The ACIT, Circle-9, Surat V. Smt. Urmilaben Kantilal Ganeshwala, Surat

ITA 1932/AHD/2007

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6426 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 08-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KARTAR SINGH
• Assessee Lawyers: M K PATEL
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : AH MEDABAD ( BEFORE HONBLE SHRI T.K.SHARMA, J.M. & HONBLE SHRI A.N.PAHUJA, A.M.) I.T.A.NO. 1932/AHD./2007 : ASSESSMENT YEAR 200 4-05 THE A.C.I.T., CIRCLE-9, SURAT VS- SMT. URMILABEN KANTILAL GANESHWALA, SURAT (PAN : ACLPG 5460F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KARTAR SINGH, CIT,D.R. RESPONDENT BY: SHRI M. K. PATEL, A.R. O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. CIT(A)-V, SURAT DATED 27.02.2007 DELETING THE ADDITION OF RS.1,43,6 1,742/- ON ACCOUNT OF CESSATION OF LIABILITY UNDER SECTION 41(1) OF I.T. ACT, 1961 MAD E BY THE AO FOR THE ASSESSMENT YEAR 2004-2005. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S IN INDIVIDUAL DOING BUSINESS OF TWISTING, WARPING AND WEAVING JOB WORK IN HER PROPR IETARY CONCERN, NAMELY, MUKESH CRIMPERS & BHAGWATI TEXTILES. FOR THE ASSESSMENT YE AR UNDER APPEAL, SHE FILED THE RETURN OF INCOME ON 27.10.2004 DECLARING TOTAL INCO ME OF RS.24,98,941/- ACCOMPANIED WITH THE AUDITED ACCOUNTS UNDER SECTION 44AB OF THE ACT IN FORM NO.3CB AND 3CD. THE AO FRAMED THE ASSESSMENT UNDER SECTION 143(3) O N 28.12.2006 WHEREIN HE MADE ADDITION OF RS. 1,43,61,742/- ON ACCOUNT OF CESSATI ON OF LIABILITY UNDER SECTION 41(I) OF THE I.T.ACT, 1961. 3. ON APPEAL, THE LD. CIT(A) DELETED THE ENTIRE ADD ITION OF RS. 1,43,61,742/- ON THE GROUND THAT THE ASSESSEE HAS NOT WRITTEN BACK T HE UNCLAIMED LIABILITY IN HER PROFIT & LOSS A/C. AND THE SAME HAS BEEN SHOWN CONTINUOUSL Y IN HER BALANCE-SHEET YEAR AFTER YEAR SINCE ASSESSMENT YEAR 1997-98 ONWARDS. THE LD. CIT(A) FURTHER OBSERVED THAT THE 2 ITA NO.1932/AHD./2007 ASSESSEE HAS NOT OBTAINED ANY BENEFIT IN RESPECT OF SUCH TRADE LIABILITIES BY CLAIMING THE SAME AS CESSATION DURING THE YEAR. AGGRIEVED WI TH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, SHRI KARTAR SI NGH APPEARED ON BEHALF OF THE REVENUE AND CONTENDED THAT THE DECISION OF THE LD. CIT(A) IS NOT ACCEPTABLE. THE LD. D.R. POINTED OUT THAT THOUGH IT IS TRUE THAT THE AS SESSEE IS SHOWING THESE 12 SUNDRY CREDITORS IN ITS BALANCE-SHEET FROM THE ASSESSMENT YEAR 1997-98 ONWARDS BUT THE ASSESSEE NEITHER PROVIDED THE AO NOR TO THE LD. CIT (A), EVEN AS ON THE DATE OF COMPLETION OF THE ASSESSMENT PROCEEDINGS OR LATER O N THERE WAS ANY PAYMENT MADE TO ANY OF SUCH PARTIES. THERE IS NO EVIDENCE AVAILABLE WITH THE ASSESSEE WHICH CAN SHOW THAT THE PARTY HAS EVER APPROACHED THE ASSESSEE OR THERE WAS ANY COMMUNICATION RELATED TO GETTING BACK OF THAT AMOUNT. THE LD. D.R . FURTHER POINTED OUT THAT THIS LIABILITY IS IN RESPECT OF PURCHASES MADE IN THE YE AR 1996-97. THE ONUS IS ON THE ASSESSEE TO PROVE THAT SUCH LIABILITY DID EXIST. MO ST OF THE PARTIES ARE NOT IN EXISTENCE AT THE GIVEN ADDRESS AND ONE PARTY, NAMELY, RAINBOW TEXTILES VIDE LETTER DATED 09.12.2006, HAS REFUSED TO HAVE ANY TRANSACTIONS WI TH THE ASSESSEE. ON THIS BASIS, HE CONTENDED THAT THE LD. CIT(A) OUGHT TO HAVE CONFIRM ED THE ADDITION OF RS. 1,43,61,742/- MADE BY THE AO UNDER SECTION 41(I) OF THE I.T.ACT, 1961. 5. ON THE OTHER HAND, SHRI M.K. PATEL, A.R., APPEAR ING ON BEHALF OF THE ASSESSEE, VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). T HE LD. A.R. ALSO RELIED ON THE DECISION OF THE ITAT, C BENCH, AHMEDABAD IN THE C ASE OF NEW COMMERCIAL MILLS CO. LTD. VS- DCIT IN ITA NO.1715/AHD/1995 REPORTED IN 73 TTJ (AHD.) 893 WHEREIN IT WAS HELD THAT THE SUNDRY CREDITORS CARRIED FORWA RD FROM THE LAST 10 TO 15 YEARS AND UNLESS THERE IS COGENT REASON AND MATERIALS TO COME TO THE CONCLUSION THAT THIS LIABILITY HAS CEASED IN THE YEAR UNDER CONSIDERATION, THE AMO UNT COULD NOT BE CHARGED TO TAX UNDER SECTION 41(1) OF THE I.T. ACT, 1961. WITH REG ARD TO RAINBOW TEXTILES DENYING TO HAVE ANY TRANSACTION WITH THE ASSESSEE, THE COUNSEL OF THE ASSESSEE POINTED OUT THAT THIS IS INCORRECT. ALTERNATIVELY, THE COUNSEL OF TH E ASSESSEE CONTENDED THAT IN CASE, THE 3 ITA NO.1932/AHD./2007 ADDITION IS REQUIRED TO BE MADE, IN THAT EVENT, ADD ITION SHOULD HAVE BEEN RESTRICTED TO ONLY IN RESPECT OF LIABILITY OF THIS PARTY AMOUNTIN G TO RS.5,67,707/-. 6. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT LIA BILITY IN QUESTION RELATES TO 12 CREDITORS. BASED ON THE ADDRESS FURNISHED BY THE ASSESSEE, AO ISSUED LETTER UNDER SECTION 133(6) TO THESE PARTIES FOR COPY OF ACCOUNT OF THE ASSESSE E, AS APPEARING IN THEIR BOOKS. IN MOST OF THE CASES, SUCH LETTERS WERE RETURNED UNSER VED. ONLY IN ONE CASE, NAMELY, RAINBOW TEXTILES, PARTY HAS DENIED HAVING ANY TRANS ACTION WITH THE ASSESSEE. ON THIS BASIS, THE AO MADE THE ADDITION UNDER SECTION 41(1) OF THE I.T.ACT, 1961. THE LD. CIT(A) DELETED THE ADDITION FOR THE DETAILED REASON S GIVEN IN PARA 21 AND 23 IN THE IMPUGNED ORDER, FOLLOWING THE VARIOUS DECISIONS INC LUDING THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT-VS- SILVER CO TTON MILLS COMPANY LTD. REPORTED IN 254 ITR 728 (GUJ.). 6.1 IN OUR OPINION, THE LD. CIT(A) HAS GIVEN COGENT REASON FOR DELETING THE ADDITION EXCEPT IN RESPECT OF ONE PARTY NAMELY, RAINBOW TEXT ILES BECAUSE THAT PARTY HAS DENIED HAVING ANY TRANSACTION WITH THE ASSESSEE. BEFORE US , THE LD. COUNSEL OF THE ASSESSEE CONCEDED THAT HE HAS NO OBJECTION IF ADDITION OF RS .5,67,707/- IN RESPECT OF RAINBOW TEXTILES IS SUSTAINED. IN THIS VIEW OF THE MATTER, WE CONFIRM THE ADDITION OF RS. 5,67,707/- IN RESPECT OF ONE PARTY NAMELY, RAINBOW TEXTILES AND UPHOLD THE ORDER OF THE LD. CIT(A) DELETING THE REMAINING ADDITION OF R S. 1,37,94,035/- (RS.1,43,61,742/- MINUS RS.5,67,707/-) IN RESPECT OF REMAINING OTHER PARTIES. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.05.2011 SD/- SD/- (A.N.PAHUJA) (T.K.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31/05/2011 4 ITA NO.1932/AHD./2007 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT 3) CIT(A) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, AHMEDABAD TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.