ITO Wd 48(1), Kolkata, Kolkata V. Sri Puspal Kumar Das, Howrah

ITA 1442/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100199 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 09-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UDAY KR SARDAR
• Keywords: Bogus purchase; Period of limitation
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C, KOLKATA (BEFORE SHRI M. BALAGANESH, A.M. & SHRI S.S.VISWANE THRA RAVI, J.M.) ITA NO. 1442/KOL/2012 : ASSTT. YEAR : 2007-2 008 I.T.O.,WARD-48(1) KOLKATA VS SRI PUSPAL KUMAR DAS (PAN: AIEPD 1515H) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI UDAY KR. SARDAR, JCIT ASSESSEE BY : SHRI SOUMITRA CHOUDHURY, ADVOCATE DATE OF HEARING : 15.10.2015 DATE OF PRONOUNCEMENT : 10-12-2015 ORDER PER SHRI S.S.VISWANETHRA RAVI, J.M . THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 18.06.2012 PASSED BY THE CIT(APPEALS)-XXX, KOLKATA IN APPEAL NO.239/CIT(A)-XXX/WD-48(1)/2009-10 FOR THE ASSESSME NT YEAR 2007- 08 FRAMED UNDER SECTION 143(3) OF THE I.T.ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS BEF ORE US. 01. THAT THE LD. CIT(APPEAL) HAS ERRED IN LAW AS W ELL AS ON FACTS IN DELETING THE ADDITION MADE UNDER THE HE AD BOGUS PURCHASE OF RS.1014942 BY HOLDING THAT WHERE SALE IS GENUINE, PURCHASE CANNOT BE BOGUS, WHEREAS NO STOCK REGISTER AND QUANTITY WISE DETAILS OF PURCHASE AND SALE IS NOT AVAILABLE. 02. THAT THE LD. CIT(APPEAL) HAS ERRED IN LAW AS W ELL AS ON FACTS IN DELETING THE ADDITION MADE UNDER THE HEAD CESSATION OF LIABILITY ON ACCOUNT OF CREDITORS OF RS.1667546 WHO COULD NOT BE TRACED OUT BY THE ASSES SING OFFICER AND EVEN THE ASSESSEE. 2 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 3. GROUND NO.1 OF THE APPEAL BY THE REVENUE IS AGAI NST ADDITION OF RS.10,14,942/- AS BOGUS PURCHASES. BRIEF FACTS RELA TING TO THIS GROUND ARE THAT THE ADDITION HAS BEEN DISCUSSED IN PARA (4 ) OF THE ASSESSMENT ORDER AND FROM THE DISCUSSION MADE BY THE A.O., IT IS OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. HAD ISSUED NOTICES UNDER SECTION 133(6) TO VARIOUS PARTIES IN ORDER TO VERIFY THEIR TRANSACTIONS OF SALES BY THEM TO THE ASSESSEE WHICH WILL BE CORRESPONDING PURCHASES BY THE ASSESSEE. THE AO NO TICED CERTAIN DISCREPANCIES WHICH COULD NOT BE SATISFACTORILY EXP LAINED BY THE ASSESSEE. THE DISCREPANCIES NOTICED BY THE AO WAS A S UNDER: TABLE-8: SI. NAME OF THE PARTY PURCHASES REFERENCE NO. SHOWN OR PURCHASE DISCREPANCY (IN RS.) ________________ 1 M/S.R.K. DUTTA & COMPANY 72,001 TABLE-L,SI.N O.L 2 M/S.JAYSHREE TRADING CO. 32,904 TABLE-L, SI.NO.2 3 M/S.BINOD KUMAR AGARWALA 71,989 TABLE-L, SI. NO.3 & CO. 4 M/S. KAMAL STATINER STORES 30,194 TABLE-L, SI.NOA 5 M/S. CHOWDHURY HARDWARE 93,300 TABLE-L, SI .NO.5 STORES 6 M/S. R. K. PODDER.& BROS. 1,16,744 TABLE-L, S I.NO.6 7 M/S. SREEMA HARDWARE 4,000 TABLE-L, SI. NO.7 8 M/S. GUPTA TRADING CONCERN 17,000 TABLE-L, S I.NO.8 9 M/S. MRITUNJOY TREDING CO. 56,190 TABLE-L, SI.NO.9 10 M/S. CHATTERJEE KUNDU & CO. 2,848 TABLE-5, SI.NO.2 11 M/S. MEHTA ENTERPRISE 1,01,455 TABLE-7,SI .NO.L 12 M/S. COMBAT CHEMICALS PVT.1,24,618 TABLE-7, S I.NO.2 LTD. 13 M/S. RAJ & RAJ PVT. LTD. 2,91,699 TABLE-7,SI.NO.3 3 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 TOTAL 10,14,942 THE AO NOTICED THAT ON INSPECTORS VISIT AT THE ADD RESSES IN RESPECT OF SL. NOS. 1 TO 9, GIVEN BY THE ASSESSEE, THE PARTIES COULD NOT BE TRACED. IN REGARD TO SL. NO. 10 AND 11, THE PARTIES HAVE SH OWN PURCHASES BY THE ASSESSEE LESSER BY RS.2,848/- AND RS.1,01,455/- RES PECTIVELY. IN REGARD TO SL.NOS.12 TO 13, THE NOTICE UNDER SECTION 133(6) COULD NOT BE SERVED ON THE PARTIES AT THE ADDRESSES GIVEN BY THE ASSESS EE. 4. AFTER CONSIDERING THE EXPLANATION PROVIDED BY T HE ASSESSEE, THE A.O. HELD THAT THESE TRANSACTIONS TOTALING TO RS.10 ,14,942/- WERE BOGUS AND HE BASED HIS FINDINGS ON THE FOLLOWING OBSERVAT IONS : 1. IT IS SEEN THAT NO SPECIFIC DETAILS OR EXPLANAT IONS HAVE BEEN OFFERED IN RESPECT OF DISCREPANCIES, MENTIONED ABOVE. THEREFORE, THE SAID EXPLANATION IS TREATED AS VERY GENERAL IN NATURE. 2. THE ASSESSEE IS NOT CLAIMING THAT THE PURCHASES WERE MADE FROM THE GENUINE PURCHASERS. HE RECEIVED PURCHASE B ILLS FROM DIFFERENT ENTITIES ON GOOD FAITH, AS SUBMITTED . IT HAS NOT BEEN SPECIFIED HOW THE ORDERS WERE PLACED, HOW THE GOODS WERE RECEIVED AND FROM WHOM THE BILLS WERE RECEIVED . HE HAS ALSO ADMITTED THAT IT IS NOT POSSIBLE FOR HIM T O PROVE THAT THE PURCHASERS OR THE ADDRESSES MENTIONED ON THE BI LLS EXISTED DURING THE PERIOD UNDER CONSIDERATION. THE ONUS IS ON THE ASSESSEE TO SUBSTANTIATE EVERY EXPENDITURE C LAIMED AND EVERY LIABILITIES SHOWN BY HIM. THE ASSESSEE HA S FAILED TO DISCHARGE THE ONUS; 4 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 3. BOOKS OF ACCOUNTS FOR A. Y.2007-08 WERE PRODUCE D ONLY ONCE DURING THE COURSE OF, HEARING. THE DISCREPANCI ES FOUND DURING VERIFICATION, AS MENTIONED IN TABLE -3 ABOVE COULD NOT BE EXPLAINED. THE SAID BOOKS OF ACCOUNTS HAVE N OT BEEN PRODUCED FOR THE SECOND TIME EVEN AFTER REPEATED RE MINDERS. 4. THE BOOKS OF ACCOUNTS FOR A.Y.2008-09 HAVE NOT B EEN PRODUCED ALSO, AFTER REPEATED REMINDERS. THE ASSESS EE HAS NOT SHOWN ANY INTENTION TO SUBMIT SPECIFIC CLARIFIC ATION IN RESPECT OF FINDINGS OBSERVED DURING THE PROCEEDINGS . 4. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE ABOVE ADDITION HAD BEEN MADE AS BOGUS PURCHASES BY THE A.O. WITHOU T CONSIDERING THE FACT THAT THE GOODS WERE EITHER SOLD TO CESC LTD. W HICH IS THE ONLY PARTY TO WHOM THE ASSESSEE HAD SUPPLIED GOODS AND T HAT THESE GOODS WERE APPEARING IN THE CLOSING STOCK AS PER STOCK RE GISTER AND WITHOUT THESE PURCHASES IT WOULD NOT HAVE BEEN POSSIBLE FOR THE ASSESSEE TO SELL THESE GOODS. IT WAS FURTHER SUBMITTED THAT THAT ADD ITION WAS MADE WITHOUT GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE . 5. THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM T HE AO. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE, REMAND REPORT OF THE AO AND ASSESSEES REJOINDER AND OTHER EVIDENCES ON RECORD, GAVE HIS FINDINGS. 5.1 THE CIT(A) WAS OF THE VIEW THAT THE AO CONSIDER ED PURCHASES AS BOGUS ON THE GROUND THAT PURCHASES WERE MADE FROM T HE AFORESAID PARTIES IN TWO YEAR I.E. 2006-07 AND 2007-08 TOTALL ING TO RS.12,62,135/- AGAINST WHICH ONLY A CASH PAYMENT OF RS.16,500/- WA S MADE IN 2007- 08. THE REMAINING PAYMENTS WERE MADE ENTIRELY IN CA SH IN THE 5 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 SUBSEQUENT YEAR I.E. A.Y. 2008-09, AFTER WHICH THER E WAS NO TRANSACTION WITH THESE PARTIES. THE MAIN CONTENTION OF THE ASSE SSEE AGAINST THE ABOVE WAS THAT THESE ARE GENUINE PURCHASES AGAINST WHICH SUPPLIES HAVE BEEN MADE BY IT TO CESC LTD. FURTHER THAT THE PURCH ASED ITEMS HAVE BEEN ENTERED IN THE STOCK REGISTER OF THE ASSESSEE AND THEREFORE WITHOUT PURCHASES NO SALES COULD HAVE BEEN MADE. 5.2 THE ASSESSEE HAS ALSO PROVIDED THE DETAILS OF T HE ITEMS PURCHASED FROM THESE PARTIES AND SUPPLIED TO M/S. CESC LTD. I N THE REMAND REPORT, THE A.O. HAS ACKNOWLEDGED THAT THE ENTRIES FOR (CASH PAYMENTS WERE MADE OF THE ACCOUNTS FOR THESE PARTIES AND ALL THESE ACCOUNTS WERE SQUARED UP IN FINANCIAL YEAR ENDING ON 31.03.2008. IN RESPECT OF THE REMAINING FOUR PARTIES OUT OF THE ABOVE MENTIONED L IST, THE A.O. HAS MADE ADDITION ON THE GROUND OF NON-RECONCILIATION O F THE ACCOUNTS WITH THE ASSESSEE. THE SAME ARE DISCUSSED AS UNDER: (I) DISCREPANCY OF RS.848/- IN RESPECT OF ACCOUNT O F M/S. CHATTERJEE KUNDU & CO. WHEREIN PURCHASES SHOWN BY T HE PARTY WERE OF RS.L0,61,354/- AS AGAINST SHOWN BY TH E ASSESSEE OF RS.L0,64,202/-. (II) DISCREPANCY OF RS.L,01,455/ IN THE CASE OF M /S. MEHTA ENTERPRISE WHICH HAS SHOWN SALES OF RS.1,642/- AGAI NST RS.L,02,597/- SHOWN BY THE ASSESSEE. (III) M/S. COMBAT CHEMICALS PVT. LTD. AND M/S. RAJ & RAJ PVT. LTD. IN RESPECT OF WHOM IT IS CLAIMED THAT NOT ICES U/S.133(6) COULD NOT BE SERVED AS THE NOTICES WERE RETURNED UN-SERVED BY THE POSTAL DEPARTMENT. 6 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 5.3. THE CIT(A) WAS OF THE VIEW THAT THE ADDITION H AS BEEN MADE BY THE A.O. TAKING THE DUAL GROUNDS OF THE TRANSACTIONS NO T CAPABLE OF BEING VERIFIED AS THE INSPECTOR COULD NOT SERVE THE NOTIC ES U/S.133(6) AND THAT NOMINAL PAYMENTS HAVE BEEN MADE AGAINST PURCHASES I N TWO YEAR I.E. A.Y.2006-07 AND 2007-08 WHEREAS ALMOST THE ENTIRE O UTSTANDING BALANCES HAVE BEEN PAID IN CASH BY 31.03.2008. IN T HIS REGARD, WHILE THE TRANSACTION COULD NOT BE VERIFIED AS THESE PART IES WERE NOT TRACEABLE UPON LOCAL ENQUIRY OF THE INSPECTOR, HOWEVER, IT IS SEEN THAT THE ASSESSEE IS A SUPPLIER PROVIDING STATIONERY ITEMS T O M/S. CESC LTD. WHICH HE PURCHASED FROM VARIOUS PARTIES IN THE MARK ET. THE ASSESSEE HAS PROVIDED DETAILS OF THE ITEMS PURCHASED BY HIM AND SUBSEQUENTLY SUPPLIED TO M/S. CESC LTD. IT IS SEEN THAT THESE AR E PETTY ITEMS OF OFFICE STATIONERY AND OFFICE MAINTENANCE INCLUDING OFFICE FURNITURE ETC. IT IS ALSO SEEN THAT ASSESSEE HAS ALSO PROVIDED THE VALUATION OF ITEM WISE DETAILS OF CLOSING STOCK AMOUNTING TO RS.6,88, 565/- AS ON 31.03.2007. WHILE THE A.O. HAS OBSERVED THAT VERIFI CATION COULD NOT BE DONE FROM THE ABOVE MENTIONED PARTIES, HOWEVER THE ADDITION IN RESPECT OF DISALLOWING THE PURCHASES FROM THESE PARTIES DOE S NOT STAND TEST AS THE DISALLOWANCE BRINGS INTO QUESTION THE SALES BEI NG SHOWN BY THE ASSESSEE, AS HIS ACTIVITIES ARE, IN TRADING NATURE AND THE ENTIRE SUPPLIES ARE BEING MADE TO ONE CONCERN I.E. M/S. CESC LTD. 5.4. THE CIT(A) POSED THE QUESTION AS TO HOW IF TH E PURCHASES ARE BEING DISALLOWED TO THE EXTENT OF RS.10,14,942/- WH AT WILL HAPPEN TO THE CORRESPONDING SALES BEING SHOWN. THE CIT(A) THE REFORE HELD THAT THE A.O. WAS NOT JUSTIFIED IN CONSIDERING THE ENTIR E PURCHASES AS BOGUS FROM THESE NINE PARTIES. THE CIT(A) ALSO OBSERVED T HAT IT WAS THE OTHER PARTIES WHO WERE SUPPRESSING THEIR SALES. HOWEVER, SINCE THE ASSESSEE 7 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 IS DISCLOSING MORE PURCHASES, THERE IS NO JUSTIFICA TION FOR THE ABOVE ADDITION. THE CIT(A) HELD THAT THE AO AT BEST COUL D HAVE REJECTED THE BOOKS AND ESTIMATED INCOME OF THE ASSESSEE BUT HE H AS NOT DONE SO. ADDING THE ENTIRE SALES AS INCOME COULD GIVE ABSURD RESULTS. THE CIT(A) ACCORDINGLY DELETED THE ADDITION OF RS.10,14 ,156/-. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENU E HAS RAISED GR.NO.1 BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIV AL SUBMISSIONS. THE LEARNED DR RELIED ON THE FINDINGS OF THE AO. T HE LEARNED COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS MADE BEFORE CIT(A) AND RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. IT IS CLEAR FROM THE ORDER OF THE CIT(A) AND THE EV IDENCE ON RECORD THAT THERE WAS NO VALID BASIS TO TREAT THE ENTIRE PURCHA SES AS BOGUS AS WAS DONE BY THE AO. IF PURCHASES ARE BEING DISALLOWED TO THE EXTENT OF RS.10,14,942/- WHAT WILL HAPPEN TO THE CORRESPONDIN G SALES BEING SHOWN. THE CIT(A) THEREFORE WAS RIGHT IN CONCLUDING THAT THE A.O. WAS NOT JUSTIFIED IN CONSIDERING THE ENTIRE PURCHASES A S BOGUS FROM THESE NINE PARTIES. THE FACT THAT THE OTHER PARTIES AVOI DED NOTICES U/S.133(6) OF THE ACT COULD BE BECAUSE THEY WERE NOT DISCLOSIN G SALES MADE TO THE ASSESSEE IN THEIR BOOKS OF ACCOUNTS. THE AO AT BES T COULD HAVE REJECTED THE BOOKS AND ESTIMATED INCOME OF THE ASSE SSEE BUT HE HAS NOT DONE SO. TREATING THE ENTIRE PURCHASES AS BOGUS AN D MAKING ADDITION WOULD RESULT IN ABSURD RESULTS IN THAT THE ENTIRE S ALE PROCEEDS WOULD GET TAXED AS INCOME. IN THE GIVEN FACTS AND CIRCUMSTAN CES OF THE CASE, THE ADDITION MADE WAS RIGHTLY DELETED BY THE CIT(A). W E FIND NO GROUND TO INTERFERE WITH THE ORDER OF THE CIT(A). CONSEQU ENTLY, GR.NO.1 RAISED BY THE REVENUE IS DISMISSED. 8 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 8. GROUND NO.2 OF THE APPEAL BY THE REVENUE IS AGAI NST ADDITION OF RS.16,67,546/- U/S.41(1) AS CESSATION OF LIABILITY. THE ADDITION HAS BEEN DISCUSSED BY THE A.O. IN PARA 4 PART B OF THE ORDER . THE A.O. HAD HELD THAT IT WAS FOUND DURING THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD SHOWN TOTAL LIABILITIES OF RS.16,67,546/- WHICH WERE FOUND TO BE NON-EXISTING. HE HELD THAT THE ASSESSEE FAILED TO S UBSTANTIATE THAT THESE LIABILITIES ACTUALLY EXISTED ON 31.03.2007. THE A. O. THEREFORE HELD THAT THESE WERE BOGUS LIABILITIES. HE WENT ON TO HOLD TH AT - 'APPLICATION OF SECTION 41(1) PRESUPPOSES GENUINENE SS OF ALLOWED IN EA1IER YEARS. THE FACT THAT THE ASSESSEE HAS CLAIMED THE SAID SUM AS EXPENDITURES IN EARLIER YEA RS CANNOT BE DENIED. AS THE LIABILITY CEASED TO EXIST AS ON 3 1.03.2007, AS FOUND DURING THE PROCEEDING, THE SUM OF RS.16,67 ,546/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S. 41(1 ) OF THE I.T. ACT,1961. ' 8.1 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E A.O. WAS WRONG IN ADDING ABOVE AMOUNT OF RS.16,67,540/- U/S.41(1) AS CESSATION OF LIABILITY AND ON THE FACTS OF THE CASE HE HAS NOT C ONSIDERED THAT THE SAID SUNDRY CREDITORS WERE ALL PAID IN THE NEXT TWO FINA NCIAL YEARS AND THEREFORE THE ADDITION IS NOT JUSTIFIED. THE ASSESS EE ALSO SUBMITTED COPIES OF ACCOUNTS OF THESE CREDITORS IN ITS BOOKS OF ACCOUNTS TO SUBSTANTIATE HIS CLAIM THAT NO ADDITION SHOULD HAVE BEEN MADE BY THE A.O. U/S. 41(1). A REMAND REPORT WAS CALLED FOR FRO M THE AO FOR VERIFICATION OF THE DETAILS OF THE PAYMENTS CLAIMED TO HAVE BEEN MADE IN RESPECT OF THESE CREDITORS FROM THE BOOKS OF ACC OUNTS OF THE ASSESSEE. IN RESPONSE TO THE ABOVE DIRECTIONS THE F INAL REPORT OF THE A.O. DATED 14.02.2012 WAS RECEIVED BY THE CIT(A) IN RESPECT OF THE MATTER REMANDED TO HIM FOR VERIFICATION. 9 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 8.2 THE ASSESSEE GAVE HIS REJOINDER TO THE ABOVE RE MAND REPORT AND THE SAME WAS FILED ON 10.05.2012 IN WHICH THE A.O. HAS HIMSELF ACKNOWLEDGED THAT PAYMENTS WERE FOUND TO HAVE BEEN MADE TO THESE PARTIES FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ALL IN CASH AND THE ACCOUNTS WERE ALLEGEDLY IN FINANCIAL YEAR ENDIN G ON 31.03.2008. THE ASSESSEE ALSO CLAIMED THAT FROM THE ASSESSMENT ORDER FOR A.Y. 2008-09 NO ADDITION HAS BEEN MADE BY THE A.O. ON AC COUNT OF PAYMENTS TO THESE SUNDRY CREDITORS. THEREFORE, IF THE PAYMEN TS WERE TAKEN TO BE GENUINE IN THE NEXT FINANCIAL YEAR THEN THEY CANNOT BE ADDED IN THE EARLIER FINANCIAL YEAR AS CESSATION OF LIABILITY. T HE ASSESSEE FURTHER SUBMITTED THAT THE SUNDRY CREDITORS CANNOT BE ADDED BY THE A.O. IF THERE IS NO REMISSION OF CESSATION OF TRADING LIABILITY A ND HR THE ABOVE CONTENTION THE ASSESSEE RELIED ON THE DECISION OF H ON'BLE SUPREME COURT IN THE CASE OF CIT V. SUGAULI SUGAR WORKS (P) LTD., 236 ITR 518. THE ASSESSEE THEREFORE SUBMITTED THAT THERE WAS NO BASIS FOR THIS ADDITION MADE BY THE A.O. 8.3 THE CIT(A) WAS OF THE VIEW THAT THE A.O. HAD C ARRIED ON VERIFICATION IN RESPECT OF CERTAIN TRANSACTIONS/PUR CHASES MADE BY THE ASSESSEE FROM NINE DIFFERENT PARTIES AND IN VIEW OF THE FACT THAT THE NOTICES FOR VERIFICATION U/S.133(6) ISSUED BY THE A .O. COULD NOT BE SERVED BY THE INSPECTOR IN VIEW OF THE FACT THAT TH ESE PARTIES SHOULD BE LOCATED BY HIM ON THE ADDRESSES GIVEN BY THE ASSESS EE. THE A.O. THEREFORE ADDED THE PURCHASES FROM THE PARTIES MADE IN THE CURRENT YEAR FROM THESE PARTIES AS BOGUS PURCHASES. HOWEVER, IN RESPECT OF THE OUTSTANDING BALANCES THE SAME HAVE BEEN CONSIDERED FOR ADDITION U/S.41(1) BY HIM IN THE ASSESSMENT ORDER. THE DETAI LS OF THESE PARTIES 10 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 AND THE OUTSTANDING BALANCES CONSIDERED BY THE A.O. ARE REPRODUCED AS UNDER: TABLE -9 SI. NAME OF THE PARTY SUNDRY ALREADY ADDITION NO. CREDITORS DISALLOWED AMOUNT SHOWN IN TABLE-8 (IN RS.) (IN RS.) ABOVE ___________________________________________ __________ 1 M/S.R.K. DUTTA & COMPANY 1,98,421 72,001 1,2 6,420 2 M/S.JAYSHREE TRADING CO. 2,30,058 32,904 1,97,154 3 M/S.BINOD KUMAR AGARWALA 2,34,062 71,989 1, 62,073 & CO. 4 M/S. KAMAL STATINER STORES 2,36,029 30,194 2,05,835 5 M/S. CHOWDHURY HARDWARE 1,91,516 93,300 98,216 STORES 6 M/S. R. K. PODDER.& BROS. 1,55,549 1,16,744 38,805 7 M/S. SREEMA HARDWARE 79,169 4,000 75,169 8 M/S. GUPTA TRADING CONCERN 63,563 17,000 46,563 9 M/S. MRITUNJOY TREDING CO. 86,135 56,190 29,945 TOTAL 9,80,180 8.4 AS MENTIONED ABOVE, THE A.O. HAD ALREADY DISALL OWED THE PURCHASES SHOWN FROM THESE PARTIES IN THE CURRENT Y EAR ON THE SIMILAR GROUNDS AS BOGUS PURCHASES AND HAS CONSIDERED THE D IFFERENCE IN RESPECT OF THE OUTSTANDING BALANCE OF THESE CREDITO RS ON 31.03.2007 AS CESSATION OF LIABILITY U/S.41(1). IT IS HOWEVER SEE N THAT THE A.O. HAS WHILE DISALLOWING THE SAME NOT ONLY CONFUSED HIMSEL F BUT HAS ALSO NOT UNDERSTOOD THE APPLICABILITY OF SECTION 41(1). WHIL E MAKING THE ADDITION, HE HAS OBSERVED THAT THESE WERE BOGUS LIA BILITIES, SINCE THESE PARTIES WERE NOT FOUND TO BE EXISTING AT THE GIVEN ADDRESS. HE HOWEVER WENT TO MENTION THAT APPLICATION OF SECTION 41(1) PRESUPPOSES GENUINE- NESS OF EXPENDITURE CLAIMED IN EARLIER YEAR AND HEL D THAT THERE IS NO 11 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 DENYING THAT THE ASSESSEE HAD CLAIMED THE EXPENDITU RE IN EARLIER YEARS. HE THEN WENT ON TO HOLD THAT THESE LIABILITIES CEAS ED TO EXIST ON 31.03.2007 AS FOUND DURING ASSESSMENT PROCEEDINGS A ND THEREFORE DISALLOWED THE SAME U/S.41(1). FROM THE ABOVE, IT I S CLEAR THAT HE HAS NOT UNDERSTOOD THE PURPOSES OR WORKING OF SECTION 4 1(1) WHICH IS IN RESPECT OF CESSATION OF A LIABILITY AT A PARTICULAR POINT AND TIME WHICH CAN BE CONSIDERED FOR ADDING BACK IN THE RELEVANT F INANCIAL YEAR. IN THIS CASE, WHILE FIRSTLY HE IS RAISING THE DOUBT TH AT THESE ARE ALL BOGUS LIABILITIES SINCE THE CREDITORS WERE FOUND TO BE NO N-EXISTING AT THE GIVEN ADDRESSES, ON THE OTHER HAND, HE IS HOLDING THAT TH ESE LIABILITIES CEASED TO EXIST ON 31.03.2007 I.E. AT THE END OF THE FINAN CIAL YEAR. IF LIABILITIES ARE BOGUS THERE IS NO QUESTION OF THEIR CEASING TO EXIST. CESSATION OF THE SAME PRESUPPOSES THAT THESE LIABILITIES ACTUALLY EX ISTED. SECONDLY IT IS NOT FOR THE ASSESSING AUTHORITY TO DECIDE THAT A PA RTICULAR LIABILITY HAD CEASED TO EXIST AT A PARTICULAR POINT IN TIME BUT T HE CONCLUSION MUST BE BASED ON EVIDENCE THAT THE CESSATION HAD TAKEN PLAC E IN THAT RELEVANT FINANCIAL YEAR. IN THE ASSESSEE'S CASE, NEITHER OF THE TWO CONDITIONS EXIST. FURTHERMORE, AS SUBMITTED BY THE ASSESSEE, T HE SUPREME COURT IN CIT V. SUGAULI SUGAR WORKS (P) LTD., SUPRA HAS HELD THAT- ' IN THE ABSENCE OF THE CREDITOR, IT IS NOT POSSIBLE FOR THE AUTHORITY TO COME TO A CONCLUSION THAT THE DEBT WAS BARRED AND HAD BECOME UNENFORCEABLE. THERE MAY BE CIRCUMST ANCES WHICH MAY ENABLE THE CREDITOR TO COME WITH A PROCEE DINQ FOR ENFORCEMENT OF THE DEBT EVEN AFTER EXPIRY OF THE NO RMAL PERIOD OF LIMITATION AS PROVIDED IN THE LIMITATION ACT. THE PRINCIPLE THAT EXPIRY OF PERIOD OF LIMITATION AS PR ESCRIBED UNDER THE LIMITATION ACT CANNOT EXTINGUISH THE DEBT BUT IT WILL ONLY PREVENT THE CREDITOR FROM ENFORCING THE D EBT IS WELL SETTLED. ' 8.5 THIS VIEW OF HON APEX COURT HAS BEEN FOLLOWED B Y THE DELHI HIGH COURT IN COMMISSIONER OF INCOME VS- SHRI VARD HMAN OVERSEAS 12 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 LTD 343 ITR 408 AND SEVERAL OTHER HIGH COURTS. IN T HE ASSESSEE'S THERE WAS NO REMISSION OR CESSATION OF LIABILITY THEREFOR E SECTION 41(1) WAS NOT ATTRACTED. SECTION 41(1) REFERS TO TAXATION OF BENEFIT IN CASH OR OTHERWISE BY WAY OF REMISSION OR CESSATION OF ANY T RADING LIABILITY THEREFORE THE CONDITION TO BE FULFILLED FIRST IS TH AT THE LIABILITY IS TO SHOULD BE EXISTING OR GENUINE AND THAT THERE IS EVI DENCE THAT THE SAME HAD BEEN UNEQUIVOCALLY REMITTED OR HAD CEASED TO EX IST IN FAVOUR OF THE ASSESSEE AND THE A.O. HIMSELF HAD CLAIMED THAT THES E LIABILITIES ARE BOGUS AND EVEN OTHERWISE THERE IS NO EVIDENCE TO SH OW THAT THESE LIABILITIES HAD CEASED TO EXIST MERELY NON VERIFICA TION OF THE CREDITORS IS NOT EVIDENCE TO SHOW THAT THE LIABILITY HAD CEASED TO EXIST. IN RESPECT OF THE ALLEGATION THAT THESE PARTIES WERE BOGUS CREDIT ORS, IT IS SEEN THAT ONLY AN ADDITION IN RESPECT OF THE LIABILITY OR PUR CHASES ARISING IN THE CURRENT YEAR CAN BE ADDED BY THE A.O., IF AT ALL. O N THE OTHER HAND, IN RESPECT OF THE BOGUS CREDITORS/BOGUS PURCHASERS THE A.O. HAS ALREADY MADE THE ADDITION IN RESPECT OF BOGUS PURCHASES WHI CH HAS BEEN CONSIDERED FOR DECISION IN GROUND OF APPEAL NO.1 IN THIS APPEAL AND THE REMAINING ADDITION IN RESPECT OF OUTSTANDING BALANC E IS NOT JUSTIFIED IN VIEW OF THE ABOVE DISCUSSION. FURTHERMORE EVEN IF I T IS PRESUMED THAT THE CREDITORS ARE BOGUS THE ADDITION CAN ONLY BE CO NSIDERED IN THE YEAR IN WHICH THE EXPENDITURE WAS INCURRED AND NOT IN TH E YEAR WHEN THE BALANCE IS OUTSTANDING DISALLOWANCE IS THEREFORE NO T JUSTIFIED AND THE SAME WAS DELETED BY THE CIT(A). 9. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENU E HAS RAISED GR.NO.2 BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIV AL SUBMISSIONS. THE LEARNED DR RELIED ON THE FINDINGS OF THE AO. T HE LEARNED COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS MADE BEFORE CIT(A) AND RELIED ON THE ORDER OF THE CIT(A). 13 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 10. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. IN OUR VIEW THE ADDITION WAS RIGHTLY DELETED BY THE CIT(A) FOR THE FOLLOWING REASONS: (I) THERE WAS NO EVIDENCE TO SHOW CESSATION OF LIABILIT Y. (II) ASSESSEE STILL SHOWS THE LIABILITY IN ITS BOO KS OF ACCOUNTS WHICH ITSELF IS PRIMA FACIE EVIDENCE THAT THE LIABILITY EXISTS. (III) THE TRANSACTION OF PURCHASE, IF REGARDED AS BOGUS THEN THERE IS NO LIABILITY IN LAW AND HENCE THE QUESTION OF AP PLYING SECTION 41(1) WILL NOT ARISE FOR CONSIDERATION. (IV) THE SUMS IN QUESTION HAS BEEN REPAID IN THE S UBSEQUENT ASSESSMENT YEARS, THEREBY RENDERING THE THEORY OF C ESSATION OF LIABILITY NOT SUSTAINABLE. WE THEREFORE CONCUR WITH THE VIEW OF THE CIT(A) AND DISMISS GR.NO.2 RAISED BY THE REVENUE ALSO. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DECEMBER, 2015. SD/- SD/- ( M. BALAGANESH) (S.S.VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10/12/2015 TALUKDAR/SR.PS 14 ITA NO.1442/KOL/2012 SRI PUSPA L KUMAR DAS ASSESSMENT YEAR: 2009-10 COPY OF ORDER FORWARDED TO: 1 SRI PUSPAL KUMAR DAS, 21/2, SWAMI VIVEKANANDA ROAD, HOWRAH 711 112 2 I.T.O., WARD-48(1), KOLKATA 3 THE CIT(A), 4 5 CIT, 5. D.R. TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA