TaxTMI 
TaxTMI 
2023 (3) TMI 192
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....g additional evidence without granting requisite opportunity to the Assessing Officer. 3. That the appellant craves to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. ITA NO. 119/JODH/2020 : 1. Whether on the facts and circumstances of the case, and in law the ld. CIT (A) erred in deleting the addition of Rs. 15,95,38,544/- (1,63,00,741+9,94,269+47,56,615+68,12,269+13,06,74,650) made on account of difference in contract receipt shown in Form 26AS vis-à-vis receipts accounted by the assessee. 2. On the facts and circumstances of the case and in law the ld. CIT (A) erred in sustaining disallowance of Rs. 15,00,000/- against disallowance of Rs. 42,34,358/- out of various expenses made by the AO in absence of verification. 3. On the facts and circumstances of the case and in law the ld. CIT (A) erred in holding the activity of ready mix concrete to be manufacturing and hence allowing additional depreciation of Rs. 51,77,474/-. 4. On the facts and circumstances of the case and in the law the ld. CIT (A) had erred by admitting additional evidence without granted requisite oppo....
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.... vide his order after discussing the matter in great details allowed the appeal of the assessee by deleting the addition. Now the Revenue is in appeal before us. 3. Before us, the ld. D/R supported the order of the Assessing Officer. The ld. D/R submitted that the assessee has failed to furnish the details in respect of the credit entries and advances received from the customers to the satisfaction of the assessing officer. He, therefore, submitted that the addition made by the AO be sustained. 4. On the other hand, the ld. Counsel for the assessee submitted that the assessee was having outstanding closing balance comprising of sundry creditors and advance from customers of Rs. 25,91,01,791/- and Rs. 8,85,08,618/- respectively totaling to Rs. 34,76,10,409/- which are duly reflected in the return of income filed by the assessee. The ld. A/R submitted that credit entries are genuine and reflected in the regular books of accounts maintained by the assessee. The books of accounts of the assessee are duly audited as per the provisions of section 44AB of the IT Act and the necessary audit report in Form No. 3CA and 3CD were furnished to the Assessing Officer. The ld. A/R further su....
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....ection 41(1) or under section 68 of the Act as the AO himself did not specify the section under which he intended to make the addition. The ld. A/R further relied on the judgment of Hon'ble Punjab & Haryana High Court in the case of G.P. International Ltd. 325 ITR 25 (P&H) wherein it is held that " provisions of section 41 cannot be applied if the assessee is still showing the liability ". The assessee further relied on a number of decisions relating to the issue under consideration, few of the decisions are as under :- ITO vs. Bhavesh Prints (P) Ltd. 142 TTJ 128. Tamilnadu Ware Housing Corporation 292 ITR 310 . Willson and Co. Ltd. 121 TTJ 258 (Chennai Trib.) Dy CIT vs. Amod Petrochem (P) Ltd. (2008) 217 CTR (Guj.) 401. CIT vs. Usha Stud Agricultural Farms Ltd. (2008) 301 ITR 384 (Delhi) Relying upon the above cited decisions, the ld. A/R has submitted that so long the assessee is showing the liability in the books even if it is time barred, it is neither remission nor cessation of trading liability. Only when the assessee treated the liability as a remission or cessation, the same will be treated as income under section 41(1) of the....
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....all creditors with opening and closing balances which were ignored by the AO. Therefore, the condition for treating the same as income of the assessee under section 41(1) is that the liability ceased to exist as at the end of the financial year relevant to the year under consideration. The AO has not written any facts or any evidence on record to show that the said liability has ceased to exist except doubting the genuineness of the creditors. The ld. CIT (A) dealt with the issue elaborately while deciding the issue of sundry creditors and advances from the customers by observing in paras 7 to 11 of his order as under :- " 7. It is seen that the AO has not specified any section under which this addition was made, however, considering the nature of this addition, it could be either u/s. 41(1) of the Act or u/s. 68 of the Act. From the facts and details as furnished by the appellant, it is seen that total sundry creditors consisted of following items:- Particular Amount Advances from customers 8,85,08,618/- Old Creditors 25,91,01,791/- Total 34,76,10,410/- Advances from Customers Rs. 8,85,08,618/- Out of total addition of Rs. 34,76,10,410/....
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....n against the Sale of Assets & equipments & machinery. 5. Further Jurisdiction of Wagad Infraprojects Private Limited (WIPL) is also with Ld. AO ACIT/DCIT, Circle-1, Udaipur and details were also submitted at the time of hearing for WIPL for AY 2014-15. 6. Thus these two amounts of Advances from Wagad Infraprojects Pvt. Ltd. i.e. 3,49,17,898 + 5,25,16,291= 8,74,34,189 were squared up after 31.03.2014 against supply of Assets & Equipments as per Ledger a/c enclosed again for ready reference. Total 8,85,08,618 Considering the facts of the case and above details, I find force in the appellant's claim. It may be noted that all these details were submitted by the appellant before the AO vide its replies dated 17.06.2016 and 21.12.2016 during the course of assessment proceedings, however, the AO failed to consider the facts and details mentioned above in respect of total credit of Rs. 8,85,08,618/-. The appellant has duly established that this amount of Rs. 8,85,08,618/- outstanding was paid off/cleared against supply of plant & machinery, Equipment etc. in subsequent years as under:- Outstanding as on 31.03.2014 Paid/Debited 2014-15 2015-16 20....
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....en in table below :- As on YEAR Ended PARTICULAR 31.03.2014 31.03.2013 31.03.2012 31.03.2011 2013-14 2012-13 2011-12 2010-11 Advance from Customer (A) WIPL *87,434189.00 5,25,16,291.00 - - Other 1,074,429.00 11,823,624.00 - - Total (A) 88508618.00 6,43,39,915.82 SUNDRY CREDITORS(B) 259,101,790.79 303,940,262.61 319,863,553.74 198,793,676.98 Total (A+B) 347,610,408.79 36,82,80,178.43 319,863,553.74 198,793,676.98 From the above table and details furnished by the appellant before me, it is further observed that the closing balance of the creditors in the immediate preceding previous year as on 31.03.2013 was Rs.30.39 Crores which was reduced to Rs.25.91 Crores during the previous FY 2013-14 relevant to the assessment year under consideration. Thus,....
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....p; 259,101,790.79 303,940,262.61 319,863,553.74 198,793,676.98 Total (A+B) 347,610,408.79 36,82,80,178.43 319,863,553.74 198,793,676.98 9. As can be seen from the above tables, almost all sundry creditors were of earlier years, therefore, there is no justification to treat the same as unexplained credit entry of the year under consideration as per the ratio laid down in various judicial precedents. In the case of CIT v. Usha Stud Agricultural Farms Ltd. (2008) 301 ITR 384 (Del), the Hon'ble Delhi High Court held as under:- "since it is a finding of fact recorded by the Commissioner (Appeals) that the credit balance appearing in the accounts of assessee, did not pertain to the year under consideration, under these circumstances, the assessing officer was not justified in making the impugned addition u/s 68 and as such no fault could be found with the order of the Tribunal which had endorsed the decision of Commissioner (Appeals)." Similarly in case of Mahabir Prasad Prem Chand Jain v.....
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....Allahabad High Court in the case of CIT Vs Pancham Dass Jain (2006) 205 CTR 440 held as under:- "The Tribunal has recorded a categorical finding of fact based on appreciation of materials and evidence on record that the AO had accepted the purchases, sales as also the trading result disclosed by the assessee. It had recorded a finding that the two amounts represented the purchases made by the assessee on credit and, therefore, the provisions of Sec. 65 could not be attracted in the present case. The view taken by the Tribunal on this issue is sustainable inasmuch as, on the basis of the findings recorded by it that these two amounts represented purchases made by the assessee on credit and the purchases and sales having been accepted by the Department, the question of addition of the said two amounts under Sec. 68 did not arise inasmuch as the provisions of Sec. 68 would not be attracted on the purchases made on credit." In fact, the AO has not made any adverse inference regarding the trading results declared by the appellant firm including the transaction with these parties. The appellant duly deducted the TDS on the payments made to these parties. The entire paym....
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....he case of Continental Carbon India Ltd. vs. ITO (ITA Nos. 5269, 5270 & 5271/Del/2010 Asstt. Yrs: 2003-04, 05-06 & 06-07), the Hon'ble Delhi Bench "B" New Delhi held as under:- "The assessee has discharged its onus to file evidence for genuineness of suppliers. The issue of creditworthiness will not be applicable in this case as the credit balances are due to purchases made by the assessee from these suppliers. Therefore, the discharge of burden of creditworthiness is implicit from these facts. Looking from any angle, the assessee cannot be held to be liable for any nondischarge of onus. In these circumstances, the additions cannot be made only because the departmental authorities failed to exercise their power and duties for serving and enforcing the summons. In the entirety of facts and circumstances of the case and the evidence produced by the assessee, the additions made u/s 68 on account difference in balances or non-receipt of reply to summons etc. cannot be made in the hands of the assessee. All these additions in the years before us are deleted. Corresponding assessee's grounds in A.Y. 2003-04 and 2005-06 are allowed and that of revenue dismissed." Further,....
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....deemed to be profits and gains of business or profession and accordingly 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 ** ** ** [Explanation 1 - For the purposes of this sub-section, the expressionloss 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 his accounts." Explanation 1 which was inserted w.e.f. 1.4.1997 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. The question has to be considered de hors Explanation 1 to Section 41(1). In order to invoke clause (a) of Sec.41(1) of the Act, it must be first established that the assessee had obtained some benefit in respect of the trading liability which was earlier allowed as....
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....of such non-existent liability would not arise. 11. The provisions of section 41(1) have been interpreted by the Hon'ble Supreme Court in the case of Sugauli Sugar Works (P) Ltd. 236 ITR 518, wherein the court concurred with the reasoning adopted by a Full Bench of Gujarat High Court in the case of CIT v. Bharat Iron & Steel Industries [1993] 70 Taxman 353/199 ITR 67, and held thus: " 9. One aspect of the matter has been completely ignored by the judgment of the Division Bench of the Bombay High Court. As pointed out already, the crucial words in the section require that the assessee has to obtain in cash or in any other manner some benefit. That part of the section has been omitted to be considered by the Division Bench of the Bombay High Court. The said words have been considered by a Full Bench of the Gujarat High Court in detail in CIT v. Bharat Iron & Steel Industries, [1993] 199 TR 67 (Guj.). The following passages in the judgment bring out the reasoning of the Full Bench succinctly: "11. In our opinion, for considering the taxability of amount coming within the mischief of Section 41(1) of the Act, the system of accounting followed by the asses....
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....consideration. In the present case, both elements are missing. There was nothing on record to suggest there was remission or cessation of liability that too during the previous year relevant to the assessment year 2007-08 which was the year under consideration. It is undoubtedly a curious case. Even the liability itself seems under serious doubt. The Assessing Officer undertook the exercise to verify the records of the so called creditors. Many of them were not found at all in the given address. Some of them stated that they had no dealing with the assessee. In one or two cases, the response was that they had no dealing with the assessee nor did they know him. Of course, these inquiries were made ex parte and in that view of the matter, the assessee would be allowed to contest such findings. Nevertheless, even if such facts were established through bi-parte inquiries, the liability as it stands perhaps holds that there was no cessation or remission of liability and that therefore, the amount in question cannot be added back as a deemed income under section 41(1) f the Act. This is one of the strange cases where even if the debt itself is found to be non-genuine from the very incept....
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....ere paid off during the Financial year 2013-14 and the outstanding Liabilities were cleared/ mostly paid in subsequent years to the extent of 52.27 percent amounting to about Rs. 19,25,08,224/- and the remaining balances were only outstanding in books of accounts. Upon perusal of the details and evidences furnished by the appellant, it is clear that in the instant case, old sundry creditor of Rs. 25,91,01,791/- as added by the AO were not written off by the appellant in the books of account and were reflecting in the books of the appellant to the extent unpaid, therefore in my considered opinion, these cannot be disallowed and added to the total income of the assessee. Considering the facts and circumstances of the case, legal position and judicial precedents cited supra, it is held that the addition of Rs. 25,91,01,791%- could not have been made either u/s. 68 or u/s. 41(1) of the Act and hence, the addition made at Rs. 25,91,01.791/- is directed to be deleted. Considering my findings contained in para Nos. 7 & 11 (Supra), the total addition of Rs. 34,76,10,409/ is directed to be deleted, ground Nos. 2 to 6 raised by the appellant regarding this issue are allowed." 5.1....
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....es are outstanding for last many years, it cannot be inferred that the said liabilities have seized to exist. The Appellate Tribunal has rightly observed that the Assessing Officer shall have to prove that the assessee has obtained the benefits in respect of such trading liabilities by way of remission or cessation thereof which is not the case before us. Merely because the assessee obtained benefit of reduction in the earlier years and balance is carried forward in the subsequent year, it would not prove that the trading liabilities the assessee have become non existent. 6.2 The aforesaid decision of the Division Bench in the case of Nitin S. Garg (supra) has been considered and followed by the Division Bench of this Court in the case of Bhogilal Ramjibhai Atara (supra) and the addition made under Section 41(1) of the Act in the similar facts and circumstances of the case is ordered to be deleted. In paragraph 8 the Division Bench has observed and held as under :- "We are in agreement with the view of the Tribunal. Section 41(1) of the Act as discussed in the above three decisions would apply in a case where there has been remission or cessation of liability duri....
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....eld that addition under section 41(1) cannot be made simply by doubting the creditor or his creditworthiness or his identity. Further, no addition can be made simply because the creditors are old. In view of the above facts as well as the various binding precedents discussed by the ld. CIT (A) hereinabove, we are of the considered opinion that no addition can be made under section 41(1) of the Act merely on the basis of doubting the genuineness of the creditor without establishing the actual cessation of liability. Hence when the assessee is showing the liability in the books of account and has repaid in the subsequent years then the addition under section 41(1) of the Act is not sustainable. Accordingly we upheld the order of ld. CIT (A) and dismiss the appeal of the revenue. 6. In the result, appeal of the Revenue is dismissed. Now we take up appeal of the Revenue in ITA NO. 119/JODH/2020 : 7. The brief facts of the case are that the assessee company is engaged in the business of Contractorship, trading of ready mix concrete (RMC) and allied activities. The assessee e-filed its return of income for the AY 2014-15 on 23.11.2014 declaring total income at Rs. 3,52,86,190/-.....
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.... CIT (A) deserves to be upheld. 10. We have heard rival contentions, perused the material available on record and deliberated upon the orders of the Revenue authorities. The AO made the addition on the ground that the assessee was unable to explain the difference between contract receipts accounted for in the books of accounts and contract receipts as per 26AS. We find that the ld. CIT (A) has dealt with the entire issue of addition of Rs. 16,05,44,170/- on account of difference in 26AS and books of accounts of the assessee para-wise in para 4.2 to 4.3 at pages 18 to 28 of his order and accordingly deleted the addition of Rs. 15,95,38,544/-. Before the ld. CIT (A), the assessee submitted party wise reconciliation of contract receipts with 26AS. The assessee has also contended that the difference in accounted receipts and 26AS are self-explanatory. The AO has made the addition for want of supporting evidence ignoring the detailed submissions and explanations furnished by the assessee. The submission of the assessee was that the book entries and ledger account of parties are sufficient evidence to explain the difference. The Learned CIT (Appeals) in para 4.2 has reproduced the par....
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....ellant's written submissions. The AO, for want of proper bills and vouchers, disallowed Rs 42,34,358/- being 1% of total claim of other expenses at Rs. 42,34,35,788/- The appellant submitted that all the expenses were incurred wholly and exclusively for the business purpose and were duly supported by proper bills and vouchers. The appellant also explained the nature of these expenses. I find that though the appellant claimed that the AO was not justified in making the addition of Rs. 42,34,358/ but failed to controvert the findings of the AO regarding various discrepancies pointed out by him in the assessment order. As per provisions of sec. 37 of the IT Act, 1961, any expenditure incurred wholly and exclusively for the purpose of business and not being in the nature of capital expenditure or personal expenses is allowable in computing the income chargeable under the head "profits and gains" of business or profession. The onus lies on the assessee to substantiate by documentary evidences when called upon to the effect that all expenditures claimed in the P&L accounts are laid out or expended wholly and exclusively for the purpose of business. The appellant has failed to establi....
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....sed by the appellant regarding this issue is partly allowed." Looking to the facts and circumstances of the case, we are of the considered view that the findings given by the ld. CIT (A) in para 8.2 (supra) are in accordance with law and accordingly deleted the disallowance. We find no infirmity in the order of ld. CIT (A), which is hereby upheld. The ground of the revenue is dismissed. Ground No. 3 of the revenue relates to holding the activity of ready mix concrete to be manufacturing and hence allowing additional depreciation of Rs. 51,77,474/-. 14. Before us, the ld. D/R supported the order of the Assessing Officer. 15. On the other hand, the ld. Counsel for the assessee has reiterated the submissions as made before the ld. CIT (A) as under :- " 26.1 The Ld. AO erred in Law and fact of the case by disallowing additional depreciation of Rs. 5177474 claimed on new plant & machineries relating to manufacture of Ready Mix Concrete (RMC). 26.2 The appellant company claim of additional depreciation on Plant & Machinery relating to Manufacturing of Ready Mixed Concrete under section 32(1)(iia) of the Act is allowable as it is engaged in the manufacturing ....
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....in respect of Raw Material consumed was also given for Manufacturing of Ready Mix Concrete (RMC). 26.8 Thus on basis of all bills, details, case Laws, claim proofs filed Additional depreciation of Rs. 5177474 is allowable to assessee company." The ld. A/R submitted that before the ld. CIT (A) the assessee submitted all the details regarding ready mix concrete, bills etc. along with other evidences which are reproduced hereinabove and after taking into consideration the facts and circumstances and evidences brought on record, the ld. CIT (A) allowed the claim of the assessee by deleting the disallowance. The ld. A/R submitted that the order of the ld. CIT (A) deserves to be upheld. 16. We have heard rival contentions, perused the material available on record and gone through the orders of the Revenue authorities. In respect of disallowance of additional depreciation claimed on new plant and machinery, we find that the ld. CIT (A) has considered the detailed submissions comprising of relevant bills on which additional depreciation were claimed along with evidences which are reproduced in para 7.1 pages 32-33 of his order. The ld. CIT (A) has deleted the disallowance of....