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TMI Blog2022 (5) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... atements, wherein they have denied of any payment due to the assessee. Facts of the case being distinguishable, the ratio of decision relied upon by the assessee, cannot be imported to the facts of the case. We find that in above case of Elde Electricals [ 2015 (7) TMI 16 - BOMBAY HIGH COURT] also there is no finding of denying of existence of liability in the year under consideration by the alleged trade creditors. Therefore, the decision relied upon by the assessee is distinguishable on facts. We have considered finding of the Tribunal in the light of both the decisions cited by the assessee, however in our opinion the ratio(s) of the decisions are not applicable in the facts of the instant case. - The appeal recalled to the extent of examining the two decisions, is accordingly dismissed. - Additions confirmed - ITA No. 1623/MUM/2017 - - - Dated:- 30-3-2022 - Shri Omprakash Kant (Accountant Member) And Shri Amarjit Singh (Judicial Member) For the Assessee : Mr. Naresh Jain, AR For the Revenue : Mr. S.N. Kabra, DR ORDER PER OM PRAKASH KANT, AM This appeal filed by the assessee against the order dated 23/12/2016 passed by the Ld. Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y.2005-06 and therefore section 69C cannot be applied. He further stated that the principles of natural justice have been violated as the information was collected behind his back and no cross examination was given to him. in response to notice issued by the AO, M/s.. Gravity India has confirmed that it has received the entire payments in Sept., 2009 and there is no balance receivable from the appellant. The appellant requested the AO to provide the details provided by M/s. Gravity India which were not provided to him. A remand report was called for by my predecessor seeking the AOs comments on the same, The AC in his remand report submitted as under - This addition of Rs.32,51,157/- claimed to be payable to INIs, gravity India P. Ltd. was treated as unexplained expenditure, as the assessee had no reply to the show cause, where it was asked to explain why it should not be treated as paid out or its unaccounted income, when the client, M/s. gravity India P. Ltd., had stated under summons issued u/s, 131 of the Income-tax Act, 1961 that there is no dues pending from 14/s. Venus International, all the payments were received in the month of September, 2009 and that they have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.2.2. Even for a moment, if it is presumed that the appellant has not made this payment and the amounts are still due to M/s. Gravity India Ltd., when the creditor itself is saying that it has received the payments and there is nothing receivable from the appellant, it amounts to cessation of liability. The party (self is clearly saying that there is nothing receivable from the appellant. Therefore, if the appellant has not paid the amount to the party, it need not pay in future also as M/s. Gravity India Ltd. has clearly stated that there is nothing receivable from the party. So if not u/s 9C, this aunt will be taxable u/s,41(1) of the 1.1. Act, The addition made by the AO is confirmed. This ground of appeal is dismissed, 5. The second ground of appeal is against the addition u/s.41(1) of Rs.41,90,675/ which was payable to M/s. R.D. textiles. 5.1. The Ld. Counsel for the appellant submitted that the AO relied on some alleged information/confirmation or some statement u/s.131 from Mr. Harish Chandra Singh, Prop. of M/s. RD. Textiles in which he confirmed that no amount is receivable from the appellant. The Ld. Counsel for the appellant submitted that the purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases, the party has not taken any steps for recovery. It is amply clear from this that the party is not interested in pursuing recovery if it all it was due from the appellant, and there is no chance of any further measures for recovery as the business of the appellant was closed down in 2003 itself. The appellant is carrying a fictitious liability, When it is very clear that there are absolutely no steps taken by the party for recovery from 2003 to 2016, it does not make any sense to still show it as a liability. Further, he had himself stated that to the best of his knowledge, no such amount is receivable by him. The AO is right in treating this as a cessation of liability and bring it to tax u/s,41(1) of the I,T. Act, 1961. This ground of 'appeal is dismissed. 6. The third ground of appeal is against the addition of Rs.2,07,48,845/- u/s.41(1) of the I.T. Act. 6,1. The party wise break up of this amount is as under :-- Name of the creditors Balance as on 31.3.2010 LM/s. Sunrise Textiles 1,71,26,130/- M/s, Paaneri Print 6,22,823/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this party is Rs.6,22,823/- and the address is Sakinaka, Andheri(E), Mumbai. This amount is being carried forward from A.Y.2004-05 i.e. for about 17 years. No payment what so ever has been made by the appellant for all these years At the time of appellate proceedings for 2004- 05, the CIT(A) has observed that the balance has been confirmed by the party and therefore he deleted the addition. He was deciding the matter for A.Y,2004- 05. The current appeal is against the additions made for A.Y.2010-11 and the situation remains the same The Ld. Counsel for the appellant was asked to submit any correspondence between the appellant and the party, He had submitted 2 letters dt 18 1 2016 and 19.8.2016 supposedly written by M/s. Paaneri Print, requesting for clearing the dues. It is surprising that after keeping silent for about 12 years, the party is writing letters in 2016. Further surprising is that the party has not initiated any legal action till date. Even more surprising is the fact that the phone number of the party i.e. M/s. Paaneri Print given in its letter head is 022 6369979 which is any seven digits All the phone numbers in Metros have been converted to 8 digits many years a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmit any correspondence between the appellant and the party. He had submitted 3 letters dt.25.12,2015, 30,06.2016 and 13.9.2016 supposedly written by M/s. Saileela Dyeing Ptg. Mills requesting for clearing the dues. It is surprising that: after keeping silent for about 12 years, the party is writing letters in 2016. Further surprising is that the party has not initiated any legal action till date. The appellant, no doubt has furnished a fabricated piece of paper for which non credence can be given. The letters from the parties submitted form the appellant also appear to be fabricated. There is no phone no. given on the letter head even though it is a very big party to whom the appellant's dues itself is 7,70,375/-. It is strange and surprising that somebody would keep quiet without initiating any legal action when the party i.e. the appellant is non-cooperative and defiant. 5) Mr. 'Pradeep Kher : The amount due to this party is Rs.5,05,799/-, This amount is being carried forward from A.Y.2004-05 i.e. for about 12 years, No payment whatsoever has been made by the appellant for all these years. At the time of appellate proceedings for 2004 05, the CIT(A) has observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly seven digits. All the phone numbers in Metros have been converted to 8 digits many years ago. if somebody is keeping seven digit phone no, on the letter head in 2016, the genuineness of such a letter is anybody's guess. The appellant no doubt has furnished a fabricated piece of paper for which non credence can be given. 6.2.2. It is clear from the above, that none of the parties have been pursuing for recovery and it is as good as not recoverable. All the parties seem to have given up on recovery. Otherwise there would have been legal suits initiated against the appellant. There is no such 'thing. Further, the appellant has furnished some fabricated letters supposedly written by these parties. The CIT(A)while deciding the appeal for A.Y,200405 has allowed the outstanding liabilities in 4 cases i.e. M/s. Paneeri Print, 'Mr. Pradee'p Kher, Shri. Sai Leela and M/s, S.R. Prints. The reason given by him is that these parties have confirmed the balances as on 31.3.2004. In the instant case, we are dealing with A.Y.201011 and the facts are being appreciated in 2016. The CIT(A) has further observed that there were some transactions and part payments to some. of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts. In fact, the appellant has net written off the liabilities but the facts and circumstances showed that there is no possibility of any recovery. Therefore, the additions made u/s.41(1) are justified. The appellant further relied upon UT Jain Exports Pvt. Ltd. 35 Taxman.com 540 (Del.) wherein the Delhi High Court held that credit amount outstanding for several years cannot be held as cessation of trading liability on ground that assessee could not prove genuineness of transaction, where assessee had acknowledged its liability successively over several years, Genuineness of the transactions is not an issue in this case. Therefore, this case cannot be applied. In the case of ITO Mumbai vs. PAN International 2013 (4 TMI 638) the ITA Mumbai held that outstanding creditors even for more than 3 years cannot be considered as sufficient evidence of cessation of liability. In the instant case, the liabilities have been existing for more than 12 years, without any efforts for recovery by the creditors, Therefore, this case is not relevant to the instant case. In the case of Aasia Business Ventures vs. ITO 2013 (430/Mum/2011), the issue is of advance against export received from the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding was shown at Rs. 32,51,157/-, the said party categorically stated that it had received the entire amount during financial year 2009-10 and thus there was nothing which was receivable by the assessee. Ld. CIT(A) during the appellate proceedings had also called for the remand report seeking AO s comments and the AO in his remand report had stated that notices u/s 133(6) of the I.T. Act were issued upon the said party i.e. M/s Gravity (I) Pvt. Ltd. for furnishing copy of bank statements highlighting the payments received from the assessee. In this regard, M/s. Gravity India P Ltd. submitted its bank of Baroda Account No.04050500000029 statement copies for the month of Sept., 2009 highlighting the amount and cheque No. received from M/s. Venus International where the exact amount of payment received was tallied. Thus in this way, the assessee was also given an opportunity by the AO during the remand proceedings by providing the copies of the bank statement of M/s. Gravity India Ltd. 6. The amounts credited into the account of M/s, Gravity India in Sept.09 exactly tally with the amount payable by the assessee. Thus in this way, AO had rightly brought this amount to tax u/s.69C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is strange and surprising that somebody would keep quiet without initiating any legal action when the party i.e. the assessee is non-cooperative and defiant. 10. As far as in the case of other parties, admittedly assessee had not made payment to any of them and the letters submitted by the assessee contains the phone numbers of the parties, which are only in 7 digits, which itself shows that no phone numbers are less than 8 digits since many years ago. These 7 digit phone numbers on the letter heads in 2016 itself doubted the genuiness of the letters. 11. We are in agreement with the reasoning given by Ld. CIT(A) while rejecting the claim of the assessee. It is also an undisputed fact that none of the parties have been pursuing for recovery and it is as good as not recoverable. Thus all the parties seem to have given up on recovery. Otherwise there would have been legal suits initiated against the assessee. 12. In the instant case, there is no unilateral write off in the books of accounts. In fact, the assessee has net written off the liabilities but the facts and circumstances showed that there is no possibility of any recovery. Therefore the additions made u/s.41(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt of India also dismissed the SLP filed by the assessee. The relevant portion of the decision is reproduced as under: We have carefully considered the rival submissions and perused the orders of the authorities below and the case laws cited at bar. The applicability of section 41(1) of the Act on outstanding trading liabilities as reflected in the balance sheet has been called into question. Section 41(1) of the Act states that where an allowance in respect of an expenditure or trading liability etc. is made in a year and the assessee obtains any benefit, whether in cash or otherwise in a subsequent year, such benefit shall be deemed to be profits gains of the business of that subsequent year, whether such business is in existence or not in that subsequent year. The Section has an effect of deeming such cessation or remission of liability as income in departure with the general law where such remission or cessation is not regarded as an income. Coming to the facts, as noted above, it is the case of the Revenue that the trading liabilities of Rs. 74.40 Lakhs claimed to be payable to several parties was not found to be subsisting liability as per the outcome of inquiries mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity had, in fact, ceased to exist. Therefore, it logically flows that the hon'ble Gujarat High Court has clearly opined that liability may cease to exist in terms of Section 41(1) where it is outstanding for a long period without any payment despite it being reflected in the books of accounts. The hon'ble Gujarat High Court also did not question the action of Revenue towards taxability u/s.41(1) of the Act with reference to financial year in question. The distinction sought to drawn on behalf of Assessee for its non-application is un-merited. The Hon'ble Gujarat High Court has approved the findings of ITAT that Section 41(1) of the Act would apply where liabilities outstanding are found to be not payable for one or more reasons. We notice that similar views have been echoed by the hon'ble Delhi High Court in the case of Chip soft Technology (supra) cited on behalf of Revenue. The hon'ble Delhi High Court in that case observed that the assessee could not claim benefit of showing unpaid dues of employees outstanding for 6-7 years and it was found that there was cessation of such liability on facts which was liable to be added to the income of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the hon'ble Bombay High Court went to the extent of confirming penalty f r not offering such trading liability under s. 41(1) of the Act. Thus, the conclusion apparently leans against the Assessee. However, we are left with one pertinent question hurled at us on behalf of the Assessee i.e. year of taxability. In this regard, we are not impressed by the plea the AO did not bring anything on record to allege that cessation took place during the financial year in question for the purposes of taxability under s. 41(1) of the Act. We find that AO has assertive justification to bring the outstanding liability within the net of s.41(1) of the Act in the Financial Year under inquiry. The onus is on the Assessee to show that year of cessation is different. In the instant case, the Assessee does not admit cessation at first place. The AG therefore is within its right to hold the Financial Year in question as the right year for taxability when the facts concurring the non-existence were unrevealed. The Assessee was failed to discharge onus. Besides, the defect of year of taxation U any can be cured under s. 153(6) in such cases. However, we do not consider it expedient to dwell fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Bhogilal Ramjibhai Atara is not applicable to the facts of the present case as in that case there was no trading liability, whereas the facts contained in the case of M/s Dattatray Poultry and M/s Gujtron Electronics (P.) Ltd. v. ITO [2017] 83 taxmann.com 389/249 Taxman 443 (Gui.) are similar to the facts of the present case nd even, the above judgments were passed subsequent to the judgment passed in the case of Bhogilal Ramjibhai Atara. The other judgments referred and relied upon by Ld. AR are not found applicable to the facts of the present case. 19. Moreover, no new facts or contrary judgments have been brought on record in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings so recorded by the Ld. CIT(A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these grounds raised by the assessee stands dismissed . 4. The Ld. counsel submitted that decision in the case of Lotus Investment Ltd. (supra) has not been considered by the Tribunal. In said case, the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has obtained benefit in respect of such liability in the impugned assessment year must be clearly brought on record. In the absence of any material to establish that the assessee had obtained any benefit in respect of the liability in the impugned assessment year, so merely on the basis of surmises and assumptions it cannot be said that there is remission/cessation of liability in the impugned assessment year. 5. Thus we find that Tribunal in case of Lotus Investment Ltd. (supra) has deleted the addition under section 41(1) of the Act mainly on the ground that genuineness of the transaction was to be examined in the year of incurring expenditure and not in the year of cessation of liability. The Assessing Officer also not examined whether assessee had obtained a benefit either in cash or in any in any form in respect of such liability in relevant previous year. The facts in the instant case before us are different. In the instant case, the Assessing Officer issued summons to the alleged trade creditors and recorded their statements, wherein they have denied of any payment due to the assessee. Facts of the case being distinguishable, the ratio of decision relied upon by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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