ITO, Ward - 36(4), Kolkata, Kolkata V. Shri Tarun Kumar Dey, Kolkata

ITA 226/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54742 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 15-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 03-02-2010
• Court: TRIBUNAL
• Department Lawyers: S K ROY LD
• Assessee Lawyers: D KHASNOBIS LD
• Keywords: Opportunity of being heard
• Section: 133(6)

Judgement Text

, A , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A , CALCUTTA () BEFORE , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . !., '# , SHRI C.D. RAO, ACCOUNTANT MEMBER. $ / ITA NO. 226/KOL/2010 %& '(/ ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER WARD 36(4), KOLKATA SRI TARUN KUMAR DEY PAN: ADVPD 8543M (*+ / APPELLANT ) - % - - VERSUS - . (-.*+/ RESPONDENT ) *+ / 0 '/ FOR THE APPELLANT: / SHRI S. K. ROY, LD.DR -.*+ / 0 '/ FOR THE RESPONDENT: / SHRI D. KHASNOBIS, LD.AR 1%2 / !# /DATE OF HEARING : 28-10-2011 3' / !# /DATE OF PRONOUNCEMENT :9-12-2011 '4 / ORDER . !., '# , ,, , SHRI C.D.RAO, ACCOUNTANT MEMBER.: REVENUE HAS FILED THIS APPEAL AGAINST ORDER DATED 3 RD NOVEMBER, 2009 OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), KOLKATA FOR T HE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL THOUGH THE REVENUE HAS TAKEN SEVE RAL GROUNDS, BUT ALL ARE RELATING TO DELETION OF ADDITION OF RS.25,25,356/- ON ACCOUNT O F FOUR SUNDRY CREDITORS. 3. BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DOING THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER HAS MADE THE FOLLOWING ADDITIONS BY OBSERV ING AS UNDER:- [PARA 6 & 6.1] DURING THE COURSE OF HEARING, THE A/R OF THE ASSES SEE HAS FURNISHED THE LIST OF SUNDRY CREDITORS ALONG WITH ADDRESSES AND AMOUNT DU E TO THEM AS ON 31.03.06. IT IS WORTH MENTIONING HERE THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS TO THE TUNE OF RS. 54.21 LACS AND ON THE OTHER HAND I.E. ON THE ASSET SIDE THE AS SESSEE HAS SHOWN FIXED DEPOSITS OF RS. 26.75 LACS, INVESTMENT IN MUTUAL FUND RS. 9 LACS, S UNDRY DEBTORS OF RS. 13.18 LACS AND CASH AT BANK RS. 24.25 LACS. ON GOING THROUGH THE A SSET SIDE, IT CREATES DOUBT ABOUT THE GENUINENESS OF SUNDRY CREDITORS, BECAUSE THE ASSESS EE WAS PAYING TO HIS CREDITORS WHEREAS HE WAS SITTING ON CASH. LETTERS WERE ISSUED TO THE SUNDRY CREDITORS FOR CONFIRMATION OF THE ITA NO.226/KOL/2010-CDR-A 2 TRANSACTIONS OF THE ASSESSEE UNDER SECTION 133(6) O F THE L.T. ACT, 1961. OUT OF THE LETTERS ISSUED TO THE ADDRESSES AVAILABLE ON RECORD AS FURN ISHED BY THE ASSESSEE, FOUR LETTERS ADDRESSED TO M/S. HIND GALVANIZING & ENGINEERING, M /S. G. K. BROTHERS, M/S. MAHABIR TRADING CO. & M/S. J. P. STEEL WERE RETURNED UNSERV ED WITH A POSTAL REMARK NOT KNOWN AND ONE SUNDRY CREDITOR NAMED AS M/S. BHUSHA N POWER & STEEL LTD. HAS INFORMED THAT THERE WAS NO OUTSTANDING AS ON 31.03. 06. 6.1 IT IS WORTH MENTIONING HERE THAT THE ASSESSEE H AS CLAIMED PAYMENTS OUTSTANDING TO THE FOLLOWING PARTIES AS ON 31.03.06 AS UNDER:- SL.NO. NAME OF THE SUNDRY CREDITORS AMOUNT (IN RS) DUE AS ON 31.03.06 01. M/S. HIND GALVANISING & ENGG.CO. 1,78,410-00 02. G.K. BROTHERS 11,36,157-99 03. M/S. MAHABIR TRADING CO. 4,02,696-33 04. M/S. J.P STEEL 8,08,092-00 05. M/S. BHUSHAN POWER & STEEL LTD. 12,27,213-00 TOTAL 37,52,569-32 LETTERS ISSUED TO THE ABOVE SUNDRY CREDITORS WERE E ITHER FOUND AS NON-EXISTENT OR THEY HAVE DENIED HAVING ANY AMOUNT OUTSTANDING AS O N 31.03.06 WITH M/S. DECO ENTERPRISE. NARRATING ALL THE ABOVE FACTS AND INFORMATION, THE ASSESSEE HAS BEEN GIVEN OPPORTUNITY VIDE THIS LETTER DATED 23.12.08 & 26.12 .08 WITH A REQUEST TO SUBMIT HIS REPLY! EXPLANATION BY 29.12.08. THE SEE WAS REQUESTED TO P ROVE THAT ALL THOSE CREDITORS WHICH ARE CLAIMED TO HAVE EXISTED AT THE END OF THE YEAR ACTUALLY EXISTED AND ALSO PROVE THAT ACTUALLY THE PAYMENTS WERE MADE TO THEM. BUT THE AS SESSEE NOR THE LD. A/R APPEARED TILL DATE TO EXPLAIN HIS POSITION WHICH CLEARLY INDICATE S THAT 9SSEE HAS NOTHING TO SAY OR HAS NO EXPLAIN IN THIS REGARD. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS NOT F URNISHED ANY EVIDENCE IN SUPPORT OF HIS CLAIM OF AND EXISTENCE OF PARTIES DURING THE RELEVANT FINANCIAL YEAR 2005-2006, ALTHOUGH INFORMATION AND EVIDENCES GATHERED DURING THE COURSE OF ASSESSMENT PROCEEDING IS DULY COMMUNICATED TO THE ASSESSEE IEN T OPPORTUNITY OF BEING HEARD AS STATED ABOVE WAS ALSO GIVEN TO THE ASSESSEE TO HIS SATISFACTION. BUT, THE ASSESSEE UTTERLY FAILED TO PROVE HIS CLAIM. IN SUCH PREMISE, THE UNDERSIGNED IS CONSTRAINED TO TREAT THE ABOVE MENTIONED SUNDRY CREDITORS OF RS.37,52,569.32 AGAINST TRADING LIABILITIES AS BOGUS AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE CESSATION OF LIABI LITY U/S.41(1) OF THE I. T. ACT, 1961 . 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME-TA X (APPEALS) HAS DELETED THE SAME BY OBSERVING AS UNDER:- 4.5 I HAVE PERUSED THE ASSESSMENT ORDER AND THE REM AND REPORT. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND ALSO THE MATERIAL AND EVIDENCE ON RECORD. IN THE CASE OF M/S. BHUSHAN PO WER & STEEL LTD, THE ITA NO.226/KOL/2010-CDR-A 3 OUTSTANDING BALANCE OF RS.12,27,213/- WAS VERIFIED BY THE AO IN THE REMAND PROCEEDINGS. IN THE CASE OF OTHER CREDITORS , PAYMENTS WERE MADE IN THE SUBSEQUENT YEARS, WHICH ARE DULY RECORDED IN THE BOOKS OF ACCOUNT. IT IS AN ADMITTED FACT THAT THE APPELLANT HAS CONTI NUED TO SHOW THE AMOUNTS AS LIABILITY IN THE BALANCE SHEET. IN THE C ASE OF CIT VS. TAMILNADU WAREHOUSING CORPORATION [2007] 292 ITR 310 (MADRAS) , THE HONBLE MADRAS HIGH COURT HAS HELD THAT ONCE THE ASSESSEE H AS CONTINUED TO SHOW THE ADMITTED AMOUNT AS LIABILITY IN THE BALANCE SHE ET, IT IS NOT ASSESSABLE U/S.41(1). UNLESS AND UNTIL THERE IS A CESSATION OF LIABILITY, SECTION 41 WILL NOT BE PRESSED INTO SERVICE. IN THE CASE OF VISNAGAR TALUKA AUDYOGIK SAHAKARI MA NDI LTD VS. CIT 242 ITR 627 (GUJRAT), THE HONBLE GUJRAT HIGH C OURT HAS HELD THAT ONE HAS TO GO BY THE LANGUAGE USED IN SECTION 41(1) TO FIND OUT WHETHER OR NOT THE AMOUNT WAS OBTAINED BY THE ASSESSEE OR WHET HER OR NOT SOME BENEFIT IN RESPECT OF TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF WAS OBTAINED BY THE ASSESSEE AND IT IS IN THE PREVIOUS YEAR IN WHICH THE AMOUNT OR BENEFIT, AS THE CASE MAY BE, HAS BEEN OBTAINED THAT THE AMOUNT OR THE VALUE OF THE BENEFIT WOULD BECOME C HARGEABLE TO INCOME TAX AS INCOME OF THAT PREVIOUS YEAR. A CESSATION OF LI ABILITY FOR THE PURPOSES OF SECTION 41(1) OF THE ACT WOULD MEAN IRREVOCABLE CES SATION SO THAT THERE IS NO POSSIBILITY OF THE LIABILITY BEING REVIVED IN FU TURE. 4.6 THE APPELLANT HAS CONTINUED TO SHOW THE AMOUNT S AS ADMITTED LIABILITY IN THE BALANCE SHEET. THE AO HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT THERE IS ANY CESSATION OF LIABILITY. A LSO, THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE APPELLANT HAS PAID OFF T HE LIABILITIES FROM HIS UNACCOUNTED SOURCES AND THAT THEY NO LONGER EXIST. ON THE CONTRARY, THERE IS MATERIAL ON RECORD TO SHOW THAT PAYMENTS WERE AC TUALLY MADE TO THE CREDITORS IN THE SUBSEQUENT YEARS. THESE PAYMENTS A RE FOUND RECORDED IN THE CASH BOOK OF THE APPELLANT AND THE SAME WAS ALS O VERIFIED BY THE AO IN THE REMAND PROCEEDINGS. IF THE AO STILL FELT THA T THE ADMITTED LIABILITIES, SHOWN IN THE AUDITED BALANCE SHEET OF THE APPELLANT , ARE BOGUS AND HAVE CEASED TO EXIST, THE ONUS WAS ON THE AO TO BRING PO SITIVE MATERIAL ON RECORD TO ESTABLISH THAT THE LIABILITIES HAD ACTUAL LY CEASED TO EXIST. I FIND NO JUSTIFICATION FOR THE AO TO PRESUME THAT THE LIA BILITIES ARE BOGUS AND THAT THEY HAVE CEASED TO EXIST. I AM INCLINED TO AG REE WITH THE APPELLANT THAT THE PROVISIONS OF SECTION 41(1) ARE NOT APPLIC ABLE IN HIS CASE. THE LEGAL PRONOUNCEMENTS IN THIS REGARD ALSO SUPPORT TH E CASE OF THE APPELLANT. IN VIEW OF THE ABOVE, I AM OF THE OPINIO N THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE OUTSTANDING SUNDRY CR EDITORS ARE BOGUS AND THAT THEY HAVE CEASED TO EXIST. THE PROVISIONS OF S ECTION 41(1) ARE NOT ATTRACTED IN THE CASE OF THE APPELLANT. THE ADDITIO N MADE BY THE AO IS DIRECTED TO BE DELETED. ITA NO.226/KOL/2010-CDR-A 4 5. AGGRIEVED BY THIS, NOW THE REVENUE IS IN APPEA L BEFORE US. 6. AT THE TIME OF HEARING BEFORE US THE LD. DR BY R EFERRING TO PAGE NO.3 OF THE REMAND REPORT SUBMITTED THAT THE ASSESSING OFFICER HAS CAT EGORICALLY OBSERVED THAT FROM THE EXAMINATION OF THE DOCUMENTS/ACCOUNTS PRODUCED, IT IS NOTICED THAT THE ALLEGED CASH PAYMENTS WERE MADE THROUGH SELF MADE VOUCHERS. THE APPELLANT ALSO COULD NOT PROVIDE ANY ADDRESS OF THOSE RECIPIENTS WHO ARE CLAIMED TO BE RECEIVING PE RIODICAL CASH PAYMENTS ON BEHALF OF THOSE SUNDRY CREDITORS. THEREFORE, THOSE ALLEGED RECIPIEN TS CANNOT BE SUMMONED FOR EXAMINATION BY DEPOSITION. HENCE, THE GENUINENESS OF THOSE PAYMENT S ARE NOT AT ALL VERIFIED. THUS, THE CLAIM OF THE APPELLANT IN RESPECT OF THE FOUR SUNDRY CREDIT ORS IS NOT FULL PROOF. THEREFORE, IT IS NOT JUSTIFIED ON THE PART OF THE LEARNED COMMISSIONER O F INCOME-TAX (APPEALS) TO DELETE THE SAME, EVEN AFTER CONSIDERING THE REMAND REPORT. 7. ON THE OTHER HAND, THE LEARNED COUNSEL APPEARIN G ON BEHALF OF THE ASSESSEE HAS HEAVILY RELIED ON THE OBSERVATIONS MADE BY THE LEARNED COMM ISSIONER OF INCOME-TAX(APPEALS) AND IN THE CASE OF VISNAGAR TALUKA AUDYOGIK SAHAKARI MANDI LTD. VS. CIT [242 ITR 627(GUJ)]. THUS, HE REQUESTED THE BENCH TO UPHOLD THE ACTION O F THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN DELETING THE ADDITION. 8. AFTER HEARING THE RIVAL SUBMISSIONS, ON CAREF UL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE ASSESSEE HAS BE EN CONTINUOUSLY SHOWING THE AMOUNTS AS LIABILITY IN THE BALANCE SHEET AND THE ASSESSING OF FICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THERE IS NO ANY CESSATION OF LIABILIT Y. ON THE CONTRARY, THERE IS MATERIAL ON RECORD TO SHOW THAT PAYMENTS WERE ACTUALLY MADE TO THE CRE DITORS IN THE SUBSEQUENT YEARS. THESE PAYMENTS WERE FOUND RECORDED IN THE BOOKS OF ACCO UNT OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT PROVISIONS OF SECTION 41(1) ARE NOT A PPLICABLE TO THE FACTS OF THE PRESENT CASE. THUS, WE FIND NO INFIRMITY IN THE ORDER OF THE LEAR NED COMMISSIONER OF INCOME-TAX (APPEALS) IN DELETING THE ADDITIONS MADE BY THE ASSESSING OF FICER. WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). ITA NO.226/KOL/2010-CDR-A 5 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. '4 #1' 5 1% 6 7 THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 9-12- 2011 SD/- SD/- ( , ) ( MAHAVIR SINGH, JUDICIAL MEMBER) ( . !. , '# ) ( C.D. RAO ,ACCOUNTANT MEMBER ) ( (( (!# !# !# !#) )) ) DATE: 09-12-2011 '4 / -8 9'8': / COPY OF THE ORDER FORWARDED TO: 1. . *+ / THE APPELLANT : I.T.O W 36(4), KOL 18 RABINDRA S ARANI, KOL. 2 -.*+ / THE RESPONDENT- SRI TARUN KUMAR DEY 37 N.S ROAD , KOL-1. 3. 4% / THE CIT, 4. 4% ( )/ THE CIT(A), 5 . ;6 -% / DR, KOLKATA BENCH 6 . GUARD FILE . .8 -/ TRUE COPY, '4%1/ BY ORDER, < /ASSTT REGISTRAR . *PRADIP* => %?< @