The ACIT, Circle-5, Ahmedabad V. R.P.K. Warehousing Pvt.Ltd., Ahmedabad

ITA 1212/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0703 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-08-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 01-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CJ MANIAR
• Keywords: Gift; Deemed to accrue or arise in india
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. ./ I.T.A. NO.1212/AHD/2012 2. ./ I.T.A. NO. 970/AHD/2012 ( / ASSESSMENT YEARS : 2003-04 & 2008-09 RESPECTIVELY) THE ASST.CIT CIRCLE-5 AHMEDABAD / VS. R.P.K. WAREHOUSING PVT.LTD. (FORMERLY KNOWN AS TRISUNS COMMODITIES PVT.LTD.) 601, ANURAG FLATS B/H. VIDYANAGAR HIGH SCHOOL USMANPURA 4 RASTA AHMEDABAD-380 013 $ ./ ./ PAN/GIR NO. : AABCT 4108 Q ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) $&) / APPELLANT BY : SHRI JAMES KURIAN, SR.DR '($&*) / RESPONDENT BY : SHRI C.J. MANIAR, AR +* / DATE OF HEARING 02/08/2016 ,-./* / DATE OF PRONOUNCEMENT 24/08/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : BOTH THESE APPEALS BY THE REVENUE IN THE CASE OF SAME ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE COMMISS IONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD DATED 22/03/2012 & 29/02 /2012 FOR THE ASSESSMENT YEARS (AYS) 2003-04 AND 2008-09 RESPECTI VELY. ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 2 - 2. WE FIRST TAKE UP REVENUES APPEAL FOR AY 2003-0 4 IN ITA NO.1212/AHD/2012. 2.1. THE RELEVANT FACTS AS CULLED OUT FROM THE MATE RIALS ON RECORD ARE AS UNDER:- 2.2. ASSESSEE IS A COMPANY STATED TO BE ENGAGED I N THE BUSINESS OF TRADING OF CASTOR OIL AND OTHER ALLIED PRODUCTS. A SSESSEE FILED ITS RETURN OF INCOME FOR AY 2003-04 ON 09/10/2003 DECLARING TOT AL INCOME OF RS.22,68,270/-. THEREAFTER, ASSESSMENT WAS FRAMED U/S.144 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') VIDE ORDER DATED 22/02/2006 AND THE TOTAL INCOME WAS DETERMINE D AT RS.3,77,40,185/-. AGGRIEVED BY THE ORDER OF ASSES SING OFFICER (AO), ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A) WHO VI DE ORDER DATED 28/07/2006 GRANTED PARTIAL RELIEF TO THE ASSESSEE. THEREAFTER, REVENUE AS WELL AS ASSESSEE PREFERRED APPEALS BEFORE THE TRIB UNAL. THE HONBLE TRIBUNAL VIDE ORDER DATED 22/05/2009 IN ITA NOS.197 3 & 2203/AHD/2006 SET ASIDE THE MATTER TO AO TO DECIDE THE ISSUE AFRESH AS PER DIRECTIONS CONTAINED THEREIN. PURSUANT TO THE DIRECTIONS OF THE HONBLE TRIBUNAL, AO VIDE ORDER DATED 04/11/2010 PA SSED U/S.143(3) R.W.S.254 OF THE ACT DETERMINED THE TOTAL INCOME AT RS.2,04,64,410/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WHO VIDE ORDER DATED 22/03/2012 (IN APPEA L NO.CIT(A)- XI/228/DCIT.CIR-5/10-11) GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 3 - AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND:- I) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.1,78,56,000/- MADE BY THE ASSESSING OFFICER U/S.68 OF THE I.T.ACT. 2.3. ON PERUSING THE BALANCE-SHEET, AO NOTICED THAT ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS.1 CRORE AND UNSECURED LOAN OF RS.40,68,618/-, THE BREAK-UP OF WHICH IS AS UNDER:- SR.NO. NAME OF THE SHARE APPLICANTS/UNSECURED LOANS SHARE APPLICATION MONEY UNSECURED LOAN 1. MEENAXIDEVI L. KHUSAHALANI 35,50,000 2. ROHIT L. KHUSAHALANI 25,18,000 10,00,000 3. PARAS L. KHUSAHALANI 25,00,000 28,50,000 4. L.T. KHUSAHALANI 14,32,000 2,18,618 TOTAL 1,00,00,000 40,68,618 2.4. THE ASSESSEE WAS ASKED TO FURNISH DETAILS AND PROVE THE IDENTITY, CREDITWORTHINESS AND THE GENUINENESS OF TRANSACTION . ON THE BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE, AO NOTICED THAT ASSESSEE HAD RECEIVED THE AMOUNT FROM FOUR PERSONS OUT OF THE GIFT RECEIV ED FROM SONIYA KHEMCHANDANI THROUGH FOREIGN REMITTANCE OF NEW YORK BRANCH OF STATE BANK OF INDIA. AO NOTED THAT THE ASSESSEES CONTEN TION OF THE RECEIPT OF GIFTS BY THE AFORESAID FOUR PERSONS WERE NOT SUPPOR TED BY ANY EVIDENCE WHICH COULD PROVE THE IDENTITY AND CREDITWORTHINESS OF THE DONOR; NAMELY ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 4 - SONIYA KHEMCHANDANI NOR ASSESSEE HAD FURNISHED ANY CONFIRMATORY LETTER FROM THE DONOR OR DISCLOSED THE SOURCE OF THE AMOUN T OF THE DONOR. HE THEREFORE HELD THE ASSESSEE HAS FAILED TO DISCHARG E THE ONUS OF PROVING THE IDENTITY, CREDITWORTHINESS OF THE DONOR AND GEN UINENESS OF THE GIFTS. AO FURTHER NOTED THAT DURING THE YEAR ASSESSEE HAD EXPORTED INDIAN CASTER OIL OF FIRST SPECIAL GRADE TO SUPREME GENER AL TRADING CO. LLC, DUBAI (UAE) @ 1,100 USD PER METRIC TON AND THE SAME COMMODITY TO CONCORDIA TRADING B.V. @ 630 USD PER METRIC TON. H E THEREFORE CONCLUDED THAT THERE WAS UNDER BILLING WITH RESPECT TO GOODS EXPORTED TO CONCORDIA TRADING B.V. WHICH ACCORDING TO AO PROVES THAT ASSESSEE HAS BROUGHT ITS OWN MONEY THROUGH HAWALA ENTRY. HE THE REFORE CONSIDERED THE AGGREGATE AMOUNT OF RS.1,78,56,000/- RECEIVED F ROM SHRI L.T. KHUSAHALANI DIRECTOR (RS.43,48,000/-), SMT. MEENAXI DEVI L.KHUSAHALANI DIRECTORS WIFE (RS.42,50,000/-), SHRI ROHIT L.KH USAHALANI, MINOR SON (RS.39,08,000/-) AND SHRI PARAS L. KHUSALANI, MINO R SON (RS.53,50,000/- ) AS UNDISCLOSED INCOME OF THE ASSESSEE AND MADE AD DITION U/S.68 OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIE D THE MATTER BEFORE THE LD.CIT(A), WHO DELETED THE ADDITION BY HOLDING AS UNDER:- 3.2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. I HAVE ALSO PERUSED VARIOUS EVIDENCES FILED BY THE APPELLANT DU RING THE ASSESSMENT PROCEEDINGS AND THE CASE LAWS RELIED UPON BY THE AP PELLANT. THE APPELLANT HAS SPECIFICALLY SUBMITTED THAT THE FOLLO WING DOCUMENTS WERE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS TO EXPL AIN THE SOURCE OF ADVANCES RECEIVED BY THE APPELLANT COMPANY. ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 5 - (C) COPY OF LEDGER ACCOUNT OF SHARE APPLICATI ON MONEY AND BREAK-UP OF UNSECURED LOANS. (D) COPY OF ACCOUNT OF THE PARTY DULY CONFIRM ED ALONG WITH NAME AND ADDRESS AND PAN, NAME OF THE BANK AND CHEQUE NO. (C) RETURN OF INCOME OF L T. KHUSAHALANI AND MEENAXIDEVI L KHUSAHALANI FOR A. Y.2003-04. THE INCOME OF MINOR ROHIT AND M INOR PARAS HAVE BEEN DULY CLUBBED IN THE RETURN OF THEIR FATHER SHRI L. T. KHUSAHALANI. (D) BALANCE SHEET AND CAPITAL A/C. SHOWING SO URCE OF MONEY GIVEN TO THE APPELLANT COMPANY IN CASE OF ALL 4 PARTIES. (E) CERTIFICATE OF FOREIGN INWARD REMITTANCE IN SUPPORT OF GIFT RECEIVED FROM RELATIVE WHICH IS THE MAIN SOURCE OF LOAN GIVE N TO THE COMPANY. (H) COPY OF BANK PASS BOOK / STATEMENT WHEREI N THE AMOUNT OF GIFT HAS BEEN CREDITED AND OUT OF WHICH THE LOAN HAS BEEN GI VEN TO THE APPELLANT COMPANY. (I) COPY OF BANK BOOKS OF ALL THE BANKS OF T HE APPELLANT COMPANY REFLECTING RECEIPT OF SHARE APPLICATION MONEY AND L OANS FROM THE PARTIES IN QUESTION. 3.3 THE FACT OF THESE DOCUMENTS BEING PART OF RECOR D HAD NOT BEEN DENIED BY THE A.O. THE ABOVE FACTS CLEARLY REVEALS THAT THE DIRECTORS WHO HAD GIVEN ADVANCES TO THE APPELLANT ARE ASSESSE D TO TAX AS THEIR PA NOS. HAVE BEEN FURNISHED DURING THE ASSESSMENT PROC EEDINGS. THE ADVANCES HAS BEEN RECEIVED BY THE APPELLANT THROUGH BANKING CHANNELS FROM THE DIRECTORS. COPY OF INCOME-TAX RETURNS FOR THE A.Y.2003-04 OF THE DIRECTORS WERE ALSO FURNISHED. IN ADDITION TO T HIS COPY OF FOREIGN INWARD REMITTANCE IN SUPPORT OF GIFTS RECEIVED BY T HE DIRECTORS WAS ALSO FILED. IN MY CONSIDERED VIEW THESE DOCUMENTS CLEARL Y ESTABLISH THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE CREDITORS. THIS WAY, THE APPELLANT HAS DISCHARGED T HE ONUS CAST UPON HIM BY THE PROVISIONS OF SEC.68 OF THE I.T.ACT. IN VIEW OF ABOVE, I AM OF THE CONSIDERED OPINION THAT ADDITION OF RS.1,78 ,56,000/- MADE BY THE A.O. U/S.68 IS UNTENABLE. ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 6 - 3.4 IT IS FURTHER SEEN THAT THE APPELLANT HAD RECEI VED A SUM OF RS. 1,00,00,000/- AS SHARE APPLICATION MONEY FROM THE D IRECTORS. IT IS CLEARLY HELD BY THE HON'BLE SUPREME COURT IN THE CA SE OF LOVELY EXPORTS PVT. LTD. 216 CTR 195 THAT IN CASE OF SHARE APPLICA TION MONEY, TO DISCHARGE THE ONUS OF SECTION 68, THE APPELLANT HAS TO ESTABLISH THE IDENTITY OF THE PERSONS, WHO HAD APPLIED FOR SHARES . IN THIS CASE THE IDENTITY OF THE DIRECTORS IS NEVER UNDER DOUBT. THE A.O. HAS NOT DOUBTED THE IDENTITY OF THE DIRECTORS AT ALL. IN VIEW OF TH ESE FACTS, ADDITION OF RS.1,00,00,000/- CANNOT BE MADE U/S.68 OF THE I.T.A CT. 3.5 I HAVE ALSO PERUSED VARIOUS CASE LAWS RELIED UP ON BY THE APPELLANT. THESE CASE LAWS SUPPORT THE ABOVE MENTIONED CONCLUS IONS. 3.6 THE ONLY OBJECTION A.O. HAD RAISED IS THAT THE GIFT DEED WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. IN MY C ONSIDERED VIEW, FOR WANT OF GIFT DEED, THE IMPUGNED ADDITION U/S.68 CANNOT BE MADE. THE DIRECTORS, WHO HAD GIVEN ADVANCES TO THE APPELLANT COMPANY IS ASSESSED TO TAX. GIFT RECEIVED HAS BEEN DECLARED BY THE DIRE CTORS IN THEIR RETURN OF INCOME. IF THE A.O. DOUBTS THE GENUINENESS OF THE G IFTS IN THE HANDS OF THE DIRECTORS, THE SAME CAN BE EXAMINED IN THE CASE OF DIRECTORS. HOWEVER, FOR ALLEGED NON GENUINENESS OF GIFTS RECEI VED BY THE DIRECTORS, ADDITION U/S.68 CANNOT BE MADE IN THE HANDS OF THE APPELLANT COMPANY. 3.7 IN VIEW OF ABOVE FACTS, ADDITION OF RS.1,78,56, 000/- MADE BY THE A.O. U/S.68 OF THE I.T.ACT IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 3. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 3.1. BEFORE US, LD.SR.DR SUPPORTED THE ORDER OF AO. LD.AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND SUPPORTED THE ORDER OF LD.CIT(A). LD.AR ALSO SUBMITTED THAT ASSESSEE HAS PROCEEDED ON THE BASIS OF SURMISES. ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 7 - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO TH E ADDITION U/S.68 OF THE ACT IN RESPECT OF SHARE APPLICATION MONEY AND LOAN RECEIVED BY THE ASSESSEE FROM THE DIRECTOR AND HIS FAMILY MEMBERS. WE FIND THAT THE LD.CIT(A) WHILE DELETING THE ADDITION HAS NOTED THA T THE PERSONS WHO HAVE ADVANCED THE AMOUNT TO THE ASSESSEE ARE ASSESS ED TO TAX AND THEIR PANS WERE FURNISHED TO THE AO DURING THE ASSESSMENT PROCEEDINGS, THE ADVANCES HAVE BEEN RECEIVED THROUGH BANKING CHANNEL S, COPY OF THE INCOME TAX RETURNS OF THE DIRECTOR WERE ALSO FURNIS HED ALONG WITH COPY OF FOREIGN INWARD REMITTANCE IN SUPPORT OF THE GIFTS R ECEIVED WERE FILED. LD.CIT(A) HAS HELD THAT THE AFORESAID DOCUMENTS EST ABLISHES THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. HE HAS FURTHER NOTED THAT DIRECTOR WHO HAD ADVANCED TO THE ASSESSE E ARE ASSESSED TO TAX, THE GIFTS RECEIVED HAVE BEEN DECLARED IN THE RETUR N OF INCOME. HE HAS FURTHER NOTED THAT IF THE AO DOUBTED THE GENUINENES S OF THE GIFTS, THE SAME COULD HAVE BEEN EXAMINED IN THE INDIVIDUALS HANDS BUT NO SUCH EXERCISE WAS UNDERTAKEN BY AO. THE LD.CIT(A) HAS T HUS GIVEN A FINDING THAT ASSESSEE HAS DISCHARGED THE ONUS CAST UPON THE ASSESSEE AS PER THE REQUIREMENT OF SECTION 68 OF THE ACT. BEFORE US, R EVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS O F THE LD.CIT(A). IN ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 8 - VIEW OF THESE FACTS, WE SEE NO REASON TO INTERFER E WITH THE ORDER OF LD.CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMIS SED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.1212/AHD/2012 FOR AY 2003-04 IS DISMISSED. 6. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.970/AH D/2012 FOR AY 2008-09. 6.2. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 200 8-09 ON 23/09/2008 DECLARING TOTAL LOSS OF RS.17,43,988/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') VIDE OR DER DATED 23/11/2010 AND THE TOTAL INCOME WAS DETERMINED AT RS.2,12,05,1 20/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (AO), ASSESSEE C ARRIED THE MATTER BEFORE THE LD.CIT(A), WHO VIDE ORDER DATED 29/02/20 12 (IN APPEAL NO.CIT(A)-XI/230/DCIT.CIR-5/10-11) GRANTED SUBSTANT IAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), RE VENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUND:- I) THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,89,11,800/- MADE U/S.41(1) OF THE ACT. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE BALANCE-SHEET, AO NOTICED THAT THE CURRENT LIABILIT IES INCLUDED RS.1,89,11,800/- FROM SUPREME GENERAL TRADING COMPA NY. THE ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 9 - ASSESSEE WAS ASKED TO EXPLAIN THE TRANSACTION. ASS ESSEE INTER-ALIA SUBMITTED THAT THE AMOUNT WAS RECEIVED AS ADVANCE I N FINANCIAL YEAR (FY) 2003-04 AND SINCE THE COMPANIES ACCOUNT BECAME NPA, ASSESSEE COULD NOT SUPPLY THE MATERIAL. THE SUBMISSION OF T HE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO AS ACCORDING TO THE AO T HE ASSESSEE SHOULD HAVE OFFERED THE AMOUNT AS INCOME BECAUSE ACCORDING TO HIM THE CREDITOR COULD NOT HAVE ENFORCED THE PAYMENT QUA THE ASSESSE E. HE ACCORDINGLY, BY INVOKING THE PROVISION OF SECTION 41(1) OF THE A CT, TREATED THE AMOUNT OF RS.1,89,11,800/- AS CESSATION OF TRADING LIABILI TY AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CAR RIED THE MATTER BEFORE THE LD.CIT(A) WHO AFTER CONSIDERING THE SUBM ISSIONS, OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 3. 2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBM ISSIONS. 1 HAVE ALSO PERUSED VARIOUS CASE LAWS RELIED UPON BY THE APPELL ANT. I HAVE ALSO GONE THROUGH THE EVIDENCES FURNISHED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS AND DURING THE APPELLATE PRO CEEDINGS. IT IS SEEN THAT ADDITIONS MADE U/S.41 (1) IS DISPUTED. IN VI EW OF THIS, IT WILL BE PERTINENT TO DISCUSS THE PROVISIONS OF SEC.41(1) OF THE L.T.ACT. IN MY CONSIDERED, VIEW THE PROVISIONS OF SEC.41(1) CAN BE INVOKED, IF THE FOLLOWING CONDITIONS PRE FULFILLED:- (I) IN THE ASSESSMENT OF AN ASSESSEE, AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN RESPECT OF ARTY LOSS, EXPENDITURE OR T RADING LIABILITIES INCURRED BY THE APPELLANT (II) (A) ANY AMOUNT IS OBTAINED IN RESPECT OF SUCH LOSS OR EXPENDITURE, OR (B) ANY BENEFIT IS OBTAINED IN RESPECT OF SUCH TRA DING LIABILITY BY WAY OF REMISSION OF CESSATION THEREOF. ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 10 - (III) SUCH AMOUNT OR BENEFIT, IS OBTAINED BY THE AS SESSEE AND (IV) SUCH AMOUNT OR BENEFIT IS OBTAINED IN A SUBSEQ UENT YEAR. 3.3 TO INVOKE PROVISIONS OF SEC.41(1), THE ABOVE SA ID CONDITIONS SHOULD BE FULFILLED. IT IS SPECIFICALLY HELD BY THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS PRANLAL P. DOSHI (1993) REPORTED AT 201 ITR 756 (GUJ) AND CIT VS BHARAT IRON & STEEL INDUSTRIES (1993) 199 ITR 67 (GUJ), THAT SEC.41(1) CREATES A LEGAL FICTION. TH EREFORE, FACTS NECESSARY BY WAY OF CONDITION PRECEDENT FOR RAISING THE LEGAL FICTION HAVE TO BE ESTABLISHED FIRST AND THEY CAN BE ESTABLISHED ONLY ON THE BASIS OF EVIDENCE ON RECORD. IN THE CASE IN HAND, THE APPELL ANT HAS SPECIFICALLY RAISED THE QUESTION THAT THE IMPUGNED AMOUNT WAS NE VER ALLOWED AS DEDUCTION IN THE EARLIER YEAR. IN THIS REGARD, THE HON'BLE DELHI HIGH COURT IN CIT VS FOOLCHAND JIVANRAM (1981) REPORTED AT 131 ITR 37 AND STEEL AND GENERAL MILLS CO. LTD. VS CIT (1974) REPO RTED AT 96 ITR 438 (DEL), HAS HELD THAT THE BURDEN LIES UPON THE DEPAR TMENT TO PROVE THAT AN ALLOWANCE OR DEDUCTION HAD BEEN GIVEN FOR RELEVA NT AMOUNT TO THE ASSESSEE IN THE EARLIER ASSESSMENT YEARS, THIS BURD EN WILL BE DISCHARGED ONLY IF REVENUE PRODUCES POSITIVE EVIDENCE AND DOES NOT RELY UPON PROBABILITIES AND EXTRANEOUS CIRCUMSTANCES. IT IS F URTHER HELD BY HON'BLE JABALPUR TRIBUNAL IN THE CASE OF CIT VS BHA GWANDAS SHOBHADAS JAIN (1997) REPORTED AT 60 ITD 180 THAT F OR APPLYING PROVISIONS OF SEC.41(1), ONUS IS UPON THE REVENUE T O ESTABLISH THAT LIABILITY HAS CEASED DURING THE RELEVANT PREVIOUS Y EAR. 3.4 THE TAXABILITY OF ADVANCE OF RS.1,89,11,800/- U/S.41 (1) NEEDS TO BE ASCERTAINED KEEPING IN VIEW OF THE ABOVE FACTS. IT IS SEEN THAT THE A.O. IN PARA-2 OF THE ASSESSMENT ORDER HAS CLEARLY MENTIONE D THAT SCHEDULE-G OF THE BALANCE-SHEET INCLUDE ADVANCE FROM CUSTOMERS OF RS.2,69,11,800/- WHICH INCLUDE RS.1,89,11,800/ - RECEIVED FROM M/S. SUPREME GENERAL TRADING ON 10/4/2003. THIS WAY THE BALANCE SHEET OF THE APPELLANT CLEARLY CATEGORIZE THE RECEIPT FROM M /S. SUPREME GENERAL TRADING AS ADVANCE. THIS FACT REMAINS UNCONTROVERTE D. THE SUM OF RS.1,89,11,800/- BEING AN ADVANCE, ACCORDINGLY THER E IS NO QUESTION OF ALLOWING A DEDUCTION IN RESPECT OF THE IMPUGNED AMO UNT OF RS.1,89,11,860/- IN THE EARLIER YEARS. THIS WAY THE FIRST CONDITION OF SEC.41 (1) AS MENTIONED ABOVE IS NOT FULFILLED. IN THIS REGARD , IT WILL ALSO ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 11 - BE PERTINENT TO MENTION THAT THE ONUS WAS ON THE A. O. TO PROVE THAT DEDUCTION HAS BEEN ALLOWED IN THE EARLIER YEARS. TH E A.O. HAS MISERABLY FAILED TO DISCHARGE HIS ONUS IN THIS REGARD. SECOND LY, THERE IS NO EVIDENCE ON RECORD TO INDICATE THAT THE APPELLANT H AS DERIVED ANY BENEFIT IN RESPECT OF THIS LIABILITY. THIS WAY THE SECOND C ONDITION OF SEC.41(1) IS NOT FULFILLED. SINCE THE BASIC CONDITIONS AS LAID D OWN IN SEC.41(1) ARE NOT FULFILLED, ACCORDINGLY, I AM OF THE CONSIDERED VIEW THAT THE A.O. CANNOT INVOKE PROVISIONS OF SEC.41(1). IT IS ALSO A MATTER OF FACT THAT ADVANCE OF RS.1,89,11,800/- WAS OUTSTANDING AS ON 3 1/3/2008 I.E. AT THE END OF CURRENT ASSESSMENT YEAR. THIS WAY THERE IS NO QUESTION OF ANY REMISSION OR CESSATION OF THIS LIABILITY. I HAVE AL SO PERUSED VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT AND THE RATIO OF THESE CASE LAWS FULLY COVERS THE FACTS OF THE APPELLANT AND AS PER THE RA TIOS OF THESE CASE LAWS ALSO PROVISION OF SEC.41 (1) CANNOT BE INVOKED. IN VIEW OF ABOVE FACTS I DO NOT HAVE ANY HESITATION IN ORDERING TO DELETION OF RS. 1,89,11,800/-. THIS GROUND OF APPEAL IS ALLOWED. 7.1. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), REVEN UE IS NOW IN APPEAL BEFORE US. 7.2. BEFORE US, LD.SR.DR SUPPORTED THE ORDER OF AO. LD.AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND SUPPORTED THE ORDER OF LD.CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO AD DITION U/S.41(1) OF THE ACT. WE FIND THAT WHILE DELETING THE ADDITION, L D.CIT(A) HAS GIVEN A FINDING THAT IN THE BALANCE SHEET THE AMOUNT HAS BE EN SHOWN AS AN ADVANCE, THERE IS NO EVIDENCE ON RECORD TO INDICATE THAT ASSESSEE HAS ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 12 - DERIVED ANY BENEFIT IN RESPECT OF THIS LIABILITY. LD.CIT(A) HAS FURTHER GIVEN A FINDING THAT SINCE THE REQUIREMENT OF PROVI SIONS FOR MAKING ADDITIONS U/S. 41(1) WERE NOT FULFILLED, PROVISION OF SECTION 41(1) COULD NOT BE INVOKED BY AO. BEFORE US, THE REVENUE HAS N OT CONTROVERTED THE FINDINGS OF THE LD.CIT(A) NOR HAS PLACED ON RECORD ANY CONTRARY BINDING DECISION IN ITS SUPPORT. ON THE OTHER HAND, WE FI ND THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA REPORTED AT (2014) 222 TAXMAN 0313 (GUJARAT) HAS DE CIDED THE ISSUE IN FAVOUR OF ASSESSEE AND HAS HELD AS UNDER:- SECTION 41(1) WOULD APPLY IN A CASE WHERE THERE HA S BEEN REMISSION OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSID ERATION SUBJECT TO THE CONDITIONS CONTAINED IN THE STATUTE BEING FULFILLED . ADDITIONALLY, SUCH CESSATION OR REMISSION HAS TO BE DURING THE PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE PRESENT CASE, BOTH ELEMENTS ARE MISSING. THERE WAS NOTHING ON RECORD TO SUGGEST THERE WAS REMISSION OR CESSATION OF LIABILITY THAT TOO DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08 WHICH WAS T HE YEAR UNDER CONSIDERATION. IT IS UNDOUBTEDLY A CURIOUS CASE. EV EN THE LIABILITY ITSELF SEEMS UNDER SERIOUS DOUBT. THE AO UNDERTOOK THE EXE RCISE TO VERIFY THE RECORDS OF THE SO CALLED CREDITORS. MANY OF THEM WE RE NOT FOUND AT ALL IN THE GIVEN ADDRESS. SOME OF THEM STATED THAT THEY HA D NO DEALING WITH THE ASSESSEE. IN ONE OR TWO CASES, THE RESPONSE WAS THA T THEY HAD NO DEALING WITH THE ASSESSEE NOR DID THEY KNOW HIM. OF COURSE, THESE INQUIRIES WERE MADE EX PARTE AND IN THAT VIEW OF THE MATTER, THE A SSESSEE WOULD BE ALLOWED TO CONTEST SUCH FINDINGS. NEVERTHELESS, EVE N IF SUCH FACTS WERE ESTABLISHED THROUGH BI-PARTE INQUIRIES, THE LIABILI TY AS IT STANDS PERHAPS HOLDS THAT THERE WAS NO CESSATION OR REMISSION OF L IABILITY AND THAT THEREFORE, THE AMOUNT IN QUESTION CANNOT BE ADDED B ACK AS A DEEMED INCOME UNDER SECTION 41(1) OF THE ACT. THIS IS ONE OF THE STRANGE CASES WHERE EVEN IF THE DEBT ITSELF IS FOUND TO BE NON-GE NUINE FROM THE VERY ITA NOS.1212 & 970 AHD/2012 ACIT VS. R.P.K.WAREHOUSING P.LTD. ASST.YEARS 2003-04 & 2008-09 RESPECTIVELY - 13 - INCEPTION, AT LEAST IN TERMS OF SECTION 41(1) OF TH E ACT THERE IS NO CURE FOR IT. THE FINDINGS OF TRIBUNAL UPHELD. 9. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY TH E HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOGILAL RAMJIBHA I ATARA (SUPRA) AND IN VIEW OF THE FINDINGS OF LD.CIT(A) WHICH HAVE REM AINED UNCONTROVERTED, WE DISMISS THE GROUND RAISED BY THE REVENUE. 9.1 RESULTANTLY, REVENUES APPEAL IN ITA NO.970 /AHD/12 FOR AY 2008-09 IS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 24/08/2016 SD/- SD/- () () (RAJPAL YADAV) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 24/ 08 /2016 3..,.../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-XI, AHMEDABAD 5. 89:'56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<=+ / GUARD FILE. / BY ORDER, (8' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD