M/s Laxmi Re-Rolling Mills, Ujjain V. The ITO ward 2(1), Ujjain

ITA 303/IND/2013

• Counselvise Citation: 30322714 RSA 2013
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 16-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: RAVI SARDA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Period of limitation; Time period of passing order
• Section: 133(6)

Judgement Text

PAGE 1 OF 40 IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAFF50816F I.T.A.NO. 295 /IND/201 3 A.Y. : 2005-06 ITO, 2(1), UJJAIN VS. M/S.LAXMI RE - ROLLING MILL, 56,INDUSTRIAL AREA, MAXI ROAD, UJJAIN APPELLANT RESPONDENT I.T.A.NO. 303/IND/2013 A.Y. : 2005-06 M/S.LAXMI RE - ROLLING MILL, 56,INDUSTRIAL AREA, MAXI ROAD, UJJAIN VS. ITO, 2(1), UJJAIN APPELLANT RESPONDEN T DEPARTMENT BY : SHRI R.A.VE RMA, SR. DR ASSESSEE BY : SHRI RAVI SARDA, ADV. DATE OF HEARING : 20 . 11 .201 3 DATE OF PRONOUNCEMENT : 27 . 01 .201 4 O R D E R M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 2 PAGE 2 OF 40 PER R. C. SHARMA, A.M. THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) DATED 25.2.2013 FOR THE ASSESSMENT YEAR 2005-06. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE IS MANUFACTURER OF ANGLES, BARS AND PICKLES ETC. RETUR N DECLARING AN INCOME OF RS. NIL WAS FILED ON 31.10.2010 ALONGW ITH AUDIT REPORT IN FORM 3CB AND 3CD. THE CASE WAS SELECTED F OR SCRUTINY AFTER APPROVAL OF CCIT, INDORE. THE ASSESS ING OFFICER COMPLETED THE ASSESSMENT AFTER MAKING ADDITION IN T RADING RESULTS AT RS. 40,00,000/- AND ON ACCOUNT OF UNPROV ED LIABILITY AT RS. 30,90,174/-. TOTAL ADDITION OF RS. 68,11,220 /- WAS MADE BY THE ASSESSING OFFICER AND TOTAL INCOME WAS ASSESSED AT RS. 68,11,220/- VIDE ORDER DATED 26.12.2007. 3. AFTER CONSIDERING THE ASSESSEES CONTENTIONS, THE L D. CIT(A) CALLED FOR A REMAND REPORT AND DELETED THE T RADING ADDITION. HOWEVER, REVENUE IS NOT IN APPEAL BEFORE US AGAINST M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 3 PAGE 3 OF 40 SUCH DELETION. THE COMMON GRIEVANCE OF BOTH ASSESSE E AND REVENUE PERTAINS TO ADDITION MADE U/S 41(1) OF THE ACT. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER HAS ALSO MADE ADDITION OF RS. 49, 08,978/- UNDER THE HEAD UNPROVED LIABILITY OF SUNDRY CREDIT ORS. IN THIS CONNECTION, THE AO HAS ISSUED LETTER U/S 133(6) TO CERTAIN CREDITORS WHICH WERE RECEIVED BACK UNSERVED. THEREF ORE AO HAS ADDED THE SAME IN THE TAXABLE INCOME OF THE ASS ESSEE. AFTER GIVING CREDIT OF G.P. ADDITION OF RS. 18,18,8 04/- TO THE ASSESSEES NET ADDITION OF RS. 30,90,174/- WAS MADE BY THE AO ON ACCOUNT OF UNPROVED CREDITORS. 5. BEFORE THE CIT(A), THE CONTENTION OF THE ASSESSEE W AS AS UNDER :- 'THE LD AO HAS TREATED RS. 4908978/- AS UNPROVED CREDITORS. THE LD AO HAS ALSO MADE AN ADDITION OF R S. 4000000/- ON ACCOUNT OF TRADING RESULTS. FROM THIS AMOUNT THE LD AO DEDUCTED AMOUNT OF RS. 2181196/- SURRENDERED BY THE APPELLANT. THUS THE DIFFERENCE AMOUNT OF RS. 1818804/- WAS SET OFF FROM 4908978/- M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 4 PAGE 4 OF 40 AND ADDITION OF RS 3090174/- WAS MADE. THE APPELLANT HAS PURCHASED MATERIAL FROM VARIOUS PARTIES ON CREDIT. THUS THERE IS AMOUNT OUTSTANDING OF THESE PARTIES IN THE YEAR END. THE LD. AO HAS TREAT ED THIS AMOUNT AS FALSE AND MADE ADDITION TO THE INCOM E. IN SOME CASES THE MATERIAL SUPPLIED BY THE SUPPLIERS WAS OF INFERIOR AND LOW QUALITY. THUS PAYMENT WAS NOT MADE TO THEM AND ALSO AS THERE WAS NO CHANCE THAT PAYMENT WOULD BE MADE IN FUTURE THUS AN AMOUNT OF RS. 2181196/- WAS OFFERED AS INCOME IN PROFIT & LOSS ACCOUNT AND THUS BALANCES OF THE CREDITORS WERE WRITTEN OFF. THE AMOUNT OF CREDITORS WHICH IS OUTSTANDING IS DUE TO VALID AND GENUINE REASONS. AS THE APPELLANT HAS INCURRED HEAVY LOSS IN BUSINESS, ITS FINANCIAL POSI TION IS NOT WELL. THUS APPELLANT COULD NOT MAKE PAYMENT OF TO THE CREDITORS. IN SOME CASES THERE IS DISPUTES A S REGARD THE AMOUNT DUE AS THE SUPPLIERS HAVE SUPPLIE D MATERIAL OF INFERIOR QUALITY. AS THE FINANCIAL POSI TION M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 5 PAGE 5 OF 40 WAS NOT WELL THE BALANCE OF SOME PARTIES WAS SETTLE D BY SELLING GOODS TO THEM. THE DETAILS OF EACH CREDI TOR IS DISCUSSED SEPARATELY IN FOLLOWING PARAGRAPHS. 2.1 REGARDING OUTSTANDING AMOUNT OF RS. 516194/- OF M/S. FORDGING STEEL INDIA, GAZIABAD. THE APPELLANT HAS PURCHASED GOODS FROM M/S. FORDGING STEEL INDIA. COPY OF HIS LEDGER ACCOUNT ALONG WITH PURCHASE BILLS AND BUILTIES IS ATTACHED HEREWITH. OUT OF HIS TOTAL OUTSTANDING AMOUNT OF RS. 593194/- THE PARTY WAS PAID RS. 40000/- ON 19/1/05 VIDE CHEQUE NO. 4201504 AND BALANCE AMOUNT OF RS. 516194/- IS OUTSTANDING. THE APPELLANT HAS NOT MADE ANY OTHER PAYMENT. IT IS NOT POSSIBLE FOR THE ASSESSEE TO UNDERSTAND HOW THE BALANCE SHOWN BY M/S FORDGING STEEL INDIA IS NIL. THE PARTY HAS NOT SEND GOODS OF DESIRED QUALITY AND THUS THE APPELLANT HAS NOT MADE THE PAYMENT OF DUE AMOUNT. BUT IT SEEMS THAT M/S FORDGING STEEL INDIA HAS MADE ENTRIES OF CASH M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 6 PAGE 6 OF 40 RECEIPT ON HIS OWN WITHOUT ANY ACTUAL PAYMENT BEING MADE BY THE APPELLANT. THE FACT THAT M/S. FORDGING STEEL INDIA HAS RECORDED RECEIPT THROUGH CASH PROVES THAT CASH RECEIPT ENTRY MADE BY IT IS BOGUS ENTRY. THUS THE ASSESSEE IS NOT AT ALL GUILTY AND THUS ADDITION MADE IS LIABLE TO BE DELETED. THE LD AO HAS NOT GIVEN A CHANCE TO CROSS EXAMINE. IF THERE IS ANY DIFFERENCE IN FIGURES SHOWN BY THE ASSESSEE AND FIGURE COLLECTED BY THE DEPARTMENT IN ANY ENQUIRY THEN THE ASSESSEE MUST BE GIVEN CHANCE TO CROSS EXAMINE IT. HOWEVER THE LD AO HAS NOT DONE SO AND ADDITION HAS BEEN MADE. THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED . 2.2 REGARDING OUTSTANDING AMOUNT OF RS. 361440/- OF M/S. BAJRANG ENTERPRISES, RAIPUR. THE APPELLANT HAS PURCHASED GOODS FROM M/S BAJRANG ENTERPRISES, RAIPUR VIDE BILL DATED 07/03/05 OF RS.361440/-. COPY OF HIS M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 7 PAGE 7 OF 40 LEDGER ACCOUNT ALONG WITH PURCHASE BILLS AND BUILTIES IS ATTACHED HEREWITH. THE LETTER ISSUED BY THE LD. AO WAS RETURNED UNSERVED AS COMPLETE ADDRESS WAS NOT MENTIONED BY THE LD AO. THE AMOUNT OF RS. 361440/- WAS DUE AS ON 31/03/05. HOWEVER IN NEXT FINANCIAL YEAR 2005-06 THE APPELLANT HAS SOLD GOODS WORTH RS. 361440/- TO A CLEAR THE ACCOUNT. THE COPY OF SALE BILL. IS ALSO ATTACHED HEREWITH. AND THUS PAYMENT HAS BEEN MADE TO THE PARTY. THIS PROVE THAT AMOUNT SHOWN AS OUTSTANDING IS ACTUAL AND GENUINE. THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED. 2.3 REGARDING OUTSTANDING AMOUNT OF RS. 33460/-OF M/S BAJRANGBALI INDUSTRIES, DELHI. THE APPELLANT HAS PURCHASED GOODS FROM M/S. BAJRANGBALI INDUSTRIES, DELHI. COPY OF HIS LEDGER ACCOUNT ALONG WITH PURCHASE BILLS AND BUILTIES IS M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 8 PAGE 8 OF 40 ATTACHED HEREWITH. THE AMOUNT WAS DUE AS ON 31/03/05. HOWEVER IN NEXT FINANCIAL YEAR 2005-06 TH E APPELLANT HAS MADE PAYMENT TO THE PARTY. THE AMOUNT OF RS.25000/- WAS PAID BY CHEQUE NO. 4201577 DATED 04/01/2006 AND RS.8000/- WAS PAID IN CASH. THIS PROVES THAT AMOUNT SHOWN AS OUTSTANDING AS ON 31/03/2005 IS ACTUAL AND GENUINE. THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED. 2.4 REGARDING OUTSTANDING AMOUNT OF RS.1006876/- OF M/S. RAJAT STEEL TRADERS, MUMBAI. THE APPELLANT HAS PURCHASED GOODS FROM M/S. RAJAT STEEL TRADERS, MUMBAI. COPY OF HIS LEDGER ACCOUNT ALONG WITH PURCHASE BILLS AND BUILTIES IS ATTACHED HEREWITH. THE AMOUNT WAS DUE AS ON 31/03/05. THE LETTER ISSUED BY THE LD A.O WAS RETURNED UNSERVED AS COMPLETE ADDRESS WAS NOT MENTIONED BY THE LD AO. HOWEVER THE APPELLANT IS FILLING THE LETTER OF CONFIRMATION FROM THE PARTY M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 9 PAGE 9 OF 40 REGARDING OUTSTANDING AMOUNT. THIS PROVE THAT AMOUNT SHOWN AS OUTSTANDING IS ACTUAL AND GENUINE. THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED. 2.5 REGARDING OUTSTANDING AMOUNT OF RS.837772/- OF M/S VALIA STEEL INDUSTRIES, MUMBAI. THE APPELLANT HAS PURCHASED GOODS FROM M/S. VALIA STEEL INDUSTRIES, MUMBAI. COPY OF HIS LEDGER ACCOUN T ALONG WITH PURCHASE BILLS AND BUILTIES IS ATTACHED HEREWITH. THE AMOUNT WAS DUE AS ON 31/03/05. THE LETTER ISSUED BY THE LD AO WAS RETURNED UNSERVED AS COMPLETE ADDRESS WAS NOT MENTIONED BY THE LD AO. HOWEVER THE APPELLANT IS FILLING THE LETTER OF CONFIRMATION FROM THE PARTY REGARDING OUTSTANDING AMOUNT. THIS PROVE THAT AMOUNT SHOWN AS OUTSTANDING IS ACTUAL AND GENUINE. THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED. 2.6 REGARDING OUTSTANDING AMOUNT OF RS. 148564/- OF M/S. M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 10 PAGE 10 OF 40 S.M TRADERS, AHMEDABAD. THE APPELLANT HAS PURCHASED GOODS FROM M/S. S.M TRADERS, AHMEDABAD. COPY OF HIS LEDGER ACCOUNT ALONG WITH PURCHASE BILLS AND BUILTIES IS ATTACHED HEREWITH. THE LETTER ISSUED BY THE LD AO WAS RETURNED UNSERVED AS COMPLETE ADDRESS WAS NOT MENTIONED BY THE LD AO. THE AMOUNT OF RS.145864/- WAS DUE AS ON 31/03/05. HOWEVER IN NEXT FINANCIAL YEAR 2005-06 THE APPELLANT HAS SOLD GOODS WORTH RS. 145864/- TO A CLEAR THE ACCOUNT. THE COPY OF SALE BILL IS ALSO ATTACHED HEREWITH. AN D THUS PAYMENT HAS BEEN MADE TO THE PARTY. THIS PROVE THAT AMOUNT SHOWN AS OUTSTANDING IS ACTUAL AND GENUINE. THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED. 2.7 REGARDING OUTSTANDING AMOUNT OF RS.389350/- OF M/S. PRAFULL SCRAP SUPPLIERS, DAHOD. THE APPELLANT HAS PURCHASED GOODS FROM M/S. PRAFULL SCRAP SUPPLIERS, DAHOD. COPY OF HIS LEDGER M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 11 PAGE 11 OF 40 ACCOUNT ALONG WITH PURCHASE BILLS AND BUILTIES IS ATTACHED HEREWITH. THE LETTER ISSUED BY THE LD AO WAS RETURNED UNSERVED AS COMPLETE ADDRESS WAS NOT MENTIONED BY THE LD AO. THE AMOUNT OF RS.389350/- WAS DUE AS ON 31/03/05. HOWEVER IN NEXT FINANCIAL YEAR 2005-06 THE APPELLANT HAS SOLD GOODS WORTH RS. 389350/- TO A CLEAR THE ACCOUNT. THE COPY OF SALE B ILL IS ALSO ATTACHED HEREWITH. AND THUS PAYMENT HAS BEEN MADE TO THE PARTY. THIS PROVE THAT AMOUNT SHOWN AS OUTSTANDING IS ACTUAL AND GENUINE. THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED. 2.8 REGARDING OUTSTANDING AMOUNT OF RS. 797378/- OF M/S. R.C. TRADING CO., MUMBAI. THE APPELLANT HAS PURCHASED GOODS FROM M/S. R.C. TRADING CO., MUMBAI. COPY OF HIS LEDGER ACCOUNT ALO NG WITH PURCHASE BILLS AND BUILTIES IS ATTACHED HEREWI TH. THE AMOUNT WAS DUE AS ON 31/03/05. THE LETTER ISSUE D BY THE LD A O WAS RETURNED UNSERVED AS COMPLETE M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 12 PAGE 12 OF 40 ADDRESS WAS NOT MENTIONED BY THE LD AO. HOWEVER THE APPELLANT IS FILLING THE LETTER OF CONFIRMATION FRO M THE PARTY REGARDING OUTSTANDING AMOUNT. THIS PROVE THAT AMOUNT SHOWN AS OUTSTANDING IS ACTUAL AND GENUINE. THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED. 2.9 REGARDING OUTSTANDING AMOUNT OF RS. 797378/- OF M/S. KANKDA ROLLING MILL, BHOPAL. THE APPELLANT HAS PURCHASED GOODS FROM M/S. KANKDA ROLLING MILL, BHOPAL. COPY OF HIS LEDGER ACCOUNT ALONG WITH PURCHASE BILLS AND BUILTIES IS ATTACHED HEREWITH. THE AMOUNT WAS DUE AS ON 31/03/05. THE LETTER ISSUED BY THE LD AO WAS RETURNED UNSERVED AS COMPLETE ADDRESS WAS NOT MENTIONED BY THE LD AO. HOWEVER THE APPELLANT IS FILLING THE LETTER OF CONFIRMATION FROM THE PARTY REGARDING OUTSTANDING AMOUNT. THIS PROVE THAT AMOUNT SHOWN AS OUTSTANDING IS ACTUAL AND GENUINE. M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 13 PAGE 13 OF 40 THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED. 2.10 REGARDING OUTSTANDING AMOUNT OF RS. 695716/- OF M/S. TIRUPATI TRADERS, RAIPUR. THE APPELLANT HAS PURCHASED GOODS FROM M/S. TIRUPATI TRADERS, RAIPUR. COPY OF HIS LEDGER ACCOUN T ALONG WITH PURCHASE BILLS AND BUILTIES IS ATTACHED HEREWITH. THE AMOUNT WAS DUE AS ON 31/03/05. THE SAID PARTY HAS NOT SUPPLIED THE MATERIAL AS REQUIRED BY THE APPELLANT AND THUS THERE WAS DISPUTE REGARDING THE PAYMENT DUE. IN NEXT FINANCIAL YEAR 2005-06 DUE TO DISPUTE IT WAS DECIDED TO WRITE OFF THIS AMOUNT AND THUS SAID AMOUNT WAS TRANSFERRED TO INCOME IN P&L ACCOUNT. THE AMOUNT DUE ON 31/03/2005 IS ACTUAL AND GENUINE. THIS PROVED THAT AMOUNT SHOWN AS OUTSTANDING IS ACTUAL AND GENUINE. THUS ADDITION MADE IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED AND THUS PLEASE DELETE THE ADDITION MADE M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 14 PAGE 14 OF 40 AND OBLIGE. ' THE APPELLANT HAS FILED WRITTEN SUBMISSION ON 25- 02-2013 WHICH IS REPRODUCED AS UNDER:- 'THE ASSESSEE FIRM HAS SHOWN CREDITORS IN ITS BALANCE SHEET (PAGE NO. 46 OF THE PAPER BOOK). THE LIABILITIES IN RESPECT OF CREDITORS WAS STANDING TH ERE. THIS LIABILITY WAS NOT CEASED TO EXIST. ACCORDING T O SECTION 41: 'PROFITS CHARGEABLE TO TAX. 41(1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR,- (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 15 PAGE 15 OF 40 TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME- TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF WHICH LOSS OR EXPENDITURE WAS INCURRED BY THE FIRST- MENTIONED PERSON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRED TO IN CLAUSE (A) BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRUING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 16 PAGE 16 OF 40 OF THE BUSINESS OR PROFESSION, AND ACCORDINGLY . CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR. ' IN THE CASE UNDER CONSIDERATION ONLY ONE CREDITOR THAT IS M/S. FORDGING STEEL INDIA OF RS.516194/- HAS STATED THAT BALANCE AS ON 31- MARCH-2005 WAS NIL. EXCEPT THIS NONE OF THE CREDITOR HAS SHOWN THAT THE LIABILITY OF THE ASSESS EE FIRM HAS BEEN CEASED TO EXIST. IN THE ABSENCE OF CREDITOR IT CANNOT BE CONCLUDED THAT THE DEBT HAS BEEN BARRED AND HAS BECOME UNENFORCEABLE. THE AUDIT REPORT OF FINANCIAL YEAR 2005-06 IS ATTACHED HEREWITH. AT PAGE NO. UNDER THE HEAD SUNDRY CREDITORS THE BALANCES OF THE SUNDRY CREDITORS ARE SHOWN. OUT OF THE ADDITIONS MADE IN RESPECT OF CREDITORS THE BALANCES OF FOLLOWING PARTIES ARE SHOWN THERE: M/S RAJAT STEELS RS.1006876/- M/S VALIYA STEELS RS.837772/- M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 17 PAGE 17 OF 40 M/S R C TRADING RS.797378/- M/S KANKDA ROLLING RS.122228/- TOTAL RS.2764254/- THE LIABILITIES IN RESPECT OF ABOVE PARTIES HAS NOT YET CEASED. THE ONUS IS ON THE DEPARTMENT TO PROVE THAT THE LIABILITY IS CEASED TO EXIST. THE LD. AO HAS NO T SHOWN THAT THE ASSESSEE HAS ACQUIRED ANY BENEFIT FROM THESE PARTICULAR LIABILITIES WHICH ARE STILL OUTSTANDING IN THE BALANCE SHEET AND IT HAS ALSO NO T BEEN SHOWN THAT THESE LIABILITIES HAVE CEASED FINAL LY WITHOUT THE POSSIBILITY OF REVIVAL. RELIANCE IS PLACED ON FOLLOWING CASES: CIT VS SUGAULI SUGAR WORKS PVT. LTD. (1999) 236ITR 518(SC) SHRI VARDHAMAN OVERSEAS LTD VS ASST. CIT (2008) 24 SOT 393 (DEL) CHIEF CIT VS. KESARIA TEA CO. LTD. (2002) 254 ITR 434 (SC) M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 18 PAGE 18 OF 40 6. BY THE IMPUGNED ORDER, THE LD. CIT(A) PARTLY DELETE D THE ADDITION WHEREAS BALANCE OF ADDITION WAS CONFIR MED, AFTER HAVING THE FOLLOWING OBSERVATIONS :- 3.2.1 THE APPELLANT HAS SHOWN SUNDRY CREDITORS AS PER SCHEDULE-J OF THE BALANCE SHEET AT RS. 82,43,947/-. THE AO HAS ISSUED LETTER U/S 133(6 ) ON POSTAL ADDRESSES FURNISHED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDING. LETTERS ISSUED HAVE BEEN RECEIVED BACK UNSERVED IN RESPECT OF FOLLOWING CREDITORS :- SR. NO. PARTY NAME AMOUNT 1. M/S. BAJRANG ENTERPRISES, RAIPUR 361440 2. M/S. BAJRANGBALI INDUSTRIES, DELHI 33460 3 M/S. RAJAT STEEL TRADERS, MUMBAI 1006876 4. M/S. VALIYA STEEL INDUSTRIES, 837772 5. M/S. S. M. TRADERS, AHMEDABAD 148564 6. M/S. PRAFULL SCRAP SUPPLIERS, 389350 7. M/S. R. C. TRADING COMPANY, 797378 8. M/S. KANKDA ROLLING MILLS, 122228 9. M/S. TIRUPATI TRADERS, RAIPUR 695716 10. M/S. FORDGING STEEL INDIA 516194 TOTAL RS. 4908978 M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 19 PAGE 19 OF 40 THE AO HAS GIVEN OPPORTUNITY TO THE APPELLANT TO PROVE THE LIABILITY ON ACCOUNT OF AFORESAID SUNDRY CREDITORS, BUT APPELLANT HAS NOT REPLIED, THEREFORE AO HAS TREATED THAT THE LIABILITY WAS DISCHARGED OUT OF INCOME FROM UNDISCLOSED SOURCES. THE AO HAS ALLOWED SET OFF OF RS. 18,18,804/- FROM G.P. ADDITION OUT OF RS. 49,08,978/- AND MADE ADDITION OF RS. 30,90,174/-. 3.2.2 THE APPELLANT HAS TAKEN A PLEA THAT AO HAS TREATED RS. 49,08,978/- AS UNPROVED CREDITORS AND HE HAS ALLOWED SET OFF OF RS. 18,18,804/- AND ADDED BALANCE AMOUNT OF RS. 30,90,174/-. IT IS CONTENDED BY THE APPELLANT THAT IT HAS PURCHASED MATERIAL FROM VARIOUS PARTIES ON CREDIT, THUS THERE IS AMOUNT OUTSTANDING OF THESE PARTIES IN THE YEAR END. IN SOME CASES THE MATERIAL SUPPLIED BY THE SUPPLIERS OF INFERIOR AND LOW QUALITY. THUS, M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 20 PAGE 20 OF 40 PAYMENT WAS NOT MADE TO THEM AND AMOUNT OF RS. 21,81,196/- WAS OFFERED AS INCOME IN THE PROFIT AND LOSS ACCOUNT. THE AMOUNT OF REMAINING CREDITORS WHICH IS OUTSTANDING IS DUE TO VALID AND GENUINE REASONS. THE APPELLANT HAS INCURRED HEAVY LOSSES IN BUSINESS AND ITS FINANCIAL POSITION IS NOT WELL. THEREFORE, BALANCES OF SOME PARTIES WERE SETTLED BY SELLING GOODS TO THEM. AS FAR AS, DIFFERENCE FROM M/S. FORDGING STEEL INDIA, THE PARTY WAS PAID RS. 40,000/AND BALANCE AMOUNT OF RS. 5,16,194/ - IS OUTSTANDING, WHEREAS M/S FORDGING STEEL INDIA HAS SHOWN NIL BALANCE. IN SUPPORT OF ITS CONTENTION APPELLANT HAS FILED COPY OF LEDGER ACCOUNT OF CREDITOR ALONGWITH PURCHASE BILLS AND BUILTIES. IT IS FURTHER CONTENDED BY THE APPELLANT THAT EXCEPT M/S. FORDGING STEEL INDIA NONE OF THE CREDITOR HAS SHOWN THAT THE LIABILITY OF THE APPELLANT FIRM HAS BEEN CEASED TO EXIST. M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 21 PAGE 21 OF 40 3.2.3 REMAND REPORT IS CALLED FOR FROM THE AO ON THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS AGAIN ISSUED THE LETTERS TO THE CREDITORS ON THE BASIS OF THE ADDRESSES PROVIDED BY THE APPELLANT. IN MOST OF THE CASES, LETTERS WERE NOT SERVED AND EVEN THE PARTIES ON WHOM LETTERS HAVE BEEN SERVED HAVE NOT CONFIRMED THE ACCOUNT, INSPITE OF THE REMINDER ISSUED BY THE AO ON 21-07-2008. NONE OF THE CREDITORS HAVE CONFIRMED THE CLAIM OF THE CREDIT BALANCE OF THE APPELLANT. EVEN, THE APPELLANT HAS NOT REPLIED TO THE LETTER ISSUED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDING AND FAILED TO PROVE THAT LIABILITIES WERE IN EXISTENCE AS ON 31-03-2005. THE APPELLANT HAS NOT FILED ANY CONFIRMATION FROM THE CREDITORS. 3.2.4 DURING THE APPELLATE PROCEEDING M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 22 PAGE 22 OF 40 APPELLANT HAS TAKEN A PLEA THAT IT HAS SUBMITTED THE RELEVANT DOCUMENTS IN SUPPORT OF ITS CONTENTION. IN SOME CASES PAYMENT HAS BEEN MADE TO THE CREDITORS LATER ON, IN SOME CASES THE SALES HAVE BEEN MADE TO THE CREDITORS AND IN SOME CASES THE APPELLANT ITSELF HAS TRANSFERRED THE CREDIT BALANCE IN THE PROFIT AND LOSS ACCOUNT. THE APPELLANT HAS OFFERED CREDIT BALANCE IN THE NAME OF M/S TIRUPATI TRADERS, RAIPUR IN A.Y. 2006-07 AS INCOME IN THE RETURN. IT IS FURTHER CONTENDED THAT IT HAS SOLD GOODS TO THE CREDITORS AT RS. 8,99,354/-, PAYMENT OF RS. 73,460/-WAS MADE TO M/S FORDGING STEEL INDIA AND BAJRANGBALI INDUSTRIES AND AMOUNT STILL DUE WAS RS. 32,40,448/-. 3.2.5 OUT OF RS. 49,08,978/- APPELLANT HAS OFFERED RS, 6,95,716/- RELATED TO M/S TIRUPATI M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 23 PAGE 23 OF 40 TRADERS, RAIPUR IN THE RETURN FOR THE A.Y. 2006- 07, THEREFORE AO IS NOT JUSTIFIED IN MAKING ADDITION ON THIS ACCOUNT. FURTHER, PAYMENT OF RS. 73,460/- AND SALE OF RS. 8,99,354/- CLAIMED BY THE APPELLANT IS NOT ACCEPTABLE AS APPELLANT FAILED TO FURNISH ANY CONFIRMATION OR COMPLETE POSTAL ADDRESS OF THE CREDITORS INSPITE OF ASKING BY THE AO, SO MANY TIMES DURING THE ASSESSMENT PROCEEDING AS WELL AS APPELLATE PROCEEDING, ALTHOUGH IT HAS CLAIMED AFFECTED SALES AND REPAYMENT TO THEM. THE APPELLANT HAS REMITTED THE LIABILITIES BY BOOKING SALES WITHOUT BRINGING ANY EVIDENCE ON THE RECORD TO PROVE THE EXISTENCE OF THE PARTIES AND GENUINENESS OF THE SALES. THEREFORE, OUTSTANDING CREDITORS WHOM APPELLANT HAS SHOWN SALES AND LIABILITY ON THEIR ACCOUNT REDUCED TO NIL COULD NOT BE TREATED EXPLAINED, BUT APPELLANT HAS SHOWN REMISSION OF THE M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 24 PAGE 24 OF 40 LIABILITY UNILATERALLY ON ACCOUNT OF THEM BY BOOKING SALES IN THEIR ACCOUNT THEREFORE IT IS TREATED CESSATION OF LIABILITY AS PER THE EXPLANATION 1 OF SECTION 41(1) AND AMOUNT OF RS. 8,99,354/- IS ADDED IN THE TAXABLE INCOME OF THE APPELLANT. SIMILARLY, APPELLANT HAS SHOWN PAYMENT OF RS. 73,460/- WITHOUT BRINGING ANY EVIDENCE ON RECORD TO PROVE THAT PAYMENT WAS RECEIVE D BY THE CREDITORS, WHOSE COMPLETE POSTAL ADDRESS APPELLANT FAILED TO FURNISH AND FILE THEIR CONFIRMATION UP TO THE APPELLATE PROCEEDINGS. THE APPELLANT HAS SHOWN REMISSION OF LIABILITY WITH UNILATERAL ACT, THEREFORE, PAYMENT OF RS. 73,460/- IS ALSO COVERED AS PER THE EXPLANATION 1 OF SECTION 41(1) AS REMISSION/CESSATION OF LIABILITY. FURTHER, ONE CREDITOR M/S. FORDGING STEEL INDIA OF RS. 5,16,194/- HAS STATED THAT BALANCE AS ON 31 ST MARCH, 2005, WAS NIL. SINCE, THE M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 25 PAGE 25 OF 40 CREDITOR M/S. FORDGING STEEL INDIA OF RS. 5,16,194/- HAS STATED THAT BALANCE AS ON 31 ST MARCH, 2005, WAS NIL. SINCE, THE CREDITOR M/S. FORDGING STEEL INDIA HAS DENIED IT HAS TO BE RECEIVED ANY PAYMENT FROM THE APPELLANT, THEREFORE LIABILITY SHOWN BY THE APPELLANT ON ACCOUNT OF THE CREDITOR AT RS. 5,16,194/- IS NOT GENUINE AND IT HAS TO BE ADDED BACK TO THE TAXABLE INCOME OF THE APPELLANT U/S 41 (1) AS CESSATION OF LIABILITY. CONSIDERING THE ABOVE FACTS, ADDITION MADE BY THE ASSESSING OFFICER AT RS. 14,89,008/- IS HEREBY CONFIRMED. 3.2.7 FOR REMAINING SUNDRY CREDITORS OF RS. 27,64,254/-, THE AO HAS MADE THE ADDITION AS THESE CREDITORS HAVE NOT FILED ANY INFORMATION CALLED FOR BY THE AO U/S 133(6) OR WRITTEN TO THEM RETURNED BACK UN-SERVED. THE APPELLANT HAS TAKEN A PLEA THAT IT HAS SHOWN SUNDRY CREDITORS IN THE BALANCE SHEET AND LIABILITIES IN M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 26 PAGE 26 OF 40 RESPECT OF THE CREDITORS WERE STANDING THERE. THIS LIABILITY WAS NOT CEASED TO EXIST ACCORDING TO SECTION 41(1). IN SUPPORT OF ITS CONTENTION APPELLANT HAS FILED THE AUDIT REPORT OF THE NEXT F.Y. 2005-06 I.E. A.Y. 2006-07. IN THE BALANCE SHEET UNDER THE HEAD SUNDRY CREDITORS BALANCES WERE SHOWN, IN RESPECT OF THE FOLLOWING CREDITORS:- 1. M/S.RAJAT STEELS RS. 10,06,876/- 2. M/S. WALIA STEELS RS. 8,37,772/-; 3. M/S. R.C. TRADING RS.7,97,378/-; 4. M/S. KANKDA ROLLING RS. 1,22,228/- TOTAL RS.27,64,254/- 3.2.8 THE APPELLANT HAS FURTHER TAKEN A PLEA THAT ONUS IS ON THE DEPARTMENT TO PROVE THAT THE LIABILITY IS CEASED TO EXIST. THE AO HAS NOT SHOWN THAT THE APPELLANT HAS RECEIVED ANY BENEFIT FROM M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 27 PAGE 27 OF 40 THESE PARTICULAR LIABILITIES, WHICH ARE STILL OUTSTANDING IN THE BALANCE SHEET AND IT HAS ALSO NOT BEEN SHOWN THAT THESE LIABILITIES HAVE CEASED FINALLY WITHOUT THE POSSIBILITY OF REVIVAL. IT HAS PLACED RELIANCE ON THE DECISIONS OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SUGAULI SUGAR WORKS PVT. LTD. (1999) 236 ITR 518 (SC), CCIT VS. KESARIA TEA CO. LTD. (2002) 254 ITR 434 (SC) AND DECISIONS OF HON'BLE ITAT, DELHI BENCH, DELHI IN TH E CASE OF SHREE VARDHMAN OVERSEAS LTD. VS. ACIT (2008) 24 SOT 393 (DEL.). 3.2.9 IN THE CASE OF THE APPELLANT AO HAS SIMPLY TREATED LIABILITIES OF THE BALANCE SHEET AS REMISSI ON OR CESSATION MERELY BECAUSE, THEY WERE OLD AND LETTER SENT TO SOME OF THEM RETURNED BACK UN- SERVED. HE DID NOT ESTABLISH THAT THE APPELLANT OBTAINED ANY BENEFIT IN RESPECT OF THEM, OR THERE WAS ANY REMISSION/CESSATION THEREOF. THERE WAS NO UNILATERAL ACT OF WRITING BACK THESE TRADING M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 28 PAGE 28 OF 40 LIABILITIES BY THE APPELLANT TO ATTRACT THE EXPLANATION TO SECTION 41(1). THE APPELLANT HAS BEEN CONTINUOUSLY SHOWING THEM IN ITS BOOK AS ITS LIABILITIES AND THERE IS NO MATERIAL TO HOLD THAT APPELLANT HAS NO INTENTION TO PAY BACK TO THE CREDITORS. WITHOUT PROVING THE SAME LIABILITIES OF THE BALANCE SHEET CANNOT BE TREATED AS THE INCOME OF THE APPELLANT. 3.2.10 IT IS HELD BY THE JUDICIAL AUTHORITIES THAT BALANCE SHEET LIABILITIES CANNOT BE TREATED AS INCOME MERELY BECAUSE, THEY ARE OLD OR LETTERS SEND TO SOME OF THEM RETURNED UN-SERVED. THE CONTINUOUS SHOWING OF LIABILITIES IN THE BOOKS OF ACCOUNT AS HIS/HER LIABILITIES IS ACKNOWLEDGMENT OF LIABILITIES. THE LIABILITIES SHOULD CEASE TO EXIST, EITHER BY OPERATION OF LAW OR BY AN ORDER OF COURT OR BY LIMITATION I.E. THERE SHOULD SOME EXTERNAL FORCE . THE LIABILITIES REFLECTED IN THE BALANCE SHEET CANN OT BE TREATED AS CESSATION OF LIABILITIES. MERELY, M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 29 PAGE 29 OF 40 BECAUSE THE LIABILITIES ARE OUTSTANDING FOR LAST MANY YEARS, IT CANNOT BE INFERRED THAT SAID LIABILITIES HAVE CEASED TO EXIST. 3.2.11 IN THE CASE OF THE APPELLANT ALL THE LIABILI TIES ARE OPENING BALANCES CARRIED FORWARD FROM EARLIER YEARS AND HAVE BEEN FURTHER CARRIED FORWARD TO NEXT YEARS. APPELLANT HAS NOT OBTAINED SOME BENEFIT IN THE YEAR UNDER CONSIDERATION I.E. INCREASE IN ITS PROFIT/CAPITAL (THAT THE LIABILITIES HAS NOT BEEN CREDITED TO THE P&L ACCOUNT AND OR CAPITAL ACCOUNT DIRECTLY), THEREFORE THEY ARE NOT LIABLE TO TAX U/S 41 (1). 3.2.12 THAT THE PROVISIONS OF SECTION 41(1) AND EXPLANTION-1 TO IT ARE DEEMING PROVISIONS. THEY SHOULD BE APPLIED AS PER THE LIMITS OF THESE SECTIO NS I.E. ONLY BILATERAL TRANSACTIONS OF REMISSION/CESSATION AND ONLY UNILATERAL TRANSACTION OF WRITING OFF LIABILITIES IN THE BOOKS OF M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 30 PAGE 30 OF 40 ACCOUNT SHOULD BE TAXED. IN THE CASE OF THE APPELLANT IT HAS NOT WRITTEN OFF THE OUTSTANDING LIABILITIES IN THE BOOKS OF ACCOUNT, THEREFORE AO I S NOT JUSTIFIED TO ADD THEM IN THE TAXABLE INCOME OF THE APPELLANT U/S 41 (1) ONLY ON THE BASIS OF THE LETTERS RETURNED BACK UN-SERVED. 3.2.13 THE AO SHALL HAVE TO PROVE THAT APPELLANT HAS OBTAINED THE BENEFITS IN RESPECT OF SUCH TRADIN G LIABILITIES BY WAY OF REMISSION/CESSATION THEREOF. MERELY, BECAUSE THE APPELLANT OBTAINED BENEFIT OF DEDUCTION IN THE EARLIER YEARS AND BALANCES ARE CARRIED FORWARD IN THE SUBSEQUENT YEAR, WOULD NOT PROVE THAT THE TRADING LIABILITIES OF THE APPELLANT HAVE BECOME NONEXISTENT. IT IS ALSO HELD BY THE JUDICIAL AUTHORITIES THAT EVEN, IN A CASE WHERE A LIABILITY CEASED TO EXIST DUE TO LIMITATION I.E. TH E CLAIM OF THE CREDITOR IS BARRED BY LIMITATION UNDER LIMITATION ACT 1963, BUT IF THE LIABILITY SUBSIST O R HAS NOT BEEN WRITTEN OFF BY THE ASSESSEE, OR THE M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 31 PAGE 31 OF 40 ASSESSEE DOES NOT ABSOLVE HIMSELF FROM THE LIABILITY, THOUGH NOT LEGALLY ENFORCEABLE, IT CANNO T BE TAXED U/S 41(1). 7. AFTER CONSIDERING THE REMAND REPORT, THE LD. CIT(A) DELETED THE ADDITION OF RS. 34,59,970/- AND CONFIRM ED THE ADDITION OF RS. 14,89,000/- AFTER HAVING THE FOLLOW ING OBSERVATIONS :- 3 .2.18 IN VARIOUS JUDICIAL DECISIONS TEST HAVE BEEN PROVIDED THAT CESSATION /REMISSION CANNOT BE DECIDED ON THE EXAMINATION OF THE CASE OF THE CREDITOR ALONE. BUT, THERE SHOULD BE SOME POSITIVE ACT ON THE PART OF THE CREDITOR I.E. SOME AGREEMENT TO WAIVE THE LIABILITY PARTLY/WHOLLY OR DECREE OF COURT IN FAVOUR OF THE DEBTOR, EXPIRY OF LIMITATION PERIOD ALONGWITH DECLARATION BY THE DEBTORS THAT HE DOES NOT INTEND TO HONOUR THE LIABILITY, CARRYING OF AMOUNT OF LIABILITY BY DEBTO R IN HIS TRADING/PROFIT AND LOSS ACCOUNT. IF , THESE M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 32 PAGE 32 OF 40 CONDITIONS ARE ABSENT THERE IS NO CESSATION/REMISSION OF LIABILITY, EVEN IF THE CREDITOR ARE NON VERIFIABLE/NON TRACEABLE. 3.2.19 CONSIDERING THE ABOVE FACTS ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ADDITION OF RS. 27,64,254/- ON ACCOUNT OF UNEXPLAINED CREDITORS AND IT IS HEREBY DELETED AND APPELLANT WILL GET FURTHER RELIEF OF RS. 6,95,716/- ON ACCOUNT OF CREDITOR WHICH WAS DISCLOSED BY IT IN THE RETURN OF ASSESSMENT YEAR 2006-07. THUS, APPELLANT WILL GET RELIEF OF RS. 34,59,970/- AND ADDITION CONFIRMED AT RS. 14,89,008/-. 8. THE LD. CIT(A) ALSO ENHANCED THE ASSESSMENT BY RS. 20,68,946/- IN RESPECT OF TRADE CREDITORS BY INVOKI NG THE PROVISIONS OF SECTION 41(1) AFTER HAVING THE FOLLOW ING OBSERVATIONS :- 3.3 THE ASSESSING OFFICER HAS ISSUED LETTER U/S 133(6) TO THE FOLLOWING PARTIES WHO HAS NOT M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 33 PAGE 33 OF 40 GIVEN ANY REPLY AND NOR FURNISHED COPY OF ACCOUNT AS REQUIRED BY THE ASSESSING OFFICER :- SR. NO. PARTIES NAME AMOUNT (RS.) L. M/S. ABDE ALI STEEL SUPPLIERS RS. 15,23,429/- 2 M/S. SHREE SIDDHI VINAYAK TRADING CO. RABDAL RS. 6,12,092/- 3 M/S. PANWAR STEEL, VARELY RS. 2,13,094/- , 4 M/S. BALAJI ISPAT,RAIPUR RS. 3,32,423/- TOTAL RS.26,81,038/- IN THE ABSENCE OF DENIAL/CONFIRMATION FROM THE PARTIES THE AO HAS NOT MADE ANY ADDITION REGARDING THE AFORESAID CREDITORS DURING THE COURSE OF ASSESSMENT. DURING THE APPELLATE PROCEEDING AO HAS AGAIN ISSUED LETTERS TO THESE PARTIES. LETTER WAS SERVED ON M/S. SHREE SIDDHI VINAYAK TRADING COMPANY, DAHOD, THE PARTY HAS NOT GIVEN ANY REPLY NOR FURNISHED COPY OF ACCOUNT. THE LETTER ISSUED TO OTHERS PARTIES AS STATED ABOVE WERE RECEIVED BACK UNSERVED. ACCORDING TO THE REPORT OF THE AO, SHOW M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 34 PAGE 34 OF 40 CAUSE NOTICE FOR ENHANCEMENT OF INCOME WAS GIVEN TO THE APPELLANT ON 17-02-2010 FOR ENHANCING THE INCOME OF RS. 26,81,038/-. THE APPELLANT HAS AGAIN TAKEN A PLEA IT HAS PURCHASED GOODS FROM THESE PARTIES, HOWEVER, THE GOODS SUPPLIED WERE NOT THE DESIRED QUALITIES, THEREFORE PAYMENT WERE NOT MADE. IT IS ALSO CLAIMED THAT IT HAS SOLD GOODS TO THESE PARTIES AT RS. 20,68,946/- AND ACCOUNT WAS CLEARED. IN RESPECT OF CREDIT OF RS. 6,12,092/- IN THE ACCOU NT OF M/S. SHREE SIDDHI VINAYAK TRADING COMPANY, DAHOD, THE SAME WAS OFFERED AS INCOME IN THE FINANCIAL YEAR 2005-06 I.E. ASSESSMENT YEAR 2006- 07. 3.3.1 THE APPELLANT HAS TRIED TO JUSTIFY THE OUTSTANDING CREDITORS BY WAY OF MAKING SALES TO THEM, BUT AGAIN IT FAILED TO FURNISH CONFIRMATION A ND COMPLETE POSTAL ADDRESS OF THE CREDITORS. IF, APPELLANT COULD SALE THE GOODS TO THE PARTIES THEN IT IS DIFFICULT TO BELIEVE THAT IT COULD NOT FURNISH T HE M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 35 PAGE 35 OF 40 CONFIRMATION AND COMPLETE POSTAL ADDRESS OF THE PARTIES. IT PROVES THAT APPELLANT HAS FABRICATED TH E DOCUMENT TO JUSTIFY THE UNPROVED LIABILITY. THE APPELLANT HAS REMITTED THE LIABILITIES BY BOOKING SALES WITHOUT BRINGING ANY EVIDENCE ON THE RECORD T O PROVE THE EXISTENCE OF THE PARTIES AND GENUINENESS OF THE SALES. THEREFORE, OUTSTANDING CREDITORS WHOM APPELLANT HAS SHOWN SALES AND LIABILITY ON THEIR ACCOUNT REDUCED TO NIL COULD NOT BE TREATED EXPLAINED, BUT APPELLANT HAS CEASED THE LIABILITY UNILATERALLY ON ACCOUNT OF THESE CREDITORS BY BOOKI NG SALES IN THEIR ACCOUNT, THEREFORE, IT IS TREATED REMISSION OF LIABILITY AS PER THE EXPLANATION 1 OF SECTION 41(1) AND AMOUNT OF RS. 20,68,946/- IS ADDED IN THE TAXABLE INCOME OF THE APPELLANT. IN RESPECT OF THE SUNDRY CREDITOR IN THE NAME OF M/S. SHREE SIDDHI VINAYAK TRADING COMPANY, DAHOD, AT RS. 6,12,092/- APPELLANT HAS OFFERED IT AS INCOME I N THE ASSESSMENT YEAR 2006-07, THEREFORE, NO ADDITION M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 36 PAGE 36 OF 40 IS REQUIRED TO BE MADE. FOR REMAINING CREDITORS OF RS. 20,68,946/- THE APPELLANT HAS MADE REMISSION OF LIABILITY BY BOOKING SALES IN THEIR NAME WITHOUT BRINGING ANY EVIDENCE ON RECORD OF THEIR EXISTENCE. HENCE, AMOUNT OUTSTANDING AGAINST THESE CREDITORS TREATED AS CESSATION OF LIABILITY AND INCOME IS ENHANCED AT RS. 20,68,946/-. 9. BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US AGAINST THE ABOVE ORDER OF CIT(A). ASSESSEE HAD ALS O RAISED ADDITIONAL GROUND OF APPEAL BEFORE US. 10. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALS O DELIBERATED ON JUDICIAL PRONOUNCEMENTS CITED AT BAR . FROM THE RECORD, WE FOUND THAT DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER CALLED CONFIRMATI ON FROM THE CREDITORS BUT THE ASSESSEE FAILED TO FILE IT. THERE AFTER, THE ASSESSING OFFICER ISSUED LETTER U/S 133(6) TO CERTA IN CREDITORS, WHICH WERE RECEIVED BACK UNSERVED. ACCORDINGLY, THE ADDITION OF RS. 49,08,978/- WAS MADE BY THE ASSESSING OFFICE R U/S M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 37 PAGE 37 OF 40 41(1). AFTER GIVING CREDIT OF GROSS PROFIT ADDITION OF RS. 18,18,804/-, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 30,90,174/- U/S 41(1). THE LD. CIT(A) HAS ALSO ENHA NCED THE ASSESSMENT WITH RESPECT TO CERTAIN OTHER CREDITORS BY RS. 20,68,946/-. FROM THE RECORD, WE FOUND THAT THE ASS ESSEE COULD NOT FURNISH CONFIRMATION FROM THESE CREDITORS NOR THE LETTERS ISSUED AT THEIR ADDRESS U/S 133(6) COULD BE SERVED ON THEM. DURING APPELLATE PROCEEDINGS, IN RESPECT OF N EW ADDRESS OF CREDITORS GIVEN BY ASSESSEE, THE LD. CIT(A) CALL ED FOR REMAND REPORT. AFTER CONSIDERING THE REMAND REPORT AND EAC H AND EVERY CREDITOR INDIVIDUALLY WITH RESPECT TO THE SUP PORTING DOCUMENTS FILED BY THE ASSESSEE, THE LD. CIT(A) HAS DELETED THE ADDITION TO THE TUNE OF RS. 27,64,254/- AND CONFIRM ED THE BALANCE ADDITION. WE FOUND THAT BOTH THE LOWER AUTH ORITIES AFTER TAKING INTO CONSIDERATION FACTUAL POSITION RE GARDING TRADE CREDITORS VIS--VIS DOCUMENTS FILED BY THE ASSESSEE TO SUBSTANTIATE THE FACT THAT THE PAYMENT WAS MADE IN SUBSEQUENT YEAR OR PART OF THE AMOUNT WAS CREDITED BY THE ASSESSEE ITSELF IN THE SUBSEQUENT YEAR, CONFIRMED T HE ADDITION M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 38 PAGE 38 OF 40 OF RS. 14,89,008/- U/S 41(1). THE DETAILED FINDING RECORDED BY THE LD.CIT(A) ARE AS PER MATERIAL ON RECORD, ACCORD INGLY, WE CONFIRM THE ACTION OF THE CIT(A) FOR DELETING THE A DDITION OF RS. 27,64,254/- AND CONFIRMING ADDITION OF RS. 14,89,00 8/-. WE ALSO CONFIRM THE ACTION OF THE CIT(A) FOR ENHANCEME NT OF THE ASSESSMENT BY RS. 20,68,946/-, IN SO FAR AS THE ASS ESSEE COULD NOT SUBSTANTIATE THE GENUINENESS OF CREDITORS AS ON 31.3.2005. 11. DURING THE COURSE OF HEARING, THE LD. AUTHORIZED REPRESENTATIVE HAS TAKEN AN ADDITIONAL GROUND TO T HE EFFECT THAT THE LD. CIT(A) HAS ERRED IN CONSIDERING ALLEGE D CREDITOR FOR RS. 49,08,978/-, WHEREAS THE ASSESSEE RAISED GROUN D FOR RS. 30,90,174/-. WE HAVE CONSIDERED RIVAL CONTENTIONS A ND DID NOT FIND ANY MERIT IN THE ADDITIONAL GROUND SO RAISED B Y THE ASSESSEE, IN SO FAR AS DURING APPELLATE PROCEEDINGS , THE LD. CIT(A) FOUND THAT CREDITOR TO THE TUNE OF RS. 49,08 ,978/- HAS NOT BEEN CONFIRMED BY THE ASSESSEE BY PLACING COGEN T MATERIAL ON RECORD. THE LD. AUTHORIZED REPRESENTATIVE HAS AL SO PLACED RELIANCE ON VARIOUS DECISIONS REPORTED AT 254 ITR 4 34, 236 ITR 518, 325 ITR 25, 292 ITR 310, 330 ITR 435, 326 ITR 117. WE M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 39 PAGE 39 OF 40 HAD CAREFULLY GONE THROUGH THE PROPOSITIONS OF LAW LAID DOWN IN THESE CASES AND FOUND THAT THE FACTS IN THE INST ANT CASE ARE DISTINGUISHABLE IN SO FAR AS ASSESSEE COULD NOT SUB STANTIATE THE GENUINENESS OF CREDITORS AS ON 31.3.2005. THUS, THE PROPOSITION LAID DOWN IN ABOVE DECISIONS ARE NOT AP PLICABLE TO THE FACTS OF ASSESSEES CASE. IN SO FAR AS THE ASSE SSEE WAS UNABLE TO PROVE THE EXISTENCE OF THESE CREDITORS AS ON 31.3.2005, AFTER RECORDING DETAILED FINDING, THE LD . CIT(A) HAS CORRECTLY CONFIRMED THE ACTION OF ASSESSING OFFICER WITH RESPECT TO RS. 14,89,008/-. THE LD. CIT(A) HAS ALSO DISCUSS ED THE ISSUE AT LENGTH WITH RESPECT TO EACH AND EVERY CREDITOR A ND HAS DONE THE ENHANCEMENT OF ASSESSMENT U/S 41(1) BY RS. 20,6 8,946/-. DETAILED FINDINGS RECORDED B Y CIT(A) HAD NOT BEEN CONTROVERTED BY LD. AUTHORIZED REPRESENTATIVE NOR BY LD. SENIOR DR BY BRINING ANY POSITIVE MATERIAL ON RECOR D. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A). 12. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE AND REVENUE ARE DISMISSED. M/S.LAXMI REROLLING MILLS, UJJAIN I.T.A.NOS. 295 & 303/IND/2013 A.Y. 2005-06 40 PAGE 40 OF 40 THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 27 TH JANUARY, 2014. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED : 27 TH JANUARY, 2014. CPU* 2111. 1612 271