TMI Blog2011 (7) TMI 1211X X X X Extracts X X X X X X X X Extracts X X X X ..... but only subsequently on 16.12.2008, so that the said provision stood attracted. The same stood confirmed in appeal on the same basis. The reliance on the case law cited by the assessee before the first appellate authority was found by him as distinguishable as well as not stating the correct law. Aggrieved, the assessee is in appeal. 3. Before us, the ld. AR contended that there was no privity of the contract between the assessee and M/s. See-Connect, to whom the freight charges stand paid. It is its suppliers who arrange for the shipment of goods to the assessee, settling the charges to be paid to the transporter/s, and which it does on the receipt of goods in good and proper condition. The fact of payment of TDS subsequently, which was only by way of abundant caution, would not operate to determine if the tax was indeed deductible, as has been wrongly interpreted by the Revenue authorities. The provision of s. 40(a)(ia) would, thus, be not applicable in the facts and circumstances of the case. The ld. DR, on the other hand, relied on the orders of the authorities below, stating of them to have applied the clear provision of law to the undisputed facts of the case. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, and neither has the assessee brought anything on record to rebut this understanding emanating from the conduct of the parties involved in the transaction/s. As such, the contention of non-existence of any contract between itself and the freight carrier, which is the same for all the three transactions comprising the impugned sum, so that it is only in pursuance to a continuing business relationship, is facile and a contradiction in terms. The matter is purely one of fact, toward which the assessee has led no evidence whatsoever, making only a bald assertion. 4.2 The second aspect of the argument, i.e., of the Revenue wrongly inferring the subsequent deposit of TDS by it as an admission of the transaction/s being a contract, subject to deduction of tax at source, is, again, misconceived. As would be apparent from the foregoing part of the discussion, the Revenue s charge is not, and could not possibly be, based on the assessee s admission, which is at best supportive. Finding the claim as hit by s. 40(a)(ia), it draws corroboration, and only rightly so, from the assessee s subsequent deposit of TDS on its own volition. As such, whether the same was done by way of abu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al high court had in the case of CIT v. Annamakuty Jose, 221 CTR (Ker.) 474 held that if the assessee could not prove the transaction, the credit is to be disallowed. The decision in the case of CIT vs. Sugauli Sugar Works Pvt. Ltd. (1999) 236 ITR 518 (SC) relied upon by the assessee was found by him as distinguishable on facts. Accordingly, the ld. CIT(A) confirmed the addition. Aggrieved, the assessee is in appeal. 6. Before us, the assessee submitted that the mere non-furnishing of the confirmation would not entitle the Revenue to apply s. 41(1) of the Act, which comes into play only where there is a cessation of liability, not otherwise. There is nothing on record to exhibit so, i.e., cessation of liability, so that the Revenue had mis-applied the provision. In fact, both the accounts have since been settled, so that the finding of the outstanding liability (as on 31.3.2007) as being non-existent, is in contradiction to the obtaining facts. Further, reliance was placed on the decisions in the case of Saraswati Industrial Syndicate Ltd. Vs. CIT (1990) 186 ITR 278 (SC) and CIT vs. Ancherry Pavoo Kakku (1985) 160 ITR 88 (Ker.). 7. We have heard the parties, and peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unproved liability. It is in this context that the ld. CIT(A) states, relying on the decision in the case of CIT v. Annamakuty Jose (supra) by the jurisdictional high court, that where the transaction is not proved, the credit could be brought to tax. 7.2 We may now examine the facts of the case. The assessee was called upon during the assessment proceedings to confirm the credit balance(s) outstanding in its books as at the year-end, where the balance(s) was at or in excess of ₹ 1 lakh each, which was from the two parties afore-referred, therefrom. It did not produce any evidence, either in the form of copy of the account or a confirmation. The reason for the same, as stated before the first appellate authority, was non-response from the concerned parties to whom letters were written by it. Why, we wonder, when, as claimed, the amount had been settled, and the liability discharged during the financial year 2007-08 itself. Rather, the parties having received the payment subsequently, ought to have confirmed the same as well. In fact, the assessee could have itself furnished the details of the subsequent payment/s, which, if through the banking channel, so that the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability to the satisfaction of the Revenue has been raised before us. Accordingly, we find no basis or reason to interfere with the impugned order, made by drawing cogent inferences on the obtaining facts and circumstances of the case. The decision by the jurisdictional high court in the case of CIT v. Annamakuty Jose (supra) is applicable in the facts and circumstances of the case, and stands rightly applied by the ld. CIT(A), which reliance has again not been met by the assessee. We decide accordingly. 7.3 With regard to the case law cited, the decision in the case of CIT vs. Sugauli Sugar Works Pvt. Ltd. (supra) proves, if any was required, that the question of existence of a liability (as on a particular date), is purely a question of fact; the apex court clarifying that the unilateral write back in its accounts by the assessee would not by itself be conclusive of the fact of cessation of liability. We have, as also the Revenue authorities, sought to draw our conclusion as to the existence or otherwise of the liability on the relevant date on the basis of the entirety of the facts before us. Also, Explanation 1 to s. 41(1) meets the cited decision by the apex court, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance in the `advance account as on 31.3.2007, i.e., ₹ 2548623/- was added as unexplained credit u/s. 68. The same stood confirmed in appeal for the same reasons; the ld. CIT(A) observing that the assessee had failed to furnish the particulars of the creditors, confirmations etc., finding the decision in the case of CIT v. Annamakuty Jose (supra) as applicable in the obtaining facts and circumstances. Aggrieved, the assessee is in appeal. 9. Before us, the ld. AR submitted that the Revenue authorities erred in invoking s. 68 qua trade credit, which, necessitated by business considerations, gets neutralized within a `few days. Adverting to the statement of the profit and loss account (PB pgs. 14,15), he further submitted that the closing stock as at the year-end is at ₹ 99.72 lakhs, which would show that the assessee is adequately capitalized, and has sufficient working capital, so that it need not resort to such ingenious methods to meet any `imagined deficiency in cash. The ld. DR, on the other hand, relied on the orders of the authorities below. 10. We have heard the parties, and perused the material on record. We find the assessee s case as wholly unsu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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