NAOZER BEJON BALDAWALA,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX 19(2), MUMBAI

The learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.63,01,823/- u/s 41(1) out of Rs.93,81,118/- made by the learned Assessing Officer.

We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paper-book. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs.

The material facts are that the assessee being resident individual stated to be engaged as contractor & trader was assessed u/s. 143(3) on 12/03/2015 wherein it was saddled with an addition of Rs.93.81 Lacs u/s. 41(1). The same stem from the fact that certain creditors were outstanding for 3-4 years in assessee’s financial statements. The assessee defended by submitting that the creditors could not be paid due to shortage of funds and the assessee was not in a position to pay the same. Thus the outstanding liabilities were only on account of commercial expediency. However, notices issued u/s 133(6) could not be Naozer Bejon Baldawala Assessment Year: 2012-13 served at the addresses provided by the assessee. Thus forming an opinion that the liability against these creditors ceased to exist, an aggregate amount of Rs.93.81 Lacs with respect to 5 creditors was added to assessee’s income invoking the provisions of Sec.41(1).

Upon further appeal, Ld. CIT(A) confirmed addition to the extent of Rs.63.01 Lacs against 3 creditors by observing that the assessee could not adduce any correspondence, legal or otherwise, with these creditors to establish that the liability subsists. Aggrieved, the assessee is in further appeal before us.

Before us, Ld. AR has pleaded that the liabilities were existing during the impugned AY and the same were very much payable by the assessee. However, in the alternative, our attention was drawn to the fact that the aggregate amount of Rs.93.81 Lacs was already offered to tax by the assessee during financial year 2018-19. In support of the same, computation of income as well as financial statements for financial year 2018-19 has been placed on record. Upon perusal of the same, we find that the assessee has credited an amount of Rs.94.02 Lacs to the Profit of Loss Account by way of sundry balance written back. This sum includes Rs.93.81 Lacs due towards five creditors. The same is evident from point no.6 of Note 8-Notes to the accounts for the year ending 31/03/2019. Since the amount has already been offered to tax and the assessee has positive income in both the years and thus there would ultimately be no loss to the revenue, we are inclined to delete the addition for this year. The confirmation of the same would result into double Naozer Bejon Baldawala Assessment Year: 2012-13 taxation of the same amount. Hence, we delete the impugned addition of Rs.63.01 Lacs and allow the appeal.

The appeal stands allowed in terms of our above order.