TMI Blog2023 (4) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... ined creditors - entire amount standing in the name of sundry creditors as reflected in the Balance Sheet as on 31.03.2010 for want of submission by the assessee of details as per the format devised by him under section 41(1) - addition deleted by the Ld. CIT(A) - HELD THAT:- As per CIT-A addition under section 41(1) can be made only if a genuine trade liability has ceased to exist for the reasons enumerated in section 41(1) of the Act. We agree. CIT(A) has recorded the finding that the Ld. AO has not made the impugned addition by holding that these liabilities ceased to exist during the year. None of the conditions precedent for applicability of the provisions of section 41(1) is fulfilled in the case of the assessee. The Ld. AO was thereof not justified at all to invoke the provisions of section 41(1) to make the impugned addition and the Ld. CIT(A) has rightly observed that the impugned addition can be deleted on this ground alone.O was not justified in treating the entire trade creditors as bogus when majority of them were well-established public sector undertakings or limited companies e.g. BSNL, MTNL, Bharti Airtel Ltd., HCT Info-systems Ltd. and Tata Tele Services Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 As per the appellant, the agreement with department of Telecommunication was entered into on 13.04.2000 for internet services for fifteen years. In December, 2004, the Government of India permitted amendment of the existing ISP license, to allow VPN (Virtual Private Network) services subject to a payment of one time entry fee of Rs. 10 crores and financial bank guarantee of Rs. 1 crores. However, the said provisional permission to offer VPN services in accordance with new guidelines did not contain detailed terms and conditions. Therefore, the Internet Service Providers Association of India and ISPs filed a petition before Hon ble TDSAT. As per the order of TDSAT, the revised guidelines were issued by DOT vide letter dated 22.06.2006 according to which the license fee was payable at 6% of the revenue on revenue sharing basis. The said payment on revenue sharing basis has been claimed by the appellant u/s 37(1). The appellant has relied on the decision of Hon ble ITAT Mumbai in the case of Bharti Airtel Ltd. reported in 48 DTR 416 and also the decision of Hon bte Delhi Tribunal in the case of M/s. MTNL reported in 8 SOT 376 holding that the deduction of licence fee is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w is not justified. The Ld. CIT(A) has placed reliance on the decision of Hon ble Delhi High Court in Bharti Hexacom Limited (supra) as also on the decision of Delhi Tribunal in the case of M/s. MTNL reported in 8 SOT 376 for recording his findings in favour of the assessee with which we concur. Accordingly ground No. 1 of the Revenue is rejected. 6. Ground No. 2 relates to addition of Rs. 23,60,79,000/- under section 41(1) of the Act on account of unexplained creditors which stands deleted by the Ld. CIT(A). The Ld. AO has discussed this issue in para 6 of his order. He found that the assessee has shown sundry creditors at Rs. 23,60,79,000/- as on 31.03.2010 in Schedule 11 of Balance Sheet. He required the assessee to furnish the details in the format devised by him. The assessee furnished a list of sundry creditors comprising of their name and closing balance exceeding Rs. 1 lac. The Ld. AO again asked the assessee to furnish complete address, PAN and confirmation of creditors. This was not done. Once again the assessee was asked to furnish confirmation of creditors exceeding Rs. 5 lacs. This was also not done. Therefore, the Ld. AO made the impugned addition. 6.1 On appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. This was the sole reason for making the addition. At the outset, an addition u/s 41(1) can be made only if a genuine trade liability has ceased to exist for the reasons mentioned in section 41(1) of the I.T. Act. If a particular liability is not genuine, the addition for the same is to be made in the year in which the corresponding expenditure was claimed and not in the year under appeal. To summarise, if the AO doubts the genuineness of opening balance of creditors and comes to a conclusion that the corresponding creditors are bogus i.e. the expenditures that led to creation of the credit balances in the books of the appellant were never incurred, the additions can be made only u/s 37(1) that too only in the year in which the expenditures were incurred. The addition u/s 41(1) can be made only if the credit balances are accepted as genuine and remission or cessation of the same has taken place or the said liability has ceased to exist in the year under appeal for the reasons mentioned in section 41(1). The majority of creditors are well established public sector undertakings or limited companies. Therefore, the question of identity of creditors cannot be questioned. The AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Ld. AO has added to the income of the assessee the entire amount standing in the name of sundry creditors as reflected in the Balance Sheet as on 31.03.2010 for want of submission by the assessee of details as per the format devised by him under section 41(1) of the Act. On appeal, the Ld. CIT(A) obtained from the assessee details of re-payment to the creditors and the amounts written back in subsequent years. The Ld. CIT(A) allowed the Ld. AO reasonable opportunity to offer rebuttal, if any which the Ld. AO chose not to avail. Since the details were culled from audited annual accounts of subsequent years, the Ld. CIT(A) presumed the factual accuracy thereof. 8.1 The Ld. CIT(A) did not agree with the Ld. AO who made the impugned addition under section 41(1) of the Act. According to him, an addition under section 41(1) of the Act can be made only if a genuine trade liability has ceased to exist for the reasons enumerated in section 41(1) of the Act. We agree. The Ld. CIT(A) has recorded the finding that the Ld. AO has not made the impugned addition by holding that these liabilities ceased to exist during the year. 8.2 The Hon ble Delhi High Court in Hotline Electronics L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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