^ ^•IS' A^- BEFORE THE HON'BLE HIGH COURT OF CHHATTISGARH AT BILASPUR n;.,;<,in Tax Case (Income Tax ApeealLNo. ^ /2008 Assistant Commissioner of Income Tax, Circle-1, Bhilai (C.G.) Appellant OZ , ^^•Jg>^t ^::"."^^^' VERSUS w'-ftesDondent S. Sukhpal Singh Bal, Prop. M/s. Interstate Trade & Transport, Parmanand Building, G.E. Road, Durg(C.G.) INCOhflE TAX APPEAL U/S. 260 A OF INCOME TAX ACT, 1961, |B-1 '^ ^?^^'^-. ^ B '""giW-^ fi S 1 -•>.. .,''' ,'f '^SS^ HIGH COURT OF CHHArTISGARH AT BILASPUR TAX CASE No. 34/2008 APPELLANT Assistant Commissioner of Income Tax, Circle-1, Bhilai Versus RESPONDENT S. Sukhpal Singh Bal DB:- HON'BLE SHRI I.M. QUDDUSI SB HON'BLE SHRI N.K. AGARWAL. JJ PRESENT:- Shri Rajeev Shrivastava, Standing Counsel for the appellant. Shri Ashish Shrivastava, Advocate for the respondent. ORAL ORDER (19^8-2010) Per I.M. Quddusi, J 1. This appeal was admitted on the following substantial question of law:- "Whether on the facts and circumstances of the case, the Income Tax appellate Tribunal was justified in law in deleting the addition ofRs. 23,27,137/- made by the Assessing Officer under Section 41(1) of the Income Tax Act, 1961 particularly when the Assessing Officer has recorded a finding that the entries in the account book of the assessee were in bogus names ? 2. Brief facts of the case are that the respondent/assessee filed its return of income for assessment year 2004-05 on 31-10-2004 declaring total income of Rs. 7,10,966/-. His case was selected for scrutiny and notices were issued under Section 143(2) and 142(1) of the Income Tax Act, 1961 (in short, 'the Act') with a detailed questionnaire. 3. During assessment proceeding, it was noticed by the Assessing Officer that the assessee had shown Sundry Creditors ofRs. 66,20,200/- in his books ofaccounts and it was gathered from the list submitted by the assessee that large number of creditors were non-moving and the ^} 'WassaSy 7. assessee also could not submit the complete addresses of the Sundry Creditors. The identity of Sundry Creditors was not believed by fhe Assessing Officer, as a result of which, he added a sum of Rs. 23,27,137/- to the total income of the assessee under Section 41(1) of the Act and the assessment was completed on total income of Rs. 30,38,103/- vide order dated 22-12-2006. This is also a fact that the Sundry Creditors shown in the return were not in respect of the previous year but they were being shown continuously since long back in the annual returns. Being aggrieved, the respondent preferred an appeal before the Commissioner of Income Tax (Appeals), but the same was dismissed. Thereafter, he preferred second appeal before the Income Tax Appellate Tribunal which was allowed inter alia with the observations that the Assessing Officer has concluded that the liability of the assessee has seized long back i.e. prior to the previous year relevant to the assessment year under consideration and Section 41(1) of fhe Act only can be applied in the year of remission or cessation of the liability and would not be applicable in the case in hand. More over admittedly, there was no fresh credit in the assessment year under consideration so as to invoke Section 68 of the Act and thus the Tribunal deleted the addition of Rs. 23,27,137/- made under Section 41(1) of the Act by the Assessing Officer. Against the aforesaid order of the Tribunal, the instant appeal has been filed by the revenue under Section 260-A of the Act which was admitted for hearing. We have heard Shri Rajeev Shrivastava, learned Standing Counsel for the appellant and Shri Ashish Shrivastava, learned counsel for the respondent. ^^- ^ 8. Before proceeding further, it is necessary to peruse the provisions of Section 41(1) as well as Section 68 of the Act, which are quoted below:- "Section 41: PROFITS CHARGEABLE TO TAX. (1) Where an allowance or deduction has been niade in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year, - (a) The Erst-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) The successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first- mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be p'rofits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. Explanation 1: For the purposes of this sub- section, the expression "loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof' shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts. Explanation: For the pT-u-poses of this sub- section, "successor in business" means, - (i) Where there has been an amalgamation of a, conipany with another company, the amalgamated company; (u) Where the first-mentioned person is succeeded by any other person in that business or profession, the other person; (iii) Where a finn cariying on a business or profession is succeeded by another firm, the other firm; (iv) Where there has been a demerger, the resulting company. Section 68: CASH CREDITS. Where any sum is found credited m the books of an assessee maintained for any previous year, and assessee offers no explanation about the nature and source thereof or the explanationoffered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 9. It is not in dispute that the details of amount of Sundry Creditors were being mentioned by the assessee in his previous years retums and the liability of the assessee had seized long back, i.e. prior to the previous year relevant to Assessment Year under consideration and the Assessing Officer himself has mentioned in this respect in his conclusion. As per Section 68 of the Act as quoted above, the sum found credited in the booksofan assessee maintained for any previous year may be charged to income tax as the income of the assessee of that previous year. In the instant case, the surn found credited in the books of assessee maintained was not a new sum but it was mentioned between the assessment year 1995 to 1999 as mentioned in the order of the Assessing offlcer and he was making scrutiny of the return for the assessment year 2004-2005. Therefore, the provisions of Section 68 were not applicable and in view of above, the Tribunal has rightly interpreted the provisions of Section 41(1) taking into consideration the observation of the Assessing Officer that the liability of the assessee had ^^- seized long back i.e. prior to previous year relevant to the assessment year under consideration. 10. In view of the above, in this case involvement of substantial question of law does not arise at all. 11. The appeal fails and is dismissed. Sd/- I-M.Quddusi Judge Sd/- N.K.Agarwai Judge 9/