TaxTMI 
TaxTMI 
2026 (8) TMI 451
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....sis of remand report received from the Ld. AO without appreciating the facts of the case and the rejoinder filed by the appellant. 2.1) The learned AO/CIT(A) failed to appreciate that outstanding amount of sundry creditor was duly supported by the invoices, ledgers confirmations and subsequent payments etc. and therefore no addition was warranted for the same. 2.2] The learned CIT(A) ought to have appreciated that out of outstanding sundry creditors of Rs. 11,55,891/-, certain amounts were either accepted by the Ld. AO himself as genuine in the remand report for AY 2012-13 or were already added as income in AY 2012-13 and therefore no separate addition was warranted for this year. 2.3) The learned AO/CIT(A) ought to have appreciated that the appellant was going through bad financial patch and was also facing various litigation in respect of project executed by him due to which all the contractual payments of the appellant were on hold which resulted into long outstanding sundry creditors and liabilities. 3) The learned CIT(A) erred in confirming an addition of Rs. 1,06,940/- alleging that contract receipts to that extent were unaccounted in the b....
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.... "4.4 From the perusal of the above stated remand report of the AO, it is clear that some of the sundry creditors to which notices u/s 133(6) has been issued by the AO, have submitted their confirmation letter in respect of such transactions. The relevant pages of the remand report are reproduced as under "All the submissions filed by the assessee in the additional evidence in support of the above Sundry Creditors are verified. It is observed that the most important supporting document required to sustainable genuineness of the transaction in confirmations/letters from the Sundry Creditors which have not been submitted by the assessee in any of the above case. Further, in some cases ledger accounts are submitted, but they are neither signed copies not duly stamped by either the assessee or the party concerned. In a few cases, copies of invoices filed, but they are found to be not pertaining to year under consideration from which outstanding balance as on 31/03/2014 cannot be ascertained. Under these circumstances, in my opinion all the aforesaid Sundry Creditors aggregating to Rs. 11,55,891/- are required to be added to the assessee's Total Income for the AY 2014-15....
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....000 1. old Creditors prior to AY 2012-13 2. Ledger signed by party is already attached 3.Accepted in remand report for AY 2012-13 Jagiwala & Co (Audit Fees Payable) 162000 205000 1. old Creditors prior to AY 2012-13 2.Ledger singed by party is already attached. 3. Accepted in remand report for AY 2012-13 Sumeet Services (Prof. fees payable) 288000 288000 1. old Creditors prior to AY 2012-13 2.Ledger signed by8 party is already attached 3.Accepted in remand report for AY 2012-13 Siddhi Ganesh Enterprises ---------- 25000 ---------- Grand Total 1155891 Now we will discuss these creditors. 6.1) Out of the above list of creditors following Creditors admittedly are prior to AY 2012-13: Sl. No. Name of the Creditor Amount O/s as on 31/03/2014 01 Bharat paints 13,651 02 D.G. Vartale 73,871 03 Shriram Sales 2,38,420 04 Dynamic Hiring Services 52,147 05 Administrative Services Centre 35,000 06 Jagiwala & Co (Audit Fees Payable) 2,05,000 07 Smeet Services (Payable) 2,88,000 07 SiddhiGanesh Enterprises 25,000 08 Sanas E....
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....ess" means,- (i) where there has been an amalgamation of a company with another company, the amalgamated company; (ii) where the first-mentioned person is succeeded by any other person in that business or profession, the other person; (iii) where a firm carrying on a business or profession is succeeded by another firm, the other firm; (iv) where there has been a demerger, the resulting company. 6.3.1) Section 41(1) is for cessation of liability. In this case the Assessee has submitted Ledger Accounts duly signed by the creditors. It means the creditors have admitted that the impugned liability was outstanding. Assessee has also submitted that theses creditors are business creditors and were outstanding at that point of time due to financial difficulties. 6.4) The proposition of Law explained by Hon'ble High Courts and Hon'ble Supreme Court is discussed here onwards. 6.5) Hon'ble Bombay High Court in the case of PCIT Vs. Batliboi Environmental Engineering Ltd. [2022] 446 ITR 238 (Bombay)[10-06-2022] held as under : Quote,"5. As regards second question of law is concerned, it was argued by the Appellant- Revenue that sinc....
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....eration without there being any remission or cessation of liability." Unquote. 6.7) Hon'ble Supreme Court in the case of CIT Vs. Sugauli Sugar Works (P.) Ltd. [1999] 236 ITR 518 (SC) has held as under : Quote, "8. There is another judgment of the Bombay High Court which was rendered much earlier in J.K. Chemicals Ltd. v. CIT [1966] 62 ITR 34. The Bench observed : ". . . The transfer of an entry is a unilateral act of the assessee, who is a debtor to its employees. We fail to see how a debtor, by his own unilateral act, can bring about the cessation or remission of his liability. Remission has to be granted by the creditor. It is not in dispute, and it indeed cannot be disputed, that it is not a case of remission of liability. Similarly, a unilateral act on the part of the debtor cannot bring about a cessation of his liability. The cessation of the liability may occur either by reason of the operation of law, i.e., on the liability becoming unenforceable at law by the creditor and the debtor declaring unequivocally his intention not to honour his liability when payment is demanded by the creditor, or a contract between the parties, or by discharge of the debt - ....
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.... the key persons of the group comprising of the Agarwal (also known as Garg) family of Surat and Vadodara, engaged mainly in the business of transportation of petro-product and trading of sarees, bitumen etc. A search operation was conducted under Section 132 of the Act at the residential premise of the assessee on 31/05/2006. During the course of assessment proceedings Under Section 143(3) read with Section-153 of the Act, the Assessing Officer noticed from the balance sheet that various creditors (other than family concerns) are very old and no interest has been paid on these loans. Despite the fact, the Assessing Officer gave various opportunities to the assessee to furnish details of such creditors viz. confirmation as well as creditworthiness, the assessee failed to produce the necessary information and details in this regard. The assessee also failed to furnish the postal addresses, PAN, confirmations of outstanding balance etc. Accordingly the Assessing Officer held that the liability incurred in regard to the purchase from the parties as claimed (i.e. Rs. 38,17,601/- Rs. 1,65,090/- Rs. 40,032/- and Rs. 1,32,118/- for the Assessment Year 2001-02, 2002-03, 2003-04 and 2006-07....
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....n. The onus is on AO to prove that the Creditor has written off the liability in its book. Just because the address was not made available by the assessee does not mean that the Liability has ceased to exist. 6.11) In the case of the Assessee Harshad H Rupani, the assessee had submitted confirmations of outstanding creditors as noted by the Ld.CIT(A). The Assessee has shown these creditors as outstanding in his books of account. The AO has not brought on record any evidence that those Creditors have written off the liabilities in their books. In these facts and circumstances of the case, respectfully following the decisions of Hon'ble Supreme Court (supra) and Hon'ble High Courts (supra), we hold that the addition sustained by ld.CIT(A) of Rs. 11,55,891/- u/s. 41(1) is unsustainable .Hence we direct the AO to delete the impugned addition of Rs. 11,55,891/-. 6.12) In this case since the liabilities pertain to earlier year those amounts cannot be added u/s. 68 of the Act. 6.13) Accordingly, for all the reasons discussed above, Ground Number 2 raised by the Assessee is allowed. Addition of Rs. 1,06,940/- : 7) There was difference in Receipt as per 26AS and Receipt shown....