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2016 (12) TMI 50 - ITAT MUMBAI

2016 (12) TMI 50 - ITAT MUMBAI - TMI - Addition of unproved credits - outstanding liability on account of aviation fuel - Held that:- Inspite of being specifically required to, the assessee has not been able to furnish any basic material evidence to establish that the alleged fuel purchases were ever made by it in the past. The assessee itself accepted that ₹ 8 lakhs thereof could not be reconciled by it. Even bills for purchase thereof, confirmations from so called creditors in respect of .....

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in the assessee’s return of income for A.Y. 2012-13. Thus we agree with the learned CIT(A) that it can be concluded that there is no genuine outstanding liability on account of aviation fuel and therefore no likelihood of any amount being paid on this account in the future and further that this amount of ₹ 99 lakhs claimed by the assessee is a bogus liability. The fact that the assessee has in its submissions before the learned CIT(A) (supra) stated that it has written back and offered to .....

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77; 99 lakhs remaining unproved.- Decided against assessee - ITA No. 7506/Mum/2014 - Dated:- 25-11-2016 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain , Judicial Member Appellant by : Shri K. Gopal Respondent by : Ms. Pooja Swaroop ORDER Per Jason P. Boaz, A. M. This appeal by the assessee is directed against the order of the CIT(A)- 9, Mumbai dated 16.10.2014 for A.Y. 2010-11; upholding the order of assessment passed under section 143(3) of the Income Tax Act, 1961 (in shor .....

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ee was heard in support of the grounds raised and reiterated the submissions put forth before the learned CIT(A) which are extracted hereunder: - 3. During the course of assessment proceedings the Ld. A.O. has asked the Appellant to prove the genuineness of the outstanding liabilities amounting to ₹ 99,00,000/-. According to the Ld. A.O, these liabilities are outstanding from the A.Y. 2002-03 and the same are being carried on as outstanding liabilities from year to year. The Ld. A.O. has a .....

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n and handing over of work the same was remained to be reconciled from the year 2003. In the accounting year 2011-12, the same was verified and proper entries has been passed in the books of the Appellant in the year 2011-12. However, with respect to the remaining outstanding liability of ₹ 8,00,000/- the Appellant was not able to reconcile. The relevant extract of the Appellant's letter is reproduced by the Ld. A.O. in paragraph 5.2 at page 3 of the assessment order. 5. The Ld. A.O. h .....

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aragraph wise as under: 6. Disallowance made under section 41(1) of the Act is unjustified ₹ 99,00,000/- i. The Ld. A.O. has discussed this issue in paragraph 5 - 5.5 at pages 2 - 5 of the assessment order. In the paragraph 5.1 of the assessment order the Ld. A.O. has observation with respect to the outstanding liability amounting to ₹ 99,00,000/- from the Assessment Year 2002-03 and the same are being carried on as outstanding liabilities from year to year. The Ld. A.O. has further .....

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ant vide its letter dated 05.03.2013. The Appellant heavily relies on the same. The Appellant further submits that the provision of section 41(1) of the Act is not at all applicable to the facts of its case. Hence, the disallowance made by invoking the provisions of section 41(1) of the Act is not at all justified and the same may be deleted. iii. In paragraph 5.3 at page 3 of the assessment order, the Ld. A.O. has proceeded to make the disallowance under section 41(1) of the Act. The Appellant .....

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tal outstanding liability of ₹ 99,00,000/-, an amount of ₹ 91,00,000/- pertains to the fuel charges. As the Appellant has only been able to identify the same during the accounting year ending on 31.03.2012, it has passed the necessary entry in the F.Y. 2011-12 pertaining to A.Y. 2012-13. The Appellant has also offered the amount of the amount of ₹ 99,00,000/- for taxation in the A. Y. 2012-13. The ledger account of aviation fuel charges is enclosed at pages 3-5 of the Paper Boo .....

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by the Ld. A.O. in this sub-paragraph (ii) is factually correct. However, your Honours will appreciate that the Appellant is going through very bad phase. The persons who are handing the accounts of the Appellant have left the services without giving any notice and without proper handing over of work. It was only during the F.Y. 2011-12 the Appellant came to know that out of outstanding liability of ₹ 99,00,000/-, an amount of ₹ 91,00,000/- pertains to aviation fuel charges. The Appe .....

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e for A.Y. 2012-13 and offered the entire amount of ₹ 99,00,000/- to tax Please see page no. 49 of the Paper Book. Hence, treating the amount of ₹ 99,00,000/- as ceased liability of the impugned assessment year under section 41(1) of the Act is without any basis and the same may be deleted. d. With respect to the contents of sub-paragraph (iv) of paragraph 5.3 of the assessment order, the Appellant submits that it has already offered the amount of ₹ 9900,000/- as income in the .....

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llant's case. Hence, the same cannot be relied upon. The Appellant, therefore, submits that no adverse inference can be drawn against him, relying on the contents of this paragraph of the assessment order. v. With respect to the contents of paragraph 5.5 of the assessment order the Appellant submits that the Ld. A.O. is not at all justified in treating the outstanding liability amounting to ₹ 99,00,000/- as ceased liability of the Appellant and thereby made the addition in the impugned .....

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merely because the amount is outstanding for more than three years, the same cannot be a basis for making addition under section 41(1) of the Act. The Appellant to support the above contention rely on the recent decision of Hon'ble Gujarat High Court in the case of CIT vs. Puridevi Mahendrakumar Chaudhary [2014] 221 Taxman 375 (Gujarat) wherein the court has held that where assessee had outstanding creditors for goods and Assessing Officer made addition in income of assessee under section 41 .....

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2007-08 had shown certain amount by way of his debts and Assessing Officer applying provisions of section 41(1) added back said amount in income of assessee as deemed income, since there was nothing on record to suggest that there was remission or cessation of liability that too during assessment year 2007-08, above amount could not be added back in income of assessee. 2.2.2 Before us, the learned A.R. of the assessee, when queried, admitted that the assessee s submission before the authorities .....

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ation fuel is still acknowledged as an outstanding debt/liability in assessee s books of account for this year, there is no remission or cessation of liability and therefore the provisions of section 41(1) of the Act could not be invoked in the case on hand in the year under consideration. In support of this proposition, the learned A.R. of the assessee placed reliance on the decision of the Hon'ble Delhi High Court in the case of Shri Vardhaman Overseas Ltd. (2002) 343 ITR 408 (Delhi). It w .....

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essee that it has written back and offered to tax the outstanding liabilities of ₹ 91 lakhs in the return of income for A.Y. 2012-13, was found to be false on verification by the AO. It was submitted that even if the provisions of section 41(1) of the Act are found not applicable to the said outstanding liabilities, they are still to be disallowed as unproved credits as existence of the same are not proved with any material evidence; like fuel bills, names of parties from whom purchased, c .....

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prove the genuineness of liabilities amounting to ₹ 99 lakhs which were being shown as outstanding, failing which the same would be brought to tax under section 41(1) of the Act. In response thereto, the assessee submitted that an amount of ₹ 91 lakhs pertained to fuel bills, but admitted that it could not reconcile the balance ₹ 8 lakhs and that the same amount of ₹ 99 lakhs was offered to tax in A.Y. 2012-13. The explanations put forth did not find favour with the AO. .....

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sh that it owed any money to anybody on this account, brought the same to tax in the assessee s hands under section 41(1) of the Act. 2.4.2 On appeal, the assessee while submitting that the outstanding liabilities of ₹ 91 lakhs were on account of aviation fuel, stated that it was not able to reconcile the balance of ₹ 8 lakhs. According to the assessee, these outstanding liabilities pertained to earlier years and the entire amount of ₹ 99 lakhs were written back and offered to .....

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f the assessee before the undersigned. It is noted that neither at the time of assessment stage nor during the appeal proceedings, inspite the specific query in this regard, the appellant has been able to provide even the basic details such as the fuel bills etc., payment of which was shown still outstanding by the appellant. Under these circumstances, it can e fairly concluded that there was no genuine outstanding and there is no possibility of any payment from the appellant to these very old o .....

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o relief can be provided to the appellant. Accordingly the addition made by the A.O. is confirmed. 2.4.3 On a careful appreciation of the facts and circumstances of the case, submission put forth and the judicial pronouncements cited, as discussed above, we concur with the observations of the learned CIT(A) that before the authorities below, inspite of being specifically required to, the assessee has not been able to furnish any basic material evidence to establish that the alleged fuel purchase .....

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