Shri Zaveribhai Kunverjibhai Shah (HUF), Valsad V. The Income Tax Officer, Ward-4, Valsad

ITA 2621/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2131 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K CHANDNANI
• Assessee Lawyers: RAJESH M UPADHYAY ITP
• Keywords: Reopening of assessment; Tangible material; Reason to believe; Reassessment proceedings
• Section: 147; 68; 148; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL,SURAT BENCH,SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NOS.2621/AHD/2016/SRT& 1069/AHD/2015/SRT [ [ / ASSESSMENT YEAR: 2008-09 ZAVERIBHAI KUVERJIBHAI SHAH [HUF], 13, AMAR PAINTS, SHROFF BUILDING, HALAR ROAD, VALSAD 396 001. [PAN: AAAHZ 0240 B] VS. THE INCOME TAX OFFICER, WARD 4, VALSAD. ( / APPELLANT) ( /RESPONDENT) / ASSESSEE BY : SHRI RAJESH M.UPADHYAY, ITP /REVENUE BY : SHRI J.K.CHANDNANI, SR.DR /DATE OF HEARING : 19-06-2018 / DATE OF PRONOUNCEMENT : 30-07-2018 / ORDER PERC.M.GARG, JUDICIAL MEMBER : THESE TWO APPEALSFILED BY THE ASSESSEE AGAINST SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS),SURAT (CIT(A) FOR SHORT) DATED 02.08.2016 AND LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VALSAD (IN SHORT CIT(A)) DATED 17.03.2015 FOR THE ASSESSMENT YEAR (A.Y) 2008-09. 2. THE GROUNDSOF ASSESSEE IN ITA NO.1069/AHD/2015/SRT FOR AY 2008-09 READ AS FOLLOWS: 2 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] 1. LR. CIT(A), VALSAD, HAS ERRED IN LAW AND ON FACTS TO CONFIRM THE REOPENING OF ASSESSMENT AS WELL AS ISSUE OF NOTICE U/S 148 BY THE ITO,WARD-4, VALSAD IGNORING THE FACT THAT DIFFERENCE IN CLOSING BALANCE OF ONE OF THE CREDITORS, ASIAN PAINT LIMITED IS A MATTER OF RECONCILIATION OF ACCOUNT CANNOT BE HELD EITHER CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. 2. LR. CIT(A),VALSAD HAS ERRED IN LAW AND ON FACTS TO UPHELD A.O.'S REOPENING AS WELL AS SUBSEQUENT ASSESSMENT U/S 143(3) OF THE ACT BY IGNORING THE FACT THAT THE REOPENING WAS NOT JUST AND PROPER BECAUSE REASONS FOR REOPENING WERE ISSUED ON DT.4/2/2015 I.E. AFTER PASSING OF ASSESSMENT ORDER FOR THE YEAR UNDER APPEAL. 3. LR. CIT(A),VALSAD HAS ERRED IN LAW AND ON FACTS TO CONFIRM THE A.O.'S ASSESSMENT WITHOUT THERE BEING SERVICE OF NOTICE U/S 143(2) OF THE ACT, UPON THE APPELLANT. 4. LR. CIT(A),VALSAD HAS ERRED IN LAW AND ON FACTS TO CONFIRM THE ADDITION OF RS. 11,91,335/- BEING ALLEGED DIFFERENCE IN ACCOUNT OF ASIAN PAINT LIMITED, THOUGH THE SAID ACCOUNT IS FULLY RECONCILED IN A.Y.2010-11. 5. LR. CIT(A), VALSAD HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE SAID ADDITION OVERLOOKING THE FACT OF RECONCILIATION MADE BY THE APPELLANT IN A.Y.2009-10 IN THE SAME CREDITOR'S ACCOUNT IN A.Y.2009-10, ASSESSMENT OF WHICH WAS COMPLETED U/S 143(3) OF THE ACT. GROUNDS NO. 1 & 2 : 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBUNAL. THE LD. ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT FROM THE COPY OF THE REASON RECORDED FOR REOPENING OF ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') SHOWS THAT THE SOLE ISSUE PICKED UP BY THE AO WAS THE CLOSING BALANCE OF ASIAN PAINTS WAS NOT MATCHING WITH THE CLOSING BALANCE SHOWN BY THE ASSESSEE AS THE CLOSING BALANCE SHOWN AS LIABILITY IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS RS. 34,26,158/- WHEREAS THE SUPPLIER ASIAN PAINTS HAS SHOWN THE BALANCE RECEIVABLE IN 3 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] THEIR BOOKS OF ACCOUNTS AS RS. 22,34,823/- AND HENCE, THE ASSESSING OFFICER (AO) RECORDED IN THE REASONS THAT THE DIFFERENCE OF RS. 9,40,727/- WHICH IS APPARENT FROM THE BOOKS OF ACCOUNTS AND THE SAME HAS TO BE TREATED AS UNACCOUNTED SALES OF THE ASSESSEE. THE LD. AR DREW OUR ATTENTION TOWARDS REASONS RECORDED PLACED AT ASSESSEE PAPER BOOK PG. 7 NOTICE OF THE AO VIDE DATED 18.06.2012, REPLY OF THE ASSESSEE DATED 05.11.2012 FURTHER SHOW CAUSE NOTICE OF AO VIDE DATED 30.09.2012 AND REPLY OF THE ASSESSEE VIDE DATED 07.01.2013 PLACED AT PGS. 16-23 OF THE ASSESSEES PAPER BOOK AND SUBMITTED THAT THERE WAS NO NEW TANGIBLE MATERIAL WITH THE AO, WHILE RECORDING REASONS FOR REOPENING OF ASSESSMENT US/. 147 OF THE ACT AND WHILE ISSUING NOTICE U/S. 148 OF THE ACT.THEREFORE, IN VIEW OF THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HEYNON INDIA LTD.315 ITR 281 (DEL.) THE REOPENING AND NOTICE U/S. 148 OF THE ACT IS BAD IN LAW IN ABSENCE OF ANY NEW TANGIBLE MATERIAL AND WITHOUT HAVING ANY NEXUS WITH THE REASONS RECORDED AND IN ABSENCE OF SUSTAINABLE REASON TO BELIEVE FOR THE AO THAT INCOME HAS ESCAPED ASSESSMENT. 4. THE LD. AR SUBMITTED THAT IN THE REASONS RECORDED FOR REOPENING DATED 31.01.2012 ARE BASED ONLY ON THE DIFFERENCE IN THE BALANCE SHOWN BY THE ASSESSEE AND THE BALANCE SHOWN IN THE BOOKS OF SUPPLIER ASIAN PAINTS HAS BEEN TAKEN INTO CONSIDERATION FOR REOPENING ASSESSMENT. WHEREAS IN THE NOTICE DATED 18.06.2012 THE ALLEGATION OF UNACCOUNTED 4 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] SALES HAS BEEN MADE AGAINST THE ASSESSEE WHICH WAS REPLIED BY THE ASSESSEE VIDE REPLY DATED 05.11.2012 AND THE ASSESSEE SUCCESSFULLY SHOWN THAT THE DIFFERENCE IN THE CLOSING BALANCE SHOWN BY THE ASSESSEE AND THE SUPPLIER ASIAN PAINTS ARE FULLY RECONCILED IN AY 2010-11 WHICH CAN BE SEEN FROM THE STATEMENT OF ACCOUNT OF ASIAN PAINTS AND BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH ARE SHOWING SIMILAR CLOSING BALANCE OF RS. 14,01,351/-. THEREFORE, THE ASSESSEE REQUESTED THE AO TO DROP THE PROCEEDINGS U/S. 147 OF THE ACT. THE LD. AR ALSO SUBMITTED THAT THE REPLY TO THE SHOW CAUSE NOTICE DATED 31.12.2012 THE ASSESSEE VIDE ITS REPLY DATED 07.01.2013 EXPLAINED THE ACCOUNTING ENTRY AND SUBMITTED THE DIFFERENCE AND CLOSING BALANCE IS NOT AN INCOME WHICH CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE AND THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE AS PER DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHRI VARDAMAN OVERSEAS LTD. 5. THE LD. AR ALSO SUBMITTED THAT FROM THE REASONS RECORDED, IT IS DISCERNABLE THAT THERE WAS NO NEW TANGIBLE MATERIAL WITH THE AO WHILE REOPENING THE ASSESSMENT THEREFORE, THE REOPENING U/S. 147 OF THE ACT AND NOTICE U/S. 148 OF THE ACT AND ALL CONSEQUENT PROCEEDINGS ARE BAD IN LAW AND DESERVE TO BE QUASHED. 6. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) STRONGLY SUPPORTED THE ACTION OF THE AO AND SUBMITTED THAT THERE WAS DIFFERENCE IN THE CLOSING BALANCE SHOWN BY THE ASSESSEE AND ITS SUPPLIERS 5 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] ASIAN PAINTS THEREFORE, THE AO HAS VALID REASON TO BELIEVE THAT THE AMOUNT OF DIFFERENCE HAS ESCAPED ASSESSMENT. THE LD. DR SUBMITTED THAT THE REOPENING AND NOTICE IS VALID THEREFORE, CONTENTIONOF LD. AR MAY KINDLY BE DISMISSED. 7. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT FROM THE REASONS RECORDED BY THE AO FOR REOPENING OF ASSESSMENT, PLACED AT PG. 7 OF THE ASSESSEES PAPER BOOK, IT IS CLEAR THAT THE ONLY BASIS WITH THE AO FOR REOPENING ASSESSMENT U/S. 147 OF THE ACT AND CONSEQUENT NOTICE U/S. 148 OF THE ACT WAS DIFFERENCE IN THE OPENING BALANCE SHOWN BY THE ASSESSEE AND AS PER BOOKS OF ACCOUNTS OF THE SUPPLIER ASIAN PAINS AND THERE WAS NO OTHER NEW TANGIBLE MATERIAL WITH THE AO WHICH WAS NOT BEFORE HIM DURING ORIGINAL ASSESSMENT PROCEEDINGS THEREFORE, REOPENING OF ASSESSMENT AND CONSEQUENT NOTICE U/S. 148 OF THE ACT HAS TO BE HELD IN VALID AND BAD IN LAW. 8. SO FAR AS SUSTAINABILITY OF ALLEGATION AND REASON TO BELIEVE THAT THE DIFFERENCE IN THE CLOSING BALANCE HAS ESCAPED ASSESSMENT IS CONCERNED AS PER DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HEYNON INDIA LTD. (SUPRA) IT IS CLEAR THAT A DISCREPANCY OR DIFFERENCE ARISE BETWEEN THE REGULAR ACCOUNTS OF TWO PARTIES CANNOT BE A VALID BASIS FOR MAKING ADDITION. IN THIS SITUATION, WHEN THE ASSESSEE IS CONSTANTLY SAYING AND EXPLAINING THAT IT WAS DUE TO ABSENCE OF RECONCILIATION OF ACCOUNTS WHICH WAS DONE SUBSEQUENTLY AND BALANCE OF BOTH THE ACCOUNTS ARE MATCHING 6 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] FINALLY IN AY 2010-11 THEN NO ADDITION CAN BE HELD AS SUSTAINABLE. AT THIS JUNCTURE, WE ARE AGREEMENT WITH THE CONTENTION OF THE LD. AR BASED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GKN DRIVERSHAFTS (INDIA) LTD. VS. ITODATED 25.11.2005 IN APPEAL (CIVIL) NO.7731/2002, WHEREIN IT WAS HELD THAT THE AO IS BOUND TO DISPOSE OF THE OBJECTIONS OF THE AO AGAINST REOPENING OF ASSESSMENT U/S. 147 OF THE ACT AND ISSUANCE OF NOTICE U/S. 148 OF THE ACT BY PASSING A SPEAKING ORDER. IT IS ALSO A WELL SETTLED PROPOSITION IN CASE IF FROM THE REPLY OF THE ASSESSEE THE AO IS SATISFIED WITH THE REPLY THEN, HE MAY DROP THE PROCEEDINGS. 9. FURTHER PLACING RELIANCE ON THE DECISION OF GKN DRIVERSHAFTS (INDIA) LTD. VS. ITO (SUPRA) SUBMITTED THAT THE ASSESSEE FILED REPLY TO THE NOTICE DATED 31.02.2012 BY FILING REPLY DATED 08.02.2012 ON 27.02.2012 WITH A REQUEST TO PROVIDE COPY OF THE REASONS RECORDED BY HIM, BUT THE SAME WERE NOT SUPPLIED TILL COMPLETION OF ASSESSMENT AND THE SAME WAS SUPPLIED TO THE ASSESSEE AFTER PRETTY LONG TIME ON 04.02.2015. THEREFORE, HE SUBMITTED THAT ALL REOPENING PROCEEDINGS AND CONSEQUENT ORDERS ARE IN VALID AND BAD IN LAW IN VIEW OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVERSHAFTS (INDIA) LTD. VS. ITO (SUPRA) AND DECISION OF HON'BLE JURISDICTIONAL HIGH COURT OF GUJARAT AND IN THE CASE OF SAHKARI KHAND UDHYOG MANDAL LTD. VS. ACIT C.SCA/3955/2014 (GUJ). 10. IN THE PRESENT CASE, FROM THE REASONS RECORDED, IT IS DISCERNABLE THAT THE SOLE REASON OF REOPENING ASSESSMENT IS DIFFERENCE IN THE 7 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] OPENING/CLOSING BALANCE SHOWS BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS AND OPENING/CLOSING BALANCE SHOWN BY THE RESPECTIVE CREDITOR/SUPPLIER AND THERE WAS NO NEW TANGIBLE MATERIAL WITH THE AO FOR REOPENING OF ASSESSMENT THUS, ONLY ON THIS COUNT REOPENING OF ASSESSMENT U/S. 147 OF THE ACT AND CONSEQUENT NOTICE U/S. 148 OF THE ACT IS BAD IN LAW AND IN VALID. SO FAR AS MERIT OF THE ALLEGATIONS ARE CONCERNED, WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. AR BASED ON THE RATIO OF THE DECISION OF HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. PANCHAM DASS JAIN REPORTED AS 196 TAXATION 569 (ALL.), WHEREIN IT WAS HELD THAT WHERE THE AO HAS ACCEPTED PURCHASES, SALES AND TRADING RESULTS THEN, THE ITEMS REPRESENTING CREDIT PURCHASES IN THE BOOKS OF ACCOUNTS CANNOT BE TAKEN FOR MAKING ADDITION U/S. 68 OF THE ACT. IN THE PRESENT CASE ALSO THE ISSUE AGITATED AND PICKED UP BY THE AO FOR REOPENING OF ASSESSMENT ITSELF NOT SUSTAINABLE AND CORRECT THEREFORE, HIS SATISFACTION BASED ON THESE FACTS THAT INCOME HAS ESCAPED ASSESSMENT IS NOT CORRECT AND SUSTAINABLE IN VIEW OF THE PROVISIONS OF THE ACT AND RATIO OF THE DECISION OF HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. PANCHAM DASS JAIN (SUPRA). ON THIS COUNT ALSO THE REOPENING AND NOTICE IS BAD IN LAW. 11. IN VIEW OF FOREGOING DISCUSSION, WE ARE OF THE VIEW THAT THE ASSESSEE IN REPLY TO THE NOTICE U/S. 148 OF THE ACT EXPLAINED THE CAUSE OF DIFFERENCE AND ALSO ASKED FOR THE COPY OF THE REASONS RECORDED WHICH WAS 8 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] NOT SUPPLIED HIM TILL COMPLETION OF REASSESSMENT PROCEEDINGS AND THE SAME WAS SUPPLIED AFTER LAPSE OF PRETTY LONG TIME ON 04.02.2015 ON THIS COUNT ALSO THE INITIATION OF REASSESSMENT AND ALL CONSEQUENT PROCEEDINGS AND ORDERS HAS TO BE HELD AS INVALID AND BAD IN LAW AND WE HOLD SO. 12. FROM THE COPIES OF THE REPLY DATED 14.06.2012 FILED BY THE ASSESSEE TO THE LETTER OF THE AO DATED 06.06.2012 PLACED AT ASSESSEE PAPER BOOK PG. 13 & 14, IT IS ALSO DISCERNABLE THAT THE ASSESSEE FILED COPY OF FORM- 3CB AND 10CCB, AUDITED TRADING AND PROFIT AND LOSS ACCOUNT AND BALANCE SHEET ALONG WITH COMPUTATION OF INCOME FOR AY 2008-09 BEFORE THE AO. FURTHER, FROM THE COPY OF THE NOTICE OF AO DATED 18.06.2012 WHICH REPLIED BY THE ASSESSEE VIDE WRITTEN SUBMISSION DATED 05.11.2012, IT IS ALSO DISCERNABLE THAT THE ASSESSEE SUBMITTED DOCUMENTS EXHIBIT-1 TO EXHIBIT- 10 EXPLAINING THAT THE DIFFERENCE IN CLOSING BALANCE HAS BEEN FULLY RECONCILED IN AY 2010-11. THE ASSESSEE ALSO EXPLAINED THAT THE DIFFERENCE IN THE CLOSING BALANCE OF AY 2008-09 AND OPENING BALANCE OF AY 2009-10 IN THE ACCOUNTS OF ASIAN PAINTS WAS ACCRUED IN ABSENCE OF PROPER RECONCILIATION OF ACCOUNTS WITH THE SAID CREDITOR AND AMOUNT OF RS. 1,21,263/- WAS ALSO ADDED TO THE SAME PERTAINING TO THE RELEVANT PERIOD. THE DIFFERENCE FINALLY RECONCILED AND TALLIED IN AY 2010-11, WHEREIN THE CLOSING BALANCE SHOWN BY THE ASSESSEE AND THE CREDITOR ASIAN PAINTS WAS SIMILAR AT RS. 14,01,350/- AND THUS, THE AMOUNT WAS FULLY RECONCILED IN AY 2010-11. THEREFORE, ON MERITS ALSO THE ADDITION ON ACCOUNT OF DIFFERENCE 9 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] OF OPENING/CLOSING AMOUNT SHOWN BY THE ASSESSEE AND IN THE BOOKS OF CREDITOR/SUPPLIER ASIAN PAINTS CANNOT BE TAKEN AS BASIS FOR MAKING ADDITION U/S. 68 OF THE ACT AND THE SATISFACTION RECORDED BY THE AO CANNOT BE HELD AS SUSTAINABLE. IN VIEW OF THE RATIO OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVERSHAFTS (INDIA) LTD. VS. ITO (SUPRA), WHEN THE ASSESSEE WAS NOT PROVIDED COPY OF THE REASONS RECORDED DURING THE COURSE OF REASSESSMENT PROCEEDINGS AND THE EXPLANATION OFFERED BY THE ASSESSEE WAS SUSTAINABLE AND JUSTIFIED EXPLAINING THE REASON OF DIFFERENCE, THEN THE AO IS EMPOWERED TO DROP THE PROCEEDINGS OF REOPENING OF ASSESSMENT AFTER BEING SATISFIED FROM THE REPLY OF THE ASSESSEE AND FOR THIS PURPOSE OR FOR DISMISSING THE OBJECTION OF THE ASSESSEE TO THE REOPENING, THE AO IS DUTY BOUND TO PASS A SPEAKING ORDER DISPOSING THE OBJECTION OF THE ASSESSEE EITHER REJECTING OR ACCEPTING THE SAME. IN THE PRESENT CASE, THE AO HAS NOT DROP THE PROCEEDINGS AND PROCEEDED TO REFRAME THE ORDER WITHOUT PROVIDING COPY OF THE REASONS TO THE ASSESSEE AND ON THIS COUNT ALSO THE INITIATION OF REASSESSMENT U/S. 147 OF THE ACT, NOTICE U/S. 148 OF THE ACT AND ALL CONSEQUENT PROCEEDINGS AND ORDERS ARE BAD IN LAW AND INVALID AND WE HAVE NO HESITATION TO HOLD SO. ACCORDINGLY, GROUND NO.1 & 2 OF THE ASSESSEE CHALLENGING THE REOPENING ARE ALLOWED AND REOPENING OF ASSESSMENT PROCEEDINGS U/S. 147, NOTICE U/S. 148 OF THE ACT AND ALL CONSEQUENT PROCEEDINGS ARE QUASHED. 10 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] GROUNDS NO.3& 4 : 13. ON MERITS ALSO WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ON CAREFUL CONSIDERATION OF THE SAME WE ARE OF THE VIEW THAT THE S. 68 OF THE ACT CANNOT BE APPLIED ON THE TRADING TRANSACTIONS OF PURCHASE AND SALES AND ON ACCOUNT OF DIFFERENCE OF CLOSING AND OPENING BALANCE SHOWN BY THE ASSESSEE AND HIS SUPPLIER/CREDITOR. IN VIEW OF THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. PANCHAM DASS JAIN (SUPRA). HOWEVER, FROM THE ASSESSMENT ORDER IT IS NOT CLEAR THAT UNDER WHICH PROVISION THE AO HAS MADE ADDITION, BUT FROM THE FIRST APPELLATE ORDER LAST PARA AT PG. 14, IT IS DISCERNABLE THAT THE LD. CIT(A) CONCLUDED THAT THE ADDITION COULD HAVE BEEN MADE U/S. 41(1) OF THE ACT BEEN REMISSION OR CESSATION OR U/S. 68 OF THE ACT BEING CREDIT ENTRIES FOR WHICH NO EXPLANATION WAS PROVIDED OR IF THE EXPLANATION PROVIDED BY THE ASSESSEE WAS NOT ACCEPTED BY THE AO. FROM THESE OBSERVATION, IT IS CLEAR THAT THE EVEN THE FIRST APPELLATE AUTHORITY WAS NOT CLEAR UNDER WHICH PROVISION HE IS CONFIRMING THE ADDITION. AS WE HAVE NOTICE ABOVE, IN VIEW OF RATIO OF THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. PANCHAM DASS JAIN ADDITION U/S. 68 OF THE ACT CANNOT BE MADE AND FURTHER IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA DATED 04.02.2014 IN TAX APPEAL NO.588 OF 2013 , THEIR LORDSHIP AGREEING TO THE VIEW TAKEN BY THE TRIBUNAL HELD THAT THE S. 41(1) OF THE ACT WOULD APPLY IN A CASE WHERE THERE HAS 11 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] BEEN REMISSION OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION SUBJECT TO THE CONDITION CONTAINING IN THE STATURE FULFILLED AND SUCH CESSATION OR REMISSION HAS TO BE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE PRESENT CASE NO SUCH REMISSION OR CESSATION HAS BEEN DONE EITHER BETWEEN THE ASSESSEE AND CREDITOR ASIAN PAINTS OR UNILATERALLY EITHER BY THE ASSESSEE OR BY THE CREDITOR DURING THE PERIOD UNDER CONSIDERATION AND THERE WAS ONLY DIFFERENCE IN THE AMOUNT SHOWN BY THE ASSESSEE AND SHOWN BY THE SUPPLIER ASIAN PAINTS IN THEIR RESPECTIVE BOOKS OF ACCOUNTS AT THE TIME OF CLOSING OF FY 2007-08 ON 31.03.2008 IN ABSENCE OF RECONCILIATION OF ACCOUNTS WHICH CANNOT BE MADE BASIS FOR MAKING ADDITION EITHER U/S. 68 OR U/S. 41(1) OF THE ACT. THEREFORE, WE ARE INCLINED TO HOLD THAT THE REASSESSMENT ORDER AND FIRST APPELLATE ORDER CONFIRMING THE SAME, OR NOT SUSTAINABLE ON MERITS ALSO AND THUS, THE ADDITION MADE BY THE AO AND UPHELD BY THE LD. CIT(A) IS ALSO NOT CORRECT AND JUSTIFIED AND HENCE, WE DIRECT THE AO TO DELETE THE SAME. ACCORDINGLY GROUNDS NO.3 & 4 OF THE ASSESSEE ARE ALLOWED. ITA NO.2621AHD/2016/SRT : 14. SINCE, BY THE EARLIER PART OF THIS ORDER WE HAVE QUASHED IMPUGNED INITIATION OF REASSESSMENT PROCEEDINGS, NOTICE U/S. 147/148 OF THE ACT AND CONSEQUENTPROCEEDINGS AND ORDERS ON LEGAL GROUND AS WELL AS ON MERITS THEREFORE, THE PENALTY IMPOSED BY THE AO AND UPHELD BY THE LD. CIT(A) ON 12 ITA NOS.2621 & 1069/AHD/2016/SRT (A.Y: 2008-09) ZAVERIBHAI KUVERJIBHAI SHAH [HUF] THE STRENGTH OF SUCH REASSESSMENT ORDER CANNOT BE HELD AS VALID AND SUSTAINABLE AND THUS, THE PENALTY AS WELL AS FIRST APPELLATE ORDER ARE DISMISSED. ACCORDINGLY, THE APPEAL OF THE ASSESSEE CHALLENGING THE PENALTY IS ALLOWED AND IS DIRECTED TO DELETE THE PENALTY. 15. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF30 TH JULY, 2018. / SURAT ; DATED :30 TH JULY, 2018 EDN / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. ( ) / THE CIT(A)-VI, BARODA; 4. CCIT, BARODA; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER, // TRUE COPY // / ASSISTANT REGISTRAR , / ITAT, SURAT SD/ - SD/ - ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ) ) (C.M.GARG) /JUDICIAL MEMBER