EXPRESS PUBLICATIONS (MADURAI)PRIVATE LTD.,CHENNAI vs. DCIT, CORPORATE CIRCLE-II(1), CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi, dated 24.05.2023 relevant to the assessment year 2017-18.

Brief facts of the case are that the assessee filed its return of income for the assessment year 2017-18 on 28.10.2017 admitting total income of ₹.14,11,87,900/- and admitted book profit of ₹.14,99,79,328/- under section 115JB of the Income Tax Act, 1961 [“Act” in short]. The case was selected for scrutiny under CASS and notice under section 143(2) of the Act dated 11.08.2018 was issued and duly served on the assessee. Notice under section 142(1) of the Act dated 16.08.2019 was also issued to the assessee to furnish the detail, evidence and information called for as per annexure enclosed with 142(1) notice. After considering the details furnished by the assessee, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 27.12.2019 by making addition of ₹.52,25,500/-under section 68 of the Act as well as disallowance of ₹.53,84,690/- under section 41(1) of the Act. On appeal, deleting the addition made under section 68 of the Act, the ld. CIT(A) confirmed the disallowance of ₹.53,84,690/- under section 41(1) of the Act.

On being aggrieved, the assessee carried the matter in appeal before the Tribunal. By filing the details of dormant creditors and referring to paper book page 6, the ld. Counsel for the assessee has submitted that the assessee has already written off the credit in the books of account and paid taxes in subsequent years and thus prayed for deleting the addition made towards disallowance under section 41(1) of the Act.

On the other hand, the ld. DR has fairly conceded that the matter may be remitted back to the Assessing Officer to verify as to whether the assessee paid taxes in sequent years.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. During the course of assessment proceedings, the Assessing Officer asked the assessee to provide the detailed note on trade payables along with comparative statement of closing balance for three years and also requested to submit the confirmation letters to substantiate the existence of liability from the creditors having no movement of transactions for more than three years. On perusal of the details furnished by the assessee, the Assessing Officer noted that the trade creditors to the tune of ₹.53,84,690/- are not having any movement for more than three years and moreover, the assessee has not furnished confirmation letters or submitted the proof for settlement of liability in subsequent years. Since the assessee was not able to submit the confirmation letters to prove the existence of liability, the Assessing Officer held that the liability of the assessee are ceased to exist and the assessee was not liable to repay the amount. Accordingly, the Assessing Officer disallowed ₹.53,85,690/- and added back to the total income of the assessee as the liability was 4 ceased to exist. On appeal, the ld. CIT(A) confirmed the assessment order. The case of the assessee is that with regard to the above credits, the assessee has already written off in the books of account and paid taxes in subsequent years and furnished the details in the form of paper book page 6. However, the above submission was not made before the Assessing Officer or before the ld. CIT(A). Accordingly, we set aside the order of the ld. CIT(A) on this issue and remit the matter back to the Assessing Officer to examine the issue as to whether the assessee paid taxes in subsequent years and decide the issue afresh in accordance with law by affording an opportunity of being heard to the assessee. In case, the assessee paid taxes in subsequent years, the provisions of section 41(1) of the Act cannot be invoked. Thus, the ground raised by the assessee is allowed for statistical purposes.