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TMI Blog2012 (7) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... nt - assessee contended that the ld. CIT(A) was not justified in upholding the addition out of expenses payable at the end of the year nor any benefit accrued to the assessee – Held that:- No basis to upheld addition while invoking provisions of sec. 41(1) of the Act - CO filed by assessee is allowed - ITA no.150/Del/2012 - - - Dated:- 25-5-2012 - SMT. DIVA SINGH, SHRI A.N. PAHUJA, JJ. Assessee by Shri Br ijesh Luthra, AR Revenue by Smt . Mamta Kochar,DR O R D E R A.N.Pahuja:- This appeal filed on 10th January, 2012 by the Revenue and the corresponding cross objection[CO] filed on 6th March,2012 by the assessee against an order dated 10.10. 2011 of the learned CIT(A)-XXIII, New Delhi, raise the following grounds:- I.T.A. no.150/D/2012 i) On the facts and on the circumstances of the case the learned CIT(A) has erred in deleting the addition of Rs.17,34,147/- on account of unexplained sundry creditors. ii) On the facts and on the circumstances of the case the learned CIT(A) has erred in allowing the relief of Rs.1,09,800/- on account of unexplained expenses. iii) The appellant craves leave to add, alter or amend any of the grounds of appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been allowed to the assessee for submitting the details. No comments were offered by the AO on merits of the evidence. Accordingly, the ld. CIT(A) vide letters dated 25.10.2010 and 3.2.2011 asked the AO to submit his report. The AO submitted his further report dated 14.3.2011, after verification of the evidence. The AO submitted that notices u/s 133(6) issued to all the parties were returned by the postal authorities with the remarks that no such person was available at the given address. After obtaining comments of the assessee on the remand report , the ld. CIT(A) concluded as under:- 7. Regarding the sundry credits having a combined outstanding of Rs.18,15,800/-, the appellant has furnished copies of ledger accounts of these parties in his books of the current and subsequent year. In the case of M/s Chipri Handicrafts, the appellant had a closing credit balance of Rs.5,97,045/- at the end of the year under consideration. The entire amount is seen to have been paid up between 14.3.07 and 2.5.07, and the appellant has made further purchases from this party of Rs.33,15,512/- in the financial year 2007-08. Payments are seen to have been made by cheques on a regular basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the entire credit balances have been paid up in the early part of the subsequent year. Examination of the ledger accounts of all the creditors shows that the Assessing Officer has accepted the bulk of the purchases made from these parties but treated the credit balance at the end of the year as unexplained. As against the disallowance of Rs.18,15,800/-, the purchases made from these parties amounts to Rs.75,46,673/-. This patently results in the absurd conclusion that the purchases which have been paid for are treated as genuine, but those remaining due for payment to the same parties at the end of the years are treated as unexplained. I am, therefore, unable to agree with the contention of the Assessing Officer that the transactions cannot be established to be genuine in the absence of confirmations. However, the amount of Rs.81,653/- claimed as payable to M/s Cottage Craft is treated as remission of trading liability as the appellant has failed to prove that the liability subsists or was settled in any subsequent year. The appellant, therefore, gets relief of Rs.17,34,147/- (18,15,800/- less 81,653/-). 4. The Revenue is now in appeal before us against the aforesaid findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded that the aforesaid liabilities subsisted in the year under consideration and most of these were paid up with further purchases from the parties. On the basis of additional evidence and after having a remand report from the AO,as already stated , the ld. CIT(A) while deleting the addition of Rs.17,34,147/-, upheld the amount of Rs.81,653/-. There is nothing on record to establish that the aforesaid liabilities had ceased to exist or were remitted by the creditors in the year under consideration. In these circumstances, as concluded by the Hon ble Gujrat High Court in CIT Vs. Bharat Iron and Steel Industries (1993) 199 ITR 67 (Guj) (FB), the provisions of sec. 41(1)(a) are not attracted. 5.1 Hon ble Gujrat High Court in the case of CIT Vs. Silver Cotton Mills Co. Ltd., 254 ITR 728(Guj) held that simply because the period of limitation had come to an end for the purpose of filing a suit for recovery of the said amount or for taking appropriate action against the assessee, it cannot be said that there was a cessation of liability. The liability still remains, though it may not be enforceable at law on account of the provisions of the law of limitation. Relying upon the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to repay the loans would be a trading liability or not, it is an admitted position that there had been no allowance or deduction in any of the preceding years and, hence, there is no question of applying the provision as such. Section 28 of the Act deals with profits and gains of business or profession and clause (iv) thereof says that the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable as income under the head Profits and gains of business or profession. In the facts of the present case, it cannot be said that the assessee-company was carrying on business of obtaining loans and that the remission of such loans by the creditors of the company was a benefit arising from such business. 5.5 Hon ble jurisdictional High Court in CIT Vs. Vardhman Overseas Ltd., 16 Taxman.com 350(Delhi) while referring the judgment of the Hon ble Supreme Court in Sugauli Sugar Works (P.) Ltd. (supra) and a number of other decisions upheld the findings of the Tribunal ,holding that since amounts payable to sundry creditors were not credited to assessee's profit and loss account and were still shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 while remaining was still outstanding. Likewise the assessee did not furnish any evidence of rent payable of Rs.8,500/-.. The ld. CIT(A) upheld the addition of Rs.58,500/- in terms of provisions of sec. 41(1)(a) of the Act. on the ground of cessation of liability. 8. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A),deleting the addition of Rs.1,09,800/-while the assessee disputed the upholding of addition of Rs.58,500/- in the CO. The ld DR supported the order of the AO while the ld. AR on behalf of the assessee contended that the ld. CIT(A) was not justified in upholding the addition of Rs.58,500/- out of expenses payable at the end of the year nor any benefit accrued to the assessee. 9. We have heard both the parties and gone through the facts of the case. In view of detailed reasons given in para 5 above and the Revenue having not placed before us any material, controverting the aforesaid findings of the ld. CIT(A) in relation to the addition of Rs.1,09,800/, we uphold the impugned order in deleting the said addition and also delete the addition sustained by the ld. CIT(A). There is no basis to upheld addition of Rs.58,500/- while inv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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