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TMI Blog2021 (8) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,94,31,358/- relating to sundry creditors deleted by the Ld.CIT(A). Brief facts of the case are that the assessee is engaged in the business of poultry farming. A survey u/s 133A was conducted in this case on 30.11.2015 and the assessee had admitted the additional income of Rs. 2,93,76,209/- in the survey proceedings. During the course of assessment proceedings, the Assessing Officer (AO) found that the assessee had entered into agreement for sale of poultry complex on 16.12.2014 with Mrs Tummala Pratyusha. The AO further observed that there were outstanding creditors of Rs. 3,33,88,175/- as on 31.03.2015. Out of the above sum of Rs. 3.34 crores, the assessee had admitted the sum of Rs. 1,39,56,817/- as additional income during the course of survey conducted u/s 133A on 30.11.2015. Since the business was closed and the assessee was unable to furnish the details of payments relating to outstanding sundry creditors amounting to Rs. 1,94,31,358/-, the AO made the addition as unproved creditors. Thus, addition was made representing the outstanding sundry creditors of Rs. 1,94,31,358/-. 3. Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook i.e. Balance Sheet as at the end of 31.03.2014 and demonstrated that the creditors were outstanding at Rs. 2,82,68,840 as per the list enclosed along with the balance sheet. Thus, the Ld.A.R demonstrated that the outstanding creditors were opening creditors, which were brought forwarded from the earlier year. The Ld.AR further submitted that the assessee had entered into an agreement for sale of poultry complex in December 2014 and received partial consideration of Rs. 30 lakhs as on the date of entering into agreement, hence, the sundry creditors could not be paid due to cash crunch. Subsequently, the assessee had received the full consideration and repaid the creditors. Therefore, submitted that the AO made the addition of opening sundry creditors on assumption that, once the poultry complex is in the process of sale, there cannot be any outstanding sundry creditors which is purely on assumption and presumption and the addition was made on guess work of the AO, which the Ld.CIT(A) rightly deleted the addition. Hence, submitted no interference is called for in the order of the Ld.CIT(A). 6. We have heard both the parties and perused the material placed on record. The sundry c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: "11. We have heard both the parties and perused the material available on record. We note that the ld. Counsel for the assessee submitted before us that assessee's books of accounts were audited. The books of accounts were not rejected by the assessing officer. The ld Counsel also pointed out that some of the creditors were paid by assessee in subsequent years therefore it cannot be said that creditors are bogus. On the other hand, ld DR for the Revenue submitted before us that the assessee has not explained the difference in creditors therefore, the difference worked out by the assessing officer should be sustained. We note that assessee has participated in the assessment proceedings and submitted the details and documents required by assessing officer. The assessee also explained the difference between creditors recorded in his books vis-à-vis balance in the books of creditors, stating that said difference was due to goods in transit or payment in transit. The assessing officer rejected the explanation of the assessee without providing any valid reasons. Besides, the assessing officer failed to adduce any evidence on record to prove that the difference in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions need to be fulfilled in order to treat cessation of liability as income under section 41(1) of the Act in the year of cessation of liability: (a) Assessee has to avail an allowance or deduction in any earlier year in respect of loss, expenditure or trading liability and (b) In subsequent year the assessee has obtained cash or any other benefit in respect of such loss, expenditure and trading liability by wav of remission or cessation of liability. In other words, if an assessee incurred any loss, expenditure or trading liability in respect of any year and subsequently has obtained cash or any other benefit in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, then, the amount of cash/benefit so received shall be treated as income in the year of receipt or cessation of liability. We note that in the assessee`s case under consideration, the assessee had shown the closing balance of sundry creditors as on 31-03-2000 in its balance sheet and the said closing balance has been continued and carried forward as opening balance in the subsequent year i.e. as on 01-04-2000. Hence, it is clear tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Chief CIT v. Kesaria Tea Co. Ltd.[2002] 254 ITR 434/122 Taxman 91 (SC) the Hon'ble Apex Court held as follows: "In order to apply section 41(1) in the context of the facts of the present case, the following points are to be kept in view (1) in the course of the assessment for an earlier year, allowance or deduction has been made in respect of trading liability incurred by the assessee; (2) Subsequently, a benefit is obtained in respect of such trading liability by wav of remission or cessation thereof during the year in which such event occurred; (3) in that situation the value of benefit accruing to the assessee is deemed to be the profit and gains of business which otherwise would not be his income; and (4) such value of benefit is made chargeable to income-tax as the income of the previous year wherein such benefit was obtained. The High Court, agreeing with the Tribunal, rightly held that the resort to section 41(1) could arise only if the liability of the assessee can be said to have ceased finally without the possibility of reviving it. On the facts found by the Tribunal, the Tribunal as well as the High Court were well-justified in coming to the conclusion that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual or legal legs to stand. Reliance is also placed on the decision of CIT v. Sita Devi Juneja [2010] 325 ITR 593/187 Taxmnan 96 (Punj. & Har.). 6.3 It is settled law by umpteen number of decisions including the decision of the apex court in the case of Sugauli Sugar Works v. CIT [1999] 236 ITR 518/102 Taxman 713 (SC) that the cessation of the liability can be done not by the unilateral act but it can certainly be so by the bilateral act. So long as the appellant is recognizing her liability to pay to these creditors, where is the question of a quasi judicial authority to intervene & to say on behalf of sundry creditors or on behalf of the appellant that amount is not payable by the assessee? Here there is not even unilateral act, let alone the bilateral act, Therefore also, action of AO in holding the liabilities ceased to exist may please be reversed. 6.4 Even in law, the addition is not sustainable for more than one reason. Section 41(1) of the Act is a deeming fiction according to which an amount which does not have any trace of income is treated as income liable to suffer the brunt of tax. Therefore, as per the established canons of law, the burden to prove that a parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electing a case in scrutiny of that year. Merely because A.O. chose to enquire about the creditors in this year and if assessee fails to establish the existence of the liability in this year (even if it is so assumed) then also it cannot be said that the liability ceased to exist only in this year and not before. Nobody can be permitted to fix the year of taxability by a conscious design or omission, be he an assessee or an Assessing Officer. Therefore, viewed from any angle, the addition made by A.O. is liable to be deleted." There is no dispute that the AO did not make any enquiries or bring any evidence to prove that the outstanding creditors are bogus or the assessee has made the payments outside the books of accounts in the assessment year under consideration. The assessee has shown the liability in the balance sheet and stated to have paid the creditors subsequently. Therefore, in the absence of any evidence to disprove the genuineness of the outstanding creditors or to controvert the submission of the assessee, there is no reason to make the addition, hence, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue. 7. The assessee filed cross objections ..... X X X X Extracts X X X X X X X X Extracts X X X X
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