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TMI Blog2024 (10) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... Mathur [ 2013 (11) TMI 1707 - RAJASTHAN HIGH COURT] Section 41(1) requires that the onus is on the assessing officer to come to the conclusion that the liabilities ceased to exist or the assessee has obtained whether in cash or in any 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. On the one hand the assessee claims that the amount was payable and the assessee may be justified in saying so because one never knows when a creditor will come and raise the demand. May be, the creditor was justified that interest was being paid, so he did not turn up to take the principal amount. Therefore, it was for the assessing officer to come to a definite finding that the liability ceased to exist during the previous year relevant to the year under appeal which, in our view, has not been proved by the assessing officer. As the facts of the case on hand with that facts of the above case decided by our High Court we respectfully following the binding precedent direct the ld. AO to delete the addition made in the year under consideration. Based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, notice u/s. 143(2) issued on 01.09.2015 fixing the case for hearing on 16.09.2015 which was duly served upon the assessee. The assessee is engaged in business of purchase and sale of Precious and Semi precious stones and carrying out his business activities in the name and style of M/s. Saket Gems. The assessee has declared business income of Rs. 6,20,094/- thereafter claiming deduction under Chapter VIA of Rs. 1,07,406/- declared total Income of Rs. 5,12,690/-. 3.1 During assessment proceeding, the ld. AO noted that the assessee has shown sundry creditors of Rs. 4,76,48,248/- against the turnover of Rs. 2,87,60,719/- implying that the sundry creditors are more than the turnover, in any business the waiting time for payment cannot be much long for sundry creditors. From the above it is seen that the assessee has carry forwarded sundry credits of previous year. As per normal business norms sundry creditors for goods are never outstanding for more than 2-3 months depending on the trade, hence any point of time sundry credits should never be more than the entire purchases made during the year. As per common understanding sundry credits exists because the seller of the goods a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not exists at the given address. Thus, ld. AO informed that in case of not proving the identity, creditworthiness and genuineness of the Sundry Creditors, the inference can be drawn that these parties have not supplied any goods to you and inflated expenditure has been declared by showing higher purchase price through fictitious invoices in the name of the parties mentioned in the letter. 3.4 In response to the Final Show cause notice the A/R of the assessee filed written submission on 23rd Dec., 2016. The assessee contended that the address taken from purchase bills has been supplied, further, during the year in some of the cases the amount has been paid through the bank account and the payments have been made through Account Payee Cheque. In order to confront the situation has taken pretext that the purchase are made through broker who submitted the purchase bill of the goods to the assessee. Thus, Ld. AR tried to examine following parties for purchase made by the assessee:- 1. M/s Akrati Gems Jewels Rs. 6,55,860/- 2. M/s Akrati Gems Jewellery Rs. 5,35,930/- 3. M/s Anurodh Enterprises Rs. 11,24,100/- 4. M/s Pari Creations Rs. 19,93,793/- 5. M/s Neelam Gems Jewels Rs. 23,47,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to produce any of the creditors. 5.1.4. In respect of assessee's contention that payments to these parties were made through cheques the Assessing Officer has placed his reliance of the judgement of Hon'ble Kolkata High Court in the case of CIT -v- Precision Finance Pvt. Ltd., 208ITR 465 (Cal) in which the Hon'ble High Court has held that the payment made by account payee cheques would not make it sacrosanct. 5.1.5. Further we want to say that appellant filed copies of purchase bills of all parties along with confirmation of all creditors to A.O along with in which their name address and PAN was given. We enclose copy of confirmation of creditors which we already submitted before AO during assessment proceedings. During the appellate proceedings, the appellant has contended that the creditors outstanding on 31.03.2014 whose liability have been added u/s. 41(1) of Income Tax At have been paid in subsequent years through banking channels. In support of his contentions the appellant has submitted the ledger copies of the creditors for subsequent years and copy of bank statements. 5.1.6. Further, the appellant has placed his reliance on the judgement of Hon'ble I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd sales register for the F.Y.2013-14. As required by your honor, we are enclosing copy of purchase and sales register of the appellant for the F.Y. 2013-14. 5.1.12. Further, the appellant has filed few letters purportedly written by the creditors to the Assessing Officer in response to notice u/s. 133(6) of the Income Tax Act issued during the assessment proceedings. From the perusal of the letters following points emerged: - 1. The letter purportedly written by the creditors to the Assessing Officer are being submitted by the appellant for whom the appellant has himself stated that he cannot contact them and cannot give their current confirmations. Further, the Assessing Officer has mentioned in the assessment order that notice u/s. 133(6) of the IT Act could not be served to the creditors. 2. The letters do not mentioned the date of notice u/s. 133(6) of the IT Act. 3. All the letters have same dated 20.10.2016. 4. None of the letters have been contact number or e-mail addresses. 5. The style of writing, font and contents of the letter are almost identical (except figures). 6. None of the letter has the details of persons who have signed these letters. 5.1.13. In view of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation of penalty is premature and liable to be dismissed. This second ground of appeal is dismissed. 6.2. The third ground of appeal is general in nature. Therefore, it needs no separate adjudication. 7.0. The appeal of the appellant is dismissed. 5. As the appeal of the assessee dismissed by the ld. CIT(A) the assessee preferred the present appeal before us on the grounds as reiterated in para 2 above. In support of the grounds so raised ld. AR of the assessee has relied upon the following written submission: - The assessee appellant is engaged in the trading export of precious and semi-precious stones in the name of his sole proprietorship firm M/s. Saket Gems. The assessee appellant maintains books of accounts including Cash book, Journal, Ledger, Stock Register, Vouchers, and bills. These accounts were subjected to thorough scrutiny and audit by a qualified firm of chartered accountants in compliance with section 44AB of the Act. The auditors provided a clean report after examining the books of accounts and other records, without making any qualifications in their report. The assessee appellant filed the return of income for the A.Y. 2014-15 on 11.12.2014 declaring therein Tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. Explanation 1.-For the purposes of this sub-section, the expression loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts. Explanation 2.-For the purposes of this sub-section, successor in business means,- (i) where there has been an amalgamation of a company with another company, the amalgamated company; (ii) where the first-mentioned person is succeeded by any other person in that business or profession, the other person; (iii) where a firm carrying on a business or profession is succeeded by another firm, the other firm; (iv) where there has been a demerger, the resulting company. 2. That the assessee appellant in order to carry out his business, purchases goods which are in the nature of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 8 NEELAM GEMS JEWELS 1100425 352227 1100425 352227 352227 220656 0 572883 9 BEENSAR GEMS JEWELS 0 832737 0 832737 832737 211470 0 1044207 10 R.S. JEWELLERS 0 571298 0 571298 571298 0 0 571298 11 MEGHA EXPORTS 0 0 0 0 0 0 0 0 12 GULMOHAR CREATION 0 0 0 0 0 796871 0 796871 13 HARSHA IMPEX 0 0 0 0 0 1112850 0 1112850 14 LAXMI ENTERPRISES 0 1885494 0 1885494 1885494 1431001 0 3316495 15 SANMATI GEMS JEWELLERS 0 0 0 0 0 0 0 0 16 NATURAL GEMS 0 1000567 0 1000567 1000567 149050 0 1149617 17 ALANKER JEWELLERS 0 1312546 0 1312546 1312546 408305 0 1720851 TOTAL 1100425 11223666 1100425 11223666 11223666 7561028 0 18784694 ASSESSMENT YEAR 2014-15 ASSESSMENT YEAR 2015-16 ASSESSMENT YEAR 2016-17 OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE 403873 655860 403873 655860 655860 969668 0 1625528 1625528 77580 0 1703108 2245271 283268 1850000 678539 678539 673096 0 1351635 1351635 101038 0 1452673 3644200 1095840 750000 3990040 3990040 452041 0 4442081 4442081 0 0 4442081 1722640 1983971 250000 3456611 3456611 1411844 0 4868455 4868455 0 1000000 3868455 0 535930 0 535930 535930 679678 0 1215608 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that regular business transactions were carried out in the past and also in the year under consideration and in subsequent years and at the same time payment was made from time to time. All the payments are by way of account payee cheque. Thus the allegation of cessation of liability is devoid of any merits and is incorrect and false. 7. That it is settled law that in absence of sales being doubted, entire purchases cannot be disallowed. Reliance is placed upon: Hon'ble Bombay High Courtin the case of PCIT v. Nitin Ramdeoji Lohia [2022] 145 taxmann.com 546 has held that: Where Assessing Officer made addition by disallowing expenses on purchases on ground that an information was received from sales tax department that assessee was beneficiary of accommodation entries on account of bogus purchases, since Assessing Officer had not disputed corresponding sales transactions, purchases also could not be bogus and, thus, impugned addition made on account of bogus purchases to be deleted. Hon ble ITAT Delhi Bench in Bhartiya International Ltd. v. DCIT [2024 (1) TMI 157 - ITAT DELHI]has held that: AO in the final assessment order however continued to treat the purchases of fabric from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs had been fully repaid as of 31.03.2018, which was evident from the bank statements submitted by the assessee appellant. The ld. Lower authorities did not identify any deficiencies in the documents submitted by the appellant. The only basis for the additions made by the ld. Lower authorities is the non-appearance of the creditors in response to the summons served under section 133(6) of the Act upon them. Mere non-appearance should not justify the aforementioned addition, as the creditors' presence is beyond the assessee appellant's control. Any default or failure on the part of the creditors cannot be attributed to the assessee appellant and should not be used to penalize the assessee appellant. The assessee appellant provided all available and within-control information and therefore, the case should be assessed based on the evidence the assessee appellant can provide, rather than being contingent upon the presence or absence of another party. The following judicial precedents are being relied upon to substantiate the case of the assessee appellant: Hon ble Supreme Court in CIT v.Sugauli Sugar Works (P.) Ltd. [1999] 102 Taxman 713 (SC)has held: Section 41 contemplates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re trade creditors. On perusal of the facts, it has not been proved by the assessing officer as to how the so-called liabilities ceased or crystallized during the previous year relevant to the assessment year under appeal. Merely because there was no response by the creditors it does not prove that the liabilities ceased during the assessment year 2002-03. Merely because the parties chose not to appear or did not respond or even did not come forward on the request of the respondent-assessee before the assessing officer, it does not prove that the trade creditors were not genuine and were not in existence so as to invoke provisions of section 41(1). 16. Section 41(1) requires that the onus is on the assessing officer to come to the conclusion that the liabilities ceased to exist or the assessee has obtained whether in cash or in any 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. On the one hand, the assessee claims that the amount was payable and the assessee may be justified in saying so because one never knows when a credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been offered to tax in the subsequent assessment years which the Department has accepted and accordingly held that no question of law arises and accordingly did not entertain the appeal and dismissed the appeal as such. 20. The Punjab Haryana High Court, in the case of CIT v. Smt. Sita Devi Juneja: (2010) 325 ITR 593 (P H), held that merely because such liabilities are outstanding for the last six years, it cannot be presumed that the said liabilities have ceased to exist. 20.1. It is also a conceded position that there is no bilateral act of the assessee and the creditors, which indicates that the said liabilities have ceased to exist. In the absence of any bilateral act, the said liabilities could not have been treated to have ceased. Accordingly, it was held that no addition could be made by invoking provisions of section 41(1) of the Act. Same position exists in the present appeal though the liabilities may be outstanding for the last several years but it is the claim of the respondent-assessee, that they are payable and had it not been payable, the assessee would not have paid any interest and that too year after year. Therefore, the liabilities, in our view, certainly did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, the money was received by the assessee in the course of carrying on his business. Although it was treated as deposit and was capital in nature at the point of time it was received, by efflux of time the money has become the assessees own money. What remains after adjustment of the deposits has not been claimed by the customers. The claims of the customers have become barred by limitation. The assessee itself has treated the money as its own money and taken the amount to its P L a/c. There is no explanation from the assessee why the surplus money was taken to its P L a/c even if. it was somebody else's money. In fact, as Atkinson J. pointed out that what the assessee did was the common sense way of dealing with the amounts. 24. In view of the above facts and circumstances, the amount having been already offered to tax in the year 2006-07 and it being a finding of fact, in our view, no substantial question of law arises for consideration by this Court. 25. Insofar as the issue of reopening of the assessment under section 147 r/w section 148 of the Income Tax Act is concerned, the same question is only academic in nature and remains academic as ultimately amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT v. Soorajmul Nagarmull [2022] 145 taxmann.com 245 (Calcutta) has held: 15. In the preceding paragraphs, we have noted the undisputed factual position which was rightly taken note of by the learned tribunal and in particular, noting that there is no dispute about the assessee to have been carrying forward the impugned liability in its books for a time span of almost three decades and the department did not raise any issue in all the intervening assessment years in question. The tribunal also noted that the assessing officer after the matter was remanded to him had issued summons to six directors of the concerned entities on test check basis, and four out of the six directors had appeared in response to the summons. The statements were recorded. The learned tribunal also notes that the creditors have given written reply in response to the summons reiterating their liability as also the fact that the assessee had settled some of the creditors even after 31-3- 2001. Thus the assessee has fulfilled the duty cast upon them to provide evidence that the liability exist at the end of the year. The duty on the assessing officer is to prove that the liability has ceased to exist which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act. 17. We, thus, find that the views taken by the Tribunal is absolutely consistent with the ones taken by the Supreme Court in the case of Sugauli Sugar Works (P.) Ltd. (supra) and other decisions which have been referred to in the judgment. We do not find any error much less an error of law in the judgment and order of the Tribunal. 18. In absence of any substantial question of law arising in these Appeals, all Appeals deserve to be dismissed and accordingly they are all dismissed. However, there shall be no order as to costs. Hon ble Bombay High Court in PCIT v. Pukhraj S. Jain [2019 (1) TMI 1761]has held: 4. It is well settled through series of judgments that merely because a debt has not been repaid for over three years, would not automatically imply cessation of liability. Exhaustion of period of limitation may prevent filing of recovery proceedings in a Court of law, nevertheless it cannot be stated by itself that the liability to repay the amount had ceased. Going by this log ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, which fact had not been disputed by the Assessing Officer, the same could not be said to have ceased. Thus, the Tribunal did not interfere with the findings recorded by the CIT (A) on this issue. The relevant findings recorded by the Tribunal on this issue read thus: '15. The A.O. made addition of Rs. 15,55,893/- under Section 41(1) on account of cessation of liability under Section 41(1) of the Act on the ground that the assessee had failed to prove that the liability subsists. Undisputedly, the liabilities to the tune of Rs. 15,55,893/- are still subsisting in the balance sheet of the assessee. Ld. A.R. by relying upon the judgment cited asCITv.SugauliSugar Works Private Limited 236 ITR 518 (S.C.),CITv.ShriVardhman Overseas Limited 343 ITR 408, Mysore Agencies Private Limited v.CIT 114 ITR 853, CIT v. Tamilnadu Ware housing Corpn 292 ITR 310 and Ambica Mills Limited v.CIT 54 ITR 167 (Guj.) contended that even unilateral entry in the accounts does not amount to cessation of liability. Hon'ble Apex Court in the judgment cited at Sugauli Sugar Works (supra) decided the issue in controversy and the operative part thereof is reproduced as under for ready reference. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been further found that the Assessing Officer had failed to show that in any earlier year allowance of deduction had been in respect of any trading liability incurred by the assessee. It was also not proved that any benefit was obtained by the assessee concerning such a trading liability by way of remission or cessation thereof during the concerned year. Thus, there did not accrue any benefit to the assessee which could be deemed to be the profit or gain of the assessee's business, which would otherwise not be the assessee's income. It had been further found as a fact that the assessee had filed the copies of accounts of sundry creditors signed by the concerned creditors. Inview of this fact, it was to be opined that the ITAT had rightly come to the conclusion that confirmations from the creditors were produced. [Para 4] In view of the above, there was no illegality in the impugned order passed by the ITAT and, therefore, no substantial questions of law arose from the order of the ITAT. [Para 5] In the result, the revenue's appeal was to be dismissed . [Para 6] Hon ble Karnataka High Court inLiquidator, Mysore Agencies (P.) Ltd. v. CIT [1978] 114 ITR 853 (Karnataka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the assessee though the counter part of the trade credits belonging to the foreigners were accepted by the AO. Thus the AO cannot apply a different parameter of outstanding period for the local trade creditors and foreign trade creditors. Even others, once the trade credits were accepted in the year when these are introduced in the books of accounts, the same cannot be treated as non-genuine in the subsequent year except the fact that the liability of the assessee to repay the amount ceased to exist. The AO has arrived to the conclusion based on the fact that the notices issued to the trade creditors were not served but that itself would not prove that the trade creditors are having no claim of the amount shown by the assessee in the books of accounts. 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 decisions referred and relied upon by the ld. CIT (A) ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gains of business in order to be taxable under section 41(1). This view was taken on the basis that these amounts representing: the unclaimed wages and bonus, though time barred had not resulted in either remission or cessation of the trading liability of the assessee without which the same could not be taxed under section 41(1). Aggrieved by the view taken by the Tribunal, the revenue applied for a reference under section 256(1) which was made by the Tribunal to answer the above- quoted question of law. 3. The preponderance of the authorities on the point is in assessee's favour. The High Courts of Bombay, Kerala, Karnataka, Calcutta and Allahabad have held that where such amount represents time barred trading liability of the assessee, there is neither remission nor cessation in the trading liability inasmuch as the law of limitation merely bars the remedy but does not wipe out the liability. On this basis, the view taken by these High Courts is that there is neither remission nor cessation of the trading liability of the assessee in such cases, since there is neither any unilateral act of the creditor amounting to remission nor any bilateral act of the parties resulting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors are standing in the books for a period which is considered to be time barred it is neither remission or cessation of liability so long the assessee is willing to pay the same and the creditor has not waived off the credit. The Hon ble Jurisdictional High Court in the case of CIT vs. Narendra Mohan Mathur (supra) has reiterated its view and held that for remission or cessation of a trading liability and for making addition under section 41(1) of the Act it is not enough that the creditors have not given any response. The revenue has to prove that how the trading liability ceased to exist. The Hon ble Punjab Haryana High Court in the case of CIT vs. Sita Devi Juneja (supra) has held in para 4 5 as under :- 4. After hearing learned counsel for the appellant and going through the impugned order, we do not find any merit in the instant appeal. It is the conceded position that in the assessee's balance sheet, the aforesaid liabilities have been shown, which are payable to the sundry creditors. Such liabilities, shown in the balance sheet, indicate the acknowledgement of the debts payable by the assessee. Merely because, such liability is outstanding for the last six years, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the first time, was brought by the assessee before the CIT (Appeals) and CIT (Appeals) accepted the same as a truth without verifying as to whether earlier firm had been dissolved and new firm had come into existence. She submitted that no necessary documents evidencing the creation of the new partnership were not even looked into by the CIT (Appeals) or ITAT. On our repeated queries made to the learned counsel as to whether this ground was raised before the ITAT while challenging the order of the CIT (Appeals) or not, Ms. Prem Lata Bansal was not able to point out any such ground having been raised before the ITAT. When such a plea was not taken before the ITAT, it is not permissible for the revenue to take this plea, for the first time, in this appeal, that too when the appeal is maintainable only on the substantial question of law. On the contrary, we find from the reading of the impugned order of the ITAT that as per the assessee, the fact that assessee was newly constituted firm and the business of the firm as now carried on is different than the business carried on by the erstwhile firm, was specifically argued and this was not even rebutted by the representative of the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In the case before us, it is not been established that the assessee has written o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 missing. 7. Under the circumstances, as such, no error has been committed by the learned Tribunal in deletin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions to argue that where the liabilities are outstanding for many years and the assessee had actually discharged the liability at future date, there is no justification to invoke or sustain any addition u/s. 41(1) of the Act. 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. It was noted that while the assessee had shown these trading liabilities in his books of account, no benefit had been obtained in respect of such trading liabilities by way of remission or cessation thereof; under the circumstances, the requirements of section 41(1) of the Act are not satisfied in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, filed a paper book containing as indexed herein below: S. No. Particulars Page Nos. 1. Written submission 127-151 2. The Hon'ble Bombay High Court in the case of Pr. CIT v. Nitin Ramdeoji Lohia [2022] 145 taxmann.com 546. 152-154 3. The Hon'ble ITAT Delhi Bench in Bhartiya International Ltd. Versus Dy. Commissioner Of Income-Tax, Circle-4 (2), New Delhi [2024 (1) TMI 157 - ITAT DELHI]. 155-163 4. The Hon'ble Supreme Court of India in the case of 164 Commissioner of Income-tax v. Sugauli Sugar Works (P.) Ltd. [1999] 102 Taxman 713 (SC). 164-168 5. The Hon'ble High Court Of Rajasthan in the case of CIT v. Narendra Mohan Mathur [2013 (11) TMI 1707] 169-174 6. The Hon'ble High Court Of Delhi in the case of Principal Commissioner of Income-tax v. Arvind Kumar Arora [2023] 156 taxmann.com 266 (Delhi) 175-178 7. The Hon'ble High Court Of Calcutta in the case of Principal Commissioner of Income-tax v. Soorajmul Nagarmull [2022] 145 taxmann.com 245 (Calcutta) 179-188 8. The Hon'ble High Court Of Gujarat in the case of Principal Commissioner of Income-tax v. Adani Agro (P.) Ltd. [2020] 118 taxmann.com 307 (Gujarat) 189-191 9. The Hon'ble High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the addition made are purely based on the surmises and conjecture required to be deleted. 7. Per contra, ld. DR relied upon the order of the lower authorities and submitted that the AO while making the assessment issued letter to the parties as per the addresses given by the assessee and summons were issued u/s. 131 of the Act and the same were also not confirmed. Even at the stage of CIT(A), assessee has not given details of PA Number, VAT/TIN number, the confirmation filed before the ld. AO was undated. Thus, the assessee failed to establish genuineness of the credit shown by the assessee and thus, the addition is required to be sustained as per provision of section 41(1) of the Act. All these aspects of the matter suggest that the liability shown by the assessee does not existed and has rightly been added by the ld. AO. Ld. AO while doing so also relied upon the decision of the jurisdictional high court in the case of M/s Bright Future Gems and therefore, she relied upon the finding recorded in the order of the ld. AO ld. CIT(A). 8. We have heard the counsel for both the parties and perused the material placed on record, judgment cited before us and the orders passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r account in their books of account and copy of Bank Account for the F.Y. 2013-14 relevant to Assessment Year 2013-14. The said information was called for as per provision of section 133(6) of the I.T. Act, 1961. In 11 cases letters received back with the remarks of the postal authority Not Known or no firm in this name and in 6 cases no information was received, even after service of the letters. Therefore, a show cause notice dated 30.09.2016 was issued to the assessee asking him to file an explanation in this regard. The show cause notice was duly served upon the assessee and he was asked to prove the identity, creditworthiness of the Sundry Creditors and genuineness of the transaction. The said notice was not replied. Therefore, notice u/s. 142(1) was issued to the assessee giving reference to the show cause letter dated 30.09.2016 and made a request to furnish requisite information on or before 03.11.2016. Although, this time also the assessee failed to file any written submission or to furnish requisite information. Meanwhile, confirmation letters which were written in a cyclostyle manner were received from some of the Sundry Creditors through Regd. Post. The confirmation let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) he has called for the current address of the parties in 2024 which the party stated that the same being paid of they were unable to provide and therefore, without appreciating the fact that the liability were existed in the balance sheet and were paid off in the subsequent year has not been considered by the ld. CIT(A) but has confirmed the addition made by the ld. AO. Before us the ld. AR of the assessee presented a chart which reads as under: ASSESSMENT YEAR 2014-15 ASSESSMENT YEAR 2015-16 ASSESSMENT YEAR 2016-17 OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE OPENING BALANCE PURCHASES PAYMENT CLOSING BALANCE 403873 655860 403873 655860 655860 969668 0 1625528 1625528 77580 0 1703108 2245271 283268 1850000 678539 678539 673096 0 1351635 1351635 101038 0 1452673 3644200 1095840 750000 3990040 3990040 452041 0 4442081 4442081 0 0 4442081 1722640 1983971 250000 3456611 3456611 1411844 0 4868455 4868455 0 1000000 3868455 0 535930 0 535930 535930 679678 0 1215608 1215608 154475 0 1370083 0 1124100 0 1124100 1124100 952500 0 2076600 2076600 0 0 2076600 483638 1410155 0 1893793 1893793 0 483638 1410155 1410155 0 0 1410155 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. Explanation 1. For the purposes of this sub-section, the expression loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof shall include the remission or cessation of any liability by a unilateral act by the first-mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 41(1). 16. Section 41(1) requires that the onus is on the assessing officer to come to the conclusion that the liabilities ceased to exist or the assessee has obtained whether in cash or in any 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. On the one hand the assessee claims that the amount was payable and the assessee may be justified in saying so because one never knows when a creditor will come and raise the demand. May be, the creditor was justified that interest was being paid, so he did not turn up to take the principal amount. Therefore, it was for the assessing officer to come to a definite finding that the liability ceased to exist during the previous year relevant to the year under appeal which, in our view, has not been proved by the assessing officer. As the facts of the case on hand with that facts of the above case decided by our High Court we respectfully following the binding precedent direct the ld. AO to delete the addition of Rs. 3,17,55,786/- made in the year under consideration. Based ..... X X X X Extracts X X X X X X X X Extracts X X X X
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