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2023 (12) TMI 458 - AT - Income TaxUnexplained Sundry Creditors - Cessation of liability in respect of some creditors - HELD THAT - The assessee filed primary details before the AO. Subsequently, the AO issued notices u/s 133(6) to creditors to confirm transactions with documentary evidence through e-mail ID. The notices were issued through ITBA Portal. The confirmation/reply were not received from all the parties regarding outstanding balances as on 31.03.2016. It was submitted that the AO had not issued any show cause notice before making any addition or intimation to the assessee for non-reply from the various parties and made addition without confronting the assessee about the non-receipt of the replies by the Assessing Officer. Absence of reply from the creditors do not entitle the Assessing Officer to treat the creditors as bogus without bringing any evidence on record to prove the payable are not indeed not required to be paid. Thus considering applicability of provisions of section 41(1) and the judgments in CIT v. Vardhman Overseas Ltd 2011 (12) TMI 77 - DELHI HIGH COURT referring to the judgment in the case of Jay Engineering Works Ltd. 2007 (9) TMI 263 - DELHI HIGH COURT and applying the ratio laid down the case of CIT v. T. V. Sundaram Iyengar Sons Ltd 1996 (9) TMI 1 - SUPREME COURT under sec. 28 of the IT Act, considered the applicability of clause (a) of subsection (1) of section 41 as to what constitute remissions or cessation of trading liability, we decline to interfere with the order of the ld. CIT(A). Appeal of the Revenue is dismissed.
Issues Involved:
The judgment involves the acceptance of additional evidence under Rule 46(1)(d), treatment of payments to M/s. For-A Company Ltd., scrutiny of sundry creditors, and applicability of section 41(1) regarding remissions or cessation of trading liability. Acceptance of Additional Evidence under Rule 46(1)(d): The Revenue appealed against the acceptance of additional evidence without independent findings. The Tribunal held that the evidence submitted by the assessee, including confirmation from M/s. For-A Company Ltd., was crucial and duly supported by bank statements and payment details. As the assessee had provided necessary documentation, the Tribunal dismissed the appeal of the Revenue on this issue. Treatment of Payments to M/s. For-A Company Ltd.: The Assessing Officer added the outstanding amount to the total income due to non-compliance by creditors and lack of details from M/s. For-A Company Ltd. However, the Tribunal found that the assessee had made payments to the company, supported by bank statements and confirmations. As all necessary details were furnished, the Tribunal dismissed the Revenue's appeal regarding the outstanding balance to M/s. For-A Company Ltd. Scrutiny of Sundry Creditors: The assessee was questioned about the genuineness of sundry creditors, and the Assessing Officer issued notices under section 133(6) to confirm transactions. Despite non-receipt of replies from all parties, the Tribunal emphasized that absence of replies does not justify treating the creditors as bogus. The assessee provided details of payments and cessation of liabilities in subsequent years, which were duly considered by the Tribunal in dismissing the Revenue's appeal on this issue. Applicability of Section 41(1) - Remissions or Cessation of Trading Liability: Considering the provisions of section 41(1) and relevant case law, the Tribunal declined to interfere with the order of the ld. CIT(A) regarding the applicability of clause (a) of subsection (1) of section 41. The Tribunal referred to precedents and judgments to support its decision, ultimately dismissing the appeal of the Revenue. Separate Judgment by Judges: The judgment was pronounced by Shri Saktijit Dey, Hon'ble Vice President, and Dr. B. R. R. Kumar, Accountant Member on 08/12/2023.
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