TaxTMI 
TaxTMI 
2023 (7) TMI 651
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....ditors more than two years old appearing in the balance sheet of the appellant company totaling at Rs. 2,07,29,190/-. These liabilities were incurred by the company in respect of the expenditure incurred in the preceding years, the genuineness of which has not been disputed in the relevant preceding years. Moreover, there was no remission or cessation of the said liabilities by the said creditors nor the appellant company has written off these liabilities in its books of accounts during the year. b) The assessing officer erred on facts and in law by raising doubts over the genuineness of the creditors just because they were more than two years old and treating them as unexplained cash credit u/s 68 of the Income Tax Act, 1961. The ....
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....essing Officer ("AO") noticed that there were brought forward creditors amounting to INR 2,07,29,190/-. The assessee was show-caused by the Assessing Authority to explain the outstanding creditors. The response of the assessee was not found acceptable and the Assessing Authority proceeded to make disallowance of INR 2,07,29,190/- u/s 68 of the Act. 4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions, sustained the addition. Although, he made addition u/s 41(1) of the Act instead of section 68 of the Act, as made by the Assessing Authority. 5. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal. 6. Apropos to Grounds of appeal Nos. 1(a),....
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....6100.97 Vikram Koria More than 2-years 153089 Total 2,07,29,190 The A/R of the assessee vide note sheet dated 21/12/2017 was show caused as to why 3-years outstanding sundry creditors should not be added back to the income of the assessee as the liability from them has ceased to exist. In response to the above show cause assessee submitted its reply, which after perusal was found not satisfactory. The creditors are more than 3- years old and they have not taken any step for recovery of the outstanding demand. It raises doubt over the genuineness of the creditors. Hence, an amount of Rs. 2,07,29,190/- is being disallowed u/s 68 of the Act and is added back to the income of the assessee. Penalty proceedings u/....
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....velled beyond the jurisdiction conferred by the Act. Moreover, both the Authorities have failed to take note of the binding judgement of the Hon'ble Delhi High Court in the case of CIT-III vs Shri Vardhman Overseas Ltd. (supra) wherein Hon'ble High Court after examining the law on the issue has held as under:- 23. "In the course of his arguments, the learned standing counsel referred to Section 28(iv) of the Act, according to which the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable to income tax under the head profits and gains of business or profession. He submitted that since the amounts remained unpaid to the sundry creditors fo....
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....an Penkar v. CIT (1948) 16 ITR 183 holding that remission of a liability in a subsequent assessment year in respect of which the assessee had obtained a deduction in an earlier assessment year, can never become income for the purpose of taxation, where the assessee maintains accounts in the mercantile system of accounting. Thus, it may be seen that Section 10(2A) of the Indian Income Tax Act, 1922 and Section 41(1) of the present Act of 1961 were intended only to govern a particular factual situation. Section 28(iv), on the other hand, is a general provision which brings to assessment the value of any benefit or perquisite arising to the assessee from the business carried on by him. If, as contended before us by the learned standing counsel....
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....on of the debt which resulted in a benefit to the assessee which should be brought to tax under Section 41(1). This argument was not given effect to by the Supreme Court, nor did it consider fit to apply Section 28(iv). It is a well settled rule of interpretation of statutes that a construction that reduces one of the two provisions in a statute to a useless lumber or a dead letter would not amount to a harmonious construction and that a familiar approach in such cases is to find out which one of the two provisions is a special provision made to govern a certain situation and to exclude that situation from the applicability of the general provision. If we apply this rule of interpretation to the case before us, we must necessarily hold that....