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2015 (3) TMI 610 - AT - Income TaxIngenuine sundry creditors - CIT(A) sustained part addition - Held that:- The assessee was not able to furnish the bank statement copy, however, the AO procured the bank statement from the bank and found certain discrepancies in the statement regarding payment to sundry creditors. Finally he made an addition of ₹ 35,13,739/- in respect of outstanding creditors treating as cessation liability. However, CIT(A) called for remand report from the AO in the course of first appellate proceedings and once again the AO called for details of sundry creditors and payment to them. The assessee failed to furnish the details in respect of sundry creditors amounting to ₹ 23,34,721/-. Admittedly, these credits continued to be carried forward year after year.In this case, the liability remains to be recovered year after year. For invoking provisions of section 68 of the Act, if any sum is to be found credited in the books of the assessee maintained during the previous year, only then it would be possible to make addition under section68 of the Income tax Act. In the case of carried forward credit, which is from earlier year, provisions of section 68 cannot be applied. In the present case, the liabilities outstanding in the books of account of the assessee for the assessment year under consideration and only the provisions of the section 41(1) of the Act could be applied. In the present case the assessee failed to establish the actual existence of the impugned disputed amount in the books of account of the assessee. The assessee has drawn its balance sheet based on its books of account, in which the above amount, were being claimed as liabilities due, to various parties, as at the end of the accounting year under dispute. However, the assessee failed to establish the genuineness of these liabilities by producing supporting evidence. Simply the liabilities being reflected against certain names in the books of account would not establish the genuineness of liabilities. - Decided against assessee. Estimation of net profit - rejection of books of accounts - out of total addition made ₹ 6,95,770/- addition to the extent of ₹ 4,87,038/- was confirmed and balance addition of ₹ 2,08,732/- was direct to be deleted by CIT(A) - Held that:- In the present case during the course of remand proceedings before AO the assessee produced the books of account. The AO also confirmed the examination of books of account and observed that the has not produced the bills in respect of conveyance expenses ₹ 75,710/-; general expense ₹ 69,361/-, motor car expenses ₹ 48,000/-, telephone expenses ₹ 20,052/-. Once the books of account of the assessee was produced before the lower authorities and if there is certain discrepancy the authorities were free to make addition to that extent of discrepancies noticed by the authorities and, authorities were precluded in rejecting the books of account of the assessee. In such circumstances in our opinion, in this case rejection of books of account of the assessee is not justified. However, there is certain discrepancy noticed by the authorities in the course of first appellate proceedings. Accordingly, in our opinion instead of adhoc estimation, we are inclined to sustain the disallowance in respect of expenses incurred in cash and no bills or vouchers were produced by the assessee for verification namely conveyance expenses, ₹ 75,710/-, general expenses ₹ 69,361/-, motor car expenses ₹ 48,000/-, telephone expenses ₹ 20,052/-. - Decided partly in favour of assessee.
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