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2015 (4) TMI 864 - AT - Income TaxAddition u/s 41(1) - unverifiable creditors - AO has made the addition invoking section 41(1) of the Act, when he found out through his inspector that the addresses of the sundry creditors were wrong; and neither the assessee could furnish the correct address nor produced the creditors before him - CIT(A) deleted the addition - Held that:- The copy of the bank statement from January 2010 to April 2010 reveals that entries given against date and amount tallies with the chart given which establish that amount have been remitted to the respective firms in their bank account by account payee/ RTGS as contended by the assessee as early as 15.12.2011 before the AO, which culminated in assessment order dated 26.12.2011. From a perusal of the chart and bank statement will reveal that the outstanding payments to the aforesaid sundry creditors for the instant Assessment Year, stands credited to their respective bank accounts by bank transfer before 28.04.2010 i.e. six months before the impugned addition made by the AO, though it was brought to his knowledge as stated above, that payments have been made. In the remand report of the AO, he states after perusal of the aforesaid bank statement evidencing account payee transfer of amount to their respective bank account, that appellant has filed copies of bank statements and same was examined. So the ld CIT(A) has rightly concluded in the light of the aforesaid evidence that sundry credit balance in the name of Nitesh Enterprises and Shri Ram Traders were genuine credit balance for purchase of material by the assessee and the liability in the name of such parties have been duly discharged by the assessee by making payment through RTGS i.e. a/c payee cheques. Moreover, it is an undisputed fact that the assessee has not written off the amount to the credit of the profit and loss accounts and the outstanding liabilities were still in existence which would prove that the assessee acknowledged his liabilities as per the book of account. Thus it has not treated the money as its own money. Accordingly, it has not become richer by the impugned amount as it continues to hold out that it is indebted to the aforesaid creditors, so it cannot be inferred that the said liability had ceased to exist. Section 41(1) is attracted only when there is cessation or remission of a trading liability. The AO in this case has failed to prove that the assessee has obtained the benefits in respect of such trading liability by way of remission or cessation thereof. Simply because the address of the sundry credits had changed, which fact was brought to the knowledge of the AO, without making any enquiry at the changed address, the AO on mere presumptions, conjectures and surmises has resorted to make the additions with the aid of Section 41(1) of the Act was misconceived and so the ld CIT(A) after considering the evidence on record and the remand report of AO has rightly held that there was no cessation of trading liability. So the question of fastening the addition with the aid of Section 41(1) does not arise. - Decided against revenue. Addition on account of rejection of books u/s 145 - estimated profit @8.7% of gross receipt - CIT(A) deleted the addition - Held that:- Books of account was produced by the assessee before the AO, so it does not lie in the mouth of the AO to simply say, the assessee failed to produce books of account when he himself say in Page 2 of the assessment order that assessee has produced books and he cannot reject the books of account without pointing out any defects in the books of account which are audited as per the law, and in the light of all supporting evidences produced by the assessee, we concur with the finding of the ld CIT(A) that the order invoking section 145 is bad in the eyes of law and is therefore legally not tenable. And in respect to the estimate @8% of gross receipt, we concur with the CIT(A) that neither the AO pointed out any wrong claim or bogus expense in the books nor has given any comparative cases wherein the net profit is shown @8% of the gross receipts. So we find no justification for the AO to estimate @ 8 % of gross receipts. Hence the ld CIT(A) has rightly deleted the addition made by the AO of ₹ 64,10,847/- - Decided against revenue.
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