DCIT, Circle-1, Ranchi V. Shri Ravindra Kumar Sinha, Ranchi

ITA 176/RAN/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7937 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 16-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A. K. MOHANTI
• Assessee Lawyers: R. K. KHUSHAL
• Keywords: Income from undisclosed sources; Additional evidence
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, ECOURT, AT KOLKATA BEFORE SHRI S.S, GODARA, JM & DR. A.L. SAINI, AM ITA NO.176/RAN/2019 (ASSESSMENT YEAR: 2015-16) DCIT, CIRCLE-1, RANCHI VS. SHRI RAVINDRA KUMAR SINHA E-8, RANISONS, KUSAI COLONY DORANDA, RANCHI, JHARKHAND ./ ./PAN/GIR NO. : AGKPS1170K ( /APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY : SHRI A. K. MOHANTI, ADDL. CIT, S R. DR RESPONDENT BY : SHRI R. K. KHUSHAL, AR / DATE OF HEARING : 22/07/2020 /DATE OF PRONOUNCEMENT : 24/08/2020 / O R D E R PER BENCH: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAINI NG TO ASSESSMENT YEAR 2015- 16, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS), JHARKHAND IN APPEAL NO. CIT(A)/RANCHI /10754/2017-18 DATED 09.01.2019 WHICH IN TURN ARISES OUT OF AN ASSESSMEN T ORDER PASSED BY ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 26.17.2017. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLATE AUTHORITY HAS ERRED IN DELETING THE WELL DISCUSSED ADDITION OF THE ASSESSI NG OFFICER. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLATE AUTHORITY HAS ERRED IN LAW AND FACT THAT SECTION 41(1) OF THE I.T. ACT 196 1 IS NOT APPLICABLE IN CASE OF SUNDRY CREDITORS AND ADVANCES IN THE CASE OF THE ASSESSEE WHEREAS IT IS CLEARLY SEEN THAT ASSESSEE FAILED TO FULFILL THE PRIMARY RESPONSIBILI TY TO PROVIDE DETAILS AS ASKED FOR AND DID NOT PROVIDE COMPLETE DETAILS OF PARTIES. ITA NO.176/RAN/2019 SHRI RAVINDRA KUMAR SINHA 2 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLATE AUTHORITY ERRED IN FACTS AND IGNORED THAT PROPER OPPORTUNITY WAS GIVEN TO THE ASSESSEE DURING ASSESSMENT PROCEEDING TO PRODUCE THE DOCUMENTS BUT IT FAILED T O DO SO AND ADDITION WAS MADE BASED ON FINDINGS OF THE ASSESSMENT PROCEEDINGS. 4. THE LD. CIT(A) ERRED IN DECIDING THE FACT WITHOU T CALLING FOR REMAND REPORT AND WITHOUT CONFRONTING THE ADDITIONAL EVIDENCE/SUBMISS IONS MADE IGNORING THE RULE 46A OF THE I.T. RULES. 5. ANY OTHER GROUND WILL BE URGED AT THE TIME OF HE ARING. 3. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE AS SESSMENT PROCEEDINGS ON CAREFUL PERUSAL OF THE DETAILS IN RESPECT OF SUNDRY CREDITO RS FILED BY THE ASSESSEE, IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAD FURNISHE D ONLY NAME OF CREDITORS AND DID NOT FURNISH COMPLETE ADDRESS OF THE CREDITORS. AGE-WISE ANALYSIS OR THE DATE SINCE WHEN THE SAID TRADE LIABILITY IS EXISTING IN THE BOOKS OF TH E ASSESSEE, AMOUNT PAID DURING THE YEAR, THE PAN OF THE CREDITORS ETC. WERE NOT FURNISHED, B EFORE THE AO. THEREFORE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO BRING SUFFICIENT EVIDENCE ON RECORD TO THE SATISFACTION O F THE ASSESSING OFFICER REGARDING THE GENUINENESS OF THE CLAIM OF SUNDRY CREDITORS AND A DVANCES, TO THE TUNE OF RS. 1,61,95,176/- IN THE GIVEN ASSESSMENT YEAR. THEREFO RE, IN THE ABSENCE OF ANY SUPPORTING DOCUMENTS, THE NECESSARY VERIFICATIONS, CONFIRMATIO NS AND INVESTIGATIONS COULD NOT BE CARRIED OUT TO FIND OUT WHETHER THE LIABILITY OF RS . 1,61,95,176 /- SHOWN UNDER THE HEAD SUNDRY CREDITORS AND ADVANCES ACTUALLY EXISTS OR NOT. HENCE THE AO MADE ADDITION BY INVOKING THE PROVISION OF SEC. 41(1) OF THE I.T. ACT, 1961 AT RS. 1,61,95,176 /-. 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO HAS DELETED THE ADDITI ON MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: WHEN THE LANGUAGE OF THE SECTION IS CLEAR AND UNAM BIGUOUS, THERE IS NO SCOPE OF IMPORTING INTO THE STATUTE WORDS WHICH ARE NOT THER E. SUCH IMPORTATION WOULD BE, NOT TO CONSTRUE, BUT TO AMEND THE STATUTE. EVEN IF THERE B E CASUS OMISSIONS, THE DEFECT CAN BE REMEDIED ONLY BY LEGISLATURE AND NOT BY JUDICIAL IN TERPRETATION. AS CAN BE SEEN FROM THE SPECIFIC PROVISIONS OF SECT ION 41(1) OF THE INCOME-TAX ACT, 1961, IT IS ONLY WHEN A PERSON DERIVES SOME BENEFIT S IN RESPECT OF SUCH TRADING ITA NO.176/RAN/2019 SHRI RAVINDRA KUMAR SINHA 3 LIABILITIES BY WAY OF REMISSION OR CESSATION THEREO F, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DE EMED TO BE PROFIT AND GAINS IS NOT WITHIN THE AMBIT OF SECTION 41(1). THEREFORE, AS PE R THE ABOVE CITED DECISION OF THE HONBLE SUPREME COURT, THE LD. AO IS NOT COMPETENT TO BRING IN ANY OTHER ITEM OTHER THAN THAT SPECIFIED IN THE SECTION. (II) PROVISIONS OF SECTION 41(1) SECTION 41(1) OF THE INCOME-TAX ACT, 1961 DOES NOT ENVISAGE THE FOLLOWING: A. DOUBT OF THE CREDITORS AND THE GENUITY OF CREDITORS B. SATISFACTION OF AO REGARDING THE GENUINENESS AND TH E SOURCE OF SUNDRY CREDITORS C. TREATING THE TRADING LIABILITY AS INCOME OF ASSESSE E FROM UNDISCLOSED SOURCES ALTHOUGH THE ABOVE ARE NOT ENVISAGED IN THE DEEMING PROVISIONS OF SECTION 41(1), THE AO HAS ERRONEOUSLY INVOKED THE DEEMING PROVISIONS O F SECTION 41(1) FOR THE ABOVE ISSUES WHICH IS NOT LEGALLY TENABLE. SECTION 41(1) IS A DEEMING SECTION AND DEEMING PROV ISION IS A STATUTORY FICTION; AS A RULE IT IMPLICITLY ADMITS THAT A THING IS NOT WHAT IT IS DEEMED TO BE BUT DECREES THAT FOR SOME PARTICULAR PURPOSE IT SHALL BE TAKEN AS IF IT WERE THAT THING. AS PER THE STATUTE, THE PROVISIONS OF SECTION 41(1) IS A DEEMING PROVISION AND SHOULD BE INTERPRETED STRICTLY. THERE IS NO DOCUMENT AVAILABLE WITH THE AO TO ESTAB LISH THAT THE APPELLANT WAS REQUIRED TO FURNISH THE CONFIRMATIONS AS PER RULE 46A(4) OF THE INCOME-TAX RULES. THEREAFTER, THE APPELLANT HAS FURNISHED THE CONFIRMATIONS FROM THE RESPECTIVE SUNDRY CREDITORS AND ALL THE CREDITORS HAVE CONFIRMED THE OUTSTANDING LIABIL ITIES AND FURNISHED PAN/AADHAR. THEREFORE, IT IS STATED THAT THE LIABILITIES HAS NE ITHER CEASED NOR REMITTED. THE APPELLANT HAS NOT GOT ANY BENEFIT BY WAY OF CESSATION OR REMI SSION OF LIABILITY WITHIN THE MEANING OF THE SECTION 41(1). 4.5.4 AS PER THE SETTLED LEGAL POSITION, THE ONUS IS ON T HE AO TO ESTABLISH THAT THE LIABILITY HAS EITHER CEASED OR REMITTED ESPECIALLY WHEN THE APPELLANT HAS STATED THAT THE LIABILITY HAS NOT CEASED/REMITTED. HOWEVER, THE AO STATED IN THE ASSESSMENT ORDER THAT DUE TO SHORTAGE OF TIME, NO NOTICE U/S 133(6) COULD BE ISSUED TO THE SUNDRY CREDITORS. THE AO HAS FURTHER STATED THAT THE ONUS WAS ON THE APPELLANT TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE CONCERNED P ARTIES. THE ASSESSING OFFICER STATED THAT THE APPELLANT FAILED TO DISCHARGE HIS ONUS TO BRING SUFFICIENT EVIDENCE ON RECORD TO THE SATISFACTION OF THE ASSESSING OFFICER REGARDING THE GENUINENESS OF THE CLAIM OF SUNDRY CREDITORS AND ADVANCES. THE PROVISIONS OF SE CTION 41(1) CAN BE INVOKED ONLY IN CASE OF LIABILITIES WHICH HAVE EITHER CEASED OR REM ITTED. THERE IS NO LEGAL REQUIREMENT AND ONUS CAST UPON THE APPELLANT FOR ESTABLISHING T HE GENUINENESS OF THE SUNDRY CREDITORS AS SUCH CREDITS HAVE ACTUALLY NOT APPEARE D IN BOOKS OF ACCOUNTS OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION. AS REGA RDS THE CESSATION OR REMISSION OF LIABILITY, THE ONUS IS ON THE AO TO ESTABLISH THAT THE LIABILITY HAS EITHER CEASED OR REMITTED ESPECIALLY WHEN THE APPELLANT HAS STATED T HAT THE LIABILITIES WERE OUTSTANDING AS THE BALANCE SHEET DATE. IN THE CASE UNDER CONSID ERATION, THERE IS NO DOCUMENTARY EVIDENCE BROUGHT ON RECORD BY THE AO TO ESTABLISH T HAT THE LIABILITY IN THE NAME OF ANY OF THE PERSON APPEARING UNDER THE HEAD SUNDRY CREDI TORS, HAVE EITHER CEASED OR REMITTED. MOREOVER, DURING THE APPELLATE PROCEEDING S, THE APPELLANT WAS REQUIRED TO FURNISH THE CONFIRMATIONS FOR THE SUNDRY CREDITORS, WHICH WERE ALSO FURNISHED AND ALL ITA NO.176/RAN/2019 SHRI RAVINDRA KUMAR SINHA 4 THE CREDITORS HAVE DULY CONCEALMENT OF INCOME AND F URNISHING OF INACCURATE PARTICULARS OF INCOME. THE ABOVE STATEMENT OF THE ASSESSING OFFICER IS NOT LEGALLY TENABLE DUE TO THE FOLLOWING REASONS:- (A) THERE CANNOT BE ANY DISALLOWANCE U/S 41(1) AS DISAL LOWANCE CAN BE ONLY FOR THE EXPENSES CLAIMED IN THE PROFIT & LOSS A/C. LEGALLY THERE CAN BE ADDITION U/S 41(1) AND NOT DISALLOWANCE. THE AMOUNT APPEARING AS LIABILITY IS A BALANCE SHEET ITEM AND NOT A PROFIT AND LOSS A/C ITEM. DISA LLOWANCE CAN BE MADE FOR A CLAIM MADE IN THE PROFIT & LOSS A/C AND NOT BALANCE SHEET. (B) THE AO HAS TREATED THAT THE SAID AMOUNT OF RS. 1,61 ,95,176/- AS INCOME FROM UNDISCLOSED SOURCES. LEGALLY, THE LIABILITIES APPEA RING IN THE BALANCE SHEET CANNOT BE HELD TO BE INCOME FROM UNDISCLOSED SOURCE S AND THERE IS NO PROVISIONS FOR SUCH TREATMENT UNDER THE INCOME-TAX ACT, 1961. (C) THE AO HAS FURTHER STATED THAT THE APPELLANT HAS FA LSELY CLAIMED THE SAID AMOUNT OF TRADING LIABILITY IN THE BALANCE SHEET. AT THE O UT-SET, IT IS STATED THAT THE AO HAS ALLOWED THE APPELLANT TO CLAIM THE ENTIRE EXPEN SES ON ACCOUNT OF PURCHASE OF MATERIAL, LABOUR CHARGE ETC. WHEN THE TOTAL EXPENSE S CLAIMED IN THE PROFIT & LOSS ACCOUNT HAS BEEN ALLOWED TO BE CLAIMED BY THE AO, THERE IS NO JUSTIFICATION TO STATE THAT THE APPELLANT FALSELY CLAIMED AS LIAB ILITY IN THE BALANCE SHEET. THE AR STATED THAT THE LIABILITY IN THE BALANCE SHEET I S A MOVING ACCOUNT AND MAJORITY OF THE CREDITORS ARE FOR CURRENT YEAR AND MOREOVER MANY CREDITORS WERE PAID OFF IN THE SUBSEQUENT YEAR. THEREFORE, THE AO S FINDING THAT THE APPELLANT HAS FALSELY CLAIMED AS TRADING LIABILITY IS ERRONEO US. 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERSUED THE MATERIALS AVAILABLE ON RECORD. LD. DR FOR THE REVENUE REITERATED THE STAND TAKEN BY ASSESSING OFFICER, WHEREAS LD. COUNSEL FOR THE ASSESSEE RELIED ON THE SUBMISSI ONS MADE BEFORE THE LD. CIT(A). WE NOTE THAT DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH CERTAIN DETAILS WITH RESPEC T TO SUNDRY CREDITORS TO THE TUNE OF RS.1,61,95,176/- AND THE ASSESSING OFFICER HAD NOT SATISFIED BY THE DETAILS FILED BY THE ASSESSEE THEREFORE THE SAID AMOUNT OF RS.1,61,95,17 6/- WAS DISALLOWED BY THE ASSESSING OFFICER U/S 41(1) OF THE INCOME TAX ACT, 1961. WE N OTE THAT THE ONUS IS ON THE ASSESSING OFFICER TO ESTABLISH THAT THE LIABILITY H AS CEASED OR REMITTED. WE NOTE THAT ASSESSEE HAS NOT OBTAINED ANY BENEFIT AS REQUIRED U NDER THE PROVISIONS OF SECTION 41(1) OF THE ACT. THE ASSESSEE SUBMITTED THAT THE LIABILI TY IN BALANCE SHEET IS A MOVING ACCOUNT ITA NO.176/RAN/2019 SHRI RAVINDRA KUMAR SINHA 5 AND MAJORITY OF THE CREDITORS ARE FOR CURRENT YEAR AND MOREOVER MANY CREDITORS WERE PAID OFF IN THE SUBSEQUENT YEAR. THEREFORE CONSIDER ING THE FACTUAL POSITION, WE NOTE THAT THERE IS NO ANY INFIRMITY IN THE ORDER PASSED BY TH E LD. CIT(A), HENCE WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A), HI S ORDER ON THIS ISSUE IS HEREBY UPHELD AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/08/2020. SD/- (S. S. GODARA) SD/- (A. L. SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED: 24/08/2020 RS / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-1, RANCHI 2. /RESPONDENT- SHRI RAVINDRA KUMAR SINHA 3. / CONCERNED CIT 4. - / CIT (A) 5. '', % / DR, ITAT, 6. ) / GUARD FILE. // TRUE COPY// BY ORDER/ , SR. PRIVATE SECRETARY