GEETA PREM TILWANI,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order of 1. Commissioner of Income Tax (A) – 9, Pune dated 31.12.2009 for the assessment year 2007-08.

Assessee is an individual and stated to be Builder and also deriving income from rent and other sources. Assessee filed her return of income for A.Y. 2007-08 on 31.10.2007 declaring total income at Rs.64,98,839/-. The case was selected for scrutiny and thereafter

assessment was framed u/s 143(3) of the Act vide order dt.31.12.2009

and the total income was determined at Rs.82,93,939/-. Aggrieved by

the order of AO, assessee carried the matter before Ld.CIT(A), who vide

order dated 31.12.2009 (in appeal No.PN/CIT(A)-V/DCIT, Cir-

9/221/2009-10) granted partial relief to the assessee. Aggrieved by the

order of Ld.CIT(A), assessee is now in appeal before us and has raised

the following grounds :

“1. On the facts & circumstances prevailing in the case & as per provisions of law, the learned Assessing Officer is not justified in making additions of Rs . 2,50,000/- on account of alleged low withdrawals though the books of accounts & Drawings Ledger was showing total Drawings at Rs. 11,27,603/- & Rs. 19,90,765/- in Pooja Enterprises & Geeta Builders respectively which is not noticed by the Assessing Officer. The additions made by the learned Assessing Officer & confirmed by Ld. CIT(A) are unwarranted, unjustified, arbitrary, improper, ad hock and contrary to provisions of the Income Tax Act, 1961.

withdrawals.

3.1. During the course of assessment proceedings, on the basis of the

details of withdrawals furnished by the assessee, AO noticed that the

cash withdrawals was Rs.90,000/- and other withdrawals was of

Rs.1,66,683/-. The assessee was asked to furnish the details of other

withdrawals of Rs.1,66,683/-. AO has noted that assessee could not

furnish the details. AO noted that assessee was having high social

status, stays in a Bunglow, owns two cars and her son and daughter

were studying in Engineering and Medical College, respectively. In such

circumstances, AO considered the cash withdrawal of Rs.90,000/- as to

be too low. He also noted that none of her family members are

admittedly assessed to tax. Considering the totality of the facts, he

concluded that the withdrawals for personal expenses were low. He

accordingly made addition of Rs.2,50,000/- on account of low

withdrawals. Aggrieved by the order of AO, assessee carried the matter

before Ld.CIT(A), who upheld the order of AO. Aggrieved by the order of

Ld.CIT(A), assessee is now before us.

Ld.CIT(A) and submitted that assessee is a partner in Geeta Builders

and Pooja Enterprises and from these two firms, assessee has made

drawings of Rs.19.90 lakhs and Rs.11.27 lakhs respectively. He also

pointed to the copy of the ledger accounts of the aforesaid drawings

which are placed at Page Nos.69 and 70 of the Paper Book. He therefore

submitted that the conclusion of the AO that there were low drawings by

the assessee is incorrect. Ld.A.R. also pointed to the details of drawings

in A.Ys.2005-06, 2006-07 and 2007-08 which are placed at Page No.80

of the Paper Book. He therefore submitted that the addition made by

the AO be deleted. Ld. D.R. on the other hand, supported the order of

AO and Ld.CIT(A) and further pointed to the drawings shown in the

ledger accounts of assessee from Geeta Builders and Pooja Enterprises

which are placed at Page Nos.69 and 70 of the Paper Book. From the

aforesaid ledger accounts, he pointed to the withdrawals in cash at

Rs.7,500/- on 12 occasions aggregating to Rs.19,000/-. Ld. D.R.

submitted that the other drawings which Ld.A.R. referred to are with

respect to the tax payments, purchase of electronic items and payment

of LIC which cannot be considered to be cash drawings towards other

expenses. In such a situation, he submitted that AO was fully justified

in making the addition.

record. The issue in the present ground is with respect to addition on

account of low tax withdrawals made by the assessee. Before us, it is

assessee’s contention that assessee has made drawings which are in

line with the drawings made in earlier years and her books of accounts

are audited. On the other hand, it is Revenue’s contention that

considering the status of the assessee, the cash withdrawals made by

the assessee are too low and in such a situation, AO based on the basis

of estimation made addition. After considering the totality of the facts

and the submissions of both the parties, we are of the view that in the

present case, the submission of Ld.A.R. and Ld. D.R. cannot be accepted

in totality. In such a situation, we are of the view that the interest of

justice shall be met if addition on account of low cash withdrawals is

upheld to the extent of Rs.1,25,000/-. We thus direct accordingly.

Thus, the ground of the assessee is partly allowed.

6.1. During the course of assessment proceedings assessee was asked

to furnish the details of the creditors outstanding over two years. On

the basis of the details furnished by the assessee it was noticed that

that the total outstanding amount payable to creditors over for two

years was Rs.51,50,334/-. The assessee was asked the reasons for

outstanding which was not paid by the assessee. Assessee furnished

confirmations from creditors amounting to Rs.32,42,790/- and it was

further submitted that all the creditors are genuine. AO noted that in

case of M/s. Shreepad Enterprises, the amount that was payable was

Rs.30,73,804/-. AO noted that the amount was outstanding for more

than three years and as on 31.12.2009 also the payment was not done.

The submission of the assessee of inferior goods been supplied and

therefore the payments being not been done was not fully accepted in

the absence of the details about the date of purchase and the quantum

of purchase made by the assessee. AO therefore concluded that it is a

case of cessation of liability of atleast a part of the outstanding payable

by assessee. He therefore made addition of 30% of such outstanding

amounting to Rs.9,22,141/- u/s 41(1) of the Act. With respect to the

balance creditors of Rs.20,76,530/-, AO noted that the creditors being

outstanding for a period of over five years, a question arises about its

genuineness. He was of the view that there was a cessation of liability

of atleast part of the amount. He accordingly worked out and made

addition of 30% of Rs.20,76,530/- i.e., Rs.6,22,959/- and made a total

addition of Rs.15,45,100/- (Rs.9,22,141/- + Rs.6,22,959/-). Aggrieved

by the order of AO, assessee carried the matter before Ld.CIT(A), who

upheld the order of AO.

Aggrieved by the order of Ld.CIT(A), assessee is now before us.

Ld.CIT(A) and further submitted that the provisions of Sec.41(1) of the

Act are not attracted in the present case. He submitted that the

liabilities are still been shown as payables in her books and the

amounts which have been added by AO have not been written back by

the assessee. He submitted that assessee had also filed the

confirmations of the creditors. With respect to the confirmation of M/s.

Shreepad Enterprises, who has also confirmed as outstanding which

is also noted by the AO in the order that there is no cessation of liability

in the case of atleast a part of the outstanding. He therefore submitted

that no addition is called for in the present case. Ld. D.R. on the other

hand, supported the order of AO and Ld.CIT(A).

record. The issue in the present ground is with respect to addition u/s

41(1) of the Act. Sec.41(1) of the Act can be applied provided the

following conditions are fulfilled in the assessment of any assessee, on

allowance or deduction has been made in respect of any loss,

expenditure or trading liability incurred by him.

- any amount is obtained in respect of such loss or expenditure; or any benefit is obtained in respect of such trading liability by way of remission or cession thereof;

- such amount or benefit is obtained by assessee.

- such amount or benefit is obtained in a subsequent year.

Thus, where a debt due from the assessee is foregone by the creditor in

a later year, it can be taxed u/s 41(1) of the Act in such later year when

it is foregone. Section 41(1) of the Act therefore contemplates existence

of a debt / liability and the remission or cessation thereof in the year

under consideration; for the purpose of taxing any income on account of

remission or cessation of liability, the AO has to establish that there was

an existing liability and that there was remission or cessation of such

liability in the previous year relevant to the assessment year in which

such income is sought to be taxed.

shown by the assessee as payable meaning thereby that assessee

acknowledges her liability to pay the creditors and it is not a case where

the amount has been written back by the assessee in the books of

accounts. When the liability is still outstanding in the Balance-Sheet of the assessee, then the liability could not be said to have been ceased in

terms of Sec.41(1) of the Act. Merely because of the amount has not

been paid and has not been written back, no addition can be made u/s

41(1) of the Act. We therefore hold that AO was not justified in making addition u/s 41(1) of the Act and therefore, we direct the deletion of

addition made by the AO. Thus, the ground of the assessee is

allowed.

Order pronounced on 12th day of September, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 12th September, 2019. Yamini आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-9, Pune. Pr. CIT-5, Pune. 4. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, ITAT, “B” Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER

// True Copy / व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.