TMI Blog2014 (12) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... and why the balance amount of ₹ 1.07 lacs paid by BS to DAC as and by way of interest had not been accounted for or otherwise adjusted between the assessee and BS - The assessee’s accounts for FY 2009-10, as well as for the subsequent years, would only have crystallized and, in fact, also been furnished to the Revenue since - again, what adjustment entries, if any, has BS, an assessee with the Revenue, correspondingly passed in his books of accounts - The onus to establish its’ case, though, would be on the assessee - the assessee shall neither be allowed to raise any new plea, nor one inconsistent with its accounts - The journal entries, purportedly passed on 31/3/2010, are ostensibly corrective entries, passed after due deliberation - The purport of the exercise is to establish the existence or otherwise of the assessee’s liability to DAC as on 31/3/2006, or, as explained, to BS in lieu thereof; the assessee’s accounts being admittedly deficient, with even the ‘corrected’ accounts being in contradiction to the stated position - The AO shall adjudicate the matter by issuing definite findings of the fact after allowing the assessee an opportunity to present its case – decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to the unmistakable inference of the liability having ceased to exist. The addition, made u/s.41(1), was accordingly confirmed as income, either u/s.41(1) or s. 28(iv), relying on the decisions in the case of CIT vs. Agarpara Co. Ltd. [1986] 158 ITR 78 (Cal); CIT vs. Hides Leather Products (P.) Ltd. [1975] 101 ITR 61 (Guj); and CIT vs. T.V. Sundaram Iyengar Sons Ltd. [1996] 222 ITR 344 (SC). The assessee before us has (vide letter dated 24.02.2014) stated that the payment (of ₹ 1,08,553/-) to the said party has since been made on 06.02.2014 by cross payee cheque, discharging the liability. The same would itself, it is argued, prove the existence of the liability as on 31.03.2006, the relevant year-end. A copy of the creditor s account in its own books (at pg.27), reflecting the said payment, is adverted to in support. The same is prayed for admission under rule 29 of the Rules. We are wholly unmoved by the assessee s case, including the additional evidence sought to be admitted. To begin with, the amount is admittedly disputed, which is the reason for it outstanding - for years together. Not only does it continue year after year, there is no attempt by either the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s our understanding of the existence of a liability (or its cessation) as being a matter of fact, which would be required to be proved based on all available facts and material on record and, further that accounts cannot be considered as determinative of the matter. Reference in the matter may be made to the decisions, inter alia, in Kesoram Industries Cotton Mills Ltd. v. CIT [1992] 196 ITR 845 (Cal); Kalyani Maan Singh vs. ITO (in ITA No. 6500/Mum/2011 dated 14.11.2013); and ITO vs. Sajjankumar Didwani (in ITA Nos. 7716 7793/Mum/2012 dated 28.05.2014). In fact, the law stands since amended, so that it is not permissible for an assessee to plead its case de hors or in disregard of its accounts and, therefore, even a unilateral entry of write off in its books of account would be taken cognizance of (refer: Explanation 1 below section 41(1)). We, in view of the foregoing, find no merit in the assessee s claim. There is accordingly no question of admission of additional evidence under r.29 of the Rules. As it appears, the assessee in his bid to exhibit it s contention as to the existence of the impugned liability as correct , pursued the creditor to make the payment in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SM for short), at ₹ 10,29,869/- and ₹ 10,31,525/- respectively, which were set off, with the net balance of ₹ 1,656/- written back as rebate. There was no transaction post 31.03.2004. Copies of the balancesheet of BS (from 31.03.2002 to 31.03.2008), reflecting the said payments (aggregating to ₹ 9.68 lacs) to DAC as loan and advance , were also submitted, besides a confirmation from him to the effect that the said payments by him to DAC were made for and on behalf of the assessee to help the latter (the assessee) in financial crisis. In the view of the Revenue, however, there was nothing to link the payments by BS to DAC with the outstanding of the latter as being reflected in the assessee s accounts. Why, in case the payment was made for and on behalf of the assessee, did the assessee s accounts not reflect the same, crediting BS in its accounts? Also, BS did not debit the said payments in his accounts to the account of the assessee, on whose behalf the same are stated to have been made, but to DAC, so that these were independent transactions. Even as stated by the ld. CIT(A), correct entries had not been passed by either the assessee or his brother in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, SSM, for financial year 2009-10), now submitted before us (PB pgs.30-31), praying for their admission as additional evidence , exhibit the transfer of the credit of DAC (Rs.8.58 lacs), firstly, to the account of BS (which is only understandable in-as-much as he has admittedly made the payments to DAC on assessee s behalf), and then to the capital account of the assessee. The latter entry needs to be explained. Why should a liability be transferred to the proprietor s capital account, which rather establishes the Revenue s case of it not being or in any case no longer representing a liability? In fact, the assessee had already advanced ₹ 5 lacs to BS as on 31.03.2008, so that the transfer of the liability of DAC in its accounts to the account of the payer (BS) would result in a net sum (liability) of ₹ 4.67 lacs to BS. We, therefore, though inclined to consider the issue as having been substantially explained by the assessee, find the journal entries passed by the assessee in its books (SMM) on 31.03.2010 as, in effect, incongruent and inconsistent with its avowed claim of it being liable to BS, i.e., in substitution of the credit to DAC, which (substitution) thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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