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TMI Blog2014 (7) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... rators, providing accommodation entries, and that evidence had been admitted and acted upon by the ld. CIT(A) in contravention of rule 46A. - matter remanded back for fresh adjudication. Additions towards unconfirmed creditors - Held that:- No confirmation or any other material evidencing the existence of the liability to the other party, Swastik Enterprises, stands furnished at any stage, with the notice to him by the AO returning unserved, for which again no explanation stands furnished by the assessee - The amount is outstanding since 09.07.2003, i.e., for a period of almost six years as at the end of the relevant previous year, and for over 9 years by the time the matter stood decided by the first appellate authority - Nor reason for the same stands advanced at any stage, and even no claims with regard thereto were made, i.e., after a further lapse of another 1 ½ years – it is clearly unproved and the application of section 41(1) in relation to the credit is confirmed. - Additions confirmed - Decided against the assessee. Addition u/s 68 of the Act – Genuineness of credit cannot accepted – Held that:- There is no finding to that effect that the payment to the stated exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No confirmation or any other material evidencing the existence of any liability to the concerned parties being furnished in the assessment proceedings, the A.O. considered the same as not representing an extant liability, and added the same as the assessee s income for the year applying section 41(1) of the Act, i.e., on account of remission or cessation of liability. In appeal, the assessee found favour with the ld. CIT(A) on the basis that the relevant details stood submitted. The parties were existing, and there was nothing to show that there was a remission or cessation of liability or part thereof. The ld. CIT(A) accepted the assessee s claim, holding thus: (pg. 7 of the impugned order) From the language of the section, it has to be seen whether assessee obtained, in cash or kind any benefit in respect of trading liability. In the A case these trading liabilities have been shown as outstanding as on 31.03.2009. In this case, therefore, it is to be seen whether assessee furnished details as required by the AO , if he furnished, regardless of the details furnished, whether the credits can be treated u/s.41(1). Here, the A submitted that he filed the details to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Of course, there could be genuine and valid reasons obtaining in a particular case, so that a credit though outstanding in the books for long, represents a genuine liability. Why, loans on interestfree basis or toward risk or seed capital by way of subscription to shares, is given with no time prescribed for its return back or even any stipulation with regard to return thereon. Again, in a given case it could be that the liability remains to be recovered for want of time or resources with the creditor, i.e., to pursue the legal recourse. If so, the recalcitrant debtor stands benefited to that extent. In other words, the matter is primarily and essentially factual. The hon ble Delhi high court per its recent decision in the case of CIT vs. Chipsoft Technology (P.) Ltd. [2012] 210 Taxman 173 (Del), examining the legal aspect of the matter, has clarified that the view that merely because a liability outstands in books, and that lapse of time bars the remedy but does not efface the liability, is an abstract and theoretical one which does not ground itself in reality. The interpretation of law, particularly fiscal and commercial legislation, is to be based on pragmatic realities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of liability. True, an amount may continue to outstand in accounts, so that the assessee is prima facie liable in its respect. However, it is the veracity or the truth of those very accounts, constituting the assessee s evidence, that the assessee is required to establish. The matter would, therefore, have to be decided in light of the conspectus of the facts of each case. 4.2 Continuing further, the assessee failing to furnish confirmations from the two creditors under reference, the A.O. inferred the said credits, notwithstanding their being reflected as payables, as not representing the assessee s liability thereto as on the relevant date (31.03.2009), so that there was a cessation of liability during the year, attracting section 41(1). As afore-noted, the basis of relief to the assessee by the ld. CIT(A) was the absence of any material with the Revenue to exhibit a remission or cessation of the impugned liability. That, in our view, is requiring it (the Revenue) to prove a negative. The primary onus to prove its return, and the claims preferred thereby, is only on the assessee (refer: CIT v. Calcutta Agency Ltd. [1951] 19 ITR 191 (SC)). The return being premised on a par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, the debtor, being in the intimate know of its affairs? Coming to the specifics of the two trade credits, i.e., the positive materials, if any, furnished by the assessee to establish the existence of the liability as at the relevant yearend, we find confirmation of the account statement as appearing in the assessee s books of account from Pasad Steels (PB pgs.13-14). The same bears the PAN of the creditor as well as the fact of payment thereto in the impugned sum vide cheque no. 201088 on 28.03.2012. Even though the said confirmation is accompanied by a certificate by the ld. AR to the effect that the same stood furnished before the A.O., it is clearly false in-asmuch as the assessment order is dated 19.12.2011. How could a transaction dated 28.03.2012, which would only be confirmed by the creditor on or after the said date, be reported to the A.O. on 19.12.2011, even as the hearing before him would have presumably closed prior thereto? This falsity on behalf of the assessee is highly condemnable to say the least and needs to be depreciated in the strongest terms. What anguishes us equally is that the same was not pointed out by the ld. DR during hearing, and which is partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to year, the A.O. entertained doubts as to the genuineness of the said credits. The assessee being unable to, in spite grant of opportunity, furnish confirmations therefrom or even their addresses, the entire amount stood added as income u/s.68 of the Act. In appeal, the assessee submitted that of the total sum only the impugned sum of ₹ 3,52,090/- pertained to the current year; the Advance account bearing an opening balance (as on 01.04.2008) of ₹ 73,25,923/-. Relying on the decisions in the case of CIT vs. P. Mohanakala [2007] 291 ITR 278 (SC) and CIT vs. Shri Vardhaman Overseas Ltd. [2012] 343 ITR 408 (Del), clearly section 68 applies only to a sum credited in the assessee s books during the relevant year. Accordingly, the assessee having failed to furnish the relevant details or prove the credits, he confirmed the addition for the credits to the extent arising during the year, i.e., for ₹ 3,52,090/-. Aggrieved, the assessee is in second appeal. 6. We have heard the parties, and perused the material on record. No improvement whatsoever in its case stands made by the assessee before us. The assessee s sole basis for contesting the same, which stood also raise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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