TaxTMI 
TaxTMI 
2026 (7) TMI 1409
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....5 is against the order of ld. CIT(A) confirming the addition of Rs. 3,44,51,900/- as made by the Assessing Officer (In short, 'the AO') u/s 41(1) of the Income-tax Act, 1961 (In short, 'the Act') in respect of liability(Sundry Creditors) shown in the books of account which according to the AO has ceased to exist. 3. The facts of the case in brief are that the assessee filed its original return of income on 30.09.2015, disclosing total loss of Rs. 41,96,652/-. The assessee-company is engaged in the business of trading of various commodities and manufacturing of knitted fabrics however during the year no business activities were there. The case was selected through CASS for three reasons, viz., (i) low income in comparison to high loans/ad....
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.... liability and is covered under the provisions of section 41(1) of the Act, accordingly, the AO added the same to the income of the assessee. 4. In the appellate proceedings, the ld. CIT(A) sustained the addition made by the AO by observing and held as under: "(A) Addition of Rs. 3,44,51,900/- under section 41(1) The said addition was made on account of cessation of liability towards Galaxy Star Trading LLC (Rs.79,65,216/-) and Yans Amir Ltd. (Rs.2,64,86,684/-). The AO relied on the FTTR reports that showed these entities had ceased functioning. Notably, Galaxy Star's license had been suspended, and Yans Amir had not filed any tax returns or caried out business activity since 2011. These facts substantiate that there wa....
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...., the assessee's operation is suspended for the last so many years owing to some business exigencies, but it does not mean that liabilities are not legally payable by assessee and could be written back by the Department unilaterally. The provisions of section 41(1) apply where a deduction or allowance has been in the earlier year in respect of trading liability and subsequently the assessee obtains some benefit in respect of that liability way of remission or cessation, the value of such benefit is to be taxed as deemed income of the relevant previous year. In our opinion there is no such remission or cessation of liability during the year and the assessee has also not got any benefit, therefore the provisions of section 41(1) were wrongly ....
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....ine sundry creditors when the said creditors failed to make any compliance to notices issued u/s 131/133(6) of the Act. 7. The facts of the case in brief are that during the assessment proceedings, the AO observed that there are some domestic corporate entities, namely, M/s Bahar Commodeal Ltd., M/s Glory Tradein Pvt. Ltd. and M/s Murlidhar Vincom Pvt. Ltd. which have already been identified as shell/jamakharchi companies for the reason that they are managed and controlled by Uday Shakar Mahawar and Devesh Upadhyay. The companies have no real business at all and all are exclusively involved in providing accommodation entries in the guise of unsecured loan/advance, share capital premium, bogus billing etc. in lieu of commission. According....
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....s creditors for the reason summon issued u/s 131 of the Act were not complied by these companies and thus remained unresponded. We note that ld. CIT(A) has confirmed the order of AO on the ground that the factual investigation was carried out by Investigation Wing. We note that the ld. CIT(A) just dismissed the appeal of the assessee by passing three lines of order without commenting the evidences filed by assessee. In our opinion, the sundry creditors cannot be added as bogus for the reasons that the summons/letters u/s 133(6) were not responded. The assessee continued to recognize these liabilities in its books of account as live and subsisting, therefore, we are not in agreement with the decision of ld. CIT(A). We note that in A.Y. 2012-....