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TMI Blog2018 (5) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... book and argued that the details of purchases were verified by the AO and found satisfied with the same and accepted the expenditure incurred to that effect. The AO is wrong in making the impugned addition on account of sundry creditor, which are related to purchases and the same also accepted by the AO as genuine. Without rejecting the purchases, the sundry creditors cannot be treated as income of assessee and in support of the contention, the assessee relied on the order dt. 07-09-2016 of the Co-ordinate Bench, ITAT, Kolkata in the case of Ms/ Standard Leather Pvt. Ltd in ITA No. 2620/Kol/2013 for A.Y 2010-11, copy of the same is on record and referred to paras 10-13 of the said order. We find that the facts of the case in M/s. Standard Leather Pvt. Ltd supra as relied on by the assessee are similar and identical to the facts of the present case. The ld.DR has relied on the orders of the AO and CIT-A. 3. We find that the issue in hand is covered in favour of assesse by the above said order of the Co-ordinate Bench, ITAT, Kolkata. Relevant portion of said order are reproduced herein below:- " 10. The assessee has shown sundry creditors in its books of account for Rs. 6,24,70,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii) Regarding applicability of provisions of section 68, I find that the appellant has brought substantial material on record to show that these are sundry creditor for purchases paid in subsequent years and that part of the purchases from the very parties were already accepted by the Assessing Officer.Evidently, the creditors were held to be bogus on the ground that enquiry letters under sec. 133(6) of the Act were received back unserved with the remarks 'not known' leaving the Assessing Officer to conclude that the appellant has failed to discharge his onus of proving the capacity of the creditors and genuineness of the transactions. Apparently, in my opinion, the Assessing Officer has not appreciated the facts of the case in its entirety. This is a case, where the books are not outrightly rejected, there is no adverse inference drawn regarding quantum of purchases or sales and even the purchase accounts of the sundry creditors have not been disturbed. The act that the assessee maintained regular books of account including stock register is also not negated. The Assessing Officer had not disallowed the purchases from those creditors nor the trading results were disturb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the income of the appellant. Accordingly, the impugned addition made by the AO is hereby directed to be deleted and thus, these grounds of the appeal of the appellant are allowed." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 12. Before us Ld. DR vehemently relied on the order of AO whereas Ld. AR submitted that the AO has made further addition of Rs. 4,29,02,130/- from Sundry Creditors. It is submitted that these creditors stood in the books of the company and the amount was never written off. The purchases of goods from these parties have been accepted to be genuine. There was no evidence to suggest that no liability to sundry creditors was payable. The details of these Sundry creditors were filed. The AO has also accepted that the payments to these parties were made by bearer cheques. However, as per the AO that payment by bearer cheques causes a serious doubt that sundry creditors did not exist. Simply because the AO doubted the said sundry creditors even though accepting that the payments were made by cheque, the doubt will not entitle the AO to treat the said sundry creditors as bogus creditors. It may be submitted that some of the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act once it is written off in the books of accounts. In the instant case the same has not been written off and very much reflecting in the books of the assessee. Therefore in our considered view the sundry creditors reflecting in the books of accounts cannot be disallowed and added to the total income of the assessee. In the instant case, the balances of many of the sundry creditors were outstanding coming from earlier years. Payments were made to some or the creditors during the year. The said payments have been accepted by the AO which means genuinity of the payments to these creditors as well as the genuinity thereof till last year have not disputed by the AO. In the instant case the firstly the AO has not specifically invoked the provisions of section 41 (1). Further in any case no such addition can be made u/s 41. In this connection we are putting our reliance in the judgment in the case of DSA Engineers. In the case of DSA Engineers v. ITO 30 SOT 31 (Mum-Trib), the AO found that there were creditor balances which in many cases were 3 years or more than 3 years old. As per the assessee the balances represented amounts due to various parties and the liability was subsisting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment intends to assess the same by applying the provisions of section 41 (1), then the onus will be on the revenue to show that the liability which is appearing in the balance sheet has ceased finally and there is no possibility of the revival of the liability. Hence, addition could not be sustained under section 41(1). The said judgment of the Tribunal was confirmed by Delhi High Court on 23-12-2011 In the case of National Insulated Cable Co. v. ITO ITA No. 421/Del/2011 dt. 8-7-2011 (Del 'E'-Trib) it was held that the fact that the creditors were old creditors brought forward from earlier years has not been disputed by the department. These creditors have not been introduced during the year under consideration. There is no evidence or material on record to establish that the assessee liability to pay the amount to the creditors have been ceased during the year under consideration. Further, the amount payable to these creditors can be added to the assessee's total income in the year in which the assessee's liability to pay the amount ceased or extinguished and not in the year under consideration where assessee has admittedly shown the liability in the balance shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal which had endorsed the decision of Commissioner (Appeals). In Mahabir Prasad Prem Chand Jain v. ITO (1988) 40 Taxman 35 (Del- Trib )(Tax Mag), it was held that amounts found in the books of assessee were in existence much prior to the beginning of the accounting period corresponding to the relevant assessment year and the same could not, therefore, be treated as the income of assessee earned during the relevant previous year. In Nuchem Ltd. v. Dy. CIT (2004) 87 TTJ (Del-Trib) 166, it was held that revenue had failed to prove that the amounts were credited to the books of account of the assessee in the year under consideration. These amounts were brought forward from earlier years and it is settled law that the addition under section 68 could be made only if the amount was credited in the accounts of the assessee in the relevant financial year. In Shri Vardhman Overseas Ltd. v. Asstt. CIT (Del-Trib): 24 SOT 393, it was held that no new amount had been credited by assessee in its account during the year under consideration. Therefore, applicability of section 68 of the Act is also ruled out and addition could not be made under section 68 of the Act. In view of above we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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