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TMI Blog2017 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly made the disallowance, as the assessee could not be able to produce the log books of the vehicles run by him and that composite electricity expenses were found incurred on office cum residence of assessee. We accordingly confirm the disallowance made out of electricity and car running expenses as made by the authorities below. - ITA No. 388/Del./2015 And Alongwith S.A. No. 257/Del./2017 - - - Dated:- 29-8-2017 - Shri Bhavnesh Saini, Judicial Member And Shri L . P . Sahu, Accountant Member For The Appellant : Sh . Ashwani Taneja, Advocate Sh . Somil Agarwal, Advocate For The Respondent : Sh . Kaushlendra Tiwari, Sr . DR ORDER Per L . P . Sahu, A . M .: This is an appeal filed by the assessee against the order dated 07.11.2014 of ld. CIT(A)-XXVIII, Delhi for the assessment year 2011-12. In this appeal, the assessee has also filed a stay petition seeking stay of the outstanding demand. The grounds raised in appeal read as under : 1 . That having regard to the facts and circumstances of the case, Ld . CIT ( A ) has erred in law and on facts in confirming the action of Ld . AO in ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year, the assessee had shown sundry creditors of ₹ 2,59,71,557/- in his balance sheet. The Assessing Officer issued notices u/s. 133(6) to various parties, from whom the assessee had claimed to have made purchases and shown them as sundry creditors in the books of account. Some notices issued u/s. 133(6) returned un-served or no reply was received. The assessee was asked to produce the said sundry creditors, who had not complied with the notices u/s. 133(6). The Assessing Officer received the confirmations from certain parties, the details of which and observations of the AO are mentioned in the assessment order as under : S . No . Name Address Response 1. M/s Shree Jee Enterprises (AGPDV6348I) Y-198, Loha Mandi Naraina, Delhi As mentioned below. 2. M/s Shiv Agro India (APRBR9138K) 540/35, Naya Bazar Lahori Gate, Delhi As mentioned below. 3. M/s Shree Ji Enterprises CB 243, Ring Road, Naraina New Delhi-110028 No reply 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. 5. M/s Shri Sai Trading Co. C-l/33, Veer Bazar, Sanjay Enclave, Uttam Ngar, New Delhi-110059 On reaching the premises no such party found. On enquiry found that no such firm is carrying on business from here since last two years. 5 The assessee failed to produce the above parties for examination. Therefore, the AO issued show cause notice to the assessee to explain why these sundry creditors outstanding amount should not be treated as income of the assessee u/s. 41(1) of the IT Act. Further on perusal of the balance sheet for the financial years ending 31.03.2008, 31.03.2009 and 31.03.2010, these amounts were shown outstanding. The AO observed that the assessee has not proved the genuineness of these sundry creditors; that the assessee failed to produce the current address of the creditors; and that the assessee failed to give any evidence regarding identity and genuineness of the creditors. The AO, therefore, after relying on some case laws and interpretation of section 41(1), added the outstanding sundry creditors totaling to ₹ 90,36,451/- back to the total income of the assessee. 4. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowances. 6. On the other hand, the ld. DR relied on the order of the authorities below and he further submitted that the assessee has not proved the genuineness of the sundry creditors. The assessee was also unable to give current address of the creditors and as per Inspector s report, the sundry creditors were not found in existence at the addresses provided. The PAN of such creditors were found incorrect. Therefore, the ld. Authorities below were quite justified in making the additions. 7. After hearing both the parties and perusing the entire material on record, we find that the Assessing Officer has made the addition of the creditors outstanding liability to the income of assessee after resorting to the provisions of section 41(1) of the IT Act. The provisions of section 41(1) of the Act read as under : 41 . ( 1 ) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability 8 incurred by the assessee ( hereinafter referred to as the first - mentioned person ) and subsequently during any previous year, - ( a ) the first - mentioned person has obtained, whether in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, it has not been established by the Revenue that the assessee has written off the outstanding liabilities in the books of account, rather continued to show the impugned liabilities in the balance sheet. The Revenue has also failed to establish that the assessee had obtained any benefit of reduction in the earlier years of such liabilities by way of their remission or cessation. All these being the conditions to be satisfied under the provisions of section 41(1) of the Act, the addition so made taking shelter of these provisions cannot be sustained for want of satisfaction of such conditions. We stand fortified by the proposition of law laid down in the following decisions : (i). Hon ble Supreme Court in the case of CIT vs. Sugauli Sugar Works (P) Ltd., 236 ITR 518 (SC) has held as under : Sec . 41 contemplates the obtaining by the assessee of an amount either in cash or in any other manner whatsoever or a benefit by way of remission or cessation and it should be of a particular amount obtained by him . Thus, the obtaining by the assessee of a benefit by virtue of remission or cessation is sine qua non for the application of this section . The mere fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of them were not found at all in the given address . Some of them stated that they had no dealing with the assessee . In one or two cases, the response was that they had no dealing with the assessee nor did they know him . Of course, these inquiries were made ex parte and in that 11 view of the matter, the assessee would be allowed to contest such findings . Nevertheless, even if such facts were established through bi - parte inquiries, the liability as it stands perhaps holds that there was no cessation or remission of liability and that therefore, the amount in question cannot be added back as a deemed income under section 41 ( c ) of the Act . This is one of the strange cases where even if the debt itself is found to be non - genuine from the very inception, at least in terms of section 41 ( 1 ) of the Act there is no cure for it . The findings of tribunal upheld . (iii). The ITAT Ahmedabad Bench vide order dated 01.10.2010 in the case of DCIT vs. Ratnamani Metals Tubes Pvt. Ltd. (ITA No. 3783/Ahd/2008, relying on the decision of Hon'ble Punjab and Haryana High Court in the case of Smt. Sita Devi Juneja 187 Taxman 96 and of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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