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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI RAMLAL NEGI, JM
O R D E R Per Shamim Yahya, A. M.: This appeal by the assessee is directed against the order by the Commissioner of Income Tax (Appeals) dated 29.02.2016 and pertains to the assessment year 2011- 12.
The grounds of appeal read as under: 1) In confirming an addition of Rs.5,64,064/- on account of outstanding liability of sundry creditors of the contractors and suppliers, over three years, as cessation of liability u/s.41(1) of the Act. 2) In overlooking the statement of sundry creditors filed before him, who were either paid off or written off as income in the subsequent Financial Year of the Assessment Year 2012.
(A.Y. 2011-12) Azofen Pvt. Ltd. 3) In merely following an order of the Tribunal in Appellant's own case, for the preceding Assessment of A.Y. 2009-10, without undertaking or causing verification of Statement of Sundry creditors before him, who were either paid off or written off as income in the subsequent assessment of A.Y. 2012-13. 4) The order passed by the Ld. C I T (A)-16, deserves to be set aside, or restored back for verification.
The Assessing Officer made the addition on the basis of sundry creditors which were outstanding for more than three years and in view of the stand taken by him in the previous year, i.e., assessment year 2010-11, the Assessing Officer held as under: 5.1 During the course of assessment proceedings, the AR of the assessee was asked to furnish details of sundry creditors along with ageing. The assessee vide note sheet dated 25.02.2014 was show caused that why the same should not be added u/s. 41(1) of the I. T. Act The assessee vide its AR’s letter dated 11.03.2014 merely filed a list of sundry creditors which are outstanding for more than three years. In view of the above and further stand taken in the preceding year, i.e., A.Y. 2010-11, where this issued discussed at length by the then A.O. It is well settled law that a cessation of liability for the purpose of section 41(1) means irrevocable cessation so that there is no possibility of the liability being revived in future. It is surprised that the creditors have not asked for their monies inspite of such a long gap nor have they initiated any legal action against the assessee.
Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) noted that similar type of addition were made by the Assessing Officer for assessment year 2009-10 which were decided by the ITAT vide order dated 30.10.2015. He noted as under:
7) Aggrieved by the order of Ld.CIT(A) the assessee has filed an appeal before us in respect of the liability u/s.41 of the Act. The Ld. Assessing Officer had given effect of the direction of the Ld.CIT(A) before the Ld. Assessing Officer. The assessee has submitted the details of the payment in respect of nine Sundry Creditors amounting to Rs.7,21,151/- being made. However, the Ld. Assessing Officer did not follow the directions of Ld.CIT(A) verbatim. The Ld. Assessing Officer, vide his order dated 31.012013 concluded that the payment made in respect of the nine creditors are live account as hence it can
(A.Y. 2011-12) Azofen Pvt. Ltd. be said that there is no cessation of liability as per the directions of CTT (A). The Ld. Assessing Officer therefore, did not grant any relieved in respect of the nine creditors. We find substance in the statement made by the Ld. AR in respect to nine creditors that were filed before the Ld. Assessing Officer we therefore, asked the Ld. Assessing Officer to allow the claim, in respect of the nine creditors amounting to Rs.7,21,151/- In respect of the balance amount out of Rs.20,36,301/- the assessee having failed to give any details before the authorities below, there is no infirmity in the observation of the Ld. CIT(A). We, therefore, held that the Ld. CIT(A) was credited in directing the Ld. Assessing Officer to follow the details from the ledger account of the creditors in the appellant books as held by him in his order. 8) In respect of the disallowance on account of the sundry debit balance being written off to the Ld.CIT(A) had dismissed. Because the assessee failed to produce sufficient findings as to how and in what circumstances on such loss were included. The assessee has not availed the primary requirements of the amount which is to be included as income and therefore the direction u/s.36/17 was denied by the Ld.CIT(A). We did not find any infirmity with the findings of the Ld.CIT(A). We, therefore, dismissed this ground of appeal in lieu of the above discussion. The assessee's appeal has partly allowed."
5. Thereafter the ld. Commissioner of Income Tax (Appeals) held as under: 6.13 The Hon’ble Tribunal has held that where the liabilities outstanding is paid in subsequent years that should be allowed and in all other cases the addition made by the A.O. was confirmed by Hon'ble ITAT. During appellate proceedings, it was submitted of the total addition of Rs.5,90,587/- only payment of Rs.6,190/- was made to Shree Enterprises and Rs.15,333/- was made to Om Plumbing Works. In view of the judgement of Hon'ble Tribunal in appellant's own case, the appellant will get a relief of Rs.21,523/- and balance amount of Rs. 5,69,064/- (590587 - 21523) is confirmed.
Against the above order, the assessee is in appeal before us.
We have heard both the counsel and perused the records. We find that on this issue the plea of the assessee is that the ld. Commissioner of Income Tax (Appeals) has not properly appreciated the submission of the assessee. It is the claim of the (A.Y. 2011-12) Azofen Pvt. Ltd. assessee that sundry creditors were paid off or written off as income in the subsequent year, i.e., assessment year 2012-13 which has not been properly appreciated.
Upon careful consideration, we find that the interest of justice demands that this issue be remitted to the file of the Assessing Officer. The Assessing Officer is directed to examine the submission of the assessee and thereafter decide as per law.
In the result, this appeal by the assessee stands allowed for statistical purpose. Order pronounced in the open court on 01.03.2018 Sd/- Sd/- (Ram Lal Negi) (Shamim Yahya) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 01.03.2018 व.�न.स./Roshani, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,