Shri Pyarelal Bajaj, Kolkata V. A.C.I.T, Circle-32, Kolkata., Kolkata

ITA 2475/KOL/2013

• Counselvise Citation: 247523514 RSA 2013
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 23-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K TULSIYAN
• Keywords: Deemed to accrue or arise in india
• Section: 131

Judgement Text

I.T.A. NO.: 2475/KOL./20 13 ASSESSMENT YEAR : 2009-201 0 PAGE 1 TO 5 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) I.T.A. NO.: 2475/KOL./2013 ASSESSMENT YEAR : 2009-2010 SHRI PYARELAL BAJAJ,............................... ..................................APPELLANT C/O. BAJAJ TRADING CO., 83, SHAKESPEARE SARANI, KOLKATA-700 017 [PAN : AENPB 4701 L] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ...............RESPONDENT CIRCLE-32, KOLKATA, APPEARANCES BY: SHRI S.K. TULSIYAN, ADVOCATE, FOR THE ASSESSEE SHRI MD. GAYASUDDIN ANSARI, JCIT, SR. D.R, FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : APRIL 08, 2014 DATE OF PRONOUNCING THE ORDER : APRIL 09, 2014 O R D E R PER ABRAHAM P. GEROGE : 1. IN THIS APPEAL FILED BY THE ASSESSEE, IT IS AGGR IEVED ON AN ADDITION OF RS.1,35,53,785/- MADE BY THE ASSESSING OFFICER, WHI CH WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 2. FACTS APROPOS ARE THAT ASSESSEE, A LEATHER TRADE R, HAD FILED HIS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING I NCOME OF RS.49,76,840/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, ASSESSING OFFICER NOTED FROM THE LIST OF SUNDRY CREDITORS PRO VIDED BY THE ASSESSEE THAT THE BALANCES WERE APPEARING SINCE LONG. ASSESS ING OFFICER DEPUTED A DEPARTMENTAL INSPECTOR TO SERVE NOTICES UNDER SECTI ON 131 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) TO SUCH CREDITOR S. THE INSPECTOR I.T.A. NO.: 2475/KOL./20 13 ASSESSMENT YEAR : 2009-201 0 PAGE 1 TO 5 2 REPORTED THAT THESE PARTIES WERE EITHER NON-EXISTEN T OR NOT AVAILABLE IN THE ADDRESSES GIVEN. ASSESSEE WAS REQUIRED TO PROVE THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS WITH THESE PARTIES. REPLY OF THE ASSESSEE WAS THAT IN RESPECT OF TWO OUT OF THE EIGHT PARTIES THERE WERE TRANSACTIONS EVEN AFTER THE RELEVANT PREVIOUS YEAR. FOUR OF THE PARTIES AS PER THE ASSESSEE WERE UNREGISTERED DEALERS. AS PER THE ASSE SSEE CONCERNED CREDITORS WERE HOLDING SALES TAX REGISTRATION NUMBE RS. HOWEVER, THE ASSESSING OFFICER WAS NOT IMPRESSED. ACCORDING TO H IM, THE LIABILITIES SHOWN AGAINST THE SUNDRY CREDITORS WERE NOT EXISTIN G. SUCH LIABILITY WAS SUBSISTING SINCE MORE THAN THREE YEARS AND THIS CLE ARLY INDICATED CESSATION OF THE LIABILITY. IN THE ABSENCE OF ANY D OCUMENTARY EVIDENCE WITH REGARD TO THE IDENTITY OF THE PARTIES, ACCORDI NG TO THE ASSESSING OFFICER, THERE WAS CESSATION OF THE LIABILITY WHICH COULD BE TREATED AS INCOME OF THE ASSESSEE. AN ADDITION WAS MADE WITH R ESPECT TO THE BALANCES TOTALLING TO RS.1,35,53,785/-, IN RESPECT OF FIVE SUNDRY CREDITORS. 3. IN HIS APPEAL BEFORE THE LD. CIT(APPEALS), ARGUM ENT OF THE ASSESSEE WAS THAT THE LIABILITY WAS VERY MUCH THERE IN THE B OOKS. AS PER THE ASSESSEE, IT WAS NEVER WRITTEN BACK IN HIS BOOKS OF ACCOUNTS. ACCORDING TO THE ASSESSEE, THE LIABILITIES BEING ALIVE, SECTION 41(1) COULD NOT BE APPLIED. HOWEVER, LD. CIT(APPEALS) DID NOT ACCEPT S UCH CONTENTIONS. ACCORDING TO HIM, ASSESSEE FAILED TO EXPLAIN IDENTI TY AND WHEREABOUTS OF THE CREDITORS. HE, THEREFORE, CONFIRMED THE ADDITIO N MADE BY THE ASSESSING OFFICER. RELIANCE WAS PLACED BY THE LD. C IT(APPEALS) ON THE DECISION OF THE HONBLE KOLKATA HIGH COURT IN THE C ASE OF KESORAM INDUSTRIES & COTTON MILLS LTD. VS.- CIT [(1992) 19 6 ITR 845]. 4. NOW BEFORE US, LD. A.R. STRONGLY ASSAILING THE O RDER OF AUTHORITIES BELOW SUBMITTED THAT THE DECISION OF THE HONBLE KO LKATA HIGH COURT IN THE CASE OF KESORAM INDUSTRIES & COTTON MILLS LTD. (SUPRA) SUPPORTED THE ASSESSEES CASE. ACCORDING TO HIM, ASSESSEE HAD NOT WRITTEN BACK THE AMOUNT IN HIS BOOKS OF ACCOUNTS. THE AMOUNTS WERE A LL OPENING CREDITORS I.T.A. NO.: 2475/KOL./20 13 ASSESSMENT YEAR : 2009-201 0 PAGE 1 TO 5 3 BALANCES, REPRESENTING TRADING TRANSACTIONS OF PREC EDING YEARS. FOR MAKING AN ADDITION UNDER SECTION 41(1), ACCORDING T O LD. A.R, IT WAS REQUIRED THAT THERE WAS CESSATION OF LIABILITY. SUC H CESSATION WAS NOT THERE. THEREFORE, ACCORDING TO HIM, THE ADDITION DI D NOT SATISFY THE REQUIREMENTS OF SECTION 41(1) OF THE ACT. RELIANCE WAS MAINLY PLACED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS.- BHOGILAL RAMJIBHAI ATARA (TAX APPEAL NO. 588 OF 201 3, JUDGMENT DATED 04.02.2014), COPY OF WHICH WAS FILED AS PAPER BOOK PAGES 56 TO 61. 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE PLAC ING RELIANCE ON THE DECISION OF THE LD. CIT(APPEALS) SUBMITTED THAT THE ASSESSEE HAD NOT DISCHARGED HIS ONUS OF PROVING THE SUBSISTENCE OF T HE CREDITORS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE S UNDRY CREDITORS FOR WHICH THE ADDITION HAS BEEN MADE WERE OPENING BALAN CES BROUGHT FORWARD FROM EARLIER YEARS. SUCH CREDITORS DID NOT COME INTO EXISTENCE DUE TO ANY TRANSACTION DONE DURING THE RELEVANT PRE VIOUS YEAR. ASSESSING OFFICER HIMSELF HAS MENTIONED THAT THE LIABILITIES WERE MORE THAN THREE YEARS OLD. CONDITIONS REQUIRED FOR APPLICATION OF S ECTION 41(1), FOR MAKING AN ADDITION FOR REMISSION OF LIABILITY ARE T WO FOLD. FIRST IS THAT SOME BENEFIT HAS TO BE OBTAINED BY THE PERSON WHO C LAIMED THE EXPENDITURE OR TRADING LIABILITY; AND THE SECOND IS THAT SUCH BENEFIT SHOULD HAVE ARISEN TO HIM ON ACCOUNT OF REMISSION O R CESSATION OF THE LIABILITY. EXPLANATION 1 TO THIS SECTION 41(1) CLEA RLY STATES THAT THE BENEFIT WILL INCLUDE A REMISSION OR CESSATION OF ANY LIABIL ITY BY A UNILATERAL ACT, BY WAY OF WRITING OFF SUCH LIABILITY IN ACCOUNTS. ADMI TTEDLY IN THE CASE BEFORE US, ASSESSEE HAD NOT WRITTEN BACK THE TRADE CREDITO RS IN HIS BOOKS OF ACCOUNTS. THE LIABILITIES CONTINUED IN HIS BOOKS OF ACCOUNTS. EVEN IF WE PRESUME THAT ASSESSEE WAS UNABLE TO PROVE THE TRANS ACTIONS WHICH RESULTED IN THE CREDIT, ADMITTEDLY SUCH TRANSACTION S HAD HAPPENED IN THE PRECEDING PREVIOUS YEARS. THE AMOUNTS WERE ALL BROU GHT FORWARD I.T.A. NO.: 2475/KOL./20 13 ASSESSMENT YEAR : 2009-201 0 PAGE 1 TO 5 4 BALANCES. BEING BROUGHT FORWARD BALANCES THERE IS N O WAY TO CONSIDER IT AS INCOME OF THE RELEVANT PREVIOUS YEAR. HONBLE GU JARAT HIGH COURT IN THE CASE OF CIT VS.- BHOGILAL RAMJIBHAI (SUPRA) HAS HE LD AS UNDER :- WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL. SECTION 41(1) OF THE ACT AS DISCUSSED IN THE ABOVE THREE DE CISIONS WOULD APPLY IN A CASE WHERE THERE HAS BEEN REMISSIO N OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSID ERATION SUBJECT TO THE CONDITIONS CONTAINED IN THE STATUE B EING FULFILLED. ADDITIONALLY, SUCH CESSATION OR REMISSIO N HAS TO BE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE PRESENT CASE, BOTH ELEM ENTS ARE MISSING. THERE WAS NOTHING ON RECORD TO SUGGEST THE RE WAS REMISSION OR CESSATION OF LIABILITY THAT TOO DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007- 08 WHICH WAS THE YEAR UNDER CONSIDERATION. IT IS UNDOUBTEDLY A CURIOUS CASE. EVEN THE LIABILITY ITSELF SEEMS UNDER SERIOUS DOUBT. THE ASSESSING OFFICER UNDERTOOK THE EXERCISE TO VERIFY THE RECORDS OF THE SO-CALLED CREDITORS. MANY OF THEM WERE NOT F OUND AT ALL IN THE GIVEN ADDRESS. SOME OF THEM STATED THAT THEY HAD NO DEALING WITH THE ASSESSEE. IN ONE OR TWO CASES, THE RESPONSE WAS THAT THEY HAD NO DEALING WITH THE ASSESSEE NOR DID THEY KNOW HIM. OF COURSE, THESE INQUIRIES WERE MADE EX P ARTE AND IN THAT VIEW OF THE MATTER, THE ASSESSEE WOULD BE A LLOWED TO CONTEST SUCH FINDINGS. NEVERTHELESS, EVEN IF SUCH F ACTS WERE ESTABLISHED THROUGH BI-PARTE INQUIRIES, THE LIABILI TY AS IT STANDS PERHAPS HOLDS THAT THERE WAS NO CESSATION OR REMISSION OF LIABILITY AND THAT THEREFORE, THE AMOU NT IN QUESTION CANNOT BE ADDED BACK AS A DEEMED INCOME UN DER SECTION 41(C) OF THE ACT. THIS IS ONE OF THE STRANG E CASES WHERE EVEN IF THE DEBT ITSELF IS FOUND TO BE NON-GE NUINE FROM THE VERY INCEPTION, AT LEAST IN TERMS OF SECTION 41 (1) OF THE ACT THERE IS NO CURE FOR IT. BE THAT AS IT MAY, INS OFAR AS THE ORDERS OF THE REVENUE AUTHORITIES ARE CONCERNED, TH E TRIBUNAL NOT HAVING MADE ANY ERROR, THIS TAX APPEAL IS DISMISSED. THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE C ASE OF KESORAM INDUSTRIES & COTTON MILLS LTD. (SUPRA) RELIED BY TH E LD. D.R. WAS ENTIRELY ON DIFFERENT SET OF FACTS. UNPAID BONUS AND LEAVE W AGES FOR WORKERS AND LABOURERS WERE CREDITED BACK BY THE ASSESSEE CONCER NED IN ITS PROFIT & LOSS A/C. IT WAS IN SUCH CIRCUMSTANCES, THAT THEIR LORDSHIPS HELD IT NECESSARY FOR THE ASSESSEE TO ESTABLISH IN LAW THAT IT WAS NOT ENTITLED TO TREAT THE SAID AMOUNT AS PART OF ITS INCOME. HERE, ON THE OTHER HAND, THE I.T.A. NO.: 2475/KOL./20 13 ASSESSMENT YEAR : 2009-201 0 PAGE 1 TO 5 5 SUNDRY CREDITORS SHOWN BY THE ASSESSEE IN ITS BALAN CE-SHEET, WERE NEVER WRITTEN BACK AS INCOME THROUGH ITS PROFIT & LOSS A/ C. JUST BECAUSE THE CREDITORS COULD NOT BE FOUND AT THE ADDRESSES GIVEN , THAT TOO IN AN ENQUIRY INITIATED WELL AFTER THREE YEARS OF THE TRA NSACTIONS WOULD NOT MEAN THAT THERE WAS A REMISSION OF CESSATION OF THE AMOUNTS DUE TO THEM. WE, THEREFORE, HAVE NO HESITATION IN DELETING THE A DDITION MADE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DAY OF APRIL, 2014. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 9 TH DAY OF APRIL, 2014 COPIES TO : (1) SHRI PYARELAL BAJAJ, C/O. BAJAJ TRADING CO., 83, SHAKESPEARE SARANI, KOLKATA-700 017 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-32, KOLKATA, (3) CIT(APPEALS) (4) CIT (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.