|The Tax Publishers2021 TaxPub(DT) 0485 (Pune-Trib)
INCOME TAX ACT, 1961
Where the AO issued notice under section 133(6) to certain creditors which remain unserved but the assessee furnished copies of e-mail where creditors admitted of having received the payment alongwith duly certified ledger copies then once assessee furnished ledger accounts of parties evidencing making of payments in a succeeding year that established the existence of liability at the end of year non-justifying the applicability of section 41(1), therefore, addition under section 41(1) could not be made.
Business income - Under section 41(l) - Certain creditors which remained outstanding from preceding year - AO simply doubted genuineness without brining anything concrete on record
During the course of the assessment proceedings, the AO observed that there were certain creditors which remained outstanding from the preceding year. On being called upon to explain as to why the provisions of section 41(1) of the Act be not applied towards such outstanding creditors, the assessee submitted that the balances remained outstanding due to disputes regarding materials not sent as per orders or shortage of materials sent by the parties or poor quality etc. The assessee further submitted that the outstanding balances of the creditors were paid in the financial year 2014-15. The AO observed that the assessee made cash payments of less than Rs. 20,000 on various dates in the year ending 31-3-2015. In order to cross verify the submission of the assessee, the AO caused inquiries conducted under section 133(6) of the Act in relation to the seven creditors. Two creditors confirmed the assessee's contention. Regarding the remaining five creditors. The AO noticed that the letters under section 133(6) sent to three creditors were returned unserved by the Postal authorities, which fact when brought to the notice of the assessee could not be sorted out. Not convinced with the assessee's submission, the AO treated such five creditors totaling as ceasing to be payable attracting the provisions of section 41(1) of the Act. Ergo, he made addition for this sum. Those notices were not served but the assessee during the course of assessment proceedings furnished e-mails from some of the parties, who attached confirmed ledger accounts affirming the assessee's stand. The AO did not accept the same by holding that “the source cannot be relied upon and all the more suspicious since the creditor could send a mail without receiving the notice issued by this officeâ€. Held: It is a matter of record that the assessee paid the amounts to some of the parties in the financial year 2014-15, whose copies have also been reproduced in the impugned order. The CIT(A) has doubted the genuineness of the transactions on the ground that cash payments could not have been made because all such parties were coming from Kerala. Once the assessee furnished ledger accounts of the parties evidencing the making of payments in a succeeding year that established the existence of liability at the end of the year under consideration non-justifying the applicability of section 41(1) of the Act. Here is a case in which some of the parties sent confirmations with their ledger accounts to the assessing officer through the assessee. The AO simply doubted the genuineness of e-mails without brining anything concrete on record as to their non-genuineness. In view of the foregoing facts, The case was not covered under section 41(1) calling for any addition.
FAVOUR : In assessee's favour.
A.Y. : 2013-14
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