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2025 (4) TMI 907 - AT - Income TaxAddition invoking the provisions of section 41(1) adding the sundry creditors - AR sought admission of additional evidence - HELD THAT - This is a fit case for admission of additional evidence filed by the assessee. Since it is evident from the record that these evidences were not considered by any of the lower authorities therefore we deem it appropriate to restore the matter to the file of the jurisdictional AO for de novo consideration after due examination and verification of the details/evidences furnished before us by the assessee. Accordingly the impugned order is set aside and the matter is restored to the file of the AO for consideration afresh. Grounds raised by the assessee are allowed for statistical purposes.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Condonation of Delay in Filing Appeal Legal Framework and Precedents: The limitation period for filing appeals before the Income Tax Appellate Tribunal (ITAT) is prescribed under the Income Tax Act, 1961. Courts have consistently held that delay caused due to negligence or mistake of the advocate or due to circumstances beyond the control of the appellant can be condoned if sufficient cause is shown. The assessee relied on precedents from the Supreme Court and Karnataka High Court, which held that delay caused due to advocate's mistake or negligence is a sufficient cause for condonation. Court's Interpretation and Reasoning: The Tribunal considered the submissions that the delay was due to the rush of work of the Chartered Accountant and the process of preparing the appeal draft. The Tribunal found the delay was not willful and was beyond the control of the assessee. Conclusion: The Tribunal held that sufficient cause existed for condonation of the 23-day delay and accordingly condoned the delay, allowing the appeal to be heard on merits. Validity of Addition Under Section 41(1) of the Income Tax Act Legal Framework and Precedents: Section 41(1) of the Income Tax Act deals with income chargeable to tax where a liability or expenditure previously allowed is no longer payable or ceases to exist. The principle is that when a liability ceases, it results in income and is taxable. However, the liability must have actually ceased or been discharged for the provisions to apply. Key Evidence and Findings: The AO made an addition of Rs. 1,49,01,483/- representing sundry creditors outstanding as on 31.03.2013, on the ground that the assessee failed to justify non-payment and failed to produce bills or details of creditors. The assessee explained that a fire at its factory in 2009 destroyed records and paralyzed business operations, which hindered its ability to provide evidence. The assessee also submitted that the liability arose in AY 2008-09 and continued to stand in the books due to the business shutdown. The assessee further submitted that creditors had initiated liquidation proceedings against it, indicating the liability had not ceased. Court's Interpretation and Reasoning: The Tribunal noted that the AO and CIT(A) had not considered the additional evidence now produced by the assessee, which was part of the assessment record for the preceding year but was not considered in the current year. The Tribunal found the assessee's explanation about the fire and destruction of records plausible and recognized the continuing nature of the liability as supported by liquidation proceedings. The Tribunal emphasized that the addition under section 41(1) requires cessation of liability, which was not established conclusively by the AO. Application of Law to Facts: Since the liability had not ceased and the assessee had shown cause for non-production of records, the addition under section 41(1) could not be sustained without proper verification of the evidence. Treatment of Competing Arguments: The Departmental Representative argued that no documents were furnished during assessment or appeal and that the new evidence was not considered by lower authorities. The Tribunal, however, found it appropriate to admit the additional evidence and remand the matter for fresh consideration. Conclusion: The Tribunal set aside the impugned order and restored the matter to the AO for de novo consideration after examining the additional evidence and verifying the details. Double Taxation on Same Sundry Creditors Legal Framework: The principle against double taxation is well established in tax law. The same income or transaction cannot be taxed twice in different assessment years unless there is a fresh accrual or new event. Court's Reasoning: The assessee contended that the AO had imposed tax twice on the same sundry creditors-once in AY 2012-13 and again in AY 2013-14-contravening the principle against double taxation. The Tribunal observed that the AO had not adequately scrutinized the previous assessment orders or reconciled the figures before making the addition in the current year. Conclusion: The Tribunal indicated that the AO should examine the previous assessments and ensure no double taxation occurs. The remand for de novo consideration includes this aspect. Consideration of Business Losses Carried Forward Legal Framework: Under the Income Tax Act, business losses can be carried forward and set off against income in subsequent years subject to conditions. Failure to consider carried forward losses results in incorrect tax computation. Findings: The assessee submitted that the AO failed to consider brought forward business losses from AY 2009-10 onwards, amounting to over Rs. 52 crores, while computing tax liability. Court's Reasoning and Conclusion: The Tribunal noted this ground and implicitly directed the AO to consider all relevant losses and set-offs during the fresh adjudication on remand. Admission of Additional Evidence Legal Framework: Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 permits admission of additional evidence if it is relevant and was not available or produced before the lower authorities. Court's Reasoning: The Tribunal found the additional evidence filed by the assessee relevant and not previously considered. Given the destruction of records due to fire and the evidence being part of preceding year's assessment record, the Tribunal admitted the evidence and remanded the matter for fresh consideration. 3. SIGNIFICANT HOLDINGS "Having considered the submissions of both sides and perused the material available on record, we are of the considered view that this is a fit case for admission of additional evidence filed by the assessee. Since it is evident from the record that these evidences were not considered by any of the lower authorities, therefore, we deem it appropriate to restore the matter to the file of the jurisdictional AO for de novo consideration after due examination and verification of the details/evidences furnished before us by the assessee." "Accordingly, the impugned order is set aside and the matter is restored to the file of the AO for consideration afresh. We further direct that the assessee shall be at liberty to furnish any other information/document in support of its claim before the AO. We also direct the assessee to fully co-operate in the assessment proceedings and furnish any other document as may be sought by the AO for complete adjudication of the issue." Core principles established include:
Final determinations:
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