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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-II, Baroda (CIT(A)’ in short), dated 03.03.2014 arising in the assessment order dated 17.01.2013 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2010-11.
The ground of appeal raised by assessee reads as under:
“1. The learned CIT (A) - IV, Baroda, erred in law and / or on facts in confirming the disallowance of depreciation u/s 32 on addition to plant and machinery of Rs.67318/-.
2. The learned CIT (A) - IV, Baroda, erred in law and / or on facts in confirming the addition of Rs. 859581/- made by the AO u/s 41(1) of the IT Act, though not u/s 41(1) but treating the said creditors as non genuine.
3. The learned CIT (A) - IV, Baroda, erred in law and / or on facts in holding that the Creditors were not genuine especially when it was specifically brought to his notice that the Creditors were on account of Freight payments duly verified by the AO without any inference to the contrary.
4. The learned CIT (A) - IV, Baroda, erred in law and / or on facts in sustaining the addition on account of personal use out of telephone expenses and depreciation on car at 10% out of 20% made by the AO, more so when other expense relating to car have not been disallowed on aforesaid ground.”
When the matter was called for hearing, the learned AR for the assessee submitted that he does not want to press Ground Nos. 1 & 4. Accordingly, Ground Nos. 1 & 4 are dismissed as not pressed.
Ground Nos. 2 & 3 concern addition of Rs.8,59,581/- made by the AO under s.41(1) of the Act on the ground that the creditors are not genuine.
We have perused the orders of the authorities below. With the assistance of the learned AR for the assessee, we find that the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Gujarat High court in the case of Dattatray Poultry Breeding Farm (P.) Ltd. vs. ACIT [2019]415 ITR 407 (Gujarat) and CIT vs. Bhogilal Ramjibhai Atara [2014] 43 taxmann.com 55Guj.). On facts, we notice that the AO has allowed the expenses claimed against the creditors in question but has disputed the bonafides of creditors on the touchstone of Section 41(1) of the act. In the facts of the present case, the assessee has shown trading liability in its books of accounts and no benefit has been obtained in respect of such trading liability by way of remission or cessation thereof. Under the circumstances, the requirements of Section 41(1) of the act are not satisfied in the present case. The crux of the observations of the Hon’ble Gujarat High Court in the case of Bhogilal Ramjibhai Atara (supra) as per head-note would be relevant to the facts and issue and therefore reproduced hereunder:
"Section 41(1) of the Income-tax Act, 1961 - Remission or cessation of trading liability (Cessation of liability) - Assessment year 2007-08 - In return of income for assessment year 2007-08, assesses had shown a certain amount by way of his debts - He supplied details of 27 different creditors - Assessing Officer undertook exercise to verify records of so called creditors and found that creditors had no dealing with assessee –
Assessing Officer further having found that debts were outstanding since several years applied section 41(1) and added above amount in income of assessee as deemed income - There was nothing on record to suggest that there was remission or cessation of liability that too during previous year relevant to assessment year 2007-08 - Whether in peculiar facts of case amount in question could not be added back in income of assessee as deemed income under section 41(1) - Held, yes [Para 8] [In favour of assessee]"
In the light of the observations of the Hon’ble Gujarat High Court, we are disposed to hold that addition made by the AO by invoking Section 41(1) of the Act is not sustainable in law. The order of the CIT(A) is accordingly set aside and the AO is directed to delete the addition.
In the result, Ground Nos. 2 & 3 concerning the aforesaid issue are accordingly allowed.
In the result, appeal of the assessee is partly allowed.
This Order pronounced in Open Court on 04/10/2019
Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 04/10/2019 S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।