TMI Blog2001 (10) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... as on 31st March, 1991, that sundry creditors of Rs. 1,32,60,255 as compared to creditors of Rs. 1,31,95,364 in the last year. The AO required certain details through his letter dt. 15th Oct., 1993, which was supplied by the assessee through its letter dt. 21st Oct., 1993. The AO produced the relevant facts related to questions and answers in his order at pp. 4 and 5 and at pp. 8 and 9 out of which some important facts are reproduced below: Gist of notice (For the details of sundry creditors, 15 days time to submit the details was requested on the ground that old records have to be verified in respect of these creditors. However, the undersigned had verified the old records of the assessee and found the position of sundry creditors as under: Year Amount (Rs.) as on 31-3-1985 1,12,14,171 as on 31-3-1986 1,12,27,408 as on 31-3-1987 1,29,14,148 as on 31-3-1988 1,24,49,706 as on 31-3-1989 1,27,63,972 as on 31-3-1990 1,31,95,364 as on 31-3-1991 1,32,60,255 Further, assessee's old records were examined and found that the business act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that its recovery is barred by limitation. (ii) CIT vs. Kutappu Sons (1974) 96 ITR 327 at 330 (Ker). Wherein it is held that obligation continues though the recovery is barred; (iii) Baroda Traders (P) Ltd. vs. CIT (1965) 57 ITR 490 (Guj); (iv) Gannon Dunkerley Co. vs. CIT 1975 CTR (Bom) 14 ; (1976) 102 ITR 428 (Bom); (v) CIT vs. Chase Bright Steel Ltd. No. 2 (1989) 75 CTR (Bom) 67 : (1989) 77 ITR 128 (Bom); (vi) Kohinoor Flour Mills Co. Ltd. vs. CIT (1963) 49 ITR 578 (Bom); and (vii) J.K. Chemicals Ltd. vs. CIT (1966) 62 ITR 34 (Bom). You may please note that in view of the above binding Supreme Court and Gujarat High Court decisions. It will not be proper for you to decide to the contrary. It bears repetition that we have not written back or credited any of these liabilities. On the contrary, as is well established by our showing it in our accounts from year to year we are going on acknowledging it and, therefore, every year it gets a lease of three years to be time-barred (vide Ambica Mills Ltd. vs. CIT (1964) 54 ITR 167 (Guj)]. Further the remark column shows that Rs. 6,66,02.75 have been paid on 7th May, 1993, to various creditors. This is sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts. Now, let us humbly submit that we can immediately understand that on record of these addresses you will address letters to them and this will create lot of difficulties in our business. The same is true for our giving and getting confirmations from some of these parties. In all humility, we want to bring to your notice that in respect of these parties nothing has happened either on the credit side or the debit side of their accounts in this year and, therefore, these accounts, addresses or confirmations are all of no consequence or result so far as income computation of this year is concerned. Therefore, we humbly request you not to press the above requisition on us and save us from resultant hardship not at all beneficial to you." 4. The assessee-company produced the books of accounts as mentioned in AO's order at p. 9 and some required details have also been submitted by the assessee and these details discussed by the AO in his order in para 16 at p. 11 which are reproduced below: "In the course of assessment proceedings, the assessee has submitted the list of sundry creditors. The assessee has put them in three categories: Rs. (i) Creditors for cotton purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o discharge the onus on it, by which it was required to prove that the creditors against whom the assessee has shown liabilities to pay, are still in existence to recover the amount due to them." 7. The CIT(A) has sustained the addition with some observations which are reproduced below: "4. I have considered the facts and I find that the liabilities worth Rs. 68,56,871 have not been proved and they ceased to exist, in absence of these liabilities, the assessee gets a clear benefit for such amount in respect of these liabilities. If these are removed from the liability side, there is an increase in the assets upto this extent and the assessee is benefited for this amount. I, therefore, hold that the provisions of s. 41(1) are applicable to the facts of this case. 5. Regarding the year of which the liabilities ceased to exist, I requested the learned counsel of the appellant to file before me the copies of accounts and the addresses so that the year in which it ceased, can be ascertained. In appeal proceedings also, the copies of accounts of these parties till date or even the full addresses were not supplied. Due to non-cooperation on the part of the assessee, the correct year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these liabilities. We do not find any cogent reason and material evidence in support that these liabilities have been ceased in the year under consideration in the orders of Revenue authorities. With this fact, it is very difficult for us to agree with the Revenue authorities to tax such liabilities under s. 41(1) in the year under consideration. Apart from this, generally income tax is levied on taxable income earned by the assessee in financial year, where necessary, the legislature has made an exception. An instance is to be found in s. 41(1). At the relevant time, inter alia, provided that "where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year, the assessee has obtained whether in cash or in any other manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation, thereof the amount obtained by him or value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the previous year, it must be deemed to have been obtained or received during that year. The amount may be actually received or it may be adjusted by way of an adjustment entry or a credit note or in any other form when the cash or the equivalent of cash can be said to have been received by the assessee. But it must be the obtaining of the actual amount which is contemplated by the legislature when it used the words 'has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure in the past'. In the context in which these words occur, no other meaning is possible." The learned authorised representative of the assessee has referred a judgment of Hon'ble Supreme Court reported in (1999) 152 CTR (SC) 46 : (1999) 236 ITR 518. The headnote of the decision is reproduced as under: "The following words in s. 41(1) of the IT Act, are important; 'the assessee had obtained, whether in cash or in any other manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him'. The section contemplates the obtaini ..... X X X X Extracts X X X X X X X X Extracts X X X X
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