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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy
Assessment Year: 2011-12 Shri Mukul Chatterjee………………………...........…………..………………………………..….…….......Appellant 242/2, Maniktala Main Road Bagmari Kolkata – 700 054 [PAN : ACJPC 6094 N] Vs. Assistant Commissioner of Income Tax, Circle-45, Kolkata.…………………..…..............Respondent Appearances by: Shri S.M. Surana, Advocate, appeared on behalf of the assessee. Shri Biswanath Das, Addl. CIT, Sr. D/R. appearing on behalf of the Revenue. Date of concluding the hearing : September 9th, 2018 Date of pronouncing the order : September 28th, 2018 ORDER Per J. Sudhakar Reddy, AM :- This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)-13, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 18/01/2018, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2011-12.
The sole issue that arises for my consideration is whether Section 41(1) of the Act, can be invoked, when the assessee has written back the creditors and advances for customers. The assessee is engaged in the business of interior decoration. The Assessing Officer added the trade creditors amounting to Rs.11,87,315/- u/s 41(1) of the Act, for the reason that the assessee could not furnish proper addresses of these creditors. The ld. CIT(A) confirmed the addition on the ground that the assessee was not able to substitute its claim that the sundry creditors are lying in its books of accounts.
In our view, such addition cannot be sustained. The ‘D’ Bench of the Kolkata Tribunal in the case of Conveyor & Ropeway Services Pt. Ltd. vs. DCIT; Assessment Year 2012-13, held as follows:-
Assessment Year: 2011-12 Shri Mukul Chatterjee “8. We have heard both the parties and have gone through the facts and circumstances of the case. We note that the assessee has produced the copies of ledger account of both the parties i.e. M/s. Metals India and M/s. Saniya Industrial Corporation which duly reflected the credit in the books of the assessee from the FY 2007-08 to 2011-12. According to ledger account the assessee owed Rs.17,43,183/- to M/s. Metals India and Rs.20,19,963/- to M/s. Saniya Industrial Corporation respectively. It was brought to our notice that these balances are lying in the accounts since 31.03.2009 and these credit balances in the accounts remained static from that date onwards. According to Ld. AR, the assessee had all the intention to pay the aforesaid creditors but could not do so for want of funds. We note that the ledger account reflected the names of both the parties and the credit balances in respect of both the concerns are in the books of the assessee from the year ended on 31.03.2009 and the assessee acknowledged the fact of its owing indebtedness to these parties by continuing to show the liabilities in its Balance Sheet. We note that these balances in these accounts are being brought forward from earlier years and there was no fresh credit in these accounts in the relevant previous year. Since the assessee had continued to owe the liability to the above creditors there cannot be any cessation of liability and, therefore, simply because the notices u/s. 133(6) of the Act returned un-served cannot be a ground for invoking sec. 41(1) of the Act and, therefore, we are of the considered opinion that the disallowance u/s. 41(1) of the Act was not warranted in this case and, therefore, we direct deletion of the addition. This ground of appeal of assessee is allowed.
9. In the result, the appeal of assessee is partly allowed for statistical purposes.”
4. Applying the propositions of law laid down in this order to the facts of the case, I have to necessarily delete the additions. The ld. CIT(A) was wrong in his factual findings that the assessee has failed to demonstrate that the balance in question were lying in its books of accounts.
In the result appeal of the assessee is allowed.