"] u/s 143(3) of the Act vide order dated 23.12.2016 and the AO assessed the income at Rs.1,43,64,590/- of the assessee. Thereby, the AO made addition of Rs.4,70,000/- by treating the amount as deemed dividend u/s 2(22)(e) of the Act, a sum of Rs.32,94,849/- and Rs.76,29,910/- on account of cessation of liability u/s 41(1) of the Act. 8. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, partly allowed the appeal of the assessee. 9. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal. Thereby, the Ld.CIT(A) confirmed the addition of Rs.4,70,000/- qua deemed dividend and in respect of cessation of liability, the Ld.CIT(A) confirmed addition to the extent of Rs.32,61,337/- and Rs.76,29,910/- respectively. 10. Ground No.1 raised by the assessee in this appeal is against the confirming the addition of Rs.4,70,000/- u/s 2(22)(e) of the Act. 11. Ld. Counsel for the assessee reiterated the submissions as made in the written synopsi....
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....ed Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. We find that the AO has observed that the assessee had shown an amount of Rs.4,70,000/- under 'Other payables' being payable to M/s. Niharika Impex Pvt.Ltd. as on 31.03.2014. The assessee was asked as to why it should not be considered as deemed dividend u/s 2(22)(e) of the Act as nature of loan/payments was not clear from the submissions received. In response thereto, it was stated that nature of expenses incurred by M/s. Niharika Impex Pvt.Ltd. on behalf of the assessee and the amount outstanding was in nature of trade creditors. However, the explanation of the assessee was not found acceptable and the AO made addition treating the amount as deemed dividend. The contention of the assessee is that no payment has been received during the year under consideration therefore, addition of opening credit balance of Rs.4,70,000/- is contrary to the judicial pronouncements. In support of this, reliance is placed upon the judgement of the Hon'ble Bombay High Court rendered in the case of CIT vs Parle Plastics Ltd. Reported in 332 ITR 63. Ld.CIT(A) has decided....
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....Act vide para 4.2 to 4.2.2 at pages 6-7 of the impugned assessment order. CIT(A): confirmed addition of Rs.32,61,337 out of total addition of Rs.32,94,849 vide para 5.2 to 5.2.7 at pages 9-11 of the appellate order. Submissions/documents relied upon: (A) Retention money (K.D. Constructions) - Rs. 3,04,337 1. Copy of A/c of current liabilities (other payable) as on 01/04/2013 and 31/03/2014 is placed at page 37 of PB. 2. Copy of ledger A/c of Retention money (K.D. Constructions) in the books of the Assessee for the year under consideration is placed at page 38 of PB. It is evident from the ledger A/c of such party that no transaction was carried out during the year under consideration and only opening credit of Rs.3,04,337 as on 01/04/2013 has been carried forward to the next financial year. The issue as to the genuineness of a credit entry, thus does not arise during the year under consideration and this issue could only be examined in the year when the liability was recorded as having arisen. In other words, the addition made u/s 41(1) of I.T. Act is legally untenable. In this connection, reliance is placed on Jurisdictional Delhi High Court judgment in the case of CIT v....
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...., the claim by M/s Elephanta Oil & Vanaspati Ltd. can also not be considered as time barred as the period of limitation would stand extended. Even, otherwise, it cannot be stated that M/s Elephanta Oil & Vanaspati Ltd. would be unable to claim a set¬off on account of the amount reflected as payable to it by the assessee. Admittedly, winding up proceedings against M/s Elephanta Oil & Vanaspati Ltd. are pending and there is no certainty that any claim that may be made by the assessee with regard to the amounts receivable from M/s Elephanta Oil & Vanaspati Ltd. would be paid without the liquidator claiming the credit for the amounts receivable from the assessee company. It is well settled that in order to attract the provisions of Section 41(1) of the Act, there should have been an Irrevocable cession of liability without any possibility of the same being revived. The assessee company having acknowledged its liability successively over the years would not be in a position to defend any claim that may be made on behalf of the liquidator for credit of the said amount reflected by the assessee as payable to M/s Elephanta Oil & Vanaspati Ltd. b) Jurisdictional Delhi High Court judgm....
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....see. The appeal of the revenue is dismissed". c) Jurisdictional Delhi High Court judgment in the case of CIT vs. Shri Vardhman Overseas Ltd. reported in 343 ITR 408, relevant portion from Head Notes is reproduced below: ''Held, dismissing the appeal, that the assessee had not unilaterally written back the accounts of the sundry creditors in its profit and loss account. The liability was shown in the balance-sheet as on March 31, 2002. The assessee being a limited company, this amounted to acknowledging the debt in favour of the creditors for purposes of section 18 of the Limitation Act, 1963. The assessee's liability to the creditors, thus, subsisted and did not cease nor was it remitted by the creditors. The liability was enforceable in a court of law. The amount was not assessable under section 41(1)". (B) Security against rent from Ethos Hotel & Resorts - Rs. 6,93,000 1. Copy of ledger A/c of security against rent (Tenant: Ethos Hotel & Resorts) for the year under consideration placed at page 39 of PB. It is evident from the ledger A/c of such tenant that no transaction has been carried out during the year under consideration and only credit opening balance of Rs.6,93,00....
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.... party vide registered lease agreement dated 20/02/2013, the AO was wholly unjustified in making an addition u/s 41(1) of I.T. Act on account of remission or cessation of trading liability. Therefore, the addition as made is legally untenable. In this connection, reliance is placed on the case laws as cited in Ground No. 2 above. (C) Mahimna Deshpandey (advance for sale of plot) - Rs.7,20,000 1. Copy of ledger A/c of Mahimna Deshpandey (advance for sale of plot) for the year under consideration placed at page 63 of PB. 2. Copy of confirmatory certificate of Mahimna Deshpandey confirming amount of Rs.7,20,000 receivable from the Assessee as on 31/03/2014 is placed at page 64 of PB. Her PAN No. is duly mentioned in the confirmatory certificate. The creditor having confirmed the outstanding balance of Rs.7,20,000, the AO was wholly unjustified in making an addition u/s 41(1) of I.T. Act on account of remission or cessation of trading liability. Therefore, the addition as made is legally untenable. In this connection, reliance is placed on the case laws as cited in Ground No. 2 above. 3. The above addition as made is wholly unjustified from another angle too inasmuch as the Ass....
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.... parties reflected under the head 'creditors' and 'other payables' by exercising the powers bestowed upon the AO either u/s 133(6) or 131 of I.T. Act. It is pertinent to point out here that the AO chose not to confirm the credit balances directly from such parties and therefore, no adverse inference could be drawn against the Assessee particularly when the Assessee had discharged the onus of proving the credit balances by filing the confirmations of all the parties. In view of the above facts, circumstances and the legal position, the addition of Rs.32,61,337 u/s 41(1) of I.T. Act on account of cessation of liability deserves to be deleted. At any rate, the addition as made is very excessive." 17. Ld.CIT DR opposed these submissions and supported the orders of the authorities below. 18. We have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. We find that the AO had made addition of Rs.32,94,849/-, the details thereof given at para 4.2 of the assessment order. During the assessment proceedings, the assessee was confronted as to why this liability should not be treated as cessat....
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....ly mentioned in the confirmatory certificate. 4. Copy of ledger A/c of K.D. Constructions in the books of the Assessee for the year under consideration is placed at page 70 of PB. 5. Confirmatory certificate of the debtor K.D. Constructions confirming debit opening balance as on 31/03/2013 & debit closing balance as on 31/03/2014 of Rs. 19,09,350 receivable from the Assessee is placed at page 71 of PB. PAN No. of K.D. Construction is duly mentioned in the confirmatory certificate. 6. Copy of ledger A/c of Sarasan Pillai G in the books of the Assessee for the year under consideration is placed at page 72 of PB. 7. Confirmatory certificate of the debtor Sarasan Pillai G confirming debit balance of Rs.5,36,540 as on 31/03/2014 receivable from the Assessee is placed at page 73 of PB. PAN No. of Sarasan Pillai G is duly mentioned in the confirmatory certificate. 8. Copy of ledger A/c of Sameer Furniture in the books of the Assessee for the year under consideration is placed at page 74 of PB. 9. Confirmatory certificate of the debtor Sameer Furniture confirming debit balance of Rs.6,95,250 as on 31/03/2014 receivable from the Assessee is placed at page 75 of PB. PAN No. of Sa....