ACIT, Circle - 40, Kolkata, Kolkata V. Shri Bijoy Kr. Jaiswal, Kolkata

ITA 2030/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1613 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 28-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHOWNGTHU ADD L
• Assessee Lawyers: MIHIR BANDYOPADHYAY
• Keywords: Business income; Retrospective amendment
• Section: 40A(3); 143(3); 68

Judgement Text

ITA NO.2030/KOL/2014 SHRI BIJOY KUMAR JAISWAL A.Y.2 010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C KOL KATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM & SHRI S.S.VISWANETHRA RAVI, JM ] ITA NO.2030/KOL/2014 ASSESSMENT YEAR : 2010-11 A.C.I.T., CIRCLE-40, -VERSUS- SHRI BIJOY KR . JAISWAL KOLKATA KOLKATA (PAN: ACFPJ 9771 N) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI DAVID Z. CHOWNGTHU, ADD L. CIT(DR) FOR THE RESPONDENT: SHRI MIHIR BANDYOPADHYAY, AR DATE OF HEARING : 08.08.2017. DATE OF PRONOUNCEMENT : 23.08.2017. ORDER PER J.SUDHAKAR REDDY, AM: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX-VI, KOLKATA FOR THE ASS ESSMENT YEAR 2010-11. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS IN THE BU SINESS OF WHOLESALE DISTRIBUTOR OF FERROUS AND NON-FERROUS SCRAP AND ELECTRICAL ITEMS. HE FILED RETURN OF INCOME ON 28.09.2010 DECLARING TOTAL INCOME OF RS.10,76,420. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 19 61 (ACT) AT A TOTAL INCOME OF RS.2,06,93,365/-. MOST OF THE ADDITIONS WERE MADE O N THE GROUND THAT THE ASSESSEE HAS NOT FURNISHED THE REQUIRED INFORMATION. THE ASSESSE E CARRIED THE MATTER TO THE LD. CIT(A). THE FIRST APPELLATE AUTHORITY GRANTED PART RELIEF. AGGRIEVED THE REVENUE IS IN APPEAL ON THE FOLLOWING GROUNDS :- 1. THAT LD.CIT(A)-XII, KOLKATA ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.1,39, 12,700/- MADE BY THE ASSESSING OFFICER BY HOLDING THAT THE AO COULD NOT ESTABLISH THE CESSATION OF LIABILITY DURING THE RELEVANT PERIOD IGNORING THE DETAILED FACTS AND CIRCUMSTANCES MENTIONED IN THE A SSESSMENT ORDER. 2. THAT LD.CIT(A)-XII, KOLKATA ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.42,04,245/- SIMPLY ON THE GROUND THAT THE DIS ALLOWANCE IS NOT JUSTIFIED U/S ITA NO.2030/KOL/2014 SHRI BIJOY KUMAR JAISWAL A.Y.2 010-11 2 40A(3) OF THE IT ACT, 1961 TOTALLY IGNORING THE GEN UINENESS ASPECT HIGHLIGHTED BY THE AO. 3. THAT LD.CIT(A)-XII, KOLKATA ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.6,00,000/- BY RELYING THE EVIDENCE GIVEN BY T HE APPELLANT AND IGNORING THE CONTENTION OF THE AO MENTIONED IN THE ASSESSMENT OR DER. 4. THAT LD.CIT(A)-XII, KOLKATA ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.9,00,000/- SIMPLY ON THE GROUND THAT THE DIS ALLOWANCE IS NOT JUSTIFIED U/S 40A(3) OF THE IT ACT, 1961 TOTALLY IGNORING THE GEN UINENESS ASPECT HIGHLIGHTED BY THE AO. 5. THAT THE APPELLANT CRAVES THE LEAVE. TO ADD, ALT ER, MODIFY, INCLUDE OR DELETE ANY GROUND OF APPEAL. 3. AFTER HEARING THE RIVAL CONTENTIONS WE HELD AS FOLLOWS :- GROUND NO.1 IS AGAINST THE DELETION OF ADDITION OF RS.1,39,12,700/- MADE BY THE AO ON THE GROUND THAT THERE WAS CESSATION OF LIABILITY . A PERUSAL OF THE ASSESSMENT ORDER DEMONSTRATES THAT ADDITION WAS MADE BECAUSE THE ASS ESSEE FAILED TO FURNISH THE DETAILS OF THE CREDITORS. THE FIRST APPELLATE AUTHORITY DEL ETED THE ADDITION BY HOLDING AS FOLLOWS :- 5.2.4. I HAVE CAREFULLY CONSIDERED THE AFORESAID D ETAILED ARGUMENTS PUT FORWARD BY THE A/R OF THE APPELLANT AND THE CASE LAWS CITED BY HIM. I AM CONVINCED THAT THE CONCERNED TOTAL DISALLOWANCES OF RS. 1,39,12,70 0 CANNOT BE MADE U/S 68 OR UNDER SECTION 41 (1) IN THE YEAR OF APPEAL CONCERNE D HERE BECAUSE OF THE CARDINAL FACTOR THAT THESE ARE NOT FRESH CREDITS IN THIS YEAR RATHER THESE ARE OLD BALANCES BROUGHT FORWARD FROM EARLIER YEARS. MOREOV ER THE GENUINENESS OF PURCHASES (WHICH GAVE RISE TO THESE CREDIT BALANCES ) HAVE NOT BEEN DOUBTED BY THE ASSESSING OFFICER AND THE CREDITORS HAVE NOT RE LINQUISHED THEIR RIGHTS - NO SUCH MATERIAL WAS BROUGHT IN BY THE ASSESSING OFFIC ER. IT MAY BE NOTED THAT WHILE SECTION 28(IV) WOULD APPLY GENERALLY TO ALL BENEFIT S OR PERQUISITES WHICH ARISE TO ASSESSEE FROM BUSINESS CARRIED ON BY HIM, BENEFIT W HICH HE OBTAINS BY WAY OF REMISSION OR CESSATION OF A TRADING LIABILITY IN A LATER YEAR, IN RESPECT OF WHICH HE HAS OBTAINED A DEDUCTION IN AN EARLIER YEAR IN COMP UTING BUSINESS INCOME, HAS TO BE GOVERNED BY SECTION 41(1) WHICH IS SPECIFIC P ROVISION GOVERNING FACTUAL SITUATION AND NOT BY SECTION 28(IV) AS HAS BEEN HEL D IN CIT V. SHRI VARDHMAN OVERSEAS LTD. [2012) 204 TAXMAN 524 (DELHI). EXPLAN ATION TO SECTION 41 (1) WHICH PROVIDES THAT UNILATERAL ACT OF ASSESSEE BY W AY OF WRITING OFF SUCH LIABILITY IN ITS ACCOUNTS WOULD BE CONSIDERED AS REMISSION OR CESSATION OF LIABILITY, APPLY IN RELATION TO ASSESSMENT YEAR 1997-98 AND SUBSEQUE NT YEARS AND IT DOES NOT HAVE ITA NO.2030/KOL/2014 SHRI BIJOY KUMAR JAISWAL A.Y.2 010-11 3 ANY RETROSPECTIVE EFFECT - CIT V. MOHAN MEAKIN LTD. [2012) 205 TAXMAN 43(DELHI). IN THE CASE OF CIT V. HOTLINE ELECTRONIC S LTD. [2012) 205 TAXMAN 245(DELHI), IT HAS BEEN HELD THAT 'UNPAID LIABILITI ES CANNOT BE ADDED TO ASSESSEE'S INCOME BY THE ASSESSING AUTHORITIES, UND ER SECTION 41 (1) MERELY BECAUSE THEY REMAINED UNPAID FOR A SUFFICIENTLY LON G TIME. THE LEGAL POSITION IS THAT UNLESS THERE IS EVIDENCE TO SHOW THAT THE CRED ITOR HAS REMITTED THE DEBT OR OTHERWISE BY OPERATION OF LAW THE LIABILITY TO PAY HIM HAS CEASED, THERE CAN BE NO BENEFIT ARISING TO THE ASSESSEE WITHIN THE MEANING OF CLAUSE (A) OF SECTION 41 (1). UNLESS NOTICES WERE ISSUED TO THE CREDITORS AND THE Y HAD STATED THAT THEY HAD GIVEN UP THE CLAIMS AGAINST THE ASSESSEE, NO DECIS ION COULD BE TAKEN BY THE INCOME-TAX AUTHORITIES, MERELY ON THE GROUND THAT T HE DEBTS REMAINED UNPAID IN THE ASSESSEE'S BOOKS FOR A NUMBER OF YEARS, THAT TH E LIABILITY HAD CEASED OR HAD BEEN REMITTED.' HAVING REGARD TO THE FACTS OF THE C ASE AND IN VIEW OF THE EMERGING LEGAL POSITION, IT COULD NOT BE SAID THAT THE LIABILITIES ON ACCOUNT OF SUNDRY CREDITORS BROUGHT FORWARD FROM THE PRECEDING FINANCIAL YEARS HAD BEEN CEASED OR REMITTED. THEREFORE, THE ASSESSING OFFICE R WAS NOT JUSTIFIED IN TREATING THE AMOUNT OF RS. 1,39,12,700/- AS INCOME OF THE AS SESSEE OF THE FINANCIAL YEAR RELEVANT FOR THE PRESENT ASSESSMENT YEAR. THIS ADDI TION IS HEREBY DELETED. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 4. WE FIND NO INFIRMITY IN THIS ORDER. THERE IS NO BASIS ON WHICH THE AO CAME TO THE CONCLUSION THAT SECTION 41(1) OF THE ACT APPLIES TO THE AMOUNTS IN QUESTION WHERE IT IS ADVANCE GIVEN BY THE CUSTOMERS AND PERTAIN TO THE B ALANCE AS ON 31.03.2008, 31.03.2009 AND 31.03.2010. JUST BECAUSE THE ASSESSE E DID NOT COOPERATE IN THE ASSESSMENT PROCEEDINGS BY FURNISHING THE DETAILS SO UGHT BY THE AO, THE AO CANNOT COME TO A CONCLUSION THAT THERE WAS REMISSION OR CE SSATION OF THIS LIABILITY. THE TERMS REMISSION OR CESSATION OF LIABILITY HAVE BEEN THE S UBJECT MATTER OF JUDICIAL INTERPRETATION. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS MOHAN MEAKIN LTD. [2012] 205 TAXMAN 43 (DELHI) HAD CONSIDERED TH E ISSUE. UNPAID LIABILITIES CANNOT BE ADDED U/S 41(1) OF THE ACT MERELY BECAUSE THEY H AVE REMAINED UNPAID FOR A SUFFICIENTLY LONG TIME. APPLYING THE PROPOSITION OF LAW LAID DOWN IN THIS CASE TO THE FACTS OF THE CASE WE UPHOLD THE FINDING OF THE FIRS T APPELLATE AUTHORITY AND DISMISS THIS GROUND OF THE REVENUE. 5. GROUND NO.2 AND 4 ARE ON THE ISSUE OF DISAL LOWANCE U/S 40A(3) OF THE ACT. IN BOTH THESE CASES THE FINDING OF THE LD. CIT(A) IS T HAT, THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT AND CONS EQUENTLY NO DISALLOWANCE CAN BE ITA NO.2030/KOL/2014 SHRI BIJOY KUMAR JAISWAL A.Y.2 010-11 4 MADE U/S 40A(3) OF THE ACT. IN OU VIEW SECTION 40A( 3A) HAS TO BE EXAMINED IN THIS CASE. HENCE WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WTIH LAW. 6. GROUND NO.3 IS ON DELETION OF ADDITION OF RS. 6,00,000/- MADE BY AO U/S 68 OF THE ACT. THIS AMOUNT WAS RECEIVED FROM M/S. SNM ENTERPR ISE THROUGH BANKING CHANNELS. THE ADDITION WAS MADE AS THE AO FOUND THAT M/S. SNM ENTERPRISE HAS SHOWN AN AMOUNT OF RS.35,184/- AS ADVANCE GIVEN TO THE ASSES SEE WHEREAS THE ASSESSEE HAS SHOWN THIS AMOUNT AS RS.6,35,184/-. IN OTHER WORDS, THE ADDITION WAS MADE BECAUSE THE ACCOUNTS HAVE NOT BEEN RECONCILED. THE LD. CIT( A) DELETED THE ADDITION AS THESE ARE BANK TRANSACTIONS. IT IS A CASE OF IDENTITY, CR EDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE PAYMENT ARE NOT IN DOUBT. UNDER THE CIRCUMSTANCES, THE AMOUNT WAS RECIEVED THROUGH BANKING CHANNELS. IT IS A CASE WHERE RECONCILIATION HAS TO BE DONE. HENCE WE SET ASIDE TO THE AO FOR FRESH CONSID ERATION AFTER VERIFYING THE RECONCILIAION. 7. IN THE RESULT THE APPEAL BY THE REVENUE IS D ISMISSED. O RDER PRONOUNCED IN THE COURT ON 23.08.2017. SD/- SD/- [S.S.VISWANETHRA RAVI] [ J.SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23.08.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI BIJOY KUMAR JAISWAL, 31, KHELAT BABU LANE, K OLKATA-700037. 2. A.C.I.T., CIRCLE-40, KOLKATA. 3. C.I.T.(A)- XII, KOLKATA 4. C.I.T-XIV, KOLK ATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES ITA NO.2030/KOL/2014 SHRI BIJOY KUMAR JAISWAL A.Y.2 010-11 5