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TMI Blog2022 (3) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... s of purchase bills of each and every creditors showing their sales tax registration number, excise number, PLA number etc. Hon'ble Delhi High Court in case of CIT vs. Shri Vardhman Overseas Ltd. [ 2011 (12) TMI 77 - DELHI HIGH COURT ] has held that if the outstanding balance in the name of sundry creditors for more than 4 years has not been written back in the profit loss account, the same cannot be taxed u/s. 41(1) of the Act. Hon'ble Supreme Court in case of CCIT vs. Kesaria Tea Co. Ltd. [ 2002 (3) TMI 1 - SUPREME COURT ] has laid down that resort to section 41(1) could arise only if the liability of the assessee has said to have ceased finally without having possibility of reviving it, which is not the case here. Accordingly, the order of the ld. CIT(A) deleting the said addition is upheld and the ground raised by the Revenue is dismissed. Unexplained cash deposits - HELD THAT: - It is undisputed fact that opening cash in hand was available in the books of account. There is no reason to treat the cash deposit in the bank account from unexplained sources; once the cash book and regular books of accounts have been accepted by the AO and no adverse inference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were bogus or did not exist. 6. That in the facts and circumstances of the case, the order of learned CIT (Appeal) has erred in law in deleting the addition of ₹ 84,19,500/- being huge cash deposits in bank account by ignoring that the huge sum, in cash, was utilized to run the normal business activity. 7. That in the facts and circumstances of the case, the learned CIT (Appeal) has erred in ignoring the fact that the defects exposed in the course of assessment does constitute the rejection of accounts. 8. That in the facts and circumstances of the case, it is requested that the order of CIT (Appeals) being erroneous in law and on fact is liable to be reversed/set-aside and the order of the A.O. may be restored. 2.1. Whereas, the grounds of appeal taken by the assessee read as under:- The Ld. CIT(A) is wrong, unjustified unjudicious in confirming the addition of ₹ 39.50 lacs to the income of the assessee, being unsecured loans received, in the facts and circumstances of the case. 3. The facts of the issues involved are that Assessee Company is engaged in the business of manufacturing, developing, improving, buying selling, import, expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 C.A. Polytech P. Ltd. 196566 2 Climax Engineering Works (R) 186967 3 Ma Chhinamastika Sponge Iron Ltd. 796539 4 Monnet Ispat and Energy Ltd. 23566 5 Nidhi Auto Pvt. Ltd. 183401 6 Pearey Lal and Sons Ltd. 1271388 7 S.A. Iron Alloys Ltd. 183973 8 S.D.M. Metalloys Ltd. 1542366 9 Shri Ganesh Sponge Iron Ltd. 298151 10 Trident Structures Pvt. Ltd. 703565 11 Valiabh Steel Ltd. 82957 12 Vimsa Balls Pvt. Ltd. 315638 Total 5785077 5. Las ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee, has deleted most of the additions in respect of unsecured loans by discussing party-wise details as well as documents filed before the AO as well as CIT(A). 7. The assessee's contention before the ld. CIT(A) as well as before us during the course of hearing was that, firstly, before the AO, the assessee has filed a letter submitting the confirmation of accounts and various other documents which has also been placed in the paper book before us. Details of documents furnished before the AO and CIT(A) have also been placed before us, which are summarised as under:- * PB 1 is assessee's letter dated 16-12-2011 filed to Ld. AO submitting confirmations of account and e - challan showing payment of tax and PAN of unsecured loans. * PB 8 is assessee's letter dated 20-12-2011 filed to Ld. AO submitting confirmations along with PAN in respect of four parties regarding unsecured loans have already been submitted. * PB 182 - 196 is assessee's written submissions dated 02-05-2015 made before Ld. CIT(A) relating to lending parties, specifying which parties submitted the required documents needed to establish their identity and which have not bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Rule 46A dated 14-05-2012 at PB 197-198. * PB 22 - 23 is relevant pages of the bank statement of the assessee company with Syndicate Bank showing the cheque was bounced. Adverse observations of Ld. AO regarding unsecured loans * On perusal of the lender's bank account and on tallying it with that of the assessee company it is seen that on the date of presentation of the cheque in the bank there was meager fund available. Further as and when the cheques were presented for clearing in the cheque issuing branch within a span of 1-2 days of it substantial credits were transferred by way of clearing. This shows incredibility. Also that for a prudent businessman it is impossible to lock such huge amount in the lending for a long period and that too, without charging of interest. * In reply it was submitted that regarding the observation in respect of availability of meager funds in the account of the lender it only reflects the quality of proper funds management and in no way reflects the non creditworthiness of the lender. Further from the perusal of the bank statement of the lender it is clear that substantial credits itself prove the credit worthiness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by assessee and are placed on record. I find that the funds of ₹ 16 lakhs were actually never realized or received by the assessee company and as such there appears to be no reasons for making any addition in respect of this ₹ 1 lakhs. In respect of M/s. Akarti Enterprises (₹ 9 lakhs) (Page 34 of CIT(A)'s order) * The assessee has furnished the bank statement and necessary evidences during appellate proceeding, which were forwarded to AO for remand. It is observed that these cheques of ₹ 9 lakhs were deposited by assessee on 31-03-2009, but these were actually bounced; for which the necessary evidences are submitted by assessee and are placed on record. 9. On the other hand, ld. DR strongly relied upon the order of the AO. 10. After considering the relevant findings in the impugned order as well as material placed and submissions made before us, we find that insofar as addition on account of unsecure loan of ₹ 1,19,00,000/-, ld. CIT(A) has given relief in respect of following four parties for a sum aggregating of ₹ 80,00,000/-:- Sl.No. Name of the Party Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was furnished. (e) Since the beginning of the case, the intention of the assessee has been not to furnish details and confirmation etc. in some cases, which are now furnished, do not bear the correct present postal addresses of the lenders. 12. The finding of the ld. CIT(A) with regard to the aforesaid four parties and also two other parties for which sum aggregating to ₹ 1,19,00,000/- which has been confirmed by him is as under:- 7.1.4 Considering all facts and documents on record; my observation regarding leader-wise factual position and my inferences are as under:- (a) Akarti Enterprises (₹ 22.50 lacs) The assessee has furnished the confirmation assessment details during assessment proceedings has submitted bank account during appellate proceedings, which were forwarded to AO for remand. Out of ₹ 22.50 lacs, the cheque of ₹ 9 lacs deposited by assessee on 31.3.09 was actually bounced, the necessary evidences for which submitted by assessee are placed on record. Thus this ₹ 9 lacs were actually never realized/received by the assessee company and as such there appears to be no reasons for making any addition in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were forwarded to AO for remand. From the bank account of the lender, I find that the funds are coming through cheques only and no cash was introduced for clearance of the assessee's cheque. Further, as per bank statement of the lender, there are credits to the tune of ₹ 280.71 lacs in a period of 3 months thro' different clearings. Thus, I find that the identity, genuineness of the transaction creditworthiness of the lender cannot be doubted and there appears to be no reasons for making any addition in this respect. (f) Remaining unsecured loans of ₹ 18.50 lacs Sine no evidences of any kind were furnished in respect of M/s. S.S. Exports, Shree Nath Steel and M/s. Shree Syam Steel Corporation, by the assessee either before AO or before me, the addition of ₹ 18.50 lacs is hereby confirmed. 7.1.5 Thus, overall, I conclude that addition to the tune of ₹ 80 lacs requires deletion, while addition of ₹ 39.50 lacs (₹ 13.50 lacs + ₹ 7.50 lacs + ₹ 18.50 lacs) is hereby confirmed. 13. In case of Akarti Enterprise who has given ₹ 22,50,000/-, as per the record and also the finding of the ld. CIT(A) as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the creditworthiness and genuineness of the loan stood proved at the appellate stage, as the parties have not only have confirmed the loan but has also given their bank details and there was no other contrary material or information to disprove such document. Therefore, the order of the ld. CIT(A) deleting the unsecured loans in respect of four parties, namely, Amba Steels, Paras Enterprise, Om Shree Traders Akarti Enterprise, for a sum aggregating to ₹ 80,00,000/- is upheld and the Revenue's appeal on this ground is dismissed. 20. Insofar as addition of ₹ 13,50,000/- in the case of Akarti Enterprise and addition of ₹ 7,50,000/- in case of Arihant Engineering Works confirmed by the ld. CIT(A), which has been challenged by the assessee, we find that the only reason cited by the ld. CIT(A) is that prior to the clearance of the cheque of the assessee, there was cash deposit in the account of the lender. Qua these two parties, we find that not only they have directly confirmed to the AO but also given bank details. The source of cash deposit, if at all, was required to be enquired from the lender and it is not the assessee's onus to prove the cash depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exist. These liabilities are not even time barred, the detailed copy of accounts of these creditors were filed during appellate proceedings the same are placed on record, then how the same can be finally ceased to exist to attract the legal fiction contemplated by sec. 41(1). The AO has not brought on records any evidence which proves that assessee has obtained any benefit concerning such trading liabilities by way of remission or cessation during the relevant year i.e. the second primary condition for applicability of sec. 41(1) is also not satisfied. Regarding genuineness creditworthiness, though the same has no role to play for application of sec. 41(1). The appellant has submitted the copies of purchase bills of these creditors showing their sales tax registration no., excise no., PLA no. etc. etc. It is observed that all the creditors are either ltd. companies or pvt. ltd. companies that the payments are always made thro' banking channels. 23. Ld. CIT(A) has also referred to various decisions and held that once the liabilities have been duly acknowledged by the assessee and no parties have been given their claim, no addition can be made u/s. 41(1) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B 91- M/s. C.A. Polytech (P) Ltd. PB 92- M/s. Pearey Lall Sons (E.P) ltd. PB 93- M/s. Sri Ganesh Sponge Iron (P) Ltd. PB 94- M/s. Vimsa Balls Pvt. Ltd. PB 95- M/s. Nidhi Auto Private Ltd. PB 96- M/s. Monnet Ispat Ltd. PB 97- M/s. S.D.M. Metalloys Ltd. PB 98- M/s. Trident Structures. PB 99- M/s. S.A. Iron Alloys Ltd. PB 100- M/s. Vailabh Steel Ltd. PB 182 - 196 Assessee's written submissions dated 02-05-2012 made before Ld. CIT(A), Ghaziabad citing reasons for non-applicability of section 41 (1). PB 199-256: Assessee's submissions before Ld, CIT(A), Ghaziabad dated 29-05-2012 furnishing the copies of invoices related to purchases made during the year under consideration on which addition was made by Ld. AO are as follows-M/s. C.A. Poly tech (P) Ltd. PB 202 Ledger Account in the books of Assessee. PB 203-205 Invoices. M/s. Climax Engineering Works (R) PB 206 Ledger Account in the books of assessee. PB 207 Invoices. M/s. Monnet Ispat Energy Ltd. PB 208 Ledger Account in the books of assessee. PB 209-213 Invoices. M/s. Pearey La. Sons Limited. PB 214 Ledger Account in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 1,44,50,000/-, the difference amount has been treated by the AO as deposit from unexplained sources. First of all, from the perusal of the impugned order and documents placed in the paper book, there was opening cash balance of ₹ 51,29,537/- and the balance amount was stated to be realized from the debtors. The assessee has filed various evidences to substantiate its claim including the cash flow statement for the entire financial year and the reasons for withdrawal/deposit of cash. Ld. CIT(A) has given following findings of facts while deleting the addition:- (i) There was opening cash in hand to the tune of ₹ 5129537/- as per audited balance sheet as at 31.3.08 as per regular books of accounts maintained by the assessee. (ii) The books accounts maintained by the assessee including cash book has been accepted as genuine by AO. (iii) There was sufficient availability of cash as per regular books of accounts for depositing in bank accounts. (iv) The AO has not brought on record any material which lead to conclusion about the nature of source from where assessee company derived the remaining cash and that the money withdrawn from bank as utilized ..... X X X X Extracts X X X X X X X X Extracts X X X X
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