TMI Blog2019 (3) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... d not tenable in the eye of law. Disallowance of sundry creditors u/s. 41(1) - AO held that creditors are not being paid since long and as such the same has become income of the assessee under section 41(1) of the Act and added all the creditors as income of the assessee - DR for invoking provision of section 28(iv) - differentiation of scope of section 28(iv) and section 41(1) - HELD THAT:- From the assessment order, it is evident that the assessee company has filed an application under section 15(1) of the Sick Industrial companies (special provision) Act, 1985. The assessee company on being questioned by the AO had given the reasoning as to why these creditors have not been paid so far. It was explained that the company has become sick and it has approached BIFR for restructuring of its liabilities. This, in our opinion, was plausible reason for delay in payment of the creditors. Section 41(1) is applicable when the trade creditors are written off as not payable. In the present case, it is not the case of the assessee that these trade creditors are not payable. It is also not the case of the AO that these creditors have been written off by the assessee. These creditors co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd., a sister concern of the assessee company and being assessed with the same Assessing Officer. The AO further noticed that this amount is not being shown as outstanding in the balance sheet of Opera Global P. Ltd. The Assessing Officer, therefore, asked the assessee to explain this inconsistency. The assessee submitted a reply explaining that this credit is appearing on account of the repayment of secured loan taken by it from SBI and SIDBI to whom payments have been made by Opera Global P. Ltd. on behalf of the assessee company. Being not satisfied with the reply of assessee, the Assessing Officer made addition of ₹ 3,44,26,263/- being the credit during the year. The AO further made an addition of ₹ 4,18,46,093/- being the difference in the balance outstanding as on 31.03.2010 (Rs.7,62,72,356/- minus ₹ 3,44,26,263/-) under section 68 of the Income-tax Act, 1961 (hereinafter referred to as the Act ). The Assessing officer further made an addition of ₹ 4,84,53,923/- on account of the sundry creditors outstanding in the books of the assessee as on 31.03.2010 on the ground that these are loans outstanding creditors by invoking the provision of section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are required to be furnish to establish the genuineness of the credit balances. It is always beneficial to the assessee not to right back the credit balances in the profit loss account to avoid tax incidence on such credit amount. The assessee can keep the credit balances in the books and enjoy the same as owner without any liability. Hence, it is to be seen whether the liability shown in the books for decades become income of the assessee. Because of non existing liabilities, the amount of assets as per balance sheet is in excess of over liabilities and thereby the difference is to be taxed as income for the year. In this regard, reliance is made on the following judgments:- 1. CIT vs. TV SundaramIyenger Sons Ltd. 222 ITR 344 (SC) [1996] In the above case, the Hon ble Supreme Court relied on the decision of the Jay S- The Jewellers Ltd. Ltd. V. Commissioner of Inland Revenue 29 TC 274 in which the commonsense principle was laid down by Atkinson J. In the instant case also, the credits had arisen out of ordinary trading transactions and the same accumulated over the years which remained unclaimed. The amounts remained with the assessee for a long period unclaimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ledger accounts of SBI and SIDBI loan account, details of payment received from M/s Opera Global Pvt. Ltd and bank statement of M/s Opera Global Pvt. Ltd (PB page no 63-101). Perusal of these documents would clearly reveal that M/s Opera Global Pvt. Ltd has repaid the loans to SBI and SIDBI on behalf of the assessee . However, disregarding the submissions made by the assessee, the AO made the addition holding the increase in the credit balance as unexplained credit balance u/s 68 of the Act. 5. The Ld. AR further submitted that it is pertinent to note that the identity cannot be doubted as M/s Opera Global Pvt. Ltd is also an assessee with the same Assessing Officer as stated by the ld. Assessing Officer at para 4 page 2 of the assessment order. Further, balance sheet of M/s Opera Global Pvt. Ltd. reveals that it has sufficient own funds to the tune of ₹ 4,86,85,437/- to take care of the payment on behalf of the assessee and establishes his creditworthiness. With regard to the allegation of the ld. Assessing Officer that that there is no corresponding debit balance showing the assessee as a debtor in the balance sheet of M/s Opera Global Pvt. Ltd., the Ld. AR submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch balances were not written off was not doubted by the ld. AO. Further, the genuineness of the creditors has also not been doubted by the Assessing Officer. It was submitted that when the company still acknowledges its debt and no benefit has accrued to it, addition could not have been made merely because the balances were unclaimed for a long time. The Ld. AR placed reliance upon the judgment of Hon ble Jurisdictional High Court in the case of CIT Vs Shri Vardhman Overseas 343 ITR 408 (Del.), wherein the Hon ble Court has held that since the amount payable to the sundry creditors was not credited to assessee s profit and loss account for the year, and as the amount was still shown as outstanding at the end of the relevant year, the provisions of section 41(1) of the Act could not be attracted. Further reliance is placed on the judgment of Karnataka High Court in the case of CIT vs. Alvares Thomas [ITA No. 658/2015 dated 24-03-2016] wherein the judgment of Delhi High Court in the case of CIT Vs Shri Vardhman Overseas (supra) has been followed. 6. We have heard the rival submissions and have gone through the entire material available on record including the orders of authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 comes to ₹ 8,58,55,902.48/- which after deduction of balance against assessee company of ₹ 4,18,46,093.65/- comes to ₹ 4,40,09,808.83/- which matches with the figure at the front of balance sheet. In view of these facts we are of the view that Assessing Officer was not justified in drawing adverse inference against the assessee. The assessee has led sufficient evidences which are supported by bank statement of Opera Global Pvt. Ltd. and its balance sheet read with the schedules attached thereto. Hence, the CIT(A) was correct in deleting the addition. Accordingly, we uphold the order of the CIT(A) on this score and ground no.1 of the Revenue appeal deserves to be dismissed. 8. Ground No.2 is regarding deletion of addition of ₹ 4,18,46,093/- in respect of the opening balance of Opera Global Pvt. Ltd. This addition has been made on the same reasoning as discussed in ground No.1. The AO has added the opening balance in the name of Opera Global Pvt. Ltd. on the ground that same is not reflected in the balance sheet of the Opera Global Pvt. Ltd. In ground No.1, we have held that the balance in the two accounts between assessee and Opera Global Pvt. Ltd. ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de creditors are written off as not payable. In the present case, it is not the case of the assessee that these trade creditors are not payable. It is also not the case of the AO that these creditors have been written off by the assessee. These creditors continue to be payable in the books of accounts of the assessee. The assessee has also explained the reason for the delay in making payment to these creditors. In these circumstances, the assumptions by the AO that these creditors had become income of the assessee cannot be sustained. On the contrary, the circumstances do explain the delay in payment of these creditors. In these facts, provisions of section 41(1) cannot be invoked. Similarly, the contention of the Ld. DR for invoking provision of section 28(iv) is misplaced as section 28(iv) is regarding value of any benefit or perquisite arising from business is chargeable to tax. These trade creditors are payable and by no stretch of imagination it can be said that assessee has received any benefit or perquisite. We have also gone through the various case laws relied upon by the Ld. DR and after going through the same we are of the view that the same are on different set of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
