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TMI Blog2023 (3) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... dismiss the appeal of the revenue. Addition on account of difference in contract receipt shown in Form 26AS vis- -vis receipts accounted by the assessee - CIT-A deleted addition - HELD THAT:- The submission of the assessee was that the book entries and ledger account of parties are sufficient evidence to explain the difference. CIT (Appeals) has reproduced the party-wise reconciliation and explained the difference - We find that the ld. CIT (A) has given specific and categorical finding and reasons for deleting each addition regarding RMC sales, Hire Charges where the parties has deducted TDS on RMC sales and higher charges which are not part of contract receipts - the finding regarding difference in 26AS and contract receipts are mentioned party-wise in detail. Considering the detailed submissions and explanations made by the assessee at the appellate proceedings, we find no infirmity in the order of the ld. CIT (A) and the same is upheld. The ground of the revenue is dismissed. Disallowance of various expenses made by the AO in absence of verification - CIT (A) has considered the detailed submissions comprising of ledger accounts and other evidences furnished by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34,76,10,409/- on account of unexplained sundry creditors and advance from customers. 2. On the facts and in the circumstances of the case and in law, ld. CIT (A) has erred by admitting additional evidence without granting requisite opportunity to the Assessing Officer. 3. That the appellant craves to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. ITA NO. 119/JODH/2020 : 1. Whether on the facts and circumstances of the case, and in law the ld. CIT (A) erred in deleting the addition of Rs. 15,95,38,544/- (1,63,00,741+9,94,269+47,56,615+68,12,269+13,06,74,650) made on account of difference in contract receipt shown in Form 26AS vis- -vis receipts accounted by the assessee. 2. On the facts and circumstances of the case and in law the ld. CIT (A) erred in sustaining disallowance of Rs. 15,00,000/- against disallowance of Rs. 42,34,358/- out of various expenses made by the AO in absence of verification. 3. On the facts and circumstances of the case and in law the ld. CIT (A) erred in holding the activity of ready mix concrete to be manufacturing and hence allowing additional depreciation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king addition of Rs. 34,76,10,409/- on account of bogus sundry creditors. Being aggrieved by the order of AO, the assessee preferred appeal before the ld. CIT (A). The ld. CIT (A) vide his order after discussing the matter in great details allowed the appeal of the assessee by deleting the addition. Now the Revenue is in appeal before us. 3. Before us, the ld. D/R supported the order of the Assessing Officer. The ld. D/R submitted that the assessee has failed to furnish the details in respect of the credit entries and advances received from the customers to the satisfaction of the assessing officer. He, therefore, submitted that the addition made by the AO be sustained. 4. On the other hand, the ld. Counsel for the assessee submitted that the assessee was having outstanding closing balance comprising of sundry creditors and advance from customers of Rs. 25,91,01,791/- and Rs. 8,85,08,618/- respectively totaling to Rs. 34,76,10,409/- which are duly reflected in the return of income filed by the assessee. The ld. A/R submitted that credit entries are genuine and reflected in the regular books of accounts maintained by the assessee. The books of accounts of the assessee are duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed and added to the total income of the assessee. The ld. A/R placing reliance on the various judicial pronouncement submitted that no addition can be made either under section 41(1) or under section 68 of the Act as the AO himself did not specify the section under which he intended to make the addition. The ld. A/R further relied on the judgment of Hon ble Punjab Haryana High Court in the case of G.P. International Ltd. 325 ITR 25 (P H) wherein it is held that provisions of section 41 cannot be applied if the assessee is still showing the liability . The assessee further relied on a number of decisions relating to the issue under consideration, few of the decisions are as under :- ITO vs. Bhavesh Prints (P) Ltd. 142 TTJ 128. Tamilnadu Ware Housing Corporation 292 ITR 310 . Willson and Co. Ltd. 121 TTJ 258 (Chennai Trib.) Dy CIT vs. Amod Petrochem (P) Ltd. (2008) 217 CTR (Guj.) 401. CIT vs. Usha Stud Agricultural Farms Ltd. (2008) 301 ITR 384 (Delhi) Relying upon the above cited decisions, the ld. A/R has submitted that so long the assessee is showing the liability in the books even if it is time barred, it is neither remission nor ces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Whereas the assessee claimed that vide letter dated 21.12.2016 provided all the required details viz. total list of creditors exceeding Rs. 50,000/- and list of all creditors with opening and closing balances which were ignored by the AO. Therefore, the condition for treating the same as income of the assessee under section 41(1) is that the liability ceased to exist as at the end of the financial year relevant to the year under consideration. The AO has not written any facts or any evidence on record to show that the said liability has ceased to exist except doubting the genuineness of the creditors. The ld. CIT (A) dealt with the issue elaborately while deciding the issue of sundry creditors and advances from the customers by observing in paras 7 to 11 of his order as under :- 7. It is seen that the AO has not specified any section under which this addition was made, however, considering the nature of this addition, it could be either u/s. 41(1) of the Act or u/s. 68 of the Act. From the facts and details as furnished by the appellant, it is seen that total sundry creditors consisted of following items:- Particular Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Private Limited (WIPL) is also with Ld. AO ACIT/DCIT, Circle-1, Udaipur and details were also submitted at the time of hearing for WIPL for AY 2014-15. Advance for Plant (WIPL) 5,25,16,291 1. Amount Outstanding for Earlier Years. 2. Details was submitted at the time of hearing for Asstt. Year 2013-14. 3. Copy of Ledger account from 01.04.2013 to 31.03.2017 in support of Assets/Machinery sold is enclosed. 4. As per which it is clear that Advances were taken against the Sale of Assets equipments machinery. 5. Further Jurisdiction of Wagad Infraprojects Private Limited (WIPL) is also with Ld. AO ACIT/DCIT, Circle-1, Udaipur and details were also submitted at the time of hearing for WIPL for AY 2014-15. 6. Thus these two amounts of Advances from Wagad Infraprojects Pvt. Ltd. i.e. 3,49,17,898 + 5,25,16,291= 8,74,34,189 were squared up after 31.03.2014 against supply of Assets Equipments as per Ledger a/c enclosed again for ready reference. Total 8,85,08,618 Considering the facts of the case and above details, I find force in the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In the instant case, the appellant has adduced sufficient evidences to prove that he made the payments in subsequent assessment years as detailed above. In view of the factual and legal position as discussed above, it is held that the AO's action in treating the credit entry of Rs. 8,85,08,618/- was not based on proper appreciation of facts and the AO was not justified in making the addition of Rs. 8,85,08,618/- to the total income which is hereby directed to be deleted. 8. As regards old Creditors of Rs. 25,91,01,791/-, it is observed that net Sundry Creditors of Rs. 25,91,01,791/- as on 31.03.2014 were carried forward from preceding previous years out of opening balance of creditors amounting to Rs. 30,39,40,262/-, the details are given in table below :- As on YEAR Ended PARTICULAR 31.03.2014 31.03.2013 31.03.2012 31.03.2011 2013-14 2012-13 2011-12 2010-11 Advance from Customer (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under consideration and the said balance of creditors was mainly carried forward balance. The table below further clarifies the situation:- Earlier years Carried Forward Creditors Opening Balance as on 01.04.2013 Creditors arised during FY 2013-14 under appeal Creditors Paid during the FY 2013- 14 under appeal Net Creditors Outstanding as on 31.03.2014 in Balance Sheet Net Outstanding as on 31.03.2015 (next year) after Payment in Balance Sheet 30,39,40,262.61 1,19,71,654.09 56810125.91 25,91,01,790.79 26,05,56,927.14 As on YEAR Ended PARTICULAR 31.03.2014 31.03.2013 31.03.2012 31.03.2011 2013-14 2012-13 2011-12 2010-11 Advance from Customer (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to consider the overall facts of the case. In the case of Sumati Dayal v. CIT, [1995] 214 ITR 001/80 Taxman 89, the Hon'ble Supreme Court held as under :- .But, in view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to Income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case there is, prima facie, evidence against the asessee, viz., the receipt of money, and if he falls to rebut it is the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the Department cannot, however, act unreasonably. The Hon'ble Supreme Court specifically held that the opinion of AO is required to be formed objectively with reference to the material available on record and while considering the explanation of the assessee the AO cannot act unreasonably. Upon perusal of details filed by the appellant viz. copies of account of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply because these parties were not produced before him. The Hon'ble Lucknow Bench 'A' (Third Member) in the case of ITO vs. Zazsons Exports Ltd. held that where Assessing Officer had drawn an adverse conclusion only on account of non-verifiability of sundry creditors but there being no dispute as regards purchases, and trading results having been accepted, addition made under section 68 was not sustainable. The head note is reproduced as below:- Section 68 of the Income-tax Act, 1961- Cash credits (Sundry creditors) - Assessment year 2005-06-Assessee company was carrying on business of export of finished leather and manufacture of shoe uppers and shoes- While framing assessment, Assessing Officer required assessee to furnish complete list of persons from whom raw hides of goats were purchased and from whom advance in shape of credit had been taken by assessee and to whom huge amounts were payable - Not being satisfied with reply given: by assessee, Assessing Officer made addition under section 68 on ground that assessee failed to give postal address, whereabouts, creditworthiness of vendors and also could not prove genuineness of transaction - Whether mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the absence of verification of the creditors, the same need to be added statutorily. Considering the factual matrix of the case and decisions cited above, it is held that the appellant has satisfactorily discharged its onus of proving the genuineness of the transactions and creditworthiness and identity of these trade creditors. Therefore, it is held that the AO was not justified in making the addition of Rs. 25,91,01,791/-treating it as unexplained cash credit. 10. Next, let us examine the applicability of section 41(1) in respect of sundry creditors of Rs. 25,91,01,791/-. The appellant referred to the provisions of sec., 41(1) and relied on various judicial decision to argue that where the liabilities are outstanding for earlier years and had not been written back, there is no justification to invoke or sustain any addition u/s. 41(1) of the Act. Before adjudicating the issue in hand, it is imperative to reproduce the relevant provisions of sec. 41(1) of the Act as under:- Profits chargeable to tax. 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance or deduction has been made in respect of any loss, expenditure or trading liability incurred by him: - any amount is obtained in respect of such loss or expenditure, or any benefit is obtained in respect of such trading liability by way of remission or cessation thereof, - such amount or benefit is obtained by the assessee; - such amount or benefit is obtained in a subsequent year, Thus, where a debt due from the assessee is foregone by the creditor in a later year, it can be taxed under section 41(1) of the Act in such later year when it was foregone. Section 41(1) of the Act, therefore, contemplates existence of a debt/liability and the remission or cessation thereof in the year under consideration. Therefore, for the purpose of taxing any income on account of remission or cessation of liability, the Assessing Officer has to establish that there was an existing liability and that there was remission or cessation of such liability in the previous year relevant to the assessment year in which such income is sought to be taxed. Moreover, any such cessation or remission of liability has to be in the previous year relevant to the assessment year under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure' incurred in any previous year clearly refer to the actual receiving of the cash of that amount. The amount may be actually received or it may be adjusted by way of an adjustment entry or a credit note or in any other form when the cash or the equivalent of the cash can be said to have been received by the assessee. But it must be the obtaining of the actual amount which is contemplated by the legislature when it used the words 'has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure in the past. As rightly observed by the Division Bench in the context in which these words occur, no other meaning is possible. We are in agreement with the said reasoning. In the instant case, there is no material whatsoever on record to show that there was cessation or remission of liability during the previous year relevant to the present assessment year 2014-15. The decision of Hon'ble Gujarat High Court in the case of Bhogilal Ramjibhai Atara (Atara) [2014] 43 taxmann.com 55/222 Taxman 313.) would be squarely applicable to the facts of the present case, wherein the court held thus: We are in agreement w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no cessation of liability. The appellant's case is also squarely covered by the decision of the Hon'ble ITAT Delhi Bench 'G' in the case of Satpal Sons (HUF) vs. ACIT [2017] 85 taxmann.com 283 (Delhi - Trib.). The relevant facts of this case were that assessee had shown outstanding sundry creditors since last three financial years in its balance sheet, on verification, Assessing Officer found that sundry creditors were not available at address provided and PAN of such creditors were also found incorrect, assessing Officer held that liabilities would ceased to exist and applied section 41(1), the assessee contended that these creditors had been paid in subsequent years through banking channels. The Commissioner (Appeals) upheld the order of the Assessing Officer. On appeal, the Hon'ble Tribunal held that where assessee had shown outstanding sundry creditors for last three years in its balance sheet and no provision was made to write off outstanding liabilities in its books of account, there would be no remission or cessation of liability under section 41(1) even if sundry creditors were not in existence at address provided and PAN of creditors were fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dry creditors mentioned in the balance sheet of the assessee were shown as sundry creditors since past several years from the relevant assessment year and at no point of time earlier the Assessing Officer doubted the creditworthiness and/or identity. In any case the addition on the aforesaid ground under Section 41(1) of the Act cannot be made unless and until it is found that there was remission and/or cessation of the liability that too during the previous year, relevant to the assessment year in question, there cannot be any addition invoking the provision of Section 41(1) of the Act. Identical question came to be considered by the Division Bench of this Court in the case of Nitin S. Garg (supra) and in the similar set of facts and circumstances of the case when the addition was made invoking Section 41(1) of the Act by doubting the creditworthiness and/or identity of the sundry creditors mentioned in the balance sheet and it was found that those sundry creditors were very old and no interest had been paid on those loans, the Division Bench has deleted such addition made under Section 41(1) of the Act. In paragraph 15 the Division Bench has observed and held as under; 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no dealing with the assessee nor did they know him. Of course, these inquiries were made ex parte and in that view of the matter, the assessee would be allowed to contest such findings. Nevertheless, even if such facts were established through bi-parte inquiries, the liability as it stands perhaps holds that there was no cessation or remission of liability and that therefore, the amount in question cannot be added back as a deemed income under section 41(c) f the Act. This is one of the strange cases where even if the debt itself is found to be non-genuine from the very inception, at least in terms of section 41(1) of the Act there is no cure for it. Be that as it may, insofar as the orders of the Revenue authorities are concerned, the Tribunal not having made any error, this Tax Appeal is dismissed. In the present case there was no remission and/or cessation of the liability during the previous year relevant to the assessment year under consideration. As such, there is no remission and/or cessation of the liability during the year under consideration subject to the conditions contained in the statute being fulfilled. In the present case, both the aforesaid elements are miss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Assessing Officer. 9. On the other hand, the ld. Counsel for the assessee reiterated the submissions as made before the ld. CIT (A) and submitted that the assessee had filed all the details explaining the difference in receipts appearing in books of accounts and as reflecting in Form 26AS. The ld. A/R submitted that while filing of return of income, it tallied Form 26AS dated 27.10.2014 with its books and there was no major difference and total contract receipts and sales turnover were at Rs. 88,99,18,296/- which was more than what was reflected at Rs. 52,83,90,243/- in Form 26AS. The ld. A/R submitted that the assessee by filing detailed submissions before the AO explained the difference in Form 26AS receipts with books of accounts and TDS deducted thereby reconciled the difference, but the AO ignoring the explanations made the addition of Rs. 16,05,44,170/- on the basis of revised 26AS. The ld. A/R submitted that the AO has failed to appreciate that the deductor may have deducted at source unilaterally on the expenditure booked by it or advance payment made by them or on certain amount which may not be income of the appellant or may be related to other year. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- against disallowance of Rs. 42,34,358/- out of various expenses made by the AO in absence of verification. 11. Before us, the ld. D/R supported the order of the Assessing Officer. 12. On the other hand, the ld. Counsel for the assessee submitted that the AO without considering the submissions of the assessee has summarily mentioned that the assessee has claimed large other expenses of Rs. 42,34,35,788/- in the profit and loss account and failed to furnish bills and vouchers and made the addition of Rs. 42,34,358/- disallowing 1% out of claim of expenses. The ld. A/R submitted that before the ld. CIT (A) the assessee submitted all the ledger accounts along with other evidences which are reproduced in para 8.1 of the order of ld. CIT (A) and after taking into consideration the detailed submissions furnished by the assessee, the ld. CIT (A) partly deleted the disallowance. The ld. A/R submitted that the order of the ld. CIT (A) deserves to be upheld. 13. We have heard rival contentions, perused the material available on record and gone through the orders of the Revenue authorities. In respect of disallowance of expenses, we find that the ld. CIT (A) has considered the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusively for the business purpose. Though it may be the case that vouchers were not kept properly, still there has to be clear finding that these expenses were not incidental to the business of the assessee or were bogus. This finding is totally lacking in the assessment order. The Hon'ble Supreme Court in the case of J. K. Woollen (72 ITR 612) had observed that the question as to whether an amount claimed as expenditure was laid out or expended wholly or exclusively for the purpose of business, profession or vocation as required under s. 10(2)(xv) of 1922 Act has to be decided on the facts and in the light of the circumstances of each particular case, but the final conclusion on the admissibility of an allowance is one of law. Keeping in view the details of the expenses furnished by the appellant in para 8.1 (supra), particularly the fact that the turnover of the appellant had increased substantially during the year with improved gross profit and net profit rates- from 65.55% and 2.70% in preceding year to 81.95% and 4.53% in the instant year, the addition made at Rs. 42,34,358/- appears to be on higher side. Keeping in view the overall facts and circumstances of the case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts has been accepted by in a similar case additional depreciation has been allowed by Delhi Tribunal on RMC plant in case of YFC Projects (P) Ltd. vs Dy. CIT (2010) 46 DTR 496 (Delhi Trib (copy enclosed); relying on decisions rendered by Hon'ble Supreme Court and following other judgments in cases of :- i. India Cine Agencies v. CIT (2009) 308 ITR 98 (SC) ii. Bangalore Water Supply and Sewerage v. R. Rajappa AIR 1978 SC 548 iii. CITY. J.B. Kharwar and Sons [1987] 163 TTR 394(Guj) iv. CIT v. Premier Tobacco Packers (P) Ltd. [2006] 284 ITR 222 (Mad.) v. Singh Engg. Works (P) Ltd.(Supra) (All). 26.4 In support of same relevant bills on which additional depreciation was claimed were submitted at the time of hearing on 21.12.2016 to Ld. AO is enclosed again for your ready reference. 26.5 But on checking all the bills the AO could not point out any specific query in respect of relevant bills, Ld AO disallowed additional depreciation by general statement that the these machineries were not used in any manufacturing unit. 26.6 Accordingly to the explanation. case laws fact of the case the Appellant company is engaged in Manufacturing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi)(Trib.) I have gone through the judgment of the Hon'ble Delhi Tribunal in the case of YFC Projects P. Ltd. (supra) and find that the issue in hand is squarely covered by this judgment. The findings as given by the Hon'ble Delhi Tribunal on this issue are reproduced as under :- Separation of RMC is not as simple as construed by the CIT (A). The assessee has been carrying out this activity in an organized manner with the help of heavy machinery and computer. Its activity is not as simply mixing of sand, cement, etc. by a labourer on the right side. Though in the common parlance, sometimes, it does not sound logic to say that mixing of RMC is a manufacturing activity but if one looks into its activity carried out by the assessee from the point of an expert who has laid down BIS standard then it would indicate that it is a complicated affair. The mixing of four products in prescribed ratio would result in a different identifiable product which cannot be reconverted to its original shape. Therefore, the Revenue Authority has erred in holding that the assessee is not carrying out any manufacturing activity. The AD is directed to allow additional depreciation on machin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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