BALKRISHNA ASHOL DHADAM,MUMBAI vs. DCIT - 15(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dated 30/02/2015,of the CIT (A )-17 Mumbai,the assessee has filed the present appeal.Assessee,an individual,filed his return of income on 14/10/2010, declaring income of Rs. 32.98 lakhs.The Assessing Officer (AO) completed the assessment, u/s.143 (3) of the Act,on 18/02/2013,determining his income at Rs. 54.05 lakhs. During the course of hearing before us, the Authorised Representative (AR) stated that the assessee was not interested in pressing 2nd and 4th ground.Hence,both the grounds stands dismissed as not pressed. 2.First Ground of appeal is about confirming the liability on account of outstanding creditors, amounting Rs.4.43lakhs.During the assessment proceedings,the AO found that in many instances the opening balance had not been paid till the end of the year. He asked the assessee to show cause as to why the same should not be added to his total income as ceased liability. As per the AO,the assessee did not furnish any explanation in that regard. He observed that in the case of KA Traders outstanding balance was of Rs.1.13 lakhs. He worked out such outstanding balances to Rs.4,43,111/-and added that the amount in question to the income of the assessee holding it to be ceased liability. 2.1.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA).Before him,it was argued that liability had not ceased, that creditors had to be paid, that during the year under consideration nothing had happened to prove that the assessee had not to pay the said amounts to the creditors.The FAA,after 3083/M/15(10-11) Sh.Balkrishna Ashok considering the available material,held that in the wine business it was a trade practice to square up the balances of previous parties at the end of the financial year, that the AO had rightly invoked the provisions of section 41 of the Act. 2.2.During the course of hearing before us, the AR stated that liability had not ceased, that same was existing, that none of the conditions,envisaged by section 41 were present.He referred to the case of SM Energy Teknik and Electronics Ltd. (ITA/1859 and 1495/ Mum/ 2008-AY.2003-04,dated 11/03/2015). The Departmental Representative(DR) supported the order of the FAA. 2.3.We have heard the rival submissions and perused the material before us.We find that the AO and the FAA made/upheld the addition as certain sums were outstanding on the last day of the year under appeal.But,both of them have not proved that liability had ceased.The other condition for invoking the provisions of section 41(1)is that an allowance or deduction should have been in the assessment for any year in respect of loss,expenditure or trading liability incurred by the assessee.Both the authorities have not discussed as to when the deduction was allowed.In absence of fulfillment of the said precondition the FAA was not justified in confirming the order of the AO.So,reversing his order,we delete the addition made by the AO.First ground of appeal is decided in favour of the assessee.

3.Second effective Ground of appeal(GOA-3)is about confirming the addition to the tune of Rs.13.60 lakhs as unaccounted/inflated purchases. During the assessment proceedings,the AO issued notices u/s.133 (6) to some parties appearing in the list of purchasers. He found that there was difference in the purchase figures regarded by those parties in their books of accounts vis a vis the figures reported by the assessee. As per the AO he had directed the assessee to reconcile the difference,but,he did not comply with the directions. He worked out the difference at Rs.13, 60,372/-and held that same was to be added back to the total income of the assessee as unaccounted purchased/inflated purchase. 3.1.During the appellate proceedings, the assessee raised additional ground in that regard and filed additional evidences before the FAA. He filed re-conciliation statement of the alleged difference.However, the FAA did not admit additional evidences holding that ledger copies of the suppliers had no evidentiary value, that the authenticity of such documents could not be vouched for, that the assessee had not made a request for admission of additional evidences. Finally,he upheld the order of the AO. 3.2.Before us, the AR stated that the assessee had raised specific additional ground with regard to violation of principle of natural justice about using the information collected from