ITO, Ward - 3(4), Kolkata, Kolkata V. M/s. Jaggi Ispat Pvt. Ltd., Kolkata

ITA 2195/KOL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87619 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED OF
• Keywords: Deemed to accrue or arise in india

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI, N . K SAINI , ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH , J UDICIAL MEMBER ITA NO. 2195 / KOL / 2010 ASSESSMENT YEAR : 2007 - 08 I.T.O. WD - 3(4)/KOLKATA 8/2, ESPLANADE EAST, DWARLI HOUSE, KOLKATA 69 V/S . M/S JAGGI ISPAT PVT. LTD. 27/28, PTR SIDING SHIBPURCHAR, HOWRAH 711 102 [ PAN NO.AABCM 9300 R ] / APPELLANT .. / RESPONDENT / APPELLANT SHRI SANJAY, ACIT, DR / BY RESPONDENT SHRI P.J. BHIDE, FCA / DATE OF HEARING 19 - 01 - 2015 / DATE OF PRONOUNCEMENT 19 - 01 - 2015 / O R D E R PER N .K. SAINI , ACCOUNTANT MEMBER: - THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 30 - 08 - 2010 OF LD. COMMISSIONER OF INCOME - TAX [APPEALS] - I KOLKATA. 2. FOLLOWING GROUND S HA VE BEEN RAISED IN THIS APPEAL: - 1. LD. CIT(A) HAS ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.1,41,52,793/ - WHICH WAS MADE BY THE ASSESSING OFFICE U/S. 41(1) OF THE I.T. ACT, 1961 AS CESSATION OF LIABILITY ON ACCOUNT OF SUNDRY CREDITORS AND ADVANCE FROM CUSTOMERS. 2. LD. CIT(A) HAS ERRED ON THE FACTS & CIRCUMSTANCES O F THE CASE, IN ACCEPTING THE ASSESSEE S EXPLANATION THAT MERELY BECAUSE THE LIABILITIES WERE BROUGHT FORWARDED FROM EARLIER YEARS WITHOUT ANY CHANGE, THE SAID LIABILITY DID NOT CEASE TO EXIST AND THERE WAS NO REMISSION OR CESSATION OF SUCH LIABILITIES WITH THE MEANING OF SECTION 41(1) OF THE IT ACT WITHOUT ITA NO. 2195/KOL/2010 A.Y. 2007 - 08 ITO WD - 3(4) KOL. V. M/S JAGGI ISPAT PVT. LTD. PAGE 2 APPRECIATING THE FACTS THAT THE ASSESSEE COMPANY DID NOT FURNISH ADDRESSES OR OTHER DETAILS AND PRODUCE BOOKS OF ACCOUNTS THAT FAILED TO PROVE THE EXISTENCE OF SAID SUNDRY CREDITORS. 3. LD. CIT(A) HAS ER RED ON THE FACTS & CIRCUMSTANCES OF THE CASE, IN ACCEPTING THE ASSESSEE S CONTENTION THAT THE LIABILITIES STILL EXISTED AND SAME WERE REMAINED OUTSTANDING I N THE BALANCE SHEET, WITHOUT APPRECIATING THE FACT THAT THE AO HAS BROUGHT SUFFICIENT EVIDENCE ON RE CORD TO PROVE THAT THE LIABILITIES HAD CEASED TO EXIST. 3. F ROM THE ABOVE GROUND, IT IS GATHERED THAT ONLY GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF 1,41,52,793/ - MADE BY THE ASSESSING OFFICER U/S 41(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT IN SHORT) AS CESSATION OF LIABILITY ON ACCOUNT OF SUNDRY CREDITORS AND ADVANCE FROM CUSTOMERS. 4 . THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 31 - 10 - 2007 DECLARING TOTAL INCOME OF NIL W HICH W AS PROCESSED U/S 143(1) OF THE ACT ON 18 - 09 - 2008. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE WAS HAVING SUNDRY CREDITORS FOR GOODS AMOUNTING TO 59,44,003/ - , SUNDRY CR EDITORS FOR OTHERS OF 72,26,542/ - AND TH E ADVANCE FROM CUSTOMERS OF 9,82,248/ - . HE ASKED THE ASSESSEE TO PRODUCE THE DETAILS OF THE ABOVE. IN RESPONSE, THE ASSESSEE SUBMITTED THAT BALANCES UNDER SUNDRY CREDITORS FOR GOODS, SUNDRY CREDITORS FOR OTHER AND ADVANCE FOR CUSTOMERS ARE LYING IN THE ACCOUNTS FOR MANY YEARS AND THE IR NAME S HAD BEEN MENTIONED IN SCHEDULE 6 OF THE A UDIT REPORT . THE AO WAS NOT SATISFIED WITH THE SUBMISSION OF ASSESSEE AND MADE THE ADDITION OF 1,41,,52,793/ - BY INVOKING THE PROVISIO NS OF SEC. 41(1) OF THE ACT. 5 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT IT HAD FILED ITS RETURN OF INCOME FOR ASSESSMENT YEARS 1998 - 99 TO 2007 - 08 ALONG WITH ITS AUDITED BALANCE - SHEET AND PROFIT AND LOSS ACCOU NT AND ALSO SUBMITTED A SUMMARISED STATEMENT OF BALANCE - SHEET CONTAINING THE ITA NO. 2195/KOL/2010 A.Y. 2007 - 08 ITO WD - 3(4) KOL. V. M/S JAGGI ISPAT PVT. LTD. PAGE 3 LIST OF SUNDRY CREDITORS FOR GOODS, SUNDRY CREDITORS FOR OTHER AND ADVANCE FROM CUSTOMERS. IT WAS STATED THAT RIGHT FROM YEAR ENDING 31 ST MARCH 2002 THOSE CREDIT BALANCES REMAINED STATIC AND THE ASSESSEE PAID SOME OF THEM WHENEVER FUNDS WERE AVAILABLE BUT FROM 31 ST MARCH, 2005 ONWARDS HARDLY ANY AMOUNT COULD BE REPAID BY THE ASSESSEE DUE TO WANT OF FUNDS. IT WAS FURTHER STATED THAT ASSESSE E HAD ACKNOWLEDGED THE FACT OF ITS OWING INDEBTEDNESS TO THOSE PARTIES BY CONTINUING TO SHOW IN ITS B ALANCES SH EET S AND THERE WAS NO CHANGE IN THE AMOUNT OF CURRENT LIABILITIES AND PROVISIONS, SUNDRY CREDITORS FOR OTHERS AND ADVANCES FROM CUSTOMERS AS COMP ARED TO EARLIER YEARS . IT WAS SUBMITTED THAT AS AND WHEN LIABILITY WAS INCURRED , THE SAME WAS DULY REFLECTED AND WAS ACCEPTED AS GENUINE IN THE RESPECTIVE YEARS FOR WHICH ASSESSEE HAD DULY SUBMITTED ITS RETURNS. IT WAS FURTHER S UBMITT ED THAT PROVISIONS OF SEC. 41(1) OF THE ACT WERE NOT APPLICABLE AND ASSESSEE HAD NOT OBTAINED WHETHER I N CASH OR IN ANY OTHER MANNER WHATSOEVER ANY BENEFIT IN RESPECT OF THOSE LIABILITIES BY WAY OF REMISSION OR CESSION THEREOF. THEREFORE, THE ADDITION MADE BY THE AO DESERVES TO BE DELETED. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - A) CIT VS. TAMILNADU WAREHOUSE CORPN. REPORTED IN 292 ITR 310 B) CIT VS. SAGAULI SUGAR WORKS PVT. LTD. 236 ITR 518 (SC) 6 . LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSE RVED THAT THERE WAS NO INCREASE IN THE AMOUNT OF SUCH LIABILITY AT THE END OF THIS YEAR A S AGAINST THE BALANCE REMAINING OUTSTANDING AT THE END OF THE LAST YEAR. THEREFORE, THERE WAS NO FRESH LIABILITY CREATED IN THIS FINANCIAL YEAR. HE FURTHER OBSERVED THAT ASSESSEE COULD NOT HAVE ANY ACCESS TO THE BOOKS OF ACCOUNT S AS THE F A CT ORY PREMISES AND THE PLA NT AND MACHINERY REMAINED IN THE CUSTODY OF THE WEST BENGAL STATE FINANCE CORPORATION. HOWEVER, THE FACTS REMAINED THAT CREDIT BALANCE IN THE ACCOUNT GROUPED UNDER THE HEAD SUNDRY CREDITORS FOR GOODS , SUNDRY CREDITORS FOR OTHER AND ADVANCES FROM CUSTO MERS WERE BROUGHT FORWARD BY THE ASSESSEE IN ITS BALANCE - SHEET AND OBVIOUSLY IN ITS BOOKS OF ACCOUNT FROM EARLIER YEARS. THEREFORE, THE AO COULD NOT HAVE NOT ITA NO. 2195/KOL/2010 A.Y. 2007 - 08 ITO WD - 3(4) KOL. V. M/S JAGGI ISPAT PVT. LTD. PAGE 4 NOT HAVE DOUBTED THE GENUINENESS OF THE SUNDRY CREDITORS AS THERE WAS NO FURTHER CREDIT APPEARING IN THESE YEA RS. HE FURTHER OBSERVED THAT THE ASSESSEE CONTINUE D TO ACKNOWLEDGE ITS LIABILITY WHICH WAS EVIDENT FROM THE AUDITED BALANCE - SHEET AND IN ANY CASE THE LIABILITY OF THE ASSESSEE DID NOT CEASE IN THIS YEAR. HE ALSO OBSERVED THAT EVEN WHERE A DEBT BEC A ME BARRE D BY TIME AND THE CREDITOR WAS NOT ABLE TO RECOVER THE AMOUNT BY ENFORCING HIS RIGHT IN COURT, SUCH RIGHT DID NOT COME TO AN END NOR THE LIABILITY OF THE DEBTOR CEASE SO AS TO ATTRACT PROVISIONS OF SEC. 41(1) OF THE ACT. RELIANCE WAS PLACED ON THE JUDGMENT OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF LIQUIDATOR, MYSORE BENCHES PVT. LTD. V. CIT 114 ITR 853 (KARN) . THE LD. CIT(A) HELD THAT AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF 1,41,52,793/ - AS THE ASSESSEE S DEEMED INCOME U/S 41(1) OF THE ACT. A CCORDINGLY, THE IMPUGNED ADDITION WAS DELETED. 7 . NOW THE DEPARTMENT IS IN APPEAL. 8 . LD. DR REITERATED THE OBSERVATION MADE BY THE ASSESSING OFFICER AND STRONGLY SUPPORTED THE ASSESSMENT ORDER DATED 31 - 10 - 2009. IT WAS FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNT WERE NOT PRODUCED BY THE ASSESSEE BEFORE THE AO. THEREFORE, THE LIABILITY SHOWN YEAR AFTER YEAR WAS RIGHTLY CONSIDERED AS THE INCOME OF THE ASSESSEE. IN HIS RIVAL SUBMISSION, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION S MADE BEFORE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE ORDER OF LD. CIT(A) , RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - A) CIT V. SAGAULI SUGAR WORKS (P) LTD. 236 ITR 518 (SC) B) CHIEF CIT V. KESARIA TEA CO. LTD. 254 ITR 434 SC) 9 . WE HAVE CONSIDE RED THE SUBMISSION OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH IN THE MATERIALS AVAILABLE ON THE RECORD . IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT ASSESSEE WAS SHOWING THE IMPUGNED LIABILITIES YEAR AFTER YEAR IN ITS BALANCE SHEET S WHICH WERE ACCE PTED BY THE DEPARTMENT AND THERE ITA NO. 2195/KOL/2010 A.Y. 2007 - 08 ITO WD - 3(4) KOL. V. M/S JAGGI ISPAT PVT. LTD. PAGE 5 WAS NO NEW LIABILITY DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS ALSO MAKING THE PAYMENTS WHENEVER FUNDS WERE AVAILABLE WITH IT BUT DUE TO WANT OF FUNDS AMOUNT COULD NOT BE REPAID AFTER 31 ST MARCH 2005. IN THE INS TANT CASE, THE ASSESSEE REFLECTED THE LIABILITIES IN ITS BOOKS OF ACCOUNT WHEN THOSE WERE INCURRED, THOSE LIABILITIES WERE ACCEPTED AS GENUINE BY THE DEPARTMENT IN THE EARLIER YEARS , ASSESSEE D ID NOT WRIT E OFF LIABILITIES TO ITS PROFIT AND LOSS ACCOUNT AND T HERE WAS NO CESSATION OF LIABILITY. THEREFORE THE PROVISION S OF SEC. 41(1) OF THE ACT W ERE NOT APPLICABLE BECAUSE THE LIABILITIES CEASES ONLY WHEN THE ASSESSEE EQUIVOCALLY EXPRESSES ITS INTENTION NOT TO HONOUR OF THE LIABILITY AS AND WHEN DEMANDED. IN TH E PRESENT CASE, NO THING WAS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE ASSESSEE EXPRESSED ITS INTENTION NOT TO HONOUR THE LIABILITY WHEN THE CREDIT ORS DEMANDED THE SAME , RATHER THE ASSESSEE HAD CONTINUED TO ACKNOWLEDGE ITS LIABILITY WHICH W HO EVIDENT FROM ITS AUDITED BALANCE SHEET S FURNISHED ALONG WITH RETURN S OF INCOME FOR THE EARLIER YEARS WHICH WERE ACCEPTED AS GENUINE BY THE DEPARTMENT. WE THEREFORE CONSIDERING THE TOTALITY OF THE FACTS DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FIN DINGS OF LD. CIT(A) . A CCORDINGLY , WE DO NOT SEE ANY MERIT IN THE APPEAL OF DEPARTMENT. 9. IN THE RESULT, APPEAL OF DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 19 / 01/201 5 SD/ - SD/ - ( MAHAVIR SINGH ) ( N .K. SAINI ) ( JUDICIAL MEMBER ) ( ACCOUNTANT MEMBER) KOLKATA , DKP - 19 / 0 1 / 201 5 ITA NO. 2195/KOL/2010 A.Y. 2007 - 08 ITO WD - 3(4) KOL. V. M/S JAGGI ISPAT PVT. LTD. PAGE 6 / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT - ITO WD - 3(4) 8/2 ESPLANADE EAST, DWARLI HOUSE, KOL - 69 2 . / RESPONDENT - M/S JAGGI ISPAT PVT. 27/28, P T R SIDING SHIBPURCHAR, HOW - 102 3 . / CONCERNED CIT 4 . - / CIT (A) 5 . , , / DR, ITAT, KOLKATA 6 . / GUARD FILE. BY ORDER/ , /TRUE COPY/ / ,