INCOME TAX ACT, 1961

Section 41(1)

Business income - Remission or cessation of trading liability - Failure by assessee to prove genuineness of claim of 'sundry creditors and advances -

Brief facts qua the issue are that during the assessment proceedings on careful perusal of the details in respect of sundry creditors filed by assessee, AO noticed that assessee had furnished only name of creditors and did not furnish complete address of the creditors. Age-wise analysis or the date since when the said trade liability is existing in the books of assessee, amount paid during the year, the PAN of the creditors, etc., were not furnished. Therefore, AO held that assessee had failed to discharge its onus to bring sufficient evidence on record to the satisfaction of AO regarding the genuineness of the claim of 'sundry creditors and advances'. Therefore, in the absence of any supporting documents, the necessary verifications, confirmations and investigations could not be carried out to find out, hence AO made addition by invoking the provision of section 41(1). Held: As required the assessee to furnish certain details with respect to sundry creditors and AO had not satisfied by the details filed by the assessee, therefore the said amount was disallowed by the AO under section 41(1). Onus was on AO to establish that liability has ceased or remitted. Assessee had not obtained any benefit as required under the provisions of section 41(1). Assessee submitted that the liability in balance sheet was a moving account and majority of creditors were for current year and moreover many creditors were paid off in the subsequent year. Therefore, addition made by AO under section 41(1) was deleted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

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