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TMI Blog2021 (9) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... y of creditors collected u/s 133(6) of the act. Reply filed by the assessee has not been considered and disposed of by speaking order before jumping on the decision to confirm the finding of the AO regarding addition on account of on account of sundry creditors u/s 41(1) and u/s 40A(3) of the Act . We, therefore, held that it is a fit case to be restored back to the Ld. CIT(A) to decide afresh on both the issues by way of speaking order - Appeal of the assessee is allowed for statistical purposes. - I.T.A. No. 375/Asr/2018 - - - Dated:- 21-9-2021 - Sh. Laliet Kumar, Judicial Member And Dr. M. L. Meena, Accountant Member For the Appellant : Sh. Abhinav Vij, CA. For the Respondent : Sh. S.M. Surendra Nath (DR) ORDER PER DR. M. L. MEENA, AM: This appeal of the assessee is directed against the order dated 27.03.2018 passed by the CIT(A), Jalandhar. The assessee has raised the following grounds: 1. That on the facts and circumstances of the case and in law, the order of assessment framed by the Assistant commissioner of Income tax, circle - 1, Jalandhar (hereinafter referred to as the AO ) under section 143(3) of the Income-tax Act, 1961 ( Act ), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the payments made are covered by exceptions as laid down in rule 6DD(e)(ii). 10. The CIT(A) is not justified in upholding the disallowance u/s 40A(3) read with rule 6DD of the Act without appreciating that the Appellant had furnish all the evidence to show that the payment has been made to actual producers of Hide and skin. The finding given by CIT(A), that the assessee has not furnished evidence to establish that the parties to whom payments were made are producers of skin and hide, is factually incorrect and does not borne out from the facts of the case. 11. That without prejudice to the contention that the suppliers are actual producers of hide and skin, the fact that the suppliers are skin peelers and process these hide and skin to some extent is undisputed. The view that processing in this case cannot be equated to production shall frustrate the provisions of Rule 6DD and render it nugatory. 12. That without prejudice to the above, in view of the facts of the case Rule 6DD(e) as well as Rule 6DD(f) both would be applicable in the case of the appellant. 13. That without prejudice to the above, since the genuineness of the transaction has not been dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g ₹ 20,000/- in violation to the provisions of section 40A(3) of the I.T. Act, 1961. The assessee failed to produce any documentary evidence in justification of the payments so made to six seller parties amounting to ₹ 262370/-, the assessing officer accordingly disallowed the same by invoking the provisions of section 40A(3 of the I.T. Act, 1961 and made an addition of ₹ 262370/-. 4. The Ld. CIT(A) while confirming the addition made by the assessing officer has observed as under: .. I have considered the observations as made by the assessing officer while making the impugned addition. I have also considered the written submissions filed by the Ld.AR of the appellant. I have further considered various judicial pronouncements relied upon by the Ld.AR of the appellant. The assessing officer has noted that these liabilities are trade abilities of earlier years and have already been allowed as a deduction in that year. Inspite of giving enough opportunity to the assessee, the assessee failed to establish the existence of liability for these sundry creditors to the tune of ₹ 32,41,130/-. The assessee has drawn its balance sheet based on its books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (in respect of 8 parties), thereby bringing to tax the written off amount twice, which is not permissible under the law and that both the lower authorities have failed to appreciate that section 41(1) can only be invoked only where some benefit has arisen to assessee by way of remission or cessation of a liability. In the said case neither there has been any cessation nor has any benefit been obtained by the assessee. 6. The defendant Ld. DR stands by the impugned order and contended that when the assessee was not sure whether those creditors had ceased to exist, then how the AO is expected to ascertain the facts regarding the year of the cessation of liability. He requested that the addition be confirmed. 7. We have heard both the sides and perused the material on record. It is noted that the disputed sundry creditors were being outstanding for more than 3 years and in compliance to notice under section 133(6) it was replied by them that they had no outstanding balance with the assessee. Further, some of the parties were not found at the given address while others did not confirm the outstanding liability of the assessee. Whereas, before the Ld. CIT(A) the assessee has tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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