TUM NATH SHAW, Burdwan V. ACIT, Circle - 2, Burdwan, Burdwan

ITA 2044/KOL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8462 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 15-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: SAUMITRA CHOUDHARY
• Keywords: Business income; Opportunity of being heard; Tangible material
• Section: 40A(3); 143(3); 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI A.T. VARKEY, JM & DR. A.L.SAINI, AM ./ ITA NOS.2043 TO 2047/KOL/2017 ( / ASSESSMENT YEARS : 2000-01 TO 2004-05 TUM NATH SHAW KAMALA KAMINITALA LANE, NUTANGANJ, BURDWAN-713102 VS. ACIT, CIRCLE-2, BURDWAN, AAYAKAR BHAWAN, COURT COMPOUND, BURDWAN- 713101. ./ ./PAN/GIR NO. : AJGPS 2913 P ( /ASSESSEE ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SAUMITRA CHOUDHARY, ADV. /REVENUE BY :ROBIN CHOUDHURY, ADDL. CIT SR. DR / DATE OF HEARING : 11/12/2018 /DATE OF PRONOUNCEMENT : 31/12/2018 / O R D E R PER DR.ARJUN LAL SAINI, AM: THE CAPTIONED FIVE APPEALS FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEARS2000-01, 2001-02, 2002-03, 2003-04, AND 2004-0 5 RESPECTIVELY, ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS)- KOLKATA (IN SHORT THE LD. CIT(A)], WHICH IN TURN ARISE OUT OF SEPARATE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER. 2. HOWEVER, IN THESE APPEALS, THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING, WE HAVE CAREFULLY PERUSED ALL THE GROUNDS RAISED BY THE ASSESSEE. MOST OF THE GROUNDS RAISED BY THE ASSESSE E, ARE EITHER ACADEMIC IN NATURE OR CONTENTIOUS IN NATURE. HOWEVER, TO MEET T HE END OF JUSTICE, WE CONFINE OURSELVES TO THE CORE OF THE CONTROVERSY AND MAIN G RIEVANCES OF THE ASSESSEE. ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 2 WITH THIS BACKGROUND, WE SUMMARIZE AND CONCISE THE GROUNDS RAISED BY THE ASSESSEE AS FOLLOWS: GROUND NO.1 ADDITION ON ACCOUNT OF BOGUS CREDITORS. FOR ASSESSMENT YEAR 2000-01 RS. 10,03,082/- FOR ASSESSMENT YEAR 2001-02 RS. 8,25,545/- FOR ASSESSMENT YEAR 2002-03 RS. 7,26,621/- FOR ASSESSMENT YEAR 2003-04 RS.13,13,668/- FOR ASSESSMENT YEAR 2004-05 RS.10,04,556/- GROUND NO.2. I.T.A. NO. 2043/KOL/2017 FOR A.Y. 2000 -01- ADDITION RS. 2,66,000/- ON ACCOUNT OF NOT DISCLOSING UNSECURED L OAN. GROUND NO.3. I.T.A. NO. 2046/KOL/2017 FOR A.Y. 2003 -04: DISALLOWANCE OF RS. 5,95,107/- UNDER SECTION 40A(3) OF THE ACT. GROUND NO.4. I.T.A. NO. 2046/KOL/2017 FOR A.Y. 2003 -04: ADDITION OF RS. 44,120/-, ON ACCOUNT OF UNDISCLOSED PROFIT. 3. SINCE, THE ISSUES INVOLVED IN ALL THE APPEALS A RE COMMON AND IDENTICAL; THEREFORE, THESE APPEALS HAVE BEEN HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER.FOR THE SAKE OF CONVENIENCE , THE GROUNDS AS WELL AS THE FACTS NARRATED IN THE ASSESSEE`S APPEAL IN ITA NO.2 043/KOL/2017 FOR A.Y. 2000- 01, IS TAKEN AS THE LEADCASE FOR ADJUDICATION OF AB OVE SUMMARIZED GROUND NOS. 1 AND 2, AND THE ASSESSEE`S APPEAL IN ITA NO.2046/KOL /2017 FOR A.Y. 2003-04, IS TAKEN AS THE LEAD CASE FOR ADJUDICATION OF ABOVE SU MMARIZED GROUND NOS. 3 AND 4. 4. NOW WE SHALL TAKE SUMMARIZED GROUND NOS.1 AND 2. AT THE COST OF REPETITION THE SUMMARIZED GROUND NO.1 AND 2 IS GIVEN BELOW FOR REA DY REFERENCE: GROUND NO.1 ADDITION ON ACCOUNT OF BOGUS CREDITORS. FOR ASSESSMENT YEAR 2000-01 RS. 10,03,082/- FOR ASSESSMENT YEAR 2001-02 RS. 8,25,545/- FOR ASSESSMENT YEAR 2002-03 RS. 7,26,621/- FOR ASSESSMENT YEAR 2003-04 RS.13,13,668/- FOR ASSESSMENT YEAR 2004-05 RS.10,04,556/- GROUND NO.2. I.T.A. NO. 2043/KOL/2017 FOR A.Y. 2000 -01- ADDITION RS. 2,66,000/- ON ACCOUNT OF NOT DISCLOSING UNSECURED L OAN. ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 3 5. THE FACTS OF THE CASE WHICH CAN BE STATED QUITE SHORTLY ARE AS FOLLOWS. THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,50,010/- ON 30.10.2000. SUBSEQUENTLY, THE ASSESSING OFFICER ISS UED NOTICE U/S 148 OF THE ACT ON 01.04.2005 AND ASSESSMENT U/S 143(3) READ WITH S ECTION 147 WAS COMPLETED ON 29.12.2006. IN THE SAID ORDER U/S 143(3) READ WITH SECTION 147 OF THE ACT, THE ASSESSING OFFICER MADE TOTAL ADDITION TO THE TUNE O F RS. 12,69,082/-, CONSISTING BOGUS CREDITORS OF RS. 10,03,082/- AND UNSECURED LO AN OF RS. 2,66,000/-. 6 ON APPEAL BY THE ASSESSEE, THE SAID ORDER U/S 143 (3) R.W.S. 147 OF THE ACT WAS, UPHELD BY THE LD. CIT(A) ON 12.10.2007. ON FURTHER APPEAL BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A), DATED 12.10.2007, T HE HONBLE INCOME TAX APPELLATE TRIBUNAL IN ITS ORDER NO. 2425 TO 2429/KO L/2017, DATED 18.07.2008 SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES FOR ASSES SMENT YEARS 2000-01 TO 2003-04, DIRECTING THAT THE ASSESSING OFFICER SHALL FURNISH THE COPY OF THE REASONS RECORDED U/S 148 OF THE ACT TO THE ASSESSEE AND IF THE ASSES SEE FILES ANY OBJECTION, THE ASSESSING OFFICER SHOULD DISPOSE OF THE SAME BY PAS SING A SPEAKING ORDER AND THEREAFTER COMPLETE THE ASSESSMENT AS PER LAW. 7. AS PER THE DIRECTION OF THE HONBLE ITAT IN I.T. A.NOS.2425TO 2429/KOL/2017, ORDER DATED 18.07.2008 (SUPRA) THE REASONS RECORDED WERE PROVIDED BY THE ASSESSING OFFICER TO THE ASSESSEE. THE ASSESSING OF FICER ALSO PROVIDED THE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE ON SEVER AL OCCASIONS, AND THEN AFTER COMPLETED THE ASSESSMENT U/S 144/147 OF THE INCOME TAX ACT, 1961, ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 8. DURING THE ASSESSMENT PROCEEDINGS,U/S 144/147 OF THE ACT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DISCLOSED RS. 1 9,40,677/- AS SUNDRY CREDITORS AND RS. 77,90,185/- AS SUNDRY DEBTORS IN HIS BOOKS OF ACCOUNTS. THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF THE SUNDRY DEBTORS AND CREDITORS AND THEIR POSTAL ADDRESSES. ACCORDINGLY, THE ASSESSEE SUBMITTED THE POSTAL ADDRESSES OF THE SUNDRY DEBTORS AND CREDITORS. AFTER GETTING POSTAL ADDRESS FROM THE ASSESSEE, THE ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 4 ASSESSING OFFICER ISSUED LETTERS TO VARIOUS CREDITO RS U/S 133(6) OF THE ACT, ON TEST CHECK BASIS. MANY LETTERS U/S 133(6) OF THE ACT, RE TURNED UNSERVED WITH POSTAL REMARK NOT KNOWN. THE ASSESSING OFFICER BASED ON THE REPORT OF THE CO MMISSION U/S 131(D) OF THE ACT, NOTED THAT ASSESSEE HAD OVERSTATED THE CREDIT PAYABLE AND CLAIMED BOGUS CREDITS IN MANY CASES, WHICH ARE GIVEN BELOW: NAME OF THE PARTY A.Y. CREDIT AS PER ASSESSEE CREDIT AS PER PARTY DIFFERENCE AGARWAL CANE CRUSHER 2000-01 60922/- NIL 60922/- AGARWAL INDUSTRIES 2000-01 158982/- 1038/- 157944/- BALDEV SINGH BHIM SINGH 2000-01 124181/- 73328/- 50 853/- HARI SHANKAR KHANDSARI UDYOG 2000-01 149471/- 266000 (UNSECURED LOAN) 149471/- GANGA SUGAR WORKS 2000-01 104943/- NIL 104943/- KISHANKHANDASARI UDYOG 2000-01 225794/- 16170/- 209 624/- SHRI HANUMAN RAB UDYOG 2000-01 271539/- 118789/- 15 2750/- SREE GANAPATI PASHUAHER 2000-01 158481/- 41906/- 11 6575/- TOTAL 1003082/- BASED ON THE ABOVE ANALYSIS, THE ASSESSING OFFICER, ASKED THE ASSESSEE TO SUBMIT THE REASONS OF THE DISCREPANCY, AS NOTED IN THE TAB LE ABOVE. IN RESPONSE THE ASSESSEE FILED WRITTEN SUBMISSION STATING THAT THE ABOVE NOTED DISCREPANCY IN THE TABLE ABOVE WAS DUE TO GOODS IN TRANSIT OR PAYMENTS IN TRANSIT. THE ASSESSING OFFICER NOTED THAT THE REPLY OF THE ASSESSEE WAS WI THOUT BASIS AND WITHOUT ANY EVIDENCE THEREFORE HE REJECTED THE CONTENTIONS OF T HE ASSESSEE AND MADE THE ADDITION TO THE TUNE OF RS. 10,03,082/-. 9. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESS EE HAD GIVEN AN UNSECURED LOAN TO THE TUNE OF RS. 2,66,000/- TO HARI SHANKAR KHAND SARI UDYOG BUT THE ASSESSEE HAS NOT SHOWN THE LOAN IN HIS BOOKS OF ACCOUNTS. T HE AO PRESUMED THAT THE ASSESSEE HAD EXTENDED THIS LOAN OUT OF HIS UNACCOUN TED CASH AND THEREFORE THE ASSESSING OFFICER MADE AN ADDITION TO THE TUNE OF R S. 2,66,000/- ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 5 10. AGGRIEVED THE ADDITION MADE BY THE ASSESSING OF FICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONF IRMED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF T HE LD. CIT(A) THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED BEFORE US THAT ASSESSEES BOOKS OF ACCOUNTS WERE AUDITED. THE BOOKS OF ACCOUN TS WERE NOT REJECTED BY THE ASSESSING OFFICER. THE LD COUNSEL ALSO POINTED OUT THAT SOME OF THE CREDITORS WERE PAID BY ASSESSEE IN SUBSEQUENT YEARS THEREFORE IT C ANNOT BE SAID THAT CREDITORS ARE BOGUS. ON THE OTHER HAND, LD DR FOR THE REVENUE SUB MITTED BEFORE US THAT THE ASSESSEE HAS NOT EXPLAINED THE DIFFERENCE IN CREDIT ORS THEREFORE, THE DIFFERENCE WORKED OUT BY THE ASSESSING OFFICER SHOULD BE SUSTA INED. WE NOTE THAT ASSESSEE HAS PARTICIPATED IN THE ASSESSMENT PROCEEDINGS AND SUBMITTED THE DETAILS AND DOCUMENTS REQUIRED BY ASSESSING OFFICER. THE ASSESS EE ALSO EXPLAINED THE DIFFERENCE BETWEEN CREDITORS RECORDED IN HIS BOOKS VIS--VIS BALANCE IN THE BOOKS OF CREDITORS, STATING THAT SAID DIFFERENCE WAS DUE TO GOODS IN TRANSIT OR PAYMENT IN TRANSIT. THE ASSESSING OFFICER REJECTED THE EXPLANA TION OF THE ASSESSEE WITHOUT PROVIDING ANY VALID REASONS. BESIDES, THE ASSESSING OFFICER FAILED TO ADDUCE ANY EVIDENCE ON RECORD TO PROVE THAT THE DIFFERENCE IN CREDITORS IS A BOGUS AND OUT OF UNACCOUNTED MONEY. JUST TO WORK OUT THE DIFFERENCE IN SUNDRY CREDITORS IS NOT SUFFICIENT, THE AO OUGHT TO ADDUCE ANY TANGIBLE MAT ERIAL ON RECORD TO PROVE THAT THE SAID DIFFERENCE BELONGS TO UNACCOUNTED MONEY OF THE ASSESSEE. WE NOTE THAT ASSESSEES PURCHASES HAD NOT BEEN DOUBTED BY THE AS SESSING OFFICER. THE ASSESSING OFFICER ALSO DID NOT DOUBT THE SALES MADE BY THE ASSESSEE THEREFORE,SO FAR THE ACCOUNTING PRINCIPLES ARE CONCERNED, IF THE TOTAL SALES AND TOTAL PURCHASES ARE NOT DOUBTED THEN BALANCE OF CREDITORS ARE GOING TO BE GENUINE, IF IT IS NOT OTHERWISE PROVED BY THE ASSESSING OFFICER. 12. WE NOTE THAT THEDIFFERENCE BETWEEN CREDITORS RE CORDED IN HIS BOOKS VIS--VIS BALANCE IN THE BOOKS OF CREDITORS, SHOULD NOT BE TR EATED AS CESSATION OF LIABILITY. AT ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 6 THIS JUNCTURE IT IS APPROPRIATE TO GO THROUGH THE R ELEVANT PROVISIONS OF SECTION 41(1) OF THE ACT, THE RELEVANT EXTRACTS OF WHICH IS REPRODUCED BELOW: SECTION 41(1):WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEARIN RESPECT OF LOSS, EXPENDIT URE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIR ST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, - (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LO SS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSI NESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-FAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WH ICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR (B) THE SUCCESSOR IN BUSINESS . . ........... EXPLANATION 1.- FOR THE PURPOSES OF THIS SUB-SECTIO N, THE EXPRESSION LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUDE THE R EMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENTIONE D PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OF THAT SUB- SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. ON PERUSAL OF THE AFORESAID PROVISION IT COULD BE S EEN THAT THE FOLLOWING TWO CONDITIONS NEED TO BE FULFILLED IN ORDER TO TREAT C ESSATION OF LIABILITY AS INCOME UNDER SECTION 41(1) OF THE ACT IN THE YEAR OF CESSA TION OF LIABILITY: A) ASSESSEE HAS TO AVAIL AN ALLOWANCE OR DEDUCTION IN ANY EARLIER YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY AND B) IN SUBSEQUENT YEAR THE ASSESSEE HAS OBTAINED CAS H OR ANY OTHER BENEFIT IN RESPECT OF SUCH LOSS, EXPENDITURE AND TRADING LIABI LITY BY WAV OF REMISSION OR CESSATION OF LIABILITY. IN OTHER WORDS, IF AN ASSESSEE INCURRED ANY LOSS, E XPENDITURE OR TRADING LIABILITY IN RESPECT OF ANY YEAR AND SUBSEQUENTLY HAS OBTAINED C ASH OR ANY OTHER BENEFIT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THEN, THE AMOUNT OF CASH /BENEFIT SO RECEIVED SHALL BE TREATED AS INCOME IN THE YEAR OF RECEIPT OR CESSATION OF LIABILITY. WE NOTE THAT IN THE ASSESSEE`S CASE UNDER CONSIDERA TION, THE ASSESSEE HAD SHOWN THE CLOSING BALANCE OF SUNDRY CREDITORS AS ON 31-03 -2000 IN ITS BALANCE SHEET AND ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 7 THE SAID CLOSING BALANCE HAS BEEN CONTINUED AND CAR RIED FORWARD AS OPENING BALANCE IN THE SUBSEQUENT YEAR I.E. AS ON 01-04-200 0. HENCE, IT IS CLEAR THAT THE ASSESSEE HAD NOT WRITTEN BACK THE SAME TO ITS PROFI T &LOSS ACCOUNT DURING THE RELEVANT YEAR. AS SUCH, IT CANNOT BE SAID THAT THE ASSESSEE HAD AVAILED ANY BENEFIT, AS SPECIFIED IN (B) ABOVE, DURING THE RELEVANT YEAR . HENCE, THE CONDITION PRESCRIBED IN SECTION 41(1) OF THE ACT HAS NOT BEEN FULFILLED IN INSTANT CASE. BESIDES,THE EXPLANATION 1 TO SECTION 41(1) OF THE A CT IS ALSO NOT APPLICABLE IN INSTANT CASE SINCE THE ASSESSEE HAS NOT CREDITED TH E SAME TO ITS PROFIT &LOSS ACCOUNT FOR THE RELEVANT YEAR. IN SUCH A SITUATION, IT CANNOT BE CONTENDED THAT THE LIABILITY OF DIFFERENT ASSESSMENT YEARS, AS MENTION ED IN THE GROUNDS OF APPEAL HAD CEASED TO EXIST. FURTHERMORE, THE ABOVE LIABILITIES HAS BEEN CONTINUED FROM EARLIER YEARS. HENCE, THE A DDITION ON ACCOUNT OF BOGUS CREDITORS IS WHOLLY UNJUSTIFIED. 13.IN THIS REGARD IT IS ALSO PERTINENT TO NOTE THAT THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO JUSTIFY THAT THE AFORESAID LIABILIT IES HAD ACTUALLY CEASED TO EXIST DURING THE RELEVANT YEAR. IN SUCH A SITUATION THE Q UESTION OF ADDITION DOES NOT ARISE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION I N THE CASE OF CIT -VS.- SUGAULI SUGAR WORKS (P). LTD. (1999) 236 ITR 518 (SC) WHERE IN, AFFIRMING THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT, THE HON'BLE APE X COURT HELD AS FOLLOWS: IT WILL BE SEEN THAT THE FOLLOWING WORDS IN THE SE CTION ARE IMPORTANT; THE ASSESSEE HAD OBTAINED WHETHER IN CASH OR IN ANY OTH ER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE O R SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CE SSATION THEREOF, THE AMOUNT OBTAINED BY HIM'. THUS, THE SECTION CONTEMPLATES TH E OBTAINING BY THE ASSESSEE OF AN AMOUNT MANNER, WHATSOEVER, OR A BENE FIT BY WAV OF REMISSION OR CESSATION AND IT SHOULD BE OF A PARTICULAR AMOUN T OBTAINED BY HIM. THUS, THE OBTAINING BY THE ASSESSEE OF A BENEFIT BY VIRTU E OF REMISSION OR CESSATION IS SINE QUA NON FOR THE APPLICATION OF THIS SECTION '. IN THE INSTANT CASE, THE ASSESSEE HAS SHOWN SUNDRY CREDITORS IN THE BOOKS OF ACCOUNTS AND AS SUCH, APPLYING THE RATIO OF THE ABO VE DECISION, IT CANNOT BE SAID THAT THE ASSESSEE HAS RECEIVED CASH OR OTHER BENEFI T IN RESPECT OF SUCH CREDITORS OR THERE HAS BEEN CESSATION/REMISSION OF LIABILITIES D URING THE RELEVANT RESPECT YEAR SO AS TO JUSTIFY ADDITION UNDER SECTION 41(1) OF THE A CT. ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 8 FURTHER, IN THE CASE OF CCIT -VS.- KESARIA TEA CO. LTD. (2002) 254 ITR 434 (SC) THE HON'BLE APEX COURT HELD AS FOLLOWS: 'IN ORDER TO APPLY SECTION 41(1) IN THE CONTEXT OF THE FACTS OF THE PRESENT CASE, THE FOLLOWING POINTS ARE TO BE KEPT IN VIEW (1) IN THE COURSE OF THE ASSESSMENT FOR AN EARLIER YEAR, ALLOWANCE OR DEDUCTION HAS BEE N MADE IN RESPECT OF TRADING LIABILITY INCURRED BY THE ASSESSEE; (2) SUB SEQUENTLY, A BENEFIT IS OBTAINED IN RESPECT OF SUCH TRADING LIABILITY BY WA V OF REMISSION OR CESSATION THEREOF DURING THE YEAR IN WHICH SUCH EVENT OCCURRE D; (3) IN THAT SITUATION THE VALUE OF BENEFIT ACCRUING TO THE ASSESSEE IS DEEMED TO BE THE PROFIT AND GAINS OF BUSINESS WHICH OTHERWISE WOULD NOT BE HIS INCOME ; AND (4) SUCH VALUE OF BENEFIT IS MADE CHARGEABLE TO INCOME-TAX AS THE INC OME OF THE PREVIOUS YEAR WHEREIN SUCH BENEFIT WAS OBTAINED. THE HIGH COURT, AGREEING WITH THE TRIBUNAL, RIGHTLY HELD THAT THE RESORT TO SECTION 4 1(1) COULD ARISE ONLY IF THE LIABILITY OF THE ASSESSEE CAN BE SAID TO HAVE CEASE D FINALLY WITHOUT THE POSSIBILITY OF REVIVING IT. ON THE FACTS FOUND BY T HE TRIBUNAL, THE TRIBUNAL AS WELL AS THE HIGH COURT WERE WELL-JUSTIFIED IN COMIN G TO THE CONCLUSION THAT THE PURCHASE TAX LIABILITY OF THE ASSESSEE HAD NOT CEASED FINALLY DURING THE YEAR IN QUESTION' IN THE ASSESSEE`S CASE UNDER CONSIDERATION, THE AS SESSEE HAS NOT RECEIVED ANY BENEFIT BY WAY OF REMISSION OR CESSATION OF LIABILI TIES DURING THE RELEVANT YEAR TOWARDS BALANCE OF SUNDRY CREDITORS AND AS SUCH, I T CAN BE STATED THAT IT HAS NOT FULFILLED THE CONDITIONS AS SPECIFIED BY THE HON'BL E APEX COURT IN THE ABOVE REFERRED DECISION. THUS, APPLYING THE RATIO OF THE HON'BLE APEX COURT, IT CAN BE STATED THAT THE AFORESAID LIABILITIES CANNOT BE ADD ED BACK UNDER SECTION 41(1) OF THE ACT FOR THE RELEVANT RESPECTIVE ASSESSMENT YEAR . OUR VIEWS ARE ALSO FORTIFIED BY THE JUDGMENT OF CO- ORDINATE BENCH IN THE CASE OF PUSPAL KUMAR DAS IN I.T.A. NO. 1442/KOL/2012 FOR AS SESSMENT YEAR 2007-08 WHEREIN IT WAS HELD AS FOLLOWS: 10. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. IN OUR VIEW THE ADDITION WAS RIGHTLY DELETED BY THE CIT(A) FOR THE FOLLOWING REASONS: I. THERE WAS NO EVIDENCE TO SHOW CESSATION OF LIABI LITY. II. ASSESSEE STILL SHOWS THE LIABILITY IN ITS BOOKS OF ACCOUNTS WHICH ITSELF IS PRIMA FACIE EVIDENCE THAT THE LIABILITY EXISTS. III. THE TRANSACTION OF PURCHASE, IF REGARDED AS BO GUS THEN THERE IS NO LIABILITY IN LAW AND HENCE THE QUESTION OF APPLYING SECTION 41(1) WI LL NOT ARISE FOR CONSIDERATION. IV. THE SUMS IN QUESTION HAS BEEN REPAID IN THE SUB SEQUENT ASSESSMENT YEARS, THEREBY RENDERING THE THEORY OF CESSATION OF LIABILITY NOT SUSTAINABLE. ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 9 WE THEREFORE CONCUR WITH THE VIEW OF THE CIT(A) AND DISMISS GR. NO. 2 RAISED BY THE REVENUE ALSO. CONSIDERING THE FACTUAL POSITION EXPLAINED ABOVE AN D THE POSITION IN LAW WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER SHOULD BE DELETED ACCORDINGLY WE DELETE THE FOLLOWING ADDITIONS MADE BY THE ASSESSING OFFICER: FOR ASSESSMENT YEAR 2000-01 RS. 10,03,082/- FOR ASSESSMENT YEAR 2001-02 RS. 8,25,545/- FOR ASSESSMENT YEAR 2002-03 RS. 7,26,621/- FOR ASSESSMENT YEAR 2003-04 RS.13,13,668/- FOR ASSESSMENT YEAR 2004-05 RS.10,04,556/- 14. GROUND NO.2. I.T.A. NO. 2043/KOL/2017 FOR A.Y. 2000 -01 RELATES TOADDITION RS. 2,66,000/- ON ACCOUNT OF NOT DISCLOSING UNSECUR ED LOAN. THE LD COUNSEL FOR THE ASSESSEE POINTED OUT THAT TH E SAID AMOUNT OF RS.2,66,000/- DOES NOT BELONG TO ASSESSEE. THE SAID AMOUNT IS NOT MENTIONED IN THE BOOKS OF THE ASSESSEE. THE DR FOR THE REVENUE FAIRLY AGREED WITH THE PROPOSITION CANVASSED BY LD COUNSEL. WE HAVE HEARD BOTH THE PARTIES AND P ERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT SAID AMOUNT OF RS.2,66,000/ -, DOES NOT EMANATE FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THAT IS, THE SAI D AMOUNT DOES NOT BELONG TO THE ASSESSEE, THEREFORE, THE QUESTION OF DISALLOWANCE D OES NOT ARISE. MOREOVER, THE AO FAILED TO BRING ANY EVIDENCE ON RECORD TO ESTABL ISH THAT THE SAID AMOUNT OF RS.2,66,000/- IS AN UNACCOUNTED MONEY OF THE ASSESS EE.HENCE, WE DELETE THE ADDITION OF RS.2,66,000/-. 15. NOW WE SHALL TAKE GROUND NO.3. I.T.A. NO. 2046/ KOL/2017 FOR A.Y. 2003-04, WHICH RELATES TO DISALLOWANCE OF RS. 5,95,107/- UND ER SECTION 40A(3) OF THE ACT. 16. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE BEING A COMMISSION AGENT, IS ALSO A TRADER IN JAGGERY. THIS IS CLEARLY REFLECTED IN THE TRADING ACCOUNT OF THE AUDITED ACCOUNTS OF THE ASSESSEE AND THE ASSESSEE M ADE PURCHASES OF GUR OF RS.29,75,538/-.THE ASSESSEE SUBMITTED BEFORE THE AS SESSING OFFICER THAT GUR TRADING WAS DONE WITH THOSE CUSTOMERS WHO DID NOT H AVE BANK ACCOUNT IN VILLAGE AND AS SUCH THE ASSESSEE WILL GET THE BENEFIT UNDER RULE 6DD(J) OF THE IT RULES. HOWEVER, THE ASSESSING OFFICER NOTED THAT GUR/ JAGG ERY IS A BY-PRODUCT OF SUGAR ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 10 CANE AND AS SUCH IT IS NOT AN AGRICULTURAL PRODUCT BUT RATHER IT IS A PRODUCT OF THE SUGAR CANE AND HENCE THE BENEFIT UNDER RULE 6DD CAN NOT BE EXTENDED TO THE ASSESSEE IN THE INSTANT CASE. THE ASSESSING OFFICER NOTED THAT ALMOST ALL THE PAYMENTS IN BOTH THE BUSINESSES WERE IN CASH, EXCEE DING RS.20,000/- THEREFORE THE ASSESSING OFFICER MADE A DISALLOWANCE OF 20% OF THE ENTIRE PURCHASES AMOUNTING TO RS. 5,95,107/-( THAT IS, 20% OF RS.29, 75,538), U/S 40A(3) OF THE ACT. 17.AGGRIEVED BY THE ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER O F THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 18.WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT CON SIDERING THE SIZE AND NATURE OF THE BUSINESS AND THE PRODUCT IN WHICH THE ASSESSEE DEALS, WE ARE OF THE VIEW THAT IN THE VILLAGE AND REMOTE AREA AND KIND OF THE PEOP LES INVOLVED IN THIS BUSINESS (THAT IS, MOST OF THE PEOPLES ARE FARMERS), THE GUR AND JAGGERY TRADING WERE BEING DONE MOSTLY ON CASH BASIS. MOST OF THE FARMERS HAVE FACTORY TO PRODUCE GUR AND JAGGERY IN THE FARM HOUSE ITSELF WHERE THE SUGARCAN E IS PRODUCED THEREFORE IT CANNOT BE SAID THAT FARMERS ARE NOT INVOLVED IN MAN UFACTURING GUR AND JAGGERY. WHEN IT COMES TO THE FARMERS, THE GENERAL PHENOMENO N AND PERCEPTION IS THAT THE INDIAN FARMERS ARE MOSTLY UNEDUCATED AND DO NOT KNO W HOW TO OPERATE THE BANK ACCOUNT. WE KNOW THAT THE GUR AND JAGGERY PRODUCTIO N IS NOT AN AGRICULTURAL ACTIVITY BUT FARMERS ARE INVOLVED IN PRODUCING GUR AND JAGGERY, AS EXPLAINED ABOVE, THEREFORE, THERE ARE MORE CHANCES TO DO THE TRANSACTIONS IN CASH. WE ALSO NOTE THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WER E AUDITED AND BOOKS OF ACCOUNTS WERE NOT REJECTED BY THE ASSESSING OFFICER . THE ASSESSING OFFICER HAS NOT TAKEN ANY ADVERSE VIEW ON THE ASSESSEES BOOKS OF ACCOUNTS, SO FAR THIS ADDITION IS CONCERNED. APART FROM THIS, THE ASSESSI NG OFFICER HAS NOT DOUBTED THE PURCHASE AND SALES MADE BY THE ASSESSING OFFICER. W E NOTE THAT THE ASSESSEES CLAIM FALLS UNDER RULE 6DD(J) OF THE INCOME TAX RUL ES (VIDE OLD RULES). IT WILL ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 11 BE PERTINENT TO GO INTO THE INTENTION BEHIND INTROD UCTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AT THIS JUNCTURE. WE FIND THAT TH E SAID PROVISIONS WAS INSERTED BY FINANCE ACT 1968 WITH THE OBJECT TO CURBING EXPE NDITURE IN CASH AND TO COUNTER TAX EVASION. IN THE ASSESSEE`S CASE, THERE IS NO TAX EVASION, AS THE BOOKS OF ACCOUNTS WERE DULY AUDITED BY THE CHARTERED ACCOUNT ANT AND AO HAS NOT REJECTED THE BOOKS OF THE ASSESSEE AND THE PAYEE HAS OFFERED THE TAX. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRME D BY THE LD. CIT(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADDITION TO THE TUNE OF RS. 5,95,107/-. 19.GROUND NO.4. I.T.A. NO. 2046/KOL/2017, FOR A.Y. 2003-04, RELATES TOADDITION OF RS. 44,120/-, ON ACCOUNT OF UNDISCLOSED PROFIT. 20. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE IN HIS STATEMENT GIVEN BY HIM, DURING THE SURVEY, HAD MENTIONED THAT THE COMMISSIO N WAS 4 PER TIN OF GUR SOLD. BASED ON THE ANALYSIS OF THE TRADING ACCOUNT OF THE ASSESSEE, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SOLD 20,966 TINS IN THE YEAR AND DISCLOSED A GROSS PROFIT OF RS. 37,744/- WHICH IS AT THE RATE OF RS. 1.8 PER TIN. THE ASSESSING OFFICER ALSO NOTED THAT THE PROFIT EARNED FROM TRAD ING ACTIVITY WAS MUCH LESS THAN THE INCOME EARNED FROM COMMISSION, THEREFORE THE IN COME DISCLOSED IN THE TRADING ACTIVITY WAS GROSSLY UNDERSTATED. THEREFORE , THE ASSESSING OFFICER NOTED THAT EVEN IF THE INCOME EARNED PER TIN FROM THE COM MISSION IS CONSIDERED @ RS.4 PER TIN, THE INCOME FROM THE SAID 20,966 TINS SHOUL D BE RS. 83,864/-. THEREFORE, THE ASSESSING OFFICER MADE AN ADDITION FOR THE DIFF ERENTIAL AMOUNT TO THE TUNE OF RS. 44,120/- (RS.83,864 - RS. 39,744). 21. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) CONFI RMED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS I N APPEAL BEFORE US. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT THE ADDITION MADE BY THE ASSESSING OFF ICER IS PURELY ON CONJECTURES AND SURMISES. THE ASSESSEE HAS DISCLOSED INCOME RS. 1.8 PER TINWHEREAS THE ASSESSING OFFICER MADE AN ADDITION ON ACCOUNT OF DI FFERENTIAL AMOUNT WITHOUT ITA NOS.2043TO2047/KOL/2017 TUM NATH SHAW A.YS.2000-01 TO 2004-05 12 ANY BASE AND WITHOUT ANY EVIDENCE ON RECORD. THE LD AO MADE THIS ADDITION SOLELY BASED ON THE STATEMENT OF THE ASSESSEE. WE N OTE THAT STATEMENT IS A GOOD EVIDENCE PROVIDED IT IS SUPPORTED BY ANY TANGIBLE M ATERIAL OR CORROBORATE EVIDENCE. WE NOTE ASSESSEES ACCOUNT ARE AUDITED AN D NOT REJECTED BY THE ASSESSING OFFICER THEREFORE TO ESTIMATE THE SEPARAT E PROFIT IN ADDITION TO PROFIT SHOWN IN THE AUDITED BOOKS OF ACCOUNTS IS NOT TENAB LE WITHOUT ANY TANGIBLE MATERIAL OR CORROBORATIVE EVIDENCE, THEREFORE WE DE LETE THE ADDITION OF RS. 44,120/-. 23.IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2000-01 TO 2004-05 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31/ 12/2018. SD/- (A.T. VARKEY) SD/- (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; DATED 31/ 12/2018 SB , SR.PS. / COPY OF THE ORDER FORWARDED TO : ASSISTANT REGISTRAR I.T.A.T., KOLKATA BENCHES, KOLKATA 1. / THE ASSESSEE- TUM NATH SHAW 2. / THE RESPONDENT.- ACIT, CIRCLE-2, BURDWAN 3. $ ( ) / THE CIT(A), :KOLKATA. 4. $ / CIT 5. % & , , / DR, ITAT, KOLKATA 6. & '( / GUARD FILE. //TRUE COPY// BY ORDER