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TMI Blog2019 (2) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... e grounds raised by the Assessee as follows: Ground No.1 Addition on account of bogus creditors. For assessment year 2000-01 Rs. 10,03,082/- For assessment year 2001-02 Rs. 8,25,545/- For assessment year 2002-03 Rs. 7,26,621/- For assessment year 2003-04 Rs.13,13,668/- For assessment year 2004-05 Rs.10,04,556/- Ground No.2. I.T.A. No. 2043/Kol/2017 for A.Y. 2000-01- Addition Rs. 2,66,000/- on account of not disclosing unsecured loan. Ground No.3. I.T.A. No. 2046/Kol/2017 for A.Y. 2003-04: Disallowance of Rs. 5,95,107/- under section 40A(3) of the Act. Ground No.4. I.T.A. No. 2046/Kol/2017 for A.Y. 2003-04: Addition of Rs. 44,120/-, on account of undisclosed profit. 3. Since, the issues involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order.For the sake of convenience, the grounds as well as the facts narrated in the assessee's appeal in ITA No.2043/Kol/2017 for A.Y. 2000- 01, is taken as the leadcase for adjudication of above summarized ground nos. 1 and 2, and the assessee's appeal in ITA No.2046/Kol/2017 for A.Y. 2003-04, is taken as the lead case for adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors and Rs. 77,90,185/- as sundry debtors in his books of accounts. The assessee was asked to file the details of the sundry debtors and creditors and their postal addresses. Accordingly, the assessee submitted the postal addresses of the sundry debtors and creditors. After getting postal address from the assessee, the Assessing Officer issued letters to various creditors u/s 133(6) of the Act, on test check basis. Many letters u/s 133(6) of the Act, returned unserved with postal remark "Not Known". The Assessing officer based on the report of the commission U/s 131(d) of the Act, noted that assessee had overstated the credit payable and claimed bogus credits in many cases, which are given below: Name of the party A.Y. Credit as per assessee Credit as per party Difference Agarwal Cane Crusher 2000-01 60922/- Nil 60922/- Agarwal Industries 2000-01 158982/- 1038/- 157944/- Baldev Singh Bhim Singh 2000-01 124181/- 73328/- 50853/- Hari Shankar Khandsari Udyog 2000-01 149471/- 266000 (Unsecured loan) 149471/- Ganga Sugar Works 2000-01 104943/- Nil 104943/- KishanKhandasari Udyog 2000-01 225794/- 16170/- 209624/- Shri Hanuman Rab Udyog 2000-01 2715 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer failed to adduce any evidence on record to prove that the difference in creditors is a bogus and out of unaccounted money. Just to work out the difference in sundry creditors is not sufficient, the AO ought to adduce any tangible material on record to prove that the said difference belongs to unaccounted money of the assessee. We note that assessee's purchases had not been doubted by the Assessing Officer. The Assessing officer also did not doubt the sales made by the assessee therefore,so far the accounting principles are concerned, if the total sales and total purchases are not doubted then balance of creditors are going to be genuine, if it is not otherwise proved by the assessing officer. 12. We note that thedifference between creditors recorded in his books vis-à-vis balance in the books of creditors, should not be treated as cessation of liability. At this juncture it is appropriate to go through the relevant provisions of section 41(1) of the Act, the relevant extracts of which is reproduced below: "Section 41(1):Where an allowance or deduction has been made in the assessment for any yearin respect of loss, expenditure or trading liability incurred by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in the subsequent year i.e. as on 01-04-2000. Hence, it is clear that the assessee had not written back the same to its Profit &Loss account during the relevant year. As such, it cannot be said that the assessee had availed any benefit, as specified in (b) above, during the relevant year. Hence, the condition prescribed in section 41(1) of the Act has not been fulfilled in instant case. Besides,the Explanation 1 to section 41(1) of the Act is also not applicable in instant case since the assessee has not credited the same to its Profit &Loss account for the relevant year. In such a situation, it cannot be contended that the liability of different assessment years, as mentioned in the grounds of appeal had ceased to exist. Furthermore, the above liabilities has been continued from earlier years. Hence, the addition on account of bogus creditors is wholly unjustified. 13. In this regard it is also pertinent to note that the AO has not brought on record any evidence to justify that the aforesaid liabilities had actually ceased to exist during the relevant year. In such a situation the question of addition does not arise. Reliance in this regard is placed on the decision in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified in coming to the conclusion that the purchase tax liability of the assessee had not ceased finally during the year in question" In the assessee's case under consideration, the assessee has not received any benefit by way of remission or cessation of liabilities during the relevant year towards balance of sundry creditors and as such, it can be stated that it has not fulfilled the conditions as specified by the Hon'ble Apex Court in the above referred decision. Thus, applying the ratio of the Hon'ble Apex Court, it can be stated that the aforesaid liabilities cannot be added back under section 41(1) of the Act for the relevant respective assessment year. Our views are also fortified by the judgment of Co-ordinate Bench in the case of Puspal Kumar Das in I.T.A. No. 1442/Kol/2012 for assessment year 2007-08 wherein it was held as follows: "10. We have given a very careful consideration to the rival submissions. In our view the addition was rightly deleted by the CIT(A) for the following reasons: i. There was no evidence to show cessation of liability. ii. Assessee still shows the liability in its books of accounts which itself is prima facie evidence that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under Rule 6DD(J) of the IT Rules. However, the Assessing officer noted that gur/ jaggery is a by-product of sugar cane and as such it is not an agricultural product but rather it is a product of the sugar cane and hence the benefit under Rule 6DD cannot be extended to the assessee in the instant case. The Assessing Officer noted that almost all the payments in both the businesses were in cash, exceeding Rs. 20,000/- therefore the Assessing Officer made a disallowance of 20% of the entire purchases amounting to Rs. 5,95,107/-( that is, 20% of Rs. 29,75,538), u/s 40A(3) of the Act. 17. Aggrieved by the addition made by the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has confirmed the addition made by the Assessing officer. Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us. 18. We have given a careful consideration to the rival submissions and perused the material available on record. We note that considering the size and nature of the business and the product in which the assessee deals, we are of the view that in the village and remote area and kind of the peoples involved in this business (that is, most of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g activity was much less than the income earned from commission, therefore the income disclosed in the trading activity was grossly understated. Therefore, the Assessing Officer noted that even if the income earned per tin from the commission is considered @ Rs. 4 per tin, the income from the said 20,966 tins should be Rs. 83,864/-. Therefore, the Assessing Officer made an addition for the differential amount to the tune of Rs. 44,120/- (Rs.83,864 - Rs. 39,744). 21. On appeal by the assessee, the Ld. CIT(A) confirmed the addition made by the Assessing Officer. Aggrieved, the assessee is in appeal before us. 22. We have heard both the parties and perused the material available on record, we note that the addition made by the Assessing Officer is purely on conjectures and surmises. The assessee has disclosed income Rs. 1.8 per tinwhereas the Assessing Officer made an addition on account of differential amount without any base and without any evidence on record. The ld AO made this addition solely based on the statement of the assessee. We note that statement is a good evidence provided it is supported by any tangible material or corroborate evidence. We note assessee's account are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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