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2019 (5) TMI 1835 - AT - Income TaxAddition u/s 69C - unexplained expenditure - HELD THAT - M/s. Gravity India P Itd. submitted its bank of Baroda Account statement copies for the month of Sept., 2009 highlighting the amount and cheque No. received from M/s. Venus International where the exact amount of payment received was tallied. Thus in this way, the assessee was also given an opportunity by the AO during the remand proceedings by providing the copies of the bank statement of M/s. Gravity India Ltd. The amounts credited into the account of M/s,Gravity India in Sept.09 exactly tally with the amount payable by the assessee. Thus in this way, AO had rightly brought this amount to tax u/s.69C as unexplained expenditure. We are also of the same view that even if for a moment, if it is presumed that the assessee had not made this payment and the amounts are still due to M/s. Gravity India Ltd. But in the present case, when the creditor itself is saying that it has received the payments and there is nothing receivable from the assessee, thus it amounts to cessation of liability. Additions as payable to M/s. R.D. textiles - AO had relied upon the statement of Mr. Harish Chandra Singh, Prop. of M/s. RD. Textiles recorded u/s 131 of the Act, in which he confirmed that no amount is receivable from the assessee. Even the said Harish Singh submitted that he had stopped the business in 2003 and had no knowledge of receiving any amount from the assessee. Thus this is a case where the creditor is stating that he does not remember any such receivable from the assessee which is good for the assessee. In this case, the copy of statement was provided to the assessee with regard to Shri Harish Singh, the proprietor of R. D. Taxtile. It is important to mention here that the matter pertains to purchases made in July, 2003 and the proprietor issued a statement in 2013 stating that he does not remember anything as receivable from the assessee. Even till the end of 2016, which is a good 13 years after the purchases, the party has not taken any steps for recovery. Thus in such circumstances, it was rightly concluded that the party is not interested in pursuing recovery if it all it was due from the assessee, and there is no chance of any further measures for recovery. The assessee is carrying a fictitious liability, Additions made by AO u/s 41(1) - HELD THAT - As far as furnishing of communication in the shape of letter are concerned, the same was rightly considered as fabricated as none of the parties personally appeared before the AO and even in the case of sunrise textile, there is no phone no. given on the letter head even though it is a very big party to whom the assessees dues itself is 1,71,26,130/-. Thus it is strange and surprising that somebody would keep quiet without initiating any legal action when the party i.e. the assessee is non-cooperative and defiant. As far as in the case of other parties, admittedly assessee had not made payment to any of them and the letters submitted by the assessee contains the phone numbers of the parties, which are only in 7 digits, which itself shows that no phone numbers are less than 8 digits since many years ago. These 7 digit phone numbers on the letter heads in 2016 itself doubted the genuiness of the letters. We are in agreement with the reasoning given by Ld. CIT(A) while rejecting the claim of the assessee. It is also an undisputed fact that none of the parties have been pursuing for recovery and it is as good as not recoverable. Thus all the parties seem to have given up on recovery. Otherwise there would have been legal suits initiated against the assessee. In the instant case, there is no unilateral write off in the books of accounts. In fact, the assessee has net written off the liabilities but the facts and circumstances showed that there is no possibility of any recovery. Therefore the additions made u/s.41(1) are justified. The assessee had not adduced any material or evidence or even explanation as to why the impugned amounts were not paid in normal course, the same amounted to cessation or remission of liability u/s. 41(1) - Decided against assessee.
Issues Involved:
1. Addition of ?2,81,90,677 under Section 41(1) without satisfaction of cessation of trading liabilities. 2. Addition of ?32,51,157 under Section 69C as unexplained expenditure from M/s. Gravity (India) Ltd. 3. Addition of ?32,51,157 under Section 41(1) as ceased liability from M/s. Gravity (India) Ltd. 4. Addition of ?41,90,675 under Section 41(1) as liability ceased for M/s. R.D. Textile. 5. Addition of ?1,71,26,130 under Section 41(1) as liability ceased for M/s. Sunrise Textiles. 6. Addition of ?36,22,715 under Section 41(1) as ceased liability for sundry creditors. Detailed Analysis: 1. Addition under Section 41(1) without satisfaction of cessation: The assessee argued that the addition of ?2,81,90,677 made by the AO was in contravention of Section 41(1) as there was no satisfaction recorded that the trading liabilities had ceased during the previous year. The Tribunal found that the AO had identified creditors outstanding for more than five years and issued summons under Section 131. The creditors either confirmed the payments or were not traceable, leading to the conclusion that the liabilities had ceased. The Tribunal upheld the addition, agreeing with the AO's findings. 2. Addition under Section 69C as unexplained expenditure: The AO added ?32,51,157 as unexplained expenditure under Section 69C, stating that M/s. Gravity (India) Ltd. confirmed receiving the payments in September 2009, leaving no balance receivable. The assessee contended that the payments were not made by them and the amounts were still payable. However, the Tribunal found that the payments tallied with the amounts credited in the bank account of M/s. Gravity (India) Ltd., confirming the AO's addition under Section 69C. 3. Addition under Section 41(1) as ceased liability: The Tribunal noted that even if the payments were not made by the assessee, the creditor's confirmation that no amount was receivable indicated cessation of liability. Therefore, the addition of ?32,51,157 under Section 41(1) was justified as the liability had ceased. 4. Addition under Section 41(1) for M/s. R.D. Textile: The AO relied on the statement of Mr. Harish Chandra Singh, proprietor of M/s. R.D. Textile, who confirmed that no amount was receivable. The assessee argued that the statement was based on memory and no cross-examination was provided. The Tribunal found that the creditor had stopped business in 2003 and had not pursued recovery for 13 years, indicating cessation of liability. The addition of ?41,90,675 under Section 41(1) was upheld. 5. Addition under Section 41(1) for M/s. Sunrise Textiles: The AO added ?1,71,26,130 under Section 41(1), noting that no payments were made by the assessee and the letters submitted appeared fabricated. The Tribunal found that the creditor had not taken any legal action for recovery and the letters lacked credibility. The addition was justified as the liability had ceased. 6. Addition under Section 41(1) for sundry creditors: The AO added ?36,22,715 for sundry creditors, noting that the creditors were not traceable or had denied any outstanding liability. The Tribunal agreed with the AO, finding that the liabilities had ceased as the creditors had not pursued recovery for many years. The addition under Section 41(1) was upheld. Conclusion: The Tribunal dismissed the appeal filed by the assessee, upholding the additions made by the AO under Sections 41(1) and 69C. The Tribunal found that the liabilities had ceased as the creditors had either confirmed receiving payments or were not traceable, and the assessee had not provided credible evidence to support their claims. The findings of the CIT(A) were considered judicious and well-reasoned.
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