Chemico Enterprises, Kolkata V. Income Tax Officer -ward 34(3), Kolkata, Kolkata

ITA 27/KOL/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7894 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2014
• Court: TRIBUNAL
• Department Lawyers: K K TRIPATHI
• Assessee Lawyers: P R KOTHARI
• Keywords: Period of limitation; Time period of passing order

Judgement Text

, SM C , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: KOLKATA ( ) BEFORE , ) [BEFORE SHRI MAHAVIR SINGH, JM] / I.T.A NO. 27 /KOL/20 1 4 / ASSESSMENT YEAR : 20 0 7 - 0 8 CHEMICO ENTERPRISES VS. INCOME - TAX OFFICER, WD - 3 4 ( 3 ), KOLKATA (PAN:A ADFC9016A ) ( /APPELLANT ) ( / RESPONDENT ) DATE OF HEARING: 2 8 . 11 .201 4 DATE OF PRONOUNCEMENT: 02 . 1 2 .201 4 FOR THE APPELLANT : SHRI P. R. KOTHARI , FCA FOR THE RESPONDENT : SHRI K. K. TRIPATHI , JCIT, SR. DR / ORDER THIS APPEAL BY ASSESSEE IS ARI SING OUT OF ORDER OF CIT(A) - X X , KOLKATA IN APPEAL NO. 192 /CIT(A) - X X / WD - 3 4( 3 )/09 - 10 /KOL DATED 2 0 . 11 .201 3 . ASSESSMENT WAS FRAMED BY ITO, WARD - 3 4 ( 3 ) , KOLKATA U/S. 14 3(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 7 - 0 8 VIDE HIS ORDER DATED 07 . 1 2 .20 0 9 . 2 . THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY AO ON ACCOUNT OF SUNDRY CREDITORS TO THE TUNE OF RS.63,750/ - . 3. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT THESE SUNDRY CREDITORS NAMELY, YASHIKA PROPERTIES & INVESTMENT IN KOLKATA IS VERY MUCH EXISTING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND IT HAS NEVER CEASED TO EXIST. ON QUERY FROM THE BENCH, LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO ASSESSEE S PAPER BOOK, WHEREIN COPY OF ACCOUNT IS FILED IN ASSESSEE S PAPER BOOK WHICH CLEARLY REVEALS THAT THESE SUNDRY CREDITORS YASHIKA PROPERTIES & INVESTMENT PVT. LTD. FOR AN AMOUNT OF RS.67,550/ - IS OUTSTANDING. AS THE AMOUNT IS OUTSTANDING THE SUNDRY CREDI TORS CANNOT BE ADDED U/S. 41(1) OF THE ACT FOR THE REASON THAT THE AMOUNT IS CEASED TO EXIST. IN MY VIEW, THERE IS NO CESSATION OF LIABILITY AND ONCE THERE IS NO CESSATION OF LIABILITY, THE ADDITION CANNOT BE MADE U/S. 41(1) OF THE A CT. I DELETE THE ADDITION. 2 ITA NO. 27 /K/2014 CHEMCO ENTERPRISES AY 200 7 - 0 8 4. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS CESSATION OF INTEREST ON UNSECURED LOAN AT RS.1,28,489/ - ADDED BY THE AO AND CONFIRMED BY CIT(A) . 5. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF T HE CASE. I FIND THAT THE AO NOTED THAT THE FOLLOWING LOAN CREDITORS ARE NOT GENUINE IN VIEW OF THE FACT THAT THESE ARE NOT EXISTING LOANS . THE AO NOTED THAT ONCE THESE LOAN CREDITORS ARE NOT EXISTING, HE MADE ADDITION OF ONE FIFTH OF THE ABOVE LOAN CREDIT ORS BY OBSERVING IN PARA 9 OF HIS ORDER AS UNDER: 9. AUTHORISED REPRESENTATIVE OF THE ASSESSEE FIRM INSPITE OF GIVING NUMEROUS OPPORTUNITY, DURING THE HEARING OF THE CASE, FAILED TO PRODUCE THE ADDRESSES OF THE ABOVE LOAN CREDITORS. IT WAS TOLD THAT NONE OF THE CREDITORS HAVE FILED ANY SUIT (OF ANY NATURE, CIVIL OR CRIMINAL) FOR RECOVERING THEIR DUES. EVEN THE LIMITATION PERIOD OF THREE YEARS FOR FILING SUIT FOR RECOVERY OF MONEY IN THE ABOVE CASES HAS PASSED. NOW THE FACT IS THAT NEITHER THE ASSESS EE KNOWS TO WHOM IT HAS TO PAY NOR THE CREDITORS ASK THE ASSESSEE TO PAY THEIR DUES. CONSIDERING THE ABOVE 1/5 TH OF THE ABOVE ALLEGED LOANS, WHICH IS SUPPOSED TO BE INTEREST DEBITED IN PROFIT & LOSS ACCOUNT OVER THE YEARS, ARE TREATED AS CEASED TO EXIST A ND RS.1,28,489/ - IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE FIRM. THE CIT(A) SIMPLY ON SAME GROUND CONFIRMED THE ADDITION. I FIND THAT THE AO HIMSELF HAS ACCEPTED THE GENUINENESS OF THE LOAN CREDITORS FOR THE REASON THAT HE HAS DISALLOWED ONLY ONE FIF TH AND REST HE HAS ADMITTED. IT MEANS THAT THE AO IS ACCEPTING THE GENUINENESS OF THE LOAN CREDITORS AND ONCE THIS IS THE POSITION, NO ADDITION ON THE BASIS OF PERCENTAGE CAN BE MADE. IN TERM OF THE ABOVE, I DELETE THE ADDITION AND ALLOW THIS ISSUE OF ASS ESSEE S APPEAL. 6. T HE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY AO ON ACCOUNT OF EXPENSES DISALLOWED AT RS.1,00,064/ - . 7. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCE S OF THE CASE. I FIND THAT THE AO NOTED THE EXPENSES DEBITED BY THE ASSESSEE FIRM AT RS.64,332/ - ON ELECTRICITY CHARGES, RS.31,048/ - ON TELEPHONE EXPENSES AND RS.29,700/ - FOR OFFICE RENT. THE AO DISALLOWED 80% OF THESE EXPENSES AT RS.1,64,000/ - FOR THE R EASON THAT THE ASSESSEE IS NOT CONTINUING ITS BUSINESS ACTIVITY. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. I FIND THAT THE AO HIMSELF ADMITTED THE CONTINUATION OF BUSINESS OR IF NO BUSINESS THEN ESTABLISHMEN T BY CONSIDERING AT LEAST 20% OF EXPENSES. EITHER NO EXPENSES OR EXPENSES IT CANNOT BE THE CASE THAT PART DISALLOWANCE CAN BE MADE IN THE EVENT ASSESSEE IS NOT CONDUCTING ANY BUSINESS. IN TERM OF THE ABOVE, I AM OF THE VIEW 3 ITA NO. 27 /K/2014 CHEMCO ENTERPRISES AY 200 7 - 0 8 THAT NO DISALLOWANCE CAN BE MA DE AND I DELETE THE DISALLOWANCE. APPEAL OF ASSESSEE IS ALLOWED. 8 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED . 9 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 0 2 . 1 2 . 2 0 1 4 SD/ - , (MAHAVIR SINGH) JUDICIAL MEMBER DATED : 2 N D DECEMBER , 201 4 JD.(SR.P.S.) - COPY OF THE ORDER FORWARDED TO: 1 . / A PPELLANT CHEMCO ENTERPRISES, C/O, M/S. BAID & CO., CHARTERED ACCOUNTANTS, 10/C, BALLYGUNGE CIRCULAR ROAD, 2 ND FLOOR, KOLKATA - 19. 2 / RESPONDENT ITO, WARD - 3 4 ( 3 ) , KOLKATA . 3 . ( )/ THE CIT(A), KOLKATA 4. 5. / CIT KOLKATA / DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR .