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TMI Blog2019 (1) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... .2014 passed by CIT(A)-II, Faridabad by the assessee for the assessment year 2009-10. 2. The grounds of appeal are 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 not deleting the addition of ₹ 37,95,928/- fully as made by Ld. AO on account of sundry creditors and has further erred in sustaining the addition to the extent of ₹ 22,73,232/- by applying the provisions of section 41(1) whereas Ld. AO made the impugned addition u/s 68 of the Act and the impugned addition has been made by recording incorrect facts and findings and without giving adequate opportunity of hearing and without considering the submissions/evidences of the assessee. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in not deleting the addition of ₹ 37,95,928/- fully as made by Ld. AO on account of sundry creditors and sustaining the same to the extent of ₹ 22,73,232/- and passing the impugned assessment order is illegal, bad in law, void ab initio, unjustified, contrary to facts law and based upon recording of incorrect facts and finding, without giving adequate opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not filed any confirmation and hence due to non-availability of any evidences and amount received from these creditors in the preceding years the Assessing Officer instead of applying Section 68 of the Act should have applied the provisions of Section 41(1) of the Income Tax Act to make the addition. Therefore the CIT(A) made additions u/s 41(1) of the Income Tax Act. 5. The Ld. AR submitted that the only effective issue in the present appeal is sustaining the addition of ₹ 22,73,232/- out of total addition of ₹ 37,95,928/- out of sundry creditors made by the Assessing Officer u/s 68 but sustained by CIT(A) u/s 41(1) the Assessing Officer made addition u/s 68 in response of the parties mentioned in the Assessing Officer. The CIT(A) deleted some of the additions but sustained the balance 6 creditors. The Ld. AR submitted that the impugned liabilities are very much payable by the assessee as to when demanded and unless it is demanded, these are bound to be shown as outstanding. The very fact that these liabilities are appearing in the balance sheet is strong acknowledgement of the dates payable by the assessee as held in the case of CIT vs. Tamil Nadu warehousing Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that there must be a trading liability in respect of which the deduction has been claimed and allowed and burden to prove the twin conditions to the effect of the above facts, it goes without saying, is on revenue. The Ld. AR submitted that there is not even an iota of whisper as to whether the impugned creditors were in respect of trading liability for which any deduction was ever claimed and allowed and if allowed, in which year was it allowed so on so forth. This is evident from a plain reading of the assessment order. Therefore, the Assessing Officer miserably failed to discharge the said burden in view of the following decisions and therefore this addition is liable to be deleted on this short ground alone. The Ld. AR submitted that the Assessing Officer has not established with evidence that the liability in respect of the above outstanding balances has ceased to exist. The Assessing Officer has gone on presumption and that too by placing the burden wrongly on the shoulders of the assessee. Section 41(1) does not envisage any such presumption of cessation and fix the incidence of tax thereon. In the absence of any material having been brought on record to establish that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Delhi High Court in case of Pr. CIT vs. New World Synthetics Limited (ITA no. 806/2018 order dated 27.08.2018) 9. The Ld. DR submitted that commencing with a brief background that the Assessing Officer made addition u/s 68 on account of sundry creditors of ₹ 37,95,928/- the CIT(A) sustained addition of ₹ 22,73,232/- which the assessee is agitating. The Ld. DR submitted that as regards M/s. Delite Trading Co.-Rs. 7,16,903, M/s. Ganesh Enterprises-Rs. 4,75,883, M/s. Krishna Trading Co.-Rs. 2,33,844 and M/s. Nanak Enterprises-Rs. 1,14,966 are concerned there was wrong PAN, no confirmations filed, and notices issued u/s. 133(6) twice remain uncompiled with, Inspector s spot inquiry by personally visiting and making inquiries at given address and from the occupants / neighbors reported that no such concerns are available at the given addresses nor their whereabouts could be located. During the remand proceedings details of confirmations filed were examined and PAN was again found to be wrong by the AO, so identity of the creditor remains profusely doubtful, creditworthiness and genuineness of transaction also not proved in absence of any evidence. As regards to M/s. S.B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax department. M/s. P.T. Polysindo, was shown and recorded as a sundry creditor, to whom the respondent-assessee was liable to pay ₹ 2,61,72,160/-. 4. While liability to pay was not disputed and doubted by the respondent- assessee, albeit, the Revenue insists and claims that there was cessation of liability as ₹ 2,61,72,160/- had remained outstanding and unpaid since 31st March, 2003 till 31s March, 2006. The debt due to M/s. P.T. Polysindo, it is stated, had become barred by limitation. Further there was no likelihood of the respondent-assessee making the said payment as the respondent-assessed had incurred huge losses and stopped business operations during the period relevant to the Assessment Year 2000-01. 5. Section 41(1) of the Act, for the sake of convenience is reproduced below: Profits chargeable to tax. 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability 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 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed to be profit and gain of the business or profession. The word cessation in common parlance and in context in which it is used in Section 41(1) of the Act connotes that the debt has become extinct, has come to an end or it has been forfeited. Remission implies cancellation or extinguishment of all or part of the financial obligation on part of the creditor. 6. Explanation to the Section states that the loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof, shall include remission and cessation of any liability by unilateral act of the first mentioned person i.e. the assessee. The explanation therefore refers to the conduct of the assessee. We need not refer to Clause (b) to Section 41(1) for the said clause is not applicable. 7. In the present case there was no unilateral act by way of remission or cessation by the assessee, for the respondent-assessee had not written off the outstanding amount of ₹ 2,61,72,160/- payable to M/s. P.T. Polysindo. This is also not a case where benefit in any form or in cash was received by the respondent-assessee. Hence the first part of Clause (a) to Section 41( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance- sheet and accounts filed with the Registrar of Companies is an acknowledgement within the meaning of Section 18 of the Limitation Act, so as to give a fresh period of the limitation as has been held in Ambica Mills Ltd. Ahmedabad Vs. Commissioner of Income-tax, Gujarat, Ahmedabad AIR 1964 Guj. 208. The Supreme Court in Uttam Singh Duggal Co. Ltd. Vs. United Bank of India Ors. (2000) (7) SCC 120 has reflected and pronounced cwradmission in the balance sheet and accounts for the purpose of Order XII, Rule 6 of the Code of Civil Procedure. 12. Decision in the case of Polyflex (India) Pvt. Ltd. Bangalore Vs. Commissioner of Income Tax Karnataka (2002) 7 SCC 188, is distinguishable, as in the said case assessee had received and obtained an amount in cash, which amount received was earlier recorded and treated as expenditure in the profit and loss account. In the said case excise duty paid had been refunded, though the Revenue had preferred an appeal and the decision on refund had not attained finality. The Supreme Court therefore drew distinction between receipt of cash or amount; and remission or cessation of liability in respect of loss or expenditure under the second ..... X X X X Extracts X X X X X X X X Extracts X X X X
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