SMT. MANISHA AGARWAL, JAIPUR V. INCOME TAX OFFICER, WARD-2-1, JAIPUR

ITA 1095/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9800 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 24-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAHLA JCIT DHK
• Assessee Lawyers: G MEHTA
• Keywords: Corroborative evidences
• Section: 40(a)(ia)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA -@ ITA NO. 1095/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2012-13 SMT. MANISHA AGARWAL, 462, KATEWA NAGAR, NEW SANGANER ROAD, SODALA, JAIPUR. C UKE VS. I.T.O. WARD-2(1), JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AJPRA 2530 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKS J LS @ ASSESSEE BY: SHRI G. MEHTA (ADV) JKTLO DH VKSJ LS @ REVENUE BY : SHRI A.K. MAHLA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24/09/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 26/09/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 05/07/2018 OF LD. CIT(A)-I, JAIPUR FOR THE A.Y. 2012-13. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING ADDITION OF RS. 9,40,152/- BY APPLYING PROVISIONS OF SECTION 41(1) OF IT ACT ON IMPORT OF GOODS DURING THE YEAR. 2. LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING DISALLOWANCE OF RS. 3,51,717/- UNDER SECTION 40(A)(IA) OF INCOME TAX ACT. ITA 1095/JP/2018 SMT. MANISHA AGARWAL VS ITO 2 2. GROUND NO. 1 OF THE APPEAL IS REGARDING ADDITION OF RS. 9,40,152/- BY TREATING THE SAME AS THE LIABILITY CEASED TO EXIST U/S 41(1) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). THE ASSESSEE IS INDIVIDUAL AND PROPRIETOR OF M/S LAVIS SILVER ARTS AND ENGAGED IN THE BUSINESS OF MANUFACTURING, SELLING, IMPORT AND EXPORT OF SILVER AND SILVER BEADS AS WELL AS OTHER METAL GOODS. THE DISPUTE IS IN RESPECT OF GOODS IMPORT BY THE ASSESSEE WORTH US DOLLAR 18,968.80 EQUIVALENT TO RS. 9,40,852/- FROM M/S HENGHAI IMP & EXP. CO. LTD., SHANGHAI, CHINA (HEREINAFTER REFERRED AS H COMPANY). AT THE END OF THE YEAR, THE ASSESSEE HAS SHOWN THE SAID AMOUNT OF RS. 9,40,852/- AS OUTSTANDING. THE A.O. ASKED THE ASSESSEE TO FILE DETAILS OF THE CREDITOR IN THE SUBSEQUENT YEARS. THE A.O. FOUND THAT THIS CREDITOR I.E. H COMPANY IS STILL OUTSTANDING. THE ASSESSEE EXPLAINED THAT IT HAS ALREADY PAID THE SAID AMOUNT TO THE SISTER CONCERN OF THE CREDITOR AND SUBMITTED THAT THE SUPPLIER HAS TWO SISTER CONCERNS M/S ZHEJIANG YIWU SAILING DIAMONDS IMP & EXP CO. LTD. (HEREINAFTER REFERRED AS Z COMPANY) AND M/S YIWU SAILING DIAMOND IMPORT & EXPORT CO. LTD. (HEREINAFTER REFERRED AS Y COMPANY). THE ASSESSEE CLAIMED THAT THE AMOUNT WAS PAID TO Z COMPANY AND REFERRED TO THE BALANCE SHEET SHOWING ADVANCE OF RS. 50,18,349/- TO THE SAID COMPANY UNDER THE HEAD LOAN AND ADVANCES. THUS, THE ASSESSEE CLAIMED THAT OUT OF THE ABOVE ADVANCE, THE OUTSTAND OF RS. 9,20,850/- ITA 1095/JP/2018 SMT. MANISHA AGARWAL VS ITO 3 ALREADY BEEN PAID BUT NOT ADJUSTED IN THE BOOKS OF ACCOUNT, THE SAME WOULD BE TAKEN INTO ACCOUNT IN THE SUBSEQUENT YEARS. THE A.O. WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE AND MADE ADDITION OUTSTANDING THE LIABILITY OF RS. 9,40,852/- BY TREATING THE SAME AS CEASED LIABILITY AS PER SECTION 41(1) OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE A.O. BEFORE THE LD. CIT(A) AND FILED CERTAIN ADDITIONAL MATERIAL/EVIDENCE BEFORE THE LD. CIT(A) IN SUPPORT OF THE CLAIM THAT THE SAID AMOUNT OF RS. 9,40,852/- WAS STAND PAID THROUGH THE SISTER CONCERN OF THE SUPPLIER FROM THE ADVANCE OF RS. 50,18,349/-. IN THIS RESPECT, THE ASSESSEE HAS PRODUCED CONFIRMATION FROM THE SUPPLIER. THE LD. CIT(A) HAS NOT ACCEPTED THE SAID CONFIRMATION FOR WANT OF SIGNATURE AND AMBIGUITY IN THE LANGUAGE OF THE CONFIRMATION. 3. BEFORE THE TRIBUNAL, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IMPORTED GLASS CHATTON STONES AND GLASS BEADS OF RS. 9,40,852/- FROM H COMPANY VIDE IMPORT INVOICE DATED 29/09/2011. HE HAS ALSO REFERRED TO THE BALANCE SHEET AND SUBMITTED THAT FOR ANOTHER TRANSACTION, THE ASSESSEE HAS REMITTED PAYMENT OF RS. 50,18,349/- ON 19/03/2012 FOR IMPORT OF GOODS FROM Y COMPANY WHICH IS A SISTER CONCERN OF THE FIRST COMPANY. AS PER THE TELEPHONIC INSTRUCTIONS FROM THE SUPPLIER AND ITS SISTER CONCERNED AN AMOUNT OF RS. 9,40,852/- WAS ITA 1095/JP/2018 SMT. MANISHA AGARWAL VS ITO 4 TRANSFERRED TO THE ACCOUNT OF THE SUPPLIER. THUS, THE LD AR HAS SUBMITTED THAT IN THE YEAR 2016, THE SAID AMOUNT WAS STAND PAID AND THE ASSESSEE HAS RECORDED IN ITS ACCOUNTS AND DISCHARGED THE LIABILITY THROUGH THE SISTER CONCERN. THE LD AR HAS FURTHER SUBMITTED THAT EVEN OTHERWISE, THE ADDITION CANNOT BE MADE U/S 41(1) OF THE ACT WHEN THE SAID AMOUNT WAS STILL APPEARING IN THE BOOKS OF ACCOUNT AS LIABILITY UNTIL AND UNLESS THE LIABILITY IS CEASED TO EXIST, THE SAME CANNOT BE ADDED U/S 41(1) OF THE ACT. IN SUPPORT OF HIS CONTENTION, THE LD AR HAS RELIED UPON THE FOLLOWING DECISIONS: (I) CIT VS ALVARES AND THOMAS (2017) 394 ITR 647 (KARN.) (II) CIT VS BANARAS HOUSE LTD. (2018) 402 ITR 88 (DEL) (III) CIT VS KANORIA SUGAR AND GENERAL MANUFACTURING CO. LTD. (2018) 407 ITR 737 (RAJ). 4. ON THE OTHER HAND, THE LD DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ASSESSEE HAS PAID ADVANCE OF RS. 50,18,349/- FOR IMPORT OF THE GOODS FROM ONE OF THE PARTIES THEN THE CLAIM OF THE ASSESSEE THAT A SUM OF RS. 9,40,852/- IS OUTSTANDING TOWARDS IMPORT FROM THE SISTER CONCERN IS NOT ACCEPTABLE. THE ASSESSEE HAS CLAIMED THAT ALL THE THREE COMPANIES ARE SISTER CONCERNS THEN IN ONE CASE, THE ADVANCE WAS PAID WHEREAS IN ANOTHER ITA 1095/JP/2018 SMT. MANISHA AGARWAL VS ITO 5 CASE THE ASSESSEE HAS CLAIMED THAT THE AMOUNT WAS STILL PAYABLE. THE ASSESSEE HAS EVEN NOT FILED ANY CONFIRMATION OR SUPPORTING EVIDENCE TO SHOW THAT THE AMOUNT WAS STILL PAYABLE. THE ALLEGED CONFIRMATION IS UNSIGNED BY THE PARTIES AND EVEN NOT CERTIFYING OUTSTANDING AND SUBSEQUENT PAYMENT. THE LETTER FILED BY THE ASSESSEE IS ONLY REVEALING THE FACT THAT THESE THREE COMPANIES ARE SISTER CONCERNS. THUS, THE LD DR HAS CONTENDED THAT THE A.O. HAS RIGHTLY MADE THE ADDITION. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS SHOWN A SUM OF RS. 9,40,852/- PAYABLE TO H COMPANY, CHINA AGAINST THE IMPORT OF GOODS. SO LONG THE ASSESSEE IS SHOWING THE SAME AS TRADING LIABILITY IN THE BOOKS OF ACCOUNT AND IN THE BALANCE SHEET, THE SAME CANNOT BE TREATED AS CESSATION OF LIABILITY. FURTHER THIS IS A TRANSACTION OF IMPORT MADE DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, THE OUTSTANDING OF RS. 9,40,852/- PAYABLE TO H COMPANY IN THE YEAR ITSELF CANNOT BE TREATED AS CESSATION OF LIABILITY TO INVOKE THE PROVISIONS OF SECTION 41(1) OF THE ACT. THE A.O. HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE THAT THE AMOUNT IS PAID THROUGH THE SISTER CONCERN OF H COMPANY AS THERE WAS ADVANCE REMITTANCE OF RS. 50,18,349/-. WITHOUT GOING INTO THE CONTROVERSY OF THE SETTLEMENT OF LIABILITY THROUGH THE SISTER ITA 1095/JP/2018 SMT. MANISHA AGARWAL VS ITO 6 CONCERNS WHEN THIS IMPORT WAS MADE DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAS NOT MADE THE PAYMENT DURING THE YEAR UNDER CONSIDERATION THEN SHOWING THE SAID AMOUNT AS OUTSTANDING AS ON 31/3/2014 CANNOT BE TREATED AS CESSATION OF LIABILITY. THERE IS NO FACTS OR MATERIAL TO SHOW THAT THIS IS NOT AN EXISTING LIABILITY, ACCORDINGLY, THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) IS DELETED. 6. AT THE TIME OF HEARING, THE LD AR OF THE ASSESSEE HAS STATED AT BAR THAT THE ASSESSEE DOES NOT WANT TO PRESS GROUND NO. 2 OF THE APPEAL AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD DR HAS RAISED NO OBJECTION IF GROUND NO. 2 OF THE ASSESSEES APPEAL IS DISMISSED AS NOT PRESSED. ACCORDINGLY, GROUND NO. 2 OF THE ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH SEPTEMBER, 2019 SD/- FOT; IKY JKO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26 TH SEPTEMBER, 2019 *RANJAN ITA 1095/JP/2018 SMT. MANISHA AGARWAL VS ITO 7 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SMT. MANISHA AGARWAL, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE I.T.O. WARD-2(1), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1095/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR