TMI Blog2019 (11) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Assessee : Shri Devesh Poddar, Advocate For the Revenue : Shri Inderjeet Singh, CIT(DR) ORDER PER BENCH: ITA No.106/Ran/2019 has been filed by the assessee against the order of Commissioner of Income Tax (Appeals), Ranchi, dated 25.01.2019 for the assessment year 2015-2016 arising out of the order passed u/s.143(3) of the Act and ITA No.53/Ran/2019 has been filed by the assessee against the order dated 03.10.2018 passed by CIT(A), Ranchi for the assessment year 2013-2014 confirming the penalty levied u/s.271(1)(c) of the Act. ITA No.106/Ran/2019 (AY : 2015-2016)(quantum appeal) : 2. In this appeal, the assessee has raised the following grounds of appeal :- 1. For that Ld. CIT(A) was not justified in confirming the addition of ₹ 2,77,65,917/- being the sundry creditors U/s 68 as alleged unexplained cash credit in the books of the assessee. 2. For that out of the sundry creditors amount of ₹ 2,12,36,651/- was the opening balance for the year under consideration. By no means can the opening balance be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been accepted by the AO and the same is not disputed, then no disallowance of creditors is called for resulting the same. It was also contended by the ld. AR that moreover the authorities below failed to consider and accept our plea that the sundry creditors added during the year amounting to ₹ 65,29,356/- stands disclosed under IDS. Assessee made a disclosure under IDS of ₹ 1 crore under the head of Sundry Debtors and Business Income. Business income includes the amount of sundry creditors as the same if and when written off is treated to the income earned from business operations. The plea of the assessee should have been accepted and no further query was called for. In this regard, ld. AR relied on the order of coordinate bench of the Tribunal in the case of M/s Gulf Steel Minerals, in ITA No.57/Ran/2016 for the assessment year 2010-2011, order dated 04.05.2018 and submitted that in this case the Tribunal has deleted the addition made u/s.68 of the Act. Therefore, addition made in the case of assessee u/s.68 of the Act may kindly be deleted. Further, ld. AR submitted that the addition confirmed by ld CIT(A) treating the same to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) who deleted the addition made by AO by observing as under:- 5.3.5 I have gone through the assessment order, submission of the AR, peruse the fact of the case and other materials brought on record and I am of the view that for the following reasons ₹ 4,29,02,130/- cannot be added to the income of the appellant either by applying the provisions of section 41(1) or 68 of the Act.:- (i) That the purchase of the hides from the sundry creditors is evident from the purchase bills and books of accounts maintained by the appellant. As regards the treatment of the same as bogus creditors by the AO, I find that the AO has treated the creditors for purchase made during the year as bogus and not existing. The AO was of the view that the notices u/s 133(6) issued to the creditors came back unserved and therefore the creditors were bogus. It is however found that the AO has treated the purchase made during the year from the same very persons as genuine. The payment made to them was also treated as genuine and disallowance was made only by applying the provisions of section 40A(3). I also find that such sundry creditors for supply of raw hides and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce for responding purchases, no addition could be made under section 68 inasmuch as it is not in dispute that the creditors' outstanding related to purchases and the trading results were accepted by the Assessing Officer.' viii) As regards applicability of provisions of section 41(1), the facts clearly show that the appellant did not write back the sundry creditors to its profit and loss account. In CIT v. Vardhman Overseas Ltd. in ITA No. 774//2009 decided on 23.12.2011, (2012) 343 ITR 408 (Del), the Delhi High Court, referring to its judgment in the case of Jay Engineering Works Ltd. v. CIT (22009) 311 ITR 299 (Del) and applying the ratio laid down the case of CIT v. T.V. Sundaram Iyengar Sons Ltd. (1996) 222 ITR 344 (SC) under sec. 28 of the IT Act, considered the applicability of clause (a) of sub-section (1) of section 41 as to what would constitute remissions or cessation of trading liability. The Hon'ble Court noted that in the reported case, the assessee has not unilaterally written back the accounts of the sundry creditors in its profit and loss account. Therefore, the High Court answered the substantial question of law in the negative and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision of section 68 or section 41(1) can be invoked and whether such creditors can be treated as bogus warranting addition in the income of the assessee. It is again submitted that there is no dispute that the goods have been purchased and the genuinity of the purchase have not been disputed and it was because that the provisions of section 40A(3) have been applied. Moreover, the assessee maintained day-to-day stock register wherein the raw material purchased were entered into and the finished goods produced have been accepted. Therefore, in so far as the purchase during the year and the corresponding outstanding balance as creditors which relates the assessment year in question, addition ITA No.57/Ran/16 u/s 68 cannot be made. In so far as the balances brought forward from earlier years are concerned addition cannot be made u/s 68 since as per section 68 credits in the books should appear during the assessment year relevant previous year for invoking provision of section 68 of the Act. 13. We have heard the rival parties and perused the materials available on record. From the aforesaid discussion we find that the addition was confirmed by the AO on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Synthetics Ltd. (1993) 199 ITR 14 (SC), the Hon'ble Court held that ITA No.2620/Kol/2013 A.Y. 2010-11 ITO Wd-12(1), Kol. vs. M/s Standard Leather Pvt. Ltd. Page 15 cessation of liability for the purpose of section 41(1) means irrevocable cessation so that there is no possibility of the liability being revived in future. If there is such a possibility, then the cessation is not complete and section 41 (1) is not attracted. In the case of Shri Vardhman Overseas Ltd. vs. Asstt. CIT 24 SOT 393 (Del 'H'-Trib), the facts of the case were that the AO asked the assessee to prove the genuineness of some sundry creditors. The assessee did not file confirmations of said sundry creditors, except one. Therefore, AO after giving various opportunities treated the balance amount as income of assessee on account of unexplained cash credits and added the same balance amount to the income of assessee. It was held that all the parties with regard to which the addition has been made, no new amount was found credited in its account during the year under consideration hence section 68 cannot be applied. It was also held that the balances were brought forward balances and if the same were adde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that so long the assessee had shown the liability in the balance sheet it cannot be said that the liability has ceased to exist. In the case of Willson and Co. Ltd reported in 121 TTJ 258 (Chennai Tribunal), it was held that unless it was shown by the Department that the liability ceased to exist during the assessment year in question it cannot partake the character of income during the assessment year in question. Similarly in the case of Dy. CIT v. Amod Petrochem (P) Ltd. (2008) 23 (I) ITCL 145 (Guj- HC) : (2008) 217 CTR (Guj) 401, it was held that as per section 68, there should be cash credits of previous year. The section provides for a deeming fiction of treating the sum found credited in the books of an assessee maintained for any previous year, being charged to income-tax as the income of the assessee of that previous year, provided (i) the assessee offers no explanation as to the nature and source of the credits, or (ii) the explanation offered by the assessee is not, in the opinion of the assessing officer, satisfactory. The crux of the issue, therefore is, there have to be credits of any sum in the books of an assessee maintained for any previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f above, we are of the view, the Tribunal has analyzed the issue with various case laws. The case laws are also relevant to the present facts of the case. Thus, the CIT-A was not justified in confirming the impugned additions challenged in ground nos. 2 to 7 of the appeal. Thus, the order of the CIT-A is set aside and direct the AO to delete the additions involved in ground nos. 2 to 7 of the appeal raised by the assessee before us. 8. Respectfully following the above observations of the Tribunal, we are of the considered opinion that the CIT(A) is not correct in confirming the impugned additions raised by the assessee in grounds No.1 to 4. Accordingly, ground Nos.1 to 4 are allowed. 9. Ground No.5 relates to charging interest u/s 234A 234B of the Act by the AO and confirmed by the CIT(A). Since we have set aside the order of CIT(A) and directed to delete the main addition, therefore, this ground of appeal being consequential in nature, has become infructuous. 10. Thus, appeal of the assessee in ITA No.106/Ran/2019 is partly allowed. 11. Now, we shall take up appeal of the assessee in ITA No.53/Ran/2019, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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