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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI RAVISH SOOD
This appeal by the assessee is directed against order of CIT-A dated 22.12.2013 and pertains to assessment year 2010-11. 2. The grounds of appeal read as under: On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below:
ALFA Distilleries Pvt. Ltd ITA no.1582/Mum./2015 1. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to take necessary action in the year in which the liability to the tune of Rs.33,02,000/- which was standing in the name of Shri Anand Parshuram Shetyc was created, ignoring the fact that the assessee had not been able to prove the genuineness of the liability and as such this amount was chargeable to tax u/s 41(1) of the Act in the year in which the Assessing Officer had proved that the said liability had ceased to exist.
In this case the A.O. observed that: i) “On perusal of the Balance Sheet, it is seen that the assessee has shown sundry creditors of Rs.33,02,000/-. The assessee's representative vide notice u/s142(1) of I.T. Act, 1961 dated 19.11.2012 was asked to furnish the confirmations in respect of sundry creditors of Rs.33,02,000/-. ii) The assessee has not furnished the confirmations in respect of sundry creditor of Mr. Anand Parshuram Shetey for Rs.32,18,500/-, instead stated that the matter is sub-judiced and in support of the same, the assessee has submitted the PLL filed in the year 2002. The information’s have been called for by issuing notice u/s. 133(6) of IT. Act from Mr. Anand Parshuram Shetey but in response to the notice nobody attended nor filed any written submissions. The assessee vide letter dated 31.01.2013 was asked to show cause as to why the amount receivable from Mr. Anand Parshuram Shetey should not be treated as your ALFA Distilleries Pvt. Ltd ITA no.1582/Mum./2015 income. However, the assessee has not submitted the current status of the above said sundry creditor. Therefore, the onus is on the assessee to furnish the confirmations in respect of sundry creditors of Rs3,02,000/- but the assessee has failed to furnish the same, therefore, the amount of sundry creditors of Rs.33,02,000/- are treated as seized to exist u/s. 41(1) of I.T. Act and added back to assessee’s total income for the year under consideration.”
Up on assessee’s appeal Ld. CIT-A decided the issue as under; “i) I have carefully and dispassionately considered the rival submissions. The A.O. doubted the genuineness of liability of Rs.33,02,000/- in the name of Mr. Anand Parshuram Shetey. He gave opportunity to the appellant to furnish confirmations from the said Mr. Shetey. The appellant failed to furnish the relevant confirmations from Mr. Shetey. The A.O., thereafter, issued notice u/5.133(6) of the Act to the said Mr. Shetey but no reply nor confirmation was received from the said Mr. Shetey. Thereafter, the A.O. issued a show cause notice to the appellant dated 31.01.2013 asking the appellant to show cause as to why the said liability in the name of Mr. Shetey should not be treated as ceased to exist and added back to appellants total income. The appellant has reportedly not furnished the relevant details before the A.O. During the course of appellate proceedings, the learned counsel has stated that the disputed liability of Rs.33,02,000/- is sub-judice before Hon’ble Bombay High Court. A perusal of the relevant arbitration petition no.118 of 2007 indicates that the appellant is neither the petitioner nor the respondent in the said litigation. The arbitration ALFA Distilleries Pvt. Ltd ITA no.1582/Mum./2015 decisions in petitions no.118 of 2007 and arbitration no.50 of 2004 do not confirm the genuineness of appellant’s liability of Rs,33,02,000/- in the name of the said Mr. Shetey. In view of the above, the genuineness of liability is not proved. However, the A.O. has not proved that the said liability arose during the previous year relevant to A,Y.2010-11. No material nor evidences are placed before me to prove the creation of liability in the previous year relevant to A.Y.2010-11. Having regard to facts and circumstances of the case, the A.O. is directed to take necessary action in the year of liability. In case the said liability has been created in the previous year relevant to A.Y.2010-11, only then the addition of Rs.33,02,000/- will be confirmed otherwise the said liability cannot be added in the A.Y.2010-11 and have to be deleted in the assessment of A.Y.2010-11.”
Against above order assessee is in appeal before us.
We have heard both the counsel and perused the records. We find that in this case assessing officer has noted that a sum of Rs.32,18,500/- was outstanding against the creditor Mr. Anand P Shetey. On assessing officer enquiry assessee had responded that the matter was sub judice and assessee has submitted the PLL filed in the year 2002. The assessing officer had issued notice under section 133 (6). This remained in responded. The assessing officer proceeded to add the outstanding credit under section 41(1). Up on assessee's appeal Ld. CIT-A held that the assessing officer should add that amount in the year in which the credit arose. Hence he directed that the addition be deleted from this year.
ALFA Distilleries Pvt. Ltd ITA no.1582/Mum./2015 7. Up on careful consideration we find that the assessing officer has disallowed the outstanding liability under section 41(1) only after issuing a notice under section 133(6). In this regard assessee had submitted that the matter with the creditor was in dispute and sub judice. In these circumstances in our considered opinion the assessing officer has not brought on record any cogent material to prove that the liability has ceased to exist When the matter is in dispute and sub judice assessee cannot be expected to get a confirmation from the creditor. In these circumstances in our considered opinion assessing officer was wrong in adding the credit under section 41(1). Accordingly, "we' hold that the addition is not sustainable.
We also make it clear that we are not in agreement with the reasoning by the learned CIT-A in deleting the addition. His direction to consider the matter in the year of origin of credit is also not sustainable.
However, in view of our discussion in para 6 & 7 we hold that the addition made by the assessing officer is not sustainable.