M/S. D.C. POLYESTER LTD,MUMBAI vs. DCIT CENT. CIR 6(4) , MUMBAI

Assessee has raised the following grounds of appeal:

Brief facts of the case are that the assessee had filed its original return of income on 30.10.2018 declaring total income of Rs. Nil after claiming set-off of carry forward loss of Rs. 14,51,016/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (in short ‘the Act’).

A search action was carried out in the case of D Décor Group on 06.03.2018. Consequent to above search action, the case of the assessee was centralized and notice u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In response to the AR of the assessee attended and submitted the information as called for.

After considering the submissions of the assessee, the AO rejected the contentions of the assessee and proceeded to make the addition on account of cessation of liability to the extent of Rs. 1,75,43,939/-.

Aggrieved, assessee preferred an appeal before the Ld. CIT(A) and filed detailed submissions. After considering the detailed submissions of the assessee, the Ld. CIT(A) relying on the outstanding status submitted by the assessee in the below chart allowed partial relief to the assessee: Particulars Amount Amount Amount outstanding as on 31/3/2018 1,75,50,524 Less: Amount paid 1,01,70,057 Amount written back in year ended 22,23,657 31/3/2019 Amount written back in year ended 21,67,775 1,45,61,489 31/3/2020 Balance payable 29,89,035

While relying on the above chart, based on the information, Ld. CIT(A) partly allowed the grounds raised by the assessee by deleting the additions made by the AO to the extent of Rs. 1,45,61,489/- and sustained the addition made by the AO to the extent of Rs. 29,89,035/-.

Aggrieved with the above order, assessee is in appeal before us.

At the time of hearing, Ld. AR of the assessee submitted that assessee has settled the outstanding liabilities in the subsequent assessment years and details were submitted before AO. Still, AO has made the addition, he brought to our notice findings of the Ld. CIT(A) and submitted that the Ld. CIT(A) agreed that the assessee’s liabilities are genuine and he acknowledge that assessee has settled the outstanding in the subsequent assessment years and still he proceeded to sustain the remaining liability. He prayed that this issue may be remitted back to the file of AO to verify all the creditors in detail and appreciate the status of the liabilities afresh.

On the other hand, the Ld. DR also agreed with the proposition to remit this issue back to the file of AO.

Considered the rival submissions and perused the material placed on record. We observed that the AO has proceeded to make the outstanding liabilities of various creditors without properly verifying the outstanding status. It is brought to our knowledge that assessee has settled most of the credit balances in the subsequent assessment year and it was claimed that the outstanding creditors are genuine and it is prayed to remit this issue for the AO to verify the same. Considered the overall facts and record, we deem fit it and proper to remit this issue to the file of AO to verify the details submitted by the assessee and determine the outstanding status as per law, it is needless to say that already Ld. CIT(A) has acknowledged that assessee has already Assessment Year: 2018-19 settled substantial outstanding, however, he has sustained the other outstanding without explaining the reasons for sustaining the addition. Therefore, AO is directed to verify the outstanding and settlement as per law. Accordingly, grounds raised by the assessee is allowed for statistical purposes.

In the result, appeal filed by the assessee is allowed for statistical purposes.