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2018 (1) TMI 9 - AT - Income TaxAddition of sundry creditors - Held that:- Since the factum of the assessee having filed the details of sundry creditors by way of written submissions (supra) dated 03.02.2014 before the AO stands accepted by the AO himself, there is no question of the assessee having improved its case at the stage of rejoinder to the AO’s remand report. The ld. CIT(A) has clearly gone wrong in rejecting such details at the threshold without verifying/getting verified the same. The AO at the first instance, had erred in not verifying these details before making the addition. This issue is, thus, remitted to the AO for deciding it afresh in accordance with law, on making necessary verification of the sundry creditors as claimed by the assessee. The assessee shall be afforded adequate opportunity of hearing by the AO Addition made as surplus of Income over Expenditure - grant of registration u/s 12AA was rejected - Held that:- The assessee was granted registration w.e.f. 01.04.2013. As per the said proviso to section 12A(2), in such a case, the provisions of section 11 and 12 of the Act shall apply in respect of any income derived from property held under the trust of any assessment year preceding the assessment year immediately following the financial year in which the application for registration is made (on or after 01.06.2007), for which, assessment proceedings are pending before the AO as on the date of registration and the objects and activities of the trust remain the same for such preceding assessment year. In the assessee’s case, though the application for registration was initially rejected, the Tribunal restored the matter to the ld. CIT, vide order dated 05.02.2014. The CIT granted registration by allowing that very application. It is also undisputed that the objects and activities, which are educational in nature, remain unchanged. As such, the aforesaid proviso to section 12A(2) is squarely applicable. Therefore, as rightly held by the ld. CIT(A), the AO should have granted the benefit of sections 11 and 12 of the Act to the assessee. Addition on account of deemed interest on advance - Held that:- Since the AO did not bring anything on record to establish that the assessee had actually earned interest on the advances made, the ld. CIT(A) has, while deleting the addition, rightly relied on ‘CIT vs. Shoorji Vallabhadas’ (1962 (3) TMI 6 - SUPREME Court), wherein, it has been held that if income does not result at all, there cannot be a tax, even though in book keeping, an entry is made about a hypothetical income which does not materialize; and that where the income cannot be said to have resulted at all, there is, obviously, neither accrual, nor receipt of income, even though an entry to that effect might have been made in the books of account. Accordingly, on this issue also, the Department’s grievance has no legs to stand on and it is rejected.
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