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TMI Blog2008 (7) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... barred and has become unenforceable and there may be some circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act. In the case of the assessee amount has not even been credited to the Profit Loss Account. Therefore, on the ground of expiry of limitation, the addition upheld by the CIT(A) u/s 41(1) cannot be held justified. Hon ble Supreme Court in the case of Kesaria Tea Co. Ltd.[ 2002 (3) TMI 1 - SUPREME COURT] have examined the provisions of section 41(1). Relying on the same, it will be inferred that it has not been shown by ld. CIT(A) that the assessee has acquired any benefit from this particular liabilities which are still outstanding in the balance sheet of the assessee and it has also not been shown that these liabilities have ceased finally without the possibility of revival. In our opinion, the onus has wrongly been shifted by the revenue on the assessee. The assessee has shown these liabilities outstanding in its balance sheet. Therefore, there was no occasion to treat the said amount as taxable u/s 41(1) of the Act and if Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . M/s. Suleman Security and Grain Merchant 2,518,200.00 10. M/s. Hari Chand Roshan Lal Jain, GT Road, Panipat 167,410.20 Total 13,117,229.05 Or say Rs. 1,31,17,230 3. The assessee did not file confirmations from above sundry creditors except one i.e., of M/s. Shri Vardhman Rice Industries Pvt. Ltd., Panipat. Therefore, the Assessing Officer after giving various opportunities treated the balance amount of Rs. 1,25,46,534 as income of assessee on account of unexplained credits and added the same to the income of assessee under section 68 of the Income-tax Act, 1961. It was pleaded before the CIT(A) that the employee who was looking after the assessment proceedings had left the services on 30-9-2004 and after him there was no person to look after the income-tax matters and both the directors were busy as one director Mr. O.P. Jain was contesting the election of MLA from Panipat for the period of January and mid February. On 18-2-2004 Mr. Ram Bhaj Jain appeared before the Assessing Officer and wanted to file confirmations obtained from M/s. Giani Ram Anil Kumar and M/s. Jai Pal Ravinder Kumar, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 41(1) with the following observations : "I have considered the contentions of the appellant, the reasons given by the Assessing Officer for the said disallowance and the material on record. In the course of appellate proceedings the appellant company was again given an opportunity for giving complete details in respect of the credit balances shown by it in its books of account so that the Assessing Officer could be asked to verify the genuineness of the claim of the appellant. The appellant company vide their letter dated 10-1-2006 filed in the course of appellate proceedings has informed that their creditors are not cooperating for giving the PAN No. as they are demanding their money and that summons should be issued for getting their confirmation and PAN numbers. It is evident that the appellant company is not in a position to prove the genuineness of these credits. It has not supplied the details and the confirmations before the Assessing Officer despite repeated opportunities. It did not bother to give their PAN numbers and addresses before the Assessing Officer and even in the course of appellate proceedings when an opportunity was allowed to it, it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 351670 351670 351670 Suleman security (P. 46-48) - - 2518200 2518200 2518200 2518200 Hari Chand Roshan Lal Jain (P. 49-52) - 167410 167410 167410 167410 167410 Confirmation enclosed PAN : AAAJH8561P Total 12546529 Difference of Rs. 5 is due to paise. 6. Referring to above chart it was pleaded that in respect of none of the parties any sum was credited during the year under consideration as the balances of their account represented opening balances. He refer-red to the relevant pages of the paper book to substantiate such contention. He further submitted that Assessing Officer added said amount under the provisions of section 68 of Income-tax Act, 1961. However, the CIT(A) has changed the basis to section 41(1) of the Act. He contended that according to the facts of the case none of these sections were applicable. Hence, addition sustained by CIT(A) is contrary to the provisions of law. In respect of applicability of section 68 it was submitted by Ld. AR that there being no credit entry into the books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adu Warehousing Corpn. [2007] 292 ITR 310 wherein addition was made under section 41(1) in respect of Group Gratuity Scheme shown on the credit side in the balance sheet on the ground that the liability with regard to that had ceased to exist and it was held by the Hon ble Madras High Court that assessee having continued to show the amount payable under the Group Gratuity Scheme as liability in the balance sheet even after surrendering the scheme, the same is not assessable under section 41(1). Further reference was made to the decision of Allahabad High Court in the case of CIT v. Willard India Ltd. [2007] 164 Taxman 1 wherein similar proposition was laid down that unilateral act of the assessee debtor in writing bad time barred debt does not amount to cessation of liability, hence the amount not chargeable under section 41(1). 8. Concluding his arguments, ld. AR pleaded that addition has wrongly been sustained by the CIT(A) on the ground of applicability of section 41(1) of the Act. 9. On the other hand relying on the order of the Assessing Officer and CIT(A), it was vehemently pleaded by ld. DR that addition has rightly been sustained by CIT(A). He contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of limitation as provided in the Limitation Act." 11. In view of the above observations of Hon ble Supreme Court, in the absence of creditor, it cannot be concluded by the Department that the debt is barred and has become unenforceable more particularly when the assessee is a limited company whose accounts are accessible to general public. In the case of Sugauli Sugar Works (P.) Ltd. ( supra ) the assessee had credited the amount which was added to its income under section 41(1) of the Act, but in the case of the assessee such amount has not even been credited to the Profit Loss Account. Thus, the case of the assessee is on sound footing than the case of the assessee in that case. Therefore, on the ground of expiry of limitation, the addition upheld by the CIT(A) under section 41(1) cannot be held justified. 12. Their Lordships of Hon ble Supreme Court in the case of Kesaria Tea Co. Ltd. ( supra ) have examined the provisions of section 41(1) and it was observed that for the application of section 41(1) following points are to be kept in view : "(1) In the course of assessment for an earlier year, allowance or deduction has been made in respect of trading liability ..... X X X X Extracts X X X X X X X X Extracts X X X X
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