2020 (4) TMI 331 - HC - Income Tax

Suppression of closing stock - Tribunal noted as a matter of fact that the Assessing Officer has not pointed out any defect/infirmity in the books of accounts of the assessee - Tribunal upholding the order of the CIT (A) deleting addition - HELD THAT - Tribunal has recorded concurrent findings of fact to the effect that there was no defect or infirmity in the books of accounts maintained by the assessee and has applied the decision of this court in the case of Commissioner of Income Tax vs. Arrow Exim Pvt. Ltd 2010 (1) TMI 769 - GUJARAT HIGH COURT to the facts of the present case. Under the circumstances, the Tribunal merely having applied the decision of the jurisdictional High Court to the facts of the case, the said ground of appeal does not give rise to any question of law, much less, a substantial question of law, warranting interference. Inflated current liability in the books of account - Tribunal upholding the order of the CIT (A) deleting addition - HELD THAT - Tribunal noted that in respect of the said items of current liabilities, the Assessing Officer has not pointed out any defect during the assessment proceedings and was of the view that before placing reliance on the statement furnished to the bank, the Assessing Officer ought to have pointed out the defects/infirmities in the current liabilities and the provisions shown by the assessee in its balance sheet. The Tribunal took note of the fact that the Commissioner (Appeal) has given a finding that the creditors shown by the assessee in its books of account exist in the books of account and that the learned DR for the revenue had not disputed this finding of fact. The Tribunal, accordingly, did not find any reason to disturb the findings recorded by the Commissioner (Appeal) and dismissed the ground of appeal. Thus, the Tribunal upon perusal of the material on record has found as a matter of fact that there were no defects in the items of current liabilities shown by the assessee in its balance sheet. In the light of the fact that the conclusion arrived at by the Tribunal is based upon concurrent findings of fact recorded by it upon appreciation of the material on record, no question of law can be said to arise out of the said ground of appeal. Cessation of liability u/s.41(1) - Tribunal upholding the order of the CIT (A) deleting addition - HELD THAT -under sub-section (1) of section 41 of the Act, any amount obtained by an assessee whether by way of remission or cessation thereof, is required to be added to his income in the year of such remission or cessation. In the facts of the present case, the Assessing Officer has made addition of liabilities in respect of two sundry creditors which according to him, the assessee was not required to pay. The assessee, however, had not written off his liabilities. Thus, there was nothing on record to show that there was any remission or cessation of such liability. Under the circumstances, in the absence of remission or cessation of such liabilities, the question of invoking subsection (1) of section 41 of the Act did not arise. The Tribunal, therefore, did not commit any error in upholding the order passed by the Commissioner (Appeals). No question of law can therefore be stated to arise out of this ground of appeal also.

Summary

Issues Involved:
1. Suppression of closing stock.
2. Inflated current liability.
3. Cessation of liability under section 41(1) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Suppression of Closing Stock:
The appellant-revenue challenged the deletion of an addition of ?1,16,65,245/- made on account of suppression of closing stock. During the assessment proceedings, the Assessing Officer (AO) noticed discrepancies between the stock shown in the bank details and the balance sheet. The AO concluded that the assessee suppressed its closing stock by ?1,16,65,245/- and added this amount to the total income.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, relying on the High Court decision in CIT v. Arrow Exim Pvt. Ltd. The CIT(A) found that the stock was reflected in the books of accounts, and no addition could be made based on non-disclosure to the bank. The stock statement given to the bank was for hypothecation purposes and not physically verified by the bank. The books were regularly audited, and no defects were found by the AO.

The Tribunal upheld the CIT(A)'s decision, noting that the AO did not point out any defects in the books. The Tribunal applied the jurisdictional High Court's decision in Arrow Exim Pvt. Ltd. and found no substantial question of law warranting interference.

2. Inflated Current Liability:
The appellant-revenue challenged the deletion of an addition of ?4,14,60,245/- made on account of inflated current liability. The AO found discrepancies between the sundry creditors shown in the bank statement and the balance sheet. The AO presumed the assessee showed excessive sundry creditors and added ?4,14,60,254/- to the total income.

The CIT(A) deleted the addition, noting that the books were audited, and no defects were found. The AO's inquiry under section 133(6) revealed no discrepancies. The assessee explained that the figures given to the bank were for securing credit and were estimated. The CIT(A) found the AO's finding baseless and deleted the addition.

The Tribunal concurred with the CIT(A), noting that the AO did not point out any defects in the current liabilities shown in the balance sheet. The Tribunal found no reason to disturb the CIT(A)'s findings and dismissed the ground of appeal, concluding that no question of law arose.

3. Cessation of Liability under Section 41(1):
The appellant-revenue challenged the deletion of an addition of ?3,08,000/- made on account of cessation of liability under section 41(1). The AO noticed that the assessee had not transacted with certain sundry creditors for three years and added ?3,08,000/- to the total income, presuming the liabilities ceased to exist.

The CIT(A) deleted the addition, finding no evidence of cessation of liability. The assessee had not written off the liabilities, and the AO did not establish that the liabilities had ceased. The CIT(A) relied on the High Court decisions in CIT v. Nitin S. Garg and CIT v. Silver Cotton Mills Company Limited.

The Tribunal upheld the CIT(A)'s decision, noting that the liabilities were not written off in the books and could not be treated as income under section 41(1). The Tribunal found no error in the CIT(A)'s order, concluding that no question of law arose.

Conclusion:
The High Court found that the Tribunal's order did not give rise to any substantial question of law warranting interference. The appeal was summarily dismissed.