TaxTMI 
TaxTMI 
2022 (9) TMI 1554
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....1. 3. On the basis of the facts and circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 4. That the revenue craves leaves to add, amend, alter or withdraw any ground of appeal. 5. It is therefore prayed that the order of the CIT(A), Jamnagar may kindly be set aside and that of Assessing Officer be restored. 3. The only issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 10,17,84,750/- and Rs 42,98,84,771/- made under section 41(1) of the Act being cessation or remission of liability. 4. The assessee is a private company and engaged in the business of manufacturing of coke. The assessee during the year has shown following parties as sundry creditors: i. Khodiyar Enterprise ii. Krishna Enterprise iii. Karan Enterprise iv. SK Corporation 5. The AO during the assessment proceeding issue notices under section 133(6) of the Act to the above parties but no response was received. Thereafter, the AO required the assessee to produce the parties in person but failed, however, the assessee provided alternate addresses of the parties....
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....e. Also the basis of writing off the same in the profit loss account was not explained. Hence the AO treated the outstanding balance of Rs. 10,17,84,750/- from these parties as income of the assessee under section 41(1) of the Act. 5.6 Likewise, the AO further held that if the purchases were made against letter of credit then in such a situation, the liability should have been reduced by the amount of LC. Further, from the perusal of bank statement of the assessee it was not established that M/s Kabra Brother is not the creditor for Rs. 71,29,78,695/- in the books of the assessee. The assessee also failed to reconcile the difference as per the confirmation received from M/s Kabra Brother. Thus the AO treated the difference amount of Rs. 42,98,84,771/- as income of the assessee under section 41(1) of the Act. 6. On appeal by the assessee, the learned CIT(A) deleted the addition made by the AO by observing as under: I have duly considered the submission of the appellant, remand report of the AO, rejoinder of the appellant and assessment order. There are basically three grounds of appeal which are dealt as under. 7.1 Addition of Rs. 10,17,84,7507- u/s.41(3) ....
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....unt copy furnished by M/s Kabra Brothers to the A.O. the closing balance was Rs. 28,30,93,924/-. Therefore the difference between the closing balance of Rs. 42,98,84,771/- ( (Rs.71,29,78,695/- - Rs. 28,30,93,924/-) was added by the Assessing Officer on the ground that the appellant has not satisfactorily explained the difference. In the course of appeal proceedings the appellant filed written submission and original certificate issued by SBI, Overseas Bank, Koikata which shows dates of LCs opening in favour of M/s Kabra Brothers dated 04.08.2015, which shows details of bills discounted with SBI, DN road branch, Mumbai. A remand report was called for from the A.O. on appellant's submission. In the remand report furnished a very vague comment has been given by the A.O. on reconciliation submitted by the appellant. The appellant submitted that the difference was because of discounting of LCs by M/s Kabra Brothers with SBI, DN Road Branch, Mumbai in the financial year 2011-12 before the due dates for payment of LCs. As per the certificate of M/s.kabra Brothers the LCs were discounted in the financial year 2011-12. From the certificates it could be se....
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....h otherwise would not be his income; and 4. Such value of benefit is made chargeable to income tax as the income of the previous year wherein such benefit was obtained. 10.2 From the above, it is revealed that to apply the provisions of section 41(1) of the Act, the condition precedent is that there should be an allowance or deduction in the assessment for any year in respect of allowance, expenses or trading liability incurred by the assessee and thereafter in any previous year if the creditor waives any such liability, then assessee is liable to tax under section 41(1) of the Act. 10.3 The provisions of Section 41(1)(a) of the Act casts a burden on the assessee to establish remission and cessation of liability in relevant assessment year where benefit has been obtained earlier by the assessee. 10.4 In West Asia Exports & Imports (P.) Ltd. v. Asstt. CIT, reported in 104 taxmann.com 170 the Hon'ble High Court of Madras while construing the provisions of Section 41(1) of the Act held that once the assessee was called upon to prove the credit entries with regard to the sundry creditors of its erstwhile business, it was for the assessee to establish the current e....
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....00/-, Rs. 28,60,000 and Rs. 13,26,400/- respectively leaving outstanding balances of Rs. 3,55,80,000/- in case of Khodiyar Enterprise, Rs. 3.25 crore in case of Krishna Enterprise and Rs. 3,31,60,000/- in case of SK Corporation which is still outstanding. 10.7 However, on perusal of ledger copy of M/s Karan Enterprises available at pages 86 to 89 we note that the purchases aggregating to Rs. 9,84,30,904/- were made during September 2010 at different dates. Against the purchases payments were made at regular interval till 10-01-2012 through banking channel leaving outstanding balance of Rs. 5,44,750/- only which seems to be genuine liability. The assessee also claimed that outstanding amount of Rs. 5,44,750/- also paid in subsequent year i.e. in F.Y. 2012-13. 10.8 From the above, there remains no ambiguity that the liabilities appearing in the books of accounts of the assessee against 3 parties namely M/s Khodiyar Enerprise, Krishna Enterprise, and SK Corporation are not actually payable if we see the facts in aggregation. Shri Kirit Kumar Jani, the alleged proprietor of Khodiyar Enterprise has appeared and admitted that he is not the proprietor of the concern namely Khodiyar ....