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Ramesh Singh Versus Income Tax Officer, Ward-36 (1) , Kolkata

2015 (9) TMI 182 - ITAT KOLKATA

Addition u/s 41(1) - Held that:- In the facts of the present case, it is not possible to conclude that the debt has become unenforceable. It is well settled that reflecting an amount as outstanding in the balance sheet by a concern amounts to the concern acknowledging the debt for the purpose of Sec. 18 of the Limitation Act, 1963. Further, sundry creditors have been reflected in the balance sheet of the assessee and AO has confirmed that there was a liability standing at the end of the year. Th .....

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ee could not prove the genuineness of the said transactions which were undertaken. Thus hereby delete the addition made by AO u/s 41(1) - Decided in favour of assessee. - ITA No.2254/Kol /2013 - Dated:- 12-8-2015 - Shri Mahavir Singh, J. For The Appellant : Shri N.M. Bhansali, Advocate For The Respondent : Shri R.P.Nag, JCIT-DR This appeal by the assessee is arising out of order of Commissioner of Income Tax (Appeals)-XX, Kolkata in appeal No.201/CIT(A)-XX/Wd.36(1)/09-10/Kol dated 16.04.2013. As .....

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9/- made by Assessing Officer u/s 41(1) of the Act, for which assessee has raised following ground:- 1. a) THAT on the facts and in the circumstances of the case the Ld. CIT(Appeals) erred in upholding the addition of ₹ 6,21,489/- made by the AO u/s. 41(1) in respect of the following sundry creditors. i) Industrial Switch Gears Cable Co. ₹ 94,765.00 ii) Ratan Trading Corporation Rs.1,12,494.00 iii) M.K. Electricals Rs.3,94,094.66 iv) Najami Industries Stores ₹ 20,135.82 He fail .....

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& figures. 4. Briefly stated facts are that assessee runs a business in trading electrical goods. The assessment order was framed u/s 144 of the Act by the Assessing Officer. The AO on the basis of available record on the file including written submission received including balance sheet and schedules thereof as well as on perusal of the list of sundry creditors for the year under assessment and immediately preceding year made a finding that some of the sundry creditor s balances are coming .....

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been carried forward from the earlier year and on verification regarding the genuineness of the creditors nothing could be conducted for non availability of the present addresses of the above said creditors. As this liability could not be established and since there was no transaction held during the year, the AO treated this liability as ceased to exist and applied the provision of Sec.41(1) of the Act and treated it as assessee s income chargeable to tax. Aggrieved, assessee went in appeal bef .....

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e is that the AO tried to verify the genuineness of the aforesaid creditors shown by the appellant. However, on verification, he found that the whereabouts of the persons concerned were not traceable in absence of their addresses. Therefore, he concluded that the liabilities were no more in existence, he invoked provision of section 41 of the IT Act. I find that the appellant could not give whereabouts of the said creditors to prove their existences. In such situation, the conclusion drawn by th .....

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ricals. As per the assessment order passed by AO the amount of sundry creditor M/s M.K. Electricals has been taken at ₹ 3,94,094.66, however the actual amount of sundry creditor of M/s M.K. Electricals as on 31st March, 2007 as per the audited balance sheet is at ₹ 45,331/-. The balance of M/s M.K. Electricals at ₹ 45,31/- is verifiable from the audited balance sheet filed along with paper book. The correct figure of the four creditors is worked out as under:- i) Industrial Swi .....

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he figure of addition of ₹ 6,21,489.48 is to be replaced by ₹ 2,72,725.82. Ld. Counsel for assessee further submitted that as the liability was existing and none other of the sundry creditors have given any reply to the contrary and further as the sundry creditors have been paid off in a subsequent year so the addition made by AO and upheld by Ld. CIT(A) u/s 41(1) of the Act needs to be deleted. 6. Ld. DR supported the orders of authorities below and he conceded the view taken by Ld. .....

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ssee had obtained, whether any cash or any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof. Relating facts of the case under appeal before me, the first condition is clearly fulfilled as the amount relates to the outstanding payment for purchases made from sundry creditors. Therefore, in the assessment of the assessee, the allowance or deduction has been made in respect of any .....

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s or expenditure and nor any benefit has been obtained in respect of such trading liability because sundry creditors have not refused for their claim of the due payment for the purchase and an additionally the assessee has confirmed that these sundry creditors have been actually paid in the subsequent year. 8. Hon ble Supreme Court in the case of Byeing and Manufacturing Ltd v. State of Bombay AIR 58 28 (SC) has clearly held that even in cases where the remedy of a creditor is barred by limitati .....

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o recover the amounts due to them for 20 years. Further the Hon ble Supreme Court affirmed the decision of Bombay High Court in the case of J.K. Chemicals Ltd. V. CIT (1966) 62 ITR 34 (Bom), wherein the words cessation or remission had been interpreted. In order to attract the provision of u/s 41(1) of the Act, it is necessary that there should have been an cessation or remission of liability cessation of liability may occur either by the reason of the liability becoming unenforceable in law by .....

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