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Issues involved: Addition u/s 41(1) of Income-tax Act, 1961 upheld by CIT(Appeals) based on unproved sundry creditors balance.
Summary: The appellant, engaged in trading in cloth, challenged the addition of Rs. 43,29,009/- made by the Assessing Officer u/s 41(1) of the Income-tax Act, 1961, which was upheld by the CIT(Appeals). During a survey under Section 133A, it was revealed that the sundry creditors balance of Rs. 43,29,009/- in the appellant's books was unproved. The appellant failed to provide evidence that these creditors were paid out of accounted income. The CIT(Appeals) confirmed the addition, considering a cessation of liability for the sum. The appellant contended that the addition was based on a surrender of income during the survey and cited legal precedents to support the argument that no addition could be made based on a statement recorded during a survey. The appellant's argument that the trade creditors' balance was a carried forward amount from as early as financial year 1998-99 and there was no cessation of liability during the relevant previous year was countered by the Revenue. The Revenue highlighted that the appellant himself admitted that the amounts were repaid long back, indicating the liability no longer existed. The Assessing Officer and CIT(Appeals) concluded that the unproved creditors were not genuine and made the addition u/s 41(1) of the Act. The appellant's failure to provide evidence of repayment or source of repayment further supported the addition. The Tribunal upheld the lower authorities' decision, emphasizing that the conditions of Section 41(1) were satisfied as the appellant accepted that the creditors were non-existent and failed to prove payments were not made during the relevant previous year. The Tribunal dismissed the appeal, affirming the addition of Rs. 43,29,009/- as justified under the Act.
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