TMI Blog2014 (12) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee transferred these amounts to the capital and current account - in the case of carry forward credit which is from earlier year, provisions of sec. 68 cannot be applied - the liability is outstanding in the books of account of the assessee for the AY under consideration – as decided in CIT vs. Chipsoft Technology (P.) Ltd. [2012 (8) TMI 154 - DELHI HIGH COURT] - the provisions of sec. 41(1) could be applied in this type of credts - section 68 is not applicable to the cash credits recorded in the books of account of the assessee in the earlier previous year not relevant to the AY under consideration - when the cash credits pertain to the earlier previous year, no addition can be made u/s. 68 – thus, the matter is to be remitted back to the AO to find out whether the liability actually ceased to exist and if there is no possibility of revival of the liability, then only the AO has to apply the provisions of sec. 41(1) – Decided partly in favour of assessee. - I.T.A. No.364 /Coch/2014 - - - Dated:- 12-12-2014 - Shri N. R. S. Ganesan, JM And Chandra Poojari, AM,JJ. For the Petitioner : Shri R. Sreenivasan, CA For the Respondent : Shri K.K. John, Sr. DR ORDE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee has also obtained loan from one of the partner s wife, Sudha, which has not been taken into consideration. 5. However, the CIT(A) observed that the assessee has not submitted any evidence for substantiating its claim, and the entire explanation was in the form of argument. According to the CIT(A), even during the course of appellate proceedings, the assessee had not submitted any statement or document and has relied upon the statement of facts and the grounds of appeal. In view of this, the CIT(A) found that the assessee has nothing to counteract against the detailed findings of the Assessing officer. Accordingly, the CIT(A) upheld the addition made by the Assessing officer and he dismissed this ground of appeal. Against this, the assessee is in appeal before us. 6. We have heard both the parties and perused the record. In this case, an amount of ₹ 1,20,000/- was received from Shri Biju Joseph and the assessee filed a copy of bank account Shri Biju Joseph alongwith the confirmation letter. The Assessing officer doubted this loan as this amount was received in cash on 15-12-2007. According to the Assessing officer, this amount was not reflected in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,052/- was treated as unexplained cash credit and addition was was made u/s. 68 of the I.T. Act. 9. Before the CIT(A), it was submitted that the assessee originally filed the return of income under electronic mode, showing a business loss of ₹ 14,09,447/- which was revised subsequently and income and income returned at ₹ 73,957/- after claiming the interest on capital and remuneration to partners. The Balance of the original return showed the total amount of sundry creditors at ₹ 50,68,767/- and in the revised return, a major portion of this sundry creditors balance was either transferred to the partner s capital account or current account and thus, the figure remain reduced to ₹ 14,20,789/-, i.e., to say an amount of R.36,47,986/- was transferred to either capital account or current account in a round sum. It was submitted that during the course of assessment, the Assessing officer asked the assessee to prove the genuineness of the sundry creditors and accordingly, the entire sundry creditors of ₹ 50,68,767/- was proved either by way of filing of confirmation or by way of proving the subsequent payment details in statement of the account. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd perused the record. Admittedly, the these credits continue to be carried forward year after year and the assessee transferred these credits to the capital and current account in the assessment year under consideration. On account of this, there was a doubt in the mind of the Assessing officer regarding these credits. In the normal course, nobody would ordinarily not claim his dues and usually they take steps to recover the dues if it is a genuine liability. In this case, the liability remains to be recovered after the assessee transferred these amounts to the capital and current account. For invoking the provisions of sec. 68 of the I.T. Act, if any sum is found credited in the books of account of the assessee maintained in the previous year, then only it could be possible to make addition u/s. 68 of the I.T. Act. In the case of carry forward credit which is from earlier year, provisions of sec. 68 cannot be applied. However, in the case of the assessee, the liability is outstanding in the books of account of the assessee for the assessment year under consideration. As per the recent judgment of the Delhi High Court in the case of CIT vs. Chipsoft Technology (P.) Ltd. [2012] 210 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed decisions to the decision in the case of Kesoram Industries Cotton Mills Ltd. vs. CIT [1992] 196 ITR 845 (Cal.) to the effect that the non-discharge of a liability over a long period of time, coupled with absence of any dispute and/or of legal recourse, would lead to a firm basis to infer remission or cessation of liability. The said decision by the hon ble court stands followed and adopted by the tribunal, as in ITO vs. Shailesh D. Shah (in and Yusuf R. Tanwar vs. ITO (in I.T. Act No.8408/Mum/2010 dated 28.02.2013). Accordingly, an omission to pay could give rise to the legal inference of cessation of liability. True, an amount may continue to outstand in accounts, so that the assessee is prima facie liable in its respect. However, it is the veracity or the truth of those very accounts, constituting the assessee s evidence, that the assessee is required to establish. The matter would, therefore, have to be decided in light of the conspectus of the facts of each case. As per the recent judgment of the Delhi High Court, cited supra, the provisions of sec. 41(1) could be applied rather than sec. 68 of the I.T. Act. Section 68 of the Act is not applicable to the cash credits r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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