Shri Natverlal Tribhovandas Patel, Ahmedabad V. The Income tax Officer,Ward-12(3), Ahmedabad

ITA 227/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63023 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: V P PATEL

Judgement Text

I.T.A.NO.227/A HD/2011 ASSESSMENT YEAR 2007-08 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, A HMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 227/AHD/2011 (ASSESSMENT YEAR: 2007-08) SHRI NATVERLAL TRIBHOVANDAS PATEL 79 UTTAR GUJARAT PATEL SOCIETY-1 NEAR MOHAN CINEMA, AHMEDABAD. (APPELLANT) VS. INCOME TAX OFFICER, WARD 12(3), NARAYAN CHAMBER, NEAR PATRANG HOTEL, ASHRAM ROAD, AHMEDABAD. (RESPONDENT) PAN: AFMPP 2705G APPELLANT BY : MR. V.P. PATEL. RESPONDENT BY : MR. D.K.SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 20 - 0 9-2012 DATE OF PRONOUNCEMENT : 19- 10-2012 PER: SHRI ANIL CHATURVEDI, A.M. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF CIT (A)-XX, AHMEDABAD DATED 7-11-2010 FOR THE ASSESSMENT YEAR 2 007-08. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS PROPRIETOR OF K.N. PATEL AND SONS. ASSESSEE FILED HIS RETURN OF INCOME ON 31-10- 2007 FOR THE I.T.A.NO.227/A HD/2011 ASSESSMENT YEAR 2007-08 . 2 ASSESSMENT YEAR 2007-08 DECLARING TOTAL INCOME OF R S.1,37,510/-.THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESS MENT WAS FRAMED U/S.143(3) VIDE ORDER DATED 24-12-2009 AND THE TOTA L INCOME WAS DETERMINED AT RS.9,00,610/- AFTER MAKING VARIOUS AD DITIONS. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE PREFERRED BEFORE CIT (A) . CIT (A) VIDE ORDER DATED 7-11-2010 DISMISSED THE APPEAL AND THEREFORE THE ASSESSEE IS NOW IN APPEAL BEFORE US. 3. BEFORE US THE A.R. DID NOT PRESS SECOND GROUND A ND HENCE NOT ADJUDICATED. 4. GROUND NO.1 READS AS UNDER:- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN SUSTAINING ADDITION OF RS.5,88,601/- TOWARDS CREDIT BALANCE OF CREDITORS (BY TREATING UNEXPLAINED SUNDRY CREDITORS), WHERE THE A PPELLANT HAD ADDUCED SUFFICIENT EVIDENCES AND GIVEN PLAUSIBLE EX PLANATION FOR LONG PERIOD OUTSTANDING, HENCE THE SAME MAY PLEASE BE DE LETED. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. ON PERUSING THE BALANCE SHEET NOTICED THAT THERE WERE 12 PARTIES AP PEARING AS SUNDRY CREDITORS WHICH WERE OUTSTANDING FOR LAST 3 YEARS A ND THE AGGREGATE AMOUNT WAS RS.5,88,601/-.ASSESSEE WAS ASKED TO FURNISH SUP PORTING CONFIRMATIONS, COMPLETE ADDRESS AND PAN NUMBER OF T HE CREDITORS AND REASON FOR IT BEING OUTSTANDING FOR 3 YEARS. THE AS SESSEE SUBMITTED THAT THE PARTIES APPEARING IN SUNDRY CREDITORS HAD SUPPL IED INFERIOR QUALITY GOODS. THOSE PARTIES HAVE ALLOWED THE ASSESSEE TO M AKE THE PAYMENT AFTER THE GOODS ARE SOLD. IT WAS FURTHER SUBMITTED THAT THE RELATION OF I.T.A.NO.227/A HD/2011 ASSESSMENT YEAR 2007-08 . 3 ASSESSEE WAS NOT GOOD WITH THE CREDITORS AND THAT T HERE ARE NO TRADING TRANSACTIONS WITH THE AFORESAID PARTIES. THE A.O. D ID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND RELYING ON THE DECI SION IN THE CASE OF UPLAKSHA METAL IND. VS. CIT (209) TAXMAN 298 (P& H) ADDED RS.5,88,601/- AS INCOME OF THE ASSESSEE. 6. AGGRIEVED BY THE ACTION OF A.O. THE ASSESSEE CAR RIED THE MATTER BEFORE CIT (A). BEFORE CIT (A), ASSESSEE REITERATE D THE CONTENTIONS MADE BEFORE A.O. CIT (A) DID NOT AGREE WITH THE CONTENT IONS OF THE ASSESSEE AND UPHELD THE ORDER OF THE A.O. BY HOLDING AS UNDER:- 3.2. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND GROUNDS OF APPEAL CAREFULLY. IT IS SEEN THAT THE OFFICE OF ASS ESSING OFFICER HAS MADE THE ADDITION BECAUSE THERE IS NO CHANGE IN THE CREDITORS ACCOUNTS IN THE LAST 3 YEARS. THUS THE LOANS COULD NOT BE ENFORCED BY THE CREDITORS. THE APPELLANT HAS ALSO STATED THAT INFERIOR GOODS HAD BEEN SUPPLIED BY THE PARTIES WHICH WERE SOLD ON INS TRUCTIONS OF THE PARTIES AND THE AMOUNTS WERE CREDITED TO THE PARTIE S ACCOUNT. BECAUSE OF THE ABOVE REASON THE APPELLANT DID NOT H AVE RELATIONS WITH THE PARTIES. IN VIEW OF THE ABOVE SUBMISSIONS OF TH E APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT IS CLEAR TH AT THE APPELLANT DOES NOT HAVE ANY INTENTION OF PAYING THESE PARTIES . IN VIEW OF THE ABOVE IT IS CLEAR THAT AT PRESENT THE AMOUNTS ARE N OT ENFORCEABLE BY THE CREDITORS AND ALSO THE APPELLANT HAD NO INTENTI ON OF PAYING THE PARTIES. THUS IT IS CLEAR THAT THE LIABILITY SHOWN IN THE CREDIT OF THESE PARTIES WAS TAXABLE ON ACCOUNT OF THE CESSATION OF LIABILITIES ALSO. IN VIEW OF THE ABOVE THE ADDITION MADE BY THE A.O. IS CORRECT. THE SAME IS HENCE CONFIRMED. 7. AGGRIEVED BY THE ACTION OF CIT (A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. I.T.A.NO.227/A HD/2011 ASSESSMENT YEAR 2007-08 . 4 8. BEFORE US, THE LD. A.R. SUBMITTED THAT THE CREDI TORS APPEARING IN THE BALANCE SHEET REPRESENT CREDITORS FOR GOODS AND THE ASSESSEE ACKNOWLEDGES ITS LIABILITY TO PAY AND THE ASSESSEE HAS NOT WRITTEN BACK THE AMOUNT IN THE PROFIT AND LOSS. HE FURTHER SUBMITTED THAT AFTER THE CLOSE OF THE YEAR THE ASSESSEE HAS MADE PAYMENTS TO SOME OF THE PARTIES. HE PLACED ON RECORD THE COPIES OF LEDGER ACCOUNT OF A FEW PARTIES (PRADIP TRADING, YOGESHWAR TRADING CO. PUSP MECH TRADING CO ., RAVI AGRI IND.) TO SUPPORT HIS CONTENTIONS. HE THUS SUBMITTED THAT THE PAYMENTS MADE AFTER THE CLOSE OF YEAR SUPPORTS HIS CONTENTIONS THAT THE LIABILITY AS SHOWN AS ON 31-3-2007 IS PAYABLE AND HAS IN FACT BEEN PAID. HE FURTHER SUBMITTED THAT THE A.O. HAS NOT HELD THE CREDITORS TO BE NON GENUI NE OR BOGUS. IN VIEW OF THESE FACTS HE URGED THAT THE DISALLOWANCE MADE BY THE A.O. BE DELETED. 9. ON THE OTHER HAND THE LD. D.R. SUBMITTED THAT TH E SAME CREDITORS WERE APPEARING WITHOUT ANY CHANGE IN THE AMOUNTS PA YABLE TO THEM FOR THREE CONSECUTIVES YEARS AND THEREFORE, THE A.O. WA S JUSTIFIED IN MAKING THE ADDITION U/S. 41(1). HE THUS RELIED ON THE ORDE R OF A.O. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTUAL MATRIX OF THE CASE IS THAT THE CREDITORS ARE OUTSTANDING FOR MORE THAN THREE YEARS WITHOUT ANY CHANGE IN THE AMOUNTS PAYABLE TO THEM. THE ASSESSEE HAS PLACED ON RECORD ON SAMPLE B ASIS THE COPY OF LEDGER ACCOUNT OF A FEW CREDITORS TO WHOM THE PAYME NTS HAVE BEEN MADE AFTER THE YEAR END. THE PARTIES TO WHOM THE PAYMENT S HAVE BEEN MADE CONSTITUTE ABOUT 71% OF THE OUTSTANDING CREDITORS. THE COPY OF THE LEDGER ACCOUNT REVEALS THAT THE ASSESSEE HAS MADE PAYMENTS TO THEM AFTER THE I.T.A.NO.227/A HD/2011 ASSESSMENT YEAR 2007-08 . 5 YEAR END AND THEREFORE THERE IS NO CESSATION OF LIA BILITIES. THE ASSESSEE ALSO ACKNOWLEDGES ITS LIABILITY TO PAY AND HAS NOT WRITTEN BACK THE CREDITORS. IT IS NOT THE CASE OF THE REVENUE THAT THE CREDITOR S APPEARING IN THE BALANCE SHEET ARE BOGUS OR ARE NOT GENUINE. THE REVENUE HAS NOT DISPUTED THE PAYMENTS NOR HAS IT CONTROVERTED THE ABOVE FACTS BY BRINGING ANY CONTRARY MATERIAL ON RECORD. IN VIEW OF THE TOTALITY OF FACT S, WE ARE OF THE OPINION THAT NO ADDITION U/S. 41(1) CAN BE MADE IN THE PRESENT C ASE. WE THEREFORE DELETE THE ADDITION MADE BY THE A.O. THUS THIS GROU ND OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON 19-10- 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) XX, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD I.T.A.NO.227/A HD/2011 ASSESSMENT YEAR 2007-08 . 6 1.DATE OF DICTATION 20 - 9 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 17 /10 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER