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2012 (10) TMI 565 - HC - Income TaxFreight Charges unpaid - Outstanding Liability - Dispute raised by AO was regarding the outstanding liabilities of Rs.34,14,910/- disclosed by the assessee in his balance sheet. Held that - Outstanding liabilities disclosed by the respondent-assessee being fake has been drawn by AO basically on the basis of the statements of 21 truck owners examined by him. Cross examination of the truck owners who appeared for cross examination before AO are not found to be creditworthy by the appellate authorities. If the statement of these witnesses are excluded from the consideration , there is no material on record which could justify doubting of the entries by AO - Addition made by AO drawing inference that the outstanding liabilities of the respondent-assessee against the freight payable to the truck owners are not genuine, solely on the basis of statements of a few truck owners recorded as aforesaid, is absolutely unjustified - No Substantial question of law arises in this appeal - decided in favor of assessee.
Issues:
1. Appeal against ITAT order under Section 260A of Income Tax Act, 1961. 2. Disputed outstanding liabilities of Rs.34,14,910. 3. Assessment of income for the year 2005-06. 4. Examination of truck owners' statements. 5. Appeal before CIT(A) and ITAT. 6. Justification of addition to total income by AO. Issue 1: Appeal against ITAT order under Section 260A of Income Tax Act, 1961 The appeal was directed against the ITAT order dated 21.9.11, where the respondent-assessee's appeal against the CIT(A)'s order allowing the appeal against the assessment order dated 28.12.07 was dismissed. The addition of Rs.34,14,910 to the total income of the assessee was deleted by the CIT(A). Issue 2: Disputed outstanding liabilities of Rs.34,14,910 The dispute arose from the outstanding liabilities shown by the assessee in the balance sheet. The AO concluded that these liabilities were non-existent and added the amount back to the total income of the assessee. The CIT(A) disagreed, stating that the AO erred in his inference and deleted the addition. Issue 3: Assessment of income for the year 2005-06 The assessee, engaged in transportation work, declared a total income of Rs.3,35,440 for the relevant assessment year. The AO processed the return under Section 143(3) of the Income Tax Act, 1961. Issue 4: Examination of truck owners' statements The AO collected statements from 21 truck owners to verify the outstanding liabilities. Only three truck owners appeared for cross-examination, and their statements were found to be contradictory and unreliable by the CIT(A) and ITAT. Issue 5: Appeal before CIT(A) and ITAT The CIT(A) found that the respondent-assessee was deprived of the right of confrontation as most truck owners did not appear for cross-examination. The CIT(A) concluded that the outstanding liabilities were genuine based on the material on record and deleted the addition made by the AO. The ITAT affirmed the CIT(A)'s decision. Issue 6: Justification of addition to total income by AO The appellant argued that the ITAT's findings were contrary to facts and law, alleging that the outstanding liabilities were unexplained. However, the High Court observed that the AO's inference was based on statements of truck owners, some of whom were found to be unreliable. The High Court upheld the concurrent findings of the appellate authorities, deeming the addition unjustified, and dismissed the appeal. In conclusion, the High Court dismissed the appeal against the ITAT order, emphasizing that the addition of outstanding liabilities to the assessee's total income was unjustified. The court highlighted the unreliability of truck owners' statements and upheld the CIT(A)'s decision to delete the addition. The judgment underscores the importance of reliable evidence and proper assessment procedures in determining tax liabilities.
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