ITO 19(1)(1), MUMBAI V. SHRI. AMIT VIRENDRA PATEL, MUMBAI

ITA 1134/MUM/2020

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7229 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 13-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A‘ BENCH MUMBAI BEFORE: SHRI M.BALAGANESH, ACCOUNTANT MEMBER & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA No.1134/Mum/2020 (Asse ssment Year :2015-16) ITO-19(1)(1) 2 nd Floor, Room No.223 Matru Mandir Building Tardeo Road Mumbai-400 007 Vs. Shri Amit Virendra Patel 103, Pancharatna, M.P. Marg, Opera House Mumbai – 400 054 PAN/GIR No.AADPF9774D (Appellant) .. (Respondent) Assessee by Shri Arvind Shah Revenue by Shri Mehul Jain Date of Hearing 22/11/2021 Date of Pronouncement 30/11/2021 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No.1134/Mum/2020 for A.Y.2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-18, Mumbai in appeal No.CIT(A)-18/IT-10234/ITO-19(1)(1)/17-18 dated 29/11/2019(ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 27/12/2017 by the ld. Income Tax Officer-19(1)(1), Mumbai (hereinafter referred to as ld. AO). ITA No.1134/Mum/2020 Shri Amit Virendra Patel 2 2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the addition made in sum of Rs. 207,90,576 u/s.41(1) of the Act on account of cessation of liability, in the facts and circumstances of the instant case. 3. We have heard the rival submissions and perused the materials available on record. We find that assessee is an individual carrying on the business of dealing and manufacturing of cut and polished diamonds and had filed his return of income for the A.Y.2015-16 on 30/09/2015 declaring total income of Rs.13,25,010/-. During the course of scrutiny assessment proceedings, the ld. AO on perusal of the balance sheet observed that assessee had shown sundry creditors totalling to Rs.2,62,98,194/- in respect of eight parties. The ld. AO issued show-cause notice to the assessee to confirm the sundry creditors as per Balance Sheet. The ld. AO also sought to issue independent notice u/s.133(6) of the Act to the sundry creditors totalling to Rs.2,07,90,576/- in respect of six creditors as under:- Name Amount M/s. Bahubali Diamond 30,44,787 M/s. Mona Gems 42,29,572 M/s. Sangham Diamonds P. Ltd 40,90,969 M/s. Parul Diamonds Pvt. Ltd., 55,26,274 M/s. Shree Bhairav Diamonds P. Ltd., 27,92,674 M/s. Rajshree Impex 11,06,300 2,07,90,576 3.1. Since, the notice u/s 133(6) of the Act were not responded by the creditors and no confirmations were received from the aforesaid parties, the ld. AO sought to treat the said sundry creditors as “liability no longer required” and sought to invoke the provisions u/s.41(1) of the Act. The assessee however, submitted before the ld. AO the ledger account of the ITA No.1134/Mum/2020 Shri Amit Virendra Patel 3 each of the creditors as appearing in its books for the year under consideration as well as the subsequent years in which payments have been fully made to the concerned sundry creditors; copy of bank statements of the assessee showing payments to each sundry creditors in subsequent years and ledger account of each of the creditors for the year under consideration duly confirmed by each creditor. Vide letter dated 30/11/2017, the assessee also filed a detailed note as to how the provisions of Section 41(1) of the Act could not be made applicable to the facts of the instant case. It was also pointed out that all these parties had valid PAN and in view of severe depression in diamond market and insolvency of numerous parties, several parties had shut down their businesses and shifted their place of business. It was also pointed out that except for M/s Sangham Diamonds having outstanding balance of Rs.40,90,969/-, the assessee had furnished the confirmation together with the ledger account of all the remaining creditors. The assessee also placed reliance on the decision of the Hon’ble Apex Court in the case of CIT vs. Sugauli Sugar Works Pvt. Ltd, reported 236 ITR 518, CIT vs. Kesaria Tea Co. Ltd., reported in 254 ITR 434, among other decisions. The ld. CIT(A) gave a categorical finding in his order stating that the assessee had not written back to income the sundry creditors payable in its books, hence, the liability payable to these sundry creditors had not ceased to exist. The ld. CIT(A) also observed that from the ledger account of the sundry creditors produced by the assessee, it could be seen that the sundry creditors are related to the new purchases made in the preceding previous year and the same have been duly discharged by the assessee in the subsequent assessment years. He observed that the liability had not ceased to exist and hence, the provisions of Section 41(1) of the Act could not be made applicable at all. Aggrieved by this, the Revenue is in appeal before us. ITA No.1134/Mum/2020 Shri Amit Virendra Patel 4 3.2. We find that the only basis for the ld. AO invoking provisions u/s.41(1) of the Act in respect of outstanding sundry creditors is that the notice u/s.133(6) of the Act sent by the ld. AO to the sundry creditors remain unresponded and those parties were not produced by the assessee for examination by the ld. AO. However, we find that the assessee had duly furnished the complete ledger account of the sundry creditors for the year under consideration as well as for the subsequent years. Except for M/s. Sangham Diamonds, the assessee had even furnished the ledger account of the creditors duly confirmed by them before the ld. AO. It is not in dispute that all these sundry creditors have a valid PAN. All these sundry creditors have been duly discharged by the assessee in subsequent assessment years as under:- Name of Creditor Amount outstanding on 31/03/2015 Amount Paid Bank Statement at Pg. No. Date Amount Bahubali Diamond 30,44,787 07/09/2016 30,44,787 16 Mona Gems 42,29,572 06/04/2016 07/09/2016 26/12/2016 26/12/2016 28/12/2016 4,32,830 5,50,000 9,50,000 10,50,000 12,46,742 42,29,572 18 19 20 20 21 M/s. Sangham Diamonds 40,90,969 17/07/2015 03/08/2015 06/04/2016 15,00,000 15,00,000 10,90,969 40,90,969 25 25 26 M/s. Parul Diamonds Pvt. Ltd., 55,26,274 15/07/2015 06/04/2016 15,00,000 23,21,274 28 29 ITA No.1134/Mum/2020 Shri Amit Virendra Patel 5 07/04/2016 02/05/2016 20,00,000 5,00,000 63,21,274 30 31 M/s. Shree Bhairav Diamonds Pvt. Ltd., 27,92,674 22/04/2015 11/05/2015 07/07/2015 21/12/2015 2,50,000 4,00,000 2,50,000 18,92,674 27,92,674 35 36 37 38 M/s. Rajshree Impex 11,06,300 02/01/2016 11,06,300 40 3.3. We also find as on 31/03/2015, the assessee had not written back the sundry creditors to its income as no longer payable, hence, the liability had not ceased to exist and assessee had duly acknowledged his debt payable to these sundry creditors. Hence, in these circumstances, in any case, irrespective of the payments made in subsequent years, the provisions of Section 41(1) of the Act could not come into operation at all. These points have been duly appreciated by the ld. CIT(A) and hence, we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee. Accordingly, the ground raised by the revenue is dismissed. 4. In the result, appeal of the revenue is dismissed. Order pronounced on 30/11/2021 by way of proper mentioning in the notice board. Sd/- (AMARJIT SINGH) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 30/11/2021 ITA No.1134/Mum/2020 Shri Amit Virendra Patel 6 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//