TaxTMI 
TaxTMI 
2024 (10) TMI 423
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....presented all the possible and relevant documentary evidences, like confirmations and original invoices, before the learned AO to prove the genuineness of the transactions entered into. Moreover, the appellant had made all the payments through account payee cheques, which further proves the identity and genuineness of the creditors appearing in the books. The intractability of some of the parties should not be charged upon the appellant as all the parties were in existence at the time of transaction and the over dues of most of the parties were settled in the ensuing financial years. While making such addition the ld. AO and CIT(A) had ignored such irrefutable documentary evidences and facts. Thus the addition so made is bad in law. 2. On the facts and in the circumstances of the case the learned A.O. and CIT(A) has legally and factually erred in issuing penalty notice u/s 271(1)(c) of the Act in a mechanical manner as the appellant did not furnish any inaccurate particulars of income. 3. The appellant craves the right to add, amend and alter the grounds on or before the hearing. 3. The fact as culled out from the record is that the assessee has filed his e-ret....
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....ame" and in 6 cases no information could be received, even after service of the letters. Therefore, a show cause letter No.3095 dated 30.09.2016 was issued to the assessee asking him to file an explanation in this regard. 3.2 The show cause was duly served upon the assessee and he was asked to prove the identity, creditworthiness of the Sundry Creditors and genuineness of the transaction on or before 05.10.2016, however, nothing has been received from the assessee in this regard. Therefore, notice u/s. 142(1) was issued to the assessee giving reference to the show cause letter dated 30.09.2016 and made a request to furnish requisite information on or before 03.11.2016. Although, this time also the assessee failed to file any written submission or to furnish requisite information. Meanwhile, confirmation letters which were written in a cyclostyle manner were received from some of the Sundry Creditors through Regd. Post. The confirmation letters received through post in the following cases: 1. Sanmati Gems & Jewellery 2. Neelam Gems & Jewels 3. Pari Creations 4. Laxmi Enterprises 5. Gulmohar Creation 6. Shri Nath Gems ....
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....ct and summons u/s 131 were issued but were not served to these parties. Since, the assessee could not proof these credits in the books of account in the name of the above parties the addition was made for an amount of Rs. 3,17,55,786/- as per provisions of section 41(1) of the Act holding it to be cession of liability in the form of sundry creditor. While doing so the ld. AO relied upon the decision of our high court in the case of Bright Future Gems. 4. Aggrieved, from the said order of assessment, assessee has filed an appeal before the ld. CIT(A). The ld. CIT(A) after hearing the contention of the assessee dismissed the appeal of the assessee by giving following findings on the issue:- "5.0 Decision and Reason. The statement of fact, grounds of appeal and the order appealed against have been perused. 5.1.1. Vide the first ground of appeal the appellant has challenged the addition of Rs. 3,17,55,786/- on account of cessation of liability u/s. 41(1) of the Income Tax Act on account of un-proved sundry creditors. 5.1.2. In the instant case, the appellant had shown sundry creditors of Rs. 4,76,48,248/- against sales of Rs. 2,87,60,719/- Findin....
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....d to produce these creditors but the assessee could not produce any of the creditors. 5.1.9. The Assessing Officer had also raised serious doubt on the confirmations submitted by appellant as these confirmations were undated. 5.1.10. During the appellate proceedings, the appellant was asked to provide current and correct addresses of the creditors. The appellant was also asked to provide current confirmations of the creditors. 5.1.11. However, the appellant expressed inability to provide current and correct addresses of the creditors as well as current confirmations of the creditors. The relevant parts of the submission of the appellant are summarized as under:- "1. Current and correct address of the credits remained outstanding as on 31.03.2014. In this regard we want to say that despite exhaustive efforts to obtain this information, we regret to inform you that appellant is unable to secure the current and accurate addresses of the creditors which outstanding as on 31.03.2024, however as on date there is no outstanding creditors, statement of creditors as on 31.03.2014 enclosed which clear that appellant paid all the creditors through ....
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....etters as confirmation establishes that the credit balances on 31.03.2014 in the name of non-existent or non-verifiable creditors are not genuine liability. 5.1.15. The contention of the appellant that payments have been made through banking channels are adequately answered by the Assessing Officer. Further, reliance is placed on the issue of payments by cheque does not establish genuineness of the transaction, on following judgments. 1. CIT-v-Raipur Builder & Developers (2013) 350 ITR 407 (Del.) 2. Sh. Nemichand Kothare -v- CIT (2003) 264 ITR-254 (Gau). 5.1.16. It is also relevant that the appellant had failed to provide even the basic information like the permanent Account Number which could have helped the Assessing Officer to verify the persons whose correct addresses were not provided by the appellant. The addresses provided by the appellant were found incorrect. 5.1.17. Further, the case laws relied upon by the appellant are distinguishable to the extent that in the instant case, the appellant has failed to establish the genuineness of the creditors both during the appellant proceedings as well as during the Assessment Proceedings.....
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....ee appellant submitted a detailed list of outstanding creditors as at 31.03.2014 along with their outstanding balances, purchase bills, accounts confirmation with PAN, bank statements, stock details and ledger accounts of the parties. Despite the comprehensive evidence and submissions furnished, the ld. Assessing Officer made an addition of Rs. 3,17,55,786/- u/s. 41(1) of the Act, alleging the cessation of liability in the form of sundry creditors vide his assessment order dated 28.12.2016. * Aggrieved by the assessment order, the assessee appellant filed an appeal before the Ld. CIT(A), who upheld the additions made by the ld. Assessing Officer vide its order dated 14.03.2024. Ground of Appeal No.1: Addition of Rs. 3,17,55,786/- u/s. 41(1) of the Act 1. That for ready reference, section 41(1) of the Act is reproduced as hereunder: Profits chargeable to tax. 41.(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first....
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....ter purchasing the goods from the traders has subsequently exported the said goods. There are NO local sales. All the export sales were cleared by customs authorities at India and also the port of Import and verified by government authorities. The legitimacy of the sales was established and has not been doubted by the ld. Lower authorities. In order to export the goods, it was essential for the assessee appellant to have made purchases in order to carry out the sales. The assessee appellant had submitted amongst following documents: * List of Creditors as at 31.03.2014 * Copy of Purchase Bills * Confirmation of Account with PAN * Bank Statement of the assessee appellant * Stock Details * Ledger Account of the parties 3. That the ld. Assessing Officer has made the addition on the sole ground that no goods were purchased from the creditors and that they were merely engaged in providing accommodation entries. That the ld. Assessing Officer has made the addition of even the purchases made during the year under consideration. That the ld. Assessing Officer has not rejected the trading results of the assessee appellant and ha....
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....1001 0 3316495 15 SANMATI GEMS & JEWELLERS 0 0 0 0 0 0 0 0 16 NATURAL GEMS 0 1000567 0 1000567 1000567 149050 0 1149617 17 ALANKER JEWELLERS 0 1312546 0 1312546 1312546 408305 0 1720851 TOTAL 1100425 11223666 1100425 11223666 11223666 7561028 0 18784694 ASSESSMENT YEAR 2014-15 ASSESSMENT YEAR 2015-16 ASSESSMENT YEAR 2016-17 OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE 403873 655860 403873 655860 655860 969668 0 1625528 1625528 77580 0 1703108 2245271 283268 1850000 678539 678539 673096 0 1351635 1351635 101038 0 1452673 3644200 1095840 750000 3990040 3990040 ....
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....E OPENING BALANCE PURCHASES PAYMENT DISCOUNT CLOSING BALANCE 1703108 1931751 1625528 0 2009331 2009331 0 2009331 0 0 1452673 2272772 1351635 0 2373810 2373810 0 2373810 0 0 4442081 0 3142081 0 1300000 1300000 0 1300000 0 0 3868455 0 3868445 10 0 0 0 0 0 0 1370083 1743764 0 0 3113847 3113847 0 3113847 0 0 2076600 807626 2076600 0 807626 807626 0 807626 0 0 1410155 0 1410155 0 0 0 0 0 0 0 2690420 0 0 0 2690420 2690420 0 2690420 0 0 2243122 0 1335510 0 907612 907612 0 907612 0 0 0 0 0 0 0 0 0 0 0 0 1813107 0 0 0 1813107 1813107 ....
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....DELHI]has held that: AO in the final assessment order however continued to treat the purchases of fabric from STPL as bogus and refused the claim made under Section 37 of the Act. We find that the additions made by the AO is not only erroneous but is also contrary to directions of DRP and settled legal position as held in Tejua Rohit Kumar Kapadia [2017 (10) TMI 729 - GUJARAT HIGH COURT]; CIT vs. JMD Computers and Communications P. Ltd. [2009 (1) TMI 855 - DELHI HIGH COURT]; Pr.CIT vs. Bansal Strips P. Ltd.[2021 (4) TMI 231 - DELHI HIGH COURT]and plethora of other judgments. Thus we find prima facie merit in the plea of the assessee. While the AO has cast doubt on propriety of purchases of fabric made from Sun gold Trade P. Ltd. on the basis of assessment order passed in the hands of such supplier, the AO has accepted the corresponding sale transactions. The exclusion of purchases from the trading results is not permissible without corresponding exclusion of the sales in such trading activity for arriving at a fair and balanced view. The action of the AO patently offends the rudimentary principle of accounting. We accordingly direct the AO to reverse the additions....
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....ee appellant: * Hon'ble Supreme Court in CIT v.Sugauli Sugar Works (P.) Ltd. [1999] 102 Taxman 713 (SC)has held: Section 41 contemplates that the obtaining by the assessee of an amount either in cash or in any other manner, whatsoever, or a benefit by way of remission or cessation and it should be of a particular amount obtained by him. Thus, the obtaining by the assessee of a benefit by virtue of remission or cessation is sine qua non for the application of this section. The mere fact that the assessee has made entry of transfer in his accounts unilaterally will not enable the department to say that section 41 would apply and the amount should be included in the total income of the assessee. Just because an assessee made an entry in his books of account unilaterally, he cannot get rid of his liability. The question whether the liability is actually barred by limitation, is not a matter which could be decided by considering the assessee's case alone but it is a matter which has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt....
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....ion or cessation thereof, the amount obtained by such person. On the one hand, the assessee claims that the amount was payable and the assessee may be justified in saying so because one never knows when a creditor will come and raise the demand. May be, the creditor was justified that interest was being paid, so he did not turn up to take the principal amount. Therefore, it was for the assessing officer to come to a definite finding that the liability ceased to exist during the previous year relevant to the year under appeal which, in our view, has not been proved by the assessing officer. 17. The assessee, however, after a lapse of four years, when the parties did net turn up on his own, has written off the said amount of liabilities in its books of accounts and came to the opinion that the liabilities ceased to exist in the financial year 2005-06, relevant for the assessment year 2006-07 and offered the same to tax in the assessment year 2006-07. It is a finding of fact by the CIT(A) as well as by the Tribunal that in the case of Narendra Mohan Mathur, the assessee offered as deemed income under section 41(1) amounting to Rs. 55,77,779 and even paid total tax payment of ....
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....t several years but it is the claim of the respondent-assessee, that they are payable and had it not been payable, the assessee would not have paid any interest and that too year after year. Therefore, the liabilities, in our view, certainly did not cease to exist in the year under appeal. 21. The Delhi High Court, in the case of CIT v. Rajasthan Golden Transport Co. (P.) Ltd. (2001) 249 ITR 723 (Del), held that if amount is received in the course of a trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character when the amount becomes the assessees own money because of limitation or by any other statutory or contractual right. When such a thing happens, common sense demands that the amount should be treated as income of the assessee and in the instant case, the assessee came to the conclusion and rightly so when the amount changed its character in the assessment year 2006-07 and not during the previous year relevant to the year under appeal. 22. The Delhi High Court, in the case of CIT v. Delhi Automobiles: (2005) 272 ITR 381 (Del), after referring to the judgment of the Hon'ble Apex....
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....g a finding of fact, in our view, no substantial question of law arises for consideration by this Court. 25. Insofar as the issue of reopening of the assessment under section 147 r/w section 148 of the Income Tax Act is concerned, the same question is only academic in nature and remains academic as ultimately amount as found by the assessing officer has been taxed though in a subsequent year and therefore, is not required to be considered. 26. In view of the discussion made above, we do not find any illegality, infirmity or ambiguity in the orders impugned passed by the authorities below so as to call for interference of this Court. It is essentially a finding of fact and no substantial question of law can be said to arise. 27. Accordingly, both the appeals, being devoid of merits, are being dismissed and accordingly dismissed. * Hon'ble Delhi High Court in PCIT v. Arvind Kumar Arora [2023] 156 taxmann.com 266 (Delhi) has held: 9. We have heard the learned counsel for the parties. In view of the fact that the entire basis of the AO for doubting the balance of Rs. 6,44,29,650/-was the order of the Commissioner, Central Excise & Customs, M....
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.... that the creditors have given written reply in response to the summons reiterating their liability as also the fact that the assessee had settled some of the creditors even after 31-3- 2001. Thus the assessee has fulfilled the duty cast upon them to provide evidence that the liability exist at the end of the year. The duty on the assessing officer is to prove that the liability has ceased to exist which in our considered view has been miserably failed to be established. 16. Thus, for all the above reasons, we find that the learned tribunal rightly declined to interfere with the orders passed by the CIT(A) by dismissing the appeal filed by the revenue. * Hon'ble Gujarat High Court in PCIT v. Adani Agro (P.) Ltd. [2020] 118 taxmann.com 307 (Gujarat)has held: 10. As per the aforesaid provisions of section 41(1) of the Act, 1961, there has to be remission or cessation of trading liability. Merely because the liability has remained outstanding for more than three years and the same is not written back in profit and loss account, application of provisions of section 41(1) of the Act, 1961 cannot be made to consider such liability as income of the year under co....
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....no order as to costs. * Hon'ble Bombay High Court in PCIT v. Pukhraj S. Jain [2019 (1) TMI 1761]has held: 4. It is well settled through series of judgments that merely because a debt has not been repaid for over three years, would not automatically imply cessation of liability. Exhaustion of period of limitation may prevent filing of recovery proceedings in a Court of law, nevertheless it cannot be stated by itself that the liability to repay the amount had ceased. Going by this logic itself, the Assessing Officer, in our opinion, committed an error invoking Section 41(1) of the Act. Further the assessee had produced additional evidence on record before the Appellate Authority after following the procedure and pointed out that substantial portion of the debt was cleared in later assessment years. 5. We do not find any error in the decision of the Tribunal. The Income Tax Appeal is dismissed. * Hon'ble Bombay High Court in CIT v. Chase Bright Steel [1989] 42 Taxman 146 (Bombay)has held: In view of the decision of the Court in the case of J.K. Chemicals Ltd. v. CIT [1966] 62 ITR 34, it is well settled that the liability of an assessee does....
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....A.R. by relying upon the judgment cited asCITv.SugauliSugar Works Private Limited 236 ITR 518 (S.C.),CITv.ShriVardhman Overseas Limited 343 ITR 408, Mysore Agencies Private Limited v.CIT 114 ITR 853, CIT v. Tamilnadu Ware housing Corpn 292 ITR 310 and Ambica Mills Limited v.CIT 54 ITR 167 (Guj.) contended that even unilateral entry in the accounts does not amount to cessation of liability. Hon'ble Apex Court in the judgment cited at Sugauli Sugar Works (supra) decided the issue in controversy and the operative part thereof is reproduced as under for ready reference. "The principle that expiry of the period of limitation prescribed under the Limitations Act could not extinguish the debt but it would only prevent the creditor from enforcing the debt, has been well settled. If that principle is applied, it is clear that mere entry in the books of account of the debtor made unilaterally without any act on the part of the creditor will not enable the debtor to say that the liability has come to an end. Apart from that, that will not by itself confer any benefit on the debtor as contemplated by the section. The decision of the Calcutta High Court in CIT v. SugauliSugar Works....
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....s a fact that the assessee had filed the copies of accounts of sundry creditors signed by the concerned creditors. Inview of this fact, it was to be opined that the ITAT had rightly come to the conclusion that confirmations from the creditors were produced. [Para 4] In view of the above, there was no illegality in the impugned order passed by the ITAT and, therefore, no substantial questions of law arose from the order of the ITAT. [Para 5] In the result, the revenue's appeal was to be dismissed. [Para 6] * Hon'ble Karnataka High Court inLiquidator, Mysore Agencies (P.) Ltd. v. CIT [1978] 114 ITR 853 (Karnataka)has held: A reading of section 41(1) shows that where any amount has been treated as an expenditure or trading liability in the assessment for any year and in a subsequent year the assessee has obtained any amount or benefit either in cash or in any other manner in respect of such expenditure or liability by way of remission or cessation thereof, such amount or the value of such benefit obtained by the assessee shall be treated as income during such subsequent year. Hence, in order to bring a case under section 41(1), it has to be shown by the ....
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....the conclusion based on the fact that the notices issued to the trade creditors were not served but that itself would not prove that the trade creditors are having no claim of the amount shown by the assessee in the books of accounts. 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 decisions referred and relied upon by the ld. CIT (A) are based on the specific facts of each case. In the case of Palkhi Investments & Trading Co. Pvt. Ltd. 71 taxmann.com 322 (Bombay) when the AO conducted the enquiry from the creditors they denied having any amount due from the assessee. Thus the said decision was based on credits denied against the assessee. Similarly, in the case of Rama Steel Rolling Mils & General Engg. Works vs. ITO (supra), the Hon'ble High Court has observed only to the extent of settled position of law that if the liability is ceased to exist on the last da....
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....e preponderance of the authorities on the point is in assessee's favour. The High Courts of Bombay, Kerala, Karnataka, Calcutta and Allahabad have held that where such amount represents time barred trading liability of the assessee, there is neither remission nor cessation in the trading liability inasmuch as the law of limitation merely bars the remedy but does not wipe out the liability. On this basis, the view taken by these High Courts is that there is neither remission nor cessation of the trading liability of the assessee in such cases, since there is neither any unilateral act of the creditor amounting to remission nor any bilateral act of the parties resulting in the liability ceasing to exist in law, merely because the recovery of the same has become time barred. It has also been held in these cases that the mere fact that the assessee has not shown such an amount as his trading liability in his account books does not affect this consequence since this unilateral act of the assessee is neither remission nor cessation of his trading liability. These decisions are Shridhar Udai Narayan v. CIT [1962] 45 ITR 577 (All.), J.K. Chemicals Ltd. v. CIT [1966] 62 1TR 34 (Bom.), G....
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....ough that the creditors have not given any response. The revenue has to prove that how the trading liability ceased to exist. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Sita Devi Juneja (supra) has held in para 4 & 5 as under :- "4. After hearing learned counsel for the appellant and going through the impugned order, we do not find any merit in the instant appeal. It is the conceded position that in the assessee's balance sheet, the aforesaid liabilities have been shown, which are payable to the sundry creditors. Such liabilities, shown in the balance sheet, indicate the acknowledgement of the debts payable by the assessee. Merely because, such liability is outstanding for the last six years, it cannot be presumed that the said liabilities have ceased to exist. It is also conceded position that there is no bilateral act of the assessee and the creditors, which indicates that the said liabilities have ceased to exist. In absence of any bilateral act, the said liabilities could not have been treated to have ceased. In view of these facts, the CIT(A) as well as the ITAT have rightly come to the conclusion that the Assessing Officer has wrongly invoked ....
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.... ground was raised before the ITAT while challenging the order of the CIT (Appeals) or not, Ms. Prem Lata Bansal was not able to point out any such ground having been raised before the ITAT. When such a plea was not taken before the ITAT, it is not permissible for the revenue to take this plea, for the first time, in this appeal, that too when the appeal is maintainable only on the substantial question of law. On the contrary, we find from the reading of the impugned order of the ITAT that as per the assessee, the fact that assessee was newly constituted firm and the business of the firm as now carried on is different than the business carried on by the erstwhile firm, was specifically argued and this was not even rebutted by the representative of the revenue who appeared before the ITAT. This can be seen from para 12 of the impugned order of the ITAT. On that basis, ITAT observed as under : "After considering the rival submissions, we do not find any infirmity in the order of the learned CIT(A). Though at the first instance the Assessing Officer was not aware of the fact as to whom the money belongs being the deposit in the bank account. However, when this fact was brough....
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....nt to the assessment year in question, there cannot be any addition invoking the provision of Section 41(1) of the Act. Identical question came to be considered by the Division Bench of this Court in the case of Nitin S. Garg (supra) and in the similar set of facts and circumstances of the case when the addition was made invoking Section 41(1) of the Act by doubting the creditworthiness and/or identity of the sundry creditors mentioned in the balance sheet and it was found that those sundry creditors were very old and no interest had been paid on those loans, the Division Bench has deleted such addition made under Section 41(1) of the Act. In paragraph 15 the Division Bench has observed and held as under; "15. In the case before us, it is not been established that the assessee has written off the outstanding liabilities in the books of account. The Appellate Tribunal is justified in taking the view that as assessee had continued to show the admitted amounts as liabilities in its balance sheet the same cannot be treated as assessment of liabilities. Merely because the liabilities are outstanding for last many years, it cannot be inferred that the said liabilities have seize....
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....Act. This is one of the strange cases where even if the debt itself is found to be non-genuine from the very inception, at least in terms of section 41(1) of the Act there is no cure for it. Be that as it may, insofar as the orders of the Revenue authorities are concerned, the Tribunal not having made any error, this Tax Appeal is dismissed." In the present case there was no remission and/or cessation of the liability during the previous year relevant to the assessment year under consideration. As such, there is no remission and/or cessation of the liability during the year under consideration subject to the conditions contained in the statute being fulfilled. In the present case, both the aforesaid elements are missing. 7. Under the circumstances, as such, no error has been committed by the learned Tribunal in deleting the additions made under Section 41(1) of the Act. The proposed substantial questions of law (A) and (B) with respect to deleting the addition made under Section 41(1) of the Act are answered against the revenue." Thus the Hon'ble High Court has held that addition under section 41(1) cannot be made simply by doubting the creditor or his cr....
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....under section 41(1) of the Act in such later year when it was foregone. Section 41(1) of the Act, therefore, contemplates existence of a debt/liability and the remission or cessation thereof in the year under consideration. Therefore, for the purpose of taxing any income on account of remission or cessation of liability, the Assessing Officer has to establish that there was an existing liability and that there was remission or cessation of such liability in the previous year relevant to the assessment year in which such income is sought to be taxed. It was noted that while the assessee had shown these trading liabilities in his books of account, no benefit had been obtained in respect of such trading liabilities by way of remission or cessation thereof; under the circumstances, the requirements of section 41(1) of the Act are not satisfied in the present case. Moreover, any such cessation or remission of liability has to be in the previous year relevant to the assessment year under consideration, in the facts of the present case, it is not the case of the AO that these liabilities ceased to exist in the previous year relevant to the assessment year under consideration. In fact, the....
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....n Bhartiya International Ltd. Versus Dy. Commissioner Of Income-Tax, Circle-4 (2), New Delhi [2024 (1) TMI 157 - ITAT DELHI]. 155-163 4. The Hon'ble Supreme Court of India in the case of 164 Commissioner of Income-tax v. Sugauli Sugar Works (P.) Ltd. [1999] 102 Taxman 713 (SC). 164-168 5. The Hon'ble High Court Of Rajasthan in the case of CIT v. Narendra Mohan Mathur [2013 (11) TMI 1707] 169-174 6. The Hon'ble High Court Of Delhi in the case of Principal Commissioner of Income-tax v. Arvind Kumar Arora [2023] 156 taxmann.com 266 (Delhi) 175-178 7. The Hon'ble High Court Of Calcutta in the case of Principal Commissioner of Income-tax v. Soorajmul Nagarmull [2022] 145 taxmann.com 245 (Calcutta) 179-188 8. The Hon'ble High Court Of Gujarat in the case of Principal Commissioner of Income-tax v. Adani Agro (P.) Ltd. [2020] 118 taxmann.com 307 (Gujarat) 189-191 9. The Hon'ble High Court Of Gujarat in the case of Commissioner of Income-tax-II v. Nitin S. Garg [2012] 22 taxmann.com 59 (Guj.) 192-196 10. The Hon'ble High Court Of Bombay in the case of Principal Commissioner of Income-tax v. Pukhraj S.....
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....he lower authorities and submitted that the AO while making the assessment issued letter to the parties as per the addresses given by the assessee and summons were issued u/s. 131 of the Act and the same were also not confirmed. Even at the stage of CIT(A), assessee has not given details of PA Number, VAT/TIN number, the confirmation filed before the ld. AO was undated. Thus, the assessee failed to establish genuineness of the credit shown by the assessee and thus, the addition is required to be sustained as per provision of section 41(1) of the Act. All these aspects of the matter suggest that the liability shown by the assessee does not existed and has rightly been added by the ld. AO. Ld. AO while doing so also relied upon the decision of the jurisdictional high court in the case of M/s Bright Future Gems and therefore, she relied upon the finding recorded in the order of the ld. AO & ld. CIT(A). 8. We have heard the counsel for both the parties and perused the material placed on record, judgment cited before us and the orders passed by the revenue authorities. In the present appeal the assessee has effectively challenged the finding of the lower authority while making the ad....
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....s called for as per provision of section 133(6) of the I.T. Act, 1961. In 11 cases letters received back with the remarks of the postal authority "Not Known" or "no firm in this name" and in 6 cases no information was received, even after service of the letters. Therefore, a show cause notice dated 30.09.2016 was issued to the assessee asking him to file an explanation in this regard. The show cause notice was duly served upon the assessee and he was asked to prove the identity, creditworthiness of the Sundry Creditors and genuineness of the transaction. The said notice was not replied. Therefore, notice u/s. 142(1) was issued to the assessee giving reference to the show cause letter dated 30.09.2016 and made a request to furnish requisite information on or before 03.11.2016. Although, this time also the assessee failed to file any written submission or to furnish requisite information. Meanwhile, confirmation letters which were written in a cyclostyle manner were received from some of the Sundry Creditors through Regd. Post. The confirmation letters received through post in the following cases: 1. Sanmati Gems & Jewellery 2. Neelam Gems & Jewels 3. Pa....
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....s. 28,72,714/- 17. M/s Vardhman Enterprises Rs. 34,56,611/- Total Rs. 3,17,55,786/- When the assessee challenged that finding of the ld. AO before the ld. CIT(A) he has called for the current address of the parties in 2024 which the party stated that the same being paid of they were unable to provide and therefore, without appreciating the fact that the liability were existed in the balance sheet and were paid off in the subsequent year has not been considered by the ld. CIT(A) but has confirmed the addition made by the ld. AO. Before us the ld. AR of the assessee presented a chart which reads as under: ASSESSMENT YEAR 2014-15 ASSESSMENT YEAR 2015-16 ASSESSMENT YEAR 2016-17 OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE 403873 655860 403873 655860 655860 969668 0 1625528 1625528 77580 0 1703108 2245271 283268 1850000 678539 678539 673096 0 1351635 1351635 101038 0 1452673 3644200 1095840 750000 3990040 3990040 4520....
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....)/131 were not responded he hold a view that the liability appearing in the case of 17 parties for an amount of Rs. 3,17,55,786/- out of total creditors of Rs. 4,15,39,855 added u/s. 41(1) of the Act. Since, the addition was made u/s. 41(1) of the Act it would be appropriate to go through the provision of section 41 which reads as follows: Profits chargeable to tax. 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be 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....
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....arendra Mohan Mathur (2013) (11) TMI 1707 wherein the High Court has held as under:- "15. It is true that these liabilities were being shown in the books of accounts of the respondent-assessee from year to year and it was the claim of the respondent-assessee that these liabilities are payable to the persons from whom the goods were purchased earlier and are trade creditors. On perusal of the facts, it has not been proved by the assessing officer as to how the so-called liabilities ceased or crystallized during the previous year relevant to the assessment year under appeal. Merely because there was no response by the creditors it does not prove that the liabilities ceased during the assessment year 2002-03 Merely because the parties chose not to appear or did not respond or even did not come forward on the request of the respondent-assessee before the assessing officer, it does not prove that the trade creditors were not genuine and were not in existence so as to invoke provisions of section 41(1). 16. Section 41(1) requires that the onus is on the assessing officer to come to the conclusion that the liabilities ceased to exist or the assessee has obtained whether ....