M/s Rishman Liquors Pvt. Ltd., Bhopal V. The ACIT 3(1), Bhopal

ITA 161/IND/2012

• Counselvise Citation: 16122714 RSA 2012
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 19-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINAY KARAN
• Assessee Lawyers: S S DESHPANDE
• Keywords: Period of limitation; Onus to prove
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AABCR7810F I.T.A.NO. 161 /IND/201 2 . A.Y. : 2007 - 08 M/S. RISHMAN LIQUORS PVT.LTD., ACIT, 3(1), 2 - A, MEZZAINE FLOOR, V S BHOPAL. ZONE II, M. P. NAGAR, BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPANDE, C. A. RESPONDENT BY : SHRI VINAY KARAN, SR. DR DATE OF HEARING : 10 .0 9 .2012 DATE OF PRONOUNCEMENT : 12 . 0 9 .201 2 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 21.12.2011 FOR THE ASSESSMENT YEAR 2007-08, -: 2: - 2 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INC OME-TAX ACT, 1961. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE :- 1. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS. 9,80,020/- AND RS. 15,00,000/- ADDED U/S 41(1) & U/S 68. 1.1 IT WAS PROVED BEFORE THE LD. CIT(A) THAT THERE IS NO CESSATION OF THE LIABILITY DURING THE YEAR UNDER CONSIDERATION AND AS SUCH THE PROVISIONS OF SECTION 41(1) ARE NOT ATTRACTED. EVEN THE PROVISIONS OF SECTION 68 ARE NOT ATTRACTED. 1.2 THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING TH E JUDGMENTS OF HON'BLE SUPREME COURT AND VARIOUS HIGH COURTS, WHEREIN IT WAS HELD THAT PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE AND UNDER NO CIRCUMSTANCES THE PROVISIONS OF SECTION 68 ARE ATTRACTED, SINCE THERE WERE NO CREDITS DURING THE YEAR UNDER CONSIDERATION. -: 3: - 3 1.3 THE ADDITION OF RS. 9,80,020/- U/S 41(1) & RS. 15,00,000/- UPHELD BY THE LD. CIT(A) ARE BAD IN LAW AND MAY PLEASE BE DELETED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPA NY IS ENGAGED IN SALE OF LIQUOR AS C & F AGENT FOR KHODEY INDIA LIMITED. DURING THE ASSESSMENT PROCEEDINGS NOTICES U/S 133(6) WERE ISSUED TO MANY CREDITORS SOME OF THE NO TICES RETURNED BACK. ASSESSEE WAS CONFRONTED WITH THESE R ETURNED NOTICES AND VIDE ORDER SHEET ENTRY DATED 12.10.2009 ASSESSEE WAS CONFRONTED WITH THE FACT THAT NOTICE OF (1) SPE NCER AND CO. (2) SURJEET WINES (3) JANTA GLASS WORKS AND (4) ANU J WINES HAVE BEEN RETURNED BACK. AGAIN ASSESSEE WAS ASKED T O PROVIDE THE LETTER OF CONFIRMATION FROM THESE FOUR PARTIES. 4. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE DID NOT PROVIDE ANY DETAILS/INFORMATION EX CEPT IN THE CASE OF JANTA GLASS WORKS, WHEREIN CONFIRMATION LET TER WAS OF DATED 31.3.2002 AND DID NOT RELATE TO THE YEAR UNDE R CONSIDERATION. THE ASSESSING OFFICER FURTHER STATED THAT ON VERIFICATION OF FOLLOWING CREDITORS IT WAS NOTED TH AT THE -: 4: - 4 BALANCES OF THE SAME IS OUTSTANDING AS OPENING BALA NCES SINCE 01.04.2004 AND NO TRANSACTION DURING THE YEAR UNDER CONSIDERATION AND EARLIER TWO ASSESSMENT YEARS ALSO . S.NO. NAME OF CREDITOR AMOUNT (RS.) 01 JANTA GLASS WORKS 1,54,884/ - 02 ANUJ WINES 8,25,136/ - TOTAL ( RS.) 9,80,020/ - ON ACCOUNT OF ABOVE, ASSESSEE DID NOT FURNISH THE CONFIRMATION OF ALL THE ABOVE CREDITORS. AS PER ASS ESSING OFFICER THE ABOVE CREDITORS AMOUNTING TO RS. 9,80,0 20/- HAS CEASED TO EXIST AND THE SAME WAS TREATED BY THE ASS ESSING OFFICER AS INCOME OF THE ASSESSEE U/S 41(1)(A) OF T HE INCOME- TAX ACT, 1961, AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 5. WITH REGARD TO CREDITOR M/S. SURJEET WINES, JAIPUR, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PROVE THE IDENTITY, CREDITWOR THINESS AND GENUINENESS OF THE TRANSACTION. ACCORDINGLY, THE AD DITION WAS MADE U/S 68 OF THE INCOME-TAX ACT, 1961. -: 5: - 5 6. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER AFTER HAVING THE FO LLOWING OBSERVATIONS :- DURING THE HEARING BEFORE ME IT IS PLEADED THAT THE NOTICES U/S 133(6) HAD COME BACK UNSERVED SINCE WRONG ADDRESS WAS PROVIDED BY THE ASSESSEE TO THE ASSESSING OFFICER. IT IS IMPORTANT TO NOTE HERE THA T RETURN OF NOTICE AND NON-SUBMISSION OF CONFIRMATION OF BALANCE FROM THE CREDITORS IS NOT RELEVANT TO DECIDE THE ISSUE UNDER THE APPEAL. DURING THE HEARING THE A.R. HAS STATED THAT THE CREDIT BALANCE ARE OUTSTANDING FOR MANY YEARS AND STILL NOT REPAID . THESE FACTS ARE CRUCIAL TO DECIDE THE ISSUE. IN CAS E OF ALL THE THREE CREDIT BALANCES, IT IS FOUND THAT THE Y ARE OUTSTANDING FOR MORE THAN 3 YEARS, THE PERIOD AVAILABLE FOR MAKING ANY CLAIM UNDER THE LIMITATION ACT. HENCE THE BALANCES ARE NOT RECOVERABLE. IT IS ALSO FOUND THAT THE BALANCES ARE STANDING IN THE APPELLANT GROUPS OF ACCOUNT EVEN TILL DATE. IN VIEW OF THESE FACTS IT IS HELD THAT THE LIABILITY IN RESPEC T OF ALL -: 6: - 6 THE THREE CREDITS HAVE CEASED WITHIN THE MEANING OF SECTION 41(1). IN RESPECT OF THE CREDIT BALANCE OF RS. 15,00,000/- IN LEDGER ACCOUNT OF M/S. SURJIT WINES IT IS FOUND THAT THIS BALANCE IS OUTSTANDING SINCE F.Y. 2002-03. HENCE, THE ADDITION OF RS. 15,00,000/- FOR OUTSTANDING CREDIT IN LEDGER OF SUR JIT WINES IS ALSO TO BE MADE U/S 41(1). IN VIEW OF THE ABOVE ADDITION OF RS. 90,80,000/- AND OF RS. 15,00,000/- ARE CONFIRMED. 7. AGAINST THE ABOVE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8. SHRI S. S. DESHPANDE, CA, APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT THERE WAS NO CESSATION OF LIABILITY AND ASSESSEE WAS TO PAY THE SAME. HE RELIED ON THE DECISIONS OF HON'BLE SUPREME COURT REPORTED AT 236 ITR 518, M .P. HIGH COURT REPORTED AT 174 ITR 528 (M.P.) AND BOMBAY HI GH COURT REPORTED AT 189 ITR 473, IN SUPPORT OF THE PROPOSIT ION THAT OBTAINING BY THE ASSESSEE OF A BENEFIT BY VIRTUE OF REMISSION OR CESSATION IS SINE QUA NON FOR APPLICATION OF SECTIO N 41(1). MERE FACT THAT THE ASSESSEE HAS MADE AN ENTRY OF TRANSFE R -: 7: - 7 UNILATERALLY WILL NOT ENABLE THE DEPARTMENT TO APPL Y SECTION 41(1). 9. ON THE OTHER HAND, THE LD. CIT DR SHRI VINAY KARAN, APPEARED ON BEHALF OF THE DEPARTMENT AND OUR ATTENT ION WAS INVITED TO THE STATEMENT OF CREDITOR APPEARING IN T HE PAPER BOOK TO SHOW THAT CREDITORS WERE LYING OUTSTANDING SINCE LONG BACK AND NOTHING WAS PAID SINCE FINANCIAL YEAR 2002 -03. ACCORDINGLY, HE ARGUED THAT OF THE TRADE LIABILITY HAS CEASED TO EXIST IN SO FAR AS THE ASSESSEE FAILED TO SUBMIT EV EN CONFIRMATION EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. W E HAVE ALSO DELIBERATED ON THE CASE LAWS CITED AT BAR BY THE LD . AUTHORIZED REPRESENTATIVE IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD, WE FOUND THAT THE LIABILITY WAS IN RESPECT OF TRADE CREDITOR. AS THE LIABILITY WAS CONTINUING SIN CE LONG BACK, THE ASSESSING OFFICER ASKED FOR CONFIRMATION OF THE TRADE LIABILITY, WHICH THE ASSESSEE FAILED TO FURNISH. -: 8: - 8 11. THE ASSESSING OFFICER ASKED ASSESSEE TO SUBMIT BALANCE CONFIRMATION FROM THESE CREDITORS, BUT THE ASSESSEE FAILED TO DO SO. IN RESPECT OF ONE OF THE PARTIES, THE CONFIRMATION SO FILED WAS PERTAINING TO THREE YEARS EARLIER. THERE IS NO DISPUTE TO THE WELL SETTLED PROPOSITION THAT WHEN ANY CREDIT EXISTS IN THE BOOKS OF ACCOUNT, THE ONUS IS ON THE ASSESSEE TO SUBSTANTIATE THE EXISTENCE OF LIABILITY . IN CASE OF CASH CREDIT, THE ASSESSEE IS REQUIRED TO PROVE IDEN TITY, GENUINENESS AND CREDITWORTHINESS. HOWEVER, IN CASE OF TRADE CREDITORS, THE ASSESSEE IS JUST REQUIRED TO PROVE T HE EXISTENCE OF LIABILITY AS ON THE DATE OF BALANCE SHEET. MEANI NG THEREBY THE ASSESSEE HAS TO SHOW THAT THE LIABILITIES SHOWN IN THE BALANCE SHEET STILL CONTINUES AND THE SAME IS REQUI RED TO BE PAID AND FOR WHICH CONFIRMATION IS REQUIRED TO BE F ILED FROM THE RELEVANT CREDITOR. IF THE ASSESSING OFFICER FINDS T HAT SUCH TRADE LIABILITY FOR WHICH ASSESSEE HAS ALREADY GOT BENEFI T IN EARLIER YEARS EITHER BY WAY OF PURCHASES OF GOODS OR RENDER ING OF CERTAIN SERVICES, HE HAS ALL THE RIGHTS TO ASK FOR CONFIRMATION FOR CONTINUATION OF SUCH LIABILITY IN ITS BOOKS OF ACCOUNT, WHICH IS USED BY THE ASSESSEE AS SOURCE OF ITS FUNDS. IF THE LIABILITY IS -: 9: - 9 LONG BACK OUTSTANDING AND THERE IS NO TRANSACTION I N THE ACCOUNT AND THE ASSESSEE FAILS TO FURNISH THE CONFI RMATION FROM THE TRADE CREDITORS, IT WILL BE OPEN TO ASSESS ING OFFICER TO INVOKE PROVISIONS OF SECTION 41(1). FOR APPLICATION OF PROVISIONS OF SECTION 41(1), IT IS MUST THAT THE AS SESSEE SHOULD HAVE OBTAINED AN AMOUNT EITHER IN CASH OR IN ANY OT HER MANNER WHATSOEVER OR A BENEFIT BY WAY OF REMISSION OR CESSATION AND IT SHOULD BE OF A PARTICULAR AMOUNT. THUS, THE OBTAINING BY THE ASSESSEE OF A BENEFIT BY VIRTUE OF REMISSION OR CESSATION IS SINE QUA NON FOR APPLICATION OF THIS S ECTION. MERE FACT THAT THE ASSESSEE HAS MADE AN ENTRY OF TRANSFE R IN ITS ACCOUNT UNILATERALLY WILL NOT ENABLE THE DEPARTMENT TO SEE THAT THE SECTION 41(1) WOULD APPLY AND THE AMOUNT SHOULD BE INCLUDED IN TOTAL INCOME OF THE ASSESSEE. THE QUEST ION WHETHER THE LIABILITY IS ACTUALLY BARRED BY LIMITATION IS N OT A MATTER WHICH CAN BE DECIDED BY CONSIDERING THE ASSESSEES CASE ALONE, BUT IT IS A MATTER WHICH HAS TO BE DECIDED ONLY IF THE CREDITOR IS BEFORE THE CONCERNED AUTHORITY. IN THE ABSENCE OF C REDITOR, IT IS NOT POSSIBLE FOR THE AUTHORITY TO COME TO CONCLUSIO N THAT THE DEBT IS BARRED OR HAS BECOME UN-ENFORCEABLE. THERE MAY BE -: 10: - 10 CIRCUMSTANCES WHICH MAY ENABLE THE CREDITOR TO COME WITH PROCEEDINGS FOR ENFORCEMENT OF THE DEBT EVEN AFTER EXPIRY OF NORMAL PERIOD OF LIMITATION AS PROVIDED IN THE LIMI TATION ACT. IT WAS HELD BY THE HON'BLE SUPREME COURT IN THE CASE O F SUGALI SUGAR WORKS PRIVATE LIMITED (SUPRA) THAT THE PRINCI PLE THAT EXPIRY OF PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT COULD NOT EXTINGUISH THE DEBT BUT IT WOULD ONLY PREVENT THE CREDITOR FROM ENFORCING THE DEBT, HAS BEEN WELL SET TLED. PLAIN READING OF SECTION 41(1) MAKES IT CLEAR THAT BEFORE INVOKING SUB SECTION (1) OF SECTION 41, THE ASSESSING OFFICE R HAS TO RECORD A SATISFACTION TO THE EFFECT THAT THE ASSESS EE HAS OBTAINED A BENEFIT BY VIRTUE OF REMISSION OR CESSAT ION OF LIABILITY. IN THE INSTANT CASE BEFORE US, NO FINDIN G HAS BEEN RECORDED EITHER BY THE ASSESSING OFFICER OR BY THE LD.CIT(A) TO THE EFFECT THAT THE ASSESSEE HAS OBTAINED ANY BENEF IT BY VIRTUE OF REMISSION OR CESSATION OF LIABILITY. IT IS ALSO NOT THE CASE OF ASSESSING OFFICER THAT THE ASSESSEE HAS PASSED AN E NTRY IN THE BOOKS OF ACCOUNT BY CREDITING THE RELEVANT AMOUNT O F CREDITOR IN ITS PROFIT AND LOSS ACCOUNT, SO AS TO PERSUADE T HE ASSESSING OFFICER TO INVOKE PROVISIONS OF SEC. 41(1). KEEPING IN VIEW THE -: 11: - 11 PROPOSITION OF LAW LAID DOWN BY HON'BLE SUPREME COU RT SUGALI SUGAR WORKS PRIVATE LIMITED (SUPRA), THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECID ING AFRESH IN TERMS OF OUR ABOVE OBSERVATIONS. WE DIRECT ACCORDIN GLY. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2012. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 12 TH SEPTEMBER, 2012. CPU* 1012