ACIT, Circle-3, Ranchi V. Shri Sumit Ramsisaria, Ranchi

ITA 222/RAN/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1428 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 27-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Question of law; Corroborative evidences; Bogus
• Section: 28; 271(1)(c); 133(6); 48; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH E COURT AT KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO. 222 / RAN / 2019 & CROSS OBJECTION NO.12/RAN/2019 (A/O ITA NO.222/RAN/2019) ASSESSMENT YEAR : 2014-15 ASSTT. COMMISSIONER OF INCOME-TAX,CIRCLE-3, ROOM NO. 302, 3 RD FLOOR, CENTRAL REVENUE BUILDING (ANNEXE), MAIN ROAD, RANCHI-834001 V/S . SHRI SUMIT RAMSISARIA KANTATOLI CHOWK, PURULIA ROAD, RANCHII-834001 [ PAN NO.AGSPR 9853 J ] /APPELLANT .. / RESPONDENT/ / CO-OBJECTOR /BY ASSESSEE SHRI R.K. GARODIA, FCA /BY RESPONDENT SHRI INDERJIT SIGNH CIT-DR /DATE OF HEARING 26-11-2020 /DATE OF PRONOUNCEMENT 14-12-2020 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL AND ASSESSEES CROSS OBJECTI ON FOR ASSESSMENT YEAR 2014-15 ARISE AGAINST THE COMMISSIONER OF INCO ME TAX (APPEALS)- RANCHIS ORDER DATED 07.03.2019 PASSED IN CASE NO. CIT(A), RANCHI/10404/2016-17 INVOLVING PROCEEDINGS U/S 143( 3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILES PERUSED. ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 2 2. THE REVENUES SOLE SUBSTANTIVE GRIEVANCE RAISED IN THE INSTANT LIS SEEKS TO REVERSE THE ASSESSING OFFICERS ACTION TREATING THE ASSESSEES SUNDRY CREDITORS LIABILITY TO 3,64,11,095/- AS BOGUS INVITING SEC. 41(1) ADDITION AS UPHELD TO THE TUNE OF 2,12,931/- IN THE CIT(A)S ORDER VIDE FOLLOWING DET AILED DISCUSSION:- [ 6.2 ] WITH REGARD TO THE ISSUES RAISED IN THESE GROUNDS , THE APPELLANT STATED THAT LD. ASSESSING OFFICER HAS NOT DONE JUSTICE IN ASSUMING THAT NO LIABILITY IN THE FORM OF SUNDRY CREDITORS TO THE TUNE OF RS.3,64,11,095/- AS SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND IN THE AUDITED BALANCE SHEET E XIST AND ERRED IN LAW BY ADDING BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U /S 41(1) OF THE ACT WITHOUT REJECTING THE BOOKS OF ACCOUNTS. [ 6.3 ] APPELLANT HAS STATED THAT ON 02.12.2016, THE A.R. OF THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS W.R.T. THE SUNDRY CREDITORS ALO NG WITH SEPARATE COPIES OF LEDGER ACCOUNT IN THE BOOKS OF THE ASSESSEE, ON 06.12.2016 , I.E. AFTER THREE DAYS ONLY. AS THE BUSINESS FIRM OF THE ASSESSEE IS SITUATED AT DE LHI AND GHAZIABAD AND THERE WAS SHORT GAP IN TIME ALLOWED, LD. A.O. HAD VERBALLY SU GGESTED FILING THE REQUIRED DETAILS FOR SEVEN CREDITORS FOR TEST CHECK. ACCORDINGLY, TH E REQUIRED SEVEN PARTY'S CONFIRMATION OF LEDGER ACCOUNT WITH THEIR POSTAL AD DRESS AND PAN WERE FILED ON 06.12.2016. MOST OF THE TRANSACTIONS WERE THROUGH A CCOUNT PAYEE CHEQUES AND SUPPORTED BY PURCHASE INVOICES. THE FACT WAS EXAMIN ED BY THE LD. A.O. DURING HEARING OF THE CASE. LD. A.O. HAS MENTIONED IN FIRST PARAGRAPH OF PAGE N O. 2 OF THE ASSESSMENT ORDER THAT COPY OF BANK ACCOUNT STATEMENTS AND OTHE R RELEVANT DETAILS/DOCUMENTS WERE FURNISHED BY THE ASSESSEE, W HICH ARE PLACED ON RECORD AND HAVE BEEN CAREFULLY EXAMINED. NO FURTHER DETAILS/ CONFIRMATION OF LEDGER ACCOUNT OF SUNDRY CREDITORS WAS ASKED TO FUR NISH. LD. A.O. HAS ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO VARIOUS PARTIES, FROM WHOM THE ASSESSEE HAD CLAIMED TO HAVE MADE PUR CHASES IN HIS FIRM NAMELY 'M/S NABCO BATTERIES, DELHI' AND SHOWN THEM AS SUNDRY CREDITORS IN THE BOOKS OF ACCOUNT. SOME NOTICES ISSUED UNDER SEC TION 133(6) WERE RETURNED UNSERVED OR NO REPLY WAS RECEIVED. ONE M/S AUTO CAR, HAS REPLIED AND STATED THAT NO SUCH TRANSACTION WAS CONDUCTED W ITH THE ASSESSEE ' SUMIT RAMSISARIA ' PAN AGSPR9835J, COPY OF LETTER IS FILED [PAGE NO. 24]. ON THIS BASIS LD. A.O. OBSERVED THAT THERE IS DEART H OF SUPPORTING EVIDENCES ON RECORD TO VERIFY THE GENUINENESS AND CORRECTNESS OF THE TRANSACTIONS WITH THE SUNDRY CREDITORS, THEREFORE, ADDED THE OUTSTAND ING SUNDRY CREDITORS AS INCOME U/S 41(1) OF THE ACT. IT IS A MATTER OF RECO RD THAT SUNDRY CREDITOR RELATES TO THE PURCHASES WHICH IS CONSIDERED GENUINE. IT IS THEREFORE NOT JUSTIFIED TO REJECT THE CREDITORS WITHOUT REJECTING THE PURCHASE S. THE PURCHASES OF THE BATTERY RELATED PARTS FROM THE SUNDRY CREDITORS ARE EVIDENT FROM THE PURCHASE BILLS AND BOOKS OF ACCOUNT MAINTAINED BY THE ASSESS EE. THE LD. A.O. HAS ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 3 TREATED THE PURCHASES MADE DURING THE YEAR FROM THE SAME VERY PARTIES AS GENUINE. ALL THE CREDITORS ARE INCOME TAX PAYEE AND THEIR PAN WAS SUBMITTED BY THE ASSESSEE. THE BOOKS OF ACCOUNTS HAVE NOT BEE N REJECTED AND THERE IS NO ADVERSE INFERENCE DRAWN REGARDING THE QUANTUM OF PURCHASE OR SALE AND EVEN THE PURCHASE ACCOUNT FROM THE SUNDRY CREDITOR HAVE NOT BEEN DISTURBED. THE PAYMENTS MADE TO THEM BY ACCOUNT PAYEE CHEQUES WERE ALSO TREATED AS GENUINE AND WERE VERIFIED FROM THE COPY OF BANK STA TEMENTS FILED DURING HEARING OF THE CASE. LD. A.O. WAS THEREFORE NOT JUSTIFIED IN MAKING THE ADDITION IN INCOME BY DISALLOWING SUNDRY CREDITORS U/S 41(1) OF THE ACT. THE ISSUE RAISED BY THE APPELLANT IS, WHETHER THE C REDIT PURCHASES CAN BE ADDED UNDER SECTION 41(1) OF THE INCOME TAX ACT, 19 61 WHEN ALL THE PURCHASES HAVE BEEN ACCEPTED AS GENUINE AND ALL THE CREDITORS STOOD IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. AS REGARDS APPLICABILITY OF PROVISIONS OF SECTION 4 1 (1), THE FACTS CLEARLY SHOW THAT THE APPELLANT DID NOT WRITE BACK THE SUNDRY CR EDITORS TO ITS PROFIT AND LOSS ACCOUNT. IN GULF & MINERALS VS ITO (04.05.2018) ITA NO.57/RAN/16 ITAT RANCHI REFERRING THE VARIOUS JUDGMENTS HAS CONCLUDED THAT WITHOUT REJECTING THE PURCHASES, THE SUNDRY CREDITORS COULD NOT BE TREATE D AS INCOME OF THE ASSESSEE. COPY OF RELEVANT ORDER OF ITAT IS FILED H EREWITH. IN CIT V. VARDHMAN OVERSEAS LTD. (2012) 343 ITR 408 (DEL), THE DELHI HIGH COURT , REFERRING TO ITS JUDGMENT IN THE CASE OF JAY ENGINEERING WORKS LTD. V. CIT (2009) 311 ITR 299 (DEL) AND APPLYING THE RATIO LAID DOWN THE CASE OF CIT V. T. V. SUNDARAMIYENGAR & SONS LTD. (1996) 222 ITR 344 (SC) UNDER SECTION 28 OF THE INCOME TAX ACT, CONSIDERED THE APPLICABILITY OF CLAUSE (A) OF SUB-SECTION (1) OF SECTION 41 AS TO WHAT WOU LD CONSTITUTE REMISSIONS OR CESSATION OF TRADING LIABILITY. THE HON'BLE COURT N OTED THAT IN THE REPORTED CASE, THE ASSESSEE HAS NOT UNILATERALLY WRITTEN BAC K THE ACCOUNTS OF THE SUNDRY CREDITORS IN ITS PROFIT AND LOSS ACCOUNT. TH EREFORE, THE HIGH COURT ANSWERED THE SUBSTANTIAL QUESTION OF LAW IN THE NEG ATIVE AND IN FAVOUR OF THE ASSESSEE. THE FACTS OF THE PRESENT CASE ARE SIMILAR THOSE OF THE CASE OF VARDHMAN OVERSEAS LTD. (SUPRA). THEREFORE, IT IS ABUNDANTLY CLEAR THAT THE PROVISION OF SECTION 41(1) ARE NOT APPLICABLE. NO ADDITION COULD BE MADE FOR REMISSION OR CESSATION OF TRADING LIABILITY AS ENVISAGED UNDER S ECTION 41 1) OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IN VIEW OF ABOVE DISCUSSED LEGAL AND FACTUAL POSITI ON, THE APPELLANT STATED THAT THE SUNDRY CREDITORS OF RS.3,64,11,095/- SHOULD NOT BE TREATED AS BOGUS SUNDRY CREDITORS AND SHOULD NOT BE ADDED TO THE INC OME OF THE APPELLANT. ACCORDINGLY, IT WAS ARGUED THAT THE IMPUGNED ADDITI ON MADE BY LD. ASSESSING OFFICER U/S 41(1) OF THE ACT IS REQUIRED TO BE DELE TED. [7.1 ] THE FINDINGS OF THE ASSESSMENT ORDER, THE WRITTEN & ORAL SUBMISSIONS AND DOCUMENTARY EVIDENCE FURNISHED BY THE AR DURING THE APPELLATE PROCEEDINGS AND THE REMAND REPORT FURNISHED BY THE AO HAVE BEEN CONSIDE RED. THE FOLLOWING FACTS AND ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 4 LEGAL POSITION ARE RELEVANT FOR DECIDING THE ISSUE UNDER CONSIDERATION. SIMULTANEOUSLY, THE ISSUE UNDER CONSIDERATION IS AL SO ADJUDICATED AS UNDER:- (I) AS PER PARA 2 OF PAGE NO.4OF THE ASSESSMENT ORD ER, THE AO INTER ALIA STATED THE FOLLOWING, ' LOOKING INTO THE TIME BARRING NATURE OF ASSESSMENT PROCEEDINGS FOR THE ASSTT YEAR 2014-15, IN THE GIVE N SITUATION, WHEN THERE IS DEARTH OF SUPPORTING EVIDENCES ON RECORD T O VERIFY THE GENUINENESS AND CORRECTNESS OF THE TRANSACTIONS WIT H THE ABOVE LISTED PARTIES, IT SHALL BE REASONABLE, JUSTIFIABLE AND IN THE INTEREST OF REVENUE TO ASSUME THAT NO SUCH LIABILITY EXISTED IN THE FOR M. OF SUNDRY CREDITORS TO THE TUNE OF RS.3,64,11,095/- AS SHOWN BY THE ASS ESSEE IN ITS BOOKS OF ACCOUNTS AND THE SAME AMOUNT IS ADDED BACK TO THE T OTAL INCOME OF THE ASSESSEE U/S 41(1) OF THE 'ACT. ' IN THIS REGARD, THE APPELLANT VEHEMENTLY OBJECTED T O THESE REMARKS OF THE ASSESSING OFFICER AS UNDER: A) 'THE AO STATED THAT LOOKING INTO THE TIME BARRIN G NATURE OF ASSESSMENT PROCEEDINGS DETAILS FURNISHED ARE NOT VERIFIABLE. I N THIS REGARD, IT IS STATED THAT THERE IS NO PROVISION AS SUCH U/S 41(1) OF THE INCO ME TAX ACT TO MAKE ADDITIONS IN THE TOTAL INCOME OF THE ASSESSEE CONSI DERING TIME BARRING NATURE OF ASSESSMENT PROCEEDINGS B) THE AO HAS STATED THAT THERE IS DEARTH OF SUPPOR TING EVIDENCES ON RECORD TO VERIFY THE GENUINENESS AND CORRECTNESS OF THE TR ANSACTIONS WITH THE SUNDRY CREDITORS. IN THIS REGARD, IT IS STATED THAT THERE IS NO DEARTH OF SUPPORTING EVIDENCE ON RECORD EXCEPT IN THE CASE OF M/S AUTO CARS (INDIA), NEW DELHI HAVING OUTSTANDING BALANCE OF RS.2,00,000/-, M/S AUTO CARS (INDIA) VIDE LETTER DATED 13-12-16 HAS REPLIED THAT THEY HA VE NOT DEALT WITH ANY PERSON WITH THE NAME MR. SUMIT RAMSISARIA, PURULIA ROAD, KANTATOLIA, RANCHI, (PAN AGSPR 9835J) FOR THE F.Y 2013-14 . THE BUSINESS TRANSACTIONS WAS WITH M/S NABCO BATTERIES, DELHI AN D NOT WITH MR. SUMIT RAMSISARIA, THE PAN OF THE PROPRIETOR OF THE FIRM Q UOTED IN THE NOTICE AGSPR 9835 J WAS ALSO NOT CORRECT. CORRECT PAN IS AGSPR 9853J. DUE TO THESE TWO ERRORS OF THE NOTICE ISSUED U/S. 133(6) O F THE ACT, M/S AUTO CARS (INDIA) WAS UNABLE TO LOCATE THE DEBTORS ACCOUNT IN THEIR BOOKS OF ACCOUNT AND ACCORDINGLY INFORMED TO A.O THAT THEY HAVE NOT DEAL T WITH ANY PERSON WITH THE NAME MR. SUMIT RAMSISARIA, RANCHI . C) THE AO HAS STATED THAT IT SHALL BE REASONABLE, JUSTIFIABLE AND IN THE INTEREST OF REVENUE TO ASSUME THAT NO SUCH LIABILIT Y EXISTED IN THE FORM OF SUNDRY CREDITORS TO THE TUNE OF RS.3,64,11,095/- AS SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS AND THE SAME AMOU NT IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE U/S 41(1) OF TH E ACT . IN THIS REGARD, IT IS STATED THAT MERELY BASED ON JUSTIFICATION AND ASSUM PTION, NO ADDITION CAN BE MADE AS PER THE PROVISION OF THE INCOME TAX ACT. D) THE AO FURTHER STATES THAT THE TRADING LIABILITI ES DO NOT ACTUALLY EXIST. IN THIS REGARD, IT IS STATED THAT THIS ERRONEOUS CONCLUSION OF THE AO IS MERELY BASED ON THE DOUBTS AND SUSPICIOUS. THE AO HAS NOT CONDUC TED THIRD PARTY ENQUIRY WHATSOEVER AND FURTHER NON OF THE CREDITORS HAVE ST ATED THAT THE LIABILITIES HAS BEEN REMITTED. UNDER THESE CIRCUMSTANCES, THE ERRON EOUS CONCLUSION OF THE AO IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE WHA TSOEVER. (II) ANALYSIS OF THE DEEMING SECTION 41( 1) AND INTERPRE TATION OF STATUTES . ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 5 ( A) SUPREME COURT DECISION ON INTERPRETATION OF STATUTE S THE APPELLANT ALSO PLACED RELIANCE UPON THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF SMT. TARULATA SHYAM AND OTHERS VS. CLT, WEST BENGAL [1977] 108 ITR 345 (SC) . THE HON'BLE SUPREME COURT HELD AS UNDER- '. ... ... IN A TAXING ACT ONE HAS TO LOOK MERELY A T WHAT IS CLEARLY SAID THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQ UITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE L ANGUAGE USED. ONCE IT IS SHOWN THAT THE CASE OF THE ASSESSEE COME S WITHIN THE LETTER OF THE LAW, HE MUST BE TAXED, HOWEVER GREAT THE HAR DSHIP MAY APPEAR TO THE JUDICIAL MIND TO BE. WHEN THE LANGUAGE OF THE SECTION IS CLEAR AND UNAMB IGUOUS, THERE IS NO SCOPE OF IMPORTING INTO THE STATUTE WORDS WHICH ARE NOT THERE. SUCH IMPORTATION WOULD BE, NOT TO CONSTRUE, BUT TO AMEND THE STATUTE. EVEN IF THREE BE A CASUS OMISSIONS, THE DEFECT CAN BE RE MEDIED ONLY BY LEGISLATURE AND NOT BY JUDICIAL INTERPRETATION. AS CAN BE SEEN FROM THE SPECIFIC PROVISIONS OF SECT ION 41 (1) OF THE INCOME- TAX ACT, 1961, IT IS ONLY WHEN A PERSON DERIVES SOM E BENEFITS IN RESPECT OF SUCH TRADING LIABILITIES BY WAY OF REMISSION OR CES SATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACC RUING TO HIM SHALL BE DEEMED TO BE PROFIT AND GAINS IS NOT WITHIN THE AMB IT OF SECTION 41(1). THEREFORE, AS PER THE ABOVE CITED DECISION OF THE H ON'BLE SUPREME COURT, THE LD. AO IS NOT COMPETENT TO BRING IN ANY OTHER ITEM OTHER THAN THAT SPECIFIED IN THE SECTION. (B) PROVISIONS OF SECTION 41(1) SECTION 41 (1) OF THE INCOME-TAX ACT, 1961 DOES N OT ENVISAGE THE FOLLOWING: A. DOUBT OF THE CREDITORS AND THE GENUITY OF CREDIT ORS B. SATISFACTION OF AO REGARDING THE GENUINENESS AND THE SOURCE OF SUNDRY CREDITORS C. TREATING THE TRADING LIABILITY AS INCOME OF ASSE SSEE FROM UNDISCLOSED SOURCES ALTHOUGH THE ABOVE ARE NOT ENVISAGED IN THE DEEMING PROVISIONS OF SECTION 41(1) FOR THE ABOVE ISSUES WHICH IS NOT LEGALLY TENABLE. SECTION 41 (1) IS A DEEMING SECTION AND DEEMING PRO VISION IS A STATUTORY FICTION; AS A RULE IT IMPLICITLY ADMITS THAT A THING IS NOT WHAT IT IS DEEMED TO BE BUT DECREES THAT FOR SOME PARTICULAR PURPOSE IT SHALL BE TAKEN AS IF IT WERE THAT THING. AS PER THE STATUTE, THE PROVISIONS OF SECTION 41(1) IS A DEEMING PROVIS ION AND SHOULD BE INTERPRETED STRICTLY. THERE IS NO DOCUMENT AVAILABLE WITH THE A O TO ESTABLISH THAT THE TRADING LIABILITY HAS CEASED/REMITTED AND THE AO COULD NOT HAVE SIMPLY DOUBTED AND SUSPECTED THE SUNDRY CREDITORS AND ADDED THE SAME A S INCOME UNDER THIS SECTION. A DEEMING PROVISION OR A LEGAL FICTION AS COMMONLY CA LLED IS ONE WHOSE MANDATE DOES NOT EXIST BUT FOR SUCH PROVISION. BECAUSE OF SUCH P ROVISION ALONE, THE GIVEN IMAGINARY STATE OF AFFAIRS IS TAKEN AS REALITY DESPITE IT BEI NG AT VARIANCE WITH THE SCOPE OF THE ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 6 RELEVANT PROVISION OF THE ENACTMENT. IT IS TRITE TH AT THE SCOPE OF A DEEMING PROVISION HAS TO BE RESTRICTED TO WHAT IS EXPRESSLY STATED IN SUCH A PROVISION. THERE CAN BE NO INFERENCE OR INTENDMENT AS REGARDS SUCH A PROVISION . THE HON'BLE SUPREME COURT IN CIT V. AMARCHAND N. SHROFF (1963) 48 ITR 59 CONSIDERED THE AMBIT OF A DEEMING PROVISION AND HELD THAT THE FICTION CANNOT BE EXTEN DED BEYOND THE OBJECT FOR WHICH IT IS ENACTED. IN CIT V. MOTHER INDIA REFRIGERATION IN DUSTRIES (P) LTD. (1985)155ITR 711 (SE) THE SAME VIEW WAS REITERATED BY HOLDING THAT T HE ' LEGAL FICTIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THESE MUST BE LI MITED TO THAT PURPOSE AND SHOULD NOT BE EXTENDED BEYOND THEIR LEGITIMATE FIEL D. ' SECTION 41(1) OF THE ACT WOULD ALSO MAKE IT CLEAR THAT THE BURDEN IS ON THE ASSESSING OFFICER TO PROVE THAT CONDITIONS OF SECTI ON 41(1) OF THE ACT HAVE BEEN FULFILLED TO TREAT A LIABILITY AS AN INCOME ON ACCOUNT OF REMISSION OR CESSATION OF LIABILITY IN A PARTICULAR ASSESSMENT Y EAR. NOT EVEN A SINGLE CREDITOR HAS INFORMED THE AO THAT THE LIABILITY HAS BEEN CEASED/REMITTED. UNDER THESE CIRCUMSTANCES, THE AO COULD NOT HAVE SI MPLY DOUBTED AND PRESUMED THAT THE LIABILITY HAS CEASED OR REMITTED. MOREOVER, DURING THE APPELLATE PROCEEDINGS, THE AR HAS FURNISHED THE CON FIRMATION FROM ALL THE CREDITORS ALONGWITH THE PAN AND THE AO HAS EXAMINED THEM DURING THE REMAND PROCEEDINGS AND FOUND THE SAME IN ORDER. THE REFORE, IT IS STATED THAT THE LIABILITIES HAS NEITHER CEASED NOR REMITTED. TH E APPELLANT HAS NOT GOT ANY BENEFIT BY WAY OF CESSATION OR REMISSION OF LIABILI TY WITHIN THE MEANING OF THE SECTION 41(1).IN VIEW OF THESE FACTS AND LEGAL POSI TION, IT IS HELD THAT THE AA HAS ERRONEOUSLY INVOKED THE DEEMING PROVISIONS OF S ECTION 41(1), WHICH IS NOT ENVISAGED AS PER LAW. AS PER THE SETTLED LEGAL POSITION, THE ONUS IS ON THE AO TO ESTABLISH THAT THE LIABILITY HAS EITHER CEASED OR REMITTED ESPECIALLY WHEN THE APPELLANT HAS STATED THAT THE LIABILITY HAS NOT CEASED/REMITTED. HOWEVER, THE AO STATED IN THE ASSESSMENT ORDER THAT LOOKING INTO TIME BARRING NATURE OF ASSESSMENT PROCEEDING ASSESSMENT HAS BEEN COMPLETED IN THE GIV EN SITUATION. THE PROVISIONS OF SECTION 41(1) CAN BE INVOKED ONLY IN CASE OF LIABILITIES WHICH HAVE EITHER CEASED OR REMITTED. AS REGARDS THE CESS ATION OR REMISSION OF LIABILITY, THE ONUS IS ON THE AO TO ESTABLISH THAT THE LIABILITY HAS EITHER CEASED OR REMITTED ESPECIALLY WHEN THE APPELLANT HAS STATE D THAT THE LIABILITIES WERE OUTSTANDING AS THE BALANCE SHEET DATE. IN THE CASE UNDER CONSIDERATION, THERE IS NO DOCUMENTARY EVIDENCE BROUGHT ON RECORD BY THE AO TO ESTABLISH THAT THE LIABILITY IN THE NAME OF ANY OF THE PERSON APPEARING UNDER THE HEAD SUNDRY CREDITORS, HAVE EITHER CEASED OR REMITTED EX CEPT IN THE CASE OF M/S AUTO CAR. MOREOVER, DURING THE APPELLATE PROCEEDING S, THE APPELLANT FURNISHED ALL THE CONFIRMATIONS FOR THE SUNDRY CRED ITORS, WHICH WERE ALSO EXAMINED BY THE AO IN THE REMAND PROCEEDINGS AND FO UND TO BE IN ORDER. THEREFORE, THIS ALSO GOES TO ESTABLISH THAT THE LIA BILITIES VERY MUCH EXISTED AS ON THE DATE OF THE BALANCE SHEET. THEREFORE, THE PR OVISIONS OF SECTION 41(1) ARE NOT ATTRACTED IN THE CASE UNDER CONSIDERATION. (III) THE AR STATED THAT THE APPELLANT HAS INCURRED EXPENSES ON ACCOUNT OF PURCHASE OF MATERIALS OF RS.4,10,78,735/- AND ON ACCOUNT OF BUSINESS EXPENSES OF RS. 26,98,782/-. THEREAFTER, THE AR STATED THAT, THE AO HAS ACCEPTED THE CLAIM ON ACCOUNT OF PURCHASE OF MATERIAL, BUSINESS EXPENSES ETC. AND RIGHTLY ALLOWED THE CLAIM ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 7 OF THESE EXPENSES. HAVING ACCEPTED THE CLAIM OF EXP ENSES, THE AR ARGUED THAT THE AO WAS NOT JUSTIFIED IN ADDING THE LIABILITIES PAYA BLE. THE AR FURTHER ARGUED THAT THE PURCHASES & BUSINESS EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT COULD BE DIVIDED INTO TWO PARTS I.E. ONE PART WHICH IS ACTUALLY PAID AND ANOTHER PART WHICH IS PAYABLE AS ON THE DATE OF THE BALANCE SHEET. DUE TO THE ACTION OF THE AO, IT HAS LED TO A SITUATION WHEREIN THE FIRST PART IS ALLOWED TO BE CLAIMED BUT THE SECOND PART WHICH IS APPEARING AS A LIABILITY ON THE DATE OF BALANCE SHEET IS NOT ALLOWED TO BE CLAIMED WHICH IS NOT AT ALL LEGALLY TENABLE. THE AR FURTHER STATED THAT, TH E SUNDRY CREDITORS IS A MOVING ACCOUNT AND MOST OF THE CREDITORS ARE FOR CURRENT Y EAR AND HAVE BEEN PAID IN THE SUBSEQUENT YEAR. THE AR FURTHER ARGUED THAT THERE I S NO LOGIC AT ALL IN ALLOWING PART OF THE CLAIM AND ADDING THE REMAINING PART OF THE CLAI M, WHICH IS PAYABLE. (IV) IN THE CONCLUDING PARA OF ASSESSMENT ORDER, TH E AO HAS STATED THE FOLLOWING: THAT NO SUCH LIABILITY EXISTED IN THE FORM OF SUND RY CREDITORS TO THE TUNE OF RS.3,64,11,095J- AS SHOWN BY THE ASSESSEE IN ITS BO OKS OF ACCOUNTS IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE U/S 41(1) OF THE ACT ALSO PENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT. ACT, 1961 ARE SEPARATELY INITIATED ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME.' THE ABOVE STATEMENT OF THE ASSESSING OFFICER IS NOT LEGALLY TENABLE DUE TO THE FOLLOWING REASONS.- THE AO HAS ASSUMED THAT NO SUCH LIABILITY EXISTED I N THE FORM OF SUNDRY CREDITORS TO THE TUNE OF RS.3,64,11,095/- AS SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. AT THE OUT-SET, IT IS STATED THA T THE AO HAS ALLOWED THE APPELLANT TO CLAIM THE ENTIRE EXPENSES ON ACCOUNT O F PURCHASE OF MATERIAL, BUSINESS EXPENSES ETC. WHEN THE TOTAL EXPENSES CLAI MED IN THE PROFIT & LOSS ACCOUNT HAS BEEN ALLOWED TO BE CLAIMED BY THE AO, T HERE IS NO JUSTIFICATION TO ASSUME THAT NO SUCH LIABILITY EXISTED IN THE BALANC E SHEET. THE AR STATED THAT THE LIABILITY IN THE BALANCE SHEET IS A MOVING ACCO UNT AND MAJORITY OF THE CREDITORS ARE FOR CURRENT YEAR AND MOREOVER MANY CR EDITORS WERE PAID OFF IN THE SUBSEQUENT YEAR. (V) THE AR ARGUED THAT THE SUNDRY CREDITORS REPRESE NT THE EXPENSES CLAIMED IN PROFIT AND LOSS ON ACCOUNT OF MATERIAL PAYMENTS AND BUSINE SS EXPENSES AND THE AO HAS ACCEPTED THE CLAIM OF EXPENSES, PROFIT AND LOSS ACC OUNT AND BALANCE SHEET, TAX AUDIT REPORT AS WELL AS NET PROFIT DECLARED BY THE APPELLANT AND THE BOOKS OF ACCOUNTS. UNDER THESE CIRCUMSTANCES, THE AO COULD N OT HAVE PRESUMED SUO MOTO THAT THE SUNDRY CREDITORS ARE NOT GENUINE. WHEN THE MATERIALS PURCHASED AND BUSINESS EXPENSES HAVE BEEN ACCEPTED BY THE AO, THE AO COULD NOT HAVE DOUBTED THE GENUINENESS OF THE SUNDRY CREDITORS. AS PER THE MATCHING CONCEPT OF INCOME, THERE ARE EXPENSES FOR EARNING ANY INCOME AND THE A SSESSING OFFICER HAS RIGHTLY ALLOWED THE CLAIM OF EXPENSES ON ACCOUNT OF LABOUR CHARGES AND MATERIALS PURCHASES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, AO HAS ADDED THE LIABILITY ON ACCOUNT OF SUCH ITEM WHICH ARE PAYABLE AS ON 31.03. 2014. IN THIS CASE, THE AO HAS ACCEPTED THE GROSS RECEIPT AND EXPENDITURE INCURRED THEREON AND DOUBTED THE GENUINENESS OF THE CREDITORS WITHOUT ANY BASIS WHAT SOEVER. (VI) THE DETAILS OF CREDITORS FOR THE CORRESPONDING YEARS ARE TABULATED AS UNDER: FINANCIAL YEAR SUNDRY CREDITORS (1) (2) 2011-2012 5,16,90,154 ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 8 2012-2013 4,75,36,565 2013-2014 3,64,11,096 AS CAN BE SEEN FROM THE ABOVE TABLE, THE QUANTUM O F SUNDRY CREDITORS IS REDUCING YEAR TO YEAR AND THERE IS NO UNUSUAL TREND DURING THE FY RELEVANT TO THE AY UNDER CONSIDERATION. THEREFORE, THERE IS NO VALID JUSTIFICATION FOR DOUBTING THE GENUINENESS OF THE CREDITORS. RATHER, THERE WAS NOT MATERIAL AVAILABLE WITH THE AO TO ESTABLISH THAT THE LIABILI TY IN ANY OF THE CASE HAS CEASED/ REMITTED EXCEPT IN THE CASE OF M/S AUTO CAR . THE AR ARGUED THAT OF THE SUNDRY CREDITORS ARE MOVING ACCOUNT AND MOST OF SUNDRY CREDITORS APPEARING AS ON 31.03.2014 ARE FOR CURRENT YEAR AND HAVE BEEN PAID IN THE SUBSEQUENT YEAR. (VII) THE AR STATED THAT THE AO HAD SELECTED THE CA SE FOR SCRUTINY BY ISSUANCE OF FIRST NOTICE DATED 30.08.2015 AND THE SUBSEQUENT QUESTION NAIRE/NOTICE SEEKING THE REQUISITE DETAILS OF SUNDRY CREDITORS WERE ISSUED A FTER MORE THAN ONE YEAR ON 02.12.2016. THE AR FURTHER ARGUED THAT THERE WERE A S MANY AS 14 CREDITORS FROM VARIOUS PLACES SUCH AS GHAZIABAD, NOIDA, DELHI, HIM ACHAL PRADESH, HARYANA AND CHANDIGARH AND COLLECTION OF CONFIRMATION FROM THEM WAS A TIME-CONSUMING AFFAIR. THE CONTENTION OF THE APPELLANT IS THAT, HAD THE AO INITIATED THE ASSESSMENT PROCEEDINGS IN TIME, SUFFICIENT TIME COULD HAVE BEE N AVAILABLE WITH THE APPELLANT TO PRODUCE THE CONFIRMATIONS BEFORE THE AO. THE AO COU LD HAVE VERY WELL STARTED THE ASSESSMENT PROCEEDINGS IN TIME AND COULD HAVE CONDU CTED THIRD PARTY ENQUIRES. WITHOUT ANY ENQUIRY, THE AO HAS SIMPLY DOUBTED THE GENUINENESS OF THE CREDITORS AND MADE THE ADDITION UNDER A DEEMING PROVISION WHI CH IS NOT LEGALLY TENABLE. (VIII) THE AR HAS ALSO BROUGHT OUT THE LEGAL PROVIS IONS OF SECTION 41(1) OF THE INCOME- TAX ACT, 1961, DECISION OF THE HON'BLE SC ON INTERP RETATION OF STATUTES AS WELL AS VARIOUS OTHER COURT DECISIONS ESTABLISHING THAT THE AMOUNT OUTSTANDING IN THE CASE OF THE APPELLANT IS NOT COVERED UNDER THE PROVISIONS O F SECTION 41 (1) OF THE INCOME-TAX ACT, 1961. FURTHER, THE AR HAS SUCCESSFULLY REBUTTE D ALL THE CONTENTION OF THE AO FOR MAKING THE ADDITION. (IX) DURING THE APPELLATE PROCEEDINGS, THE AR HAS A LSO FURNISHED THE REQUISITE DOCUMENTARY EVIDENCE TO ESTABLISH THAT THE AMOUNT O UTSTANDING IN THE NAME OF SUNDRY CREDITORS HAVE NEITHER BEEN CEASED NOR REMIT TED AND THEREFORE, THE APPELLANT HAS NOT DERIVED ANY BENEFIT WHATSOEVER EXCEPT IN TH E CASE OF M/S AUTO CAR. THE AO HAS NOT BROUGHT OUT ANY DOCUMENTARY EVIDENCE WHATSO EVER TO ESTABLISH THAT ANY OF THE LIABILITY HAS CEASED OR REMITTED EXCEPT IN THE CASE OF M/ S AUTO CAR. (X) THE AR HAS FURNISHED DETAILED WRITTEN SUBMISSIO N ALONG WITH THE REQUISITE DOCUMENTARY EVIDENCE WHICH SATISFACTORILY EXPLAINS THE CONTENTION OF THE APPELLANT. FURTHER, THE AR .HAS ALSO RELIED UPON VARIOUS JUDIC IAL DECISIONS IN SUPPORT OF THE CONTENTION OF THE APPELLANT. (XI) AS STATED IN PARA 2.1 ABOVE AS PER PAGE NO. 3 OF THE ASSESSMENT ORDER, THE APPELLANT HAD ALREADY FURNISHED THE CONFIRMATION OF ALL MAJOR PARTIES TOTALLING TO RS.3,25,73,002/-. THE CONFIRMATION WITH RESPECT TO M/S BALAJI AUTOMOBILE, M/S BATTERY DIRECTORY AND YEAR BOOK AND M/S DECENT LINK TOTALLI NG TO RS.1,19,406/- WERE NOT FURNISHED. THESE WERE ALSO FURNISHED DURING THE APP ELLATE PROCEEDINGS WHICH WERE ALSO VERIFIED BY THE AO IN THE REMAND PROCEEDINGS. ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 9 (XII) DURING THE APPELLATE PROCEEDINGS, THE APPELLA NT HAD FILED THE CONFIRMATION FOR ALL THE PARTIES AND THEREAFTER, REMAND REPORT WAS SOUGH T FROM THE AO. THE REMAND REPORT IS SCANNED AND ALSO PRINTED ABOVE. IN THIS R EGARD, THE AO IN THE REMAND REPORT DATED 30.03.2018 IN PARA 2(VIII) HAS STATED AS UNDE R: 'DURING THE ASSESSMENT PROCEEDINGS LEDGER ACCOUNT O F CREDITORS WERE CERTIFIED TO BE NOT FURNISHED. HOWEVER, DETAILS FUR NISHED BEFORE THE LD. CIT(A) HAS BEEN VERIFIED AND IT IS FOUND THAT LEDGER ACCOU NT OF CREDITORS HAS BEEN FILED ONLY IN FIVE CASES ARE AS UNDER: ALB METALS FOR M/S S.R. TRADING AND BALAJI AUTOMOBI LE, M/S BATTERY BATTERY DIRECTORY AND YEAR BOOK AND DECENT LINK AND FUJIYAM A POWER SYSTEM FOR M/S NOABCO BATTERIES. THE SAME HAS BEEN VERIFIED WI TH THE BANK STATEMENT FURNISHED BY THE ARE MATCHED TO THE EXTENT PAYMENT HAS BEEN MADE. FOR REMAINING CREDITORS ASSESSEE HAS FURNISHED COPY OF BALANCE CONFIRMATION. THE SAME HAS ALSO BEEN VERIFIED WITH THE BANK STATE MENT FURNISHED BY THE ASSESSEE ARE MATCHED TO THE EXTENT PAYMENT HAS BEEN MADE:' AS CAN BE SEEN FROM THE ABOVE, INITIALLY THE AO HAS COMMENTED WITH RESPECT TO FIVE SUNDRY CREDITORS THE DETAILS OF WHICH HAVE BEEN VER IFIED BY AO. THEREAFTER, THE AO HAS ALSO STATED THAT THE REMAINING CONFIRMATIONS WE RE ALSO SUBMITTED, WHICH WERE ALSO VERIFIED BY THE AO. IN EFFECT, THE APPELLANT H AS SUBMITTED CONFIRMATION FOR ALL THE PARTIES AND THE AO HAS ALSO VERIFIED THE SAME AND F OUND TO BE IN ORDER. THEREFORE, AS PER THE FINDINGS OF THE AO HIMSELF IN THE REMAND RE PORT, THERE IS NO REQUIREMENT OF ADDITION ON ACCOUNT OF SUNDRY CREDITORS AS THE SAME HAS BEEN FOUND TO BE IN ORDER. AS REGARDS THE SUNDRY CREDITOR IN THE NAME OF M/S B ALAJI STORAGE BATTERIES LTD., THE AO HAS POINTED OUT THAT THE THIRD PARTY HAS CONFIRM ED THE BALANCE OF RS.31,30,331.90 WHEREAS AS PER THE BALANCE SHEET, THE APPELLANT HAS SHOWN THE OUTSTANDING LIABILITY OF RS.30,43,263/-. THEREFORE, THIS CATEGORICALLY GO ES TO ESTABLISH THE LIABILITY TO THE EXTENT OF RS.12,931/- IN THE NAME OF BALAJI STORAGE BATTERIES LTD. HAS BEEN REMITTED/CEASED. AS REGARDS THE LIABILITY OUTSTANDI NG IN THE NAME OF M/S AUTO CAR TO THE EXTENT OF RS.2,00,000/-, THE THIRD PARTY COMMUN ICATED TO THE AO THAT NO SUCH LIABILITY IS EXISTING. HOWEVER, DURING THE APPELLAT E PROCEEDINGS THE APPELLANT HAS FURNISHED ANOTHER CONFIRMATION FROM M/S AUTO CAR TH AT THE LIABILITY IS EXISTING. THIS APPEARS TO BE SELF-SERVING DOCUMENT AND THE THIRD P ARTY HAS DIRECTLY COMMUNICATED TO THE AO THAT NO SUCH LIABILITY IS EXISTING. AND HENC E, CREDENCE HAS BEEN GIVEN TO THE SAME OVER THE SUBSEQUENT CLARIFICATION GIVEN BY THE APPELLANT. IN VIEW OF THESE FACTS, IT IS HELD THAT THE LIABILITY IN THE NAME OF M/S AU TO CAR RS. 2,00,000/- HAS CEASED AND THEREFORE, PROVISION OF SECTION 41 (1) IS VERY MUCH APPLICABLE WITH RESPECT TO M/S AUTO CAR. [ 7.2 ] IN VIEW OF THE ABOVE DETAILED DISCUSSION, IT IS HELD THAT THE LIABILITY OUTSTANDING OF RS. 2,00,000/- IN THE NAME OF M/S AUTO CAR AND T HE PART LIABILITY OF RS.12,931/- IN THE NAME OF M/S BALAJI BATTERIES STORAGE HAVE CEASE D / REMITTED. THEREFORE, ADDITION TO THE EXTENT OF RS.2,12,931/- I HEREBY CONFIRMED U /S 41(1) OF THE I.T. ACT AND REMAINING ADDITION OF RS.3,61,98,164/- IS HEREBY DELETED . 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL PLEADINGS. LEARNED CIT-DR VEHEMENTLY CONTENDED DURING THE COURSE OF HE ARING THAT THE ASSESSING OFFICER HAD RIGHTLY MADE THE IMPUGNED ADD ITION ON ACCOUNT OF ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 10 ASSESSEES FAILURE IN PROVING THE SUNDRY CREDITORS LIABILITY BY NECESSARY SUPPORTIVE EVIDENCE. LEARNED AUTHORIZED REPRESENTAT IVE REPRESENTING ASSESSEE HAS STRONGLY SUPPORTED THE CIT(A)S ABOVE EXTRACTED DETAILED DISCUSSION (SUPRA) DELETING THE IMPUGNED ADDITIONS. 4. WE OBSERVE IN THIS BACKDROP OF FACTS THAT THERE IS NO DISPUTE ABOUT THE ASSESSEE HAVING RECORDED THE SUNDRY CREDITORS LIABI LITY IN QUESTION AS PERTAINING TO MATERIAL PURCHASES IN THE REGULAR COU RSE OF BUSINESS. THERE IS NO DENIAL FROM THE DEPARTMENT SIDE QUA THE CLINCHING ASPECT THE CORRESPONDING MATERIAL PURCHASES HAVE ALREADY BEEN ACCEPTED UNDER THE HEAD REGULAR REVENUE IN THE COURSE OF ASSESSMENT ITSELF. COUPLED WITH THIS, ASSESSEE HAD ALSO SUCCESSFULLY FILED ALL NECESSARY DETAILED EVID ENCE OF THE SUNDRY CREDITORS IN REMAND REPORT PROCEEDINGS. IT EMERGES FROM A PER USAL OF THE ASSESSING OFFICERS REMAND RECORD DATED 30.03.2018 FILED BEFO RE THE CIT(A) THAT HE HAD VERIFIED THE LEDGER ACCOUNT OF THE CREDITOR PARTIES WITH THE BANK STATEMENTS AND PERUSED THE BALANCE(S) CONFIRMATION AS WELL. THAT B EING THE CASE, WE QUOTE HON'BLE MADRES HIGH COURTS DECISION IN SMT. B. JAYALAKSHMI VS. JCIT (2018) 90 TAXMANN.COM 480 (MAD) THAT NO GRIEVANCE IS CAUSE D TO THE REVENUE SO AS TO PREFER ITS APPEAL BEFORE THE TRIBUNAL WHEN THE A SSESSING OFFICERS REMAND REPORT ITSELF ACCEPTS THE TAXPAYERS EXPLANATION ON FACTS. 5. WE ALSO PROCEED FURTHER AND NOTICE THAT ONCE THE ASSESSING OFFICER HAS ALLOWED THE ASSESSEES CORRESPONDING MATERIAL PURCH ASES CLAIM IN THE REVENUE ACCOUNT AS A REGULAR HEAD OF EXPENDITURE, T HE SAME VERY AMOUNT COULD NOT HAVE BEEN ADDED AS A BOGUS SUNDRY CREDITO R LIABILITY U/S 41(1) OF THE ACT. MORE SO, WHEN THERE IS NO INDICATION ABOUT THE SAID SUM INVOLVING ANY CESSATION OR REMISSION OF LIABILITY AS PER THIS TRI BUNALS CO-ORDINATE BENCH DECISION IN INCOME TAX OFFICER WARD 12(1) KOLKATA VS. M/S STANDARD LEATHER PVT. LT D. IN ITA NO.2620/KOL/2013 DECIDED ON 07.09.2016 HOLDING AS UNDER:- 13. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE AFORESAID DISCUSSION WE FIND THAT THE ADDI TION WAS CONFIRMED BY THE AO ON ACCOUNT OF NON-SERVICE OF NOTICE ISSUED UNDER SECTI ON 133(6) OF THE ACT FOR THE PURPOSE OF THE CONFIRMATION OF SUNDRY CREDITORS. HO WEVER WE FIND THAT THE AO HAS CONFIRMED THE ADDITION OF THE SUNDRY CREDITORS WITH OUT DISALLOWING THE CORRESPONDING ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 11 PURCHASES. FROM THE ABOVE IT IS CLEAR THAT THE PURC HASES IN THE INSTANT CASE HAVE BEEN ADMITTED BUT THE CORRESPONDING SUNDRY CREDITOR S HAVE BEEN ADDED AS TOTAL INCOME OF THE ASSESSEE. IN OUR CONSIDERED VIEW THE ACTION OF THE AO FOR MAKING THE ADDITION OF THE SUNDRY CREDITORS WITHOUT DISALLOWIN G THE PURCHASES IS BASED ON WRONG INTERPRETATION OF INCOME TAX LAWS. THE SUNDRY CREDI TORS CAN BE ADDED AS INCOME UNDER SECTION 41(1) OF THE ACT ONCE IT IS WRITTEN O FF IN THE BOOKS OF ACCOUNTS. IN THE INSTANT CASE THE SAME HAS NOT BEEN WRITTEN OFF AND VERY MUCH REFLECTING IN THE BOOKS OF THE ASSESSEE. THEREFORE IN OUR CONSIDERED VIEW T HE SUNDRY CREDITORS REFLECTING IN THE BOOKS OF ACCOUNTS CANNOT BE DISALLOWED AND ADDE D TO THE TOTAL INCOME OF THE ASSESSEE. IN THE INSTANT CASE, THE BALANCES OF MANY OF THE SUNDRY CREDITORS WERE OUTSTANDING COMING FROM EARLIER YEARS. PAYMENTS WER E MADE TO SOME OR THE CREDITORS DURING THE YEAR. THE SAID PAYMENTS HAVE BEEN ACCEPT ED BY THE AO WHICH MEANS GENUINITY OF THE PAYMENTS TO THESE CREDITORS AS WEL L AS THE GENUINITY THEREOF TILL LAST YEAR HAVE NOT DISPUTED BY THE AO. IN THE INSTANT CA SE THE FIRSTLY THE AO HAS NOT SPECIFICALLY INVOKED THE PROVISIONS OF SECTION 41 ( 1). FURTHER IN ANY CASE NO SUCH ADDITION CAN BE MADE U/S 41. IN THIS CONNECTION WE ARE PUTTING OUR RELIANCE IN THE JUDGMENT IN THE CASE OF DSA ENGINEERS. IN THE CASE OF DSA ENGINEERS V. ITO 30 SOT 31 (MUM-TRIB), THE AO FOUND THAT THERE WERE CRE DITOR BALANCES WHICH IN MANY CASES WERE 3 YEARS OR MORE THAN 3 YEARS OLD. AS PER THE ASSESSEE THE BALANCES REPRESENTED AMOUNTS DUE TO VARIOUS PARTIES AND THE LIABILITY WAS SUBSISTING. THE TRIBUNAL HELD THAT IN THE ABSENCE OF CESSATION OF L IABILITIES AND ON THE MERE FACT THAT THE AMOUNTS WERE OUTSTANDING FOR MORE THAN 3 YEARS, THE PROVISIONS OF SECTION 41 (1) COULD NOT BE APPLIED. IN THE CASE OF DHAWAN (M.R.) V. CIT 149 ITR 160 (DEL), IT WAS OBSERVED THAT THE REMISSION OF THE LIABILITY ARISES WHEN THE CREDITOR VOLUNTARILY GIVES UP THE CLAIM. THE CESSATION OF SUCH LIABILITY ARISE S ONLY WHEN IT CEASES TO EXIST IN THE EYES OF LAW FOR ALL INTENTS AND PURPOSES. IN THE CA SE OF UOI V.J. K.. SYNTHETICS LTD. (1993) 199 ITR 14 (SC), THE HONBLE COURT HELD THAT CESSATION OF LIABILITY FOR THE PURPOSE OF SECTION 41(1) MEANS IRREVOCABLE CESSATIO N SO THAT THERE IS NO POSSIBILITY OF THE LIABILITY BEING REVIVED IN FUTURE. IF THERE IS SUCH A POSSIBILITY, THEN THE CESSATION IS NOT COMPLETE AND SECTION 41 (1) IS NOT ATTRACTED. I N THE CASE OF SHRI VARDHMAN OVERSEAS LTD. VS. ASSTT. CIT 24 SOT 393 (DEL H-TR IB), THE FACTS OF THE CASE WERE THAT THE AO ASKED THE ASSESSEE TO PROVE THE GENUINE NESS OF SOME SUNDRY CREDITORS. THE ASSESSEE DID NOT FILE CONFIRMATIONS OF SAID SUN DRY CREDITORS, EXCEPT ONE. THEREFORE, AO AFTER GIVING VARIOUS OPPORTUNITIES TR EATED THE BALANCE AMOUNT AS INCOME OF ASSESSEE ON ACCOUNT OF UNEXPLAINED CASH C REDITS AND ADDED THE SAME BALANCE AMOUNT TO THE INCOME OF ASSESSEE. IT WAS HE LD THAT ALL THE PARTIES WITH REGARD TO WHICH THE ADDITION HAS BEEN MADE, NO NEW AMOUNT WAS FOUND CREDITED IN ITS ACCOUNT DURING THE YEAR UNDER CONSIDERATION HENCE S ECTION 68 CANNOT BE APPLIED. IT WAS ALSO HELD THAT THE BALANCES WERE BROUGHT FORWAR D BALANCES AND IF THE SAME WERE ADDED ON ACCOUNT OF THEIR NON-GENUINENESS, THEN ALS O THESE AMOUNTS COULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE FOR THE YEAR UN DER CONSIDERATION AS THE QUESTION OF GENUINENESS THEREOF CAN BE EXAMINED ONL Y IN THE YEAR IN WHICH THEY WERE CREDITED IN THE ACCOUNT OF THE ASSESSEE. IT WAS ALS O HELD THAT THE DEPARTMENT COULD NOT PROVE THAT THE DEBT CANNOT BE SAID TO BE UNENFO RCEABLE. IT WAS HELD THAT THE ONUS HAD WRONGLY BEEN SHIFTED BY THE REVENUE ON THE ASSE SSEE. IT WAS HELD THAT THE LIABILITY EXISTED SINCE TILE ASSESSEE HAD SHOWN THE LIABILITIES OUTSTANDING IN ITS BALANCE SHEET. THEREFORE, THERE WAS NO OCCASION TO TREAT TH E SAID AMOUNT AS TAXABLE UNDER SECTION 41(1) AND IF DEPARTMENT INTENDS TO ASSESS T HE SAME BY APPLYING THE PROVISIONS OF SECTION 41(1), THEN THE ONUS WILL BE ON THE REVENUE TO SHOW THAT THE LIABILITY WHICH IS APPEARING IN THE BALANCE SHEET H AS CEASED FINALLY AND THERE IS NO POSSIBILITY OF THE REVIVAL OF THE LIABILITY. HENCE, ADDITION COULD NOT BE SUSTAINED UNDER SECTION 41(1). THE SAID JUDGMENT OF THE TRIBUNAL WA S CONFIRMED BY DELHI HIGH COURT ON 23-12-2011 IN THE CASE OF NATIONAL INSULATED CAB LE CO. V. ITO ITA NO. 421/DEL/2011 DT. 8-7-2011 (DEL 'E-TRIB) IT WAS HELD THAT THE F ACT THAT THE CREDITORS WERE OLD CREDITORS BROUGHT FORWARD FROM EARLIER YEA RS HAS NOT BEEN DISPUTED BY THE ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 12 DEPARTMENT. THESE CREDITORS HAVE NOT BEEN INTRODUCE D DURING THE YEAR UNDER CONSIDERATION. THERE IS NO EVIDENCE OR MATERIAL ON RECORD TO ESTABLISH THAT THE ASSESSEE LIABILITY TO PAY THE AMOUNT TO THE CREDITO RS HAVE BEEN CEASED DURING THE YEAR UNDER CONSIDERATION. FURTHER, THE AMOUNT PAYAB LE TO THESE CREDITORS CAN BE ADDED TO THE ASSESSEES TOTAL INCOME IN THE YEAR IN WHICH THE ASSESSEES LIABILITY TO PAY THE AMOUNT CEASED OR EXTINGUISHED AND NOT IN TH E YEAR UNDER CONSIDERATION WHERE ASSESSEE HAS ADMITTEDLY SHOWN THE LIABILITY I N THE BALANCE SHEET. IT HAS BEEN HELD IN THE CASE OF G P INTERNATIONAL LTD. (P & H) REPORTED IN 325 ITR PAGE 25 THAT PROVISIONS OF SECTION 41 CANNOT BE APPLIED IF THE A SSESSEE IS STILL SHOWING THE LIABILITY. IT HAS BEEN HELD IN THE CASE OF BHAVESH PRINTS REPO RTED IN 142 TTJ PAGE 128 THAT SIMPLY BECAUSE SOME OF THE CREDITORS WERE NOT TRACE ABLE IT CANNOT BE HELD THAT THE LIABILITY IS NOT PAYABLE. IN THE CASE OF TAMINADU W ARE HOUSING CORPORATION REPORTED IN 292 ITR 310, IT WAS HELD THAT SO LONG THE ASSESS EE HAD SHOWN THE LIABILITY IN THE BALANCE SHEET IT CANNOT BE SAID THAT THE LIABILITY HAS CEASED TO EXIST. IN THE CASE OF WILLSON AND CO. LTD REPORTED IN 121 TTJ 258 (CHENNAI TRIBUNAL), IT WAS HELD THAT UNLESS IT WAS SHOWN BY THE DEPARTMENT THAT THE LIAB ILITY CEASED TO EXIST DURING THE ASSESSMENT YEAR IN QUESTION IT CANNOT PARTAKE THE C HARACTER OF INCOME DURING THE ASSESSMENT YEAR IN QUESTION. SIMILARLY IN THE CASE OF DY. CIT V. AMOD PETROCHEM (P) LTD. (2008) 23 (I) ITCL 145 (GUJ-HC) : (2008) 217 C TR (GUJ) 401, IT WAS HELD THAT AS PER SECTION 68, THERE SHOULD BE CASH CREDITS OF PRE VIOUS YEAR. THE SECTION PROVIDES FOR A DEEMING FICTION OF TREATING THE SUM FOUND CRE DITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, BEING CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR, PROVIDED (I) THE AS SESSEE OFFERS NO EXPLANATION AS TO THE NATURE AND SOURCE OF THE CREDITS, OR (II) THE E XPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATIS FACTORY. THE CRUX OF THE ISSUE, THEREFORE IS, THERE HAVE TO BE CREDITS OF ANY SUM I N THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, ONLY THEN THE SUM SO CREDITED CAN BE BROUGHT TO TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR; IN OTHER WORDS, FIRST OF ALL, THERE HAVE TO BE CREDITS IN A PREVIOUS YEAR AND ONL Y IN THE ASSESSMENT RELATABLE TO THAT PREVIOUS YEAR, NAMELY, YEAR OF CREDIT, THE SUM CAN BE BROUGHT TO TAX. IN CIT V. USHA STUD AGRICULTURAL FARMS LTD. (2008) 301 ITR 384 (DEL) : (2009) 183 TAXMAN 277 (DEL), IT WAS HELD THAT SINCE IT IS A FINDING O F FACT RECORDED BY THE COMMISSIONER (APPEALS) THAT THE CREDIT BALANCE APPEARING IN THE ACCOUNTS OF ASSESSEE, DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION, UNDER THES E CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE IMPUGNED AD DITION U/S 68 AND AS SUCH NO FAULT COULD BE FOUND WITH THE ORDER OF THE TRIBUNAL WHICH HAD ENDORSED THE DECISION OF COMMISSIONER (APPEALS). IN MAHABIR PRASAD PREM CHAN D JAIN V. ITO (1988) 40 TAXMAN 35 (DEL- TRIB )(TAX MAG), IT WAS HELD THAT A MOUNTS FOUND IN THE BOOKS OF ASSESSEE WERE IN EXISTENCE MUCH PRIOR TO THE BEGINN ING OF THE ACCOUNTING PERIOD CORRESPONDING TO THE RELEVANT ASSESSMENT YEAR AND T HE SAME COULD NOT, THEREFORE, BE TREATED AS THE INCOME OF ASSESSEE EARNED DURING THE RELEVANT PREVIOUS YEAR. IN NUCHEM LTD. V. DY. CIT (2004) 87 TTJ (DEL-TRIB) 166 , IT WAS HELD THAT REVENUE HAD FAILED TO PROVE THAT THE AMOUNTS WERE CREDITED TO T HE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THESE AMO UNTS WERE BROUGHT FORWARD FROM EARLIER YEARS AND IT IS SETTLED LAW THAT THE ADDITI ON UNDER SECTION 68 COULD BE MADE ONLY IF THE AMOUNT WAS CREDITED IN THE ACCOUNTS OF THE ASSESSEE IN THE RELEVANT FINANCIAL YEAR. IN SHRI VARDHMAN OVERSEAS LTD. V. A SSTT. CIT (DEL-TRIB): 24 SOT 393 , IT WAS HELD THAT NO NEW AMOUNT HAD BEEN CREDITED BY ASSESSEE IN ITS ACCOUNT DURING THE YEAR UNDER CONSIDERATION. THEREFORE, APPLICABIL ITY OF SECTION 68 OF THE ACT IS ALSO RULED OUT AND ADDITION COULD NOT BE MADE UNDER SECT ION 68 OF THE ACT. IN VIEW OF ABOVE WE FIND NO REASON TO INTERFERE IN THE ORDER O F LD. CIT(A). HENCE THIS GROUND OF REVENUE IS DISMISSED . ITA NO.222/R/2019 & C.O.12/R/2019 A.Y. 2014-15 ACIT, CIR-3,RAN VS. SH SUM IT RAMSISARIA PA GE 13 WE ACCORDINGLY FIND NO REASON TO ACCEPT REVENUES A RGUMENTS SEEKING TO REVIVE THE IMPUGNED SEC. 41(1) ADDITION. ITS APPEAL ITA NO.222/RAN/2019 FAILS THEREFORE. 6. LEARNED COUNSEL NEXT INVITED OUR ATTENTION TO AS SESSEES CROSS OBJECTION SUPPORTING LEARNED CIT(A)S ACTION DELETING THE IMP UGNED ADDITION ON THE ONE HAND AND ALSO PIN-POINTING SOME TYPOGRAPHICAL ERROR IN THE REVENUES FROM- 36. THE SAME IS DISMISSED AS RENDERED INFRUCTUOUS S INCE WE HAVE ALREADY UPHELD THE CIT(A)S ORDER DELETING THE IMPUGNED ADD ITION. 7. THIS REVENUES APPEAL ITA NO.222/RAN/2019 IS DISMISSED WHEREAS ASSESSEES CROSS OBJECTION NO.12/RAN/2019 IS DISMISSED AS RENDERED INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT 14/ 12/2020 SD/- SD/- ( ) ('( ) (J.SUDHAKAR REDDY) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP )- 14 / 12 /20 20 / / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-SHRI SUMIT RAMSISARIA,KANTATOLIA CHOWK, P URULIA RD.RANCHI-834001 2. /REVENUE-ACIT, CIR-3, R.NO.302, 3 RD FLOOR, CENTRAL REVENUE BUILDING (ANNEXE) MAIN ROAD, RANCHI-8 34001 3. 3 5 / CONCERNED CIT RANCHI 4. 5- / CIT (A) RANCHI 5. 9 ((3, 3 , / DR, ITAT, RANCHI 6. ? / GUARD FILE. BY ORDER/ , /TRUE COPY/ CD ( 3 SR. PRIVATE SECRETARY, 3,