Smt. Sucharita Kar, Kolkata V. ITO, Ward-55(1), Kolkata, Kolkata

ITA 2239/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4107 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 03-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2014
• Court: TRIBUNAL
• Department Lawyers: P B PRAMANICK
• Assessee Lawyers: V N DUTTA
• Keywords: Gift; Business income; Business expenditure; Period of limitation; Difference of opinion; Revised return; Revenue expenditure
• Section: 142(1); 37(1); 194C; 10; 68

Judgement Text

ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 1 IN THE INCOME TAX APPELLATE TRIBUNAL,D BENCH KOLKATA BEFORE SHRI M.BALAGANESH, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2239/KOL/2014 A.Y: 2010-11 SMT. SUCHARITA KAR VS. I.T.O., WARD 55 (1), KOLKATA PAN: AFNPK5288G (APPELLANT) (RESPONDENT) APPEARANCES BY: SHRI V.N DUTTA, ADVOCATE, AR FOR THE ASSESSEE SHRI P.B. PRAMANICK, JCIT, SR.DR FOR THE REVENUE DATE OF HEARING : 03-11-2016 DATE OF PRONOUNCEMENT : 14-12-2016 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30-09-2014 PASSED BY THE COMMISSIONER OF INCO ME TAX(APPEALS),XXXVI, KOLKATA FOR THE ASSESSMENT YEAR 2010-11. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS OF APPEAL:- 1. FOR THAT THE ASSESSMENT ORDER IS ARBITRARY, OPPO SED TO REQUIREMENT OF LAW AND BAD IN LAW. 2. FOR THAT THE ASSESSMENT ORDER IS NEITHER TENABLE IN LAW NOR IN FACT NOR PROPER OPPORTUNITIES IS PROVIDED TO THE ASSESSEE. 3. FOR THAT ADDITION OF RS.34,43,606/- UNDER THE HE AD CESSATION OF TRADE LIABILITY U/S 41 (1) OF THE ACT IS NEITHER TENABLE IN LAW NOR IN FACTS. 4. FOR THAT THE TREATING THE GIFT OF RS.L,50,000/- AS INCOME U/S 56(2)(VII) OF THE ACT IS UNJUST AND UNCALLED FOR .THE CONTENTION OF THE ASSESSING OFFICER IS OPPOSED TO REQUIREMENT OF LAW AND BAD IN LAW. 5. FOR THAT DISALLOWANCE OF 50% EXPENSES UNDER THE HEAD SALES PROMOTION AMOUNTING TO RS.88,245/- U/S 37(1) OF THE ACT IS WI THOUT HAVING ANY BASIS, UNJUSTIFIED AND UNCALLED FOR. ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 2 6. FOR THAT THE DISALLOWANCE OF ENTERTAINMENT EXPEN SES OF RS.67,5001- BY APPLYING SECTION 40(A)(IA) IS NEITHER TENABLE IN LA W NOR IN FACTS. 7. FOR THAT THE APPELLANT CRAVES LEAVE TO AMEND, AL TER, ADD, DELETE OR SUBSTITUTE ANY OTHER GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3. THE ASSESSEE IS AN INDIVIDUAL AND IS IN THE BUSI NESS OF MANUFACTURING OF MEDICINES AND CONDUCTING HER BUSIN ESS IN THE NAME AND STYLE AS M/S ESKAAR PHARMACEUTICALS WHICH IS A PROPRIETARY CONCERN, BESIDES THE INCOME FROM BUSINE SS THE ASSESSEE DERIVES INCOME FROM OTHER SOURCES. THE ASS ESSEE FILED HER RETURN OF INCOME ON 31.07.2010 DISCLOSING A TOT AL INCOME OF RS.6,50,835/- AND AGAIN FILED A REVISED RETURN ON 2 8.08.2010 SHOWING TOTAL INCOME OF RS. 6,46,900/-. UNDER SCRUT INY NOTICES U/S. 143(2) AND 142(1) WERE ISSUED.DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE APPE ARED AND PRODUCED BOOKS OF ACCOUNT, AND VARIOUS DOCUMENTS ET C. 4. GROUND NOS 1&2 ARE GENERAL IN NATURE AND NEEDS NO ORDER AND HENCE DISMISSED. 5. GROUND NO-3 IS RELATING TO DISALLOWANCE MADE ON ACCOUNT OF NON EXISTENCE OF LIABILITY U/SECTION 41(1) OF TH E ACT. IN RESPONSE TO THE STATUTORY NOTICES, THE ASSESSEE FIL ED DETAIL OF SUNDRY CREDITORS IN FIVE (5) CATEGORIES. (I) HAVING TRANSACTIONS ABOVE RS.50,000/- RS.5,01,3 03/- (II) EXEMPTED PURCHASE ABOVE RS.50,000/- RS.48,800/ - (III) UNREGISTERED PURCHASE BELOW RS.50,000/- NIL (IV) PURCHASE BELOW RS.50,000/- RS. 37,71,492/- (V) PURCHASE OF FIXED ASSETS -NIL. ACCORDING TO AO THE ASSESSEE FILED THE DETAIL PARTY WISE BREAK UP OF CATEGORY AN D DID NOT FILE ANY DETAILS REGARDING CATEGORY OF ( IV) AND THE ASSESSEE FILED HER ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 3 EXPLANATION THROUGH HER REPLY DT:01-03-2013 WHEREIN THE ASSESSEE INITIALLY REPORTED SUNDRY CREDITS UPTO RS. 37,71,493/- AND BUT FOUND ONLY OF RS.30,86,847/-, BESIDES, THE AO NOTICED THAT THE ASSESSEE DID NOT HAVE ANY TRANSACTION DURI NG THE ENTIRE YEAR UNDER CONSIDERATION. THE AO WAS OF THE OPINION THAT THE CREDIT AMOUNT WAS BROUGHT FORWARD AND THE ASSES SEE FILED ONLY THE PRINTED CONFIRMATION OF ACCOUNTS FORMS WHI CH ARE AVAILABLE IN THE MARKET ON WHICH NAME AND ADDRESS O F THE PARTICULAR CREDITOR, THE CREDIT AMOUNT AND SIGNATUR ES OF THE ASSESSEE AND THE CREDITOR, SOMETIMES WITH RUBBER ST AMP, SOMETIMES WITHOUT IT. THE AO FOUND THAT NONE OF THE CONFIRMATIONS WERE ON THE LETTERHEAD AND PAD OF THE CREDITORS AND THEIR ADDRESSES ARE ALL INCOMPLETE AND WRONG. T HE PAN OF THE CREDITORS WAS NOT MENTIONED IN ANY OF THE CONFI RMATIONS, THOUGH THERE HAS BEEN SPECIFIC COLUMN IN THE CONFIR MATION FORMS. THE ASSESSEE CLAIMED THAT HER CREDITORS WERE SMALL TRADERS. THE AO TAKING INTO CONSIDERATION THE ADMIS SION OF THE ASSESSEE IN RESPECT OF NON-EXISTENCE OF LIABILITY T O THE TUNE OF RS. RS.4,90,961/- ALONG WITH SAME ADDED AN AMOUNT O F RS. 29,52,645/- FOR NON SUBSTANTIATING THE CLAIM TOTALL ING TO RS. 34,43,606/- TO THE INCOME OF THE ASSESSEE U/S 41(1) OF THE ACT. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW: EVEN IF THE ASSESSEE WAS SERIOUS TO SUBSTANTIATE HE R CLAIM REGARDING SUNDRY CREDITORS, SHE COULD EVEN PRODUCE ALL OR SOME OF TH EM. SHE COULD HAVE EASILY FILE SOME OF THE BILLS/ INVOICES RELATING TO THE TRANSACTIONS WITH THOSE PARTIES, WHICH LED THE CURRENT FIGURES OF SUNDRY CR EDITORS. BUT, SHE DIDN'T EVEN TRY IN THAT ANGLE. ON THE OTHER HAND, WHEN THE ASSESSEE WAS DEALING WITH CREDITORS WITH CURRENT TRANSACTIONS, THE CHANG E OF ATTITUDE IS NOTABLE. IN CASE OF M/ S RAJESH ENTERPRISE (LETTER ADDRESSED TO IT ALSO RETURNED BACK), THE ASSESSEE DIDN'T GO FOR THE FAULT FINDING ON THE PART OF THE A.O. OR POSTAL DEPARTMENT. SHE SIMPLY FILED A COPY OF THE I NVOICE. BUT, IN CASE OF FORMER CATEGORIES, SHE DIDN'T INTEND TO SUBSTANTIAT E ON THAT MANNER AND COMPLETELY ENGAGED IN EITHER FAULT FINDING OF THE A .O. AND THE POSTAL DEPARTMENT OR FURNISHED SOME EMOTIONAL REASONING. FROM THE ABOVE DISCUSSION, IT IS ESTABLISHED BEYOND DOUBT THAT THE TRADE LIABILITY TO THE TUNE OF RS. 29,52,645/- (PARTIES M ENTIONED IN THE TABLE AT PAGES 3 & 4 OF THIS ORDER; SL NO.- 01 TO 14 AND 20 TO 26) CLAIMED IN HER RETURN IS CEASED TO EXIST ANYMORE. SIMILARLY, THE A SSESSEE HERSELF ADMITTED NON-EXISTENCE OF TRADE LIABILITY TO THE TUNE OF RS. 4,90,961/- VIDE HER ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 4 SUBMISSION FILED DURING THE HEARING ON 01.03.2013. THEREFORE, TOTAL TRADE LIABILITY TO THE TUNE OF RS. 34,43,606/- IS ADDED B ACK TO THE INCOME OF THE ASSESSEE U/S 41(1) OF THE ACT. 6. IN CHALLENGE BEFORE THE CIT-A, THE ASSESSEE SUBM ITTED AS UNDER: 1. THAT YOUR PETITIONER IS A SMALL MANUFACTURER IN THE LINE OF MEDICINE HOLDING SSI REGISTRATION NO. TRYING TO COM PLY WITH ALL THE FORMALITIES OF THE RESPECTIVE ACTS AND LAWS AS FAR AS POSSIBLE. 2. THAT YOUR PETITIONER HAD SHOWN A GOOD AMOUNT OF PROFIT OF RS.6,46,900/- DURING THE PREVIOUS YEAR ENDED 31.3.1 0 AS AGAINST THE TURNOVER OF RS. 99, 05,872/- WHEREAS, THE ASSESSMEN T ORDER HAS COMPUTED THE TOTAL INCOME OF RS.43,96,251/-. 3. THAT YOUR PETITIONER IS NOW SUBMITTING HEREWITH THE DETAILS OF THE SUNDRY CREDITORS FOR YOUR KIND PERUSAL AND RECORDS. THE MOST OF THE SUNDRY CREDITORS WERE SUMMONED BY THE LD. AO REGARD ING THE CONFIRMATION OF ACCOUNTS. OUT OF THAT MAJOR CREDITO RS HAD GIVEN CONFIRMATION EITHER DIRECTLY OR THROUGH US WHERE LE TTER HEADS OF THE RESPECTIVE PARTIES WERE NOT USED BUT THEY HAD GIVEN THE DETAILS OF THE TRANSACTION ALONG WITH ADDRESS, DATE OF CONFIRM ATION AND PUTTING THE SIGNATURE THEREON UNDER THEIR RUBBER STAMP WHIC H HAD NOT BEEN ACCEPTED BY THE LD. AO FOR THE REASONS BEST KNOWN T O HIM. THE LD. A0 EXPRESSED HIS OPINION THAT THE LETTER HEADS/PAD WERE NOT USED FOR GIVING CONFIRMATION OF ACCOUNTS HENCE, THERE WERE R EJECTED. SIR, WE ARE SMALL MANUFACTURER AND PROCURED MATERIALS FROM THE LOCAL MARKET AT A CHEAPEST PRICE. WE DO NOT THINK AT THE TIME OF BUYING WHETHER THE SUPPLIER IS A BIG ONE OR NOT. IF YOUR H ONOUR IS PLEASED TO DIRECT US TO SUBMIT CONFIRMATION OF ACCOUNTS FROM T HE SUNDRY CREDITORS WE ARE, READY TO SUBMIT IT AT OUR LABEL B EST. 4. THAT FEW CREDITOR'S OPENING AND CLOSING BALANCE REMAINED SAME AS THERE HAS BEEN A DIFFERENCE OF OPINION REGARDING PR ICE AND QUALITY OF THE MATERIALS. THAT'S WHY THE PAYMENT HAS NOT BEEN MADE ON THE OTHER HAND THE CREDITORS HAD NOT SUPPLIED MATERIAL TO US DURING THE PREVIOUS YEAR ON THE GROUND THAT THE PAYMENT IS STI LL PENDING. IT DOES NOT MEAN THE CREDITORS ARE BOGUS AND FAKE. HEN CE, CESSATION OF TRADING LIABILITY U/S.41 OF THE IT ACT, 1961 IS NOT APPLICABLE HERE. THE LD. AO HAS ARBITRARILY ADDED SUM OF RS. 34, 43, 606/- TO THE TRADING RESULT ON ACCOUNT OF CESSATION OF TRADING L IABILITY. 7. THE ASSESSEE FURTHER SUBMITTED AS UNDER: IN CONTINUATION OF MY PREVIOUS WRITTEN SUBMISSION D ULY SUBMITTED TO YOUR ESTEEMED OFFICE ON 10.9.14 DURING THE COURSE O F HEARING, I LIKE TO SUBMIT FURTHER THE WRITTEN SUBMISSION IN CONNECTION WITH THE APPEAL CASE. NOW I RELY UPON THE JUDGMENT PASSED BY THE HON'BLE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH AHMEDABAD IN THE CASE OF SHRI NITIN S. GARG VS. THE ACIT, CIRCLE-A, SURAT, WHERE IT HAS BEEN OB SERVED THAT WHEN THE SUNDRY CREDITORS HAS BEEN SHOWN OR REFLECTED IN THE ASSESSEE'S BALANCE SHEET IT INDICATES THE ACKNOWLEDGEMENT OF THE DEBTS PAYABLE BY THE ASSESSEE AND IF SUCH LIABILITIES OUTSTANDING FOR TH E LAST SEVERAL YEARS, IT CANNOT BE PRESUMED THAT THE SAID LIABILITIES HAVE C EASED TO EXIST. IT IS ALSO CONCEDED POSITION THAT THERE IS NO BILATERAL ACT OF THE ASSESSEE AND THE CREDITORS WHICH INDICATES THAT THE SAID LIABILITIES HAVE CEASED TO EXIST. IN ABSENCE OF ANY BILATERAL ACT THE SAID LIABILITIES C OULD NOT HAVE BEEN TREATED TO HAVE CEASED. EVEN IN A CASE WHERE A LIABILITY CEASED TO EXIST DU E TO LIMITATION I. E. THE CLAIM OF THE CREDITOR IS BARRED BY LIMITATIO N UNDER LIMITATION ACT OF 1963 BUT IF THE LIABILITY SUBSIST OR HAS NOT BEEN W RITTEN OFF BY THE ASSESSEE, ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 5 OR THE ASSESSEE DOES NOT ABSOLVE HIMSELF FROM THE L IABILITY, THOUGH NOT LEGALLY ENFORCEABLE, IT CANNOT BE TAXED UNDER SECTI ON 41 (1). NOW I AM ENCLOSING HEREWITH THE JUDGMENT PASSED BY THE HON'BLE BENCH FOR YOUR KIND KNOWLEDGE AND NECESSARY RECORDS . 8. THE CIT-A WAS OF THE OPINION THAT THE ASSESSEE C OULD NOT FURNISH FULL DETAILS OF THE SOME OF THE PARTIES IN SPITE OF AVAILING THE MANY OPPORTUNITIES AND AGREED WITH FINDING OF T HE AO THAT THE CREDIT AMOUNT WAS BROUGHT FORWARD AND CONFIRMED THE ADDITION MADE ON ACCOUNT OF NON EXISTENCE OF LIABIL ITY. THE RELEVANT PORTION OF WHICH REPRODUCED HEREIN BELOW: 6.6 IN THIS CASE APPELLANT INSPITE OF THE OPPORTUN ITY GIVEN HAS NOT BEEN ABLE TO PROVE THAT THE ALLEGED SUNDRY CREDITORS AMOUNTIN G TO RS.34,43,606/- CLAIMED TO BE CARRIED FORWARD FROM EARLIER YEARS, W ITHOUT ANY TRANSACTION DURING THE CURRENT YEAR, STILL EXISTED. FURTHER, FR OM THE INFORMATION GIVEN, AO. COULD NOT MAKE ENQUIRY AS EITHER INFORMATION WAS NO T GIVEN IN CERTAIN CASES, OR FROM THE INCOMPLETE INFORMATION GIVEN AO. COULD NOT CARRY OUT CROSS- VERIFICATION, INSPITE OF HIS BEST EFFORT, AS ELABOR ATED IN HIS ORDER. IN VIEW OF THE ABOVE FACTS AND COURT DECISIONS DISCUSSED EARLI ER, AS THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE SUNDRY CREDITORS WERE I N EXISTENCE DURING THE YEAR, A.O. HAD CORRECTLY ADDED IT AS CESSATION OF L IABILITY U/S. 41 (1) OF THE I.T. ACT. THE APPEAL ON THIS GROUND IS DISMISSED. 9. BEFORE US THE LD.AR REITERATED THE SUBMISSIONS A S MADE BEFORE THE LOWER AUTHORITIES AND RELIED ON THE DECI SION IN THE CASE OF NITIN S.GARG OF HONBLE HIGH COURT OF GUJAR AT REPORTED IN (2012) 22 TAXMANN.COM 59(GUJ.) AND REFERRED TO P ARA NOS. 15 AND 16 OF ABOVE SAID DECISIONS AND ARGUED THAT T HE ASSESSEE DID NOT WRITE OFF THE LIABILITIES IN THE BOOKS OF A CCOUNT THEREBY ADDITION U/S. 41(1) OF THE ACT NOT MAINTAINABLE. HE ALSO RELIED ON IN THE CASE OF ALVARES & THOMAS OF HONBLE HIGH COURT OF KARNATAKA REPORTED IN (2016) 69 TAXMANN.COM 257(KAR ) AND DREW OUR ATTENTION TO PARA NO. 9 AND ARGUED THAT IF THE CREDITOR NOT TRACED AT THE TIME OF ENQUIRY AND SAME CANNOT B E GROUND TO ATTRACT THE PROVISIONS OF SECTION 41(1) OF THE ACT. HE FURTHER TOOK US TO A DECISION IN THE CASE OF ITO VS. SHRI R AMASHIS SHAW OF CO-ORDINATE BENCH OF KOLKATA TRIBUNAL AND DREW O UR ATTENTION TO PARA NO.3 OF THE SAID ORDER AND ARGUED THAT THER E CANNOT BE ADDITION ON THE ALLEGED GROUND OF NON EXISTENCE OF PARTIES AND ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 6 BOGUS SUNDRY CREDITORS AND URGED TO ALLOW THE GROUN D OF APPEAL IN THIS REGARD. 10. ON THE CONTRARY, THE LD.DR SUBMITS THAT IT IS N OT THE ONUS ON THE REVENUE TO PROVE THE EXISTENCE OF LIABILITY AND SUNDRY CREDITORS AND ARGUED THAT THE ASSESSEE COULD NOT PR ODUCE ANY SUCH DETAILS OF SUNDRY CREDITORS INSPITE OF HAVING SUFFICIENT OPPORTUNITIES. HE ALSO DREW OUR ATTENTION TO THE DE CISION IN THE CASE OF CIT VS. SMT. ARATI JANA OF HONBLE HIGH COU RT OF CALCUTTA REPORTED IN (2013) 216 TAXMAN 109 (CAL) AN D ARGUED THAT IF THE ASSESSEE FAILS TO OFFER ANY EXPLANATION OR RELEVANT EVIDENCE ABOUT THE TRANSACTION THE ADDITION U/S. 41 (1) IS INVITED. HE FURTHER DREW OUR ATTENTION TO THE DECIS ION OF ITAT, MUMBAI IN THE CASE OF SHAILESH D. SHAH VS. ITO IN I TA NO. 7012/M/10 AND ARGUED IF THE ASSESSEE FAILS TO PROVE THAT LIABILITY IS STILL EXISTING, AN ADDITION U/S. 41(1) OF THE ACT IS MAINTAINABLE. LIKEWISE, HE INVITED OUR ATTENTION TO PAGES 16 AND 17 OF THE IMPUGNED ORDER OF THE CIT-A AND ARGUE D IF THE LIABILITY NOT PROVED AT THE END OF YEAR IT IS OPEN TO THE AO TO ADD THE SAME U/S. 41(1) OF THE ACT AND ACCORDINGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 11. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESS EE FILED ALL THE DETAILS IN RESPECT OF SUNDRY CREDITORS, BUT THE AO DOUBTED THE VERACITY OF SUCH TRANSACTION THAT THE ASSESSEE HAS NOT SUBMITTED THE SAME IN PROPER MANNER. THE AO ALSO DO UBTED IN RESPECT OF OPENING AND CLOSING BALANCE OF FEW CREDI TORS AND CONCLUDED THAT THERE WAS NO TRANSACTION DURING THE YEAR UNDER CONSIDERATION. BUT, HOWEVER, THE ASSESSEE SUBMITTED THAT THERE WAS DIFFERENCE OF OPINION REGARDING PRICE AND QUALI TY OF THE ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 7 MATERIALS AS SUCH THERE WAS NO PAYMENT AND NO SUPPL Y BY ASSESSEE AND CREDITORS RESPECTIVELY. 12. IN THIS REGARD, WE MAY REFER TO THE DECISION IN THE CASE OF NITIN S.GARG OF HONBLE HIGH COURT OF GUJARAT REPOR TED IN (2012) 22 TAXMANN.COM 59(GUJ). THE RELEVANT PARAS ARE REP RODUCED HEREIN BELOW FOR BETTER UNDERSTANDING: 15. IN THE CASE BEFORE US. IT IS NOT BEEN ESTABLISH ED MAT THE ASSESSEE HAS WRITTEN OFF THE OUTSTANDING BOOKS OF ACCOUNT, THE A PPELLATE TRIBUNAL IS JUSTIFIED IN TAKING THE VIEW THAT AS ASSESSEE HAD C ONTINUED TO SHOW THE ADMITTED AMOUNTS AS LIABILITIES IN ITS BALANCE SHEE T THE SAME CANNOT BE TREATED AS ASSESSMENT OF LIABILITIES. MERELY BECAUS E THE LIABILITIES ARE OUTSTANDING FOR LAST MANY YEARS, IT CANNOT BE INFER RED THAT THE SAID LIABILITIES HAVE SEIZED TO EXIST. THE APPELLATE TRIBUNAL HAS RI GHTLY OBSERVED THAT THE ASSESSING OFFICER SHALL HAVE TO PROVE THAT THE ASSE SSEE HAS OBTAINED THE BENEFITS IN RESPECT OF SUCH TRADING LIABILITIES BY WAY OF REMISSION OR CESSATION THEREOF WHICH IS NOT THE CASE BEFORE US. MERELY BECAUSE THE ASSESSEE OBTAINED BENEFIT OF REDUCTION IN THE EARLI ER YEARS AND BALANCE IS CARRIED FORWARD IN THE SUBSEQUENT YEAR, IT WOULD NO T PROVE THAT THE TRADING LIABILITIES OF THE ASSESSEE HAVE BECOME NON-EXISTEN T. 16 MOREOVER, AS POINTED OUT IN THE CASE OF SUGAULI SUGAR WORKS (P) LTD (SUPRA), VIDE THE LAST FIVE LINES F THE PARAGRAPH-6 OF THE JUDGEMENT, THE QUESTION WHETHER THE LIABILITY IS ACTUALLY BARRED B Y LIMITATION IS NOT A MATTER WHICH CAN BE DECIDED BY CONSIDERING THE ASSESSEE'S CASE ALONE BUT HAS TO BE DECIDED ONLY IF THE CREDITOR IS BEFORE THE CONCERNE D AUTHORITY. IN THE ABSENCE OF THE CREDITOR, IT IS NOT POSSIBLE FOR THE AUTHORI TY TO COME TO A CONCLUSION THAT THE DEBT IS BARRED AND HAS BECOME UNENFORCEABL E. THERE MAY BE CIRCUMSTANCES WHICH MAY ENABLE THE CREDITOR TO COME WITH A PROCEEDING FOR ENFORCEMENT OF THE DEBT EVEN AFTER EXPIRY OF THE NO RMAL PERIOD OF LIMITATION AS PROVIDED IN THE LIMITATION ACT.' 13. IN THE AFORESAID DECISION THE HONBLE HIGH COUR T OF GUJARAT WAS PLEASED TO HOLD THAT IF THE ASSESSEE CONTINUES TO SHOW THE ADMITTED AMOUNTS AS LIABILITIES IN ITS BALANCE SHEE T AND THE SAME CANNOT BE TREATED AS SEIZED TO EXIST. IN THE P RESENT CASE ALSO THE ASSESSEE HAS SHOWN THE LIABILITIES TO BE P AID AS THERE DIFFERENCE OF OPINION REGARDING THE QUALITY AND PRI CE BETWEEN ASSESSEE AND SUPPLIERS. THEREFORE, WE ARE OF THE VI EW THE FACTS OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF SUPRA IS ALSO APPLICABLE TO THE PRESENT FACTS OF THE CASE. 14. AS RELIED ON BY THE LD.AR IN THE CASE OF CIT V S. ALVARES & THOMAS JAYANT PATEL & MRS. B.V NAGARITHNA REPORTED IN [ 2016] ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 8 69 TAXMANN. COM 257 (KAR) HELD THAT IF THE PARTIES COULD NOT BE TRACED AND THE DEBTS COULD NOT BE VERIFIED IN SU CH CIRCUMSTANCES ALSO NO ADDITION ON ACCOUNT OF CESSAT ION OF LIABILITY IS ATTRACTED. THE RELEVANT PORTION IS REP RODUCED HEREIN BELOW:- 9. IN OUR VIEW, EVEN IF WE ACCEPT THE CONTENTION OF THE REVENUE THAT THE PARTY COULD NOT BE TRACED AND THEREFORE DEBT COULD NOT BE VERIFIED THEN ALSO, BY NO STRETCH OF IMAGINATION CAN IT BE HELD THAT IT WOULD SATISFY THE REQUIREMENT OF CESSATION OF LIABILITY. IN LEGAL PAR LANCE, MERELY BECAUSE THE CREDITOR COULD NOT BE TRACED ON THE DATE WHEN THE V ERIFICATION WAS MADE, SAME IS NOT A GROUND TO CONCLUDE THAT THERE WAS CES SATION OF THE LIABILITY. CESSATION OF THE LIABILITY HAS TO BE CESSATION IN L AW, OF THE DEBT TO BE PAID BY THE ASSESSEE TO THE CREDITOR. THE DEBT IS RECOVERAB LE EVEN IF THE CREDITOR HAS EXPIRED, BY THE LEGAL HEIRS OF THE DECEASED CREDITO R. UNDER THE CIRCUMSTANCES, IN THE PRESENT CASE, IT CAN HARDLY B E SAID THAT THE LIABILITY HAD CEASED. IF THE LIABILITY HAD NOT CEASED OR THE BENEFIT WAS NOT TAKEN BY THE ASSESSEE IN RESPECT OF SUCH TRADE LIABILITY, IN OUR VIEW, THE CONDITIONS PRECEDENT WERE NOT SATISFIED FOR INVOKING SECTION 4 1(1) OF THE ACT IN THE INSTANT CASE. 15. IN THE PRESENT CASE ACCORDING TO THE AO THE ASS ESSEE COULD NOT PRODUCE FULL DETAILS OF SUNDRY CREDITORS AND AD DED THE SAID AMOUNT U/S. 41(1) OF THE ACT BY OBSERVING THAT THE TRANSACTIONS COULD NOT BE VERIFIED DURING THE COURSE OF ASSESSME NT PROCEEDINGS. THEREFORE, IN OUR VIEW THAT THE FACTS AND CIRCUMSTANCES OF THE ABOVE CASE ARE APPLICABLE TO T HE PRESENT CASE AND THEREBY THE ADDITION REQUIRES TO BE DELETE D. 16. IN THE CASE OF ITO, KOLKATA VS. SHRI RAMASHIS S HAW IN ITA NO. 672/KOL/2012 HELD THAT NON EXISTENCE OF SUNDRY CREDITORS ADDITION U/S. 41(1) OF THE ACT IS NOT MAINTAINABLE. RELEVANT PORTION IS REPRODUCED HEREIN BELOW:- 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. IN OUR OPINION, NO ILLEGALITY AND INFIRMITY H AS BEEN COMMITTED BY THE CIT(A) IN DELETING THE ADDITION OF SUNDRY CREDITORS , WHICH DID NOT ARISE DURING THE IMPUGNED ASSESSMENT ORDER IN THEIR OPENI NG BALANCE FROM THE EARLIER ASSESSMENT YEAR 2005-06. AS PER THE PROVISI ONS OF SECTION 68, ANY AMOUNT FOUND CREDITED IN THE BOOKS OF ASSESSEE CAN BE ADDED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, IN C ASE, THE ASSESSEE FAILS TO PROVE THE NATURE AND SOURCE OF SUCH CREDIT, IN W HICH THESE AMOUNTS AROSE ARE CREDITED. SINCE THE AMOUNTS WERE NOT CRED ITED IN THE IMPUGNED A.Y., THEREFORE, IN VIEW OF THE DECISION OF THE HON 'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SRIDEV ENTERPRISES 192 ITR 16 5 WE CONFIRM THE ORDER OF THE CIT (A) DELETING THE SAID ADDITION. ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 9 17. RESPECTFULLY FOLLOWING THE LAW LAID DOWN BY THE HONBLE HIGH COURTS OF GUJARAT AND KARNATAKA AND THE ORDER OF THE CO- ORDINATE BENCH OF KOLKATA TRIBUNAL IN THE CASES OF SUPRA, WE DELETE THE IMPUGNED ADDITION AS MADE BY THE AO. 18. GROUND NO-4 RELATING TO ADDITION MADE ON ACCOUN T OF CAPITALISATION OF RS. 1,50,000/- U/SECTION 68 OF TH E ACT. 19. THE AO FOUND THAT THE ASSESSEE RECEIVED CASH GI FTS TO THE TUNE OF RS. 1,50,000/- FROM HER RELATIVES ON THE OC CASION OF HER 50 TH YEAR CELEBRATIONS AS THERE WAS NO DETAILS AND RECE IPTS PRODUCED, THE AO WAS OF THE OPINION THAT THE ASSESS EE CAPITALIZED SUCH AMOUNT. WHEN ASKED FOR THE DETAIL, . AS NO DETAIL WAS FILED, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE SAID SUM WOULD NOT ADDED BACK TO HER INCOME U/S. 56(2)(V II) OF THE ACT. 20. IN RESPONSE, SRI SUBAL SAKHA MUKHERJEE, AN EMPL OYEE OF THE ASSESSEE APPEARED ALONG WITH THE A.R. OF THE AS SESSEE SUBMITTED THAT THE EMPLOYEES OF THE ASSESSEE'S FIRM OUT OF THEIR RESPECT, GRATITUDE AND REGARD ORGANIZED A CELEBRATI ON ON THE OCCASION OF 50 YEARS OF THE ASSESSEE ON 24.02.2010 AND SAME WAS ATTENDED BY THE FAMILY MEMBERS, HIS COLLEAGUES, THE SALE AND PURCHASE PARTIES, FRIENDS ETC AND CASH GIFTS TO THE TUNE OF RS. 1,50,000/- WAS COLLECTED AS MANY OF THE PARTICI PANTS INCLUDING HIS COLLEAGUES DONATED GENEROUSLY AS A GE STURE OF GRATITUDE WAS HANDED OVER TO THE ASSESSEE AS A GIFT . ACCORDING TO AO THAT THE ASSESSEE RECEIVED THE SAME FROM THE PERSONS NOT CONNECTED BY BLOOD RELATION AND NO LIST OF THE NAME S OF THE CONTRIBUTORS OR CORRESPONDING AMOUNT HAD BEEN PREPA RED OR MAINTAINED AND THE OCCASION WAS OTHER THAN MARRIAGE AND ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 10 INVOKED THE SECTION 56(2)(VII) OF THE ACT RS. 1,50, 000/- AND ADDED TO THE TOTAL INCOME. 21. BEFORE THE CIT-A SUBMITTED AS UNDER: 'THAT YOUR PETITIONER CELEBRATED HER 50 YEARS BIRTH ANNIVERSARY WHICH WAS CONDUCTED BY HER OFFICE STAFF AND WELL WISHERS WHO HAD GIVEN AWAY PRESENTATION ON THE OCCASION OF BIRTH DAY ANNIVERSA RY WHERE FOOD AND BEVERAGE WERE SUPPLIED TO THE INVITEES. THIS IS NOT A GIFT AS DISCUSSED IN THE ASSESSMENT ORDER BUT IT SHOULD BE CONSIDERED AS A T OKEN OF PRESENTATION HENCE, THE ADDITION OF RS.1,50,000/- TO THE TRADING RESULT MAY BE DELETED. ' 22. THE CIT-A OPINED THE AMOUNT RECEIVED FROM PERSO NS OTHER THAN RELATIVES AS GIFTS DURING 50 TH BIRTH YEAR CELEBRATIONS EXCEEDED RS.50,000/- IN AGGREGATE ATTRACTS AND ALSO FAILED TO DISCHARGE THE ONUS IN IDENTIFYING THE SUCH PERSONS, ACCORDINGLY CONFIRMED THE ADDITION AS MADE BY AO U/SECTION 68 O F THE ACT. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREUND ER: 7.3 APPELLANT'S SUBMISSION AND FACTS AVAILABLE ON R ECORD IS CAREFULLY CONSIDERED. AS IS EVIDENT FROM ASSESSEE'S REPLY, AS SESSEE HAS IN AGGREGATE RECEIVED GIFTS EXCEEDING RS.50,000/-FROM PERSONS OT HER THAN RELATIVES. THEREFORE THE APPELLANT'S CASE IS CLEARLY COVERED U /S. 56(2)(VII) OF THE I.T. ACT. EVEN OTHERWISE THE ADDITION WAS TO BE MADE U/S 68 OF THE I.T. ACT AS THE ASSESSEE HAD NOT DISCHARGED THE ONUS ON HER BY IDENTIFYING THE PERSONS GIVING GIFT. THEREFORE, APPEAL ON THIS GROUND IS DI SMISSED. 23. THE LD.AR SUBMITS THAT GIFTS WERE RECEIVED BY T HE ASSESSEE DURING HER 50 TH BIRTH DAY CEREBRATION AS ORGINISED BY STAFF OF HER FIRM. THE AO ADDED SUCH AMOUNT FOR NOT GIVING T HE DETAILS OF THE PERSONS, WHO HAVE GIVEN CASH GIFTS TO THE AS SESSEE. HE SUBMITS THAT IT IS VERY DIFFICULT TO PROVIDE SUCH D ETAILS AS THE FUNCTION WAS PARTICIPATED BY 150 GUESTS CONSISTING OF FAMILY MEMBERS, STAFF AND OTHER PERSONS RELATING TO HER BU SINESS. 24. THE LD.DR SUBMITS THAT THE ASSESSEE FAILED TO G IVE AT LEAST THE NAME, STATUS AND OTHER DETAILS OF SUCH PERSONS TO PROVE THAT IT IS A CASH GIFTS RECEIVED ON HER 50 TH BIRTH DAY CELEBRATION. ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 11 25. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT IN MANY OCCASIONS THE INVIT EES WOULD OFFER CASH GIFTS AND OTHER GIFTS IN KIND AND IN SUC H SITUATION HAVING A REASONABLY LARGE GATHERING OF 150 GUESTS, IT IS VERY DIFFICULT TO GATHER THE INFORMATION REGARDING THE S TATUS AND FULL ADDRESS OF SUCH PERSONS. IN THIS REGARD WE MAY REFE R TO THE PROVISION U/SECTION 56(2)(VII) OF THE ACT RELEVANT TO THE YEAR UNDER CONSIDERATION: SECTION - 56, INCOME-TAX ACT, 1961-2009 F.INCOME FROM OTHER SOURCES INCOME FROM OTHER SOURCES 56. (1) INCOME OF EVERY KIND WHICH IS NOT TO BE EXCL UDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FRO M OTHER SOURCES', IF IT IS NOT CHARGEABLE TO INCOME -TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITE MS A TO E. (2) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GEN ERALITY OF THE PROVISIONS OF SUB-SECTION (1), THE F OLLOWING INCOMES, SHALL BE CHARGEABLE TO INCOME-TAX UNDER TH E HEAD 'INCOME FROM OTHER SOURCES', NAMELY ( VII ) WHERE AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON OR PERSONS ON OR AFTER THE 1ST DAY OF OCTOBER, 2009, ( A ) ANY SUM OF MONEY, WITHOUT CONSIDERATION, THE AGGR EGATE VALUE OF WHICH EXCEEDS FIFTY THOUSAND RUPEES, THE WHOLE OF THE AGGREGATE VALUE OF SUCH SU M; 26. A BARE READING OF THE ABOVE PROVISION EXPLAINS THAT ANY MONEY RECEIVED AFTER 01-10-2009 BY AN INDIVIDUAL OR HUF EXCEEDING RS.50,000/- DURING PREVIOUS YEAR THE WHOL E OF THE AGGREGATE VALUE OF SUCH MONEY IS CHARGEABLE TO TAX. ADMITTEDLY THE ASSESSEE RECEIVED SUCH CASH GIFTS ON THE OCCASI ON OF HER 50 TH BIRTHDAY ON 24-02-2010 AND THEREFORE THE ONUS IS O N THE ASSESSEE TO PROVE THE IDENTITY, CREDITWORTHINESS AN D FINANCIAL CAPACITY OF DONOR FAILING WHICH THE AO IS EMPOWERED TO TREAT SUCH AMOUNT RECEIVED TOWARDS GIFT AS INCOME OF THE ASSESSEE AND ADD THE SAME U/SECTION 68 OF THE ACT. BUT WHAT IS NOTICED IN THIS ISSUE WAS THAT THE CASH GIFT DONATED BY MAN Y GUESTS CONSISTING OF RELATIVES, STAFF AND OTHERS RELATING TO HER BUSINESS. IN SUCH CIRCUMSTANCES, WE FIND THAT THE ASSESSEE HA S NOT ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 12 CONCLUSIVELY PROVED THE RECEIPT OF CASH GIFTS FROM RELATIVES, FRIENDS AND OTHERS BY GIVING THE NAMES AND ADDRESSE S OF DONORS TOGETHER WITH THEIR CREDITWORTHINESS. ACCORDINGLY, WE CONFIRM THE IMPUGNED ADDITION OF 1,50,000/- AS MADE BY THE AO. 27 . GROUND NO-5 INVOLVING ADDITION OF RS.88,245/- BEIN G 50% EXPENSES UNDER THE SALES PROMOTION. 28. THE AO ASSESSEE FOUND THAT PROMOTIONAL EXPENSES I.E. GIFTS TO DOCTORS AND OTHER IS ACCOUNTED FOR RS. 1,74,690/ -. ON PERUSALS THE DETAILS OF SALE PROMOTION EXPENSES AS FILED BY THE ASSESSEE, THE AO WAS OF THE OPINION THE EXPENSES ON GIFTS OR FREEBIES TO DOCTORS IS NOT ALLOWABLE BUSINESS EXPEN DITURE IN TERMS OF THE CBDT'S CIRCULAR NO.5/2012 DATED 01.08. 2012 R/W EXPLANATION TO SECTION 37(1) OF THE ACT. IN RESPONS E THE ASSESSEE CLARIFIED THAT THE FIELD SALES REPRESENTAT IVE WOULD INCUR THE SAID EXPENDITURE. ACCORDING TO AO THE ASSESSEE DIDN'T DISCLOSE THE LIST OF BENEFICIARIES AND FINDING IT B E ALLOWABLE EXPENDITURE THE GIFTS OR FREEBIES GIVEN TO THE DIST RIBUTOR OR RETAILERS, BUT, HOWEVER, IN ABSENCE OF ANY DETAILS, 50% OF THE EXPENDITURE RS. 88,245/- AGAINST 1,74,690/- WAS ADD ED TO THE INCOME OF THE ASSESSEE U/S 37(1) OF THE ACT. 29. THE ASSESSEE CHALLENGED THE ADDITION MADE BY TH E AO DISALLOWING EXPENSES INCURRED TOWARDS SALES PROMOTI ON. THE ASSESSEE SUBMITTED AS UNDER: 'THAT YOUR PETITIONER DEALS IN MEDICINES OF HUMAN C ONSUMPTION AND IT IS OPEN TO ALL THAT MEDICINES COULD NOT BE SOLD WIT HOUT THE HELP OF THE MEDICAL REPRESENTATIVE. YOUR PETITIONER APPOINTED S ALES REPRESENTATIVE ON CERTAIN TERMS AND CONDITIONS AND THEY PROCURED ORDE R FROM THE MARKET BY GIVING SOME CHARMING OFFERS TO THE BUYERS AND MEDIC AL PRACTITIONERS OVER WHICH YOUR PETITIONER HAS NO CONTROL OVER ADDITIONA L BENEFITS. THAT THE SALES REPRESENTATIVE HAD GIVEN SOME WRITING PADS, LITERAT URES, VISUAL-AID, LEAF-LETS, DOT PENS, DIARIES, TABLE CALENDARS ETC TO THE DEALE RS AND MEDICAL PRACTITIONERS FOR PUSHING BACK THE SALES OF THE COM MODITIES. SUCH EXPENSES HAD BEEN EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PUR POSE OF THE BUSINESS. HENCE THE ADDITION IS RS. 88,245/- MAY KINDLY BE DE LETED. ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 13 30. ACCORDING TO CIT-A THE ASSESSEE DID NOT FURNISH THE DETAILS OF PERSONS ON WHOM THE SALES PROMOTION EXPENSES WER E INCURRED AND THE ISSUE OF PROVIDING FREEBIES TO MED ICAL PRACTITIONERS HAS BEEN DEALT BY BOARD IN CIRCULAR N O. 5/2012, DATED 01.08.2012 AND PROVIDING FREEBIES IN VIOLATIO N OF THE PROVISIONS OF INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULATIONS, 2002 AND ARE INA DMISSIBLE UNDER SECTION 37(1) OF THE ACT AND CONFIRMED THE OR DER OF AO OBSERVING AS UNDER: 'IT HAS BEEN BROUGHT TO THE NOTICE OF THE BOARD THA T SOME PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRIES ARE PROVIDING F REE BEES (FREEBIES) TO MEDICAL PRACTITIONERS AND THEIR PROFESSIONAL ASSOCI ATIONS IN VIOLATION OF THE REGULATIONS ISSUED BY MEDICAL COUNCIL OF INDIA ( THE 'COUNCIL') WHICH IS A REGULATORY BODY CONSTITUTED UNDER THE MEDICAL COU NCIL ACT,1956. 2. THE COUNCIL IN EXERCISE OF ITS STATUTORY POWERS AMENDED THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AN D ETHICS) REGULATIONS, 2002 (THE REGULATIONS) ON 10-12- 2009 IMPOSING A PR OHIBITION ON THE MEDICAL PRACTITIONER AND THEIR PROFESSIONAL ASSOCIA TIONS FROM TAKING ANY GIFT, TRAVEL FACILITY, HOSPITALITY, CASH OR MONETAR Y GRANT FROM THE PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRIES. 3. SECTION 37(1) OF THE INCOME TAX ACT PROVIDES FOR DEDUCTION OF ANY REVENUE EXPENDITURE (OTHER THAN THOSE FAILING UNDER SECTION 30 TO 36) FROM THE BUSINESS INCOME IF SUCH EXPENSE IS LAID OU T/EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSI ON. HOWEVER, THE EXPLANATION APPENDED TO THIS SUB-SECTION DENIES CLA IM OF ANY SUCH EXPENSE, IF THE SAME HAS BEEN INCURRED FOR A PURPOS E WHICH IS EITHER AN OFFENCE OR PROHIBITED BY LAW. THUS, THE CLAIM OF ANY EXPENSE INCURRED IN PROVIDIN G ABOVE MENTIONED OR SIMILAR FREEBEES IN VIOLATION OF THE PROVISIONS OF INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS) REGULA TIONS, 2002 SHALL BE INADMISSIBLE UNDER SECTION 37(1) OF THE INCOME TAX ACT BEING AN EXPENSE PROHIBITED BY THE LAW. THIS DISALLOWANCE SHALL BE M ADE IN THE HANDS OF SUCH PHARMACEUTICAL OR ALLIED HEALTH SECTOR INDUSTR IES OR OTHER ASSESSEE WHICH HAS PROVIDED AFORESAID FREEBEES AND CLAIMED I T AS A DEDUCTIBLE EXPENSE IN ITS ACCOUNTS AGAINST INCOME. 4. IT IS ALSO CLARIFIED THAT THE SUM EQUIVALENT TO VALUE OF FREE BEES ENJOYED BY THE AFORESAID MEDICAL PRACTITIONER OR PR OFESSIONAL ASSOCIATIONS IS ALSO TAXABLE AS BUSINESS INCOME OR INCOME FROM O THER SOURCES AS THE CASE MAY BE DEPENDING ON THE FACTS OF EACH CASE. TH E ASSESSING OFFICERS OF SUCH MEDICAL PRACTITIONER OR PROFESSIONAL ASSOCIATIONS SHOULD EXAMINE THE SAME AND TAKE AN AP PROPRIATE ACTION. THIS MAY BE BROUGHT TO THE NOTICE OF ALL THE OFFICE RS OF THE CHARGE FOR NECESSARY ACTION. ' AS HAS BEEN ELABORATED BY BOARD IN ITS CIRCULAR MED ICAL COUNCIL OF INDIA HAS PROHIBITED MEDICAL PRACTITIONERS FROM TAKING ANY GI FT, ETC. FROM PHARMACEUTICAL & ALLIED SECTORS. THEREFORE ANY EXPE NDITURE INCURRED FOR ABOVE PURPOSE, WHICH IS IN VIOLATION OF PROVISIONS OF INDIAN MEDICAL COUNCIL IS INADMISSIBLE UNDER SECTION 37(1) OF THE I.T. ACT . THEREFORE AS THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF SALES PRO MOTION EXPENSES, A.O. ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 14 HAS QUITE REASONABLY CONSIDERED 50% OF THE EXPENSES INCURRED AS EXPENSES INCURRED FOR MEDICAL PRACTITIONERS, WHICH IS AGAINS T THE REGULATION OF MEDICAL COUNCIL OF INDIA. THEREFORE IT HAS BEEN COR RECTLY DISALLOWED AS PER EXPLANATION TO SECTION 37(1). THE APPEAL MADE ON TH IS GROUND IS DISMISSED. 31. THE LD.AR SUBMITS THAT WITHOUT ANY BASIS THE LD .AO ADDED 50% OF SALES PROMOTIONAL EXPENSES AND REITERATED TH E SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW. 32. THE LD.DR ARGUED THAT NO WHERE BEFORE THE AUTHO RITIES IT WAS CONTENDED THAT THE EXPENSES INCURRED TOWARDS SA LES AND PROMOTION SCHEME AND RELIED ON THE ORDERS OF AUTHOR ITIES BELOW. 33. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. IT IS SEEN FROM THE RECORD THAT THE ASSE SSEE SUPPLIES MACHINES FOR HUMAN CONSUMPTION AND PROMOTES SALES T HROUGH MEDICAL REPRESENTATIVES. IT IS OBSERVED FROM THE SU BMISSIONS OF THE ASSESSEE BEFORE THE CIT-A THAT THE SAID EXPENSE S INCURRED TOWARDS PURCHASE OF WRITING PADS, LITERATURES, VISU AL AID, LEAF LETS, DOT PENS, DIARIES AND TABLE CALENDARS AND ARE SUPPLIED TO MEDICAL PRACTITIONERS. WE FIND THAT IT IS A GENERAL PRACTICE THAT ANYONE IN PHARMACEUTICAL BUSINESS WOULD INCUR SAID EXPENDITURE IN CONNECTION WITH THEIR BUSINESS AND WE HOLD THAT IT IS A BUSINESS EXPENDITURE AND IS ALLOWABLE U/SEC 37(1) O F THE ACT. THEREFORE, GROUND NO-5 IS ALLOWED AND ACCORDINGLY T HE ADDITION MADE THEREUNDER IS DELETED. 34. GROUND NO-5 RELATING TO DISALLOWANCE AS U/SECTI ON 40(A) (IA) OF THE ACT FOR VIOLATION OF NON DEDUCTION OF T DS U/SECTION 194C OF THE ACT. 35. THE AO FOUND EXPENSES TO THE TUNE OF RS.43,100/ - AND RS. 49,150/- UNDER THE HEADS 'BISWAKARMA PUJA' AND 'BIR THDAY ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 15 CELEBRATION'S RESPECTIVELY UNDER ENTERTAINMENT EXPE NSES. IN EXPLANATION IT WAS STATED THAT RS. 33,500/- AND RS. 46,500/- RESPECTIVELY WERE PAID TO ONE M/S STAR DECORATORS A ND CATERER OF KOLKATA-700061 AND THE ASSESSEE EXPLAINED THAT T HE AMOUNTS WERE PAID FOR EACH OCCASION ON DIFFERENT DATES IN T HE FOLLOWING MANNER: FOR BISWAKARMA PUJA: DATE: 17-09-2009: RS. 17,625/- FOR SUPPLY OF FOODS AND DRINKS FOR 135 PERSONS DATE: 20-09-2009: RS. 3,375/- FOR SERVICE CHARGES @ 25/-FOR 135 PERSONS FOR BIRTHDAY CELEBRATION: DATE: 24-02-2010: RS. 39,000/ -FOR SUPPLY OF ???? (NOTHING WRITTEN). DATE: 26.02.2010: RS. 7,500/- FOR SERVICE CHARGES @ 50/- FOR 150 PERSONS 36. BASING ON THE PHOTOCOPIES OF MONEY RECEIPTS ISS UED BY THE SAID FIRM IN ITS OWN LETTERHEAD, THE AO FOUND THE D ISCREPANCIES AS UNDER: FOR BISWAKARMA PUJA: RECEIVED A SUM OF RS. 21,000/- FOR 135 PLATES OF LUNCH INCLUDING MUTTON, FISH, FISH FRY, FRIED RICE, SWEET ON THE OCCASION OF BISWAKARMA PUJA FROM M/S ESKAAR PHARMACEUTICALS (DATED 17.09.2009.) FOR BIRTHDAY CELEBRATION: RECEIVED A SUM OF RS. 46, 500/- TOWARDS THE COST OF FOOD, FLOWER & CAKES FOR ARRANGE THE BIRTHDAY PARTY & REFRESHES 150 GUESTS WITH BREAKFAST AND LUNCH INCLUDING MUTTON, FISH, FISHFRY, FRIED RI CE, SWEET ON THE OCCASION OF BIRTHDAY OF MRS. SUCHARITA KAR, PROPRIETOR OF M/S ESKAAR PHARMA CEUTICALS (DATED 24,02.2010.) 37. TAKING INTO CONSIDERATION THE MONEY RECEIPTS, T HE AO FORMED AN OPINION THAT THE ASSESSEE PAID SUCH AMOUN TS TO THE SAID FIRM AT A TIME AND FILED VOUCHERS OF DIFFERENT DATES AS THE AMOUNT EXCEEDED THE PRESCRIBED LIMIT OF RS.50,000/- AND FOR VIOLATION OF SECTION 194C OF THE ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE AND THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW: FROM PERUSAL OF ABOVE, IT IS CLEAR THAT IN BOTH THE OCCASIONS, THE SAID DECORATING FIRM WAS CONTACTED FOR PROVIDING FLOWERS , SUPPLYING FOODS ETC. AS A WHOLE AND THE PAYMENTS WERE MADE AT A TIME FOR THE ENTIRE EVENT, NOT IN SPLIT MANNER AS THE ASSESSEE TRIED TO PRESEN T BY FILING SEPARATE VOUCHERS OF DIFFERENT DATES. IT IS UNBELIEVABLE THA T THE SAID DECORATING FIRM ISSUED THE MONEY RECEIPTS IN ITS OWN PAD EVEN BEFORE RECEIVING THE ENTIRE PAYMENT (IN CASE OF BISWAKARMA PUJA, THE MON EY RECEIPT ISSUED ON 17.09.2009., WHEREAS VOUCHERS SHOWED PAYMENTS OF RS.17,625/ - ON ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 16 17.09.09. AND RS.3,375/- ON 20.09.2009 RESPECTIVELY AND IN CASE OF BIRTHDAY CELEBRATION, THE MONEY RECEIPT ISSUED ON 2 4.02.2010., WHEREAS VOUCHERS SHOWED PAYMENTS OF RS. 39,100/- ON 24.02.1 0.AND RS. 7,500/-. ON 26.02.2010 RESPECTIVELY). SO, IT HAS BEEN CLEARL Y AN AFTERTHOUGHT ON RECEIPT OF THE SHOW CAUSE LETTER. MOREOVER THE TOTA L ANNUAL PAYMENT TO THE SAID FIRM WAS RS.67,500/-, WHICH IS HIGHER THAN RS. 50,000/-, THE THRESHOLD LIMIT FOR NON APPLICATION OF SECTION 194C . THE ASSESSEE DIDN'T DISPUTE THE EXISTENCE OF CONTRACT BETWEEN THE SAID FIRM AND HERS. SO PAYMENT OF RS. 67,500/ - WAS PAID IN VIOLATION OF T HE TDS OBLIGATION STIPULATED U/S 194C OF THE ACT AND THE SUM IS HEREB Y DISALLOWED U/S 40(A)(IA) OF THE ACT AND ADDED BACK TO HER INCOME. 38. BEFORE THE CIT-A, THE ASSESSEE SUBMITTED AS UN DER: 'THAT YOUR PETITIONER EXPENDED A SUM OF RS.67,500/- ON ACCOUNT OF BISWAKARMA PUJA AND BIRTHDAY CELEBRATION, THIS AMOU NT WAS PAID TO THE CATERER FOR SUPPLY OF FOOD AND LABOUR CHARGES SEPAR ATELY ON DIFFERENT DATES. HENCE, THE ADDITIONAL OF RS.67,500/-MAY BE DELETED. NOW, WE ARE READY TO SUBMIT ANY OTHER INFORMATION A ND EVIDENCES AS YOUR HONOUR MAY DEEM FIT AND PROPER. ' 39. THE FINDING OF THE CIT-A WAS THAT THE WHOLE AMO UNT FOR THE BOTH THE OCCASIONS PAID TO ONE CONTRACTOR IN ONE YE AR WHICH EXCEEDED RS.50,000/- AND CONFIRMED THE ADDITION MAD E BY THE AO AS UNDER: 8.4 THE OTHER GROUND OF ADDITION MADE BY A.O. IS U NDER SECTION 40(A)(IA) AS THE PAYMENT MADE TO ONE M/S. DECORATOR S & CATERER, ON TWO OCCASION NAMELY 'BISWAKARMA PUJA' AND 'BIRTHDAY CEL EBRATION'. ON EACH OCCASION THE PAYMENT EXCEEDED RS.20,000/- THEREFORE TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE U/S. 194C AS THE PAYMENT W AS CONTRACTUAL IN NATURE. ASSESSEE'S CLAIM THAT THE MONEY RECEIPT SHO WS THAT PAYMENT ON EACH OCCASION WAS BELOW RS.20,000/- HAS CORRECTLY N OT BEEN ACCEPTED BY A.O., AS THE BILLS WERE ISSUED PRIOR TO ISSUE OF MO NEY RECEIPT AND ONE BILL WAS ISSUED FOR EACH OCCASION, THAT IS BISWAKARMA PU JA AND BIRTHDAY CELEBRATION, SHOWING EXPENSES ABOVE RS.30,000/- ON EACH OCCASION. THEREFORE, A.O. HAS CORRECTLY TREATED THE MONEY REC EIPT SHOWING LESSER AMOUNT OF PAYMENT, SPLIT ON DIFFERENT DATES, WAS CL EARLY IN THE NATURE OF ACCOMMODATION, TO PERHAPS AVOID PROVISIONS OF SECTI ON 40A(3). THE BILLS CLEARLY INDICATES THAT EACH CONTRACT WAS FOR AMOUNT EXCEEDING THRESHOLD LIMIT FOR TAX DEDUCTION AT SOURCE. IN ANY CASE THE COMBINED PAYMENT MADE TO CONTRACTOR DURING THIS YEAR EXCEEDED RS.50, 000/-, FOR WHICH TAX DEDUCTION AT SOURCE U/S 194C WAS REQUIRED TO BE DON E. AS NO TAX WAS DEDUCTED, A.O. HAD CORRECTLY DISALLOWED THE EXPENSE CLAIMED ULS. 40(A)(IA). THE APPEAL ON THIS GROUND IS DISMISSED. 40. THE LD.AR SUBMITS THAT IT IS AN ENTERTAINMENT E XPENSES AND THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND M/S. DECORATORS & CATERER AND LD.DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 17 41. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVA ILABLE ON RECORD. WE FIND THAT THE AO FOUND THAT THE PAYMENT TOTALLING TO RS.67,500/- WAS MADE TO ONE CONTRACTOR AND DISCRE PANCIES ON COMPARING THE SUBMISSIONS OF THE ASSESSEE WITH THAT OF RECEIPTS AS ISSUED BY SAID M/S. DECORATORS & CATERER. THE CO NTENTION OF THE AO WAS THAT SAID M/S. DECORATORS & CATERER ISSU ED ONE RECEIPT FOR BOTH THE OCCASIONS EXCEEDING THE MONETA RY LIMIT AS PRESCRIBED AND VIOLATED PROVISION U/SEC 194C OF THE ACT. THE CONTENTION OF THE ASSESSEE WAS THAT THE SAID PAYMEN TS WERE MADE ON DIFFERENT OCCASIONS. THE LD.AR CONTENDS THA T THERE WAS NO CONTRACT BETWEEN THE PARTIES AND THEREBY NO ADDI TION ATTRACTS U/SEC 40(A)(IA) OF THE ACT. WE FIND THAT THE TRIBU NAL IN THE CASE OF RAJA TRANSPORT SUPRA HELD THAT FOR VIOLATION OF SECTION 194C AND ADDITION BY INVOKING THE PROVISION OF SECTION 4 0(A)(IA) OF THE ACT IS NOT MAINTAINABLE IN THE ABSENCE OF EITHER VE RBAL OR WRITTEN CONTRACT. WE ALSO FIND THAT THE TRIBUNAL IN THE CA SE OF SUPRA DERIVED SUPPORT FROM THE DECISION OF THE HONBLE JU RISDICTIONAL HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. STUMN INDIA IN ARRIVING SUCH CONCLUSION AS DISCUSSED ABOVE. THE RE LEVANT DISCUSSION AND FINDING OF THE TRIBUNAL IN THE CASE OF SUPRA AT PARA NO. 2.4 AND 2.5 ARE REPRODUCED HEREIN BELOW:- 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. THE FACTS STATED HEREINABOVE U NDISPUTED AND HENCE, THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY; WE FIND FROM THE FACTS AND CIRCUMSTANCE OF THE CASE THAT THE PROVISION OF SECT ION 194C(2) COULD NOT BE MADE APPLICABLE AS THERE WAS NO CONTRACT BETWEEN TH E ASSESSEE AND INDIVIDUAL DUMPER OWNERS AND HENCE, THE INVOCATION OF PROVISION OF SECTION 40(A)(IA) CANNOT BE MADE APPLICABLE. WE FIND THAT T HE INVOCATION OF PROVISIONS OF SECTION 40(A)(IA) IS TO BE DECIDED ON THE SCOPE AND AMBIT OF SUCH ENACTMENT. IT IS NOT IN DISPUTE THAT THE ASSES SEE HAD INDEED DEDUCTED TAX AT SOURCE WHEREVER IT HAD DULY ENTERED INTO CON TRACTS FOR TRANSPORTATION OF GOODS TO THE TUNE OF RS.11,18,33,299/- OF THE TO TAL HIRE CHARGES RS.16,17,19,641/-. IN RESPECT OF REMAINING HIRE CHA RGES OF RS.4,98,86,342/- ,DEPENDING ON THE EXIGENCIES OF CIRCUMSTANCES, THE ASSESSEE HAD MADE PAYMENTS TOWARDS HIRE CHARGES ON TEMPORARY BASIS ON VARIOUS OCCASIONS WHICH WAS DONE FROM THE MARKET MOSTLY THROUGH BROKE RS. WE FIND THAT THERE WAS NO MATERIAL TO SUGGEST THE DUMPER OWNERS/DRIVER S WHO ARE ARRANGED THROUGH BROKERS BY THE ASSESSEE WERE INVOLVED IN CA RRYING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE BY SPENDING THE IR TIME, ENERGY AND BY TAKING THE RISK ASSOCIATED WITH THE MAIN CONTRACT W ORK. NO CONTRACT, EITHER ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 18 VERBAL OR WRITTEN, IS ENTERED INTO WITH THE OWNERS/ DRIVERS IN THESE CASES OF PURELY TEMPORARY TRANSPORTING ARRANGEMENTS. 2.5 WE FIND THAT THE ISSUE BEFORE US IS COVERED B Y THE DIRECT DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. STUMN INDIA SUPRA, WHEREIN IT WAS HELD THAT : IT IS URGED BEFORE US THAT THE LEARNED TRIBUNAL OU GHT NOT TO HAVE ACCEPTED THE JUDGMENT AND ORDER OF THE CIT(APPEAL) WHO HAS QUASHED THE DISALLOWANCE OF DEDUCTION OF RS.41,33,710/- AND ON ACCOUNT OF TAX DEDUCTION AT SOURCE. THE LEARNED TRIBUNAL HAS RECOR DED THE FACT THAT THE DEPARTMENT HAS NOT BEEN ABLE TO BRING ANY MATER IAL ON RECORD TO SHOW THAT THE ASSESSEE HAS MADE THE PAYMENT TO THE TRANSPORTERS IN PURSUANCE OF CONTRACT FOR CARRIAGE OF GOODS OF THE ASSESSEE AND THE QUESTION OF DEDUCTION AT SOURCE UNDER SECTION 194C DOES NOT AND CANNOT ARISE. IN THE ABSENCE OF EVIDENCE OF PAYMENT MADE BY THE ASSESSEE TO THE TRANSPORTERS, THE ASSESSEE CANNOT B E SADDLED WITH THE LIABILITY OF DEDUCTING TAX AT SOURCE. BEFORE US NO OTHER POINT AS BEING URGED NOT IT IS SAID THAT THE AFORESAID FACT FINDIN G IS TRUTHFUL WITHOUT ANY BASIS WHATSOEVER. 42. IN THE PRESENT CASE THE CONTENTION OF THE LD.AR AS NOTICED FROM THE ORDERS OF THE AUTHORITIES BELOW THAT THERE WAS NO CONTRACT IN EXISTENCE BETWEEN THE ASSESSEE NOR THE ORGANISERS OF SUCH CER EMONY, AS THE CASE MAY BE, AND THE M/S. DECORATORS & CATERER. IN SUCH CIRCUMSTANCES AS RIGHTLY POINTED OUT BY THE LD. AR THAT THE FACTS IN THE AFOREMENTIONED CASE AS DECIDED BY THE KOLKATA TRIBUNAL IN THE CASE OF SUPRA ARE CLEARLY APPLICABLE TO THE PRESENT FACTS OF THE CASE TO THE EXTENT THAT THE REVENUE COULD NOT PRODUCE ANYTHING ON RECORD TO SHOW THE EX ISTENCE OF ANY CONTRACT. WE ALSO FIND THAT THE TRIBUNAL SUPRA WHILE CONSIDERING THE CASE ON HAND DERIVED SUPPORT FROM THE DECISION OF HONBL E JURISDICTIONAL HIGH COURT OF CALCUTTA IN THE CASE OF SUPRA. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE ORDER OF THE CIT-A IS UNJUSTIFIED AND ACCORDINGLY, WE DELETE THE IMPUGNED ADDITION AS MADE BY THE AO AND AS CONF IRMED BY CIT-A. THUS, THE GROUND-6 RAISED IN THIS REGARD IS ALLOWED . ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 19 43. IN THE RESULT, THE APPEAL OF ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 14 TH DECEMBER,2016 SD/- SD/- M.BALAGANESH S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 14/12/ 2016 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT/ ASSESSEE: SMT. SUCHARITA KAR PROP M/S. ESKAAR PHARMACEUTICALS 1A, PEARY MOHAN PAUL LANE, KOLKATA- 7. 2 THE RESPONDENT/ DEPARTMENT: INCOME TAX OFFICER, WARD 55(1), 54/1 RAFI AHMED KIDWAI ROAD, KOLKATA-16 . 3 4. / THE CIT(A) THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . **PP/SPS TRUE COPY, BY ORDER, AS STT REGISTRAR ITA NO. 2239/KOL/14 SMT. SUCHARITA KAR 20