TMI Blog2012 (8) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities have ceased to exist. The assessee has not written back the amount and the outstanding liabilities are still in existence would prove that the assessee acknowledges its liability as per the books of accounts - the Revenue has also not brought any material on record to prove that the purchases & advance are not genuine and the creditors have remitted the amounts due to them section 41(1)cannot be attracted there is nothing to suggest that the assessee has obtained any benefit either by way of remission or cessation of any liability while the aforesaid liabilities are continually admitted by the assessee in their balance sheet - in favour of assessee. Addition on account of belated payment of Provident fund and ESIC - Held that:- As deduction of statutory liability towards Provident fund and other funds referred to in clause (b) of sec.43B is permissible if the payments are made by the assessee before the due date of submission of return u/s. 139(1) Addition on account of belated payment need to be deleted - in favour of assessee. Initiation of penalty u/s. 271(1) (c ) as the same is consequential the same is not adjudicated - I.T.A. No. 4064/AHD/2008. - - - Dated:- 6- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against supply though trading liability really exist as on 31-3- 05. The Hon ble CIT (A) has not appreciated the principles laid down by the Hon ble Supreme Court in the case of C.I.T. vs. Sugauli Sugar Works (P) Ltd. 236 ITR 518 and in the case of C.I.T. vs. Kesaria Tea Co. Ltd. 254 ITR 434.. 6. The Hon ble CIT (A) has also erred in law and on facts in confirming the disallowance of Rs.22,530/- made on account of belated payment though the same has been paid before the due date of filing the return of income and hence the same is allowable as per Hon ble Karnataka High Court s decision in the case of C.I.T. vs. Sabari Enterprises (2007 ) 213 CTR 269. 7. The Hon ble CIT (A) has also erred in law and on facts in directing to the Ld. A.O. to charge the interest as per law though the appellant is not anticipated that the Ld. A.O. would make the huge addition in the total income. The Hon ble Gujarat High Court has held in the case of C.I.T. vs. Bharat Machinery and Hardware Mart; 136 ITR 875, that interest is not chargeable in such circumstances. 8. The Hon ble CIT (A) has also erred in law and on facts in not giving finding/observation about the initiation of penal proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-3-2005 where the excess stock found was to the extent of 34.310 mt. Income tax authorities carried out survey proceedings immediately on 9-3-2005 (i.e. immediately after 3 days of survey by the sales tax authorities) and estimated the physical stock of 586.826 mt. as against the actual book stock of 160.210 mt. The statement of the assessee was recorded u/s. 133A where the assessee under pressure admitted to the discrepancy of stock to the extent of 426.616 mt. The assessee retracted the statement by filing a duly notarized affidavit on 26-11-2007. The Ld. A.R. submitted that the Income tax authorities did not carry out the physical weighment of stock but made addition only on the basis of statement of the assessee. The Ld. A.R. submitted that after the survey action by the sales tax authorities, there were two holidays on account of Mahashivaratri and Sunday and so there was effectively only one working day between the two surveys. It was therefore impossible for the assessee to purchase the stock of 426.616 mt. in one single day. To prove that the assessee could not have purchased 426.616 mt. in a single day, the Ld. A.R. submitted that during the entire financial year the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timated, if adjustment of account of opening stock and sales is made, the purchases during the period 5.3.2005 to 9.3.2005 would work out to the tune of 426.616 mt. The purchases of 426.616 mt seems to be far fetched proposition in view of the fact that the purchases of each month during the year ranged between minimum purchase of 3.340 mt. and maximum of 134.480 mt. Further the cash requirement for the purchase of aforesaid quantity would be to the extent of approx. Rs.72 lacs apart from the large storage space required to store the goods. It is also a fact that the Sales tax authorities have completed the sales tax assessment after considering the stock of 34.310 mt. In the case of CIT vs. Anandha Metal Corporation (2005) 273 ITR 262 (Mad.), the Hon ble Madras High Court has held that return accepted by the Commercial Tax Department under the Tamil Nadu General Sales Tax Act is binding on the I.T. authorities and the A.O. has no jurisdiction to go beyond the value of the closing stock declared by the assessee and accepted by the Commercial Tax Department. And consequently no addition u/s. 69 could be made in respect of unexplained difference between the value of closing stock as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim, he added the amount of Rs.11,27,771/- u/s. 41(1). Aggrieved by the addition, the assessee preferred appeal before CIT (A). CIT (A) confirmed the action of the A.O. by holding as under:- 5.3. I have considered the contention of the appellant as well as the observation of the A.O. in the remand report and the assessment order. I find that the appellant has not given any submissions to prove genuineness of the creditors reflected in the balance sheet aggregating to Rs.2,88,124/- and the advances against supplies of Rs.11,27,771/- even during the course of the appellate proceedings. The appellant would have at least filed the complete addresses of these creditors and should have also filed the confirmations even during the remand report stage. The unilateral contention of the appellant that the A.O. has made the addition of the creditors to whom liability still exists is not enough as the appellant has failed to show that who are these parties and what are their whereabouts. I am therefore of the considered view that there is a substance in the action of the A.O. in making addition of Rs.2,88,124/- on account of sundry creditors and Rs.11,27,771/- on account of advances. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of remission or cessation of any liability while the aforesaid liabilities are continually admitted by the assessee in their balance sheet. In these circumstances, we have no alternative but to vacate the findings of the Ld. CIT (A) and delete the addition sustained by the Ld. CIT (A). Therefore, ground nos. 3 to 5 in the appeal of the assessee are allowed while ground nos.1 and 2 in the appeal of the Revenue are dismissed. 13. In view of the aforesaid facts, we are of the view that the addition made by the A.O. is not called for and therefore we delete the addition made. In the result, this ground of the assessee is allowed. 14. Ground No.6 7 pertains to belated payment of Provident fund and ESIC. 15. The A.O. observed that there was delay on the part of the assessee in depositing the employee s contribution of provident fund and Employees State Insurance. The contribution for the month of April,2004 to December, 2004 was paid on 25-2-2005 and for January, 2005 was paid on 10-3-2005. The A.O. accordingly added Rs.22,530/- u/s./ 2(24) r.w.s. 36(va). CIT (A) sustained the disallowance. 16. Before us, the Ld. A.R. contended that amount of contribution has been paid befo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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