The ITO, Ward-7(2), Surat V. Shri Hemantkumar Surendra Jain, Surat

ITA 1767/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6371 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 19-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND JT
• Assessee Lawyers: H S JAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER DATE OF HEARING : 15/06/2011 DRAFTED ON: 16/06/2011 ITA NO.1767/AHD/2008 ASSESSMENT YEAR : 2004-05 THE ITO WARD-7(2) SURAT VS. HEMANTKUMAR SURENDRA JAIN 7/3227, KACHIA SHERI SAIYEDPURA, SURAT PAN/GIR NO. : ABUPJ 7815 P ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI ROOP CHAND, JT.CIT-DR RESPONDENT BY: SHRI H.S. JAIN, ASSESSEE O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-IV, SURAT DA TED 18/03/2008 PASSED FOR ASSESSMENT YEAR 2004-05 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A), WITHOUT APPRECIATING THE FACTS, HAS ERRED IN DELETING AN ADDITION OF RS.31,76,195/- MADE BY T HE A.O. U/S.41(1) OF THE ACT VIDE ASSESSMENT ORDER U/S.143( 3) OF THE I.T. ACT, 1961 DATED 28/12/2006 ON ACCOUNT OF CESSATION OF LIABILITY FROM M/S.MANISH EXPORT AND M/S. PRIDE ENTERPRISES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A), WITHOUT APPRECIATING THE FACTS, HAS ERRED IN GIVING RELIEF OF RS.40,035/- OUT OF TOTAL ADDITI ON OF RS.65,035/- MADE BY THE A.O. VIDE ASSESSMENT ORDER U/S.143(3) ITA NO.1767/AHD /2008 ITO VS. HEMANTKUMAR SURENDRA JAIN ASST.YEAR 2004-05 - 2 - OF THE I.T. ACT, 1961 DATED 28/12/2006 ON ACCOUNT O F LOW HOUSEHOLD WITHDRAWALS. 2. APROPOS GROUND NO.1, FACTS IN BRIEF AS EMERGED F ROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 28/12/2006 WERE THAT THE ASSESSEE IS IN THE BUSINESS OF DIAMOND TRADING. IT WAS NOTED BY THE ASSESSING OFFICER THA T CERTAIN AMOUNTS HAVE BEEN SHOWN OUTSTANDING AS PER THE ACCOUNTS OF THE A SSESSEE, LISTED BELOW: (A) M/S.MANISH EXPORTS RS.27,60,000/- (B) M/S.PRIDE ENTERPRISES RS. 4,16,195/- TOTAL RS.31,76,195/- 2.1. THE ALLEGATION OF THE ASSESSING OFFICER WAS TH AT THE ABOVE REFERRED TWO AMOUNTS WERE OUTSTANDING IN THE NAMES OF THOSE TWO CREDITORS FOR MORE THAN LAST THREE YEARS. HOWEVER, IN COMPLIANCE OF SHOW-CAUSE NOTICE, M/S. MANISH EXPORTS HAD ADMITTED THE LIABI LITY AND EXPLAINED THAT IT WAS A TRADING LIABILITY. IN RESPECT OF M/S.PRI DE ENTERPRISES, IT WAS AFFIRMED THAT THE LIABILITY WAS TOWARDS THE PURCHAS E OF LICENCE. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED AND IN HIS OPINION SINCE THE RECOVERY HAD BEEN BARRED BY LIMITATION, THEREFORE T HOSE LIABILITIES CEASED TO EXIST WITH THE RESULT BY INVOKING THE PROVISION S OF SECTION 41(1) OF THE I.T.ACT THE IMPUGNED AMOUNT WAS TAXED IN THE HAND S OF THE ASSESSEE. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE LEARNED CIT(APPEALS) HAS APPRECIATED THE FACTS OF THE CASE AS ALSO ITA NO.1767/AHD /2008 ITO VS. HEMANTKUMAR SURENDRA JAIN ASST.YEAR 2004-05 - 3 - THE EVIDENCES FILED AND REVERSED THE ACTION OF THE ASSESSING OFFICER IN THE LIGHT OF THE FOLLOWING OBSERVATION: BEFORE ME, THE LD. AR SUBMITTED THAT IN THE CASE O F M/S.MANISH EXPORTS, THE CONFIRMATION WAS FILED BEFO RE THE AO. THE TAX WAS RECEIVED IN AY 2002-03 AND IT WAS ADVANCE TOWARDS SALES TO BE MADE. THE APPELLANT HAD A CRED IT BALANCE OF RS.18,52,841/- OUT OF THE ABOVE ADVANCED AMOUNT AS ON 31.03.2007 AND IN BETWEEN THE APPELLANT HAD SOLD PO LISHED DIAMONDS TO THE SAID PARTY WORTH RS.9,07,159/-. IT WAS NOT A TRADING LIABILITY AND WAS ONLY AN ADVANCE AND THERE FORE THE SAME COULD NOT BE CONSIDERED AS CESSATION OF LIABIL ITY. IN THE CASE OF M/S.PRIDE ENTERPRISES, THE LIABILITY WAS TO WARDS PURCHASE OF LICENSE AND THE SAME WAS VERIFIABLE AND THE CREDIT WAS VERY MUCH ALIVE. THE SAME WAS REPAID IN AY 20 05-06. THE INFORMATION WAS FILED BEFORE THE AO BUT NO COG NIZANCE OF THE SAME WAS TAKEN BY HIM. THE LD. AR FILED COPIE S OF CONTRA ACCOUNT AND BANK STATEMENT IN SUPPORT OF HIS CLAIM. I HAVE CONSIDERED THE SUBMISSIONS AND GONE THROUGH THE DETAILS. IT IS SEEN THAT EVEN IN THE FUTURE ASSESS MENT YEARS, THE APPELLANT HAS MADE PAYMENT IN THE FORM OF SALE OF P OLISHED DIAMONDS TO M/S.MANISH EXPORTS AND THE SAME IS THE POSITION WITH M/S.PRIDE ENTERPRISE ALSO. BOTH THE LIABILITI ES ARE EXISTING LIABILITIES AND THE AO'S ACTION IN TREATI NG THESE AS HAVING BEEN CEASED IS WITHOUT MERITS. EVEN OTHER W ISE, THE CESSATION OF LIABILITY WILL OCCUR ONLY WHEN A DEDUC TION WAS CLAIMED ON ACCOUNT OF A TRADING LIABILITY IN THE EA RLIER YEAR. IN THE INSTANT CASE THE AMOUNT WAS RECEIVED BY THE APPELLANT IN THE FORM OF ADVANCE AND WAS NEVER CLAIMED AS DED UCTION IN ANY OF THE EARLIER YEARS. THEREFORE, BY NO STRETCH OF IMAGINATION, THE PROVISIONS OF SECTION 41(1) OF THE IT ACT ARE ATTRACTED IN THIS CASE. THE ADDITION BEING NOT SUS TAINABLE IS DIRECTED TO BE DELETED. ITA NO.1767/AHD /2008 ITO VS. HEMANTKUMAR SURENDRA JAIN ASST.YEAR 2004-05 - 4 - 4. FROM THE SIDE OF THE REVENUE, LEARNED DEPARTMENT AL REPRESENTATIVE MR.ROOP CHAND APPEARED AND PLACED RE LIANCE ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, RESPONDENT-APPELLANT MR.H.S. JAIN HIMSELF APPEARED AND FURNISHED A SHOR T COMPILATION ALONGWITH HIS SWORN WRITTEN SUBMISSION. 5. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. W E HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND EXA MINED THE EVIDENCES ANNEXED WITH THE COMPILATION. THE MAIN CONTENTION FROM THE SIDE OF THE RESPONDENT-ASSESSEE IS THAT THE SAID LIABILITIES HA VE NOT CEASED TO EXIST BUT ENFORCEABLE IN THE EYES OF LAW. HE HAS POINTED OU T THAT THE PERMANENT ACCOUNT NUMBER OF THOSE CREDITORS HAVE BEEN FURNI SHED ALONGWITH THEIR RESPECTIVE CONFIRMATIONS ABOUT THE GENUINENESS OF T HE LIABILITY. IT IS ALSO STATED BEFORE US THAT IN COMPLIANCE OF SEVERAL NOTI CES OF HEARING, THE ASSESSEE HAS FURNISHED ALL THOSE DETAILS AND EVIDEN CES BEFORE THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO AFFIRME D THAT HE PERSONALLY ATTENDED THE ASSESSMENT PROCEEDINGS BEFORE THE ASSE SSING OFFICER AND FURNISHED THE DOCUMENTARY EVIDENCES, THEREFORE IT W AS WRONG ON THE PART OF THE REVENUE TO ALLEGE THAT THE COMPLIANCE BEFORE THE ASSESSING OFFICER WAS NOT PROPER. KEEPING BREVITY IN MIND, WE HEREBY REPRODUCE THE EXPLANATION OFFERED BEFORE THE REVENUE AUTHORITIES. 7.3. IN CASE OF MANISH EXPORTS (RS 27,60,000/-), T HE ACCOUNT COPY AS PER THE BOOKS OF ACCOUNT OF THE ASSESSEE FO R THE YEAR 2002- 03 IS ENCLOSED HEREWITH. FURTHER THE XEROX COPY OF THE BANK STATEMENT IN WHICH THE CHEUQES RECEIVED FROM M/S.MA NISH EXPORTS ITA NO.1767/AHD /2008 ITO VS. HEMANTKUMAR SURENDRA JAIN ASST.YEAR 2004-05 - 5 - ARE CREDITED IS ALSO ENCLOSED HEREWITH. FROM THE D ETAILS SUBMITTED IT WAS CRYSTAL CLEAR THAT THE LIABILITY IS NOT A TR ADING LIABILITY BUT AN ADVANCE RECEIVED BY CHEQUE. ACCOR DINGLY THE SAME CANNOT BE CONSIDERED AND SUBJECTED TO THE RIGOURS OF THE PROVISIONS OF SEC 41(1) OF THE ACT. (ANN L PAGE NO 100-104/ANN O PAGE NO.125-133/ ANN P PAGE NO.134-136). 7.4. IN THE CASE OF PRIDE ENTERPRISES (RS 416,195/- ), THOUGH THE LIABILITY IS TOWARDS PURCHASE OF LICENCE THE SAME IS VERIFIABLE AND LIVE CREDITOR OF THE ASSESSEE. THE CREDIT HAD BEEN REPAID IN THE NEXT YEAR I.E. AY 2005-06. THE COPIES OF ACCOUNT AND CONTRA ACCOUNT ARE ENCLOSED HEREWITH FO R YOUR KIND PERUSAL. ALL THESE WERE SUBMITTED BEFORE THE LD ASSESSING OFFICER BUT NOT TAKEN COGNIZANCE OF. (ANN L PAGE NO 100-104/ANN Q 137-140/ANN R PAGE NO 141-149). 6. UNDER THE TOTALITY OF THE CIRCUMSTANCE OF THE CA SE, ONCE THE CREDITORS HAVE AFFIRMED THE NATURE OF THE LIABILITY AND ALSO STATED THAT THE SAME DID NOT CEASE TO EXIST BUT LATER ON SQUARED U P IN THE SUCCEEDING YEARS, THEREFORE WE HEREBY CONFIRM THE FINDING ON F ACTS OF LEARNED CIT(APPEALS) SPECIALLY WHEN NO CONTRARY EVIDENCE OR MATERIAL IS PLACED BEFORE US FROM THE SIDE OF THE REVENUE. RESULTANTL Y, FOLLOWING SUGAULI SUGAR WORKS 236 ITR 518, THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 7. APROPOS GROUND NO.2, THE ASSESSEE HAD SHOWN WITH DRAWAL OF RS.18,986/-, HOWEVER, THE ASSESSING OFFICER HAS ES TIMATED THE HOUSEHOLD EXPENDITURE AT RS.84,000/-. THE LEARNED CIT(APPEAL S) HAS GRANTED PART RELIEF, AS PER THE FOLLOWING OBSERVATION: ITA NO.1767/AHD /2008 ITO VS. HEMANTKUMAR SURENDRA JAIN ASST.YEAR 2004-05 - 6 - THE NEXT GROUND OF APPEAL IS ADDITION OF RS.65,035 /- ON ACCOUNT OF LOW WITHDRAWALS FOR HOUSEHOLD EXPENSES. THE APPELLANT HAD SHOWN WITHDRAWAL OF RS.18,986/- ONLY. THE ASSESSING OFFICER ESTIMATED THE HOUSEHOLD EXPENDITU RE AT RS.84,000/- AND MADE AN ADDITION OF THE DIFFERENCE. IN THIS CONNECTION, IT WAS SUBMITTED THAT THE FINAN CIAL POSITION OF THE APPELLANT WAS EXTREMELY BAD DURING THAT PERI OD WITH A LIABILITY OF MORE THAN RS.1 CRORE OUTSTANDING AGAIN ST HIM AND THE BUSINESS WAS NOT RUNNING SMOOTHLY. HIS WIFE HA D TO UNDERTAKE PRIVATE TUITIONS AND STITCHING WORK IN OR DER TO SUPPLEMENT THE HOUSEHOLD EXPENSES AND A SUM OF RS.5 5,000/- WAS CONTRIBUTED BY HER FROM OUT OF HER INCOME FROM SUCH JOBS. AFTER GOING THROUGH THE DETAILS, I AM OF THE VIEW T HAT THE APPELLANTS EXPLANATION ALTHOUGH APPEARS TO BE CORR ECT BUT CANNOT BE TAKEN AT ITS FACE VALUE. I AM OF THE CON SIDERED VIEW THAT AN ADDITION OF RS.25,000/- ON THIS ACCOUNT IS CALLED FOR. THE AO SHALL RESTRICT THE ADDITION TO THIS AMOUNT ONLY. 8. ON HEARING BOTH THE SIDES, WE HAVE FOUND THAT TH E ADDITION IS BASED MERELY ON AN ESTIMATION OF HOUSEHOLD EXPENDITURE. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, HE HA S ALSO MADE AN ESTIMATION AND GRANTED PART RELIEF. THEREFORE, THE GROUND OF THE REVENUE IS MERELY CHALLENGING ONE ESTIMATION AGAINST ANOTHE R ESTIMATION. WE ARE NOT INCLINED TO INTERFERE IN SUCH A SITUATION WHERE THE CONTENTION IS TO UPHOLD ONE ESTIMATION AS BETTER ESTIMATION THAN THE OTHER. FROM THE SIDE OF THE REVENUE, THERE IS NO MATERIAL ON RECORD TO S UBSTANTIATE ITS CLAIM, HENCE, WE FIND NO FORCE IN THIS GROUND OF THE REVE NUE. THIS GROUND IS DISMISSED. ITA NO.1767/AHD /2008 ITO VS. HEMANTKUMAR SURENDRA JAIN ASST.YEAR 2004-05 - 7 - 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 17/ 06 /2011. SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 17/ 06 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-IV, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION.. 15/06/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16/06/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 17/6/ 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S17/6/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17/6/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER