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TMI Blog2020 (4) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... on - HELD THAT:- Tribunal noted that in respect of the said items of current liabilities, the Assessing Officer has not pointed out any defect during the assessment proceedings and was of the view that before placing reliance on the statement furnished to the bank, the Assessing Officer ought to have pointed out the defects/infirmities in the current liabilities and the provisions shown by the assessee in its balance sheet. The Tribunal took note of the fact that the Commissioner (Appeal) has given a finding that the creditors shown by the assessee in its books of account exist in the books of account and that the learned DR for the revenue had not disputed this finding of fact. The Tribunal, accordingly, did not find any reason to disturb the findings recorded by the Commissioner (Appeal) and dismissed the ground of appeal. Thus, the Tribunal upon perusal of the material on record has found as a matter of fact that there were no defects in the items of current liabilities shown by the assessee in its balance sheet. In the light of the fact that the conclusion arrived at by the Tribunal is based upon concurrent findings of fact recorded by it upon appreciation of the material on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,08,000/- made on account of cessation of liability u/s.41(1) of the I.T. Act, 1961? 2. The assessment year is 2009-2010 and the corresponding accounting period is the previous year 2008- 2009. 3. The assessee is engaged in the business of manufacturing of HDPE/PP Woven Sacks Jacquard Woven Labels, trading of Fabrics Labels. The assessee filed its return of income on 27th September, 2009 declaring total loss of ₹ 6,46,33,478/-. The assessment proceedings under section 143(3) of the Act came to be completed on 16th December, 2011, determining assessed loss at ₹ 1,09,64,913/- making the following disallowances: (i) ₹ 1,16,65,245/- on account of suppression of stock, (ii) ₹ 4,14,60,245/- on account of inflated current liability, (iii) ₹ 3,08,000/- under section 41(1) of the Act, and (iv) ₹ 2,35,075/- on account of expenditure not incurred for business purposes. 4. Insofar as proposed Question [A] which relates to disallowance of ₹ 1,16,65,245/- on account of alleged suppression of closing stock is concerned, during the course of assessment proceedings, the Assessing Officer noticed that the assessee had taken cash credit loan against the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was not justified in making the addition on this account and directed him to delete such addition. The Commissioner (Appeals) further recorded that the other component of addition was on account of difference in valuation of stock. After considering the submissions made on this issue, the Commissioner (Appeals) noted that the stock statement furnished to the bank was in connection with hypothecation of goods which has been given by the assessee as it had taken some loan from the bank. The stock was not pledged with the bank authorities and bank authorities had not physically verified the stock mentioned in the statement filed before them. The Commissioner (Appeals) further noted that the books of accounts maintained by the assessee were regularly audited and the Assessing Officer had not found any defect with reference to the books of account or details of production. The assessee had also explained that the difference in valuation in the statement submitted to the bank was on account of valuation which was made on the basis of last purchase bill in the statement submitted to the bank; whereas, in the books of accounts the valuation was made as per the accounting standards. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was noticed by the Assessing Officer that sundry creditors are shown at ₹ 2,44,11,803/- and other liabilities of ₹ 2,09,08,451/- and thus, total liability is shown at ₹ 4,53,20,254/- whereas in its books of accounts the assessee had shown ₹ 38,60,000/-. The Assessing Officer therefore, found that in the books of account the assessee had shown excess liability of ₹ 4,14,60,254/- and during the assessment proceedings, the assessee had not furnished any reason for the difference of liability between the bank and books of accounts and thus, added an amount of ₹ 4,14,60,254/- to the total income of the assessee. 13. Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals) who deleted the addition. The revenue carried the matter in the appeal before the Tribunal, but did not succeed. 14. As can be seen from the order passed by the Commissioner (Appeals), before the Commissioner (Appeals), the assessee had submitted that the books of accounts of the assessee were audited and no difference or defect in the books of accounts had been pointed out by the Assessing Officer. It was further pointed out that the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out the defects/infirmities in the current liabilities and the provisions shown by the assessee in its balance sheet. The Tribunal took note of the fact that the Commissioner (Appeal) has given a finding that the creditors shown by the assessee in its books of account exist in the books of account and that the learned DR for the revenue had not disputed this finding of fact. The Tribunal, accordingly, did not find any reason to disturb the findings recorded by the Commissioner (Appeal) and dismissed the ground of appeal. 17. Thus, the Tribunal upon perusal of the material on record has found as a matter of fact that there were no defects in the items of current liabilities shown by the assessee in its balance sheet. In the light of the fact that the conclusion arrived at by the Tribunal is based upon concurrent findings of fact recorded by it upon appreciation of the material on record, no question of law can be said to arise out of the said ground of appeal. 18. Proposed Question [C] relates to deletion of addition of ₹ 3,08,000/- made on account of suppression of liability under section 41(1) of the Income Tax Act, 1961. During the course of assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x v. Nitin S. Garg, (2012) 71 DTR (Guj.) 73 as well as in the case of Commissioner of Income Tax v. Silver Cotton Mills Company Limited, (2002) 254 ITR 728 (Guj.), the Commissioner (Appeals) set aside the addition made by the Assessing Officer. 21. The Tribunal, in the impugned order, has observed that there is no dispute as regards the fact that the liabilities in question were not written off in the books of accounts of the assessee and was of the view that the same cannot be treated as income under the provisions of section 41(1) of the Act on account of cessation of liabilities. 22. Sub-section (1) of section 41 of the Act provides that where any allowance or deduction had been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year the assessee has obtained whether in cash or 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 of the value of benefit accruing to him shall be deemed to be the profits and gains of business or profe ..... 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