The ITO,Patan Ward-4, Mehsana V. Shree B.V. Oil Industries, Mehsana

ITA 2014/AHD/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1275 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: PRITESH L SHAH
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD , BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 2014/AHD/2012 ASSESSMENT YEAR :2009-10 ITO, PATAN WARD 4, MEHSANA V/S . SHREE B. V. OIL INDUSTRIES, SR. NO. 322, INDRAD, TAL. KADI, - 382715, DIST. MEHSANA PAN NO. AAUFS2306K (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI NARENDRA SINGH, SR. D.R. /BY ASSESSEE SHRI PRITESH L. SHAH, A.R. /DATE OF HEARING 15.09.2015 /DATE OF PRONOUNCEMENT 24 .09.2015 O R D E R PER : RAJPAL YADAV, JUDICIAL MEMBER THIS APPEAL IS DIRECTED AT THE INSTANCE OF REVENUE AGAINST THE ORDER OF LD. CIT(A), GANDHINAGAR, DATED 20.06.2012 PASSED FOR A. Y.2009-10. 2. THE REVENUE HAS TAKEN THREE GROUNDS OF APPEAL BU T ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE, WHEREBY, IT HAS CHALLENGED T HE DELETION OF AN ADDITION OF ITA NO. 2014/AHD/12 A.Y. 09-10 (ITO VS. SHRI B. V. OIL INDUSTRIES) PAGE 2 RS.33,75,471/- WHICH WAS ADDED BY THE ASSESSING OFF ICER WITH THE AID OF SECTION 41(1) OF THE INCOME TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM HAS FILED ITS RETURN OF INCOME ON 24.08.2009 DECLARING A LOSS OF RS.2,76,06 3/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S.143(2) OF THE INCOME TAX ACT WAS ISSUED ON 18 TH AUGUST, 2010. ON SCRUTINY OF THE ACCOUNTS, IT REVEALS TO THE ASSESSING OFFICER THAT ASSESSEE I S ENGAGED IN THE BUSINESS OF GINNING, PRESSING OF COTTON AND CRUSHING OF COTTON SEEDS. IT HAS SHOWN A LIABILITY OF RS.33,75,471/- AGAINST NAMES OF 14 INDIVIDUALS. LD. ASSESSING OFFICER HAS REPRODUCED THE DETAILS ON PAGE 2 OF THE ASSESSMENT ORDER. HE HARBORED A BELIEF THAT THESE CREDITS ARE SHOWN FOR PURCHASE OF KAPAS. THE ASSESSEE IS IN THE BUSINESS OF PRESSING, GINNING OF COTTON AND CRUSHIN G OF COTTON SEEDS. THE FARMERS CAME WITH THE CROP AND ASSESSEE MUST MADE T HE PAYMENTS OF PURCHASE OF THE CROPS IN CASH. THEREFORE, THERE CANNOT BE A NY OUTSTANDING LIABILITY. HE FURTHER OBSERVED THAT ASSESSEE HAS NOT FILED CONFIR MATION FROM THE ALLEGED CREDITORS. LD. ASSESSING OFFICER ARRIVED AT A CONC LUSION THAT LIABILITY TO PAY .. CEASED AND THEREFORE HE MADE AN ADDITION OF RS.33,7 5,471/-. THE LD. ASSESSING OFFICER HAS REPRODUCED THE SHOW CAUSE NOTICE ISSUED BY HIM. HE HAS NOWHERE ANALYZED THE SUBMISSIONS OF THE ASSESSEE. IMMEDIAT ELY AFTER THE REPRODUCTION OF THE SHOW CAUSE NOTICE, HE HAS CONCLUDED AS UNDER: AS MENTIONED ABOVE, THE PURCHASES OF KAPAS IS MADE IN CASH. ALL THE FARMERS COLLECT THEIR PAYMENT IMMEDIATELY ON THE SAME DAY ITSELF. THERE CANNOT BE ANY CREDITORS UNDER THIS HEAD. DESPITE REPEATED OPPORTUNITIES, C ONFIRMATIONS AS WELL AS GENUINENESS IS NOT PROVED. IN VIEW OF ABOVE AMOUNT OF RS.33,75,471/- IS LIABILITY WHICH IS NOT PAYABLE. IT IS A INCOME U/S. 41(1) OF THE INCOME-TAX ACT, 1961. THE AMOUNT IS ADDED TO THE TOTAL INCOME. PENALTY PROCE EDINGS ARE INITIATED U/S.271(1)(C) OF THE INCOME-TAX ACT, 1961 FOR FILING INACCURATE P ARTICULARS OF TOTAL INCOME. [ADDITION OF RS.33,75,471/-] 4. ON APPEAL, LD. CIT(A) HAS DELETED THE ADDITION B Y OBSERVING AS UNDER: 5.3 I HAVE CONSIDERED THE ASSESSMENT ORDER, THE SU BMISSIONS, THE DECIDED LAW AND THE FACTS OF THE CASE. THE AO HAS NOWHERE DISPUTED THE EXPENSE AND THE PURCHASES. ONCE THE ORIGINAL LIABILITY TO PAY TO THE PERSONS I S ACCEPTED; THE BASIC CONDITION FOR ADDITION U/S 41(1) TO BE SATISFIED IS THAT EITHER T HE PERSON TO WHOM THE PAYMENT HAS TO ITA NO. 2014/AHD/12 A.Y. 09-10 (ITO VS. SHRI B. V. OIL INDUSTRIES) PAGE 3 BE MADE HAS CEDED/RELINQUISHED HIS RIGHT TO RECEIVE THE PAYMENT OR THE ASSESSEE HIMSELF HAS REFUSED TO MAKE THE PAYMENT OR ACCEPT T HE LIABILITY. NO SUCH CASE IS BEING EVEN ALLEGED HERE. THE COURTS HAVE HELD THAT EVEN T IME BARRED LIABILITIES WHERE NO ACTION IS TAKEN CANNOT COME IN SCOPE OF SECTION 41( 1) UNLESS THE ASSESSEE ALSO HAS NO INTENTION TO PAY. NOT ONLY ARE THE DEBTS NOT WRITTE N OFF BUT ALSO THE PAYMENTS HAVE BEEN CLAIMED MADE IN THE NEXT QUARTER ITSELF. IT IS HELD THAT NO CESSATION OF LIABILITY HAS BEEN PROVED NOR REFLECTED IN THE ACCOUNT AND TH E CASE OF THE AO IS BASED ON CONJECTURES ONLY AND IS NOT AS PER LAW. THE ADDITIO N IS THEREFORE DIRECTED TO BE DELETED. 5. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE H AVE GONE THROUGH THE RECORD CAREFULLY. SECTION 41(1) HAS BEEN INCORPORA TED IN THE ACT TO COVER A PARTICULAR FACTS SITUATION. THIS SECTION APPLIES W HERE A TRADING LIABILITY WAS ALLOWED AS A DEDUCTION IN EARLIER YEARS IN COMPUTIN G THE BUSINESS INCOME OF THE ASSESSEE AND THE ASSESSEE HAS OBTAINED A BENEFIT IN RESPECT OF SUCH TRADING LIABILITY IN LATER YEAR BY WAY OF REMISSION OR CESS ATION OF THE LIABILITY. IN SUCH A CASE, THE SECTION SAYS THAT WHATEVER BENEFIT HAS AR ISEN TO THE ASSESSEE IN THE LATER YEAR BY WAY OF REMISSION OF THE LIABILITY WILL BE B ROUGHT TO TAX IN THAT YEAR. THE PRINCIPLE BEHIND THE SECTION IS THAT A PROVISION IN TENDED TO ENSURE THAT THE ASSESSEE DOES NOT GET AWAY WITH A DOUBLE BENEFIT ON CE BY WAY OF A DEDUCTION IN AN EARLIER ASSESSMENT YEAR AND AGAIN BY NOT BEING T AXED ON THE BENEFIT RECEIVED BY HIM IN A LATER YEAR WITH REFERENCE TO THE LIABIL ITY EARLIER ALLOWED AS A DEDUCTION. LD. ASSESSING OFFICER HAS NOWHERE BROUG HT ANY MATERIAL ON RECORD EXHIBITING THE FACT THAT LIABILITY RECOGNIZED BY TH E ASSESSEE IN ACCOUNTS HAS BEEN CEASED. THE LD. FIRST APPELLATE AUTHORITY HAS RECO RDED THE FINDING OF FACT THAT THESE PAYMENTS HAVE BEEN MADE IN THE NEXT QUARTER I TSELF. THIS SHOWS THAT LIABILITY WAS OUTSTANDING. THE DEPARTMENT FAILED TO BRING ANY MATERIAL TO OUR NOTICE CONTRARY TO THE FINDING OF FACT RECORDED BY THE LD. FIRST APPELLATE AUTHORITY. ONCE ASSESSEE HAS SHOWN THE LIABILITY O UTSTANDING IN THE ACCOUNTS AND THAT LIABILITY HAS BEEN DISCHARGED IN NEXT QUAR TER THEN HOW ASSESSING OFFICER WITHOUT BRINGING ANY MATERIAL ON RECORD CAN CONCLUDE THAT LIABILITY WAS CEASED TO EXIST. IN OUR OPINION, LD. FIRST APPELLA TE AUTHORITY HAS APPRECIATED THE ITA NO. 2014/AHD/12 A.Y. 09-10 (ITO VS. SHRI B. V. OIL INDUSTRIES) PAGE 4 CONTROVERSY IN RIGHT PERSPECTIVE NO INTERFERENCE IS CALLED FOR. THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 24.9.2015 ( MANISH BORAD) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER