Recon valves Company, Kolkata V. D.C.I.T.,Circle-50, Kolkata, Kolkata

ITA 2680/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99668 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 1999-2000
• Appeal Filed On: 29-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEBASIS ROY JCITSRD R
• Assessee Lawyers: S BAGCHI
• Section: 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI B. P. JAIN, AM] I.T.A. NO.2680-2681/KOL/2013 ASSESSMENT YEARS: 2000-01 & 2001-02 RECON VALVES COMPANY VS. DEPUTY COMMISSIONER OF I NCOME TAX, 98, M.M.GHOSH ROAD CIRCLE-50, KOLKATA, MANICKTALA CIVIC KOLKATA-74 CENTRE, 1ST FL . ULTDADANGA,KOL- 74 (PAN: AAEFR 2520C) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 03.07.2015 DATE OF PRONOUNCEMENT: 14.08.2015 FOR THE APPELLANT: SHRI S, BAGCHI, ADVOCATE FOR THE RESPONDENT: SHRI DEBASIS ROY, JCIT-SR-D R ORDER PER SHRI MAHAVIR SINGH, JM: THESE TWO APPEALS BY ASSESSEE ARE ARISING OUT OF CO MMON ORDER OF CIT(A)- XXXII, KOLKATA DATED 01-10-2013. ASSESSMENTS WERE F RAMED BY DCIT, CIRCLE-50, KOLKATA U/S147/143 R.W.S 254 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2000-01 AND 2001 -02 VIDE HIS ORDERS DATED 05.03.2013. 2. THE ONLY COMMON ISSUE IN THESE TWO APPEALS OF AS SESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF BOGUS SUNDRY CREDITORS OF RS.11,32,975/- IN AY 2000-01 AN D SETTING OFF OF THE SAME AMOUNT OF RS.9,78,152/- IN AY 2001-02. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT IN AY 2001-02, THE AO FRA MED ASSESSMENT ORDER U/S 147 R.W.S. 143 OF THE ACT ON 27.07.2011. FURTHER, ASSES SMENT ORDER IN DIRECTION OF TRIBUNAL WAS FRAMED VIDE DATED 05.03.2013. WE FIND THAT THE TOTAL AMOUNT OF SUNDRY CREDITS OF RS.11,36,355/- AND THE RELEVANT DETAILS WHICH IS REPRODUCED IN THE ORIGINAL ASSESSMENT ORDER READS AS UNDER:- SL. NO. NAME OF THE SUNDRY CREDITORS AMOUNT OUTSTANDING AS ON 31.03.2000 (RS) 1. B.K. ENTERPRISES 35,658.20 2 ITA NO.2680-81/K/2013 RECON VALVES CO. AYS 00-01 & 01-02 2. BLUE STAR ENGINEERING CO. 44,625.00 3. BHOWMICK ENGINEERING CO. 97,062.00 4. CHATTERJEE ENGINEERING CO 71,423.00 5. DAS ENGINEERING 63,498.00 6. EAS BEE ENTERPRISE 85,999.80 7. GOUR FURNITURE 42,324.30 8. J.K.TOOLS 66,061.16 9. KAMALA ENGINEERING WORKS 66,933.40 10. MITRA ENGINEERING WORKS 68,358.00 11. NORTH CALCUTTA ENGINEERING WORKS 52,704.00 12. N.K.TOOLS 91,603.00 13. PRIYA & CO. 82,151.95 14. ROY& CO. 93,405.80 15. TISTA ENGG.CO. 89,800.00 16. ZENEETH ENGINEERING CO 84,748.38 TOTAL RS.11,36,355.99 THE AO ISSUED NOTICE U/S 133(6) TO THE CREDITORS ON THEIR ADDRESSES BUT RETURNED UNSERVED, AND THESE SUNDRY CREDITORS BELONGED TO EA RLIER ASSESSMENT YEARS AND CARRIED FORWARD FROM AY 2004-05. ACCORDING TO AO, T HESE ARE UNVERIFIABLE CREDITS, HENCE ADDED U/S 41(1) OF THE ACT. THE CIT(A) ALSO C ONFIRMED THE ACTION OF AO. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. WE FIND THAT ASSESSEE HAS NOT WRITTEN OFF THE SU NDRY CREDITORS AND THESE ARE EXISTING LIABILITIES OUTSTANDING IN THE BOOKS OF AC COUNTS OF THE ASSESSEE. ONCE THE LIABILITIES ARE OUTSTANDING WHETHER IN SUCH CASES, PROVISION OF SECTION 41(1) OF THE ACT CAN BE INVOKED. FROM THE PERUSAL OF SEC. 41(1) OF THE ACT, WE ARE OF THE VIEW THAT THE REQUIREMENT OF OBTAIN A BENEFIT CAN BE SAI D TO HAVE SATISFIED IF THE CASH IS ACTUALLY RECEIVED OR ADJUSTMENT ENTRY IS MADE. THE PROVISION OF SEC. 41(1) COMES INTO OPERATION WHERE THE ASSESSEE HAS INCURRED A TR ADING LIABILITY AND TRADING LIABILITY HAS BEEN ALLOWED AS A DEDUCTION IN ANY EARLIER YEAR , AND SOMETHING HAS, LATER ON, BEING RECOVERED IN RESPECT OF SUCH LIABILITY OR SUC H LIABILITY HAS EITHER BEEN REMITTED OR HAS SEIZED TO EXIST. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V S.K. REFERENCE LTD (1994) 768 TAXMAN 252 (CAL) HAS HELD THAT WHERE THE LIABILITY TO PAY COMMISSION ON SUGARCANE WAS LATER ALLOWED AS DEDUCT ION PURSUANT TO STATE GOVERNMENTS ORDINANCE WHICH WAS LATER ENACTED INTO ACT, PROVISION FOR SUCH 3 ITA NO.2680-81/K/2013 RECON VALVES CO. AYS 00-01 & 01-02 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 T O PROFIT AND LOSS ACCOUNT, UNLESS SUCH LIABILITY WAS REMITTED OR SEIZED TO EXI STS. 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 LIABILITY AND ONCE IT IS NOT SEIZE TO EXIST, OR REMITTED, THE MERE NON-EXISTENCE OF THE PARTIES CAN NOT BE ADDED AS AN INCOME OF THE ASSESSEE. ACCORDINGLY, THIS APPEAL OF ASSESSEE IS ALLOWED 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 RS.9,78,152/- AND CARRIE D FORWARD FROM EARLIER YEAR, AS THE APPEAL FOR AY 2000-01 HAS ALREADY BEEN ALLOWED IN F AVOUR OF ASSESSEE, THIS WILL NOT BE TREATED AS INCOME FOR AY 2001-02. HENCE, THESE TWO APPEALS OF ASSESSEE ARE ALLOWED. AS REGARDS TO THE GROUND ON JURISDICTIONAL ISSUE, FOR INITIATION OF PROCEEDINGS U/S. 148 R.W.S. 147 OF THE ACT, LD. CO UNSEL FOR ASSESSEE HAS NOT PRESSED THIS GROUNDS AND HENCE, SAME ARE DISMISSED ARE NOT PRESSED. 5. IN THE RESULT, BOTH APPEAL OF ASSESSEE ARE PARTL Y ALLOWED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST, 2015. SD/- SD/- (B. P. JAIN) 10/08/2015 (MAHAV IR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14 TH AUGUST, 2015 *DKP-P.S COPY OF THE ORDER FORWARDED TO: 1 . ASSESSEE RECON VALVES CO., 98, M.M. GHOSH, ROAD, DUM DUM, KOLKATA-700074. 2 REVENUE DCIT, CIRCLE-50, MANICKTALA CIVIC CENTRE, 1 ST FLOOR, UNTADANGA, KOLKATA-74. 3 . THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .