Asstt. Comm. Of Income Tax Circle 1, Margao V. Shri Gangadhar Narsingdas Agrawal (HUF), Margao

ITA 213/PAN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79694 (ITAT-PANAJI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-07-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 25-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K
• Assessee Lawyers: MOHAN PYATI
• Keywords: Corroborative evidences; Assessment record; Revised return
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 201/PNJ/2013 : (ASST. YEAR : 2001 - 02) GANGADHAR NARSINGDAS AGRAWAL (HUF) ANAND BHUVAN, OLD STATION ROAD, MARGAO, GOA. PAN : AABHG4804R (APPELLANT) VS. JT. COMMISSIONER OF INCOME TAX, MARGAO RANGE, MARGAO, GOA (RESPONDENT) ITA NO. 213/PNJ/2013 : (ASST. YEAR : 2001 - 02) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1, MARGAO, GOA (APPELLANT) VS. GANGADHAR NARSINGDAS AGRAWAL (HUF) ANAND BHUVAN, OLD STATION ROAD, MARGAO, GOA. PAN : AABHG4804R (RESPONDENT) ASSESSEE BY : SHRI MOHAN PYATI, C.A REVENUE BY : SHRI NISHANT K., DR DATE OF HEARING : 03/07/2014 DATE OF PRONOUNCEMENT : 1 8 /07/2014 O R D E R PER P.K. BANSAL 1. BOTH THESE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORDER OF CIT(A) DT. 3.5.2013. THE ASSESSEE IN HIS APPEAL HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) PANAJI, GOA (HEREINAFTER REFERRED TO AS THE CIT(A)) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) 2. (A) THE CIT(A) ERRED IN CONFIRMING THE CONCLUSIONS OF THE ASSESSING OFFICER (A.O.) THAT THE APPELLANT HAD OVER STATED THE CLOSING STOCK IN RESPECT OF BIMBOL MINE WITH A VIEW TO AVAIL OF HIGHER RELIEF U/S. 8 0 HHC IN THE FOLLOWING ASSESSMENT YEARS. (B) HAVING ACCEPTED THE PRODU CTION FIGURES AS PER THE BOOKS BY THE AO, THE CIT(A) OUGHT TO HAVE HELD THAT THE A.O. WAS WRONG IN ADOPTING THE CLOSING STOCK FIGURES AS PER THE STATEMENT FURNISHED TO THE MINING AUTHORITIES. (C) HAVING IN KNOWLEDGE THAT THE AO HAS ACCEPTED THE VALUATION OF CLOSING STOCK AS PER THE BOOKS OF ACCOUNT OF THE APPELLANT IN THE SUBSEQUENT ASSESSMENT YEARS, THE CIT(A) OUGHT TO HAVE HELD THAT THE ACTION OF AO IN REDUCING THE CLOSING STOCK FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS NOT WARRANTED. 3. (A) THE C IT(A) LEGALLY ERRED IN CONFIRMING THE INFERENCE OF THE A.O. THAT THE SALE OF IRON ORE OF THE VALUE OF RS.1,84,63,388/ - MADE TO TWO EXPORT TRADING HOUSES AS A SUPPORTING MANUFACTURER DURING THE FINANCIAL YEAR 2000 - 2001 RELEVANT TO ASSESSMENT YEAR 2001 - 2002 WERE ACTUALLY MADE IN THE FINANCIAL YEAR 2001 - 2002 RELEVANT TO ASSESSMENT YEAR 2002 - 2003 RESULTING IN TO DENYING THE BENEFIT OF DEDUCTION U/S. 8 0 HHC(1A) TO THE APPELLANT FOR ASSESSMENT YEAR 2001 - 02. (B) THE CIT(A) FACTUALLY ERRED IN CONFIRMING THE A.O.S ACTION FOR DENIAL OF BENEFIT U/S.8 0 HHC(1A) O F THE ACT ON THE BASIS OF ANALYSIS CERTIFICATES DATED AFTER 31 - 03 - 2001 (INVOLVING 16645.65 WMT OUT OF TOTAL 43379 WMT) THOUGH A REFERENCE TO THE AFORESAID ANALYSIS REPORTS SHOW THAT THE SAMPLES WERE DRAWN PRIOR TO 31 - 03 - 2001 FROM THE WEIGHBRIDGE OF THE BUYERS SITUATED AT SURLA AND SANVORDEM. (C) THE CIT(A) FURTHER LEGALLY ERRED IN CONFIRMING THE ACTION OF THE A.O. WITHOUT VER I FICATION OF MATERIAL EVIDENCES AVAILABLE IN THE ASSESSMENT RECORD OF THE APPELLANT FOR TH E RELEVANT ASSESSMENT YEAR. ( D ) ASSUMING WITHOUT ADMITTING THAT THE SALE MADE TO EXPORT TRADING HOUSES WERE AFTER 31 - 03 - 2001, THE CIT(A) ERRED IN NOT GIVING CLEAR DIRECTION TO THE A.O. FOR APPROPRIATE ADJUSTMENTS TO THE TRADING AND PROFIT AND LOSS ACCOUNT OF THE APPELLANT FLOWING THERE FROM INCLUDING THE REVALUATION OF CLOSING STOCK FOR THE YEAR UNDER CONSIDERATION AND FOR THE FOLLOWING ASSESSMENT YEAR I.E. FOR ASSESSMENT YEAR 2002 - 03. 4. THE CIT(A) LEGALLY ERRED IN CONFIRMING THE ACTION OF THE A.O. IN BRINGING INTO TAX A SUM OF RS.20,58,095/ - BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE AC T. 3 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) WHILE THE REVENUE IN ITS APPEAL HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THE ORDER OF LD. CIT(A) IS OPPOSED TO LAW AND FACT OF THE CASE. 2. THE LD. CIT(A) PANAJI, HAS ERRED IN DELETING THE ADDITION OF RS.28,72,736/ - MADE BY THE A.O ON ACCOUNT OF CESSATION OF LIABILITY U/S 41(1) OF THE I.T. ACT. 3. THE LD. CIT(A) PANAJI, HAS ERRED IN DELETING THE ADDITION OF RS.28,72,736/ - , WHICH AO HAS ADDED DURING THE COURSE OF ASSESSMENT TOWARDS UNCONFIRMED SUNDRY CREDITORS, LOANS AND ADVANCES TAKEN BY ASSESSEE HUF AND ARE BEING CARRY FORWARD FOR MANY YEARS WITHOUT PROPER DOCUMENTARY EVIDENCE IN SUPPORT OF CLAIM BY THE ASSESSEE. 2. GROUND NO. 1 IN ASSESSEES APPEAL AS WELL AS REVENUES APPEAL IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 3. GROUND NO. 2 IN ASSESSEES APPEAL RELATES TO OVER VALUATION OF THE CLOSING STOCK. 3.1 THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE AO NOTED THAT THE ASSESSEE WAS GETTING DEDUCTION U/S 80HHC. THE ASSESSEE CLAIM ED TOTAL SALE OF IRON ORE WORTH RS. 6,50,84,506/ - IN ITS PROFIT & LOSS ACCOUNT AND HAS SHOWN NET PROFIT AT RS.3,16,90,678/ - . THUS, THE NET PROFIT SHOWN BY THE ASSESSEE WAS 48. 7% WHICH IN THE OPINION OF THE AO WAS HIGHER THAN OTHER SUPPORTING MANUFACTURERS IN THE SAME LINE OF BUSINESS WHICH WERE IN THE RANGE OF 10 - 15%. THE AO WAS OF THE OPINION THAT THE CLOSING STOCK AS ON 31.3.199 9 WAS RS.73,50,035/ - WHICH INCREASED TO RS.2,07,38,120/ - AS ON 31.3.2000 AND FURTHER INCREASED TO RS.2,92,49,971/ - AS ON 31.3.2001. THE NET PROFIT IN THE YEAR ENDED 31.3.2000 WAS 63.53%. THE AO CALLED FOR DETAILS OF VALUATION OF CLOSING STOCK. THE AO NOTED TH E METHOD OF TAKING STOCK OF ORE PREVALENT IN GOA. AS PER THE SAID METHOD, ORE QUANTITY IS DETERMINED BY THE SURVEYOR ON THE BASIS OF THE LENGTH, WIDTH AND HEIGHT OF THE HEAP OF IRON ORE. THE SURVEYOR GIVES THE REPORT 4 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) GIVING THE WEIGHT OF IRON ORE. ACCUR ACY OF THE REPORT IN TERMS OF ACTUAL WEIGHT OF IRON ORE MAY BE + 5%. OTHER EVIDENCE AVAILABLE WAS MONTHLY RETURNS BY THE ASSESSEE WHICH THE ASSESSEE FILED WITH THE DIRECTORATE OF MINES. THE AO NOTED THAT IN THE MONTHLY RETURN THE MINE OWNERS HAVE TO GIVE DETAILS SUCH AS OPENING STOCK OF ORE (DIFFERENT GRADES ), PRODUCTION/EXTRACTION OF SALES/EXPORTS OF ORES AND THE CLOSING STOCK. ON THE BASIS OF THESE RETURNS, THE DIRECTORATE OF MINES COLLECTED ROYALTY. THE ASSESSEE FILED THE COPY OF THE TWO MONTHLY RETU RNS FOR THE MONTHS OF FEBRUARY, 2001 AND MARCH, 2001. ON PERUSAL OF THESE TWO RETURNS, THE AO NOTED THAT NO DETAILS IN RESPECT OF OPENING STOCK, PRODUCTION/SALE WERE GIVEN AS ALL THE THREE COLUMNS SHOWED NIL AND ONLY THE CLOSING STOCK SHOWED QUANTITY OF 2,51,232 MT OF 59 GRADE IRON ORE. THE ASSESSEE TOOK THE PLEA THAT ONLY CLOSING STOCK HAS TO BE REPORTED. THE AO DID NOT AGREE THAT THE CLOSING STOCK COULD HAVE BEEN THE SAME IN THE MONTH OF FEBRUARY, 2001 AND MARCH, 2001 AS AS PER THE BOOKS OF ACCOUNTS THERE WAS SALE SHOWN BY THE ASSESSEE IN THE MONTH OF MARCH, 2001. THE AO WAS OF THE OPINION THAT EITHER THE INFORMATION GIVEN TO THE DIRECTORATE OF MINES IS WRONG OR THE CLAIM OF SALES WAS WRONG. THE AO ASKED FOR THE CLARIFICATION. IN REPLY THERETO, THE ASSESSEE SUBMITTED THAT THE MONTHLY RETURNS FOR FEBRUARY AND MARCH, 2001 IN RESPECT OF MINE, BORCHI MORDI SHOWED CLOSING STOCK OF ROM AT 2,51,232 TONS INADVERTENTLY AS THAT OF BIMBOL MINE. IT WAS SUBMITTED THAT THE SAID STOCK DOES NOT BELONG TO M/S. SOCI EDADE DE FOMENTO P. LTD. THE ASSESSEE HAS ALSO FILED SEPARATE MONTHLY RETURN WITH THE ABOVE AUTHORITIES FOR BIMBOL MINE. THE AO FURTHER NOTED THAT THE ASSESSEE WAS HAVING OPENING STOCK OF ONLY 5286 MT AS ON 1.4.2000 AND TOTAL PRODUCTION WAS 1,49,266 MT A ND THE SALE WAS 1,54,652 MT AND THE CLOSING STOCK WAS NIL. EACH MINE OWNER HAS TO PAY ROYALTY ON PER METRIC TONNE BASIS. THE ASSESSEE PAID ROYALTY ONLY ON 1,58,552 MT WHICH IS CLOSE TO THE QUANTITY PRODUCED AS PER THE RETURN FILED. THE CLOSING STOCK AS PER THE INCOME - TAX RETURN WAS 2,49,864 MT VALUED AT RS.2,92,49,971/ - WHEREAS CLOSING STOCK AS PER RETURN FILED WITH THE DIRECTORATE 5 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) OF MINES WAS 2,51,232 MT OF 59 GRADE IRON . THE AO, THEREFORE, WAS OF THE VIEW THAT THE ASSESSEE HAS INFLATED THE CLOSIN G STOCK TO SHOW MORE NET PROFIT FOR CLAIMING HIGHER DEDUCTION U/S 80HHC(1A). WHEN THE ASSESSEE WAS CONFRONTED WITH RESPECT TO THE QUANTITY OF CLOSING STOCK AS SHOWN IN THE PROFIT & LOSS ACCOUNT AND AS RETURNED TO THE DIRECTORATE OF MINES, THE LD. AR COULD NOT GIVE ANY SATISFACTORY REPLY. IT WAS ALSO STATED BY THE AO THAT EVEN THOUGH THE OPENING STOCK AS PER THE RETURN FILED WITH THE DIRECTORATE OF MINES WAS ONLY 5286 MT, THE OPENING STOCK AS PER THE INCOME TAX RETURN IS RS.2, 07,38,120/ - . SINCE THIS STOCK WAS ACCEPTED, SAME WAS TAKEN AS OPENING STOCK. THE AO, THEREFORE, REDUCED THE PROFIT OF THE ASSESSEE BY AN AMOUNT OF RS.85,11,851/ - I.E. RS.2,92,49,971 RS.2,07,38,120 . 3.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT IN THIS CASE THE STOCK AS ON 1.4.2000 HAS DULY BEEN ACCEPTED BY THE REVENUE IN THE PRECEDING A.Y AND THE AO WHILE MAKING THE ADDITION HAS DULY GIVEN THE CREDIT TO THE ASSESSEE IN RESPECT OF VALUE OF THE OPENING STOCK. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE LD. AR SO FAR AS THE CLAIM THAT THE ASSESSEE SHOULD BE GIVEN CREDIT FOR THE OPENING STOCK. THE AO IN THIS CASE HAS REDUCED THE CLOSING STOCK AS SHOWN BY THE ASSESSEE IN THE INCOME TAX RETURN BY THE VALUE OF THE OPENING STOCK AS HAS BEEN ACCEPTED BY THE REVENUE IN THE EARLIER YEAR. WE NOTED THAT THE ASSESSEE HAS GIVEN AN EXPLANATION SUBSEQUENTLY THAT THE STOCK OF 2,51,232 TONS OF 59 GRADE IRON ORE AS SHOWN OF BIMBOL MINE BELONGED TO M/S. SOCIEDADE DE FOMENTO P. LTD. THE ASSE SSEE EVEN THOUGH GAVE THIS EXPLANATION, BUT DID NOT ADDUCE ANY SUPPORTING EVIDENCE EITHER BEFORE US OR BEFORE THE AUTHORITIES BELOW. IF THE ASSESSEE HAS GIVEN AN EXPLANATION, THE ONUS LIES ON THE ASSESSEE TO SUBSTANTIATE THE EXPLANATION FURNISHED BY HIM. NO DOUBT, THE ASSESSEE HAS FILED THE REVISED RETURN WITH THE DIRECTORATE OF MINES SHOWING QUANTITY OF STOCK AT 2,51,232 MT. THIS EVIDENCE OF FILING REVISED RETURN WAS FILED BY THE ASSESSEE BEFORE THE AO 6 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) AS WELL AS BEFORE THE CIT(A). THIS IS NOT FRESH EV IDENCE. THE ASSESSEE INFORMED THE AO THAT ON INQUIRY, M/S. SOCIEDADE DE FOMENTO P. LTD. WILL CLARIFY THE CORRECT POSITION BUT NO EVIDENCE WHATSOEVER WAS BROUGHT ON RECORD EITHER BEFORE US OR BEFORE CIT(A) HOW THIS HAS BEEN CLARIFIED BY M/S. SOCIEDADE DE F OMENTO P. LTD. DURING THE COURSE OF HEARING WE ASKED THE LD. AR IN THIS REGARD SPECIFICALLY BUT HE WAS NOT ABLE TO DRAW OUR ATTENTION TO ANY COGENT MATERIAL OR EVIDENCE. WE DO AGREE ON THE LAST BIT OF SUBMISSION OF LD. AR THAT WHATEVER THE VALUE OF THE S TOCK HAS BEEN ACCEPTED BY THE AO AS CLOSING STOCK DURING THE IMPUGNED ASSESSMENT YEAR, THE SAME SHOULD HAVE BEEN TAKEN AS THE OPENING STOCK IN THE SUCCEEDING ASSESSMENT YEAR I.E. IN A.Y 2002 - 03. WE NOTED THAT IN THE SUCCEEDING ASSESSMENT YEAR, THE AO HAS TAKEN THE OPENING STOCK TO BE AT RS. 2,92,49,971/ - INSTEAD OF RS.2,07,38,120/ - . TO THAT EXTENT THE AO WAS BOUND TO GIVE EFFECT IN THE SUCCEEDING ASSESSMENT YEAR. WHATEVER WILL BE THE CLOSING STOCK OF THE IMPUGNED ASSESSMENT YEAR, THE SAME WILL BECOME THE OPENING STOCK OF THE SUCCEEDING YEAR. IN VIEW OF THIS FACT AND IN THE ABSENCE OF EVIDENCE BEING BROUGHT ON RECORD BY THE LD. AR, WE CONFIRM THE ACTION OF THE AO OF REDUCING THE CLOSING STOCK BY RS.85,11, 851/ - DURING THE IMPUGNED ASSESSMENT YEAR BUT DIRECT THE AO TO REDUCE THE OPENING STOCK IN THE SUCCEEDING ASSESSMENT YEAR 2002 - 03 AND GIVE THE CREDIT TO THE ASSESSEE IN ACCORDANCE WITH LAW IN THE SUCCEEDING ASSESSMENT YEAR. WE, ACCORDINGLY, DISMISS GROUND NO. 2 TAKEN BY THE ASSESSEE. 4. GROUND NO. 3 IN ASSESSEES APPEAL RELATES TO THE CLAIM OF DEDUCTION BY THE ASSESSEE U/S 80HHC(1A) AS A SUPPORTING MANUFACTURER. 4.1 THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSEE IS A SUPPORTING MANUFACTURER AND HAS CLAIMED TO HAVE SOLD PROCESSED IRON ORE AMOUNTING TO RS.1,74,26,996/ - AND RS.10,36,392/ - TO M/S. V.S. DEMPO & CO. LTD. AND M/S. SALGAOKAR MINING INDUSTRIES P. LTD. RESPECTIVELY ON 31 ST MARCH AND 29 TH MARCH , 7 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) 2001. THES E EXPORT HOUSES ISSUED CERTIFICATE IN FORM NO. 10CCAB ALLOWING ASSESSEE TO CLAIM DEDUCTION AS PROVIDED U/S 80HHC RELATING TO A.Y 2002 - 03 BUT THE ASSESSEE CLAIMED DEDUCTION IN A.Y 2001 - 02. THE AO DID NOT ALLOW THE DEDUCTION IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) CONFIRMED THE ORDER OF THE AO. 4.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE HAVE GONE THROUGH THE ANALYSIS CERTIFICATE APPEARING IN THE PAPER BOOK FROM PG. 8 - 17. WE NO TED THAT THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE REPORT OF ANALYSIS IN ONE CASE DT. 10.4.2001 BEARING NO. 274 /2001 , 275 /2001 AND 276 /2001 . WE NOTED THAT SO FAR AS THE REPORT OF ANALYSIS BEARING NO. 23 7 /2001 DT. 29.3.2001 RELATING T O 2223.54 MT IN RESPECT OF SALE MADE TO M/S. SALGAONKAR MINING INDUSTRIES P. LTD. IS CONCERNED , THE SAMPLE WAS RECEIVED ON 24.3.2001. IN RESPECT OF REPORT OF ANALYSIS BEARING NOS. 163/2001, 164/2001, 238/2001 AND 239/2001 IN RESPECT OF SALES MADE TO M/S. V.S. DEMPO & CO. LTD. A S DETAILED HEREUNDER WE NOTED THAT ALL THESE RELATE TO SAMPLE RECEIVED B Y THE CONCERN PRIOR TO 31 ST MARCH AND THEREFORE THESE CANNOT BE REGARDED TO BE SALES MADE SUBSEQUENTLY : ANALYSIS CERTIFICATE QUANTITY NO : 163/2001 DT : 07.03.2001 2729.950 M. TONS NO : 164/2001 DT : 07.03.2001 11355.770 M TONS NO : 238/2001 DT : 29.0 3.2001 7996.760 M. TONS NO : 239/2001 DT : 29.03.2001 2427.630 M. TONS 4.2.1 WE HAVE ALSO GONE THROUGH THE REPORT OF ANALYSIS BEARING NOS. 251/2001, 274/2001, 275/2001 AND 276/2001 AS DETAILED BELOW . ANALYSIS CERTIFICATE QUANTITY NO : 251 /2001 DT : 0 3 .0 4 .2001 2 346 .0 20 M. TONS NO : 27 4/2001 DT : 10 .0 4 .2001 5749.630 M TONS NO : 2 75 /2001 DT : 10 .0 4 .2001 1305.820 M. TONS NO : 2 76 /2001 DT : 10 .0 4 .2001 7244.180 M. TONS 8 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) WE NOTED FROM THESE REPORTS THAT IN EACH CASE THE BUYER IS M/S. V.S. DEMPO & CO. LTD. AND IN THE ANALYSIS REPORT IT IS CLEARLY MENTIONED IN EACH CASE THAT THE SAMPLES WERE DRAWN ON 24 TH & 25 TH MARCH, 2001, 28 TH TO 31 ST MARCH, 2001, 31 ST MARCH, 2001 AND 28 TH TO 31 ST MARCH, 2001. THE ANALYST HAS ANALYSED THE SAMPLE ON 3.4.2001 AND 10.4.2001. THE REPORT OF ANALYSIS ISSUED BY THE CHEMIST CANNOT BE THE DATE OF SALE S . THE ASSESSEE HAS SOLD MOVEABLE PROPERTY AND DELIVERY IN EACH CASE IS ON 31 ST MARCH OR PRIOR TO THAT. THEREFORE, WE DO NOT AGREE WITH THE SUBMISSION OF THE REVENUE THAT WHEN THE CHEMIST HAS ISSUED THE ANALYSIS CERTIFICATE , THAT WILL BE THE DATE OF SALES. WE HAVE ALSO GONE THROUGH FORM NO. 10CCAB ISSUED BY THE C.A, COPY OF WHICH IS AVAILABLE IN THE PAPER BOOK. IN THE CERTIFICATE, THE C.A HAS DULY CERTIFIED THE CLAIM OF T HE ASSESSEE. WE HAVE ALSO REFERRED TO THE CERTIFICATE ISSUED BY THE EXPORT HOUSE IN FORM NO. 10CCAB ( AVAILABLE AT PGS. 1 & 3 OF PAPER BOOK) IN RESPECT OF M/S. V.S. DEMPO & CO. LTD. AND M/S. SALGAONKAR MINING INDUSTRIES P. LTD. WE NOTED THAT IN THE CERTIF ICATE UNDER THE HEADING P ARTICULARS RELATING TO THE SUPPORTING MANUFACTURER UNDER THE SUB - HEAD UNDER COLUMN 6 AGAINST BILL NUMBER AND DATE OF PURCHASE IN CASE OF M/S. V.S. DEMPO & CO. LTD. THE DATE OF PURCHASE IS GIVEN AS 31.3.2001 WHILE IN THE CASE OF M /S. SALGAOCAR MINING INDUSTRIES P. LTD., THE DATE OF PURCHASE IS GIVEN AS 29.3.2001. ALL THESE CERTIFICATES AND EVIDENCE PRODUCED BY THE ASSESSEE PROVE THAT THE ASSESSEE HAS MADE THE SALES TO THE EXPORT HOUSES DURING THE IMPUGNED ASSESSMENT YEAR AND WE, A CCORDINGLY, SET ASIDE THE ORDER OF CIT(A) AND HOLD THAT THE SALE HAS BEEN MADE BY THE ASSESSEE TO THE TWO EXPORT HOUSES PRIOR TO 31.3.2001. 4.2.2 WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SEC. 80HHC(1A). THIS SECTION STIPULATES AS UNDER : 9 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) (1A) WHERE THE ASSESSEE, BEING A SUPPORTING MANUFACTURER, HAS DURING THE PREVIOUS YEAR, SOLD GOODS OR MERCHANDISE TO ANY EXPORT HOUSE OR TRADING HOUSE IN RESPECT OF WHICH THE EXPORT HOUSE OR TRADING HOUSE HAS ISSUED A CERTIFICATE UNDER THE PROVISO TO SUB - SECTION (1), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION TO THE EXTENT OF PROFITS, REFERRED TO IN SUB - SECTION (1B) DERIVED BY THE ASSESSEE FROM THE SAL E OF GOODS OR MERCHANDISE TO THE EXPORT HOUSE OR TRADING HOUSE IN RESPECT OF WHICH THE CERTIFICATE HAS BEEN ISSUED BY THE EXPORT HOUSE OR TRADING HOUSE. FROM THE PERUSAL OF THE SAID SECTION IT IS APPARENT THAT THE SECTION ALLOWS THE SUPPORTING MANUFACTUR ERS TO CLAIM DEDUCTION OF THE PROFIT DERIVED BY IT FROM THE SALE OF THE GOODS OR MERCHANDISE TO THE EXPORT HOUSES OR TRADING HOUSES IN RESPECT OF WHICH THE CERTIFICATE HAS BEEN ISSUED BY THE EXPORT OR TRADING HOUSE. THERE IS NO COMPULSION WHATSOEVER THAT THE EXPORT HOUSE HAS TO NECESSARILY EXPORT THE GOODS ONLY IN THAT YEAR IN WHICH IT HAS PURCHASED THE GOODS FROM THE SUPPORTING MANUFACTURERS. THE FACT THAT THE CERTIFICATE HAS BEEN ISSUED BY THE EXPORT HOUSES PROVE THAT THE GOODS PURCHASED FROM THE ASSESS EE (SUPPORTING MANUFACTURER) WERE ULTIMATELY EXPORTED AND THAT SHOULD ENABLE THE SUPPORTING MANUFACTURER TO CLAIM APPROPRIATE DEDUCTION UNDER THE SECTION IN THE YEAR OF ITS SUPPLY TO THE EXPORT HOUSE. THERE CANNOT BE ANY OTHER INTERPRETATION OF THIS PROVI SION. WE, ACCORDINGLY, SET ASIDE THE ORDER OF CIT(A) AND ALLOW GROUND NO. 3 TAKEN BY THE ASSESSEE AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE U/S 80HHC(1A) DURING THE IMPUGNED ASSESSMENT YEAR. 5. GROUND NOS. 2 & 3 IN REVENUES APPEAL AND GROUND NO. 4 IN ASSESSEES APPEAL RELATE TO THE COMMON ISSUE REGARDING SUSTENANCE OF ADDITION U/S 41(1). 5.1 THE BRIEF FACTS OF THESE GROUNDS ARE THAT THE AO MADE ADDITION OF RS.49,30,831/ - U/S 41(1) . THE AO NOTED THAT THE SUNDRY CREDITORS AND LOANS AND ADVAN CES TAKEN BY THE ASSESSEE ARE BEING CARRIED FORWARD FOR MANY YEARS. THE ASSESSEE PROVIDED THE BREAK - UP AS UNDER : 10 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) NAMES OF THE UNCONFIRMED CREDITORS/PERSONS WHO HAVE GIVEN LOANS AND ADVANCES AMOUNT IN RS. 01. ARVIND CHANDRAKANT NAIK 377,577.00 02. CESS SUSPENSE 123,591.27 03. GIRIDHAR GOPAL MOR 100,395.00 04. INVESTMENT SUSPENSE 259,200.00 05. PRATHO NOTERY & SENIOR MASTER (HIGH COURT)/(INCLUDED IN OVER DUE CREDITORS) 1,154,716.20 06. ROYALTY SUSPENSE 581,261.76 07. SMT. GEETABALA M.N. PARULEKAR 281,533.77 08. OTHER SUNDRY CREDITORS NOT EXCEEDING RS.1,00,000 EACH 1,836,959.13 09. M.M.T.C., VASCO 753,676 .49 10. SOCIEDADE DE FOMENTO IND. PVT. LTD. 1,000,000.00 11. SMT. KAUSHALDEVI MOR, NAGPUR 359,127.49 12. SMT. KRISHNADEVI KANORIA 113,094.00 13. SRI SHYAMSUNDER KEJRIWAL (HUF) 191,616.40 14. OTHER DEPOSITS NOT EXCEEDINGS RS.1,00,000/ - EACH 442,944.70 75,75,693.21 THE TOTAL AMOUNT WAS RS.75,75,693. THE ASSESSEE SUBMITTED THAT IN THE BALANCE SHEET THERE ARE MANY DEBTORS FROM WHICH ASSESSEE COULD NOT RECOVER AND CONTINUED FROM YEAR TO YEAR AND IF ANY ADDITION HAS TO BE MADE, THAT CAN BE OF NET AMOUNT. THE AO, THEREFORE, REDUCED OUT OF SUM OF RS.75,75,693/ - SUNDRY DEBTORS OF RS.18,26,245/ - AND UNRECOVERED ADVANCES OF RS.8,18,617/ - AND MADE A DDITION OF RS.49,30,831/ - . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). BEFORE CIT(A), THE ASSESSEE CONTENDED THAT SUBSEQUENT TO THE ASSESSMENT PROCEEDINGS MANY CREDITORS HAVE EITHER BEEN ACTUALLY PAID OFF OR THE BALANCES HAVE BEEN WRITTEN BACK IN THE BOOKS. CIT(A) ULTIMATELY NOTED THAT THE ASSESSEE HAD BEEN ABLE TO GIVE LIST AND PROOF OF AMOUNT OF RS.28,72,736/ - WHICH HAVE EITHER BEEN PAID OR HAVE BEEN WRITTEN OFF/WRITTEN BACK SUBSEQUENTLY UPTO 31.3.2011. THEREFORE, CIT(A) DELETED THE ADDITION OF RS. 28,72,736/ - AND SUSTAINED THE ADDITION OF RS.20,58,095/ - . 5.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE TOTAL OUTSTANDING LIABILITIES IN THE BOOKS OF THE ASSESSEE AS ON 11 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) 31.3.2001 WERE TO THE EXTENT OF RS.75, 75,693/ - AND THERE WAS DEBIT BALANCE OF RS.26,44,862/ - . THE AO ADDED SUM OF RS.49,30,831/ - BEING THE DIFFERENCE OF CREDITORS AND DEBTORS. CIT(A) REDUCED THE ADDITION TO RS.20,58,095/ - ON THE BASIS THAT THE ASSESSEE HAS ALREADY SETTLED LIABILITIES TO THE EXTENT OF RS.28,72,736/ - UPTO 31.3.2010 EITHER BY MAKING PAYMENT OR BY WRITING BACK THE SUM BUT SUSTAINED ADDITION OF RS.20,58,095/ - WHICH RELATE TO THE UNRECOVERED ADVANCES. WE MAY CLARIFY THAT SO FAR THE CLAIM OF THE ASSESSEE IN RESPECT OF UNRECOVERED A DVANCES ARE CONCERNED, THE ASSESSEE CAN CLAIM DEDUCTION ONLY U/S 36(1)(VII ) IN THE YEAR IN WHICH THESE DEBTS HAVE BEEN WRITTEN OFF BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS. IT IS AN UNDISPUTED FACT THAT THE SAID AMOUNT HAS NOT BEEN WRITTEN OFF BY THE ASSE SSEE DURING THE IMPUGNED ASSESSMENT YEAR. SO FAR AS THE ADDITION MADE U/S 41(1) IS CONCERNED, THE ONUS, IN OUR OPINION, LIES ON THE REVENUE TO PROVE THAT THE LIABILITY HAS CEASED DURING THE IMPUGNED ASSESSMENT YEAR. MERELY LIABILITY HAS BECOME BARRED BY LIMITATION WILL NOT PROVE THAT THE LIABILITY OF THE ASSESSEE HAS CEASED. THE LIABILITY CEASES WHEN IT HAS BECOME BARRED BY LIMITATION AND ASSESSEE HAS UNEQUIVOCALLY EXPRESSED ITS INTENTION NOT TO HONOUR THE LIABILITY EVEN WHEN DEMANDED. OUR AFORESAID VIE W IS DULY SUPPORTED BY THE DECISION OF THE JURISDICTION HIGH COURT IN THE CASE OF CIT VS. CHASE BRIGHT STEEL LTD. , 177 ITR 128. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION MADE BY THE AO AS ULTIMATELY THE ADDITION WHICH REMAINS SU STAINED BY CIT(A) RELATES TO THE SUNDRY CREDITORS AND THE LIABILITY OUTSTANDING AGAINST THE ASSESSEE. SO FAR AS THE UNRECOVERED BALANCE IN RESPECT OF THE ADVANCES IS CONCERNED, THE SAME HAS ALREADY BEEN ALLOWED BY THE AO WHILE MAKING THE NET ADDITION OF R S.49,30,831/ - OUT OF THE SUM OF RS.75,75,693/ - EVEN THOUGH THESE UNRECOVERED DEBTORS HAVE TO BE ALLOWED, AS OBSERVED BY US EARLIER, IN THE YEAR IN WHICH THEY HAVE BEEN WRITTEN OFF. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION OF RS .49,30,831/ - RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTION HIGH 12 ITA NOS. 201 & 213/PNJ/2013 (ASST. YEAR : 2001 - 02) COURT. IN THE RESULT, THE GROUNDS TAKEN BY THE REVENUE STAND DISMISSED WHILE THE GROUND TAKEN BY THE ASSESSEE STANDS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED WHILE THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 /07/2014. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI DATED : 1 8 /07/ 201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER