Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2015 (4) TMI 1018

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Rajesh Raheja Prop. of R&A Techniques and Mr. Anubhav Raheja Prop. of Millennium Marketing on oath. They stated on oath that there were no money payable to M/s Perfect Paradise Emporium Ltd. i.e. the appellant and they further stated that they never signed any confirmation letters. The remand report of the Assessing Officer was furnished to the Authorized Representative of the appellant by the learned CIT(A). This amounts to affording an opportunity to rebut the remand report. While responding to the remand report, it is noticed that the appellant had not asked for the opportunity to cross examine those two parties except stating that the amounts were written off unilaterally by those two concerns. This, in our considered opinion, is not acceptable, inasmuch as, it is for those concerns to explain that the outstanding amounts have been written off in the earlier year itself. Pleading at this stage that the CIT(A) has not given opportunity to cross examine those parties is not tenable in the eyes of law since no party can take the advantage of its own mistakes. Therefore, the depositions made by those two creditors have become final and the depositions remain uncontroverted. This c .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... confronted to the appellant so as to cross examine these two parties with reference to the documents and papers already filed by the appellant before the learned Assessing Officer as well with the Hon'ble CIT (A) before the statements of the above two parties were recorded. These statements were recorded behind the back of the appellant and these remained unrebutted by the appellant, therefore, the appellant is deprived of an opportunity to cross examine the witnesses. 3. That the appellate order passed by the Hon'ble CIT(A) in the instant appeal are vague because from it, it is not clear as to whether he is upholding the findings of additions made by the learned Assessing Officer u/sec. 68 of the Income Tax Act, 1961 or he is upholding the additions u/sec. 41 (1) of the Act considering the same as the case of remission of /cessation of liability. He has not passed speaking order in this reference, therefore, the non-speaking orders passed by the Hon'ble CIT(A) itself is not only bad in law by ab-initio void. 4. That the appellate orders passed by the Hon'ble CIT(A) are also in violation of the principles of natural justice as he had at first not dispose off t .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... titious creditors. During the assessment proceedings, the assessee was called upon to file the confirmation from all creditors. Since the appellant failed to file the confirmation letters from the creditors, a sum of ₹ 19,61,036/- was added to the returned income. Aggrieved, the assessee filed an appeal before the learned CIT(A) who vide order dated 11.11.2010 dismissed the appeal after considering the confirmation letters filed before him. He further concluded that the confirmation letters filed before him were bogus and therefore, upheld the addition. Hence, the present appeal. 3. It was argued before us that the learned CIT(A) while disposing of appeal had not complied with the principles of natural justice by not confronting with the statements obtained on oath from the creditors. He further argued that in any event it does not call for any addition in the appeal for the reason that even in case the creditors are found to be unproved the addition was to be made only in the year in which subject credit was made in the books of account and the addition cannot be made under Section 143(3) of the Act because there was no cessation of any trading liability. 4. On the oth .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... e become final and the depositions remain uncontroverted. This clinches the issue that sundry creditors can be held to be fictitious and no longer payable by the appellant. Therefore, in our considered opinion, the CIT(A) is justified in holding that the sundry creditors are factious. 6. Having held that the sundry creditors are not payable and fictitious, the next question that comes up for our consideration is the year in which the amount is taxable under what provisions of law either under Section 41(1) or 68 of the Act. We are required to examine whether this amount should be brought to tax in the year in which credit was made first time in the books of account or in the year in which these are found not payable. An identical issue had come up for consideration before the Hon ble Gujarat High Court in the case of CIT Vs Bhogilal Ramjibhai Atara in Tax Appeal No. 588 of 2013, dated 04.02.2013, in which it was held as under: Section 41(1) of the Act as discussed in the above three decisions would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled. A .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... itor, or by a contract between the parties, or by discharge of the debt. 8. Applying the ratio in the cases mentioned supra, we hold that the amount in question cannot be brought to tax in the year under appeal under the provisions of Section 41(1) of the Act. It is trite law that an addition under Section 68 can be made only in the year in which credit was made to the account of the creditors in the books of account maintained. Kindly refer to the Hon ble Supreme Court in the case of Damodar Hansraj Vs. CIT, (1969) 71 ITR 427 (SC). Admittedly, in this case the credit to the account of creditors was made in the earlier years and therefore, the amount even cannot be brought to tax under Section 68 in the year under appeal. However, it is open to the Department to levy tax on such amount by resorting to the remedies available under the provisions of Act by duly following the procedure known to the law. This disposes of ground nos. 1 to 5. 9. The ground no. 6 relating to the initiation of penalty proceedings under Section 271(1)(c) of the Act. This issues does not emanate from the order of learned CIT(A) and therefore dismissed. 10. In the result, the appeal is partly allowed .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates