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TMI Blog2015 (12) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the given facts and circumstances of the case, the addition made was rightly deleted by the CIT(A). We find no ground to interfere with the order of the CIT(A). - Decided against revenue Addition u/s.41(1) as cessation of liability - CIT(A) deleted the addition - Held that:- There was no evidence to show cessation of liability. Assessee still shows the liability in its books of accounts which itself is primafacie evidence that the liability exists.The transaction of purchase, if regarded as bogus then there is no liability in law and hence the question of applying section 41(1) will not arise for consideration.The sums in question has been repaid in the subsequent assessment years, thereby rendering the theory of cessation of liability not sustainable. - Decided against revenue - ITA No. 1442/Kol/2012 - - - Dated:- 10-12-2015 - Shri M. Balaganesh, A.M. Shri S.S.Viswanethra Ravi, J.M. For The Department : Shri Uday Kr. Sardar, JCIT For The Assessee : Shri Soumitra Choudhury, Advocate ORDER Per Shri S.S.Viswanethra Ravi, J.M. This is an appeal preferred by the Revenue against the order dated 18.06.2012 passed by the CIT(Appeals)-XXX, Kolkata i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 TABLE-l, SI.No.7 8 M/s. Gupta Trading Concern 17,000 TABLE-l, SI.No.8 9 M/s. Mritunjoy Treding Co. 56,190 TABLE-l , SI.No.9 10 M/s. Chatterjee Kundu Co. 2,848 TABLE-5, SI.No.2 11 M/s. Mehta Enterprise 1,01,455 TABLE-7,SI.No.l 12 M/s. Combat Chemicals Pvt. Ltd. 1,24,618 TABLE-7, SI.No.2 13 M/s. Raj Raj Pvt. Ltd. 2,91,699 TABLE-7,SI.No.3 TOTAL 10,14,942 The AO noticed that on Inspector s visit at the addresses in respect of Sl. Nos. 1 to 9, given by the assessee, the parties could not be traced. In regard to Sl. No. 10 and 11, the parties have shown purchases by the assessee lesser by ₹ 2,848/- and ₹ 1,01,455/- respectively. In regard to Sl.Nos.12 to 13, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings. 5.1 The CIT(A) was of the view that the AO considered purchases as bogus on the ground that purchases were made from the aforesaid parties in two year i.e. 2006-07 and 2007-08 totalling to ₹ 12,62,135/- against which only a cash payment of ₹ 16,500/- was made in 2007- 08. The remaining payments were made entirely in cash in the subsequent year i.e. A.Y. 2008-09, after which there was no transaction with these parties. The main contention of the assessee against the above was that these are genuine purchases against which supplies have been made by it to CESC Ltd. Further that the purchased items have been entered in the Stock Register of the assessee and therefore without purchases no sales could have been made. 5.2 The assessee has also provided the details of the items purchased from these parties and supplied to M/s. CESC Ltd. In the Remand Report, the A.O. has acknowledged that the entries for (cash payments were made of the accounts for these parties and all these accounts were squared up in Financial Year ending on 31.03.2008. In respect of the remaining four parties out of the above mentioned list, the A.O. has made addition on the ground of non-rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. The CIT(A) also observed that it was the other parties who were suppressing their sales. However, since the assessee is disclosing more purchases, there is no justification for the above addition. The CIT(A) held that the AO at best could have rejected the books and estimated income of the assessee but he has not done so. Adding the entire sales as income could give absurd results. The CIT(A) accordingly deleted the addition of ₹ 10,14,156/-. 6. Aggrieved by the order of the CIT(A) the revenue has raised Gr.No.1 before the Tribunal. We have heard the rival submissions. The learned DR relied on the findings of the AO. The learned counsel for the Assessee reiterated submissions made before CIT(A) and relied on the order of the CIT(A). 7. We have given a very careful consideration to the rival submissions. It is clear from the order of the CIT(A) and the evidence on record that there was no valid basis to treat the entire purchases as bogus as was done by the AO. If purchases are being disallowed to the extent of ₹ 10,14,942/- what will happen to the corresponding sales being shown. The CIT(A) therefore was right in concluding that the A.O. was not justified in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al report of the A.O. dated 14.02.2012 was received by the CIT(A) in respect of the matter remanded to him for verification. 8.2 The assessee gave his rejoinder to the above Remand Report and the same was filed on 10.05.2012 in which the A.O. has himself acknowledged that payments were found to have been made to these parties from the Books of Accounts of the assessee and all in cash and the accounts were allegedly in Financial Year ending on 31.03.2008. The assessee also claimed that from the Assessment Order for A.Y. 2008-09 no addition has been made by the A.O. on account of payments to these sundry creditors. Therefore, if the payments were taken to be genuine in the next Financial Year then they cannot be added in the earlier Financial Year as cessation of liability. The assessee further submitted that the sundry creditors cannot be added by the A.O. if there is no remission of cessation of trading liability and hr the above contention the assessee relied on the decision of Hon'ble Supreme Court in the case of CIT v. Sugauli Sugar Works (P) Ltd., 236 ITR 518. The assessee therefore submitted that there was no basis for this addition made by the A.O. 8.3 The CIT(A) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually existed. Secondly it is not for the assessing authority to decide that a particular liability had ceased to exist at a particular point in time but the conclusion must be based on evidence that the cessation had taken place in that relevant financial year. In the assessee's case, neither of the two conditions exist. Furthermore, as submitted by the assessee, the Supreme Court in CIT v. Sugauli Sugar Works (P) Ltd., supra has held that- In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt was barred and had become unenforceable. There may be circumstances which may enable the creditor to come with a proceedinq for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act. The principle that expiry of period of limitation as prescribed under the Limitation Act cannot extinguish the debt but it will only prevent the creditor from enforcing the debt is well settled. 8.5 This view of Hon Apex Court has been followed by the Delhi High Court in Commissioner of Income vs- Shri Vardhman Overseas Ltd 343 ITR 408 and several other High Courts. In the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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