KANERIYA INFRATECH LIMITED, VALSAD V. ITO, WARD-2, VALSAD

ITA 28/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1655 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-07-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 05-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 28/Srt/2020 (Assessment Year: 2014-15) (Virtual hearing) Kaneriya Infratech Ltd., A/802, Amardham, Tithal Road, Valsad. e.mail: [e-mail] PAN No. AACCK 4336 N Vs. I.T.O., Ward-2, Valsad. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Surjit D Chheda, AR Department represented by Shri Vinod Kumar, Sr. DR Date of hearing 05/07/2022 Date of pronouncement 23/09/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), Valsad (in short, the ld. CIT(A) dated 11/12/2019 for the Assessment year (AY) 2014-15. The assessee has raised following grounds of appeal: “1. The ld. CIT(A) has erred in law and in facts to confirm action of AO to add 19,70,374/- being the outstanding amount of Shri D.M. Moradiya as on 31/03/2014 as fictitious liability U/s 41(1). 2. The CIT(A) has erred in law and in facts to confirm action of AO without appreciating the fact that there was no cessation of liability as the payment was done in the earlier year i.e. in the financial year 2011-12 ITA No.28/Srt/2020 Kaneriya Infratech Ltd. Vs ITO 2 and in such a case no addition can be made for cessation of liability U/s 41(1). 3. The appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal at the time of regular hearing and all grounds are without prejudice to each other.” 2. Brief facts of the case are that the assessee-company engaged in the business of trading of black trip, filed its return of income on 28/09/2014 declaring income of Rs. 12,33,650/-. The case of assessee was selected for scrutiny. During the assessment, the Assessing Officer noted that there was a credit in the books of assessee for more than three years against a party namely Dayalbhai Mohanbhai Moradia of Rs. 19,70,374/-. The assessee was asked to explain the credit. The assessee explained that in Financial Year (FY) 2011-12, the party supplied sand to the assessee, which is still to be paid. The assessee filed copy of confirmation (self- certificate) and bills and submitted that the credits are outstanding for long period for the reasons of financial crisis with the assessee. The reply of assessee was not accepted by the Assessing Officer by taking a view that the confirmation is not signed by the parties and the liability is of more than three years and no document or confirmation that liability still stands alive and the provisions of Section 41(1) of the Income Tax Act, 1961 (in short, the Act) attracts on such credit. Accordingly, the Assessing ITA No.28/Srt/2020 Kaneriya Infratech Ltd. Vs ITO 3 Officer added Rs. 19,70,374/- on account of remission of cessation of liability. 3. Aggrieved by the additions, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed detailed written submissions. The submission of assessee was recorded in para 3.2 of order of ld. CIT(A). In the submission, the assessee stated that they are in the business of trading of black trp. During the assessment, the Assessing Officer was asked to furnish confirmation of sundry creditors for more than three years vide notice dated 16/11/2016. The assessee filed its reply, the confirmation of Dayalbhai M. Moradia was not received as he was out of station. The assessee furnished copy of bills of the said party. The Assessing Officer without giving any further opportunity, made the addition. The assessee filed confirmation from creditor Dayalbhai M. Moradia as additional evidence which could not be furnished during the assessment due to insufficiency of time. The assessee also relied on certain case laws. The submission of assessee was forwarded to the Assessing officer for his remand report. 4. The Assessing Officer furnished his remand report dated 16/11/2018. In the remand report, the Assessing Officer stated that he has not received confirmation of creditors in original. And that after receiving additional ITA No.28/Srt/2020 Kaneriya Infratech Ltd. Vs ITO 4 evidence from assessee, information was called from creditor Dayalbhai M. Moradia, vide letter dated 07/08/2018 and 17/09/2018. The Assessing Officer reported that creditor furnished his reply vide reply dated 20/09/2018. On perusal of reply of creditor, the Assessing Officer reported that the creditor has not answered properly. The assessing officer has again sent copies of confirmation singed by him along with letter and asked creditor to confirm whether such confirmation was given by him or not as the creditor has not mentioned anything about such confirmation in his earlier reply and that details of payment received by him was also called but he has not given any detail that how and where he received such payment. The Assessing officer reported that one more letter was issued to assessee called certain details. In response to said letter, the creditor has filed written reply through e-mail vide his letter dated 09/10/2018 and submitted that “I have carefully gone through confirmation as sent by you and submitted by M/s Kaneria Infratech Ltd. I have surprised & shocked that I did not sign in the said confirmation pertaining to F.Y. 2011-12, 2012-13 and 2013-14 and also reveal that signature is differ as compare with invoices as issued by me. I strongly denied that I have not signed in the said confirmation. It is illegally and unfair practice has been done by Kaneriya Infotech Ltd.” The creditor also ITA No.28/Srt/2020 Kaneriya Infratech Ltd. Vs ITO 5 submitted copy of ledger account of assessee and copy of return of income and duly audited statement of account. On perusal of such statement furnished by creditor, the Assessing Officer reported that the creditor has not shown any amount outstanding from assessee on account of sale of sand. As per balance sheet, the outstanding amount of creditor is Nil. The Assessing Officer reported that the ledger account of assessee submitted by creditor itself shows that there was no liability of assessee. The Assessing Officer issued summon to the assessee to appear on 04/10/2018, it was reported that the assessee was out of station and sought two weeks’ time. The adjournment was granted, however, the assessee did not appear before the Assessing Officer till the preparing of remand report. The Assessing Officer submitted that the confirmation filed by assessee is fake and self-prepared. The report of Assessing Officer and the reply furnished by creditor is recorded on page 22 and 23 of order of ld. CIT(A). 5. The ld. CIT(A) after considering the contents of assessment order, submission of assessee and remand report of Assessing Officer held that the assessee’s claim of outstanding amount pertaining to Dayalbhai M. Moradia was false and no such credit outstanding as the creditor has shown in its account. The e-mail sent by creditors clearly leads to ITA No.28/Srt/2020 Kaneriya Infratech Ltd. Vs ITO 6 conclusion that the credit liability cease to exist and thus provisions of Section 41(1)(a) is clearly applicable. On such observation, the ld. CIT(A) upheld the addition made by the Assessing Officer. Further aggrieved, the assessee has filed the present appeal before this Tribunal. 6. We have heard the submissions of the ld. Authorised Representative ld. AR) of the assessee and the ld. Senior Departmental Representative (Sr. DR) for the revenue. The ld. AR of the assessee submits that as per confirmation of creditors in consequence of remand proceedings, the assessee has made payment in F.Y. 2011-12. The above said payments were not reflected in the books of assessee as the payment was made by the Director from his personal account on behalf of company. Thus, no addition under Section 41(1) can be made. To support his submission, the ld. AR of the assessee relied upon the decision of Hon’ble Gujarat High Court in PCIT Vs Matruprasad C. Pandey (2015) 377 ITR 363 (Guj). 7. On the other hand, the ld. Sr. DR for the Revenue has supported the orders of the lower authorities. The ld. Sr. DR for revenue submits that the assessee has made a false claim of cessation of liability and filed false confirmation. The creditor himself confirmed that he has been paid against the supply of goods in F.Y. 2011-12 itself. The appeal of the assessee deserve dismissal. ITA No.28/Srt/2020 Kaneriya Infratech Ltd. Vs ITO 7 8. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that the Assessing Officer made addition on account of cessation of liability as the liability was standing for more than three years and no confirmation was furnished. Before the ld. CIT(A), the assessee took plea that no sufficient time was given by the Assessing Officer. The assessee filed additional evidence in the form of confirmation for F.Y. 2011-12, 2012-13 and 2013- 14. The additional evidence of assessee was admitted by the ld. CIT(A). The ld. CIT(A) referred the submission and confirmation of creditors to the Assessing Officer to furnish remand report. The Assessing officer furnished his remand report vide report dated 16/11/2018, along with remand report, the Assessing officer also furnished copy of reply of said creditor, sent through e-mail, wherein he has disputed his signature on the confirmation and submitted that he has sold sand to assessee in F.Y. 2011-12 of Rs. 19,70,211/- and he has received amount by cash on various dates in F.Y. 2011-12 i.e. within the short span of period of 15 days from the date of sale of goods as per the custom in his business. On the basis of such reply, the Assessing Officer furnished his remand report and reported that the confirmation filed by assessee is false. The ld. CIT(A) after considering the reply of Assessing Officer, upheld the addition ITA No.28/Srt/2020 Kaneriya Infratech Ltd. Vs ITO 8 by holding that no such credit balance is outstanding in the books of creditor, who have already received in F.Y. 2011-12 itself, thus, the claim of assessee has no legs to stand. 9. Before us, the assessee took a plea that the said payment was made by director of the assessee and the same cannot be treated the payment by assessee company. This stand of the assessee is absolutely baseless and is afterthought theory. The material was supplied to the assessee-company, even if it is considered that the said payment was made by director, why the assessee has not shown such liability against director in its books. The case law relied by the ld AR for the assessee in PCIT Vs Matruprasad C. Pandey (supra) is not applicable on the facts of present case. The Hon’ble High in Matruprasad Pandey (supra) held that amount of old sundry creditors appearing in balance sheet cannot be added under section 41(1) unless and until it is found that there was remission/cessation of liability and that too during relevant assessment year. (underlined by us) 10. As recorded above, during the remand report, the creditor clearly replied that he has already received payment against the supply of sand I FY 2011-12, thus, the liability to make payment was cessed long back, thus, we affirm the order of ld CIT(A). In the result, the grounds of appeal raised by the assessee are dismissed. ITA No.28/Srt/2020 Kaneriya Infratech Ltd. Vs ITO 9 11. In the result, this appeal of assessee is dismissed. No order as to cost. Order pronounced in the open court on 23 rd September, 2022 and result was also placed on notice board. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 23/09/2022 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr.Private Secretary, ITAT, Surat