Nasir Ahmed, Kolkata V. Income Tax Officer, Ward - 33(3), Kolkata, Kolkata

ITA 2518/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4765 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KLYAN NATH J
• Assessee Lawyers: A K TIBREWAL
• Keywords: Bogus purchase
• Section: 40A(3); 143(3); 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 2518 / KOL / 2013 ASSESSMENT YEAR :2009-10 NASIR AHMED 30/2A, RANI RASHMONI ROAD, KOLKATA-700 087 [ PAN NO.ADCPA 1080 B ] V/S . INCOME TAX OFFICER, WARD-33(3), 3 RD FLOOR, 10B, MIDDLETON ROW KOLKATA-700 071 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI A.K.TIBREWAL, FCA /BY RESPONDENT SHRI KLYAN NATH, JCIT-DR /DATE OF HEARING 25-05-2016 /DATE OF PRONOUNCEMENT 03-06-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-XIX, KOLKATA IN APPEAL NO.267/ CIT(A)-XIX/WARD- 33)3)/KOL/12-13 DATED 24.09.2013. ASSESSMENT WAS FR AMED BY ITO WARD- 33(4), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 29.12.2011 FOR A SSESSMENT YEAR 2009-10. 2. FIRST GROUND IN THIS APPEAL IS THAT LD. CIT(A) E RRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY SUSTAINING THE DISAL LOWANCE OF 4,14,003/- ON ACCOUNT OF CASH PAYMENT EXCEEDING OR 20,000/-, THEREFORE THE FOLLOWING THE PROVISION OF SEC. 40A(3) OF THE ACT. ITA NO.2518/KOL/2013 A.Y. 2009-10 NASIR AHMED V. ITO WD-33(3) KOL. PAGE 2 3. FACTS IN BRIEF ARE THAT ASSESSEE IS AN INDIVIDUA L AND ENGAGED IN THE BUSINESS OF DECORATOR AND SUPPLYING GOODS ON HIRE. DURING THE YEAR ASSESSEE HAS CLAIMED EXPENSES FOR A SUM OF 27,85,984/- ON ACCOUNT OF LABOUR CHARGES. THE AO DURING ASSESSMENT OBSERVED THAT OUT OF THE AFORESAID SUM THE PAYMENT IN CASH FOR 4,14,003/- WAS EXCEEDING THE SINGLE PAYMENT OF 20,000/-. THEREFORE THE ASSESSEE HAS VIOLATED THE P ROVISION OF SEC. 40A(3) OF THE ACT. ACCORDINGLY THE AO DISALLOWED THE SAME AND ADDED BACK TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A), WHERE ASSESSEE SUBMITTED THAT PAYMENTS WERE MADE TO CASUA L WORKERS WHO WERE HIRED ON DAILY BASIS AND IN NONE OF CASE PAYMENTS E XCEED MORE THAN 20,000/-. IT WAS FURTHER SUBMITTED THAT ASSESSEE FO R MAKING THESE WAGES PAYMENT HAS MADE SINGLE VOUCHER BUT THE PAYMENT WAS MADE TO SEVERAL LABOURS. HOWEVER THE LD. CIT(A) DISREGARDED THE CLA IM OF ASSESSEE AND CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMIS SION AND THE BASIS OF THE DISALLOWANCE MADE BY THE AO IN THIS REGARD. SECTION 40A(3) IS A VERY POINT SECTION OF THE ACT TO BE READ WITH RULE 6DD OF THE IT RULES. UNLESS COVERED BY THE SAID RULE, ANY SINGLE TRANSACTIONS IN EXCESS OF 20,000/- AND WHICH COULD NOT BE EXPLAINED BY THE APPELLANT. NOW THE PL EA TAKEN BY THE APPELLANT AS NARRATED (SUPRA) CANNOT EXONERATE HIM FROM THE C LUTCHS OF SECTION 40A(3) AND ALSO I FIND THAT THE APPELLANT; CASE IS NOT CO VERED BY ANY OF THE EXCEPTIONS CONTAINED IN RULE 6DD. HENCE, THE ADDITI ON MADE BY THE AO AMOUNTING TO 4,14,003/- ON THIS COUNT IS CONFIRMED . BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. SHRI A.K.TIBREWAL, LD. AUTHORIZED REPRESENTATIVE AP PEARING ON BEHALF OF ASSESSEE AND SHRI KALYAN NATH, LD. DEPARTMENTAL REP RESENTATIVE APPEARING ON BEHALF OF REVENUE. ITA NO.2518/KOL/2013 A.Y. 2009-10 NASIR AHMED V. ITO WD-33(3) KOL. PAGE 3 5. BEFORE US LD. AR SUBMITTED PAPER BOOK WHICH IS R UNNING PAGES FROM 1 TO 1 TO 75 AND INDEX OF VARIOUS JUDGMENTS CONTAININ G PAGES 1 TO 35 RESPECTIVELY. AT THE TIME OF HEARING OUR ATTENTION WAS DRAWN ON PAGES 1 TO 4 OF THE PB, WHERE THE DETAIL FOR THE PAYMENT OF LABOUR CHARGES WAS RECORDED AND CLAIM THAT IN NONE OF THE CASE EXCESS PAYMENT WAS E XCEEDING OF 20,000/-. LD. AR FURTHER DREW OUR ATTENTION AT PAGES 6 TO 41 WHERE THE VOUCHERS IN RESPECT OF LABOUR PLACED. ON THE BASIS OF THOSE VOU CHERS IT WAS FURTHER SUBMITTED THAT WHERE THE PAYMENTS EXCEEDS MORE THAN 20,000/- IT WAS PAID TO THE LABOUR SARDARS WHO IN TURN MAKE THE PAYMENT TO SEVERAL LABOURERS. ALL THE PAYMENTS MADE TO THE LABOURERS ARE GENUINE AND WITHOUT VIOLATING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE LD. AR LEFT THE ISSUE BEFORE THE BENCH TO DECIDE ACCORDING TO MERIT. ON THE OTHER HAND, LD. DR SUBMITTED THAT IN MOST OF THE CASES, PAYMENT IS EXCEEDING 20,000/- AND THERE IS CLEAR-CUT VIOLATION OF PROVIS ION OF SEC.40A(3) OF THE ACT. HE FURTHER STATED THAT AS PER PROVISION OF SEC.40A(3) OF THE ACT, THE PAYMENT SHOULD NOT BE MADE AND THE SECTION DOES NOT TALK ABOUT GENUINE OR NON-GENUINE EXPENSES. AT THE TIME OF ASSESSMENT NO SUCH DETAILS WERE SUBMITTED BY ASSESSEE AND HE VEHEMENTLY RELIED ON T HE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE AFORESAID DISCUSSION, WE FIND THAT PAYMENTS WERE MADE TO LABOURERS EXCEEDING 20,000/-. THEREFORE, AO INVOKED THE PROVISION OF SEC.40A(3) AND DISALLOWED THE SAME, WH ICH WAS SUBSEQUENTLY CONFIRMED BY LD. CIT(A). NOW THE QUESTION BEFORE US ARISES SO AS TO PAYMENT MADE TO THE LABOURERS IN THE INSTANT CASE IS IN VIO LATION OF PROVISION OF SEC.40A(3) OF THE ACT. HOWEVER WE FIND THAT THE GEN UINENESS OF THE EXPENSES HAS NOT BEEN DOUBTED IN THE PRESENT CASE. WE FIND T HAT ON SIMILAR ISSUE, THIS HONBLE TRIBUNAL HAS ALLOWED THIS ISSUE IN FAVOUR O F ASSESSEE WHERE THE GENUINE OF THE PAYMENT WAS NOT DOUBTED. IN THIS CON NECTION WE ARE PUTTING OUR ITA NO.2518/KOL/2013 A.Y. 2009-10 NASIR AHMED V. ITO WD-33(3) KOL. PAGE 4 RELIANCE IN THE CASE OF SRI MANORANJAN RAHA VS. ITO IN ITA NO.1448/KOL/2011 DATED 18.11.2015, WHEREIN THE TRIBUNAL HAS HELD AS UNDER:- 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE PAYMENTS MADE BY CASH IN VIOLATION OF SECTION 40A(3) OF THE ACT HAVE BEEN DULY ACKNOWLEDG ED BY THE RECIPIENT SHRI AMIT DUTTA WHO HAD DEPOSED BEFORE THE LEARNED AO AN D CONFIRMED THE FACT OF RECEIPT OF MONIES IN CASH. HENCE THE GENUINITY OF P AYMENTS MADE BY THE ASSESSEE STANDS CLEARLY ESTABLISHED BEYOND DOUBT. E VEN FOR THE AMOUNTS ENHANCED BY LEARNED CIT(A) IN THE SUM OF RS.54,01,4 73/-, THE GENUINENESS OF THE PAYMENTS AND THE NECESSITY TO INCUR THE SAID EXPENDITURE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE WAS NEVER DISPU TED BY THE LEARNED CIT(A). WE HOLD THAT SINCE THE GENUINITY OF THE PAY MENTS MADE TO THE PARTIES IS NOT DOUBTED BY THE REVENUE, THE PROVISIONS OF SE CTION 40A(3) COULD NOT BE MADE APPLICABLE TO THE FATS OF THE INSTANT CASE. IT WILL BE PERTINENT TO GO INTO THE INTENTION BEHIND INTRODUCTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AT THIS JUNCTURE. WE FIND THAT THE SAID PROVISION WAS INSERTED BY FINANCE ACT 1968 WITH THE OBJECT OF CURBING EXPENDITURE IN CASH AND TO COUNTER TAX EVASION. THE CBDT CIRCULAR NO. 6P DATED 6.7.1968 RE ITERATES THIS VIEW THAT THIS PROVISION IS DESIGNED TO COUNTER EVASION OF A TAX THROUGH CLAIMS FOR EXPENDITURE SHOWN TO HAVE BEEN INCURRED IN CASH WIT H A VIEW TO FRUSTRATING PROPER INVESTIGATION BY THE DEPARTMENT AS TO THE ID ENTITY OF THE PAYEE AND REASONABLENESS OF THE PAYMENT. IN THE INSTANT CASE, THE GENUINENESS OF THE PAYMENT S HAS NOT BEEN DOUBTED. BESIDES THE ABOVE WE ALSO FIND THAT FROM THE SUBMIS SION MADE BY LD. AR THAT NONE OF THE CASE, THE PAYMENT HAS EXCEEDED MORE THA N 20,000/- AND WHERE THE PAYMENT WAS EXCEEDING MORE THAN 20,000/- IT WAS PAID TO THE SARDARS WHO FURTHER PAID TO INDIVIDUAL LABOURERS. IN REJOIN DER LD. DR HAS ALSO FAILED TO BRING ANYTHING CONTRARY TO THE ARGUMENT PLACED BY L D. AR BEFORE US. THEREFORE IN OUR CONSIDERED VIEW IN NONE OF CASE THE PAYMENT IN THE INSTANT CASE IS INCONSISTENT TO THE PROVISION OF SECTION 40A(3) OF THE ACT AND TAKING A CONSISTENT VIEW OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL IN THE CASE OF SRI MANORANJAN RAHA (SUPRA) WE ARE INCLINED TO REVERSE THE ORDERS OF A UTHORITIES BELOW. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 7. NEXT GROUND IN THIS APPEAL OF ASSESSEE IS THAT L D. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO BY SUSTAINING THE ADDIT ION OF 1,24,108/- ON ACCOUNT OF BOGUS PURCHASE, WHICH IS REPRODUCED BEL OW:- ITA NO.2518/KOL/2013 A.Y. 2009-10 NASIR AHMED V. ITO WD-33(3) KOL. PAGE 5 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW I N CONFIRMING THE ADDITION OF RS.124108 MADE BY THE A.O ON ACCOUNT OF BOGUS PURCHASES AS THE SAME ARE DULY EVIDENCED BY INCONTR OVERTIBLE EVIDENCE AND THEREFORE IT NEEDS TO BE DELETED. 8. DURING THE YEAR ASSESSEE HAS PURCHASED GOODS WOR TH 1,24,108/- FROM MR. SAMIRAN DUTTA BUT ON VERIFICATION U/S133(6) OF THE ACT IT WAS FOUND THAT NOTICE WAS RETURNED BY POSTAL AUTHORITY WITH THE RE MARKS NOT KNOWN. ACCORDINGLY, AO DISALLOWED THE PURCHASE MADE BY ASS ESSEE FOR AN AMOUNT OF 1,24,108/- AND ADDED IT TO THE INCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO UPHELD THE ACTION OF AO BY OBSERVING AS UNDER:- ON EXAMINING THE ISSUE, I DO NOT AGREE WITH THE CO NTENTION OF THE APPELLANT. IF THE SELLER IS NOT TRACEABLE AT THE AD DRESS, THE APPELLANT SHOULD HAVE PRODUCED HIM SO THAT THE TRANSACTIONS C OULD BE VERIFIED. THERE IS NO MERIT IN THIS GROUND AND ACCORDINGLY IT IS REJECTED AND THE ADDITION ON THIS COUNT AMOUNTING TO 1,24,108/- IS CONFIRMED . BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 10. BEFORE US LD.AR SUBMITTED THAT THE GOODS WERE A LSO PURCHASED FROM MR. SAMIRAN DUTTA IN THE AY 2010-11 WHICH IS NOT BE FORE US FOR AN AMOUNT OF 6,05,412/- AND THE SAME WAS ADDED BY AO AS BOGUS PU RCHASE BUT LD. CIT(A) DELETED THE ADDITION MADE BY AO THAT NOTICE/ S. 133(6) WAS ISSUED AND PARTY CONFIRMED THE SAME. SHRI SAMIRAN DUTTA WAS FI LING HIS INCOME TAX RETURN U/S 44F WHICH DOES NOT REQUIRE MAINTENANCE OF HIS B OOKS OF ACCOUNT. IN REJOINDER LD. DR SUBMITTED THAT EACH YEAR IS A S EPARATE YEAR AND PARTY UNDER CONSIDERATION BY THE ASSESSEE FAILED TO PROVI DE THE ADDRESS OF THE PARTY AND VEHEMENTLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. ITA NO.2518/KOL/2013 A.Y. 2009-10 NASIR AHMED V. ITO WD-33(3) KOL. PAGE 6 11. FROM THE AFORESAID DISCUSSION, WE FIND THAT AO DISALLOWED THE PURCHASES FROM MR SAMIRAN DUTTA ON THE GROUND THAT NOTICE FOR VERIFICATION WAS NOT SERVED U/S. 133(6) OF THE ACT BUT LD. AR HA S PRODUCED THE SAME BEFORE APPELLATE STAGE FOR AY 2010-11. SO THE IDENT ITY OF THE PARTY (MR. SAMAIRAN DUTTA) CANNOT BE DOUBTED FOR INSTANT CASE AND FOR THE YEAR UNDER CONSIDERATION. THE COPY OF THE ORDER OF LD. CIT(A) IS PLACED AT PAGE 68 OF THE PAPER BOOK. IN THIS VIEW OF THE MATTER AND AFTER CO NSIDERING ASSESSMENT ORDER FOR AY 2010-11, WE ARE OF THE CONSIDERED VIEW THAT THE PARTY IS NOT IDENTIFIABLE AND SO THE PURCHASE CANNOT BE HELD BOGUS. THEREFORE WE ARE INCLINED TO REVERSE THE ORDERS OF AUTHORITIES BELOW. THIS GROUN D OF ASSESSEES APPEAL IS ALLOWED. 12. NEXT GROUND IS AS REGARDS THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO BY SUSTAINING DISALLOWANCE OF 31,59,970/-. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND:- 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW I N CONFIRMING THE ADDITION OF RS.3159970 MADE BY THE AO ON THE GROUND THAT THE AMOUNT REPRESENTS INCOME OF THE APPELLANT BECAUSE THERE HA S BEEN REMISSION AND/OR CESSATION OF SEVERAL ACCOUNTS COMPRISED IN T HE AMOUNT IN TERMS OF S.41(1) OF INCOME TAX ACT. 13. DURING THE YEAR UNDER CONSIDERATION, AS MANY AS 19 CREDITORS FOR A VALUE OF 31,59,970/- APPEARING IN THE BALANCE-SHEET OF ASSES SEE BUT AT THE ASSESSMENT PROCEEDING, AO SOUGHT A CLARIFICATION FR OM THE ASSESSEE REGARDING THE NAMES AND ADDRESSES ALONG WITH PAN OF THE CREDITORS WITH THE DETAILS OF THE TRANSACTIONS. ACCORDINGLY THE ASSESS EE SUBMITTED A LIST OF CREDITORS BUT WITHOUT THE ADDRESSES AND SUBMITTED T HAT THESE ARE OLD CREDITORS, THEREFORE ADDRESSES ARE NOT AVAILABLE. ACCORDINGLY, AO SOUGHT CLARIFICATION FROM ASSESSEE ABOUT THE GENUINENESS OF THE CREDITOR S. IN COMPLIANCE THERETO ASSESSEE SUBMITTED THAT SAID CREDITORS WERE ALSO AP PEARING IN HIS BALANCE- SHEET RELATING TO AY 2006-07 AND THESE ARE EXAMINED BY THE PREDECESSOR WHILE MAKING THE SCRUTINY ASSESSMENT FOR AY 2006-07 . HOWEVER, AO ITA NO.2518/KOL/2013 A.Y. 2009-10 NASIR AHMED V. ITO WD-33(3) KOL. PAGE 7 DISREGARDED THE PLEA OF ASSESSEE AND TREATED THE SA ME AS INCOME OF ASSESSEE U/S 41(1) OF THE ACT. 14. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO UPHELD THE ACTION OF AO BY OBSERVING AS UNDER:- 10.1 BOTH THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONSIDERED. SECTION 41(1) BECOMES APPLICABLE O NLY WHEN PAST LIABILITY CEASES OR IS REMITTED. A CESSATION OF LIABILITY FOR THE PURPOSE OF SECTION 41(1) WOULD MEAN IRREVOCABLE CESSATION SO THAT THERE IS N O POSSIBILITY OF THE LIABILITY BEING REVIVED IN FUTURE. THE CALCUTTA HIGH COURT IN THE CASE OF KESORAM INDUSTRIES & COTTON MILLS LTD. V. CIT [1992] 196 ITR 845 (CAL) HELD THAT WHETHER THE LIABILITY OF THE ASSESSEE HAS BEEN FULL Y DISCHARGED IS WITHIN THE SPECIAL KNOWLEDGE OF THE SE. HE HAS TO PROVE THAT I N FACT THE LIABILITY SUBSISTS. WHERE THE CONDUCT AND SURROUNDING CIRCUMSTANCES DEM ONSTRATE THAT THE AMOUNT HAS BEEN REMITTED OR FORGONE OR THE SUM HAS CEASED TO BE CLAIMABLE, THE LIABILITY OF THE ASSESSEE WOULD CEASE. IN THIS REGARD IT WAS FOUND THAT THE APPELLANT HAS NOT MADE ANY TRANSACTIONS WITH THESE PARTIES BUT THE AO. IT IS NEEDLESS TO SAY THAT YEAR AFTER YEAR OPENING BALANC ES WERE CARRIED FORWARD TO CLOSING BALANCES JUST TO KEEP THE BALANCE OF SUNDRY CREDITORS ALIVE. IN MY VIEW SUCH SUMS HAVE CEASED TO BE CLAIMABLE BY THE APPELLANT. IT WOULD BE A CLEAR CASE OF REMISSION OR CESSATION OF THE LI ABILITY OF THE ASSESSEE. IT IS NEEDLESS TO SAY THAT AS PER SECTION 59(1) OF THE AC T, THE PROVISION OF SECTION 41(1) APPLIES TO INCOME UNDER THE HEAD OTHER SOURC ES ALSO. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A), ASSESS EE CAME IN SECOND APPEAL BEFORE US. 15. BEFORE US LD. AR SUBMITTED THAT THESE CREDITORS ARE PERTINENT TO EARLIER YEARS AND DREW OUR ATTENTION AT PAGES 47 TO 50 OF T HE PAPER BOOK WHERE THE LIST OF CREDITORS ALONG WITH OTHER DETAILS WERE PLA CED AND HE LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. ON THE OTHER HAND, LD DR SUBMITTED THAT ASSESSEE FA ILED TO SUBMIT THE ADDRESSES OF THE CREDITORS AND THOSE CREDITORS HAVE BEEN APPEARING MORE THAN THREE YEARS FOR WHICH NO CONFIRMATION HAS BEEN SUBMITTED BY ASSESSEE. HE RELIED ON THE ORDERS OF AUTHORITIES BELOW. 16. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE AFORESAID DISCUSSION, WE FIND THAT CERTAIN OLD CREDITORS ARE ITA NO.2518/KOL/2013 A.Y. 2009-10 NASIR AHMED V. ITO WD-33(3) KOL. PAGE 8 REFLECTING IN THE BALANCE SHEET OF ASSESSEE AND NON E OF THE SUNDRY CREDITORS WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT OF ASSESSEE . IN OUR CONSIDERED VIEW THE INCOME CANNOT BE BROUGHT TO TAX US/ 41(1) OF TH E ACT UNTIL AND UNLESS THE TRADING LIABILITY CEASED TO EXIST IN THE BOOKS OF A CCOUNT. IN THE INSTANT CASE THE LIABILITY OF THE SUNDRY CREDITORS IS VERY MUCH APPE ARING. THEREFORE, THE QUESTION OF TREATING THE SAME AS INCOME U/S 41(1) OF THE ACT DOES NOT ARISE. IN THIS CONNECTION, WE ARE PUTTING OUR RELIANCE ON SEVERAL CASE LAWS WHICH ARE CITED BELOW:- (A) CIT VS. BHOGILAL RAMJIBHAI ATARA (2014) 43 TAXM ANN.COM 55 (GUJ) (B) PR. CIT VS. MATRUPRASAD C PANDEY (2015) 59 TAXM ANN.COM 428 (GUJ) ITO VS. JAGGI ISPAT PVT. LTD. ITA NO.755/KOL/2014 DATED 19.01.2015 (D) MANGAL CHAND & SONS VS. ITO ITA NO.157/KOL/2014 DATED 31.07.2015 (E) RECON VALVES CO. V. DCIT ITA NOS.2680-2681/KOL/ 2013 DATED 14.08.2015 (F) ACIT VS. LEKHA RANI GUPTA ITA NO.2081/KOL/2010 DATED 31.10.2011 NOW WE HAVE TO TAKE ONE OF THE CASE LAW CITED ABOVE IN THE CASE OF RECON VALVES CO. (SUPRA), WHERE THE CO-ORDINATE BENCH OF THIS TRIBU NAL HAS HELD AS UNDER: 4. WE FIND THAT ASSESSEE HAS NOT WRITTEN OFF THE SU NDRY CREDITORS AND THESE ARE EXISTING LIABILITIES OUTSTANDING IN THE BOOKS O F ACCOUNTS OF THE ASSESSEE. ONCE THE LIABILITIES ARE OUTSTANDING WHETHER IN SUC H CASES, PROVISION OF SECTION 41(1) OF THE ACT CAN BE INVOKED. FROM THE P ERUSAL OF SEC.41(1) OF THE ACT, WE ARE OF THE VIEW THAT THE REQUIREMENT OF OBT AIN A BENEFIT CAN BE SAID TO HAVE SATISFIED IF THE CASH IS ACTUALLY RECEIVED OR ADJUSTMENT ENTRY IS MADE. THE PROVISION OF SEC.41(1) COMES INTO OPERATION WHERE T HE ASSESSEE HAS INCURRED A TRADING LIABILITY AND TRADING LIABILITY HAS BEEN ALLOWED AS A DEDUCTION IN ANY EARLIER YEAR, AND SOMETHING HAS, LATER ON, BEING RE COVERED IN RESPECT OF SUCH LIABILITY OR SUCH LIABILITY HAS EITHER BEEN REMITTE D OR HAS SEIZED TO EXIST. HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. S/.K. REFERENCE LTD . (1994) 768 TAXMANN 252 (CAL) HAS HELD THAT WHERE THE LIABILITY TO PAY COMMISSIONS ON SUGARCANE WAS LATER ALLOWED AS DEDUCTION PURSUANT T O STATE GOVERNMENTS ORDINANCE WHICH WAS LATER ENACTED INTO ACT, PROVISI ON FOR SUCH LIABILITY CANNOT BE TAXED BY INVOKING THE PROVISION OF SEC.41(1) OF THE ACT ON THE MERE GROUND THAT AMOUNT ALLOWED WAS RETURNED BACK TO PROFIT AND LOSS ACCOUNT, UNLESS SUCH LIABILITY WAS REMITTED OR SEIZED TO EXISTS. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE LIABILITY VE RY MUCH IN EXISTENCE IN ON ACCOUNT OF SUNDRY CREDIT AND THIS IS TRADING LIABI LITY AND ONCE IT IS NOT SEIZE TO EXIST, OR REMITTED, THE MERE NON-EXISTENCE OF THE P ARTIES CANNOT BE ADDED AS AN INCOME OF THE ASSESSEE. ACCORDINGLY, THIS APPEAL OF ASS ESSEE IS ALLOWED ITA NO.2518/KOL/2013 A.Y. 2009-10 NASIR AHMED V. ITO WD-33(3) KOL. PAGE 9 ON MERITS. SIMILARLY, ISSUE IN ITA NO.2680/KOL/2013 FOR AY 2000-01, WHEREIN ONLY SET OFF OF SUNDRY CREDITORS TO THE EXTENT OF R S.9,78,152/- AND CARRIED FORWARD FROM EARLIER YEAR, AS THE APPEAL FOR AY 200 0-01 HAS ALREADY BEEN ALLOWED IN FAVOUR OF ASSESSEE, THIS WILL NOT BE TRE ATED AS INCOME FOR AY 2001-02. HENCE, THESE TWO APPEALS OF ASSESSEE ARE A LLOWED. AS REGARD TO THE GROUND ON JURISDICTIONAL ISSUE, FOR INITIATION OF P ROCEEDINGS U/S. 148 R.WS. 147 OF THE ACT, LD. COUNSEL FOR ASSESSEE HAS NOT PRESSE D THIS GROUNDS AND HENCE, SAME ARE DISMISSED ARE NOT PRESSED. TAKING A CONSISTENT VIEW OF THE CASES CITED AND THE DECISION OF ONE OF THE CASE LAW IN THE CASE OF RECON VALVES CO. (SUPRA) WE ARE INCLINED TO REVERSE THE ORDERS OF AUTHORITIES BELOW. THIS GROUND OF ASS ESSEES APPEAL IS ALLOWED. 17. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 03/ 06/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 03 / 06 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-NASIR AHMED, 30/2A, RANI RASHMONI ROAD, KOLKATA-87 2. /RESPONDENT-ITO WARD-33(3), 3 RD FL, 10B, MIDDLETON ROW, KOLKATA-71 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,