Case Law Details
Krishnaping Alloys Ltd vs ACIT (ITAT Mumbai)
Ld. AO had alleged that the so called trading liability existed in the books of accounts of the assessee is non-genuine, because none of the creditors have confirmed the liability, when enquiries was conducted by issue of notice u/s 133(6) of the I.T.Act, 1961. The Ld. AO had also taken support from the fact that the so called shareholders have gifted their shares to the directors and relatives in subsequent financial years. No doubt, there may be no response from certain creditors in response to 133(6) notices, but non appearance or non response of the creditors cannot be a sole grounds to draw an adverse inference against the assesee, when the assessee has filed necessary evidence to prove that the liability is genuine in nature, which was subsequently paid back by converting said liability into share application money.
As regards, the other allegations of the ld. AO that so called shareholders have gifted their shares to directors and relatives in subsequent financial year, said findings is not relevant in the context of additions made by the Ld. AO u/s 41(1) of the Act, because in order to invoke provisions of section 41(1) of the Act, three conditions enumerated therein should be fulfilled. Unless, the conditions prescribed therein are not fulfilled, the Ld. AO cannot make additions u/s 41(1) of the Act. In this case, on perusal of facts available on record, we find that none of the conditions prescribed therein u/s 41(1) of the I.T.Act, 1961 were fulfilled, in order to bring said liability within the ambit of provisions of section 41(1) of the Act, because neither, the liability is ceased to exist during the impugned assessment year, nor the Ld. AO proved that it is a non-genuine trading liability. On the other hand, the assessee has filed necessary evidences to prove that the liability was existed in the books of accounts up to 31/03/2009 and on 31/03/2009 said liability has been fully paid back by converting, the same into share application money with the consent of creditors. We, therefore, are of the considered opinion that the Ld. AO, as well as the Ld.CIT (A) was completely erred in making additions towards cessation or remission of liability u/s 41(1) of the Act, towards share application money of Rs.15.15 crores.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal filed by the assessee is directed against order of the Ld. Commissioner of Income Tax (Appeals)–17, Mumbai, dated 25/03 /2019 and it pertains to Assessment Year 2010-11.
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