Outstanding balances for more than one year can be treated as income of the Assessee?
There are various issues which were involved in the case before Hon’ble ITAT bench of Delhi in the case of ACIT v. M/s. Delmos Aviation Pvt. Ltd. ITA No. 7894/Del/2019 (AY 2016-17).
The court vide its order dated 06.10.2023 has held as under:-
The first issue was with regard to the addition of Rs. 20,00,37,558/- u/s 41 of the Act. The issue was whether outstanding balances for more than one year were added to the income of assessee. Reference was made to order of CIT(A) wherein CIT(A) quoted relevant decision of Hon’ble ITAT in the case of Smt. Sudha Loyalka, New Delhi v. ITO in ITA No. 399/Del/2017 wherein it was held after discussion on various decisions that:-
• Revenue is to justify how ingredients of section 41 are fulfilled to warrant any addition.
• Burden is on the revenue to prove that liability ceases to exist.
• Revenue is to establish with evidence as to how sum due to creditors can be treated as trading liability in respect of which any deduction/expense was ever allowed.
• So long as liability person is recognising liability it can be ceased by bilateral act (Apex Court – Sugaoli Sugar Works v. CIT)
ITAT has observed as under:
- Parties have running balances.
• Transaction with said parties was also accepted in assessment proceedings of earlier years.
• Primary onus not discharged by AO.
Thus, Hon’ble ITAT upholds the order of ld. CIT(A) deleting the addition.
The second issue was with regard to addition of Rs. 2,27,64,303/- by disallowing 50% of handling charges. Outstanding balance already added by AO as above, so ld. AO also made an addition of 50% of handling expenses expenses.
ITAT held that expenses cannot be disallowed merely on the basis of non-payment to vendors and no evidence brought on record to substantiate that expenses incurred are not genuine. So the addition was deleted and the appeal of the assessee was allowed.
The third issue was with regard to the addition of Rs. 2,45,00,000/- u/s 68 of the Act.
The ITAT after analysis of the facts of the case was restored back to the file of AO for want of verification of bank statements.
The fourth issue was with regard to the addition of Rs. 2,84,270/- by disallowing PMS Fees;
ITAT held that the PMS fees be allowed as deduction as the shares are held as stock in trade.
The another issue was with regard to the addition of Rs. 8,40,255/- by making disallowance u/s 14A of the Act.
ITAT restricted the disallowance to the extent of dividend income earned.
The last issue3 was with regard to the addition of Rs. 53,90,000/- on account of increase in remuneration paid to employees.
ITAT observed that the Assessee first time submitted before CIT(A) that the increase in remuneration was on account of increase in rent by the landlord of accommodation provided to the director. So matter restored back to the file of AO for verification of said claim of assessee.
The copy of the order is as under:
