2015 (10) TMI 524 - AT - Income Tax

Addition on bogus/ceased liabilities under section 41(1)(a) - CIT(A) deleted addition accepting additional evidence - Held that - With regard to addition of ₹ 15.16 lacs deleted by the CIT(A), we find that the parties to whom the payment of ₹ 15.16 lacs were made by account payee cheques and these payments have been confirmed by the assessee banker Bank of Maharastara and therefore, theses parties are neither bogus nor liabilities of these amounts had ceased. We also find considerable cogency in the submissions of the assessee that regarding the balance amount of ₹ 16.37 lacs, the assessee surrendered the amount before the Ld. CIT(A) as he could not obtain the confirmations from the parties due to his ill health and heart problems as confirmed by the medical certificates and medical reports filed. In view of the above, we find that Ld. CIT(A) s has rightly deleted the addition of ₹ 15.16 and balance payment of ₹ 16.37 lacs was rightly confirmed by the Ld. CIT(A), which does not need any interference on our part, hence, the same is decided against the Revenue. As per the assessee s submission the Bank certificate issued by Bank of Maharashtra from Faridabad Branch and Dehradun Branch, the assessee has proved to the satisfaction of the Ld. CIT(A) that payments of RS.15,15,851/- were made by account payee cheques. The assessee had also filed the copy of ledger account and the bills of the parties before Ld. CIT(A) as per details given in the excel sheet which was filed before Hon ble CIT(A), a copy of which is attached herewith at Page 3-9. The assessee was also having very poor health due to heart problem and was admitted at Kailash Hospital, Noida as per discharge summary and medical reports of the Hospital filed before the Ld. CIT(A). The assessee was not able to attend the work properly for almost 18 months till December 2010. After that it took further two years for him to recover fully and attend to his work on a regular basis, a copy of the discharge summary and medical reports available on record. In view of the above, we are of the considered view that Ld. CIT(A) has not violated the Rule 46-A in admitting the additional evidence from the assessee, as AO has filed the Remand Report on this account - Decided against revenue.

Summary

Issues:
1. Addition of liabilities under section 41(1)(a) based on sundry creditors' outstanding balances.
2. Deletion of addition by Ld. CIT(A) and reliance on additional evidence without AO's examination.

Analysis:

Issue 1: Addition of Liabilities under Section 41(1)(a)
The case involved the assessment of an individual engaged in civil construction for the assessment year 2008-09. The AO made additions under section 41(1)(a) totaling &8377; 31,33,434 out of outstanding balances of sundry creditors amounting to &8377; 46,98,427. The AO treated a portion of these liabilities as bogus or ceased. The Ld. CIT(A) considered relevant documents and evidence, deleting &8377; 15.16 lacs and confirming the addition of &8377; 16,37,373, which was surrendered by the assessee. The ITAT upheld the CIT(A)'s decision, noting that payments of &8377; 15.16 lacs were made through account payee cheques, confirmed by the assessee's banker. The remaining balance was attributed to the assessee's ill health and inability to obtain confirmations due to heart problems, supported by medical certificates.

Issue 2: Deletion of Addition and Reliance on Additional Evidence
The Revenue contended that the Ld. CIT(A) erred in admitting additional evidence without allowing the AO to examine it, violating Rule 46A(3) of the IT Rule, 1962. However, the ITAT found that the assessee had valid grounds for submitting additional evidence under Rule 46A, as the AO had not provided sufficient opportunities and failed to share relevant notices and information with the assessee. The evidence submitted included a bank certificate from Bank of Maharashtra, ledger accounts, and bills of the parties. The ITAT concluded that the Ld. CIT(A) did not violate Rule 46A by admitting this evidence, as the AO had filed a remand report addressing the issues raised. Therefore, the ITAT dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision.

In conclusion, the ITAT upheld the Ld. CIT(A)'s decision to delete a portion of the addition made under section 41(1)(a) and confirmed the balance, citing valid reasons related to payment confirmations and the assessee's health issues. Additionally, the ITAT found no fault in the Ld. CIT(A)'s admission of additional evidence under Rule 46A, as the AO had not provided adequate opportunities to the assessee, resulting in the dismissal of the Revenue's appeal.