TMI Blog2019 (5) TMI 1835X X X X Extracts X X X X X X X X Extracts X X X X ..... iles - AO had relied upon the statement of Mr. Harish Chandra Singh, Prop. of M/s. RD. Textiles recorded u/s 131 of the Act, in which he confirmed that no amount is receivable from the assessee. Even the said Harish Singh submitted that he had stopped the business in 2003 and had no knowledge of receiving any amount from the assessee. Thus this is a case where the creditor is stating that he does not remember any such receivable from the assessee which is good for the assessee. In this case, the copy of statement was provided to the assessee with regard to Shri Harish Singh, the proprietor of R. D. Taxtile. It is important to mention here that the matter pertains to purchases made in July, 2003 and the proprietor issued a statement in 2013 stating that he does not remember anything as receivable from the assessee. Even till the end of 2016, which is a good 13 years after the purchases, the party has not taken any steps for recovery. Thus in such circumstances, it was rightly concluded that the party is not interested in pursuing recovery if it all it was due from the assessee, and there is no chance of any further measures for recovery. The assessee is carrying a fictitious l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O which is in contravention of the provisions of section 41(1), i.e., without recording any satisfaction that the trading liabilities had actually ceased during the previous year also that the appellant had actually received any benefit during the year. 2. That in the facts and circumstances of the case and in law, 2.1 The Ld. CIT(A) has erred in confirming the addition of ₹ 32,51,157/- u/s 69C as unexplained expenditure being purchases from M/s. Gravity (India) Ltd. 2.2 Without prejudice to the above, the Ld. CIT(A) has erred in making/confirming the addition of ₹ 32,51,157/- u/s 41(1) as ceased liability in respect of M/s. Gravity (India) Ltd. 2.3 The Ld. CIT(A) has erred in confirming the addition of ₹ 32,51,157/- without affording an opportunity of cross-examination to the appellant assessee and in violation of the principles of natural justice. 3. that in the facts and circumstances of the case and in law, 3.1 The Ld. CIT (A) has erred in confirming the addition u/s 41(1) of ₹ 41,90,675/- (included in the addition of ₹ 2,49,39,520/-) being due to creditor, i.e., M/s. R.D. Textile. 3.2 The Ld. CIT(A) has erred in confirming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the parties, partly allowed the appeal of the assessee. Now before us, the assessee has preferred the present appeal by raising the above grounds. Ground No. 1 to 5. 3. These grounds raised by the assessee are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in upholding the additions made by AO u/s 41(1) of the I.T. Act, therefore we thought it fit to dispose of the same by this common order. 4. We have heard the counsels for both the parties and we have also perused the material placed on record, judgment cited by the parties, respective written submissions as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the assessee by taking into consideration the submissions made by the assessee, remand report submitted by the AO in para no. 4 to 7 of its order and the same is reproduced below:- 4. The first Ground of appeal is against the addition u/s.69C of ₹ 32,51,157/ being the amount payable to M/s. Gravity(India) Ltd. 4.1. It is the contention of the Ld. cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the bank statement of M/s.Gravity India Ltd. However, it is the contention of the appellant that these amounts are not paid by him. The cheques deposited into the account of M/s.Gravity India have come from various parties and not from the appellant. The Ld, Counsel claims that the amount of ₹ 32,51,157 is still payable as on 31.2.2010 and cannot be added u/s.69C. 4.2.1. The amounts credited into the account of M/s,Gravity India in Sept.09 exactly tally with the amount payable by the appellant. Even though the cheques are issued by various parties, the possibility of the payments being made by the appellant through other parties is not ruled out. For example, P.D. Sinar, who is the agent of the appellant has collected the amount due to the appellant from its clients and adjusted it against tn dues from the appellant. Similarly, the appellant would have some of its debtors pay to M/s.Gravity India Ltd. M/s, Gravity India is confirming that it had received the payment from the appellant and is showing the bank account statement as a proof. Therefore, this is a payment made by the appellant which has not gone through the books and the AO has rightly brought this to tax u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The statement was recorded on oath u/s.131 of the I.T.Act, wherein question was put to the proprieto, by the AO which is annexed herewith. Q.No.4. My assessee M/s, Venus International in his return of income for AY.2010-11 claims that they had purchased material from M/s. R.I), textile and shown creditors of Rs,41,90,675.20, please explain whether an amount of ₹ 41,90,675.20 was receivable by you,? Ans - To the best of my know/edge, no such big amount i.e. ₹ 41,90,672,20 as stated above is receivable by me. This itself is satisfactory that there is no amount payable to P4/s. P.D. textiles or Mr. H.V.Singh, the proprietor ( copy of the statement is attached herewith for your reference and perusal) Assessee's claim for cross examination is not justifiable as such a huge amount receivable by a person cannot he waived out, hence, there is no justification for the claim of sundry creditors ad the addition made stands. 5.2. It is also a fact that the matter pertains to purchases made in July, 2003 and the proprietor issued a statement in 2013 stating that he does not remember anything as receivable from the appellant. Even till the end of 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments have been made by the appellant. However, the appellant has produced some letters which were supposed to be correspondence between the appellant and the parties, 1) M/s. Sunrise Textiles H This is a Surat based party to whom the - appellant claims to have a liability of ₹ 1,71,26,130/-. No amount has been paid by the appellant till now. Even though this is due for so many years, the Ld. Counsel for the appellant has furnished 2 letters dated 8.3.2016 and 26.7.2016 where the party had requested the appellant to make the payment. The appellant also seems to have replied stating that he would start making the payments by the end of Dec., 2016. It is not understood why no legal action has been taker by this party even after so many years. The letters from the parties submitted by the appellant also appear to be fabricated. There is no phone no. given on the letter head even though it is a very big party to whom the appellant's dues itself is 1,71,26,130/-. 11 s strange and surprising that somebody would keep quiet without initiating any legal action when the party i.e. the apellant is non-cooperative and defiant. 2) MIs. Paanerj Print : The amount payable to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not initiated, any legal .action till date. Even more surprising is the fact that the phone number of the party i.e. M/s.S.R. Print given in its letter head is 022- B523863/8505623 which are only seven digits. All the phone numbers in Metros have been converted to 8 digits many years ago. If somebody is keeping seven digit phone no. on the letter head in 2016, the genuineness of the letter is anybody's guess. The appellant no doubt has furnished a fabricated piece of paper for which no credence can be given. 4) Shri Sai Leela Dyeing and PN.Mills The amount due to this party was ₹ 7,70,375/- which is due from A,Y.2004-05. This amount is being carried forward from A.Y.2004-05 i.e. for about 12 years. No payment whatsoever has been made by the appellant for all these years. At the time of appellate proceedings for 2004-05, the CIT(A) has observed that the balance has been confirmed by the party and therefore he deleted the addition. He was deciding the matter for A.Y.200405 when it was too early to apply Sec.41(1). The current appeal is against the additions made for 201011 and the situation remains the same. The Ld. Counsel for the appellant was asked to submit any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt due to this party is ₹ 7,56,544/-. No amount has been paid by the appellant till now. Even though this is due for so many years, the Lb. Counsel for the appellant has furnished 2 letters dated 2.3,7,2016 and 2.5.8.2016 where the party had requested the appellant to make the payment. The appellant also seems to have replied stating that he would start making the payments by the end of Dec., 2016. It is not understood why no legal action has been taken by this party even after so many years. The letters from the parties submitted form the appellant also appear to be fabricated, 6.2.1. The Ld. Counsel for the appellant was asked to submit any correspondence between the appellant and the party. He had submitted 2 letters dt.18.1 .2016 and 19.8.2016 supposedly written by MIs. Om Textiles P,Ltd, requesting for clearing the dues. It is surprising that after keeping silent for about 12 years, the party is writing lettefs in 2016. Further surprising is that the party has not initiated any legal action till date. Even more surprising is the fact: that the phone number of the arty i.e. Om Textiles P.Ltd. given in this lettei head is 7685926 which is only seven digits. All the phon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilaterally, he cannot get rid of his liability. The question whether the liability is actually barred by limitation is not a matter which can be decided by considering the assessee's case alone but it is a matter which has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act. The principle that expiry of periOd of limitation prescribed under the Limitation Act could not extinguish the debt but it would only prevent the creditor from enforcing the debt, has been well settled. If that principle is applied, it is clear that mere entry in the books of accounts of the debtor made unilaterally without any act on the part of the creditor will not enable the debtor to say that the liability has come to an end. 6.2.4. In the instant case, there is no unilateral write off in the books of accounts. In fact, the appellant has net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere outstanding in assessee's books for periods from 3 to 25 years - revenue was of the view that liability no longer existed- whether since assessee has not adduced any material or evidence or even explanation as to why the impugned amounts were not paid in normal course, the same amounted to cessation or remission of liability/s.41( I ): held .yes, 6.2.7. In view of the facts and circumstances discussed above and in view of the judgments cited above, the additions made by the AO in the cases of R.D. Textiles, MI/s. Sunrise Textiles, M/s. Panneri Print, M/s. S.R. Prints, NI/s. Shri. Sai Leena Dyg. Ptg.Mills, Mr. Pradeep Kher and M/s. Om.Textiles Pvt. Ltd. have to be upheld. 6.2.8. In view of the facts and circumstances discussed above, the addition made by the AO u/s,41(1) is upheld. This ground of appeal is dismissed. 5. After having gone through the facts of the present case, we find that the AO had made additions by identifying the creditors who were outstanding for more than five years and in this respect, summons were issued separately u/s 131 to them. In the case of M/s Gravity (I) Ltd, where the amount outstanding was shown at ₹ 32,51,157/-, the said pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement in 2013 stating that he does not remember anything as receivable from the assessee. Even till the end of 2016, which is a good 13 years after the purchases, the party has not taken any steps for recovery. Thus in such circumstances, it was rightly concluded that the party is not interested in pursuing recovery if it all it was due from the assessee, and there is no chance of any further measures for recovery. The assessee is carrying a fictitious liability, 9. As far as addition of ₹ 2,07,48,845/- u/s.41(1) of the I.T. Act is concerned, we have minuently gone through the orders passed by Ld. CIT(A), wherein each party wise details have been provided, wherein it was categorically admitted that no amount has been paid by the assessee to any of the parties till date. As far as furnishing of communication in the shape of letter are concerned, the same was rightly considered as fabricated as none of the parties personally appeared before the AO and even in the case of sunrise textile, there is no phone no. given on the letter head even though it is a very big party to whom the assessees dues itself is 1,71,26,130/-. Thus it is strange and surprising that somebody would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogilal Ramjilal Atara ie on 12-07-2017 and the Hon'ble Gujarat High Court had also referred to the case of Bhogilal Ramjibhai Atara while passing the judgment in the case of Gujtron Electronics (P.) Ltd. v. ITO referred supra 15. Even the Coordinate Bench of ITAT while reaching to the conclusion had also referred the decision of Hon ble Bombay High Court in the case of Palkhi Investments Trading Co. (P.) Ltd. v. ITO 120161 71 taxmann.com 322 wherein the Hon'ble Bombay High Court had held that penalty is also leviable if the assessee fails to offer cessation of liability of outstanding demand. In this case also one of the creditor admitted that nothing was outstanding against the assessee in his books and certain other creditors were not found at the address given. The Assessing Officer made additions u/s 41(1) as ceased Liability. In quantum proceedings of the case, the Ld CIT(A) confirmed the action of Assessing Officer, the Hon'ble ITAT also confirmed the action of Assessing Officer. Thereafter the Hon ble Bombay High Court dismissed the appeal of the assessee and the Honble Supreme Court of India also dismissed the SLP filed by the assessee. The relevant portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue that the law has evolved judicial precedents since the earlier decision of the hon'ble Gujarat High Court in the case of Bhogilal Ramjibhai Atara's case (supra). Keeping in mind the peculiar facts as found by the AO, we observe that hon'ble Gujarat High Court was confronted with the similar issue in the case of Gujtron Electronics's case (supra) where also the facts are broadly similar. In Gujtron Electronics's case (supra) also the outstanding was appearing in the balance sheet during the year under consideration and was not actually written off by the Assessee. However, the hon'ble Gujarat High Court noted that not a single customer had demanded money back nor assessee had made any attempt to repay the same. Over year, company had invested such amount in diverse activities. On such facts where since last many years, there was no activity of any repayment of amounts nor the amounts have been collected by the customers, the hon'ble Court endorsed the decision of the co-ordinate bench of tribunal (HA No.1145/Ahd/2016 order dated 10.01.2017) that trading liability had, in fact, ceased to exist. Therefore, it logically flows that the hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iffCrent in the present case. It does not accord with human probabilities to infer that trading liabilities do exist where the parties are not traceable, denied the outstanding, no repayment made for last many many years and till date. Such approach would be quite theoretical and abstract. 11. Adverting to the legal claim made before us on behalf of the assessee that liabilities shown in the balance sheet was itself sufficient to hold such liability exists and bonafide is not understood at all. The liabilities shown in the balance sheet as existing by assessee was found to be symbolic by AO. The onus is on the assessee to show the reasons why it believed at the time of filing the return that the liabilities were true. No such attempt was even made to prove the existence of liabilities. In this view of the matter, the incidence of taxation under s.41(1) of the Act cannot be escaped on non-existing liability. Our this view also finds support from yet another decision of the hon'ble Bombay High Court in the case of Palkhi Investments Trading Co. (P.) Ltd. v. ITO 120161 71 taxmann.com 322 where the hon'ble Bombay High Court went to the extent of confirming penalty f r not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice, the assessee never responded. However, during the appellate proceedings, the assessee placed on records certain letters which Ld CIT(A) had rightly considered the same as fabricated and unreliable on the basis of detailed facts and reasoning mentioned in his order. Even otherwise, the assessee could not furnish any documentary evidence showing that even after lapse of so many years, none of the party entered into any correspondence with him to recover their dues. 17. However it was argued by Ld. AR that in AY 2004-05, Ld. CIT(A) had deleted the additions under the identical circumstances. But it is important to mention here that the present proceedings have been initiated by making additions after lapse of 13 years and even till date, the same amount is still shown as outstanding, whereas factually either some of the parties are not traceable or some have admitted that nothing is outstanding. Thus in these circumstances, the above plea raised by Ld. AR is not sustainable. 18. Keeping in view of our above discussion, we are of the view that the facts contained in the case of Bhogilal Ramjibhai Atara is not applicable to the facts of the present case as in that case the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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