M/s. Kanusha Steel, Ahmednagar V. ITO, Ahmednagar

ITA 1145/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56609 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1998-1999
• Appeal Filed On: 16-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: P D KUDWA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I.C. SUDHIR, J.M. AND SHRI D. KARUNAKARA RAO, A.M. I.T.A. NO. 1145/PN/2010 : A.Y. 1998-99 M/S. KANUSHA STEEL C-14 MIDC, AHMEDNAGAR 410 010 PAN AAFFK 7672 M .. APPELLANT VS. I.T.O. WARD I, AHMEDNAGAR .. RESPONDENT APPELLANT BY: P.D. KUDWA, CA RESPONDENT BY: MS. ANN KAPTHUAMA DATE OF HEARING : 9-12-2011 DATE OF PRONOUNCEMENT: ___12-2011 ORDER PER D. KARUNAKARA RAO, AM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER OF THE CIT(A)-I PUNE DATED 3-11-2009 FOR A.Y. 1998-99. THE SOLITARY GROUND RAISED BY THE ASSESSEE IS AS UNDER: THE HONBLE CIT(A) ERRED IN UPHOLDING THE AOS ORD ER ADDING RS. 2,02,215/- TO RETURNED INCOME ON GROUNDS THAT LIABI LITY TO M/S. METRO STEEL TRADERS WAS NOT PROVED. THE APPELLANT PLEADS THAT THE ADDITION IS NOT JUSTIFIED. 2. THE FACTS RELATING TO THE ADDITION OF RS. 2,02,2 15/- ARE MENTIONED IN PARA 3.3(III) OF THE IMPUGNED ORDER. IT ALSO CONTAINS T HE REASONING OF THE CIT(A) IN NOT GRANTING RELIEF TO THE ASSESSEE. THE CONTENTS OF THE SAID PARA AS APPEARING ON PAGE 7 OF THE IMPUGNED ORDER RELATING TO METRO S TEEL TRADERS ARE AS UNDER: AS PER THE DETAILS FURNISHED BY THE APPELLANT, THE CREDITOR SUPPLIED THE MATERIAL ON 26-11-1997 AND THE ENTIRE AMOUNT WAS SH OWN AS OUTSTANDING AS ON 31-3-1998. IN THE NEXT YEAR, THE FIRST PAYME NT OF RS. 60,000/- WAS MADE IN JULY, 1998 AND THE SECOND PAYMENT OF RS. 49 ,517/- WAS MADE IN FEBRUARY 1999 AND THE BALANCE AMOUNT OF RS. 2,02,21 5/- IS SHOWN AS OUTSTANDING AS ON 31-3-1999. THUS, THE CREDITOR HA S BEEN SHOWN AS OUTSTANDING EVEN AS ON 31-3-1999 FOR SINGLE SUPPLY OF MATERIAL SHOWN TO HAVE BEEN MADE TO THE APPELLANT IN NOVEMBER 1997. THE APPELLANT COULD NOT EXPLAIN AS TO WHY THE LIABILITY, IF GENUINE, WAS OUTSTANDING TILL 31-3-1999 AND IT WAS ALSO NOT KNOWN WHEN THE CREDITOR WAS FULLY PAID IN SUBSEQUENT YEARS. THE CONFIRMATION LETTER FILED IS NOT ON THE LETTER HEAD OF THE CREDITOR AND IT WAS PREPARED BY THE APPELLA NT AND THE SIGNATURE OF THE ALLEGED CREDITOR WAS OBTAINED ON T HE DOTTED LINE. EXCEPT FURNISHING A STEREO TYPE CONFIRMATION LETTER IN THE NAME OF THE CREDITOR, THE APPELLANT HAS NOT FURNISHED THE RELEVANT PURCHA SE INVOICE, LEDGER ACCOUNT OF THE APPELLANT IN THE BOOKS OF THE CREDIT OR TO PROVE THE GENUINENESS OF THE CREDITOR AND THE LIABILITY. IF IT IS A TRADE LIABILITY AND IS GENUINE AS STATED BY THE APPELLANT, IT CANNOT BE OU TSTANDING FOR SUCH A ITA NO. 1145/PN/2010 KANUSHA STEELS A.Y. 1998-89 2 LONG PERIOD AND NO PRUDENT CREDITOR WOULD EXTEND CR EDIT FOR SUPPLY OF GOODS FOR YEARS, PARTICULARLY WHEN THERE WERE NO OT HER PURCHASES FROM THE SAME CREDITOR EITHER DURING THE YEAR OR IN THE NEXT YEAR. THIS CLEARLY PROVES THAT EITHER THE LIABILITY IS NOT GENUINE TO THE EXTENT OF RS. 2,02,215/- OR THE LIABILITY WAS DISCHARGED OUTSIDE THE BOOKS OF ACCOUNTS. AS REGARDS THE CONTENTION OF THE APPELLANT THAT THE AO HAS NOT COMMENTED ADVERSELY IN THE REMAND REPORT FILED BEFO RE THE CIT(A), IT IS TO BE MENTIONED THAT THE REPORT OF THE AO IS CRYPTIC A ND IT DOES NOT ADDRESS THE ISSUE WHETHER THE LIABILITY SHOWN IN THE NAME O F THE CREDITORS IS GENUINE OR NOT. THE REPORT ONLY STATES THAT THE AP PELLANT HAS PURCHASED THE GOODS AND THE NECESSARY ENTRIES TO THAT EFFECT WERE MADE IN THE PURCHASE REGISTER. WHILE SENDING THE REMAND REPORT , THE AO HAS OVERLOOKED THE IMPORTANT ASPECT WHY THE LIABILITY, IF GENUINE HAS BEEN OUTSTANDING FOR YEARS IN THE CASE OF THIS CREDITOR. IN THE CIRCUMSTANCES, MERELY BECAUSE THE AO HAS NOT GIVEN ANY ADVERSE FIN DING IN THE REMAND REPORT, IT CANNOT BE SAID THAT THE LIABILITY TO THE EXTENT OF R. 2,02,215/- IS GENUINE. THUS, IN RESPECT OF THIS CREDITOR, LIABILITY TO THE EXTENT OF RS. 2,02,215/- CANNOT BE HELD TO BE G ENUINE OR EVEN IF THE LIABILITY IS GENUINE, THE LIABILITY CEASED TO EXIST FOR ALL INTENT AND PURPOSES. . . 3.5 FOR THE FOREGOING REASONS, OUT OF THE TOTAL ADD ITION OF RS. 7,35,000/- MADE BY THE AO ON ACCOUNT OF UNPROVED CR EDITORS, ADDITION TO THE EXTENT OF RS. 2,02,215/- IS UPHELD AND THE BALA NCE AMOUNT OF RS/. 5,32,785/- IS DELETED. 3. THE ABOVE EXTRACTION FROM THE ORDER OF THE CIT(A ) REVEALS THAT THE CIT(A) CONFIRMED THE ADDITION SUSPECTING THAT THE SAID AMO UNT IS A BOGUS CREDIT. THE CIT(A) IS OF THE OPINION THAT THE SAID AMOUNT WAS P ROBABLY NOT PAID IN SUBSEQUENT YEARS ALSO. BUT DURING THE PROCEEDINGS B EFORE US NOW, THE LEARNED COUNSEL FOR THE ASSESSEE FILED A BANK STATEMENT STA NDING IN THE NAME OF KANUSHA STEELS, A/C NO. 01-186859 WITH CO-OPERATIVE BANK OF AHMEDABAD LTD. BOMBAY, AND BROUGHT OUR ATTENTION TO THE ENTRIES APPEARING ON 26-7-1999 AND MENTIONED THAT THE SAID ENTRIES REFER TO THE PAYMENT OF OUTST ANDING LIABILITY, WHICH IS A SUBJECT MATTER NOW. FURTHER, HE HAS ALSO DRAWN OUR ATTENTION TO LETTER DATED 6- 12-2011 WRITTEN BY METRO STEEL TRADER THE CREDITO R, WHO BEARS THE PERMANENT ACCOUNT NO. AAFPS 0843 L, WHICH IS A CONFIRMATION L ETTER AND AND MENTIONED THAT THE IMPUGNED LIABILITIES ARE SQUIRED UP ONCE F OR ALL. WE HAVE PERUSED THE SAME AND THE CONTENTS OF THE SAME ARE REPRODUCED AS UNDER: I HEREBY WANT TO CONFIRM IN THE YEAR 1999-2000, TH ERE WAS NO OUTSTANDING AND OUR ACCOUNT WAS NIL (CLEARED) BY M/ S. KANUSHA STEELS IN THE YEAR 1999-2000, THE PAYMENT WAS CLEARED BY M/S. KANUSHA STEELS. 4. THUS, IN OUR OPINION, THE CIT(A) IS OF THE WRONG OPINION THAT THE IMPUGNED AMOUNT WAS NEVER PAID IN LATER YEARS TOO. BUT THE FACTS SPEAK DIFFERENT. THE SAID AMOUNT WAS ALREADY CLEARED BY JULY 1999 AS EVIDENCED FROM ITA NO. 1145/PN/2010 KANUSHA STEELS A.Y. 1998-89 3 THE CONFIRMATION PRODUCED BY THE CREDITOR. IN THES E CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ASSESSEE DESERVES RELIEF. WE THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . DECISION IS PRONOUNCED IN THE OPEN COURT ON 16-12-2 011. SD/- SD/- (I.C. SUDHIR) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED THE 16 TH DECEMBER 2011. ANKAM COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I PUNE 4. CIT-I PUNE 5. THE D.R, PUNE BENCH B TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY ITAT, PUNE BENCH, PUNE