TMI Blog2015 (3) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income tax Act. In the case of carried forward credit, which is from earlier year, provisions of section 68 cannot be applied. In the present case, the liabilities outstanding in the books of account of the assessee for the assessment year under consideration and only the provisions of the section 41(1) of the Act could be applied. In the present case the assessee failed to establish the actual existence of the impugned disputed amount in the books of account of the assessee. The assessee has drawn its balance sheet based on its books of account, in which the above amount, were being claimed as liabilities due, to various parties, as at the end of the accounting year under dispute. However, the assessee failed to establish the genuineness of these liabilities by producing supporting evidence. Simply the liabilities being reflected against certain names in the books of account would not establish the genuineness of liabilities. - Decided against assessee. Estimation of net profit - rejection of books of accounts - out of total addition made ₹ 6,95,770/- addition to the extent of ₹ 4,87,038/- was confirmed and balance addition of ₹ 2,08,732/- was direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing sundry creditors are shown at ₹ 35.49 lacs in the name of 31 parties as per the balance sheet. The AO noted that even, after providing sufficient opportunities and time the assessee failed to provide the necessary details for proving their genuineness in respect of the remaining 25 parties. The AO further noted that the non furnishing of the requisite details gives an indication that the assessee has either not paid creditors or the creditors are non existing. After having made thorough enquiry in respect of sundry creditors the AO reached to the conclusion that out of total outstanding sundry creditors of ₹ 35,49,294/- an amount of ₹ 35,555/- is only genuine sundry creditors. The remaining amount of ₹ 35,13,739/- are non-genuine creditors and are no more payable. Therefore, the AO made addition of ₹ 35,13,739/- u/s.41(1) of the I.T. Act, 1961. The assessee is in appeal against this addition made by the AO. 3. On appeal CIT(A) called for the remand report from AO and observed that out of ₹ 35,13,739/- assessee failed to furnish proof of creditors in respect of ₹ 23,34,721/- and proved the creditors only in respect of ₹ 11, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich it is found that liability in respect of all three parties is appearing in the books of assessee and there were no purchases during the year. All the balances were out of opening balances only. Therefore, section 68 cannot be invoked as genuineness of the transaction can be examined only in year to which it pertained. Reliance was also placed on decision of ITAT in the case of Bamboat Co vs. ACIT in ITA No. 1438/Mum/2010 order dated 20.04.2011 in which it has been held that the burden for proving, that the liability had ceased to exist during the year, is on revenue. This view is also supported by decision of the tribunal in case of DCIT vs. Bhagwandas Shoberlal Jain 60 lTD 118, and also by the decision of Hon ble Supreme Court in matter of Sugauli Sugar Works 236 ITR 518. Reliance was placed on decision of ITAT in matter of International Clothing Inds Ltd v. DCIT ITA No. 5923/Mum/2009 order dated 28/01/2011 in which it has been found that liability has been shown as outstanding and not written off by assessee. It had been held that department could assess the under section 41(1) only when assessee writes it off actually. Reliance was also placed on decision of Hon ble Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition despite rejection of books of accounts. It is submitted that since books of accounts of assessee were rejected and net profit is estimated addition of cessation of liabilities under section 41(1) is not justified and liable to be deleted. Reliance in this regard was placed on decision of ITAT in matter of M/s Exim Kargo Kare v. ITO in ITA No. 5134/Mum/2011 order dated 7.08.2013 in which it is found that Ld. AO made additions under section 41(1) despite the estimation of net profit, it had been held that no further addition could be made when AO estimated the net profits after relying on the decision of Hon ble Allahabad High Court in case of CIT vs. Banwarilal Banshidhar (229 ITR 229). 4.3 He further relied on the following judgment in the case of MCorp Global (P.) Ltd. (2009) 178 taxmann 347(SC). 5. On the other hand the ld. DR submitted that inspite of giving enough opportunity to the assessee, the assessee failed to establish the existence of sundry creditors to the tune of ₹ 23,34,702/- . Being so, it was considered that these creditors were not in existence and same was considered as cessation of liability under section 41(1) of the Act. 6. We have hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SHREENATH TEXTILES 23/09/2009 REPLY NOT RECEIVED 96501/- SHREENATH TEXTILES 23/09/2009 REPLY RECEIVED 63715/- SHREENATH TEXTILES 23/09/2009 REPLY RECEIVED SHREENATH TEXTILES 23/09/2009 REPLY NOT RECEIVED 126200/- 6.3 From the above, it can be seen that out of 14 cases notices were returned unserved in 8 cases on the ground that party is not known. 6.4 Since the notices issued by AO to the parties were returned unserved, assessee vide order sheet noting dated 01.10.2009 was asked to furnish the details of subsequent payment of outstanding sundry creditors by giving cheque number through which creditors are paid and date of cheques issued. The aforesaid details were furnished on 29th October 2009 in respect of few parties. 6.5 The details were submitted by the assessee before AO in respect of M/s Baba Textiles, M/s Bhavani Textiles, M/s Hari Enterprises, M/s Jyoti Traders, M/s Sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 755944 12.09.2006 12461/- Hari Enterprise 755982 14.11.2006 13272/- Hari Enterprise 277059 11.10.2006 25000/- 2,75,115/- Jyoti Traders 55300/- 93,010/- 6.7 The creditors which are outstanding from 2001 if paid in the year 2009 clearly indicates doubts and hence in order to examine the correctness of the statement furnished by the assessee, notice u/s 133(6); was issued to the banker of the assessee by AO, requiring it to furnish the copy of bank statement and payment detail in respect of outstanding creditors as stated by the assessee to settle the creditors. 7. The assessee was not able to furnish the bank statement copy, however, the AO procured the bank statement from the bank and found certain discrepancies in the statement regarding payment to sundry creditors. Finally he made an addition of ₹ 35,13,739/- in respect of outstanding creditors treating as cessation liability. However, CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us, that this issue was covered in favour of the assessee by the judgment of Hon'ble Jurisdictional High Court in the case of CIT vs. Surindra Engineering Co. Pvt. Ltd. in IT Appeal No.2812 of 2010 dated 12/09/2012. We have carefully gone through this judgment wherein it was decided in favour of the assessee on the reason that the liability in respect of alleged bogus purchases having been made in the assessment year 1993 i.e. outside the block period, it cannot be brought to tax in the block assessment covering the period from 1/4/1995 to 21/3/2002. Being so, this judgment is of no assistance to the assessee . We find that there are following judgments which are decided by the co-ordinate Bench against the assessee . i) ITO vs. Shailesh B. dated 11/12/2013 in ITA No.7012/2010; ii) Yusuf Kanwar vs. ITO . dated 28/2/2013 in ITA No.8408/M/2010; iii) ITO vs. Sajjan Kumar Didwani 65 SOT 179; 9.1 Being so, in our opinion the above judgments are squarely applicable to the facts of the case. Accordingly, this ground of the assessee is dismissed. 10. The next ground i.e. ground No.3 in this appeal is with regard to the estimation of net profit of ₹ 6.95,7701- b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t those books and estimate the income to the best of his judgment. When such an estimate is made it is in substitution of the income that is to be computed under Section 29. In other words, all the deductions which are referred to under Section 29 are deemed to have been taken into account while making such an estimate. This will also mean that the embargo placed in Section 40 is also taken into account. 12. This will mean that the embargo placed in section 41 (1) is also taken into account. In the present case during the course of remand proceedings before AO the assessee produced the books of account. The AO also confirmed the examination of books of account and observed that the has not produced the bills in respect of conveyance expenses ₹ 75,710/-; general expense ₹ 69,361/-, motor car expenses ₹ 48,000/-, telephone expenses ₹ 20,052/-. Once the books of account of the assessee was produced before the lower authorities and if there is certain discrepancy the authorities were free to make addition to that extent of discrepancies noticed by the authorities and, authorities were precluded in rejecting the books of account of the assessee. In such circum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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