Shivam Sales Corporation, Ahmedabad V. The ITO, Ward-5(2)(4), Ahmedabad

ITA 136/AHD/2020

AI Insights

The case involves Shivam Sales Corporation appealing against the order of the CIT(A) which upheld various additions made by the AO for the Assessment Year 2015-16. The additions included losses on sale of grey cloth, differences in contract confirmations, cessation of liabilities under section 41(1), and bogus sundry creditors. The Tribunal examined the evidences and submissions, including remand reports from the AO, and found that the transactions were genuine and the additions were not justified. The Tribunal's decision was based on the lack of evidence supporting the AO's and CIT(A)'s conclusions and the proper evidences and explanations provided by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133456 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 14-02-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 03-02-2020
• Other Referred Cases: CIT Vs. Bhogilal R. Atara
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Sham transactions; Bogus
• Section: 144; 133(6); 43

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘A’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.136/Ahd/2020 [Asst.Year : 2015-16] Shivam Sales Corporation 212, A-Oxford avenue Nr.CU Shah College Ashram Road Ahmedabad. PAN : ABSFS 4612 D ITO, Ward-5(2)(4) Ahmedabad. (Applicant) (Responent) Assessee by : Shri S.N. Divatia, AR Revenue by : Smt. Saumya Pandey Jain, Sr.DR स ु नवाई क तार ख/Date of Hearing : 15/02/2023 घोषणा क तार ख /Date of Pronouncement: 04/05/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld. Commissioner of Income Tax (Appeals)-5, Ahmedabad[hereinafter referred to as “Ld.CIT”] dated 13.12.2019 pertaining to the Asst.Year 2015-16 under section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as the “Act’ for short). 2. The assessee originally filed grounds of appeal in its appeal memo ,which grounds were subsequently modified and filed before the Tribunal vide communication dated September, 2021, which the ITA No.136/Ahd/2020 2 ld.DR admitted to have received in August, 2022. The ld.DR had no objection to the same and the appeal was accordingly proceeded to be decided on the basis of modified grounds of appeal filed. These grounds read as under: “1.1 The order pass u/s.250 on 13.12.2019 for A.Y.2015-19 by CIT(A)-5, Ahmedabad upholding the additions/disallowances aggregating to Rs.1,25,76,805/- made by AO is wholly illegal, unlawful and against natural justice. 1.2 The LD CIT(A) has grievously erred in law and on facts in not appreciating the contentions and evidences submitted during the proceedings. 2.1 The ld.CIT(A) has grievously erred in upholding the additions/ disallowances aggregating to Rs.1,25,76,805/- as under: a) Loss on sale of grey cloth : Rs.23,27,617/- b) Difference in contract confirmation : Rs.71,68,534/- c) Cession of liability u/s.41(1) : Rs.15,85,477/- d) Bogus sundry creditors : Rs.33,29,467/- 2.2 That in the facts and circumstances of the case as well as in law, theld.CIT9A) has grievously erred in upholding the above said additions/disallowances. 2.3 The observations made and conclusions reached by the both the lower authorities in so far as they were contrary to the evidence on record are not admitted by the appellant so that the entire conclusion is vitiated. 2.4 The ld.CIT(A) has erred in confirming the action of AO in making ex parte assessment u/s.144. 3.1 Without prejudice to above and in alternative, the disallowance/additions made by the AO and confirmed by CIT(A) are highly excessive and the benefit of telescoping should have been allowed or the holistic view of the matter should have been taken by them. 4.1 Both lower authorities have erred in not allowing set off of c/f business losses of earlier years. 3. Ground No.1.1 and 1.2 and 4.1, it was stated were general in nature, therefore, the same are not being adjudicated by us. ITA No.136/Ahd/2020 3 4. Ground no.2.1 to 2.4, it was stated, related to the additions/ disallowance made in the present case , ground no.2.1(a) to 2.1(d) specifically challenging the various disallowances/additions made on merits. Ground no.2.4 raised by the assessee is against the action of the AO in making ex parte assessment order passed in the present case under section 144 of the Act. We shall first take up the ground no2.4 raised by the assessee. 5. As transpires from order of the authorities below, the AO framed assessment under section 144 of the Act i.e.ex parte assessment order ,passed after giving due notices to the assessee on the issues raised and on the basis of materials and submissions, whatever filed by the assessee before it. 6. In the order passed, the AO made various additions totaling in all to Rs.1,44,11,095/- resulting in assessing the taxable income of the assessee at Rs.1,34,93,950/- as opposed to a lossof Rs.9,17,145/- returned by the assessee. The additions/ disallowances made were onaccount of the following as transpires from page no.11 of the assessment order as under: Total toss as per return of income RS. (-) 9,17,145/- Add: On account of toss of sale of grey cloth as per para-6 Rs. 23,27,617/- Add: On account of difference in contra confirmation as per para-8 Rs. 71,68,534/- Add: On account of cessation of liability as per para- 10 Rs. 15,85,477/- . : Add: On account of bogus sundry creditors as per -para-11 Rs. 33,29,467/- ITA No.136/Ahd/2020 4 Assessed Income Rs.1,34,93,950/- The assessee filed additional evidences before the ld.CIT(A) which theld.CIT(A) forwarded to the AO for his comments ,after considering which he admitted all the evidences and based on the remand report of the AO, submissions made by the assessee and considering all the evidences filed by the assessee, the ld.CIT(A) confirmed all the additions made by the AO. 7. Aggrieved by the same, the assessee has now come up in appeal before us. The assessee had challenged the ex parte assessment order passed by the AO before the ld.CIT(A) also, who dismissed this contention of the assessee finding that the AO had followed the due procedure of law and passed a speaking order after giving sufficient opportunity of hearing to the assessee. His finding in this regard at para-5 of the order is as under: “5. Ground no.l of appeal is against the action of the AO in passing the assessment 144 of the Act. The appellant has not furnished any details or evidences against the passing of order u/s 144 of the Act. From the assessment order, I find that the AO has followed due procedure while passing a speaking order. The AO had offered opportunities of being heard to the appellant by issuing various statutory notices, as is narrated in the assessment order. In view of these facts, I find no infirmity in the action of the AO and the action of the AO in passing the assessment order u/s 144 of the Act is upheld.” 8. Before us, the ld.counsel for the assessee was unable to point out any infirmity in the finding of the ld.CIT(A) to the effect that the AO had not violated due procedure of law and passed a speaking order in the present case after affording due opportunity of hearing to the assessee. We have also gone through the assessment order, and we find that before making various additions/disallowances, the ITA No.136/Ahd/2020 5 AO had issued show cause notice to the assessee, considered the reply filed by the assessee, and thereafter proceeded to make various additions based on the material evidences and submissions filed whatever by the assessee before him. The Ld.counsel for the assessee was unable to point out any instance of the AO having passed the order in violation of law, without affording any opportunity of hearing to the assessee. Therefore, we agree with the ld.CIT(A) that there is no infirmity in the action of the AO in passing the assessment order under section 144 of the Act,. 9. Even otherwise, we find that there has been no miscarriage of justice in the present case, because, as is evident from the appellate order of the ld.CIT(A) that whatever additional evidences the assessee sought to present for pleading its case, were all entertained and admitted by the ld.CIT(A) while deciding the assessee’s appeal. Therefore, there cannot be any grievance to the assessee to the exparte order passed by the Ld.AO, since the assessee has been heard by the appellate authority to its complete satisfaction, after considering all evidences and submissions filed by the assessee. For this reason, we see no merit in the ground raised by the assessee challenging passing of assessment order under section 144 of the Act. Ground no.2.4 raised by the assessee is therefore dismissed. 10. Ground No.2.1(a) relates to disallowance of loss on sale of grey cloth claimed by the assessee amounting to Rs.23,27,617/-. 11. The facts relating to the said loss are in relation to purchase and sale of grey cloth of 86,208 meters purchased by the assessee from M/s.Pratiksha Textiles for a sum of Rs.1,03,82,892/- at the rate of 120.44 per meter and sold to Rameshwar Sales Corporation ITA No.136/Ahd/2020 6 for a consideration of Rs.80,55,275/- at the rate of Rs.93.44 per meter. 12. We are not in agreement with the ld.CIT(A) in confirming the disallowance of the aforesaid business loss of Rs.23,27,617/-. The reasons for the same being that, as transpires from orders of the AO and the ld.CIT(A) there is no shred of evidence with the Revenue authorities doubting the purchase and sale transaction which had resulted in impugned business loss. Infact the inquiry conducted by the AO under section 133(6) of the Act from the party from whom purchases were made i.e. M/s.Pratiksha Textiles confirmed the purchase of grey cloth for the impugned year by the assessee. During the appellate proceedings, the assessee filed complete address and copy of purchase bills and delivery challans along with bank statement reflecting the impugned transactions in respect of M/s.Pratiksha Textiles and Rameshwar Sales Corporation, and we have noted thatthe AO in his remand report admitted to the fact after appraising all the evidences, as above filed before him that prima facie the transactions appears to be genuine. The relevant portion of the remand report containing the above finding of the AO reproduced at page no.5 of the CIT(A)’s order is as under: "2. Vide letter under reference, directions had been issued to the undersigned to verify the genuineness of the loss incurred on sale of goods on the basis of the evidences submitted by the assessee after providing it an opportunity of being heard 3. The issue wise reply after verification of additional evidences and conducting enquiries are submitted as under :- 3.1 Loss on account of Purchase/Sale 3.1 During the course of assessment proceedings the AO observed that the assesee hadpurchased 86208 Mtrs of Grey Cloth @Rs 120.44 from Pratkisha Textiles for a sum ofRs.1,03,82,892/ and on the same day sold the entire quantity to Rameshwar SalesCorporation @ 93.44/- for a consideration of Rs 80,55,275/- at a loss of Rs 23,27,617/-observing the following :- ITA No.136/Ahd/2020 7 i. The assessee had not been able to explain the rationale behind purchasing the greycloth at a high price from PratikshaTexitle and selling the same at the lower price toRameshwar Sales Corporation on the same day. ii. The assessee had not been able to prove the purchase and sale with supportingevidences i.e purchase and sales bills along with LAR. 3.1.2 Inferences on the Additional Evidences produced by the assessee In this regard, the assesssee vide letter dated 25.4.2019 submitted the complete address and copy of purchase bills and delivery challan along with Bank statement reflecting the transaction in respect of M/s Pratkisha Textile and M/s.Rameshwar Sales. The assessee also submitted addresses of the creditors. In order to verify the genuineness of the claim made by the assessee, third party enquiries were conducted in respect of these parties . The purchase and sales ledger of Pratiksha Textile and Rameshwar Sales Corporation submitted by the assessee were correlated and the following table illustrates the findings Date Purchase of Grey Cloth From Prathiksha Textile (In Rs) Sale of Grey Cloth to Rameshwar Sales Corporation (In Rs) Loss claimed in Rupees 21.12.2014 1489241 1150440 -338801 11.01.2015 1490630 1156890 -333740 24.01.2015 1711394 1331050 -380344 18.02:2015 1822113 1415520 -406593 08.03.2015 1833234 1576315 -256919 28.03.2015 2036280 1576315 -2176362 The above chart reveals that it is not a one-off instance where the assessee had claimed loss on the transaction related to purchased 'Grey Cloth' from 'Pratiksha Textile ' and Sale to 'Rameshwar Sales Corporation'. Thus the claim of the assessee that it had sold the goods to Rameshwar Sales Corpration just to maintain its business relation and commitments is a farce explanation. The AO has not made the disallowance doubting whether such transaction took place or not, but has made the disallowance on the genuineness of the transaction. Therefore although prima fade the transaction may appear to be genuine, but the pattern and correlated evidence clearly indicate a certain pattern which indicates a modus operand! adopted by the assessee to claim fabricated bogus losses. Thus it is kindly requested that the additional evidence justifying these transactions may not be accepted and the disallowance made by the Assessing Officer may kindly be sustained, if deemed fit.” 13. The only comment of the AO and the reasons given by the AO for confirming his action of finding the transactions to be bogus is that since facts before him revealed that grey cloth was purchased at ITA No.136/Ahd/2020 8 a higher rate and sold at a lower rate on the same day, that the transactions taking place between the same parties appeared tobe a modus operandi adopted by the assessee to claim fabricated bogus loss. On the basis of investigation conducted by the AO and all thematerial and evidences placed before him, this conclusion surely could not have been arrived at by theAO, as admitted by him by stating that it appears to be genuine transactions. His finding of the transactions therefore being bogus is only figment of the imagination and based on surmises and conjectures and that too without any basis. The assessee has filed all evidences to prove genuineness of the transactions, which is not disputed by the Revenue. The AO has found no infirmity in the evidences filed, as is evident from his remand report also, therefore, we hold there is no basis for holding the impugned transactions to be as bogus/sham transactions and disallowance of loss therefore to the extent of Rs.23,27,617/-, we hold, is not sustainable as per the facts of the case before us. 14. We have noted from order of the ld.CIT(A) contained at para 6.2 to 6.4 that theld.CIT(A) found that the assessee did not file necessary details and evidences to justify genuineness of the transactions with regard to the following: i) Justification for goods sold on loss on the same day. ii) List of parties, their address and confirmations to whom sale was made. iii) Evidence of goods delivered by PratikshaTextiles; iv) Whether other sales was also made in similar manner. v) Details of transportation of goods, vehicle number, payments to transporter, evidence of goods received by the buyer. 15. As far as genuineness of the purchases made from M/s.Pratiksha Textiles is concerned, there is no occasion for questioning the same by the ld.CIT(A) by asking for evidences of goods delivered by M/s.Pratiksha Textiles considering the fact that the purchases were confirmed by the said party itself on inquiry ITA No.136/Ahd/2020 9 conducted by the AO, and the AO found no reason to doubt the confirmation from the said party regarding aforesaid transactions. In the absence of the same, onus to prove genuineness of the purchases made from M/s.Pratiksha Textiles had not shifted to the assessee, and he was not required to file any further evidences to prove genuineness of the purchases. 16. As for the justification for goods sold for loss on the same day, we find that the assessee did file an explanation stating that it had entered into an agreement with the party towhom the goods were sold i.e. Rameshwar Sales Corporation earlier only, for the goods to be sold at an agreed price; that it was a pre-determined and pre- agreed sale contract and the assessee could not have been altered the sales price in any manner. This is the justification given by the assessee for the transactions to have resulted in loss, and the Revenue authorities having not pointed out any infirmity inthis explanation of the assessee by conducting further inquiries from parties to whom the sales were made, the assessee could not have been asked to justify theloss any further. 17. As per the list of the parties whom the sales were made, the same were also supplied by the assessee to AO, as is evident from the remand report, and as noted above, no infirmity was pointed out by the AO and the information furnished by the assessee regarding the sale transactions with respect to grey-cloth. Therefore, all in all, as noted above by us, except for doubting on account of the fact that goods were purchased and sold on the same day at a loss, the AO had no other material on hand to doubt the genuineness or the veracity of the transactions, which otherwise was suitably established by the assessee with all evidences, which were examined and found to be in order by the AO in his remand report. ITA No.136/Ahd/2020 10 In view of the above, we hold that there is no basis for disallowing theloss of Rs.23,27,617/- to the assessee and the disallowance so made is therefore directed tobe deleted. Thus, ground no.2.1(a) of the assessee is therefore allowed. 18. Taking up the grievance raised by the assessee in Ground No.2.1(b), we have noted from the order of the authoritybelow that the said addition relates to unreconciled difference in the outstanding balance of the following sundry creditors: Sr.No Name of the Sundry Creditor Closing balance as per Assessee's books of accounts Closing balance as per contra confirmation obtained u/s 133(6) Difference 1 Gujarat Plast Industries 1,15,609 8881 1,06,728 2 Yug International (P) Ltd 57,11,806 0 57,11,806 3 Shivbaba Textile 13,79,000 29000 13,50,000 Total 71,68,534 19. We have heard both the parties, and have gone through the assessment order, order of the ld.CIT(A), additional evidences filed by the assessee before us in the PB in the form of copy of accounts of these parties from the earlier years right upto the impugned year, both as per its own books and as per the books of accounts of the said parties, and have also gone through the remand report filed by the AO after cross-examining all the evidences. 20. After going through the above, we find that the finding of both the AO and theld.CIT(A) that the outstanding balance with respect to all the above parties were unreconciled, is contrary to the facts on record. As noted above, the assessee had filed copies of ledger account of all these parties in its own books of accounts as well as ITA No.136/Ahd/2020 11 copy of its own account in the books of the said parties right from the preceding financial year. In the case of Gujarat Plast Industries, the copy of account of the assessee in the books of Gujarat Plast Industries was filed right from 1.4.2013 to 31.3.2017. Similarly, the copies of the same were placed before us in PB No.57. Similarly, copy of Gujarat Plast Industries in the books of the assessee right from 1.4.2012 to 31.3.2015 for each financial year involved was filed to the AO, copies of which were placed before us at PB Page No.58 to 60. Similarly, in the case of Shivbaba Textile, copy of account of the assessee in the books of Shivbaba Textiles for the impugned year i.e. financial year 2014-15 relevant to Asst.Year 2015-16, which is impugned before us, was filed, copy of which was placed before at PB page no.53. Similarly, copy of account of Shivababa Textiles in the books of the assessee in the impugned year was filed, which is placed before us at PB Page No.54 & 55. The assessee had maintained apparently two separate accounts of Shivbaba Textiles; one reflecting payments to Shivbaba Textiles only vide banking channels alone, and other accounts named “Shivababa Textile Cr.” reflecting all purchases made by the assessee from the said parties including the opening credit balance. On compiling two accounts together, which showed a balance of Rs.15,29,000/- (Dr.) in thepayment account and Rs.15,29,000/- in the credit account; net credit balance outstanding of thesaid party amounted to Rs.29,000/- which tallied with the balance reflected by Shivababa Textiles in its books resulting to the assessee. 21. With respect to Yug International Pvt. Ltd. copy of account of the assessee in the books of the said party from the year beginning 1.4.2011 right upto 31.3.2015 was filed to the AO, copies of which ere placed before us at PB page no.107 to 112. Similarly, the copy of the account of the said party in the books of the assessee for the ITA No.136/Ahd/2020 12 said period, 1.4.2011 right upto 31.3.2015 was also filed to the AO. Copies of which were placed before us at Page No.113 to 117. 22. As is evident from the bare perusal of these accounts, the discrepancies could well have been culled out from the entries reflected bythe respective parties in their booksof accounts. True, the assessee did not file a specific reconciliation of the outstanding balance on these parties as reflected in its own books, and that reflected in the books of accounts of the said party, but reason for the difference was very much apparent from copies of the accounts of these parties submitted by the assessee to the AO; both in its own books and in the books of other parties. As pointed out by the ld.counsel for the assessee, in the case of Shivbaba Textiles, it was clear from the documents on record that there was no difference at all in the outstanding balance of the said party, as reflected in the books of accounts of the assessee and the balance of the assessee, reflected in the books of accountsof the said party. As for other two parties, these ledger accounts clearly demonstrated that only entries reflected by both the parties was in relation to bills of purchases raised by the said party, on the assessee, and the payments made by the assessee through banking channels to the said party. There is not a single transaction of cash reflected either of the accounts filed by the assessee or copy of the accounts filed by the said party. The ld.counsel for the assessee pointed out that difference was mainly on account of the fact that certain bills remained to be accounted for either by the said party in its books or by the assessee in its books of accounts and all these bills were raised in the earlier years, and not a single bill was raised in the impugned year either in relation to the transactions with Gujarat Plast Ltd or in relation to Yug International P.Ltd.; that the only transactions in the impugned year with this party was of payments made to the said parties. Therefore, ITA No.136/Ahd/2020 13 the reason for difference in the outstanding balance of the parties as per the assessee’s books of accounts and as per the balance of the assessee in the books of accounts of the said parties, was clearly discernible from theledger accounts filed to the AO and the ld.CIT(A), who we find, have not cared to go through the same before holding that the balances were not reconciled by the assessee. On the contrary, we hold that evidences filedby the assessee clearly brought out the reasons for difference in the outstanding balance, and the Revenue authorities having not been able to see through the evidences and accounts, which were placed before him, have erred in holding that the differences are unreconciled. The addition, therefore, made on this basis and confirmed by the ld.CIT(A), we hold, is not sustainable as per the facts of the case, and we direct the deletion of the addition amounting to Rs.71,68,534/-. The ground no.2.1(b) is therefore allowed. 23. Grievance raised by the assessee in ground no.2.1(c) is in relation to the addition on account of purported cessation of liability of the following sundry creditors, noting the fact that their opening and closing balances remained the same, since last three years: Sr. No Name of the sundry creditors F.Y. 2012-13(A.Y. 2013- 14) F.Y. 2013-14(A.Y. 2014- 15) F.Y. 2014-15(A.Y. 2015- 16) Op.Bal. Clos.Bal Op.Bal. Clos.Bal Op.Bal. Clos.Bal 1 Amit ProcessorsP Ltd 700000 700000 700000 700000 7,00,000 7,00,000 2 Dhruvin Textile 664335 664335 664335 664335 6,64,335 6,64,335 3 Shiv Shakti Textiles 221142 221142 221142 221142 2,21,142 2,21,142 Total 1585477 1585477 1585477 1585477 1585477 1585477 The addition made on account of the same and confirmed by the ld.CIT(A) amounted to Rs,15,85,477/-. ITA No.136/Ahd/2020 14 24. We have heard both the parties, and have gone through the assessment order, order of the ld.CIT(A), additional evidences filed by the assessee before us in the PB in the form of copy of accounts of these parties from the earlier years right upto the impugned year, both as per its own books and as per the books of accounts of the said parties, and have also gone through the remand report filedby the AO after cross-examining all the evidences. 25. We are not in agreement with order of the ld.CIT(A) confirming addition made on account of outstanding balances of the aforesaid three parties allegedly ceasing to exit. 26. With respect to outstanding balance pertaining to Amit Processors P.Ltd. of Rs.7.00 lakhs, we find that the assessee had explained that the outstanding balance so accounted was an incorrect entry made by the assessee in its books of accounts. It was pointed out by the assessee that outstanding balance of Rs.7.00 lakhs was on account of cheque received by the assessee from one Ambika Textiles in financial year 2010-11, which was incorrectly accounted for in the ledger accounts of Amit Processors Pvt. Ltd; that account of Amit Processors was settled in the said year itself. All payments onaccount of its outstanding balance as at the beginning of the year at Rs.96,45,878/- having been made during the impugned year by the assessee and no further purchases made from the said party. The only credit entry reflected in the said account was of Rs.7.00 lakhs which was on account of cheque received on 31.5.2010 which apparently received from Ambica Textiles wrongly added in the accounts of Amit Processors P.Ltd. The ledger accountof Amit Processors for financialyear 2010-11 reflecting the said facts was placedbefore us at PB Page no.73. Copy of the bank accounts, wherein cheque of Rs.7 lakhs was received on ITA No.136/Ahd/2020 15 31.5.2010 was filedbefore us at PB Page No.74, and also copy of the accounts of the assessee in the Ambica Textiles for the financial year 2010-11 was filed before us at PB Page No.76 reflecting the fact of payment of Rs.7 lakhs of cheque by Ambica Textiles to the assessee on 31.5.2010. Similarly, the copy of account of Ambica Textiles in the books of the assessee for the period was also filed, pointing out that outstanding balance of the assessee in the books of Ambica Textiles differed on account of this entry of Rs.7.00 lakhs not accounted for by the assessee in its books in the accounts of Ambica Textiles, but wrongly accounted for in the account of Amit Processors P.ltd. Thus, it is evident from the above that the assessee had clearly established that outstanding balance of Rs.7.00 lakhs in the case of Amit Processors P.Ltd. had nothing to day with the said party. 27. We have noted that the AO has not gone through all these evidences filed before it, nor the ld.CIT(A), and therefore their finding to the effect that the amount of Rs.7.00 lakhs represented outstanding balance in the account of Amit Processors for the past three years is an incorrect finding. For this reason alone, the assessee had established that the balance of Rs.7.00 lakhs in the account of Amit Processors P.Ltd. did not belong to the said party at all. There is no reason for making any addition of the same under section 41(1) of the Act. 28. As for other two parties viz. Dhruvin Textiles and Shiv Shakti Textiles, the onlybasis for holding that these liabilities ceased to exit was that there were outstanding for three years and no confirmation forthcoming from the said party regarding the outstanding balance. The above facts by itself did not establish that any benefit had accrued to the assessee on account of cessation of liability on this ITA No.136/Ahd/2020 16 count. Firstly the fact that the liability on account of these parties had ceased to exist cannot be established merely by the fact that the balance outstanding had remained unclaimed for last three years, and as long as the assessee reflecting this amount as outstanding for payments, there could be no case for cessation of liability. The issue is squarely covered by the decision of Hon’ble jurisdictional High Court in the case of CIT Vs. Bhogilal R. Atara, 43 taxmann.com 55. In view of the above addition made onaccount of cessation of liability as per the provisionsof section 41(1) of the Act amounting to rs.15,85,477/- is directed tobe deleted. The ground no.2.1(c) of the assessee is allowed. 29. The ground no.2.1(d) raised by the assessee is against the addition made onaccount of bogus sundry creditors relating to the following two parties viz. (i) Shivshakti Traders of Rs.2,21,142/-, and (ii) Rudra Coats & Cotton of Rs.31,08,325/-, thus aggregating to rs.33,29,467/-. The same was confirmed by the ld.CIT(A). 30. We have heard both the parties, and have gone through the assessment order, order of the ld.CIT(A), additional evidences filed by the assessee before us in the PB in the form of copy of accounts of these parties from the earlier years right upto the impugned year, both as per its own books and as per the books of accounts of the said parties, and have also gone through the remand report filed by the AO after cross-examining all the evidences. 31. We are not in agreement with the ld.CIT(A) in confirming the aforesaid additions. Clearly, the addition has been made holding these sundry creditors to be bogus in the absence of the assessee not being able to establish the genuineness of the transactions. ITA No.136/Ahd/2020 17 Since the assessee was unable to produce any supporting records or evidences in the nature of purchase bills/vouchers relating to the same, the ld.CIT(A) has held that since the assessee has failed to establish the aforesaid two parties were existing, he held, clearly bogus creditors. His finding to this effect is at para 9.2 and 9.3 of the order. But a perusal of the evidence filed by the assessee before the AO in the form of ledger accounts of these parties reveal that these outstanding balances of the aforesaid two parties are all balances of earlier years; that no transaction of purchase took place with these parties during the impugned year. In the case of Shiv Shakti Traders, we have noted that the AO made additionof the outstanding balance of Rs.2,21,142/- noting to be outstanding for the past twoyears, and holding that the liability ceased to exit. Therefore, it is clearly beyond doubt that these sundry creditors balance did not pertain to any transaction during the year, but were all outstanding balances of preceding year. Holding these balances to be bogus, can only mean and as has held by theld.CIT(A) also that there were in fact no transactions entered with these parties,and transaction if any entered were of sham/bogus. Since the transactions were entered into in thepreceding year the addition, if any, could have been made holding them to be bogus in he said year only. There cannot be case of treating the outstanding balance as bogus and making the addition of the same. In view, therefore, the addition made by treating the outstanding balance of creditors amounting to Rs.33,29,467/- is held to be not sustainable, and accordingly directed to be deleted. Thus, the ground no.2.1(d) of the appeal is allowed. 32. In effect, all the additions confirmed bythe ld.CIT(A) stand deleted on merit. ITA No.136/Ahd/2020 18 33. The ground no.3.1 raised by the assessee is alternative ground raised seeking telescoping of addition made and taking holistic view of the matter. 34. Since all the additions confirmed by the ld.CIT(A) have been deleted by us above, the ground no.3.1 has no relevance and the same is therefore dismissed, as being academic. 35. The ground no.4.1 raised by the assessee is with respect to set off carry forward of business loss of earlier years. 36. No facts have been brought to our notice regarding the brought forward loss of earlier years claimed to be set off by the assessee in the impugned year. Even otherwise, since all the additions have been deleted by us, the assessee is restored back to the returned loss of Rs.9,17,145/- andtherefore there remains no case for claiming any set off of brought forward loss. Thus, the ground raised by the assessee is no longer relevant, and dismissed accordingly. 37. In the result, the appeal of the assessee is partly allowed in above terms. Order pronounced in the Court on 4 th May, 2023 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 04/05/2023 vk*