The ITO, Ward 1 (3), JAMNAGAR V. Smt Ramilabe Ramji Bhadra, JAMNAGAR

ITA 1298/RJT/2010

• Counselvise Citation: 129824914 RSA 2010
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJIV RANADE DR IOL
• Assessee Lawyers: PRASHANT MAHAR ISHI CA L
• Keywords: Opportunity of being heard; Additional evidence
• Section: 144

Judgement Text

N , H IN THE INCOME TAX APPELLATE TRIBU N AL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAVA, AM IT A NO . 1298 / RJT/20 10 IO O / ASSESSMENT YEAR 20 0 7 - 08 ITO, WARD 1 (3), JAMNAGAR ( / APPELLANT) VS. SMT RAMILABEN RAMJI BHADRA PROP. LAXMI ENTERPRISES, C - 2 - 35/2, GIDC, STU, JAMNAGAR PAN : AFWPB 3443 F CR / RESPONDENT 6 L / REVENUE BY SHRI RAJIV RANADE , DR IO\L / ASSESSEE BY SHRI PRASHANT MAHAR ISHI , CA L /DATE OF HEARING 07 . 0 6 .2013 L / DATE OF PRONOUNCEMENT 21 . 06 . 2013 / ORDER . . [ , HD) / T. K. SHARMA, J. M . : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 17.09.2010 OF LD CIT ( A) , JAMNAGAR IN DELETING THE ADDITION OF RS.63,50,779/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS FOR THE ASSESSMENT YEAR 200 7 - 08 . 2 . THE BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A N INDIVIDUAL ENGAGED IN THE BUSINESS O F MANUFACTURING AND TRADING OF BRASS PARTS ITEMS. FOR THE ASSESSMENT YEAR UNDER APPEAL, SHE FILED HER RETURN OF INCOME ON 29.10.2007 DECLARING TOTAL INCOME OF RS.1,31,250/ - . THIS RETURN OF INCOME WAS ACCOMPANIED WITH AUDIT REPORT IN FORM NO.3CD & 3 CD AND OTHER ALLIED ACCOUNTS. THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S 144 OF THE INCOME - TAX ACT, WHEREIN HE TREATED THE LIABILITIES AMOUNTING TO RS.63,50,779/ - AS FICTITIOUS LIABILITIES WITHIN THE MEANING OF SECTION 41(1) OF THE INCOME - TAX ACT, 1961 A ND DISALLOWED THE SAME. ON APPEAL BEFORE THE LD CIT(A), THE ASSESSEE EXPLAINED THAT SHE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF BRASS PARTS ITEMS AS PROPRIETOR OF M/S. LAXMI ENTERPRISES AND FILED RETURN OF INCOME WITH FORM NO.3CB AND 3 CD FOR ASSESSMENT YEAR 2007 - 08 ON 29.10.2007. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER MADE ADDITION OF RS.63,50,779/ - U/S ITA NO. 1298/RJT/2010 2 41(1) OF THE INCOME - TAX ACT IN RESPECT OF SUNDRY CREDITORS AS AT 31.03.2007 AS PER SCHEDULE H OF AUDITED BALANCE SHEET. IN TH IS SCHEDULE THERE WERE 21 PARTIES WHOSE ACCOUNTS ARE OUTSTANDING FOR THE PURCHASE OF GOODS. IT WAS ALSO SUBMITTED THAT OUT OF THESE PARTIES AMOUNT OF R S .52,21,725/ - IS OUTSTANDING FROM 31.03.2006, I.E. EARLIER YEAR AND DURING THE YEAR PURCHASES ARE MADE FR OM 6 PARTIES WHO ARE ALSO OUTSTANDING. THE ASSESSEE SUBMITTED COPIES OF ACCOUNTS OF THOSE PARTIES AS WELL AS THE PHOTOCOPIES OF THE BILLS OF THOSE PARTIES WHEREIN THE ADDRESS, CST NUMBER, VAT NUMBER, AND TELEPHONE NUMBERS OF PARTIES WERE MENTIONED. HE SU BMITTED THAT THESE ADDITIONAL EVIDENCES BE ADMITTED. THEREAFTER, THE LD CIT(A) FORWARDED ALL THESE DETAILS TO ASSESSING OFFICER VIDE LETTER DATED 12.02.2010 U/S 250(4) OF THE INCOME - TAX ACT. IN RESPONSE TO THIS, THE ASSESSING OFFICER SUBMITTED HIS REMAND REPORT ON 06.04.2010. AFTER CONSIDERING THE SAID REPORT, THE LD CIT(A) DELETED THE ADDITIONS FOR THE DETAILED REASONS GIVEN IN PARAGRAPH 6 OF THE APPELLATE ORDER WHICH READS AS UNDER: - I HAVE CAREFULLY CONSIDERED THE REASONS GIVEN BY AO IN THE ASSESSMEN T ORDER AS WELL AS IN REMAND REPORT, AND SUBMISSIONS MADE BY APPELLANT. AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT, WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INC URRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR ASSESSEE AS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISS ION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME - TAX AS THE INCOME OF THE PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT. THEREFORE TO INVOKE THE PROVISION OF SECTION 41(1) OF THE THERE HAS TO BE REMISSION OR CESSATION OF ANY LIABILITY FOR WHICH ASSESSEE HA S CLAIMED A DEDUCTION IN THE PREVIOUS YEAR. FROM THE ABOVE READING IT IS CLEAR THAT PROVISION OF SECTION 41(1) ARE ATTRACTED ON FULFILLMENT OF CONDITIONS THAT ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE; OR AN ALLOWANCE OR DEDUCTION SHOULD HAVE BEEN MADE IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY AN ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR SAME ASSESSEE SHOULD HAVE RECEIVED (A) ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR (B) SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION. ON SATISFACTION OF ABOVE CONDITIONS, THE AMOUNT OBTAINED BY THE ASSESSEE OR VALUE OF BENEFIT ACCRUED TO HIM WOULD BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE AS INCO ME OF THAT PREVIOUS YEAR IRRESPECTIVE OF THE FACT WHETHER THE BUSINESS IN RESPECT OF WHICH ALLOWANCE OR DEDUCTION HAD BEEN GRANTED IS IN EXISTENCE OR NOT IN SUCH PREVIOUS YEAR. HERE ALL THE LIABILITIES ARE SHOWN IN THE BALANCE SHEET OF THE ASSESSEE AND THE Y ARE PAYABLE, NEITHER THE ASSESSEE NOR THE CREDITORS HAVE FORGONE THEIR CLAIM. FURTHER THE PURCHASES MADE FROM THOSE PARTIES, IN RESPECT OF WHOM IS ADDED U/S 41(1) HAS BEEN ACCEPTED BY AO AS GENUINE, IN ASSESSMENT. AO HAS NOT ITA NO. 1298/RJT/2010 3 PLACED ANY EVIDENCE WHICH EVE N REMOTELY SUGGEST THAT THOSE CREDITORS ARE NOT PAYABLE AND THEREFORE THERE IS CESSATION OR REMISSION OF THESE LIABILITIES. IT IS ALSO PERTINENT TO NOTE THAT WHEN AO HAS ALLOWED PURCHASE MADE BY THE APPELLANT FROM THOSE PARTIES AND ACCEPTED THE SAME IN TOT O, IT IS NOT CORRECT FOR HIM TO SAY THAT LIABILITY ON ACCOUNTS OF THOSE PURCHASES MADE, HAVE CEASED. AS HELD IN THE CASE OF CIT V PRANLAL P DOSHI 201 ITR 756 (GUJ) IN ORDER TO ATTRACT SECTION 41(1), THERE SHOULD BE EVIDENCE ON RECORD THAT PARTICULAR EXPEND ITURE HAD IN FACT BEEN ALLOWED IN THE EARLIER YEAR. FINDING REGARDING THIS FACT CANNOT BE BASED ON MERE CONJECTURES AND SURMISES. AS HELD BY KARNATAKA HIGH COURT IN LQUIDATOR, MYSORE AGENCIES PVT. LTD. VS. CIT 1978 CTR (KAR) 284 THAT THE REMISSION OF THE LIABILITY ARISES WHEN THE CREDITOR VOLUNTARILY GIVES UP THE CLAIM. IT IS A POSITIVE ACT OF THE CREDITOR. THE CESSATION OF THE LIABILITY ARISES ONLY WHEN SUCH LIABILITY CEASES TO EXIST IN THE EYE OF LAW FOR ALL INTENTS AND PURCHASES. THERE IS NO SUCH EVIDEN CE PLACED ON RECORD BY AO THAT CREDITORS HAVE GIVEN UP THEIR CLAIM. SINCE THERE IS NO EVIDENCE OF CESSATION OF LIABILITY, THESE AMOUNTS CANNOT BE HELD ASSESSABLE AS INCOME U/S 41(1). IN VIEW OF THIS THE ADDITION OF RS.63,50,779/ - MADE BY AO U/S 41(1) OF T HE ACT IS DELETED. 3. AGGRIEVED BY THE ORDER OF LD CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE THIS TRIBUNAL ON THE FOLLOWING GROUNDS: - 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.63,50,779/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS. 2. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS NOT DISCHARGED HIS ONUS BY PRODUCING DOCUMENTARY EVIDENCE TO EXPLAIN THE SUNDRY CREDITORS BEFORE THE ASSESSING OFFICER EITHER DURING THE ASSESSM ENT PROCEEDINGS OR EVEN DURING THE REMAND PROCEEDINGS. 4. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF REVENUE SHRI RAJIV RANADE APPEARED AND CONTENDED THAT THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S 144 OF THE INCOME - TAX ACT. S INCE THE ASSESSEE HAS NOT PRODUCED THE DOCUMENTARY EVIDENCE TO EXPLAIN THE SUNDRY CREDITORS BEFORE THE ASSESSING OFFICER, EITHER THE ADDITION MADE BY THE ASSESSING OFFICER BE CONFIRMED OR THE MATTER BE REMANDED TO THE FILE OF ASSESSING OFFICER. AS AGAINST THIS, THE LD COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE LD CIT(A) HAS GIVEN COGENT REASON IN DELETING THE ADDITION OF RS.63,50,779/ - MADE BY THE ASSESSING OFFICER U/S 41(1) OF THE INCOME - TAX ACT, THEREFORE THE VIEW TAKEN BY THE LD CIT(A) BE UPHELD. 5 . HAVING HEARD BOTH THE SIDES, I HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER MADE THE ADDITION OF RS.63,50,779/ - CONSIDERING THE CREDITORS APPEARING IN BALANCE SHEET ARE FICTITIOUS WITHIN THE MEANING OF SECTION 41(1) OF THE INCOME - TAX ACT BY ITA NO. 1298/RJT/2010 4 STATING THAT ON PERUSAL OF THE BALANCE SHEET AND INSPITE OF SUFFICIENT OPPORTUNITIES OF BEING HEARD AND TO FURNISH VARIOUS DETAILS AS CALLED FOR VIDE NOTICE U/S 142 (1) DATED 27/01/2009, THE ASSESSEE CHOOSE TO REM AIN SILENT, IT IS THEREFORE NOT POSSIBLE TO ASCERTAIN WITH ANY DEGREE OF CERTAINTY TO THE GENUINENESS OF THESE OUTSTANDING LIABILITIES AS FICTITIOUS LIABILITIES WITHIN THE MEANING OF SECTION 41(1) OF THE IT ACT . SINCE THE ASSESSING OFFICER FRAMED ASSESS MENT U/S 144 OF THE IT ACT, IN OUR OPINION, THE LD CIT(A) IS NOT JUSTIFIED IN DELETING THE ENTIRE ADDITION WITHOUT CALLING THE REMAND REPORT FROM THE ASSESSING OFFICER. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD CIT(A) AND REMAND THE ISS UE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSING OFFICER MAY RE - ADJUDICATE THIS ADDITION AFRESH , AFTER EXAMINING THE BOOKS OF ACCOUNTS, VOUCHERS OF PURCHASES ETC., AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH SIDES . 6 . IN T HE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( D. K. SRIVASTAVA ) (T. K. SHARMA) IN T / ACCOUNTANT MEMBER HI 6 / JUDICIAL MEMBER / ORDER DATE 21 . 06 .2013 . /RAJKOT BT T DJO O / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT - ITO, WARD 1 (3), JAMNAGAR 2 . CR / RESPONDENT - SMT RAMILABEN RAMJI BHADRA, PROP. LAXMI ENTERPRISES, C - 2 - 35/2, GIDC, STU, JAMNAGAR 3 . N / CONCERNED CIT , JAMNAGAR 4 . - / CIT (A) , JAMNAGAR 5 . CIIN , N , / DR, ITAT, RAJKOT 6 . O / GUARD FILE. / BY ORDER , TRUE COPY PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT