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TMI Blog2019 (2) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... s and total purchases are not doubted then balance of creditors are going to be genuine, if it is not otherwise proved by the assessing officer. We note that the difference between creditors recorded in his books vis-à-vis balance in the books of creditors, should not be treated as cessation of liability. We note that in the assessee’s case under consideration, the assessee had shown the closing balance of sundry creditors as on 31-03-2000 in its balance sheet and the said closing balance has been continued and carried forward as opening balance in the subsequent year i.e. as on 01-04-2000. Hence, it is clear that the assessee had not written back the same to its Profit &Loss account during the relevant year. As such, it cannot be said that the assessee had availed any benefit, as specified in (b) above, during the relevant year. Hence, the condition prescribed in section 41(1) of the Act has not been fulfilled in instant case. In instant case since the assessee has not credited the same to its Profit &Loss account for the relevant year. In such a situation, it cannot be contended that the liability of different assessment years, as mentioned in the grounds of appeal had c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s supported by any tangible material or corroborate evidence. We note assessee’s account are audited and not rejected by the Assessing Officer therefore to estimate the separate profit in addition to profit shown in the audited books of accounts is not tenable without any tangible material or corroborative evidence, therefore we delete the addition. - ITA Nos.2043 to 2047/Kol /2017 - - - Dated:- 31-12-2018 - SHRI A.T. VARKEY, JM AND DR. A.L.SAINI, AM For The Assessee : Shri Saumitra Choudhary, Adv. For The Revenue : Robin Choudhury, Addl. CIT Sr. DR ORDER Per Dr.Arjun Lal Saini, AM: The captioned five appeals filed by the assessee, pertaining to assessment years2000-01, 2001-02, 2002-03, 2003-04, and 2004-05 respectively, are directed against the separate orders passed by the learned Commissioner of Income Tax (Appeals)- Kolkata (in short the ld. CIT(A)], which in turn arise out of separate assessment orders passed by the Assessing Officer. 2. However, in these appeals, the assessee has raised multiple grounds of appeal, but at the time of hearing, we have carefully perused all the grounds raised by the Assessee. Most of the grounds raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01- Addition ₹ 2,66,000/- on account of not disclosing unsecured loan. 5. The facts of the case which can be stated quite shortly are as follows. The assessee filed his return of income declaring total income of ₹ 1,50,010/- on 30.10.2000. Subsequently, the Assessing Officer issued notice u/s 148 of the Act on 01.04.2005 and assessment u/s 143(3) read with section 147 was completed on 29.12.2006. In the said order u/s 143(3) read with section 147 of the Act, the Assessing Officer made total addition to the tune of ₹ 12,69,082/-, consisting bogus creditors of ₹ 10,03,082/- and unsecured loan of ₹ 2,66,000/-. 6 On appeal by the assessee, the said order u/s 143(3) r.w.s. 147 of the Act was, upheld by the ld. CIT(A) on 12.10.2007. On further appeal by the assessee against the order of ld CIT(A), dated 12.10.2007, the Hon ble Income Tax Appellate Tribunal in its order no. 2425 to 2429/Kol/2017, dated 18.07.2008 set aside the orders of the lower authorities for assessment years 2000-01 to 2003-04, directing that the Assessing Officer shall furnish the copy of the reasons recorded u/s 148 of the Act to the assessee and if the assessee files any objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16170/- 209624/- Shri Hanuman Rab Udyog 2000-01 271539/- 118789/- 152750/- Sree Ganapati PashuAher 2000-01 158481/- 41906/- 116575/- Total 1003082/- Based on the above analysis, the Assessing officer, asked the assessee to submit the reasons of the discrepancy, as noted in the table above. In response the assessee filed written submission stating that the above noted discrepancy in the table above was due to goods in transit or payments in transit. The Assessing Officer noted that the reply of the assessee was without basis and without any evidence therefore he rejected the contentions of the assessee and made the addition to the tune of ₹ 10,03,082/-. 9. The Assessing Officer also noted that the assessee had given an unsecured loan to the tune of ₹ 2,66,000/- to Hari Shankar Khandsari Udyog but the assessee has not shown the loan in his books of accounts. The AO presumed that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... juncture it is appropriate to go through the relevant provisions of section 41(1) of the Act, the relevant extracts of which is reproduced below: Section 41(1):Where an allowance or deduction has been made in the assessment for any yearin 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 in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-fax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or ( b) the successor in business . . ........... Explanation 1.- For the purposes of this sub-section, the expression loss or expenditure or some benefit in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wholly unjustified. 13. In this regard it is also pertinent to note that the AO has not brought on record any evidence to justify that the aforesaid liabilities had actually ceased to exist during the relevant year. In such a situation the question of addition does not arise. Reliance in this regard is placed on the decision in the case of CIT -vs.- Sugauli Sugar Works (P). Ltd. (1999) 236 ITR 518 (SC) wherein, affirming the decision of the Hon'ble Calcutta High Court, the Hon'ble Apex Court held as follows: It will be seen that the following words in the section are important; the assessee had obtained whether in cash or in any other manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him'. Thus, the section contemplates the obtaining by the assessee of an amount manner, whatsoever, or a benefit by wav 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 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held as follows: 10. We have given a very careful consideration to the rival submissions. In our view the addition was rightly deleted by the CIT(A) for the following reasons: i. There was no evidence to show cessation of liability. ii. Assessee still shows the liability in its books of accounts which itself is prima facie evidence that the liability exists. iii. 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. iv. The sums in question has been repaid in the subsequent assessment years, thereby rendering the theory of cessation of liability not sustainable. We therefore concur with the view of the CIT(A) and dismiss Gr. No. 2 raised by the revenue also. Considering the factual position explained above and the position in law we are of the view that the addition made by the Assessing Officer should be deleted accordingly we delete the following additions made by the Assessing Officer: For assessment year 2000-01 ₹ 10,03,082/- For assessment year 2001-02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 40A(3) of the Act. 17. Aggrieved by the addition made by the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has confirmed the addition made by the Assessing officer. Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us. 18. We have given a careful consideration to the rival submissions and perused the material available on record. We note that considering the size and nature of the business and the product in which the assessee deals, we are of the view that in the village and remote area and kind of the peoples involved in this business (that is, most of the peoples are farmers), the gur and jaggery trading were being done mostly on cash basis. Most of the farmers have factory to produce gur and jaggery in the farm house itself where the sugarcane is produced therefore it cannot be said that farmers are not involved in manufacturing gur and jaggery. When it comes to the farmers, the general phenomenon and perception is that the Indian farmers are mostly uneducated and do not know how to operate the bank account. We know that the gur and jaggery production is not an agricultural activity but farmers are involv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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