CIT Vs. HOTLINE ELECTRONICS LTD

JUDGEMENT

(1.) In this appeal by the revenue filed under Section 260A of the Income Tax Act, 1961 (the Act, for short), the order of the Income Tax Appellate Tribunal (The Tribunal, for short) dated 28.01.2011 in ITA No.2635/Delhi of 2010 (assessment year 2005-06) is challenged.

(2.) The respondent assessee is a limited company engaged in the business of manufacturing and trading in television sets. In respect of the assessment year 2005-06, it filed a return of income declaring income of Rs.1,79,90,660/-. The return was processed under Section 143(1) of the Act but was later selected for scrutiny and notice was issued to the assessee under Section 143(2) asking for details in support of the return. In the course of the assessment proceedings, the Assessing Officer called upon the assessee to furnish the details of advances received from customers and also show when those advances were repaid. From the reply filed by the assessee, the Assessing Officer noticed that there were several advances which had not been repaid till date. He, therefore, called upon the assessee to explain why in the case of advances which had not been repaid, it should not be held that there was a cessation of liability. The assessee respondent by saying that the amounts were in the nature of credit balances which arose on account of credit notes issued in respect of rate difference, difference in calculation of raw material costs or sales returns. On these facts, the Assessing Officer was of the view that the assessee s reply was very general without being supported by any documentary evidence. He held that the following balances were outstanding till date and no confirmation was furnished by the assessee in respect of them: <FRM>JUDGEMENT_4977_ILRDLH21_2011_1.html</FRM>

(3.) The assessee appealed and contended that it had given advances to parties for purchases and also received advances against supplies, that it would be evident from the balance sheet that the credit balances in favour of the customers represented a running account with them and were pending adjustment for claims and counter claims and that in these circumstances it is not permissible to hold that the assessee was no longer liable to return the amounts to the creditors. It was thus contended that the addition was unsustainable.