GURMEET SINGH SETHI,NEW DELHI vs. ITO WARD - 45(2), NEW DELHI

This appeal by the assessee is directed against the order of the Ld. CIT(A)-15, New Delhi dated 14.08.2019 pertaining to Assessment Year 2012-13 on the following grounds:- 1. That Ld. CIT(A) has erred in law as well as in facts of the case for upholding the additions on account of cessation of liability Rs. 1,12,75,760/- even after furnishing of all the information along with PAN and address of sundry creditors available with him.

2. That the Ld. CIT(A) has erred in imposing the burden of notices sent to creditors under section 133(6) which remained unanswered.

3. That CIT(A) has failed to appreciate that fact that the AO has not given enough opportunity of being heard in the course of assessment proceedings for the sake of natural justice.

5. That CIT(A) has erred in not appreciating the evidences furnished by appellate in the course of proceedings of the case.

9. That the order passed by CIT(A) Delhi is against the spirit of law and facts of the case.

of hearing and all above grounds are without prejudice to each other.

2. Brief facts of the case are that assessee filed his return of income on 30.9.2012 for AY 2012-13, declaring an income of Rs. 3,20,460/-. The assessment u/s. 143(3) of the Act was completed by the AO on 31.3.2015 by determining the assessed income at Rs. 1,50,31,470/-. IN appeal, Ld. CIT(A) has partly allowed the appeal of the assessee. Against the order of the Ld. CIT(A), assessee is in appeal before us.

3. As far as addition of Rs. 1,12,75,060/- on account of cessation of liability u/s. 41(1) is concerned, we note that Ld. CIT(A) sustained the addition in dispute even after furnishing of all the information alongwith PAN and address of sundry creditors available with him. It is noted that assessee has started a new proprietorship business in the name of M/s RJ Traders dealing in trading of mobile gadgets after shutting down the business in name of M/s United Fashions 2010 during the AY 2012-13. Additions have been made amounting to Rs. 1,12,75,060/- on account of cessation of liability u/s. 41(1) and the amount was received in the new business during the year as advance for supply of goods also the confirmation of major accounts were furnished in the course of assessment proceedings by the parties. It is further noted that addition of Rs. 16,52,720/- has been made on account of non-deduction of TDS from Commission, whereas in books of accounts it is reflected on discount account the amounts of which were credited to Sales A/c, and written as commission in profit and loss account. However, the commission was never paid via bank / cash, which facts is evident on perusal of books of accounts which were produced in the course of assessment proceedings. There should be benefit obtained by the assessee by way of remission or cessation of liability either in cash or in any other manner. There is no document on record which prove that there is actual remission and cessation or the liability. It has been decided in various cases, that where notices issued to sundry creditors u/s. 133(6) remained unanswered, the same cannot diminish the genuineness of creditors and additions on this behalf cannot be made. We note that in this case assessee has furnished all the necessary details of the companies alongwith PAN but none of the lower authorities have confirmed the same from AO’s having jurisdiction over the said companies. Thus, the assessee cannot be penalized merely on the ground that the said companies failed to reply to the notices issued to them under section 133(6) of the Act. It is further noted that AO has not brought any cogent basis and these amounts have been written off in the books of accounts, we do not find any reason to hold that the amount is liable to be added u/s. 41(1) of the Act. Hence, we delete the addition in dispute allow the ground in favour of the assessee.

4. As regards addition of Rs. 16,28,500/- on account of cash deposited in Canara Bank in name of Old Business United Fashions 2010 on the pretext that the assessee failed to show the bank account in the return of income for AY 2012-13. Whereas the same was reflected in return of income for period for AY 2011-12. In form of return of income there is scope of reflecting one bank account only in that period more over the business cease to exit and account were prepared for new business M/s RJ Traders. Source of cash deposit is withdrawal form same bank Rs. 11,60,000/- and disposal of assets of business as shown in the cash book. It is noted that lower authorities failed to check bank statement and the cash book properly. From the perusal of the bank statement itself primary source of cash deposit can be confirmed as cash withdrawals. The AO also failed to check the financials and return of income of preceding year which clearly reflects that the business was in existence last year. In view of above factual matrix, we delete the addition in dispute and decide the ground in favour of the assessee.