Shri K.Vijay, Erode V. ITO, Erode

ITA 210/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68747 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Section: 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 210/MDS/2013 (ASSESSMENT YEAR : 2009-10) SHRI K. VIJAY, NO.3, NACHIAPPA II STREET, ERODE 638 001. PAN : ABBPV 9125 H (APPELLANT) V. THE INCOME TAX OFFICER, WARD I(2), ERODE-1. (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : SHRI GURU BASHYAM, JCIT DATE OF HEARING : 23.09.2013 DATE OF PRONOUNCEMENT : 26.09.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, HIS GRIEVAN CE IS THAT AN ADDITION OF ` 43,29,009/- MADE BY THE ASSESSING OFFICER UNDER SECTION 41(1) OF INCOME-TAX ACT, 1961 (IN SHORT 'TH E ACT'), WAS UPHELD BY THE CIT(APPEALS). I.T.A. NO. 210/MDS/13 2 2. FACTS APROPOS ARE THAT ASSESSEE, AN INDIVIDUAL E NGAGED IN TRADING IN CLOTH, WAS SUBJECTED TO A SURVEY UNDER S ECTION 133A OF THE ACT ON 2.12.2009. THE SURVEY WAS CONDUCTED IN A GR OUP OF CONCERNS, WHICH APART FROM THE ASSESSEE, CONSISTED OF HIS FAT HER SHRI T.P. KATHIRVEL (INDVL.), SHRI T.P. KATHIRVEL (HUF), AND SHRI K. GOKUL, ASSESSEES BROTHER. DURING THE COURSE OF SURVEY, A SSESSEES FATHER IN A STATEMENT RECORDED FROM HIM MENTIONED THAT FOR TH E TOTAL SUNDRY CREDITORS OF BALANCE ` 1,96,69,348/- APPEARING IN THE BOOKS OF THE FOUR ASSESSEES, NAME AND ADDRESS COULD NOT BE FURNISHED. ACCORDING TO HIM, SUCH AMOUNT WAS TO BE OFFERED AS UNDISCLOSED I NCOME FOR ASSESSMENT YEAR 2009-10 AS UNPROVED SUNDRY CREDITOR S. THE AMOUNT OF SUCH SUNDRY CREDITORS IN THE BOOKS OF THE ASSESS EE WAS ` 43,29,009/-. HOWEVER, WHEN RETURN OF INCOME WAS FI LED, NO SUCH INCOME WAS ADMITTED BY THE ASSESSEE. ASSESSING OFF ICER, BASED ON A SIGNED LIST OF UNPROVED SUNDRY CREDITORS, VOLUNTA RILY FURNISHED BY THE ASSESSEE DURING THE COURSE OF SURVEY, REQUIRED THE ASSESSEE TO EXPLAIN WHY THE AMOUNT OF ` 43,29,009/- SHOULD NOT BE ADDED AS HIS INCOME. ON 15.11.2011, A LETTER WAS FILED BY THE A SSESSEE STATING THAT THE SUNDRY CREDITORS BALANCE OF ` 43,29,009/- WAS A RUNNING ONE SINCE FINANCIAL YEAR 1998-99. IT WAS HOWEVER ADMIT TED THAT SUCH SUNDRY CREDITORS WERE NOT IN ACTUAL EXISTENCE AND H ENCE NO ADDRESS I.T.A. NO. 210/MDS/13 3 COULD BE GIVEN. ASSESSING OFFICER THUS CAME TO A C ONCLUSION THAT THE CREDIT BALANCE OF ` 43,29,009/- SHOWN IN THE BALANCE SHEET AS ON 31.3.2009 OF THE ASSESSEE, WAS NOT EXISTING. ASSES SING OFFICER ALSO NOTED THAT THE ASSESSEE, ALONG WITH HIS FATHER AND BROTHER, IN AN AFFIDAVIT DATED 4.12.2009 HAD AGREED TO DISCLOSE TH E AMOUNTS SHOWN AS SUNDRY CREDITORS AS THEIR INCOME FOR ASSESSMENT YEAR 2009-10. IN THIS VIEW OF THE MATTER, A.O. MADE AN ADDITION OF ` 43,29,009/- AND COMPLETED THE ASSESSMENT. 3. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS) ARG UING THAT THE CREDIT BALANCES WERE REFLECTED IN THE BALANCE S HEET AND WERE SO APPEARING IN THE BOOKS FROM FINANCIAL YEAR 1998-99. AS PER ASSESSEE, THERE WAS NO EVIDENCE FOUND DURING THE CO URSE OF SURVEY THAT SUCH CREDITORS WERE PAID OUT OF ANY UNACCOUNTE D INCOME DURING THE RELEVANT PREVIOUS YEAR. ACCORDING TO HIM, THE SUM WAS UNJUSTLY TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. 4. HOWEVER, THE CIT(APPEALS) WAS NOT IMPRESSED. HE WAS OF THE OPINION THAT ASSESSEE HAD HIMSELF ADMITTED THE CRED IT BALANCE TO BE NOT EXISTING. ACCORDING TO HIM, THERE WAS NO LIABI LITY TOWARDS ANY SUCH PERSONS. ASSESSEE COULD NOT PROVE THE CREDITO RS THOUGH HE HAD GIVEN THE NAMES. ACCORDING TO LD. CIT(APPEALS), TH ERE WAS A I.T.A. NO. 210/MDS/13 4 CESSATION OF LIABILITY FOR THE SUM OF ` 43,29,009/-. HE, THEREFORE, CONFIRMED THE ADDITION. 5. NOW BEFORE US, ADV. S. SRIDHAR, APPEARING FOR TH E ASSESSEE, STRONGLY ASSAILING THE ORDER OF AUTHORITIES BELOW, SUBMITTED THAT THE ADDITION ITSELF WAS BASED ON A SURRENDER OF INCOME MADE DURING THE SURVEY. ACCORDING TO HIM, BY VIRTUE OF THE DECISIO N OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. S. KADER KHAN (300 ITR 157), NO ADDITION COULD BE MADE ON THE BASIS OF A S TATEMENT RECORDED DURING A SURVEY. LEARNED A.R. SUBMITTED THAT THE S AID DECISION OF HON'BLE JURISDICTIONAL HIGH COURT STOOD AFFIRMED BY HON'BLE APEX COURT REPORTED IN 352 ITR 480. FURTHER, ACCORDING TO HIM, THE AMOUNT WAS A CARRIED FORWARD BALANCE FROM AN YEAR A S EARLY AS FINANCIAL YEAR 1998-99. THERE WAS NO CESSATION OF LIABILITY DURING THE RELEVANT PREVIOUS YEAR. ACCORDING TO HIM, SINCE IT WAS A CARRIED FORWARD BALANCE, NO ADDITION COULD BE MADE UNDER SE CTION 68 OF THE ACT. ASSESSING OFFICER PRESUMED THAT THERE WAS AUT OMATIC CESSATION OF LIABILITY. LEARNED A.R. POINTED OUT THAT IN THE BUSINESS THAT ASSESSEE WAS IN, THE MAXIMUM CREDIT PERIOD THAT COU LD BE OBTAINED WAS ONLY THREE MONTHS. THUS, IF AT ALL THERE WAS A NY SQUARING OFF LIABILITY, IT COULD HAVE HAPPENED LONG BACK. IN OT HER WORDS, ACCORDING I.T.A. NO. 210/MDS/13 5 TO HIM, THE PRESUMPTION TAKEN BY THE ASSESSING OFFI CER THAT CESSATION HAD HAPPENED DURING THE RELEVANT PREVIOUS YEAR WAS INCORRECT. RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT V. SUGAULI SUGAR WORKS (P) LTD. (23 6 ITR 518). 6. PER CONTRA, SHRI GURU BASHYAM, APPEARING FOR THE REVENUE, SUBMITTED THAT ASSESSEE HIMSELF HAD IN HIS SWORN ST ATEMENT CLEARLY MENTIONED THAT THE LIABILITY DID NOT EXIST AT ALL. FURTHER ACCORDING TO HIM, IN THE LETTER DATED 28.10.2011 FILED BEFORE AS SESSING OFFICER, ASSESSEE HAD STATED THAT THE AMOUNT STOOD REPAID LO NG BACK. ONCE HE HAD ADMITTED THAT THE AMOUNTS WERE REPAID, THE L IABILITY NO MORE EXISTED. WHEN THE LIABILITY NO MORE EXITED AND ASS ESSEE WAS UNABLE TO GIVE EXPLANATION WITH REGARD TO SOURCE FROM WHIC H THE LIABILITY WAS SQUARED OFF, AS PER LEARNED D.R., ADDITION WAS RIGH TLY DONE. THE CREDITORS ITSELF WERE BOGUS. RELYING ON THE DECISI ON OF BANGALORE BENCH OF THIS TRIBUNAL IN THE CASE OF SURESH KUMAR T. JAIN V. ITO (128 ITD 74), LEARNED D.R. SUBMITTED THAT WHEN BROU GHT FORWARD TRADE CREDITORS WERE NOT GENUINE AND ASSESSEE NEVER RECON CILED THE DIFFERENCE, AN ADDITION UNDER SECTION 41(1) COULD B E DONE. 7. IN REPLY, LEARNED A.R. SUBMITTED THAT IF THE REV ENUE WAS RELYING ON THE STATEMENT RECORDED FROM ASSESSEE, THEN IT CO ULD NOT IGNORE I.T.A. NO. 210/MDS/13 6 PART OF THE AFFIDAVIT WHICH CLEARLY MENTIONED THAT THE AMOUNTS WERE PAID BY THE ASSESSEE ABOUT EIGHT YEARS BACK. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. ASSESSEE BELONGED TO A GROUP OF CONCERNS CALLED T.P . KATHIRVEL & GROUP. THE GROUP CONSISTED OF FOUR PERSONS, NAMELY , SHRI T.P. KATHIRVEL, PROPRIETOR OF M/S THE HINDUSTAN TEXTILES , SHRI T.P. KATHIRVEL (HUF), PROPRIETOR OF M/S TEX INDIA, SHRI K. GOKUL, PROPRIETOR OF M/S GOKUL & GOKUL AND ASSESSEE, WHO WAS THE PROP RIETOR OF M/S K. VIJAY. TRADE CREDITORS BALANCE APPEARING IN THE BO OKS OF THE ASSESSEE WAS ` 43,29,009/-. SHRI T.P. KATHIRVEL IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY, HAD MENTIONED THAT NAMES AND ADDRESS OF CREDITORS COULD NOT BE GIVEN AND AMOUNTS WOULD BE ADMITTED AS INCOME FOR ASSESSMENT YEAR 2009-10. AS SESSEE SHRI K. VIJAY WAS SON OF SHRI T.P. KATHIRVEL. HOWEVER, ASS ESSEE WHEN HE FILED HIS RETURN, DID NOT ADMIT SUCH INCOME. ASSES SEE HAD GIVEN A LIST OF THE CREDITORS WITH THEIR NAMES BUT, NEVER GIVEN THEIR ADDRESSES. ASSESSEE ALSO STATED IN A LETTER DATED 15.11.2011 T HAT THE SUNDRY CREDITORS BALANCE, THOUGH IT WAS APPEARING RIGHT FR OM FINANCIAL YEAR 1998-99, WAS NOT ACTUALLY IN EXISTENCE. IN HIS LET TER DATED 28.10.2011, ASSESSEE EXPLAINED TO THE A.O. THAT THE AMOUNT STOOD I.T.A. NO. 210/MDS/13 7 REPAID MANY YEARS BACK. ASSESSING OFFICER MADE AN ADDITION CONSIDERING THE SUM OF ` 43,29,009/- UNPROVED. ASSESSING OFFICER DID NOT MENTION THE SECTION UNDER WHICH THE ADDITION WA S MADE. CIT(APPEALS), HOWEVER, CONSIDERED THE ADDITION TO H AVE BEEN MADE UNDER SECTION 41(1) OF THE ACT TREATING AS CESSATIO N OF THE LIABILITY. NO DOUBT, AS POINTED OUT BY THE LEARNED A.R., A SUR RENDER OF INCOME ADMITTED IN THE STATEMENT RECORDED DURING THE SURVE Y UNDER SECTION 133A, MAY NOT HAVE MUCH EVIDENTIARY THERE. LEAVING THIS ASPECT APART, WITHOUT DOUBT, EVEN DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, ASSESSEE HAD TIME AND AGAIN MENTIONED THAT THE CREDITORS BALANCE, WHICH WERE APPEARING IN HIS BOOK S, WERE NOT ACTUALLY THERE. THOUGH THE ASSESSEE STATED THAT SU CH AMOUNTS WERE PAID ABOUT EIGHT YEARS BACK, NO EVIDENCE IN THIS RE GARD WAS FILED. THEREFORE, IF THE ASSESSING OFFICER PRESUMED THAT T HE AMOUNTS WOULD HAVE BEEN SQUARED OFF ONLY DURING THE PREVIOUS YEAR RELEVANT TO IMPUGNED ASSESSMENT YEAR, WE CANNOT FAULT HIM. THE FACT OF THE MATTER IS THAT THE TRADE CREDITORS OF ` 43,29,009/- SHOWN BY THE ASSESSEE WAS NOT ACTUALLY THERE AND THIS WAS AN ADM ITTED POSITION. ASSESSEE IS ONLY TRYING TO WRIGGLE OUT OF THE SITUA TION BY STATING THAT THE AMOUNTS WERE PAID ABOUT EIGHT YEARS BACK THAT T OO WITH NO EVIDENCE IN SUPPORT. ASSESSEES ARGUMENT THAT TRAD E CREDITORS IN I.T.A. NO. 210/MDS/13 8 ASSESSEES LINE OF BUSINESS WOULD ALWAYS BE SQUARED OFF WITHIN A THREE MONTHS PERIOD, HAS NOT BEEN SUBSTANTIATED. N OTHING WAS PRODUCED BY THE ASSESSEE TO SHOW THAT SUCH PRACTICE S WERE IN VOGUE IN CLOTH INDUSTRY. WHEN DURING THE COURSE OF SURVE Y IT WAS STATED THAT THE TRADE CREDITORS WERE NOT IN EXISTENCE, AND NEVE R RETRACTED, WE CANNOT SAY THAT SECTION 41(1) COULD NOT BE APPLIED. 9. AS FOR THE RELIANCE PLACED BY THE LEARNED A.R. I N THE CASE OF SUGAULI SUGAR WORKS (P) LTD. (SUPRA), IT WAS FOR AN ASSESSMENT YEAR PRIOR TO ASSESSMENT YEAR 1997-98, I.E. BEFORE INSER TION OF EXPLANATION 1 TO SECTION 41(1) OF THE ACT. BY VIRTUE OF SUCH E XPLANATION, A REMISSION OR CESSATION OF ANY LIABILITY EVEN BY A U NILATERAL ACT CAN ATTRACT THE RIGOURS OF SECTION 41(1) OF THE ACT. S ECTION 41(1) ALONG WITH EXPLANATION IS REPRODUCED HEREUNDER:- 41. (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDI TURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINA FTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS 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 I.T.A. NO. 210/MDS/13 9 BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE T O INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS I N EXISTENCE IN THAT YEAR OR NOT; OR (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF WHICH LOSS OR EXPENDITURE WAS INCURRE D BY THE FIRST-MENTIONED PERSON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRED TO IN CLA USE ( A ) BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRUING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR. [ EXPLANATION 1. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSION 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSA TION THEREOF' SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIA BILITY BY A UNILATERAL ACT BY THE FIRST MENTIONED 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.] A CAREFUL READING OF ABOVE SECTION WOULD SHOW THAT WHEN IT IS APPLIED TO INSTANT CASE BEFORE US, ALL THE CONDITIONS MENTI ONED THEREIN HAVE BEEN SATISFIED. ONCE THE ASSESSEE ACCEPTS THAT THE CREDITORS WERE NOT EXISTING, IT IS FOR THE ASSESSEE TO SHOW THAT T HE PAYMENTS WERE NOT MADE DURING THE RELEVANT PREVIOUS YEAR. WE ARE, TH EREFORE, OF THE OPINION THAT THE LOWER AUTHORITIES WERE JUSTIFIED I N MAKING THE ADDITION OF ` 43,29,009/-. NO INTERFERENCE IS CALLED FOR. I.T.A. NO. 210/MDS/13 10 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 26 TH OF SEPTEMBER, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 26 TH SEPTEMBER, 2013. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, COIMBATORE (4) CIT-II, COIMBATORE (5) D.R. (6) GUARD FILE