DHANJI RAVJI PATEL (HUF), MUMBAI V. ITO WD 12(1)(1), MUMBAI

ITA 2817/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62560 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 02-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: A S MISAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.2817/MUM/2011 (ASSESSMENT YEAR: 2007-08) DHANJI RAVJI PATEL (HUF), 14, MACKWEE MANSION, 7, GUNBOW STREET, MUMBAI -400 001 ..... APPELLANT VS INCOME-TAX OFFICER -12(1)(1), 1ST FLOOR, AAYAKAR BHAVAN, NEW MARINE LINES, MUMBAI -400 020 .... RESPONDENT PAN : AAAHP 3373 D APPELLANT BY: SHRI A.S. MISAR RESPONDENT BY: SHRI C.G.K. NAIR DATE OF HEARING: 02.05.2012 DATE OF PRONOUNCEMENT: 15.06.2012 O R D E R PER P.M. JAGTAP, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT (A)-23, MUMBAI DATED 01.02.2011 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE ADDITION OF ` 84,81,208/- MADE BY THE A.O. U/S.41(1) TREATING THE LIABILITY ON ACCOUN T OF SUNDRY CREDITORS SHOWN BY THE ASSESSEE AS CEASED TO HAVE BEEN EXISTE D WHICH HAS BEEN SUSTAINED BY THE LD. CIT (A) AT ` 39,63,381/-. 2. THE ASSESSEE, IN THE PRESENT CASE, IS A HUF WHIC H IS ENGAGED IN THE BUSINESS OF TRADING IN STATIONARY AND ALLIED IT EMS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y IT ON 28.10.2007 DECLARING TOTAL INCOME OF ` 1,80,012/-. IN THE BALANCE SHEET FILED ALONG WITH SAID RETURN, SUNDRY CREDITORS AGGREGATING TO ` 84,81,208/- WERE SHOWN BY THE ASSESSEE. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, ITA NO.2817/MUM/2011 DHANJI RAVJI PATEL (HUF) 2 THE ASSESSEE COULD NOT FURNISH THE DETAILS OF THE S AID SUNDRY CREDITORS SUCH AS COMPLETE ADDRESS, NATURE OF TRANSACTION WIT H THE CREDITORS, YEAR OF TRANSACTIONS ETC. AS REQUIRED BY THE A.O. AND IN THE ABSENCE OF THE SAID DETAILS, THE A.O. TREATED THE SUNDRY CREDITORS AMOUNTING TO ` 84,81,208/- AS LIABILITY THAT HAS CEASED TO EXIST. ACCORDINGLY THE SAID AMOUNT WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE U/S.41(1) IN THE ASSESSMENT COMPLETED U/S.143(3) VIDE AN ORDE R DATED 13.12.2009. 3. AGAINST THE ORDER PASSED BY THE A.O. U/S.143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT (A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT (A), IT WA S SUBMITTED ON BEHALF OF THE ASSESSEE THAT ALL THE SUNDRY CREDITORS WERE TRADE CREDITORS TO WHOM THE AMOUNTS WERE PAYABLE. IT WAS ALSO SUBMITT ED THAT THESE CREDITORS WERE HAVING REGULAR TRANSACTIONS WITH THE ASSESSEE AND THEIR ACCOUNTS WERE IN THE NATURE OF CURRENT ACCOUNTS. I T WAS SUBMITTED THAT ALL THE RELEVANT DETAILS AND DOCUMENTS REQUIRED TO SHOW THE GENUINENESS OF THE SAID CREDITORS WERE AVAILABLE WI TH THE ASSESSEE BUT THE SAME COULD NOT BE FURNISHED BEFORE THE A.O. AS A RESULT OF FAILURE OF THE ASSESSEES CHARTERED ACCOUNTANT TO ATTEND THE A SSESSMENT PROCEEDINGS BEFORE THE A.O. IT WAS POINTED OUT THA T A TOTAL SUM OF ` 46,33,588/- WAS PAID BY THE ASSESSEE AGAINST THE OU TSTANDING BALANCES OF SUNDRY CREDITORS AND PROOF OF SUCH PAYMENTS IN T HE FORM OF RELEVANT BANK STATEMENTS WAS ALSO FILED BY THE ASSESSEE. IT WAS CONTENDED THAT THE RELEVANT SUNDRY CREDITORS THUS DID NOT REPRESEN T THE LIABILITY OF THE ASSESSEE, WHICH HAD CEASED TO EXIST AS HELD BY THE A.O. AND THE ADDITION MADE U/S.41(1) WAS NOT JUSTIFIED. 4. AFTER GIVING THE A.O. AN OPPORTUNITY TO VERIFY T HE DETAILS AND DOCUMENTS FURNISHED BY THE ASSESSEE TO SHOW THE PAY MENTS MADE TO THE SUNDRY CREDITORS SUBSEQUENTLY AND AFTER GETTING REMAND REPORT OF THE A.O. THEREON, THE LD. CIT (A) FOUND THAT THE SU NDRY CREDITORS WERE MOSTLY SETTLED BY THE ASSESSEE BY MAKING PAYMENTS B Y CHEQUES EXCEPT TO THE EXTENT OF ` 39,63,381/-. HE FOUND THAT THE AMOUNT OF ` ITA NO.2817/MUM/2011 DHANJI RAVJI PATEL (HUF) 3 39,63,381/- WAS INCLUSIVE OF A SUM OF ` 7,59,654/- WHICH WAS PAID BY THE ASSESSEE IN CASH, THE RELIABILITY OF WHICH WAS DOUBTFUL. HE ALSO FOUND THAT OUT OF THE BALANCE AMOUNT, A SUM OF ` 7,18,467/- CLAIMED TO BE PAID BY THE ASSESSEE BY CHEQUE WAS NOT PROPERLY ESTABLISHED WHEREAS A FURTHER SUM OF ` 6,80,259/- CLAIMED TO BE PAID BY CHEQUE WAS NOT ESTABLISHED BY FILING THE RELEVANT BANK STA TEMENT. HE, THEREFORE, CONFIRMED THE ADDITION OF ` 84,81,208/- MADE BY THE A.O. U/S.41(1) TO THE EXTENT OF ` 39,63,381/-. AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED TH AT THE GENUINENESS OF THE SUNDRY CREDITORS TO THE EXTENT ESTABLISHED TO B E PAID BY CHEQUES WAS ACCEPTED BY THE LD. CIT (A). HE, HOWEVER, DID NOT ACCEPT SOME OF THE CREDITORS AS GENUINE SINCE THE PAYMENTS TO THEM WERE CLAIMED TO BE MADE BY THE ASSESSEE IN CASH. MERELY BECAUSE THE P AYMENTS TO THE SAID CREDITORS WERE MADE BY THE ASSESSEE IN CASH, THE LD . CIT (A) HELD THAT SUCH PAYMENTS WERE NOT RELIABLE AND THE CONCERNED C REDITORS WERE TREATED BY HIM AS CEASED TO HAVE BEEN EXISTED. W E ARE UNABLE TO UPHOLD THIS VIEW OF THE LD. CIT (A). THE CLAIM OF THE ASSESSEE OF HAVING MADE CASH PAYMENTS TO THE SAID CREDITORS WAS DULY S UPPORTED BY ITS BOOKS OF ACCOUNT WHERE THE SAID PAYMENTS WERE REFLE CTED AND EVEN THOUGH THERE WAS NO OTHER EVIDENCE PRODUCED BY THE ASSESSEE TO FURTHER SUPPORT ITS CASE, WE ARE OF THE VIEW THAT THE SAME WAS NOT SUFFICIENT TO HOLD THAT THE ASSESSEE HAD OBTAINED SOME BENEFIT IN RESPECT OF THE RELEVANT LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF TO INVOKE THE PROVISIONS OF SEC.41(1). AS REGARDS THE BALANCE AM OUNT OF ` 32,03,726/- , THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED TH AT THE ASSESSEE IS IN A POSITION TO ESTABLISH TO PAYMENT OF ` 6,80,259/- AND ` 7,18,267/- MADE TO THE SUNDRY CREDITORS BY CHEQUE ON EVIDENCE. HE HAS SUBMITTED THAT SUCH EVIDENCE IS NOW AVAILABLE WITH THE ASSESS EE AND IF OPPORTUNITY IS GIVEN, THE SAME CAN BE PRODUCED BEFORE THE A.O. FOR A VERIFICATION. HE HAS SUBMITTED THAT EVEN THE BALANCE AMOUNT OF ` 18,05,000/- THEN PAYABLE TO THE SUNDRY CREDITORS HAS BEEN PAID BY TH E ASSESSEE BY ITA NO.2817/MUM/2011 DHANJI RAVJI PATEL (HUF) 4 CHEQUES, SUBSEQUENT TO THE DATE OF THE IMPUGNED ORD ER OF THE LD. CIT (A) AND THE ASSESSEE IS HAVING SUFFICIENT DOCUMENTA RY EVIDENCE TO PROVE THE SAID PAYMENTS MADE BY CHEQUES. KEEPING IN VIEW THESE SUBMISSIONS MADE BY LD. COUNSEL FOR THE ASSESSEE, W E CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO GIVE A N OPPORTUNITY TO THE ASSESSEE TO ESTABLISH ITS CASE OF HAVING PAID THE T OTAL AMOUNT OF ` 32,03,726/- TO THE SUNDRY CREDITORS ON EVIDENCE. A CCORDINGLY, THE IMPUGNED ORDER OF THE LD. CIT (A) TO THE EXTENT OF SUSTAINING THE ADDITION MADE BY THE A.O. U/S.41(1) AT ` 33,03,726/- IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE A.O. WITH A DIRECTION TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO ESTABLISH THAT PAYME NT TO THE EXTENT OF ` 32,03,726/- WAS MADE TO THE CREDITORS BY CHEQUES. TO THE EXTENT THE ASSESSEE CAN ESTABLISH SUCH PAYMENTS TO THE SATISFA CTION OF THE A.O., THE ADDITION MADE U/S.41(1) SHALL BE DELETED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH JUNE 2012. SD/- ( AMIT SHUKLA ) JUDICIAL MEMBER SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER MUMBAI, DATE: 15TH JUNE 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 23, MUMBAI. 4) THE CIT-12, MUMBAI. 5) THE D.R. D BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN