I.T.O Wd - 42(2),kolkata., Kolkata V. Ajay Haldia., Kolkata

ITA 184/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100007 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 28-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S ALAM JCITSRDR
• Section: 143(3); 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 184 / KOL / 2013 ASSESSMENT YEAR :2007-08 INCOME TAX OFFICER, WARD-42(2), PODDAR COURT, 4 TH FLOOR, 18, RABINDRA SARANI, KOLKATA 700 001 V/S . AJAY HALDIA 152, B.K.PAUL AVENUE, KOLKATA 05 [ PAN NO.ABEPH 5981 L ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI S.S.ALAM, JCIT-SR-DR /BY RESPONDENT SHRI SUBASH AGARWAL, ADVOCATE /DATE OF HEARING 29-10-2015 /DATE OF PRONOUNCEMENT 13-11-2015 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA IN APPEAL NO.977/ XII/42(2)/09-10 DATED 11.10.2012. ASSESSMENT WAS FRAMED BY ITO WARD -42(2), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS ORDER DATED 31.12.2009 FOR ASSESSMENT YEAR 2007 -08. THE SOLITARY GROUND RAISED IS THAT REVENUE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION OF RS.13,71,210/- ON ACCOUNT OF SUNDRY CRE DITORS. ITA NO. 184/KOL/2013 A.Y. 2007-08 ITO WD.42(2), KOL. V. AJAY HALDIA PAGE 2 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN IND IVIDUAL AND EARNED INCOME FROM BUSINESS OF TRADING AND MANUFACTURING O F TEA GARDEN MACHINE. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS D ECLARED SUNDRY CREDITORS FOR A VALUE OF 1,30,68,313/- AS APPEARING ON THE BALANCE-SHEET FOR THE PREVIOUS YEAR 2006-07. THE AO FOUND FROM THE LIST F URNISHED BY ASSESSEE IN RESPECT OF AFORESAID CREDITORS THAT IN MANY CASES, THE ADDRESSES OF THE PARTIES WERE NOT GIVEN. IN THE ABSENCE OF ADDRESSES OF THE PARTIES THE AO COULD NOT ESTABLISH THE GENUINENESS OF THE CREDIT BALANCE OF THE PARTIES. THEREFORE, AO DISALLOWED CERTAIN CREDITORS HAVING VALUE OF RS.13, 71,210/- OUT OF THE TOTAL VALUE OF THE SUNDRY CREDITORS ON THE GROUND OF NON- AVAILABILITY OF ADDRESSES OF SUCH CREDITORS WHICH RESULTED NON VERIFICATION OF T HE CREDITORS. THE LIST OF SUCH CREDITORS IS PLACED ON PAGE 2 OF THE ASSESSMENT ORD ER. THE AO TREATED SUCH CREDITORS AS CASH CREDIT UNDER SECTION 68 OF THE AC T AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) WHERE LD. AR PLEADED THAT ALL THE CREDITORS SHOWN ON 31 ST MARCH, 2007 ARE CARRIED FORWARD FROM THE EARLIER YEAR AND FURNISHED LIST OF THE CRE DITORS APPEARING AS ON 31 ST MARCH, 2006 AND 2007 RESPECTIVELY IN SUPPORT OF HIS ARGUMENT. ACCORDINGLY THE LD.CIT(A) HAD DELETED THE ADDITION MADE BY AO B Y OBSERVING THAT CREDITORS ARE OLD ONE AND THEY EXIST ON THE FILE OF ASSESSEE FOR THE LAST SEVERAL YEARS. AGGRIEVED, BY THIS ORDER OF LD. CIT(A) REVENUE IS I N APPEAL BEFORE THE TRIBUNAL. SHRI SUBASH AGARWAL, LD. AUTHORIZED REPRESENTATIVE APPEARING ON BEHALF OF ASSESSEE AND SHRI S.S.ALAM, LD. DEPARTMENTAL REPRES ENTATIVE APPEARING ON BEHALF OF REVENUE. 3. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE AFO RESAID DISCUSSION THAT THE AO HAS DISALLOWED CERTAIN NUMBER OF CREDITORS FOR T HE NON AVAILABILITY OF THEIR ITA NO. 184/KOL/2013 A.Y. 2007-08 ITO WD.42(2), KOL. V. AJAY HALDIA PAGE 3 ADDRESSES WHICH CAUSED NON VERIFICATION OF THE GENU INENESS OF SUCH CREDITORS AND TREATED AS CASH CREDIT UNDER SECTION 68 OF THE ACT. HOWEVER, LD. CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT ALL THE CREDITORS WERE CARRIED FORWARD FROM THE EARLIER YEA RS. THERE WAS NO ADDITION OF THE CREDITORS IN THE RELEVANT YEAR. THE CLOSING BAL ANCES OF SUCH CREDITORS ARE MATCHING WITH THE BALANCES OF THE LAST YEAR. FROM T HE AFORESAID DISCUSSION WE FIND THAT THE AO HAS DISALLOWED THE CREDITORS FOR T HE REASON STATED ABOVE AND ADDED TO THE INCOME OF THE ASSESSEE UNDER SECTION 6 8 OF THE ACT. NOW LET US EXAMINE THE SECTION 68 OF THE ACT. 68 . WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF A N ASSESSEE MAINTAINED NATURE AND SOURCE THEREOF OR THE EXPLANA TION OFFERED BY HIM IS NOT, IN THE OPINION OF THE [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR: [ PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLAN ATION OFFERED BY SUCH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SAT ISFACTORY, UNLESS- (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AN EXPLANA TION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSIN G OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRS T PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THERE IN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY A S REFERRED TO IN CLAUSE (23FB) OF SECTION 10.] IT IS CRYSTAL CLEAR THAT THE PROVISIONS OF SECTION 68 ARE ATTRACTED WHEN THERE IS ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNT FOR ANY PREVIOUS YEAR AND IS SHOWN AS LIABILITY IN THE BOOKS OF THE ASSESSEE. SE CTION 68 DOES NOT TALK ABOUT THE LIABILITY ARISING OUT OF THE TRADING TRANSACTIO N. TRADING LIABILITY ARISES FROM THE EXPENSES WHICH ARE CLAIMED AS DEDUCTION EITHER IN THE TRADING ACCOUNT OR PROFIT & LOSS ACCOUNT. THEREFORE THERE IS A DIRECT NEXUS BETWEEN THE EXPENSES (DIRECT OR INDIRECT EXPENSES) AND THE TRADING LIABI LITY. IN CASE THE AO WISHES TO DISALLOW THE TRADING LIABILITY THEN HE SHOULD DISAL LOW THE CORRESPONDING ITA NO. 184/KOL/2013 A.Y. 2007-08 ITO WD.42(2), KOL. V. AJAY HALDIA PAGE 4 EXPENSES CLAIMED BY THE ASSESSEE IN RELATION TO THA T TRADING LIABILITY IN THE TRADING AND PROFIT & LOSS ACCOUNT. THE AO CANNOT D ISALLOW THE TRADING LIABILITY WITHOUT DISALLOWING THE CORRESPONDING EXPENSES. THE TRADING LIABILITY CAN BE TAXED ONLY BY VIRTUE OF SECTION 41(1) WHICH PROVIDE D THAT WHERE THE ASSESSEE HAS INCURRED A TRADING LIABILITY AND THE SAME HAS B EEN ALLOWED AS DEDUCTION IN ANY EARLIER YEAR AND LATER ON SUCH LIABILITY HAS EI THER BEEN REMITTED OR SEIZED TO EXIST. IN THE INSTANT CASE THE SECTION 68 OF THE AC T DOES NOT APPLY AS THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THESE ARE TRADING LIABILITIES AND NO MATERIAL HAS BEEN BROUGHT BY THE LD. CIT(A) TO C ONTROVERT THE CLAIM OF THE ASSESSEE. SIMILARLY THE TRANSACTION IS ALSO OUT OF THE PURVIEW SECTION 41(1) OF THE ACT AS THE LIABILITY HAS NEITHER BEEN REMITTED NOR SEIZED TO EXIST. TO CONCLUDE THE ABOVE, WE ARE PLACING OUR RELIANCE TO THE FOLLOWING JUDGMENTS. 1) CIT-III VS. SHRI VARDHMAN OVERSEAS LTD. 343 ITR 350 (DEL) 2) AMBICA MILLS LTD. VS. COMMISSIONER OF INCOME TAX 54 ITR 167 (GUJ) 3) MANGAL CHAND & SONS VS. ITO WARD 35(4), ITAT, KO LKATA ITA 755/KOL/ 2014 AY 2007-08 4) HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. S.K. REFERENCE LTD. (1994) 768 TAXMANN. 252 (CAL) HAS HELD THAT WHERE THE LIABILITY TO PAY COMMISSION ON SUGARCANE WAS LATER ALLOWED AS DE DUCTION PURSUANT TO STATE GOVERNMENTS ORDINANCE WHICH WAS LATER ENA CTED INTO ACT, PROVISION FOR SUCH LIABILITY CANNOT BE TAXED BY INV OKING THE PROVISION OF SEC. 41(1) OF THE ACT ON THE MERE GROUND THAT AMOUN T ALLOWED WAS RETURNED BACK TO PROFIT AND LOSS ACCOUNT, UNLESS SU CH LIABILITY WAS REMITTED OR SEIZED TO EXISTS. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT IN TH E PRESENT CASE, THE LIABILITY IS VERY MUCH IN EXISTENCE ON ACCOUNT OF SUNDRY CREDIT AND THIS IS TRADING LIABILITY AND ONCE IT IS NOT SEIZE TO EXIST, OR REMITTED THE MERE NON-EXISTENCE OF THE PARTIES CANNOT BE ADDED AS AN INCOME OF THE ASSESSEE. ACCORDINGLY, THIS APPEAL OF ASSESSEE IS ALLOWED ON MERITS. SIMILAR IS SUE IN ITA NO. 2680/KOL/2013 FOR A.Y. 2000-01 THIS TRIBUNAL WHEREI N ONLY SET OFF OF SUNDRY CREDITORS TO THE EXTENT OF RS.9,78,152/- AND CARRIE D FORWARD FROM EARLIER YEAR ITA NO. 184/KOL/2013 A.Y. 2007-08 ITO WD.42(2), KOL. V. AJAY HALDIA PAGE 5 AS THE APPEAL FOR A.Y. 2000-01 HAS ALREADY BEEN ALL OWED IN FAVOUR OF ASSESSEE. IT WILL NOT BE TREATED AS INCOME FOR A.Y. 2001-02. HENCE, IN VIEW OF THE ORDER OF THIS TRIBUNAL IN ITA NO. 2680/KOL/2013 FOR A.Y. 2000-01, WE DISMISS THE REVENUES APPEAL. 4. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 13/ 11/2015 SD/- SD/- (MAHAVIR SINGH) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 13/ 1 1 /2015 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO, WARD-42(2), PODDAR COURT, 4 TH FL, 18, RABINDRA SARANI, KOL-01 2. /RESPONDENT-AJAY HALDIA, 152, B.K.PAUL AVENUE, KOLK ATA -05 3. * +, - - . / CONCERNED CIT KOLKATA 4. - - .- / CIT (A) KOLKATA 5. 012 33+,, - +, , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ - , /TRUE COPY/ / - +, ,