M/s Chanduwar Udyog, Kolkata V. Income Tax Officer -ward 34(3), Kolkata, Kolkata

ITA 26/KOL/2014

• Counselvise Citation: 2623514 RSA 2014
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2014
• Court: TRIBUNAL
• Department Lawyers: SANJAY MUKHERJEE JC
• Assessee Lawyers: P R KOTHARI FCA LD
• Keywords: Onus to prove
• Section: 143(3); 133(6)

Judgement Text

ITA NO 26/KOL/2014 - SMC - MVS M/S. CHANDUWAR UDYOG 1 IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH: KOLKATA BEFORE HON BLE SRI MAHAVIR SINGH, JM I.T.A NO . 2 6 /KOL/201 4 A.Y 200 7 - 08 M/S. CHANDUWAR UDYOG V S. I.T.O WARD 34(3), KOLKAT A PAN: AABFC 7945B ( APPELLANT ) ( RESPONDENT ) FOR THE APPELLANT/ ASSESSEE : SHRI P.R KOTHARI, FCA, LD.AR FOR THE RESPONDENT / DEPARTMENT : SHRI SANJAY MUKHERJEE, JCIT/ LD. SR. DR DATE OF HEARING: 2 0 - 07 - 2015 DATE OF PRONOUNCEMENT : - 07 - 201 5 10/ 09/2015 ORDER TH IS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF C IT(A), KOLKATA IN APPEAL NO. 235 / CIT(A) - XX/WD - 34(3)/09 - 10/KOL DATED 2 0 / 11 /2013 . ASSESSMENT WAS FRAMED BY I.T.O WD 34(3), KOLKATA FOR THE ASSESSMENT YEAR 200 7 - 08 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 14 - 12 - 2009 . 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF LD.CIT(A) CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT OF SUNDRY CREDITORS OUTSTA NDING . FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING REVISED GROUND : - ( 1 ) . RE: ADDITION RS.418257/ - ON ACCOUNT ON SUNDRY CREDITORS: FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)[CIT(A) ERRE D IN SUSTAINING THE ADDITION OF RS.418257/ - MADE BY LD. A / O ON ACCOUNT OF OLD SUNDRY CREDITORS. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE HAS DECLARED SUNDRY CREDITORS FOR GOODS AT R S.5,81,783/ - AND SUNDRY CREDITORS FOR EXPENSES AT R S.9, 33,250/ - I N BALANCE SHEET AS ON 31 - 03 - 2007 . THE AO REQUIRED THE ASSESSEE TO EXPLAIN WHETHER THESE SUNDRY CREDITORS ARE GENUINE OR NOT. THE ASSESSEE SUBMITTED A LIST OF SUNDRY CREDITORS IN THE GIVEN FORMAT. BUT FINALLY THE AO NOTED THAT THE FOLLOWING SUNDR Y CREDITORS WERE NOT KNOWN AND LETTERS ISSUED U/S. 133(6) OF THE ACT TO THEM WERE RETURNED BY THE POSTAL AUTHORITIES, WITH THE REMARK IN MOST CASES NOT KNOWN : - ITA NO 26/KOL/2014 - SMC - MVS M/S. CHANDUWAR UDYOG 2 SL. NO. NAME AMOUNT IN RS. 1 . HINDUSTAN ZINC LTD 5,716/ - 2 . MPL ROADWAYS 2,14,736/ - 3 . H. NAGINDAS & BROTHERS 90,636/ - NO ADDRESSES OF THE FOLLOWING PARTIES WAS GIVEN I ) GIRIRAJ PROPERTIES (P) LTD 60,250/ - II ) IMPEX INTERNATIONAL 46,919/ - 4,18,257/ - 4. THE ASSESSEE WAS AGAIN REQUIRED TO EXPLAIN HOW THE SUNDRY CREDITORS ARE GENUINE. THE ASSESSEE EXPLAINED BEFORE THE AO THAT THESE ARE OUTSTANDING SUNDRY CREDITORS FROM EARLIER YEARS. THESE ARE NOT BOGUS AND NEVER CEASED TO EXIST. BUT THE A O HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND TREATED THESE SUNDRY CREDITORS AS NON - EXISTENT SUNDRY CREDITORS AND BOGUS/CEASED TO EXIST, AND HENCE ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5 . AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BE FORE THE CIT(A) , WHO CONFIRMED THE ACTION OF AO BY OBSERVING THAT THE ONUS TO PROVE THE GENUINENESS OF SUNDRY CREDITORS OR EXISTING LIABILITY , IF ANY , IS ON THE ASSESSEE. SINCE THE ASSESSEE FAILED TO PROVE THE SAME, THE CIT(A) CONFIRMED THE ORDER OF THE A O. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . 6 . I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT THE ASSESSEE HAS DECLARED SUNDRY CREDITORS TO THE TUNE OF R S. 5,81,783/ - OUT OF WHICH THE AO HAS ADDED THE SUNDRY CREDITORS TO THE EXTENT OF RS.4,18,257/ - . THE DETAILS OF WHICH IS AVAILABLE IN THE ASSESSMENT ORDER , WHICH IS REPRODUCED HEREIN ABOVE. ADMITTEDLY, THESE ARE OUTSTANDING LIABILITIES AND TRADING LIABILITIES, NEITHER THE ASS ESSEE HAS WRITTEN OFF THESE LIABILITIES NOR THESE CEASED TO EXIST. BEFORE ME THE LD. COUNSEL FOR THE ASSESSEE HAS STATED THAT THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. JAIN EXPORTS (P) LTD REPORTED IN (2013) 35 TAXMANN.COM 540(DEL) DEALT WITH THE PROPOSITION THAT SECTION 4 1 (1) OF THE ACT CONTEMPLATES REMISSION OR CESSATION OF TRADING LIABILITY AND AMOUNT EITHER IN CASH OR ANY OTHER BENEFIT OR CESSATION OF LIABILITY , THE N THE ADDITION CAN BE MADE. BUT IN THE PRESENT CASE THE ASSESSEE S LIABILI TY IS ON ACCOUNT OF SUNDRY CREDITORS OUTSTANDING. ADMITTEDLY, THESE ARE LIABILITIES FROM EARLIER YEARS. BEFORE ME THE LD. SR. DR HAS NOT DISPUTED THIS FACT . SIMILARLY, HON BLE GUJARAT ITA NO 26/KOL/2014 - SMC - MVS M/S. CHANDUWAR UDYOG 3 HIGH COURT IN THE CASE OF CIT VS. NITIN S. GARG REPORTED IN (2012) 22 TAXMAN.COM 59(GUJ.) ON SIMILAR FACTS , WHEREIN IT HAS BEEN HELD AS UNDER : - IT HAD NOT BEEN ESTABLISHED THAT THE ASSESSEE HAD WRITTEN OFF THE OUTSTANDING LIABILITIES IN THE BOOKS OF ACCOUNT. THE TRIBUNAL WAS JUSTIFIED IN TAKING THE VIEW THAT THE ASSESSE E HAD CONTINUED TO SHOW THE ADMITTED AMOUNTS AS LIABILITIES IN ITS BALANCE SHEET, THE SAME COULD BE TREATED AS CESSATION OF LIABILITIES. MERELY BECAUSE THE LIABILITIES WERE OUTSTANDING FOR LAST MANY YEARS, IT COULD NOT BE INFERRED THAT THE SAID LIABI LITIES HAS CEASED TO EXIST. THE TRIBUNAL HAD RIGHTLY OBSERVED THAT THE ASSESSING OFFICER WOULD HAVE TO PROVE THAT THE ASSESSEE HAD OBTAINED THE BENEFITS IN RESPECT OF SUCH TRADING LIABILITIES BY WAY OF REMISSION OR CESSATION THEREOF. MERELY BECAUSE THE A SSESSEE OBTAINED BENEFIT OF REDUCTION IN THE EARLIER YEARS AND BALANCE WAS CARRIED FORWARD IN THE SUBSEQUENT YEAR, IT WOULD NOT PROVE THAT THE TRADING LIABILITIES OF THE ASSESSEE HAD BECOME NON - EXISTENCE. . 6. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE CASE LAWS AS RELIED UPON BEFORE ME BY THE ASSESSEE , I AM OF THE VIEW THAT IN THE PRESENT CASE THE LIABILITIES ARE VERY MUCH OUTSTANDING. THERE IS NO CESSATION OF LIABILITY . HENCE, THE ADDITION MADE BY THE AO AND CONFIRMED BY T HE CIT(A) STANDS DELETED. THIS GROUND OF ASSESSEE S APPEAL IS ALLOWED. 7 . NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) CONFIRMING THE ADDITION MADE BY THE AO ON ADHOC BASIS AT 1/5 TH OF ESTIMATING INTEREST ON LOAN CREDITORS AMO UNTING TO RS.10,51,987/ - . FOR THIS , THE ASSESSEE HAS RAISED THE FOLLOWING GROUND: - (2). RE: ADDITION OF RS.1051987/ - FOR ALLEGED ESTIMATED INTEREST ON LOAN CREDITORS: FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN S USTAINING THE ADDITION OF RS.1051987/ - MADE BY LD.A/O ON ACCOUNT OF ALLEGED CESSATION OF OR BOGUS OLD INTEREST ON LOANS. 8 . BRIEFLY STATED THE FACTS ARE THAT THE AO NOTICED THAT THE ASSESSEE HAS DISCLOSED UNSECURED LOAN TO THE TUNE OF R S.52,59,936/ - . AC CORDING TO THE AO , THESE CREDITORS ARE BOGUS AS THE ASSESSEE WAS UNABLE TO CONFIRM THE LOAN LIABILITIES. THE ASSESSEE CLAIMED BEFORE THE AO THAT THESE LOANS WERE TAKEN ON OR BEFORE THE AY 2000 - 01. BUT THE ASSESSEE HA S FAILED TO PRODUCE DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM . THEREFORE, THE AO ADDED 1/5 TH OF THESE ALLEGED LOANS INCLUDING INTEREST BY TREATING IT BOGUS AND NON EXISTENCE BY OBSERVING AS UNDER: - 15. CONSIDERING ALL THESE FACTS, THE DISCUSSION HELD 1/5 TH OF THESE ALLEGED LOANS, WHICH IS I NTEREST ESTIMATED, IS TREATED AS BOGUS AND/OR NON EXISTING AND HENCE ITA NO 26/KOL/2014 - SMC - MVS M/S. CHANDUWAR UDYOG 4 ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THUS, ADDITION OF RS.10,51,987/ - IS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 9 . AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT( A), WHO ALSO CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO PROVE THAT THE LIABILITY SHOWN BY THE M WERE GENUINE . A GGRIEVED, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL . 10 . I HAVE HEARD THE R IVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS ADMITTED FACT THAT THERE WAS LOAN LIABILITY TO THE EXTENT OF RS.52,59,936. ADMITTEDLY, THESE LIABILITIES ARE NOT OF THIS YEAR. IT IS FROM EARLIER YEARS. EVEN THE RECORDS OF T HE ASSESSEE AS AVAILABLE WITH THE AO, HE COULD VERIFY THE PAST RECORDS WHETHER THESE LOAN LIABILITIES ARE NEW OR OLD BEING OUTSTANDING LIABILITY. EVEN OTHERWISE THERE IS NO STRAIGHT JACKET FORMULA FOR MAKING THIS DISALLOWANCE I.E. AT 1/5 TH ON AD HOC BASIS. IN ANY WAY , IF AO WANTS TO DISALLOW THE UNSECURED LOAN, HE HAS TO SPECIFY WHICH LIABILITY OR WHICH CREDITORS ARE NOT GENUINE. THERE IS NO METHOD FOR MAKING DISALLOWANCE OF 1/5 TH ON A D HOC BASIS. ACCORDINGLY, THE DISALLOWANCE AS MADE BY AO AND CONFIRMED B Y CIT(A) IS DELETED . 1 1 . IN THE RESULT, ASSESSEE S APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON - 07 - 2015 10/9/2015 10/09/2015 SD/ - DATED - 07 - 2015 [ MAHAVIR SINGH, JUDICIAL MEMBER ] *PP /SR.P.S. COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT - M/ S. CHANDUWAR UDYOG C/O BAID & COMPANY, CHARTERED ACCOUNTANTS, 10/C BALLYGUNGE CIRCULAR ROAD, 2 ND FL., KOLKATA - 19. 2 RESPONDENT : I T O WARD 34(3), SHANTIPALLY, EM BYE PASS, KOLKATA - 107. 3 . THE CIT, 4 . THE CIT(A), KOLKATA 5 . DR, KOLKATA BEN CHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR