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TMI Blog2016 (12) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) which are extracted hereunder: - 3. During the course of assessment proceedings the Ld. A.O. has asked the Appellant to prove the genuineness of the outstanding liabilities amounting to Rs. 99,00,000/-. According to the Ld. A.O, these liabilities are outstanding from the A.Y. 2002-03 and the same are being carried on as outstanding liabilities from year to year. The Ld. A.O. has also asked the Appellant vide letter dated 20.12.2012 to show cause as to why the outstanding liability amounting to Rs. 99,00,000/- should not be disallowed under section 41(1) of the Act. 4. The Appellant in reply to the above show cause notice filed a letter dated 05.03.2013 and explained that out of total outstanding liability of Rs. 99,00,000/-, an amount of Rs. 91,000001/- pertains to fuel bills. However, due to sudden departure of the accounts personnel without proper intimation and handing over of work the same was remained to be reconciled from the year 2003. In the accounting year 2011-12, the same was verified and proper entries has been passed in the books of the Appellant in the year 2011-12. However, with respect to the remaining outstanding liability of Rs. 8,00,000/- the Appellant w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained to the Ld. A.O. that due to sudden departure of the accounts personnel, without proper handing over, it has not been able to identify the outstanding liability amounting to Rs. 99,00,000/-. However, subsequently the Appellant was able to identify that out of the total outstanding liability of Rs. 99,00,000/-, an amount of Rs. 91,00,000/- pertains to the fuel charges. As the Appellant has only been able to identify the same during the accounting year ending on 31.03.2012, it has passed the necessary entry in the F.Y. 2011-12 pertaining to A.Y. 2012-13. The Appellant has also offered the amount of the amount of Rs. 99,00,000/- for taxation in the A. Y. 2012-13. The ledger account of aviation fuel charges is enclosed at pages 3-5 of the Paper Book as well as the return of income for A.Y. 2012-13 showing the same income have offered for tax is enclosed at page 49 of the Paper Book. Thus, treating an amount of Rs. 99,00,000/- as ceased liability under section 41(1) of the Act is not at all justified and the same may be deleted. b. In sub-paragraph (ii) of the assessment order, the Ld. A.O., has mentioned that there has been no transaction in these accounts for the last six y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the outstanding liability amounting to Rs. 99,00,000/- as ceased liability of the Appellant and thereby made the addition in the impugned assessment year invoking the provisions of section 41(1) of the Act. The Appellant submits that the entire amount of Rs. 99,00,000/- has been offered for tax in the Assessment Year 2012-13. Hence, treating the same ceased liability of the impugned assessment year is without any basis. The Appellant, therefore, prays that the disallowance made by Ld. A.O. under section 41(1) of the Act is unjustified and your Honours may be pleased to delete the same. 7. The Appellant, further, submits that merely because the amount is outstanding for more than three years, the same cannot be a basis for making addition under section 41(1) of the Act. The Appellant to support the above contention rely on the recent decision of Hon'ble Gujarat High Court in the case of CIT vs. Puridevi Mahendrakumar Chaudhary [2014] 221 Taxman 375 (Gujarat) wherein the court has held that where assessee had outstanding creditors for goods and Assessing Officer made addition in income of assessee under section 41(1) on basis that with respect to 14 creditors liability was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the statement of the assessee that it has written back and offered to tax the outstanding liabilities of Rs. 91 lakhs in the return of income for A.Y. 2012-13, was found to be false on verification by the AO. It was submitted that even if the provisions of section 41(1) of the Act are found not applicable to the said outstanding liabilities, they are still to be disallowed as unproved credits as existence of the same are not proved with any material evidence; like fuel bills, names of parties from whom purchased, confirmation from those parties of outstanding amounts and therefore it can be fairly concluded that there was no genuine outstanding liabilities of Rs. 99 lakhs which the assessee will never be called upon to pay. 2.4.1 We have heard the rival contentions and perused and carefully considered the material on record including the judicial pronouncements cited. As per the facts on record; it is seen that in the course of assessment proceedings the Assessing Officer (AO) required the assessee to prove the genuineness of liabilities amounting to Rs. 99 lakhs which were being shown as outstanding, failing which the same would be brought to tax under section 41(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dits as ceased liability appears to be justified, hence the same is confirmed. It is further noted that by surrendering the aforesaid sum in subsequent year the appellant has also admitted that the liability in question is not genuine one, however such surrender in subsequent year just appears an afterthought which is much after the detection of this bogus liability by the A.O., hence on this ground no relief can be provided to the appellant. Accordingly the addition made by the A.O. is confirmed." 2.4.3 On a careful appreciation of the facts and circumstances of the case, submission put forth and the judicial pronouncements cited, as discussed above, we concur with the observations of the learned CIT(A) that before the authorities below, inspite of being specifically required to, the assessee has not been able to furnish any basic material evidence to establish that the alleged fuel purchases were ever made by it in the past. The assessee itself accepted that Rs. 8 lakhs thereof could not be reconciled by it. Even bills for purchase thereof, confirmations from so called creditors in respect of outstanding balances were never furnished. That the said amounts were outstanding liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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