Kanhaiyalal Sitaram, Kolkata V. I.T.O Wd - 35(3),kolkata, Kolkata

ITA 2057/KOL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83091 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 03-07-2013
• Court: TRIBUNAL
• Department Lawyers: MD GAYASUDDIN ANSARI
• Assessee Lawyers: J M THARD
• Section: 143(3); 133(6)

Judgement Text

` , SMC(B) , IN THE INCOME TAX APPELLATE TRIBUNAL SMC(B) BENCH : KOLKATA () BEFORE , ) [BEFORE SHRI MAHAVIR SINGH, JM] / I.T.A NO.2057/KOL/2013 !'/ ASSESSMENT YEAR: 2008-09 KANHAIYALAL SITARAM VS. INCOME-TAX OFFICER, WD-3 5(3), KOLKATA (PAN: AADFK0722E) ($% /APPELLANT ) (&'$%/ RESPONDENT ) DATE OF HEARING: 20.08.2014 DATE OF PRONOUNCEMENT: 02.09.2014 FOR THE APPELLANT: SHRI J. M. THARD, ADVOCATE FOR THE RESPONDENT: MD. GAYASUDDIN ANSARI, JCIT, SR. DR () / ORDER THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XX, KOLKATA IN APPEAL NO. 245/CIT(A)-XX/WARD-35(3)/2010-11/KOL DATED 05.03.20 11. ASSESSMENT WAS FRAMED BY ITO, WARD-35(3), KOLKATA U/S. 143(3) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2008-09 VIDE HIS ORDER D ATED 28.12.2010. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN MAKING ADDITION OF CREDIT BALANCE O F RS.1,78,308/- AND RS.73,857/- BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT OR CESSA TION OF LIABILITY. 3. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT THE ASSESSEE HAS PURCHASED GOODS FROM SHR EE KRISHNA SALES ON 16.05.2005 FOR A SUM OF RS.1,73,308/- ON CREDIT AND ALSO ONE OLD CREDITO R IN THE NAME OF VENKATESH LAXMI TRADERS, THERE LIES A CREDIT BALANCE OF RS.73,857/-. THE RE LEVANT ASSESSMENT YEAR INVOLVED IS 2008-09 RELEVANT TO FY 2007-08. ADMITTEDLY, THESE CREDITORS ARE OLD AND OUTSTANDING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE AO REQUIRED THE ASSE SSEE TO EXPLAIN THESE CREDITORS. ASSESSEE EXPLAINED THAT THESE ARE OUTSTANDING CREDIT BALANCE S AND ASSESSEE HAS NOT TAKEN WRITE OFF OF THESE TWO CREDITORS, HENCE, THESE TWO CREDITORS CAN NOT BE ADDED BACK BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT. BUT AO MADE ADDITION. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO VIDE PARA 4.2 OF HIS APPELLATE ORDER AS UNDER: 4.2. I HAVE PERUSED THE ASSESSMENT ORDER AND CONSI DERED THE SUBMISSION OF THE APPELLANT. THE FACT OF THE CASE IS THAT THERE WERE CREDIT BALANCES APPEARING IN THE BOOKS OF ACCOUNT OF THE APPELLANT IN THE NAME OF SHREE SH YAM SALES AMOUNTING TO RS.1,78,308/- AND VENKATESH LAXMI TRADERS AMOUNTING TO RS.73,857/ -. SINCE, THE SAME AMOUNT HAVE 2 ITA NO.2057/K/2013 KANHAIYALAL SITARAM, AY 08-09 BEEN APPEARING EVERY YEAR IN THE BALANCE SHEET, THE AO ISSUED NOTICES U/S. 133(6) OF THE I. T. ACT TO KNOW THE GENUINENESS OF THE LIABILITIES S HOWN. IN THESE CASES THE NOTICES RETURNED BACK UNSERVED WITH THE REMARK NOT KNOWN. THE APPELLANT WAS ALSO ASKED TO PRODUCE THE SAID PARTIES WITH THE SUPPORTING DOCUME NTS TO VERIFY THE GENUINENESS OF THE LIABILITIES BUT THE APPELLANT FAILED TO DO SO. BEFO RE ME ALSO THE APPELLANT STATED THAT THE CREDITORS ARE VERY OLD, THEREFORE, IT IS NOT POSSIB LE TO PRODUCE THEIR EVIDENCE AS ASKED BY THE A.O. FROM THE PERUSAL OF THE FACTS/SUBMISSION, IT IS EMERGED THAT THE PERSON CONCERNED ARE NO LONGER IN TOUCH WITH THE APPELLANT EVEN THERE WHEREABOUTS ARE NOT KNOWN BY THE APPELLANT. UNDER SUCH SITUATION, IT I S NOT ACCEPTABLE THAT THE LIABILITIES STILL EXIST. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE, I AM OF THE VIEW THAT THE LIABILITIES SHOWN BY THE APPELLANT IS NOT GENUINE O R DOES NOT EXIST, THEREFORE, THE AO HAS RIGHTLY INVOKED SECTION 41 OF THE I. T. ACT, HENCE, APPEAL ON THESE GROUNDS ARE DISMISSED. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE TRIBUNAL. 4. I FIND FROM THE ABOVE FACTS THAT THERE ARE OUTS TANDING CREDIT BALANCES APPEARING IN THE BOOKS OF ACCOUNT OF ASSESSEE IN THE NAME OF SHREE S HYAM SALES AMOUNTING TO RS.1,78,308/- AND VENKATESH LAXMI TRADERS AMOUNTING TO RS.73,857/ -. THESE ARE VERY OLD OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THERE IS NO WR ITE OFF CLAIMED BY THE ASSESSEE. THIS FACT IS ADMITTED BY CIT(A) IN THE VERY OPENING WORDS OF PAR A QUOTED ABOVE THAT THESE CREDITORS ARE OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE RELEVANT YEAR. TO INVOKE PROVISION OF SECTION 41(1) OF THE ACT, THE PRIMARY CONDITION IS THAT THERE IS A REMISSION OF DEBT BY CREDITORS. THE MAIN PURPOSE OF THE PROVISION OF SECTION 41(1) OF THE ACT IS TO CATCH CASES OF REMISSION OF DEBT BY CREDITOR IN RESPECT OF EARLIER TRADING ITEM S WHICH WERE THEN ALLOWED AS DEDUCTIONS. IF A PORTION OF LOSS OR LIABILITY INCURRED IN A PARTICUL AR YEAR IS SUBSEQUENTLY DIMINISHED BY WAY OF REMISSION OR OTHERWISE, THE PROVISIONS OF SECTION 4 1(1) OF THE ACT CREATES A FICTION AND DIRECTS THAT THE REMISSION OR DIMINUTION SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION AND HAVE TO BE ACCRUED OR ARISEN DURING THE RELEVANT PREVIOUS YEAR IN WHICH THE REMISSION OF DEBT BY CREDITOR IS MADE. IN THE PRES ENT CASE BEFORE ME, THERE IS NO REMISSION OF THE LIABILITY OR THE CESSATION OF THE LIABILITY AND IN SUCH CIRCUMSTANCES, THE ADDITION ON THAT ACCOUNT CANNOT BE MADE. THE ADDITION MADE BY AO AN D CONFIRMED BY CIT(A) IS REVERSED AND THE APPEAL OF ASSESSEE IS ALLOWED. 5. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 6. ORDER PRONOUNCED IN OPEN COURT ON 02.09.2014. SD/- , (MAHAVIR SINGH) JUDICIAL MEMBER DATED : 2ND SEPTEMBER, 2014 *+ ,- . JD.(SR.P.S.) 3 ITA NO.2057/K/2013 KANHAIYALAL SITARAM, AY 08-09 () / &0 1(0!2- COPY OF THE ORDER FORWARDED TO: 1 . $% / APPELLANT SHRI KANHAIYALAL SITARAM, 33, ARMENIAN STREET, KOLKATA-700 001. 2 &'$% / RESPONDENT ITO, WARD-35(3), KOLKATA 3 . ) ( )/ THE CIT(A), KOLKATA 4. 5. ) / CIT KOLKATA 089 & / DR, KOLKATA BENCHES, KOLKATA '0 &/ TRUE COPY, ():/ BY ORDER, - /ASSTT. REGISTRAR .