TMI Blog2013 (11) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... al filed by the assessee read as under: 1. The learned CIT(Appeals) has erred in law and facts in confirming the action of the A.O. in treating non-payment of Rs.19,87,927/- to sundry creditors as income of the assessee. 2. The learned CIT(Appeals) erred in law and facts in appreciating that the ld. Assessing Officer did not provide sufficient to gather details of sundry creditors outstanding for more than 8 years on the date of assessment and also did not provide show cause notice before treating non-payment to creditors as income to the assessee. 3. The learned CIT(Appeals) erred in concluding that the assessee has claimed expenses for which payments are not made to the sundry creditors. In fact the expenses not paid were capitalized and carried to the balance sheet as stocks. 4. Without prejudice to the above, the ld. CIT(Appeals) erred in not considering the special nature of business of the assessee which is production of television serials and have treated the debtors and creditors like the other trading or manufacturing organization. In a television serial production business debtors and creditors are directly related to each other and there is a complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said share application money was received by the assessee in violation of the Companies Act as the same was in excess of the authorized capital of Rs.40 lacs. Neither any shares were allotted against the said share application money nor was the same returned to the applicants for seven years. Though the confirmations from the applicants/creditors were submitted by the assessee, the AO treated the said money as trading liability. The AO further observed that the liability had become time barred as per the law of limitation and as such there was cessation of liability. So the AO treated the same as income of the assessee company. The remaining addition of Rs. 19,87,927/- was made by the AO on account of cessation of liability of sundry creditors. The ld. CIT(A) after hearing the parties deleted the additions made by the AO in respect of share application money. However, he confirmed the additions made by the AO on account of cessation of liability towards sundry creditors. The finding of the ld. CIT(A) regarding the issue relating to share application money is reproduced as under: 2.1.1 During appellate proceedings, Appellant has strongly argued against the same stating that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) has given his findings as under: 2.2 In so far as sundry creditors are concerned, these at the year end were at Rs.19,87,927/-. Appellant was asked to furnish various details by the AO including ledger copies from the date of inception, details and confirmations by the parties, the source of fund, nature of transaction etc. Appellant responded that it was under the process of getting confirmations made which would be submitted. However, till date of assessment i.e. about two weeks later to the Appellant's submission these were not received and the AO treated them as unexplained and added to the total income. Appellant argues that AO did not give them a show cause notice before adding sundry creditors to the income. Further, that the creditors pertain to the serial Sanjeevani (Kannada) where amount receivable from ETV Kannada was shown in Sundry Debtors. If the company received any payment from the said channel, the sundry creditors would be paid off. Appellant also argues that the AO has not justified in asking confirmations of old creditors and it was justified to retest the same after 6 years and after the assessment for A.Y. 03-04 having being passed u/s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Rs.19,87,927 made by the AO is sustained. 6. We have heard the respective representatives of the authorities and have also gone through the record. The main grievance of the assessee regarding addition made by the AO on account of cessation of liability on account of sundry creditors is that he was not provided with sufficient time and opportunity to gather details of sundry creditors outstanding for more than eight years on the date of assessment. The next contention of the AR is that if the amount received from sundry creditors is to be treated as income then the amount outstanding towards sundry debtors should be treated as expenses on account of non-receipt. He has further relied upon the authority of the Hon'ble Delhi High Court styled as CIT v. Shri Vardhman Overseas Ltd. in ITA No.774/2009 and further that of Gujarat High Court styled as CIT v. Nitin Garg [2012] 208 Taxman 16 to stress the point that even though the debt has become time barred the liabilities have not ceased to exist. On the other hand, the ld. DR has relied upon the authority of the Hon'ble Delhi High Court styled as CIT v. Chipsoft Technology (P.) Ltd. (2012) 26 Taxman.com 109 to stress the poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation of laws, particularly fiscal and commercial legislation is increasingly based on pragmatic realities, which means that even though the law, permits the debtor to take all defences, and successfully avoid liability, for abstract juristic purposes, he would be shown as a debtor. In other words, would be illogical to say that a debtor or an employer, holding on to unpaid dues, should be given the benefit of his showing the amount as a liability, even though he would be entitled in law to say that a claim for its recovery is time barred, and continue to enjoy the amount. The second reason why the assessee's contention is unacceptable is because with effect from 1-4-1997 by virtue of Finance Act, 1996 (No.2), an Explanation was added to Section 41 which spells out that loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof shall include the remission or cessation of any liability by an unilateral act by the first mentioned person under clause . The expression include is significant; Parliament did not use the expression means . Necessarily, even omission to pay, over a period of time, and the resultant benefit d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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