ACIT, Ludhiana V. Sh. Sukhwinder Singh, Ludhiana

ITA 1295/CHANDI/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51612 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: DEEPAK AGGARWAL
• Keywords: Additional evidence; Non compliance; Sham transactions; Revenue expenditure
• Section: 144; 10; 40A(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1295/CHD/2010 ASSESSMENT YEAR: 2006-07 ACIT, CIRCLE 1, V SHRI SUKHWINDER SINGH, LUDHIANA. PROP. M/S AHMEDGARH TANKER TRANSPORT, HEERA NAGAR, ST. NO. 4, LUDHIANA. PAN: ANZPS-8434Q (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI AKHILESH GUPTA ASSESSEE BY : SHRI DEEPAK AGGARWAL DATE OF HEARING : 17.11.2011 DATE OF PRONOUNCEMENT : 08.12.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 27.08.2010 PASSED BY THE LD. CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN ADMITTING THE ADDITIONAL EVIDENCE FURNISHED BY T HE ASSESSEE BEFORE HIM DURING THE APPELLATE PROCEEDING S WITHOUT GIVING ANY OPPORTUNITY TO THE AO AND THUS IGNORING SUB RULE 3 OF RULE 46A OF THE INCOME TAX RULES. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN ADMITTING THE ADDITIONAL EVIDENCE FURNISHED BY T HE ASSESSEE BEFORE HIM DURING THE APPELLATE PROCEEDING S IGNORING THE FACTS: 2 I) THAT THE CIRCUMSTANCES EXPLAINED BY THE ASSESSEE DO NOT FALL UNDER CLAUSES (A)(B)(C) AND (D) OF RULE 46A(1) OF INCOME TAX RULES, 1961. II) THAT SUFFICIENT OPPORTUNITIES WERE ALLOWED TO THE ASSESSEE TO FURNISH THE RELEVANT DOCUMENTS AND PRODUCE THE BOOKS OF ACCOUNT DURING THE ASSESSMENT PROCEEDINGS, WHICH THE ASSESSEE FAILED TO FURNISH/PRODUCE. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.14,22,405/- MADE BY AO BEING DIFFERENCE IN THE TWO LISTS OF TRANSPORTERS SUBMITTED BY THE ASSESSEE, TO WHOM THE PAYMENTS HAD BEEN MADE. THE LD. CIT(A) ERRED IN HOLDING THAT IN ABSENCE OF BOOKS OF ACCOUNT SOME ACTS OF OMISSION/COMMISSION MIGHT HAVE OCCURRED IN THE SECOND LIST PREPARED AND THAT INADVERTENTLY SOME TYPOGRAPHICAL ERROR HAS OCCURRED IN SECOND LIST WHE N THE TWO LISTS WERE SUBMITTED BY THE ASSESSEE ON THE SAME DATE I.E. 26.12.2008. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT IN ALLOWING THE CONTENTION OF THE ASSESSEE THAT THE LIST OF TRANSPORTERS FROM THE OFFICE COPIES OF FORM NO.1 5-I SUBMITTED BY THESE OWNERS FOR NON-DEDUCTION OF TDS WHEN NO SUCH RECORD WAS PRODUCED BEFORE AO FOR VERIFICATION. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT IN HOLDING THAT THERE IS NO NON-COMPLIANCE BY THE ASSESSEE, WHEREAS CONTRARY FINDINGS HAVE CLEARLY BEEN GIVEN BY THE AO IN THE ASSESSMENT ORDER. 6. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT IN HOLDING THAT AO WAS NOT JUSTIFIED IN MAKING DISALLOWANCE U/S 40A(3) ON THE PRESUMPTIVE BASIS WHEN NO BOOKS OF ACCOUNT WERE PRODUCED BY THE ASSESSEE BEFORE AO. 3 7. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT IN DELETING THE ADDITION OF RS.21,55,629/- ON ACCOU NT OF SUNDRY TRADE CREDITORS AS THE ADDITION WAS MADE ON PRESUMPTION AND WITHOUT ANY BASIS IGNORING THE FACT THAT ONLY PHOTOCOPIES OF UNDATED CONFIRMATIONS WERE PRODUCED BEFORE THE AO AND THAT AO HAS CLEARLY OBSERVED THAT THE ASSESSEE COULD NOT HAVE ARRANGED THE CONFIRMATIONS WITHIN A SPAN OF 2-3 DAYS FROM FA R OFF PLACES AND THAT EVEN THE SIGNATURES ON THE CONFIRMATIONS WERE NOT SUSPICION FREE. 3. IN GROUND NO.1 & 2, THE REVENUE STATED THAT THE CIT(A) ADMITTED NEW EVIDENCE WITHOUT FOLLOWING THE PROVISI ONS OF RULE 46A OF THE INCOME TAX RULES, 1962. IN THE COUR SE OF APPELLATE PROCEEDINGS, LD. 'DR' STATED THAT ADDITIO NAL EVIDENCES WERE ADMITTED BY THE CIT(A) WITHOUT AFFOR DING OPPORTUNITY TO THE ASSESSEE. 4. LD. 'AR', ON THE OTHER HAND, VEHEMENTLY CONTENDE D THAT NO NEW EVIDENCE WAS FILED BEFORE THE CIT(A) WHICH W ERE NOT SUBMITTED BEFORE THE AO. IT WAS ALSO CONTENDED BY THE LD. 'AR' THAT CONFIRMATORY LETTERS FILED BEFORE THE CIT (A) WERE ALSO MADE AVAILABLE TO THE AO AS IS EVIDENT FROM PA GE 5, PARA 2, OF ASSESSMENT ORDER WHEREIN LD. AO HAS MEN TIONED THAT PHOTO COPIES OF CONFIRMATION LETTERS FROM SUND RY CREDITORS HAD BEEN FURNISHED ALONGWITH LETTER FILED ON 26.11.2008. SIMILAR, CONFIRMATIONS WERE FILED BEFO RE CIT(A) AS RECORDED IN PARA 4.2 OF THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY. THE ASSESSEE SUBMITTED BEFORE CIT(A) IN REPLY TO THE QUERY RAISED BY THE CIT(A) IN RESPE CT OF PARA 2 OF ASSESSMENT ORDER THAT THE ASSESSEE HAD IN HIS POSSESSION AN IMPORTANT FILE CONTAINING OFFICE COPI ES OF THE 4 CONFIRMATIONS SUBMITTED BY PETTY TRANSPORTERS FOR N ON DEDUCTION OF TDS ON THE PAYMENTS ON ACCOUNT OF FREI GHT PAID TO EACH OF THEM. THESE OFFICE COPIES ARE ON FORM N O.15-I OF INCOME TAX RULES, 1962 SINCE TIME BARRING ASSESSMEN T WAS PENDING IN THE CASE, FOR WHICH NO PARTY WAS VIRTUAL LY LEFT, THE ASSESSEE MADE HIS BEST EFFORTS TO COLLECT MAXIM UM NUMBER OF CONFIRMATIONS FROM THE PETTY TRANSPORTERS TO PROVE HIS CASE AND ALSO PLACED DOCUMENTARY EVIDENCE ON RECORD. IT WAS, THEREFORE, UNDER THESE CIRCUMSTANC ES THAT THE ASSESSEE FILED CONFIRMATION AS AFORESAID AND AS SUCH THE OBSERVATIONS OF THE LD. AO ARE BASED ON SURMISES. SIMILARLY, THE LIST OF 78 TRANSPORTERS AS ALSO ANOTHER LIST OF 75 TRANSPORTERS WERE AVAILABLE BEFORE THE AO. HE, FUR THER, SUBMITTED THAT THE LD. 'DR' HAS FAILED TO SPECIFICA LLY POINT OUT HOW SUCH EVIDENCES CAN BE REFERRED TO AS NEW ON ES FILED BEFORE THE CIT(A). 5. WE HAVE CAREFULLY PERUSED THE FACT SITUATION OF THE CASE, RIVAL SUBMISSIONS AND FOUND THAT A CLEAR REFE RENCE HAS BEEN MADE BY THE AO, IN THE IMPUGNED ASSESSMENT ORD ER, IN RESPECT OF THESE TWO LISTS OF 78 AND 75 TRANSPORTER S ALONGWITH PHOTO COPIES OF CONFIRMATORY LETTERS. IN VIEW OF THIS, IT IS EVIDENT THAT NO NEW EVIDENCE HAD BEEN F ILED BEFORE THE CIT(A), CONTRARY TO THE PROVISIONS OF RULE 46A OF THE INCOME TAX RULES, 1962. THUS, IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSIONS, RULE 46A IS NOT APPLICABLE TO THE PRESENT CASE. THEREFORE, THESE TWO GROUNDS OF THE REVENUE ARE DISMISSED. 5 6. IN GROUND NO.3, THE REVENUE CONTENDED THAT THE C IT(A) ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.14,22,404/- MADE BY THE AO BEING DIFFERENCE IN T WO LISTS OF THE TRANSPORTERS SUBMITTED BY THE ASSESSEE. LD. 'DR' CONTENDED THAT THE ADDITIONS MADE BY THE AO IN RESP ECT OF DISCREPANCIES NOTED IN THE TWO LISTS OF TRANSPORTER S FILED BY THE ASSESSEE ARE VALID AND DESERVE TO BE SUSTAINED. 7. THE LD. 'AR' MENTIONED THAT THERE IS NO DISCREPA NCY IN THE TWO LISTS CONTAINING NAMES OF 78 AND 75 TRANSPO RTERS. IT WAS CLARIFIED THAT THE LIST CONTAINING NAMES OF 78 TRANSPORTERS IS CORRECT AND COMPLETE AS THE TOTAL O F ALL THE ENTRIES HAS BEEN CLEARLY TYPED AS RS.4,52,45,873/- ON THE LAST PAGE OF THE LIST. AS FAR AS THE SECOND LIST C ONTAINING 75 NAMES IS CONCERNED, IT IS INCOMPLETE AS IT WAS UNDE R PREPARATION AND AS SUCH THE TOTAL OF PAYMENTS HAD N OT BEEN TYPED OR OTHERWISE STRUCK BY THE ASSESSEE. IT WAS F URTHER CONTENDED THAT IT IS QUITE APPARENT FROM A BARE PER USAL OF BOTH THE LISTS UNDER REFERENCE THAT THE LIST CONTAI NING 75 NAMES OF THE TRANSPORTERS IS INCOMPLETE. THEREFORE , THE ADDITION MADE BY THE AO IS NOT JUSTIFIED. THE AO, BASED ON THE DISCREPANCIES IN THESE TWO LISTS, MADE THE ADDI TION OF RS.14,22,405/- HOLDING THE SAME AS SHAM TRANSACTION S. THE FINDINGS OF THE CIT(A) AS CONTAINED IN PARA 4.3 TO 4.4 CONTAINING FULL DISCUSSION OF FACTS ARE REPRODUCED HEREUNDER FOR THE PURPOSE OF PROPER APPRECIATION OF THE ISSUE IN QUESTION: 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE AR. RETURN OF INCOME IN THIS CASE WAS FILED ON 29.10.2 006 6 DECLARING TOTAL INCOME AT RS.6,49,310/-, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY THE CASE WAS TAKEN UP FOR SCRUTINY. STATUTORY NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED ON VARIOUS DATES WHICH ACCORDING TO THE AO WERE NOT FULLY COMPLIED WITH. AO HAS ALSO OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED BOOKS O F ACCOUNT AND VOUCHERS AND THEREFORE HE HAS MADE THE ASSESSMENT UNDER SECTION 144 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED TH AT THE AO FILED TWO LISTS OF TRANSPORTERS IN SUPPORT O F PAYMENT OF RS.4,52,45,873/- ALLEGEDLY MADE TO THEM WITHOUT ANY EVIDENCE AND ON THE DATES ON WHICH SUCH PAYMENTS WERE MADE AND VEHICLE FOR WHICH MADE. IN ONE LIST NAMES OF 78 TRANSPORTERS ARE MENTIONED WITHOUT PANS TO WHOM PAYMENTS OF RS.4,47,28,468/- (4,52,45,873-5,17,405/-) WERE CLAIMED TO HAVE BEEN MADE TO OTHER TRUCKERS. IN THE SECOND LIST THERE A RE 75 TRANSPORTERS WHOSE NAME ALSO APPEAR IN THE FIRST LI ST OF 78 TRANSPORTERS. AO FOUND THAT THERE WERE SOME DIFFERENCES IN TWO LISTS AS NOTED AT PAGE 3 OF THE ASSESSMENT ORDER AS UNDER : S.NO./LIST NO. NAME OF ALLEGED TRANSPORTER AMO UNT IN LIST OF 78 TRANSPORTERS BUT NOT IN OTHER LIST OF 75 TRANS- PORTERS ------------------ ---------------------------- ------------ ----------- 1/64 AMARJIT SINGH S/O KULDIP 2,80,000 SINGH 2/70 SATPAL SINGH S/O BIRINDER 3,10,000 SINGH 3/71 BALWANT SINGH S/O GURMEET 3,15.000 SINGH 4/- PAYMENT TO OTHER TRUCKERS 5,17,405 TOTAL 14,22,405 IN THE ABSENCE OF ACCOUNT BOOKS, THE AO MADE ADDITION OF RS.14,22,405/- BEING THE DIFFERENCE IN THE TWO LISTS OF TRANSPORTERS HOLDING THE SAME AS SHAM TRANSACTIONS. 4.3 IN THIS REGARD, AR HAS STATED THAT LIST CONTAIN ING NAME OF 78 TRANSPORTERS IS CORRECT AND COMPLETE AS THE 7 TOTAL OF ALL THE ENTRIES HAS BEEN CLEARLY TYPED AS RS.4,52,45,873/- ON THE LAST PAGE OF THE LIST. SO F AR THE SECOND LIST CONTAINING OF 75 NAMES IS CONCERNED , IT IS INCOMPLETE AS IT WAS UNDER PREPARATION AND TOTAL OF PAYMENTS HAD NOT BEEN TYPED. MOREOVER, THESE LISTS ARE NOT OF MUCH CONSEQUENCE AS THEY RELATES TO THE FREIGHT PAYMENTS TO THE TANKER OWNERS TO WHOM THE PAYMENTS OF FREIGHT WERE MADE. THE DIFFERENCE IN T WO LIST POSSIBLY OCCURRED AS THE BOOKS OF ACCOUNT OF T HE ASSESSEE HAD LIST. REGARDING THE QUESTION AS TO HO W IN THE ABSENCE OF ACCOUNT BOOKS THESE WERE PREPARED , AR VIDE HIS FURTHER REPLY SUBMITTED THAT THE ASSESS EE WAS IN POSSESSION OF FILE CONTAINING OFFICE COPIES OF FORMS SUBMITTED BY PETTY TRANSPORTERS FOR NON DEDUCTION OF TDS ON THE PAYMENTS ON ACCOUNT OF FREIGHT PAID TO EACH OF THEM. THESE OFFICE COPIES A RE ON FORM NO.15-I OF INCOME TAX RULES, 1962. SINCE A TIM E BARRING ASSESSMENT WAS PENDING IN THIS CASE AND TIM E LEFT WAS VERY LITTLE, THE ASSESSEE PUT IN HIS BEST EFFORTS TO COLLECT THE MAXIMUM NUMBER OF CONFIRMATIONS FROM THE PETTY TRANSPORTERS TO PROVE HIS CASE AND ALSO PLACED DOCUMENTARY EVIDENCE ON RECORD. IT WAS UNDER THESE CIRCUMSTANCES THAT THE ASSESSEE FILED THE CONFIRMATIONS AS AFORESAID. REGARDING OBSERVATION OF THE AO OF NON COMPLIANCE, AR HAS SUBMITTED THAT THE RE HAD NEVER BEEN A FAILURE ON THE PART OF THE ASSESSE E TO ATTEND ASSESSMENT PROCEEDINGS ON EACH AND EVERY DATE OF HEARING. THE RELEVANT INFORMATION CALLED FO R DURING THE ASSESSMENT PROCEEDINGS WAS PROMPTLY FURNISHED BY THE ASSESSEE AND ENTRIES TO THIS EFFEC T HAVE DULY BEEN RECORDED BY THE AO. SO FAR AS THE BOOKS OF ACCOUNT ARE CONCERNED, THE ASSESSEE WAS HELPLESS IN THE MATTER AS HIS BOOKS OF ACCOUNT WERE LOST IN TRANSIT AND COPY OF FIT WAS DULY PRODUCED B Y THE ASSESSEE AND PLACED ON RECORD. THE FACT THAT T HE ASSESSEE HAD ATTENDED THE ASSESSMENT PROCEEDINGS AND FILED THE DETAILS FROM TIME TO TIME IS EVIDENT FROM THE FACT THAT THE AO IMPOSED PENALTY UNDER SECTION 8 271(1)(B) FOR NON ATTENDANCE OF THE ASSESSMENT PROCEEDINGS ON 11.8.2008 WHEREAS THE ORDERSHEET ENTRY OF THE SAID DATE AND THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ASSESSEE'S REPRESENTATIVE ATTENDED THE ASSESSMENT PROCEEDINGS ON 11.8.2008, FURNISHED THE REQUISITE INFORMATION AND ALSO DISCUS SED CASE WITH THE AO. FROM THE FACTS DISCUSSED ABOVE IT IS SEEN THAT THE AR/ASSESSEE HAVE ATTENDED THE ASSESSMENT PROCEEDINGS AND FILED CERTAIN DETAILS EXCEPT ON SOME DATES SUCH AS 12.11.2008 WHEREAS AO HAS OBSERVED THAT THERE APPEARS TO BE NON COMPLIANC E ON THIS DATE. ON 15.12.208 ALSO AO HAS OBSERVED TH AT THERE WAS NO COMPLIANCE HOWEVER ASSESSEE'S LETTER DATED 4.12.2008 FILED IN WHICH COPY OF FIR FOR LOSS OF BOOKS WAS GIVEN. FROM THE DISCUSSION MADE ABOVE, I T APPEARS TO ME THAT ASSESSEE HAS BY AND LARGE ATTENDED THE ASSESSMENT PROCEEDINGS AND HAS FILED VARIOUS DETAILS EXCEPT OF COURSE ACCOUNT BOOKS WHIC H WERE LIST IN THE TRANSIT AS IS EVIDENCED BY THE FIR . 4.4 REGARDING ADDITION OF RS.14,22,405 KEEPING IN VIEW THE FACTS DISCUSSED ABOVE AND CONTENTIONS MADE BY THE AR, I AM OF THE OPINION THAT IN THE ABSENCE OF ACCOUNT BOOKS SOME ACTS OF OMISSION/COMMISSION MIGHT HAVE OCCURRED IN THE SECOND LIST PREPARED. TH E ORIGINAL LIST CONTAINING 78 NAMES SHOWED TOTAL OF RS.4,52,45,873/- WHICH IS THE AMOUNT OF TRANSPORT RECEIPTS AND COMMISSION AND BROKERAGE AS NOTED AT PAGE 2 AND 3 OF THE ASSESSMENT ORDER. IN VIEW OF TH E ABOVE, I AM OF THE OPINION THAT INADVERTENTLY TYPOGRAPHICAL ERROR HAS OCCURRED IN THE SECOND LIST AND THEREFORE, NO ADDITION IS CALLED FOR AND ACCORDINGLY SAME IS DELETED. THUS GROUND OF APPEAL NO.5 IS ALLOWED. 8. PERUSAL OF THE ORDER OF FIRST APPELLATE AUTHORIT Y AND FACTUAL MATRIX OF THE CASE CLEARLY REVEALS THAT THE AO PROCEEDED ON ASSUMPTION OF WRONG FACTS, WHICH LED T O INFER 9 ALLEGED DISCREPANCY, IN THE TWO LISTS OF TRANSPORTE RS. BOTH THE LISTS CONTAIN COMMON NAMES OF TRANSPORTERS. 9. IN VIEW OF THE ABOVE DISCUSSION, WE FIND THAT TH E FINDINGS OF THE CIT(A) ARE BASED ON PROPER APPRECIA TION OF THE MATERIAL BROUGHT BEFORE HIM. THEREFORE, THIS G ROUND OF APPEAL OF THE REVENUE IS DISMISSED. 10. GROUND NO.4 RAISED BY THE REVENUE IS LINKED TO GROUND NO. 1 & 2 ADJUDICATED EARLIER. THEREFORE, T HE GROUND NO.4 IS ALSO DISMISSED ACCORDINGLY. 11. GROUND NO.5, RAISED BY THE REVENUE PERTAINS TO THE ISSUE OF HOLDING BY THE CIT(A) THAT THERE IS NO NON - COMPLIANCE, ON THE PART OF THE ASSESSEE, WHEREAS CO NTRARY FINDINGS HAVE CLEARLY BEEN GIVEN BY THE AO, IN THE ASSESSMENT ORDER. THIS GROUND IS GENERAL IN NATURE AND HAS BEEN DULY DISCUSSED BY THE CIT(A) IN PARA 4.3, WHER EIN IT HAS BEEN HELD THAT BY AND LARGE THE ASSESSEE ATTEND ED ASSESSMENT PROCEEDINGS AND FILED VARIOUS DETAILS EX CEPT, OF COURSE ACCOUNT BOOKS WHICH WERE LOST IN TRANSIT AS IS EVIDENCED BY THE FIR. IN VIEW OF THE CLEAR FINDING S OF THE CIT(A), IN RESPECT OF THIS GENERAL GROUND OF APPEAL , WE DO NOT HAVE ANY GROUND TO INTERFERE IN SUCH FINDINGS AND T HIS GROUND OF APPEAL OF THE REVENUE IS ALSO DISMISSED. 12. IN GROUND NO.6, REVENUE CONTENDED THAT LD. CIT( A) ERRED IN LAW AND ON FACTS, IN HOLDING THAT AO WAS N OT JUSTIFIED IN MAKING ADDITION U/S 40A(3), ON THE PRE SUMPTIVE BASIS WHERE NO BOOKS OF ACCOUNT WERE PRODUCED BY TH E ASSESSEE BEFORE THE AO. THE AO INVOKED PROVISIONS OF 10 SECTION 40A(3) OF THE ACT, ON THE BASIS OF PRESUMPT ION. RELEVANT FINDINGS AS CONTAINED IN PARA 3.1 OF TH E ASSESSMENT ORDER, ARE REPRODUCED HEREUNDER : AS REGARDS THE REMAINING PAYMENTS OF RS.4,38,23,468/- (45245873-1422405), ALTHOUGH NO EVIDENCE HAS BEEN FURNISHED IN SUPPORT THEREOF, TOO YET KEEPING IN VIEW THE NATURE OF ASSESSEE'S BUSINESS SUCH ARRANGEMENTS/PAYMENTS ARE MUST. HOWEVER, ALTHOUGH NO BANK A/CS WERE ALSO PRODUCED, YET IT IS PRESUMED THAT THE ASSESSEE WOULD HAVE MADE CASH PAYMENTS TO THEM IN VIOLATION OF THE PROVISION OF SECTION 40A(3) AFTER MAKING WITHDRAWAL S FROM HIS BANK ACCOUNTS IN WHICH PROCEEDS OF GOODS RECEIPTS AS PER TDS CERTIFICATES WOULD HAVE BEEN DEPOSITED. THIS MIGHT BE ONE OF THE MAJOR REASONS F OR NON PRODUCTION OF HIS A/C BOOKS/BANK ACCOUNTS. THUS CONSIDERING THE ASSESSEE IS TREATED TO HAVE MADE PAYMENTS OF RS.43824468/- IN CONTRAVENTION OF THE PROVISION OF SECTION 40A(3) FOR WHICH DISALLOWANCE OF RS.87,64,894/- BEING 20% THEREOF DESERVES TO BE MADE. HENCE, ADDITION OF RS.87,64,894/- ON ACCOUNT OF DISALLOWANCE FOR CONTRAVENTION OF THE PROVISION OF SECTION 40A(3) IS HEREBY MADE TO HIS TOTAL INCOME 13. LD. CIT(A), DELETED THE ADDITIONS, ON THE BASIS OF SUBMISSIONS FILED BY THE ASSESSEE AND APPRECIATION OF THE RELEVANT PROVISIONS OF THE ACT. 14. THE RELEVANT FINDINGS OF THE CIT(A) ARE REPRODU CED HEREUNDER AS CONTAINED IN PARA 5.4 TO 5.5 : I HAVE CONSIDERED ALL THE SUBMISSIONS OF THE AR REPRODUCED ABOVE. AS NOTED IN THE ASSESSMENT ORDER THE ASSESSEE DERIVES INCOME FROM TRANSPORTATION OF GOODS. AS PER TDS CERTIFICATE ACCOMPANYING THE 11 RETURN, ASSESSEE EARNED GROSS RECEIPTS ON ACCOUNT O F FREIGHT AND COMMISSION/BROKERAGE AT RS.5,35,56,452/- FROM VARIOUS PARTIES, BUT IN THE PROFIT AND LOSS ACCOUNT ACCOMPANYING RETURN, THE ASSESSEE CREDITED GROSS RECEIPTS AMOUNTING TO RS.83,10,579/- AS FOLLOWS: I) FREIGHT RECEIPTS RS.53,92,161/- II) COMMISSION RECEIPTS RS.29,18,418/- TOTAL RS.83,10,579/- THIS RESULTED INTO VARIATION OF RS.4,52,45,873/- ON ACCOUNT OF GROSS RECEIPTS, WHICH ACCORDING TO THE A O WERE NOT SUBJECT TO VERIFICATION IN THE ABSENCE OF ACCOUNT BOOKS. AO FURTHER PRESUMED THAT ASSESSEE WOULD HAVE MADE CASH PAYMENTS TO THE TRANSPORTERS IN VIOLATION OF PROVISIONS OF SECTION 40A(3) AFTER MAKING WITHDRAWALS FROM HIS BANK ACCOUNT IN WHICH PROCEEDS OF GOODS RECEIPTS AS PER TDS CERTIFICATES WOULD HAVE BEEN DEPOSITED. ACCORDING TO THE AO THI S MIGHT BE ONE OF THE MAJOR REASONS FOR NON-PRODUCTIO N OF ACCOUNT BOOKS. AO ACCORDINGLY AFTER EXCLUDING AMOUNT OF RS.14,22,405/- BEING THE DIFFERENCE IN TH E TWO LIST OF TRANSPORTERS FOR WHICH SEPARATE ADDITIO N HAS BEEN MADE AS DISCUSSED IN GROUND OF APPEAL NO.3 TREATED THE REMAINING AMOUNT OF RS.4,38,24,468/- AS HAVING BEEN PAID IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) A ND ACCORDINGLY HE MADE DISALLOWANCE OF RS.87,64,894/- BEING 20% OF THE ABOVE AMOUNT. 15. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND RELEVANT ORDERS PASSED BY THE LOWER AUTHORITIES AND FOUND THAT THE AO PROCEEDED IN INVO KING PROVISIONS OF SECTION 40A(3) OF THE ACT ON THE BASI S OF ASSUMED FACTS WITHOUT BRINGING ON RECORD ANY MATERI AL TO SUPPORT HIS FINDINGS. LD. CIT(A) DELETED THE SAID ADDITIONS MADE BY THE AO. 12 16. IN VIEW OF THE FINDINGS OF THE LD. CIT(A) AND H AVING REGARD TO THE FACTS OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) IN THE MATTER. TH EREFORE, GROUND NO.6 OF THE REVENUE IS DISMISSED. 17. REVENUE CHALLENGED THE DELETION OF ADDITION IN GROUND NO.7 AMOUNTING TO RS.21,55,629/- BEING THE TOTAL AM OUNT OF SUNDRY TRADE CREDITORS APPEARING IN THE BALANCE SHE ET AS ON 31.3.2006 U/S 41(1) OF THE ACT. THE LD. 'DR' PLACED RELIANCE ON THE ASSESSMENT ORDER WHEREAS THE LD. 'AR' CONTEN DED THAT THE PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE. IT WAS CONTENDED BY THE LD. 'AR' THAT THE IMPUGNED ADDITIO N OF RS.21,55,629/- HAS NEVER BEEN CLAIMED AS DEDUCTION BY THE ASSESSEE WITHIN THE MEANING OF SECTION 41(1) OF THE ACT. CONSEQUENTLY, THERE IS NO QUESTION OF APPLICATION O F PROVISIONS OF SECTION 41(1) OF THE ACT. FINDINGS O F THE CIT(A) IN THE MATTER ARE CONTAINED IN PARA 6.1 AND THE SAM E ARE REPRODUCED HEREUNDER FOR THE PURPOSE OF PROPER APPR ECIATION OF THE SAME : 6.1 THE ASSESSEE HAS SHOWN IN THE BALANCE SHEET SUNDRY CREDITORS AT RS.21,55,629/-. ON BEING ASKED ASSESSEE FURNISHED LIST OF SUNDRY CREDITORS ALONGWI TH PHOTO COPIES OF THEIR CONFIRMATION. AO HAS OBSERVED THAT SAME WERE NOT SUBJECT TO VERIFICATION FOR WANT OF ACCOUNT BOOKS. AO HAS ALSO OBSERVED THAT ASSESSEE COULD NOT HAVE ARRANGED SUCH CONFIRMATION IN SHORT PERIOD OF 2-3 DAYS AS SUNDRY CREDITORS ARE MAINLY O F FAR OFF PLACES. THERE WERE NO DATES ON CONFIRMATIO NS. AO HAS ALSO OBSERVED THAT EVEN THE SIGNATURE ON THE CONFIRMATIONS DO NOT APPEAR TO BE SUSPICION FREE. AO THEREFORE HELD THAT THESE SUNDRY CREDITORS HAVE CEA SED TO EXIST AND/OR ALREADY REMITTED FROM INCOME FROM OTHER SOURCES AND THEREFORE MADE THE ADDITION OF 13 RS.21,55,629/- UNDER SECTION 41(1) OF THE ACT. IN THIS REGARD AR HAS SUBMITTED THAT AO HAS MADE THE AFORESAID ADDITION ONLY ON HYPOTHECATED ASSUMPTION WITHOUT ANY LOGIC. THE PROVISIONS OF SECTION 41(1) OF THE ACT PRESUPPOSES THE EXISTENCE OF A GENUINE TRAD E LIABILITY IN RESPECT OF WHICH THE ASSESSEE HAD CLAI MED A DEDUCTION FROM HIS INCOME IN ANY OF THE PRECEDING YEAR. AR HAS STATED THAT ASSESSEE HAD NEVER CLAIME D THE AMOUNT OF RS.21,55,629/- AS REVENUE EXPENDITURE IN ANY OF THE PRECEDING YEAR AND SAME IS EXCLUSIVE ON ACCOUNT OF FREIGHT PAYBLE TO THE TANKER OWNERS AS O N 31.3.2006 WHICH WERE PAID OFF IN THE SUBSEQUENT YEA R. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE HERE AGAIN I FIND THAT THE AO HAS MADE THE ADDITION ON PRESUMPTION WITHOUT ANY BASIS. IN FACT SUNDRY CREDITORS DURING THE PRECEDING TWO YEARS WER E VERY MUCH ON THE HIGHER SIDE AS PER DETAILS GIVEN I N THE ARS SUBMISSION REPRODUCED ABOVE. IT IS SEEN TH AT SUNDRY CREDITORS HAVE GONE DOWN TO RS.21,55,629/- I N THE CURRENT ASSESSMENT YEAR 2006-07 OVER THE SUNDRY CREDITORS IN THE EARLIER YEARS AND NO DISALLOWANCE WAS MADE IN EARLIER YEARS. IN VIEW OF THE ABOVE, ADDITI ON OF RS.21,55,629/- IS DELETED. 18. A BARE PERUSAL OF THE PROVISIONS OF SECTION 41( 1) OF THE ACT CLEARLY REVEALS THAT IT PRESUPPOSES THE EXISTEN CE OF GENUINE TRADE LIABILITY IN RESPECT OF WHICH THE ASS ESSEE HAD CLAIMED DEDUCTION FROM HIS INCOME IN ANY OF THE PRE CEDING YEAR. THE REVENUE FAILED TO BRING ON RECORD THAT S UCH DEDUCTION HAS BEEN CLAIMED BY THE ASSESSEE IN ANY O F THE PRECEDING YEAR. THE AO HELD THAT THESE SUNDRY CRED ITORS CEASES TO EXIST AND/OR HELD REMITTED FROM UNDISCLOS ED SOURCE OF INCOME AS PER PARA 4 OF THE ASSESSMENT OR DER AND CONSEQUENTLY MADE ADDITION U/S 41(1) OF THE ACT. S UCH FINDINGS OF THE AO AS HELD BY THE CIT(A) ARE CONTRA RY TO THE 14 PROVISIONS OF SECTION 41(1) OF THE ACT. THEREFORE, FINDINGS OF THE CIT(A), IN THE MATTER ARE UPHELD AND THIS GROUN D OF APPEAL IS DISMISSED. 19. GROUND NOS. 8 & 9 ARE GENERAL IN NATURE AND NEE D NO FRESH ADJUDICATION AND ARE DISMISSED. 20. APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH DEC.,2011. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 8 TH DEC.,2011. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH