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2018 (4) TMI 452 - AT - Income TaxValidity of assessment framed u/s. 147 - credit balance in the name of M/s. Mahindra & Mahindra - Held that:- The name of M/s. Mahindra & Mahindra in his books of account as reflected in the balance sheet and its annexure. It has surfaced during the course of scrutiny proceedings for the AY 2012-13 in the books of M/s. Mahindra & Mahindra that debtor has written off the corresponding debit balance in its books of account as on 31.3.2011 itself. Therefore, on the basis of these facts, the AO has properly formed a belief that income chargeable to tax has escaped assessment. In the light of these facts, we do not agree with the contentions of the assessee that no material was available before the AO to form a belief that income chargeable to tax has escaped assessment. More over, no regular assessment was framed u/s. 143(3) of the Act. Cessation of liability u/s. 41(1) - In any case, where the assessee has denied the knowledge of writing off of such huge amount of bad debt, it was incumbent upon the AO to dig out the truth by making necessary enquiries from M/s. Mahindra & Mahindra, but it was not done and without doing so, the AO has made the addition of the same in the hands of the assessee, having invoked the provisions of section 41(1) of the Act. We are therefore of the view that in the absence of complete information, the conclusion drawn by the AO is not proper. Therefore, it requires further enquiry and investigation from M/s. Mahindra & Mahindra with regard to any settlement undertaken between the parties under which M/s. Mahindra & Mahindra has written off huge amount of ₹ 3,08,03,419.13. Accordingly, we set aside the order of the CIT(Appeals) in this regard and restore the matter to the AO with a direction to make necessary enquiry from M/s. Mahindra & Mahindra and from the assessee also with regard to any settlement under which 3,08,03,419.13 has been written off by M/s. Mahindra & Mahindra.
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