2016 (8) TMI 108 - HC - Income Tax

Addition on account of unverifiable and bogus liability - ITAT deleted the addition stating that the same can t be added u/s. 41(1) or Sec. 68- Held that - As the entire issue is based on appreciation of evidence on record. CIT (Appeals) as well as the Tribunal both concurrently found that the assessee had produced sufficient material to establish the claim. The Assessing Officer had raised demands which were not possible to meet with. - Decided against revenue

Summary

Issues:
1. Whether addition of unverifiable and bogus liability can be made under Sec. 41(1) or Sec. 68 of the Income Tax Act, 1961?

Analysis:
1. The Revenue appealed against the ITAT judgment regarding the addition of ?1,87,46,520 on account of unverifiable liability. The CIT (Appeals) observed that the Assessing Officer did not dispute the expenses related to trucks but only added the outstanding closing balance. The CIT (Appeals) held that this addition could not be made under Section 68 or Section 41(1) of the Income Tax Act without rejecting the book results under Section 145 of the Act. The CIT (Appeals) found that the assessee maintained sufficient records like LRs, registers, vouchers, and the Assessing Officer's demand for confirmation from individual truck owners was impractical due to their scattered locations.

2. The Tribunal upheld the CIT (Appeals) decision, noting that the issue was about a non-existing liability. The Tribunal found that the CIT (Appeals) had verified truck rent payment copies and details, which were duly stamped and acknowledged. The Tribunal agreed that the addition could not be made under Sec. 68 or Sec. 41(1) as those provisions were not applicable. Reference was made to a previous Gujarat High Court case emphasizing the conditions for applying Sec. 41(1), which were not met in the present case. The Tribunal dismissed the Revenue's appeal, stating that the Assessing Officer's inquiries did not establish cessation or remission of liability, thus the amount could not be added back as deemed income.

3. Both the CIT (Appeals) and the Tribunal found that the assessee provided sufficient evidence to support their claim, and the Assessing Officer's demands were unreasonable. The judgment concluded that no legal question arose, and the tax appeal was dismissed.