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TMI Blog2015 (3) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... s not known. Outstanding sundry creditors are shown at Rs. 35.49 lacs in the name of 31 parties as per the balance sheet. The AO noted that even, after providing sufficient opportunities and time the assessee failed to provide the necessary details for proving their genuineness in respect of the remaining 25 parties. The AO further noted that the non furnishing of the requisite details gives an indication that the assessee has either not paid creditors or the creditors are non existing. After having made thorough enquiry in respect of sundry creditors the AO reached to the conclusion that out of total outstanding sundry creditors of Rs. 35,49,294/- an amount of Rs. 35,555/- is only genuine sundry creditors. The remaining amount of Rs. 35,13,739/- are non-genuine creditors and are no more payable. Therefore, the AO made addition of Rs. 35,13,739/- u/s.41(1) of the I.T. Act, 1961. The assessee is in appeal against this addition made by the AO. 3. On appeal CIT(A) called for the remand report from AO and observed that out of Rs. 35,13,739/- assessee failed to furnish proof of creditors in respect of Rs. 23,34,721/- and proved the creditors only in respect of Rs. 11,79,018/- and as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in respect of all three parties is appearing in the books of assessee and there were no purchases during the year. All the balances were out of opening balances only. Therefore, section 68 cannot be invoked as genuineness of the transaction can be examined only in year to which it pertained. Reliance was also placed on decision of ITAT in the case of Bamboat & Co vs. ACIT in ITA No. 1438/Mum/2010 order dated 20.04.2011 in which it has been held that the burden for proving, that the liability had ceased to exist during the year, is on revenue. This view is also supported by decision of the tribunal in case of DCIT vs. Bhagwandas Shoberlal Jain 60 lTD 118, and also by the decision of Hon'ble Supreme Court in matter of Sugauli Sugar Works 236 ITR 518. Reliance was placed on decision of ITAT in matter of International Clothing Inds Ltd v. DCIT ITA No. 5923/Mum/2009 order dated 28/01/2011 in which it has been found that liability has been shown as outstanding and not written off by assessee. It had been held that department could assess the under section 41(1) only when assessee writes it off actually. Reliance was also placed on decision of Hon'ble Delhi High Court in case of CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of accounts. It is submitted that since books of accounts of assessee were rejected and net profit is estimated addition of cessation of liabilities under section 41(1) is not justified and liable to be deleted. Reliance in this regard was placed on decision of ITAT in matter of M/s Exim Kargo Kare v. ITO in ITA No. 5134/Mum/2011 order dated 7.08.2013 in which it is found that Ld. AO made additions under section 41(1) despite the estimation of net profit, it had been held that no further addition could be made when AO estimated the net profits after relying on the decision of Hon"ble Allahabad High Court in case of CIT vs. Banwarilal Banshidhar (229 ITR 229). 4.3 He further relied on the following judgment in the case of MCorp Global (P.) Ltd. (2009) 178 taxmann 347(SC). 5. On the other hand the ld. DR submitted that inspite of giving enough opportunity to the assessee, the assessee failed to establish the existence of sundry creditors to the tune of Rs. 23,34,702/- . Being so, it was considered that these creditors were not in existence and same was considered as cessation of liability under section 41(1) of the Act. 6. We have heard both the parties and perused the materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 in respect of few parties. 6.5 The details were submitted by the assessee before AO in respect of M/s Baba Textiles, M/s Bhavani Textiles, M/s Hari Enterprises, M/s Jyoti Traders, M/s Sai Baba Textiles and M/s Shreenath Textiles. However, the outstanding sundry creditors are shown at Rs. 35.49 lacs in the name of 31 parties as per the balance sheet. Even after providing sufficient opportunities by AO, assessee failed to provide the above details in respect of the remaining 25 parties. Non furnishing of these details gives an indication that assessee has either not paid the creditors or creditors are non-existent. 6.6 It is seen from the details of subsequent payment of sundry creditors furnished in respect of certain parties that some of these creditors are outstanding from 2001 and some of them are being paid partly in the year 2009. The details furnished by the assessee in respect of only 5 parties are as under : Name of the creditors Cheque No. Date of issue Amount(Rs.) Final closing Balance Baba Textiles 276729 19.4.2007 26650/- Baba Textiles 277073 23.10.2008 50000/- Baba Textiles 277094 8.12.2008 30000/- Baba Textiles 277019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding in the books of account of the assessee for the assessment year under consideration and only the provisions of the section 41(1) of the Act could be applied. In the present case the assessee failed to establish the actual existence of the impugned disputed amount in the books of account of the assessee. The assessee has drawn its balance sheet based on its books of account, in which the above amount, were being claimed as liabilities due, to various parties, as at the end of the accounting year under dispute. However, the assessee failed to establish the genuineness of these liabilities by producing supporting evidence. Simply the liabilities being reflected against certain names in the books of account would not establish the genuineness of liabilities. 8. On the other hand the AO required the assessee to file supporting evidence from the alleged creditors and the assessee was only able to prove the existence of the liability in respect of Rs. 11,79,018/- and balance was not established as genuine. This shows, that the assessee has no explanation to prove that the creditors in the books of account are genuine. The assessee failed to discharge its onus cast on it, to substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ground that the books of accounts and bills etc. were not produced before him. During the remand proceedings the assessee had produced the books of accounts with bills and vouchers. The AO has not commented adversely anything about the purchase of the assessee. However, with regard to the fourexpenses as stated above he has stated that there are no bills and vouchers for these expenses and the same are incurred in cash. In view of this he estimated profit at 7% of the turnover which works out to Rs. 4,87,038/-. Therefore, out of total addition made Rs. 6,95,770/- addition to the extent of Rs. 4,87,038/- was confirmed and balance addition of Rs. 2,08,732/- was direct to be deleted. Against this the assessee is in appeal before us. 11. We have heard both the parties and perused the material available on record. The pattern of assessment is given by Section 29 of the Income tax Act, which states that the income from profit and gains of business shall be computed in accordance with the provisions contained in sections 30 to 43D. Section 43 provides for certain disallowances in certain cases not withstanding that those amounts are allowed jointly under other sections. 11.1 The c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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