Sh. Mahavir Parshad, Kurukshetra V. ITO, Kurukshetra

CO 78/CHANDI/2011

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8675 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india
• Section: 131; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, JM ITA NO. 1155/CHD/2011 ASSESSMENT YEAR : 2007-08 I.T.O. WARD 1 V MAHAVIR PARSHAD KURUKSHETRA PROP. M/S GAGAN TRADING CO SHOP NO. 29, ANAJ MANDI PEHOWA (KURUKSHETRA) AANPP 3942 M CROSS-OBJECTIONS NO. 78/CHD/2011 ARISING OUT OF ITA NO. 1155/CHD/2011 ASSESSMENT YEAR : 2007-08 MAHAVIR PARSHAD V I.T.O. WARD 1, KURUKSHETRA PROP. M/S GAGAN TRADING CO SHOP NO. 29, ANAJ MANDI PEHOWA (KURUKSHETRA) ITA NO. 1209/CHD/2011 ASSESSMENT YEAR : 2007-08 MAHAVIR PARSHAD V J.C.I.T. KURUKSHETRA PROP. M/S GAGAN TRADING CO SHOP NO. 29, ANAJ MANDI PEHOWA (KURUKSHETRA) (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI AKHILESH GUPTA ASSESSEE BY: NONE DATE OF HEARING 5.6.2013 DATE OF PRONOUNCEMENT 11.6.2013 O R D E R PER T.R.SOOD, A.M THE APPEAL BY THE DEPARTMENT AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LD. CIT(A ), KARNAL DATED 16.9.2011 AND THE ASSESSEE HAS FILED CROSS-OB JECTIONS OUT OF ITA NO. 1155/CHD/2011. 2 ITA NO. 1155/CHD/2011 DEPARTMENTAL APPEAL 2. FOLLOWING GROUND HAS BEEN RAISED BY THE DEPARTME NT IN THIS APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 83,81,902/- MADE U/S 41(1) OF THE ACT ON ACCOUNT OF CESSATION OF LIABILITY APPEARING IN THE NAME OF SHR I AMIT KUMAR, PROP. SINGLA TRADING CO. 3. THESE CASES CAME UP FOR HEARING FOR THE FIRST TI ME ON 25.1.2012 AND THE HEARING WAS ADJOURNED TO VARIOUS DATES ON 9.4.2012, 9.5.2012, 26.6.2012, 30.8.2012, 28.10.201 2 AND 21.1.2013 MAINLY AT THE REQUEST OF THE LD. COUNSEL OF THE ASSESSEE. THEREAFTER THE BENCH DID NOT FUNCTION ON 14.2.2013 AND 4.4.2013. THE CASES WERE ULTIMATELY FIXED FOR HEARING FOR TODAY I. 5.6.2013 AND NOTICE THROUGH RPAD WAS ISSUE D AGAIN BUT NEITHER ANYBODY APPEARED ON BEHALF OF THE ASSES SEE NOR ANY APPLICATION FOR ADJOURNMENT HAS BEEN MOVED. IN THESE CIRCUMSTANCES, WE WERE LEFT WITH NO OPTION BUT TO P ROCEED THE APPEALS ON EXPARTE BASIS. 4. AFTER HEARING THE LD. DR FOR THE REVENUE WE FIND THAT ASSESSMENT WAS COMPLETED U/S 144 BECAUSE NOBODY APP EARED DESPITE VARIOUS NOTICES. IN FACT LAST NOTICE WHICH THE NOTICE SERVER TRIED TO SERVE ON THE ASSESSEE ON 29.12.2009 WAS REFUSED BY THE ASSESSEE. DURING THE ASSESSMENT PROC EEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN A LIABILITY OF RS. 83,81,902/- IN THE NAME OF M/S SIN GLA TRADING CO. IT WAS FURTHER NOTICED THAT THE FAMILY MEMBERS OF M/S SINGLA TRADING CO. I.E. S/SHRI MAM CHAND AND HIS FA MILY EXPIRED IN MARCH 2008 AND NOBODY WAS LEFT TO CLAIM THIS 3 LIABILITY. ACCORDINGLY TO THE ASSESSING OFFICER TH IS LIABILITY CEASED TO EXIST AND ACCORDINGLY A SUM OF RS. 83,81 ,902/- WAS ADDED TO THE INCOME OF THE ASSESSEE U/S 41(1) OF TH E ACT. 5. BEFORE THE LD. CIT(A) IT WAS ADMITTED THAT SHRI AMIT KUMAR PROP. SINGLA TRADING CO. COMMITTED SUICIDE AND HIS BODY ALONG WITH THE BODIES OF HIS FAMILY MEMBERS WERE FOUND FR OM SYL CANAL, JYOTISAR, KURUKSHETRA ON 31.3.2008. HOWEVER , IT WAS SUBMITTED THAT IT CANNOT BE SAID THAT LIABILITY CEA SE TO BE THERE BECAUSE AFTER THE POLICE CASE IS DECIDED LEGAL HEIR S MAY APPEAR. FURTHER THOUGH THE ASSESSEE HAD LOST HIS BO OKS BUT AS PER THE BOOKS OF M/S SINGLA TRADING CO. OUTSTANDIN G BALANCE WAS ONLY RS. 30,97,931/-. THIS FACT WAS ESTABLISHE D BY POLICE FROM THE BOOKS OF SINGLA TRADING CO. AND THE STATE MENT OF SHRI JANAK RAJ, RAJINDER SINGH AND SURAJ BHAN WHO WERE T HE ACCOUNTANTS. FURTHER SHRI AMIT KUMAR HAS OBTAINED LOAN FROM ICICI BANK THROUGH THE ASSESSEE WHO IS WM AGENT OF THE BANK AND STOOD GUARANTOR OF SHRI AMIT KUMAR. A LETTER F ROM ICICI BANK WAS FURNISHED BEFORE THE LD. CIT(A) SHOWING TH AT THE ASSESSEE MIGHT HAVE TO PAY. 6 THE LD. DR FOR THE REVENUE WAS HEARD. 7 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DR F OR THE REVENUE AND THE RELEVANT MATERIAL, WE FIND THAT TH IS ISSUE HAS BEEN ADJUDICATED BY THE LD. CIT(A) VIDE PARAS 1.14 AND 1.15 WHICH ARE AS UNDER: THE ISSUE IS CONSIDERED. THE FACTS ARE THAT THE AO NOTED THAT TRADING LIABILITY OF RS. 83,81,902/- IN THE NAME OF M/S SINGLA TRADING CO. PEHOWA WAS CEASED SINCE THE PROP. OF TH E CONCERN ALONGWITH ALL THE FAMILY MEMBERS EXPIRED IN 4 MARCH,2008 AND AS SUCH NOBODY LEFT TO CLAIM THESE L IABILITIES. THE APPELLANT IN THE WRITTEN SUBMISSIONS SUBMITTED THAT DEEMED INCOME U/S 41(1) CAN BE ADDED TO THE INCOME OF AN ASSESSEE IN THE YEAR IN WHICH THE LIABILITY ACTUALL Y CEASED. THE APPELLANT FURTHER SUBMITTED THAT IT IS WRONG TO ASS UME THAT THERE WILL BE NO LEGAL HEIR OF THE SAID SH. AMIT KU MAR. ONCE THE POLICE CASE IS DECIDED, MANY MAY APPEAR TO CLAI M HIS PROPERTY. FURTHER, THE AO HAS NOT TRIED TO ASCERTAI N THE BALANCE PAYABLE BY THE APPELLANT ON THE DATE OF DEA TH OF AMIT KUMAR. THOUGH HE LOST HIS BOOKS YET THE BALANCE REC EIVABLE BY SH. AMIT KUMAR FROM THE APPELLANT WAS ONLY RS. 30,9 7,931/- IN THE NEXT YEAR. THIS FACT IS ESTABLISHED FROM THE ST ATEMENTS OF SH. JANAK RAJ, RAJINDER SINGH & SURAJ BHAN, ACCOUNT ANTS, MADE TO THE POLICE ON THE BASIS OF THE BOOKS OF M/S SINGLA TRADING CO. AND ENCLOSED A COPY OF THEIR STATEMENT. IN VIEW OF THIS FACT, THE APPELLANT SUBMITTED THAT HE WAS NOT TO PAY RS. 83,81,902/- TO M/S SINGLA TRADING CO. WHICH WAS ADD ED BY THE AO IN HIS INCOME. THE APPELLANT ALSO SUBMITTED THAT HE GOT ARRANGED LOAN TO SH. AMIT KUMAR FROM ICICI BANK SIN CE HE IS A.W.M. AGENT OF THE BANK AND STOOD GUARANTOR OF THE LIABILITY OUTSTANDING IN THE NAME OF SH. AMIT KUMAR AMOUNTING TO RS. 77,28,000/-. IN VIEW OF THE FACTUAL POSITION DISCUSSED ABOVE, TH E TRADING LIABILITY IN THE CASE OF M/S SINGLA TRADING CO. CAN NOT BE SAID TO BE CEASED ON 31.3.2007 AND HENCE ADDITION THEREOF M ADE BY THE AO U/S 41(1) CANNOT BE SUSTAINED AND HENCE IS D IRECTED TO BE DELETED. WE ARE OF THE OPINION THAT THE LD. CIT(A) HAS ADJUD ICATED THE ISSUE CORRECTLY BECAUSE SOME LEGAL HEIRS MAY LATER ON MAKE THE CLAIM AGAINST THE RECEIVABLES BY SINGLA TRADING CO. MOREOVER THE ASSESSEE MAY BE LIABLE TO PAY TO THE BANK AND I N ANY CASE THE ASSESSEE HAS NOT WRITTEN OFF THE AMOUNT DURING THE YEAR, THEREFORE, THE LIABILITY CANNOT BE SAID TO HAVE CE ASED. IN THIS BACKGROUND WE FIND NOTHING WRONG IN THE ORDER OF TH E LD. CIT(A) AND CONFIRM THE SAME. 8. APPEAL OF THE DEPARTMENT IS DISMISSED. ITA NO. 1209/CHD/2011 ASSESSEES APPEAL 9 THIS APPEAL IS LATE BY TWO DAYS SINCE THE APPEAL IS OF TWO DAYS LATE AND THEREFORE, THE SAME IS CONDONED. 5 10 FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE IN THIS APPEAL: 1 THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE WHILE UPHOLDING THE ADDITION OF RS. 25,74,652/- IN THE INCOME OF THE ASSESSEE ON ACCOUNT OF GROSS PROFIT BY INCREASING GROSS PROFIT RATIO. 2 THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE WHILE UPHOLDING THE ADDITION OF RS. 2,60,000/- ON A CCOUNT OF CESSATION OF LIABILITY TOWARDS M/S LACHHI RAM R AMESH CHAND. 11 GROUND NO. 1 AS DISCUSSED WHILE ADJUDICATING T HE REVENUES APPEAL, THE ASSESSMENT WAS COMPLETED U/S 144 BECAUSE NO REPRESENTATION WAS MADE BEFORE THE ASSES SING OFFICER DESPITE NOTICE. DURING THE ASSESSMENT PROC EEDINGS THE ASSESSING OFFICER NOTICED THE ASSESSEE HAS SHOWN SA LES OF RS. 10.72 CRORES DURING THE YEAR AND GROSS PROFIT WAS SHOWN AT RS. 27,88,996/- WHICH WAS ABOUT 2.95% WHEREAS IN TH E IMMEDIATELY PRECEDING YEAR THE GP RATE SHOWN BY THE ASSESSEE WAS AT RS. 7.76%. SINCE NO BOOKS AND DETA ILS WERE FILED, THE RESULTS DECLARED BY THE ASSESSEE WERE RE JECTED AND GROSS PROFIT WAS ESTIMATED AT 5% AND ACCORDINGLY A SUM OF RS. 25,74,652/- WAS ADDED TO THE INCOME OF THE ASSE SSEE. 12 ON APPEAL IT WAS MAINLY STATED THAT THE ASSESSEE HAS ENTERED INTO TRADING BUSINESS AND WAS MAINLY TRADIN G IN VARIOUS RICE PRODUCTS AND PROFIT IN MOST OF THEM WAS LOW. IT WAS SUBMITTED THAT THERE WAS A LOSS IN BASMATI RICE BEC AUSE OPENING STOCK WAS OF HIGHER VALUE. THE LD. CIT(A) ADJUDICATED THE ISSUE VIDE PARA 1.09 WHICH IS AS UNDER: THE ISSUE IS EXAMINED. THE APPELLANT CLAIMED THAT D ECLINE IN GP IS ATTRIBUTABLE TO THE DECLINE OF RATE OF RICE B ASMATI DUE TO WHICH HE HAD TO SALE OPENING STOCK @ RS. 2789/- PER QTL. AS AGAINST THE VALUATION THEREOF AT RS. 3947/- PER QTL . AT THE OUTSET IT IS NOTED THAT NO EVIDENCE IN SUPPORT OF T HIS CLAIM HAS BEEN BROUGHT ON RECORD. FURTHER IT IS NOTED THAT RA TES OF PADDY BASMATI WOULD HAVE ALSO DECLINED STEEPLY BEING THE RAW MATERIAL FOR MANUFACTURING RICE BASMATI BUT THE APP ELLANT DECLARED GP @ 21.35% IN THE TRADING ACCOUNT OF PADD Y 6 BASMATI. IT IS WORTH TO MENTION THAT THE APPELLANT HAS SHOWN OPENING STOCK OF PADDY BASMATI AT 2475 QTLS WHICH W AS VALUED AT RS. 23,87,221/-. THE PLEA OF THE APPELLANT IS, T HEREFORE, NOT TENABLE/VERIFIABLE AND HENCE IS REJECTED. THE AO ES TIMATED THE INCOME BY APPLYING GP AT 5% AS AGAINST THE GP OF 7. 76% DECLARED IN THE LAST YEAR WHICH IS REASONABLE AND H ENCE ADDITION ON THIS ACCOUNT MADE BY THE AO IS HEREBY C ONFIRMED. GROUND NO.1 OF APPEAL IS, THEREFORE, REJECTED. 13 THE LD. DR FOR THE REVENUE WAS HEARD. 14 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DR FOR THE REVENUE AND THE RELEVANT MATERIAL, WE FIND NOTHING WRONG WITH THE ORDER OF THE LD. CIT(A) THOUGH IT WAS CLAIMED T HAT THE ASSESSEE HAD LOSS IN BASMATI PADDY BUT IN THE DETAI LS SUBMITTED BEFORE THE LD. CIT(A) THE ASSESSEE HAS HI MSELF SHOWN GROSS PROFIT @ 21.35% ON TRADING OF BASMATI . FURTHER GROSS PROFIT IN THE IMMEDIATELY PRECEDING YEAR WAS 7.76%. IN CASE NO BOOKS OF ACCOUNT ARE PRODUCED AND THE ASSES SING OFFICER IS REQUIRED TO ESTIMATE THE PROFIT, HE IS D UTY BOUND TO ESTIMATE SUCH PROFITS IN A JUDICIAL FASHION. NO BE TTER YARD STICK CAN BE AVAILABLE TO THE ASSESSING OFFICER THEN THE TRADING RESULTS OF THE ASSESSEE SHOWN IN THE EARLIER YEARS. THE ASSESSING OFFICER HAS BEEN MORE THAN REASONABLE TO ESTIMATE THE GROSS PROFIT AT 5% DESPITE THE FACT THAT IN T HE IMMEDIATELY PRECEDING YEAR THE GROSS PROFIT DECLARED BY THE A SSESSEE WAS 7.76%. IN THE LIGHT OF THESE FACTS WE FIND NO INFI RMITY IN THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 15 GROUND NO. 2 DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHO WN A SUM OF RS. 2,60,000/- DUE TO M/S LACHHI RAM RAMESH CHAN D, PEHOWA. A SUMMON WAS ISSUED U/S 131 OF THE ACT TO THIS FIRM. SHRI RAMESH CHAND PARTNER OF M/S LACHHI RAM RAMESH CHAND 7 IN RESPONSE TO THE SUMMONS, CONFIRMED THAT NO BALAN CE WAS OUTSTANDING IN THEIR BOOKS. ACCORDINGLY THE ASSES SING OFFICER CONCLUDED THAT THERE IS NO LIABILITY BY THE ASSESSE E TO M/S LACHHI RAM RAMESH CHAND, PEHOWA AND THE SUM OF RS. 2,60,000/- WAS ADDED TO THE INCOME U/S 41(1) OF THE ACT. 16 ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTE D THAT THOUGH THE FIRM HAS GIVEN ACCOUNT STATEMENT TO THE ASSESSING OFFICER BUT NO SUCH STATEMENT WAS GIVEN TO THE ASSE SSEE. IT WAS SUBMITTED THAT THE FIRM WAS AT FAULT AS IT WRON GLY SQUARED UP ACCOUNT BY SHOWING CASH RECEIPT AND THE ASSESSEE HAD NOT PAID ANY CASH. 17 . THE CIT(A) ADJUDICATED THE ISSUE IN PARA 1.16 AND 1.17 OF IMPUGNED ORDER WHICH READ AS UNDER: ANOTHER LIABILITY WHICH WAS ADDED BY THE AO U/S 41( 1) OF THE ACT IS RS. 2,60,000/- OUTSTANDING IN THE NAME OF M/S LA CHHI RAM RAMESH CHAND, PEHOWA. THE AO NOTED THAT IN RESPONSE TO SUMMONS U/S 131 OF THE ACT, NO BALANCE STATED TO BE OUTSTANDING IN THE BOOKS OF THE PARTY IN THE ACCOUNT OF THE APP ELLANT. THE APPELLANT IN THE WRITTEN SUBMISSIONS, HOWEVER, SUBM ITTED THAT THE SAID FIRM REFUSED TO GIVE US A COPY OF ACCOUNT. IT IS FURTHER SUBMITTED THAT IT SEEMS THAT THE SAID FIRM HAS SQUA RED UP HIS ACCOUNT BY SHOWING CASH RECEIPT FROM US WHEREAS WE HAVE PAID NO CASH TO THAT PARTY. THE AO HELD THE LIABILITY OUTSTANDING IN THE NAME O F THIS PARTY CEASED TO EXIST ON THE BASIS THAT THE SAID PARTY CO NFIRMED THAT NO AMOUNT WAS DUE FROM THIS PARTY AS ON 31.03.2007. EV EN IF THE PLEA OF THE APPELLANT THAT HIS ACCOUNT WAS SQUARED UP BY THE SAID PARTY BY SHOWING THE RECEIPT OF CASH, IS TAKEN ON F ACE VALUE, NO AMOUNT WAS TO BE PAID BY THE APPELLANT TO THAT FIRM AND HENCE THE ADDITION MADE BY THE AO U/S 41(1) OF RS. 2,60,000/ - IS HEREBY CONFIRMED. GROUND NO. 2 OF APPEAL IS AS SUCH PARTLY ALLOWED. 18 THE LD. DR FOR THE REVENUE WAS HEARD. 19 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. DR FOR THE REVENUE AND THE RELEVANT MATERIAL ON RECORD, WE FIN D NOTHING 8 WRONG WITH THE ORDER OF THE LD. CIT(A). NOBODY WOU LD SHOW THE RECEIPT OF CASH BECAUSE THAT WOULD MEAN THAT SUCH P ARTY IS FORGOING THE CLAIM, THEREFORE, IT IS CLEAR THAT TH E ASSESSEE HIMSELF HAS PAID THE CASH AND LIABILITY CEASED TO E XIST. IN THIS BACK GROUND WE FIND NOTHING WRONG IN THE ORDER OF T HE LD. CIT(A) AND CONFIRM THE SAME. 20 APPEAL OF THE ASSESSEE IS DISMISSED. 21 CROSS-OBJECTIONS NO. 78/CHD/2011 22 THE ISSUE RAISED IN BOTH THE CROSS-OBJECTIONS AR E IDENTICAL TO THE ISSUES RAISED IN ASSESSEES APPEAL . IT SEEMS THAT THE CROSS-OBJECTIONS MIGHT HAVE BEEN FILED BEC AUSE ASSESSEES APPEAL WAS LATE. BOTH THE ISSUES HAVE B EEN ADJUDICATED IN ASSESSEES APPEAL AND THEREFORE, TH E CROSS- OBJECTIONS HAVE BECOME INFRUCTUOUS AND ACCORDINGLY THE SAME ARE DISMISSED AS INFRUCTUOUS. 23 CROSS-OBJECTIONS ARE DISMISSED. 24 IN THE RESULT, APPEALS OF THE DEPARTMENT, ASSESS EE AND CROSS-OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED ON 11.6.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11.6.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR