HAZARAT & CO., MUMBAI V. ITO WD 15(3)(1), MUMBAI

ITA 2106/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79532 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 23-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D D ANJARIA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 2106/MUM/2012 ( / ASSESSMENT YEAR: 2007-08) HAZARAT & CO. GROUND FLOOR, 56, C. P. TANK ROAD, MUMBAI-400 004 / VS. INCOME TAX OFFICER, WARD 15(3)(1), 1 ST FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI-400 007 ' ./# ./PAN/GIR NO. AACFH 2388 G ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) '$ ' ( / APPELLANT BY : SHRI D. D. ANJARIA %&'$ ' ( / RESPONDENT BY : MS. NEERAJA PRADHAN )* + ' , / DATE OF HEARING : 23.07.2014 DATE OF ORDER : 28.07.2014 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-26, MUMBAI (CIT(A) FOR SH ORT) DATED 03.01.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2007-08 VIDE ORDER DATED 23.12.2009. 2.1 OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE ASSESSEE, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESSEES COUNSEL, THAT THE ASSESSEE, A PARTNERSHIP FIRM IN THE BUSINESS OF MANUFACTURE OF GUAR GUM PRODUCTS, CONSISTS OF THREE 2 ITA NO. 2106/MUM/2012 (A.Y. 2007-08) HAZARAT & CO. VS. ITO PARTNERS. DURING THE COURSE OF THE ASSESSMENT PROCE EDINGS FOR THE RELEVANT YEAR, THE ASSESSING OFFICER (A.O.) OBSERVED CREDITS OUTSTANDI NG IN THE NAME OF TWO FIRMS, BEING M/S. VIVEKANAND MILLS SAKI AND M/S. 3003 SPECIALTIE S, IN THE SUM OF RS.1,71,434/- AND RS.5,34,326/- RESPECTIVELY. THE ASSESSEE BEING UNAB LE TO ADDUCE A CONFIRMATION FROM THE SAID PARTIES, WHICH ARE IN FACT THE PROPRIETARY FIR MS OF ONE OF THE PARTNERS, SHRI BALWANT RAI GUPTA (KARTA), I.E., IN RESPECT OF THE OUTSTAND ING LIABILITY AS AT THE YEAR-END, THE SAME WERE BROUGHT TO TAX BY HIM AS A LIABILITY, SINCE CE ASED, U/S. 41(1)(A) IN-AS-MUCH AS THE LIABILITIES WERE OUTSTANDING FOR MORE THAN THREE YE ARS. THE SAME STOOD CONFIRMED IN FIRST APPEAL ON THIS BASIS; THE ASSESSEE BEING UNABLE TO ADDUCE ANY EVIDENCE WITH REGARD TO THE EXISTENCE OF THE LIABILITIES TO THE SAID TWO TRADE CREDITORS BEFORE THE FIRST APPELLATE AUTHORITY AS WELL. THIS HAD BEEN FOR THE REASON OF A DISPUTE, WHICH STANDS SINCE RESOLVED. ACCORDINGLY, HE PLEADED FOR RESTORATION OF THE MATT ER BACK TO THE FILE OF THE A.O. TO ENABLE THE ASSESSEE TO ADDUCE EVIDENCE WITH REGARD TO THE EXISTENCE OF THE SAID LIABILITY/S AS AT THE RELEVANT YEAR-END, ADDUCING A COPY OF THE FINAL ACC OUNTS (OF BOTH THE CONCERNS) REFLECTING THE ASSESSEE AS A TRADE DEBTOR. 2.2 THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD, ON THE OTHER HAND, CONTEND OF THERE BEING NO INFIRMITY IN THE ORDERS OF THE AUTHO RITIES BELOW IN-AS-MUCH AS NO EVIDENCE SUBSTANTIATING ITS CLAIM OF AN EXISTING LIABILITY A S AT THE YEAR-END STANDS ADMITTEDLY ADDUCED BY THE ASSESSEE AT ANY STAGE, SO THAT THE R EVENUE AUTHORITIES WERE ONLY CORRECT IN INFERRING CESSATION THEREOF; THERE BEING NO EXPLANA TION OR EVEN REFERENCE TO ANY DISPUTE BEFORE THEM. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE SOLE ISSUE ARISING IN THE INSTANT APPEALS IS THE MAINTAINABILI TY IN LAW OF THE ADDITION QUA THE LIABILITY TO TWO TRADE CREDITORS U/S. 41(1)(A) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE SAID PROVISION COMES INTO PLAY ON A REMISSION O R CESSATION OF A TRADING LIABILITY, EXPENDITURE IN RESPECT OF WHICH HAS BEEN CLAIMED IN AN EARLIER YEAR, DURING THE RELEVANT YEAR. THE ASSESSEE HAVING BEEN UNABLE TO SUBSTANTIA TE ITS CLAIM WITH REGARD TO THE 3 ITA NO. 2106/MUM/2012 (A.Y. 2007-08) HAZARAT & CO. VS. ITO EXISTENCE OF THE LIABILITY/S AS AT THE YEAR-END, AN INFERENCE AS TO ITS REMISSION OR CESSATION IN THE FACTS AND CIRCUMSTANCES OF THE CASE STOOD DR AWN, AND ADDITION MADE ON THAT BASIS. THE EXISTENCE OF A LIABILITY IS ESSENTIALLY A MATTE R OF FACT, THE ONUS TO ESTABLISH WHICH; THE ASSESSEE CLAIMING SO, IS ON IT. THE LIABILITY OUTST ANDS IN THE ASSESSEES ACCOUNTS, WHICH PURPORTEDLY REPRESENT TRUE STATE OF AFFAIRS. WHAT T HE ASSESSEE IS BEING REQUIRED TO ESTABLISH, THEREFORE, IS ONLY THE TRUTH OF ITS ACCO UNTS. THE ASSESSEE CLAIMING LIABILITY TO TWO CREDITORS, WHICH FOR NO APPARENT REASON OUTSTANDS SINCE LONG, WITH N O TRADE RELATIONSHIP IN ONE CASE, AND BARELY ANY TO CONTEND WITH IN ANOTHER , THE OUTSTANDING/S WAS CONSIDERED AS NOT REPRESENTING AN EXISTING LIABILITY. AN INFERENC E AS TO REMISSION OR CESSATION OF A LIABILITY, ATTRACTING SECTION 41(1)(A), BY THE REVE NUE AUTHORITIES, IS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR VIEW, NOT INCORRE CT. THIS MATTER STANDS DEALT WITH BY THE TRIBUNAL AT LENGTH PER ITS DECISIONS IN THE CASE OF ITO VS. SHAKEEL M. SHAREEF (IN ITA NO. 1564/MUM(E)/2013 DATED 18.06.2014) AND KALYANI MANN SINGH VS. ITO [2013] 37 CCH 259 (MUM) (TRIB) (IN ITA NO. 6500/MUM(A)/2011 D ATED 14.11.2013), RENDERED AFTER CONSIDERING JUDICIAL PRECEDENTS. FURTHER, THE ASSESSEE CLAIMING THE SAID LIABILITIES AS AT THE END OF THE IMMEDIATELY PRECEDING YEAR, WHICH STOOD ACCEPTED AS SUCH, THE CESSATION OF LIABILITY WOULD STAND TO BE INFERABLE FOR OR REF ERABLE TO THE CURRENT YEAR. SO HOWEVER, THE ASSESSEE HAS, THROUGH THE LD. AR, C ONCEDED BEFORE US TO THE NON- PRODUCTION OF ANY EVIDENCE QUA THE EXISTENCE OF THE LIABILITY, EXPLAINING THE SAM E TO BE ON ACCOUNT OF A SUBSISTING DISPUTE. THAT PERHAPS ALSO EXPLAINS THE NON-PAYMENT TO THE SAID CONCERNS BELONGING TO THE SAME GROUP, WHICH IS ITSE LF SURPRISING, WHILE AT THE SAME TIME RAISING DOUBT AS TO WHETHER THE SAME ARE INDEED PAY ABLE. NO DOUBT, NO MATERIAL TO SUBSTANTIATE THE SAID DISPUTE HAS BEEN BROUGHT ON R ECORD, YET IT GOES WITHOUT SAYING THAT NO ONE WOULD ACT TO HIS OWN DETRIMENT EXCEPT FOR PR ESSING REASONS. TWO, THE SAID CREDITORS BEING REGULAR ASSESSEES ON THE FILES OF T HE DEPARTMENT, THEIR ACCOUNTS FOR THE RELEVANT YEAR WOULD HAVE BEEN PRESUMABLY SINCE FINA LIZED AND FURNISHED TO IT. PROCEDURAL LAW, IT IS TRITE, IS A HANDMAID OF JUSTICE AND, THE REFORE, SHOULD NOT IMPEDE ITS DELIVERY. WE, ACCORDINGLY, ONLY CONSIDER IT FIT AND PROPER IN THE FACTS AND CIRCUMSTANCES OF THE CASE TO RESTORE THE MATTER BACK TO THE FILE OF THE A.O. TO DECIDE THE SAME IN ACCORDANCE WITH LAW 4 ITA NO. 2106/MUM/2012 (A.Y. 2007-08) HAZARAT & CO. VS. ITO AFTER ALLOWING DUE OPPORTUNITY TO THE ASSESSEE TO S TATE AND PRESENT ITS CASE IN THE MATTER, ISSUING DEFINITE FINDINGS OF FACT. WE DECIDE ACCORD INGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. -. / )0 1- ' 2' 345 6 * 7 ' 89 ORDER PRONOUNCED IN THE OPEN COURT ON JULY 23, 2014 AT THE CONCLUSION OF THE HEARING. SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER :+ MUMBAI; ;) DATED : 28.07.2014 *.)../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. >*? @ %)A0 , , A0. , :+ / DR, ITAT, MUMBAI 6. @ B1 C + / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , :+ / ITAT, MUMBAI