TMI Blog2023 (7) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the book results, we do not find any justification in the action of the Assessing Officer in making the addition u/s 68 - set aside the finding of the ld. CIT(A) and delete the addition made u/s 68 - Decided in favour of assessee. - I.T.A. No. 227/Kol/2023 - - - Dated:- 9-6-2023 - SHRI SANJAY GARG, HON BLE JUDICIAL MEMBER AND DR. MANISH BORAD, HON BLE ACCOUNTANT MEMBER For the Assessee by : Shri S.K. Tulsiyan, Advocate Ms. Puja Somani, C.A. For the Revenue by : Shri Vijay Kumar, Addl. CIT O R D E R PER DR. MANISH BORAD, ACCOUNTANT MEMBER : This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the ld. CIT(A) ], passed u/s 250 of the Income-tax Act, 1961 (hereinafter the Act ), dated 12/05/2022 for the Assessment Year 2015-16. 2. The Registry has pointed out that there is a delay of 253 days in filing of this appeal. In the condonation application, the assessee stated that an affidavit and an application has been filed wherein it has been submitted that the impugned order was passed on 12/05/2022 by the National Faceless Appeal Centre (NFAC), Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he doctrine must be applied in a rational common sense pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. 6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 6. Similarly, we would like to make reference to authoritative pronouncement of Hon'ble Supreme Court in the case of N.Balakrishnan Vs. M. Krishnamurthy (supra). It reads as under: Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to re-cite or recapitulate the proposition laid down in other decisions. It is suffice to say that the Hon'ble Courts are unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the delay, then such reasons are to be construed with a justice oriented approach. 8. In light of the above, if we examine the explanation of the assessee then, it would reveal that basically the delay has occurred on account of lacunae by the erstwhile tax consultant of the assessee Shri Debabrata Dan and the assessee did not have any malafide intention to cause the delay. Therefore, cumulative setting of all these factors would suggest that there is no deliberate delay at the end of the assessee because the assessee was not going to gain anything from delaying this appeal. It is also pertinent to note that the Hon ble Supreme Court in the case of N.Balakrishnan Vs. M. Krishnamurthy (supra) has observed that period of delay does not matter. It is the quality of the explanation. If some valid reason is there, then any period can be condoned. In this case delay was caused due to fault of the erstwhile tax consultant of the assessee. Taking into consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in the subsequent years sales were realized and most of the alleged sundry creditors have been paid and since the farmers have been paid, it is quite possible that they were not interested to carry out any further communication. The ld. Assessing Officer was, however, not satisfied and invoked the provision of Section 68 of the Act for unexplained sundry creditors and made addition of Rs.3,55,92,450/- and assessed income at Rs.3,66,38,260/-. 11. Aggrieved the assessee preferred appeal before the ld. CIT(A) challenging the additions for unexplained sundry creditors and gave the details in the statement of facts. However, to the notice of hearing sent through e-mail, the assessee did not attend to the same. Since no submissions were filed on the given dates, as the appellate proceedings were faceless, ld. CIT(A) considering the assessment records and the details filed by the assessee before the lower authorities as well as the detailed submission, passed a speaking order confirming the action of the Assessing Officer observing as follows:- 6 In view of the above facts, it appears that the appellant is not interested in prosecuting its appeal as it failed to avail the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017. 6.2 Thus during assessment proceedings the appellant has failed to show that these parties - reflected as sundry creditors in the balance sheet, were indeed so. In the quest to verify the sundry creditors, the AO repeatedly requested for furnishing of the confirmations and details like complete address and PAN so as to examine the genuineness of the transactions and the outstanding amount. However, confirmations amounting to Rs. 42,50,050/- were only furnished by the assessee before the AO, who accepted the same. In respect of the remaining sundry creditors of Rs. 3,55,92,450/- despite being called upon to furnish details by the AO during assessment proceedings time and time again they were not furnished. By failing to furnish details like the complete address and PAN the appellant has failed in discharging its responsibility of showing the amounts due from him as being a consequence of transactions undertaken by him. The assessee thus failed to prove the authenticity of the transactions with the parties claimed as sundry creditors before the AO, as no copy of account, bills and payments in respect of any amounts to these parties by cheque, were shown to the AO during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books and the sundry creditors have been paid in subsequent year and sufficient evidence has been placed on record to prove that the creditors are genuine and have been paid. Reliance was placed on the judgments in the case of CIT vs. Mahindra and Mahindra Ltd. reported in [2018] 93 taxmann.com 32 (SC), judgment of the Hon ble Gujarat High Court in the case of PCIT vs. Adani Agro (P) Ltd. reported in [2020] 118 taxmann.com 307 (Gujarat) and on the decision of the ITAT Kolkata Bench in the case of Sharda Commercial Co. Ltd. vs. ITO in ITA No. 1657/Kol/2011. 14. On the other hand, the ld. D/R vehemently argued referring to the detailed finding of the ld. CIT(A) extracted (supra) and stated that the assessee failed to explain the genuineness of the sundry creditors and thus rightly added by the Assessing Officer u/s 68 of the Act. 15. We have heard rival contentions and perused the record placed before us. Though the assessee has raised four (4) grounds of appeal but the grievance is only with regard to the addition made for unexplained sundry creditors u/s 68 of the Act at Rs. 3,55,92,450/-. We observe that the assessee is engaged in trading of rice. The purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : [Provided that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: [Provided further] that nothing contained in the first proviso [or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and most importantly, before the conclusion of the assessment proceedings, most of the alleged sundry creditors i.e., the farmers were paid. Therefore, under these given facts and circumstances, the ld. AO ought to have considered the facts of the case and should have accepted the genuineness of the sundry creditors. 19. Even for the sake of argument or academic discussion, we deem that the ld. Assessing Officer inadvertently invoked Section 68 and ought to have invoked the provision of Section 41(1) of the Act, regarding the remission or cessation of liability, as the assessee failed to explain the sundry creditors during the course of assessment proceedings but even that will not sustain as the assessee has not written off the sundry creditors in its books and there is no evidence that the liabilities as on the year-end extincted. Further since the said liabilities towards the sundry creditors have been paid in the subsequent years, the details of which have been filed in the paper book in the summary of the details of the payments as mentioned below, there remains no basis to even invoke the provisions of Section 41(1) of the Act. The details of year-wise payments to outsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in previous assessment years was due to the deprecation of the machine and not on the interest paid by it.[Para 15] Moreover, the purchase effected from the KJC is in respect of plant, machinery and tooling equipments which are capital assets of the assessee. It is important to note that the said purchase amount had not been debited to the trading account or to the profit or loss account in any of the assessment years. It is to be noted that there is difference between 'trading liability' and 'other liability'. Section 41(1) particularly deals with the remission of trading liability. Whereas in the instant case, waiver of loan amounts to cessation of liability other than trading liability. Hence, there is no force in the argument of the revenue that the case of the assessee would fall under section 41(1).[Para 16] 20.1. The Hon ble High Court of Gujarat in the case of PCIT vs. Adani Agro (P.) Ltd. (supra) has held as under:- Merely because liability had remained outstanding for more than three years and same was not written back in profit and loss account, application of provisions of section 41(1) could not be made to consider such liability as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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