Muktaben N.Sanghvi, Ahmedabad V. The Income tax Officer,Ward-2(4), Ahmedabad

ITA 3127/AHD/2010

• Counselvise Citation: 312720514 RSA 2010
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 26-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: A C SHAH
• Keywords: Additional evidence
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEM BER MUKTABEN N. SANGHVI PROP. TEJAL TRADING CO. 14-A, STHANASKVASI JAIN SOCIETY, OPP. MAMTA FLATS, NR. NARANPURA RAILWAY CROSSING, AHMEDABAD- 380013 PAN: ACIPS5716M (APPELLANT) VS THE ITO, WARD-2(4), AHMEDABAD (RESPONDENT) REVENUE BY: SRI O.P. BATHEJA, SR.D.R. ASSESSEE BY: SRI A.C. SHAH, A.R. DATE OF HEARING : 09-10-2013 DATE OF PRONOUNCEMENT : 25-10-20 13 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A)-XVI AHMEDABAD DATED 08-11-2010. 2. THE ASSESSEE HAS TAKEN FOLLOWING THREE EFFECTIVE GROUNDS:- ITA NO. 3127/AHD/2010 ASSESSMENT YEAR 2007-08 I.T.A NO.3127/AHD/2010 A.Y. 2007-08 PAGE NO MUKTABEN N. SANGHVI VS. ITO 2 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS. 70,64,644/- BEING THE SUNDRY CREDITORS FOR GOODS UN DER SEC. 41(1) IN CASE OF FOLLOWING PARTIES. BANAL STEEL RS. 4,53,064 SUBH ENTERPRISE RS. 15,98,817 MAHESH STEEL CORPORATION RS. 12,63,150 SWAMINI ENTERPRISE RS. 37,49,613 ON THE GROUND THAT THE SUNDRY CREDITORS ARE NOT GEN UINE IN AS MUCH AS THE SUNDRY CREDITORS ARE GENUINE. 2. THE CIT(A) HAS ERRED IN CONFIRMING ADDITION OF R S. 50,000 UNDER SEC. 68 IN CASE OF JAY CONSTRUCTIONS ON THE GROUNDS THAT THE ADDITIONAL EVIDENCE IN THE FORM OF CONFIRMATION IS NOT ADMITTED IN AS MUCH AS THE ADDITIONAL EVIDENCE SHOULD HAVE BEEN AD MITTED AND THAT THE ADDITION SHOULD HAVE BEEN DELETED SINCE THE CON FIRMATION PROVES THE IDENTITY OF THE DEPOSITOR SINCE THE PAN IS FURN ISHED. 3. THE LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS. 12,34,640 BEING THE LABOUR & FREIGHT EXPENSES AS BO GUS IN AS MUCH AS THE SAID EXPENSES ARE GENUINE. 3. FIRST GROUND RELATES TO ADDITION OF RS. 70,64,64 4/- U/S. 41(1) OF THE ACT BY THE AO WHICH HAS BEEN CONFIRMED BY LD. CIT(A). 4. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS SHOWN LIABILITY OF RS. 1 ,41,49,545/- UNDER THE HEAD SUNDRY CREDITORS FOR GOODS. THE AO SENT LETTE RS U/S. 133(6) TO ALL THE CREDITORS. HOWEVER THE LETTERS SENT TO THE FOLLOWI NG FIVE PARTIES WERE RETURNED UN-SERVED. 1. BINAL STEEL RS. 4,53,064/- 2. SUBH ENTERPRISE RS. 15,98,817/- 3. MAHESH STEEL CORP. RS. 12,60,150/- I.T.A NO.3127/AHD/2010 A.Y. 2007-08 PAGE NO MUKTABEN N. SANGHVI VS. ITO 3 4. KALA STEEL CORP. RS. 3,16,724/- 5. SWAMINI ENTERPRISE RS. 37,49,613/- THE LETTERS IN RESPECT OF THREE PARTIES WERE RETURN ED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN, IN RESPECT OF FORTH P ARTY I.E. KALA STEEL CORPORATION THE PARTY DENIED TO HAVE MADE ANY TRANS ACTION WITH THE ASSESSEE VIDE LETTER DATED 29-07-2009 AND IN RESPECT OF THE FIFTH PARTY, THE LETTER WAS RECEIVED BACK FROM THE POSTAL AUTHORITY WITH THE RE MARK LEFT INDIA. THE AO THEREFORE ASKED THE ASSESSEE TO GIVE NEW ADDRESSES OR TO PRODUCE THESE PARTIES. DESPITE SEVERAL OPPORTUNITIES GIVEN BY TH E AO, ASSESSEE COULD NOT FILE THE CONFIRMATIONS FROM THESE PARTIES. HOWEVER IT WAS CONTENDED THAT ASSESSEE HAS NOT GIVEN THE OUTSTANDING AMOUNT TILL DATE. THE AO DISCUSSED EACH OF THESE PARTIES SEPARATELY IN HIS LETTER AS U NDER:- 1. WITH RESPECT TO MESSRS. BINAL STEEL, THE AO STA TED THAT THE ASSESSEE GAVE A NEW ADDRESS ON WHICH THE INSPECTOR WAS SENT FOR MAKING INQUIRY. THE INSPECTOR REPORTED THAT NO SUCH FIRM OR PARTY WAS FOUND ON THE GIVEN ADDRESS AND SOME OTHER PERSON WA S STAYING FOR THE LAST 3 TO 4 YEARS AS A TENANT. THE AO AGAIN GAVE AN OPPORTUNITY ON 02/12/2009 TO THE ASSESSEE TO PRODUCE THE PARTY. TH E ASSESSEE DID NOT RESPOND TO THIS SHOW CAUSE NOTICE AND DID NOT PRODU CE THE PARTIES. IN VIEW OF THIS THE AO HAS STATED THAT IT IS VERY CLEA R THAT THE LIABILITY HAS CEASED TO EXIST. AND HENCE THE ADDITION UNDER SECTI ON 41[1] NEEDS TO BE MADE. 2. WITH RESPECT TO SUBH ENTERPRISE, THE AO STATED T HAT THE ASSESSEE HAS ONLY GIVEN LEDGER ACCOUNT COPIES FROM ITS OOKS OF A CCOUNTS. THE INSPECTOR WAS DEPUTED ON 02/12/2009 TO MAKE INQUIRY FROM THE PREMISES OF THE ADDRESS GIVEN. THE INSPECTOR REPORT ED THAT ON THE GIVEN ADDRESS NO SUCH FIRM WAS FOUND. THE AO THEREF ORE, AGAIN GAVE AN OPPORTUNITY WIDE LETTER DATED 02/12/2009 TO PRODUCE THE PARTIES. BUT THE ASSESSEE IGNORED THE NOTICE. IN V IEW OF THIS REASON, THE AO HELD THAT THE LIABILITY IN RESPECT OF THIS P ARTY HAS CEASED TO EXIST AND IS LIABLE TO BE TAXED UNDER SECTION 41[1] . 3. WITH RESPECT TO MAHESH STEEL CORP., THE AO STATE D THAT THE LETTER ISSUED TO THIS PARTY WAS RETURNED UN-SERVED. THE AS SESSEE WAS GIVEN I.T.A NO.3127/AHD/2010 A.Y. 2007-08 PAGE NO MUKTABEN N. SANGHVI VS. ITO 4 OPPORTUNITY TO PRODUCE, THE PARTIES BUT THE ASSESSE E COULD NOT DO SO. IN VIEW OF THIS REASON, THE AO HELD THAT THE LIABIL ITY IN RESPECT OF THIS PARTY HAS CEASED TO EXIST AND IS THEREFORE LIABLE T O BE TAX UNDER SECTION 41[1] 4. WITH RESPECT TO KALA STEEL CORP., THE AO STATED THAT THE NOTICES ISSUED TO THIS PARTY UNDER SECTION 133 [6] ON 15/07 /2009. THE ASSESSEE WERE GIVEN SUFFICIENT OPPORTUNITY TO GIVE CLARIFICA TION AND ALSO TO PRODUCE THE PARTY. BUT THE ASSESSEE DID NOT COMPLY WITH A NOTICE IN THE AO THEREFORE HELD THAT THE LIABILITY IN RESPECT OF THIS PARTY HAS CEASED TO EXIST AND IS THEREFORE LIABLE TO BE TAXED UNDER SECTION 41 [1]. 5. WITH RESPECT TO SWAMINL ENTERPRISE; THE ASSESSEE STATED THAT THIS PARTY HAS GONE ABROAD AND THEREFORE NO SUCH CONFIRM ATION IS POSSIBLE. IN VIEW OF THIS REASON, THE AO STATED THAT A PARTY WHO HAS OUTSTANDING BALANCE OF RS. 37 , 49,613/- CANNOT SIMPLY DISAPPEAR WITHOUT TAKING SUCH OUTSTANDING AMOUNT. IN VIEW OF THIS REASON, TH E AO HELD THAT THE LIABILITY IN RESPECT OF THIS PARTY HAS CEASED TO EX IST AND IS THEREFORE LIABLE TO BE TAXED UNDER SECTION 41 [1]. IN VIEW OF THE ABOVE AO TREATED THE BALANCE OUTSTAN DING IN RESPECT OF THESE FIVE PARTIES AS CESSATION OF LIABILITY AND ADDED TH E AMOUNT U/S. 41(1) OF THE IT ACT. 5. IN APPEAL LD. CIT(A) CONFIRMED THE ACTION OF AO. 6. BEFORE US LEARNED COUNSEL OF THE ASSESSEE SUBMIT TED THAT THE SUNDRY CREDITORS DID NOT RESPOND DUE TO CHANGE IN ADDRESS AND THAT JUST BECAUSE THE CREDITORS DID NOT RESPOND, THE AO CANNOT PRESUME T HAT LIABILITY HAS CEASED AND THEREBY THE AO HAS ERRED IN MAKING ADDITION OF RS. 70,64,640/- U/S. 41(1) OF THE ACT. FOR MAKING THIS SUBMISSION LEARN ED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON SEVERAL CASE LAWS INCLU DING THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. G.K. PAT EL & CO. TAX APPEAL NO. 1532 OF 2011 DATED 16 TH OCTOBER, 2012 REPORTED IN [2013] 212 TAXMAN 384/29. I.T.A NO.3127/AHD/2010 A.Y. 2007-08 PAGE NO MUKTABEN N. SANGHVI VS. ITO 5 7. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF LOWER AUTHORITIES. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THE FACTS OF THIS CASE ARE IDENTICAL TO THAT OF CIT VS. GK PATEL & CO WHEREIN IT WAS HELD AS UNDER:- FOR THE PURPOSE OF INVOKING SUB-SECTION (1) OF SEC TION 41, THERE HAS TO BE REMISSION OR CESSATION OF THE TRADING LIABILI TY IN THE PREVIOUS YEAR AND IN THE LIGHT OF EXPLANATION 1 THERETO, SUC H REMISSION OR CESSATION SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT OF THE ASSESSES BY WAY OF WRITING OF F SUCH LIABILITY IN HIS ACCOUNTS. IN THE PRESENT CASE, THERE IS NO UNILATERAL ACT OF THE ASSESSEE OF MAKING ANY ENTRY IN RESPECT OF THE TRADING LIABILITIES IN ITS BOOKS OF ACCOUNT. THEREFORE, A SINE QUA NON FOR ATTRACTING SECTION 41 IN THE PRESENT CASE, IS THAT THE ASSESSEE SHOULD HAVE OBTAINED A BENEFIT BY WAY OF REMISSION OR CESSATION OF A PARTICULAR AMOUNT IN TH E PREVIOUS YEAR CORRESPONDING TO THE ASSESSMENT YEAR IN QUESTION. A S NOTED BY THE TRIBUNAL, THERE WAS NO POSITIVE ACT ON THE PART OF EITHER THE ASSESSEE OR THE CREDITORS WHICH WOULD AMOUNT TO THE ASSESSEE HAVING GAINED THE BENEFIT OF REMISSION OR CASSATION OF THE LIABIL ITIES IN QUESTION. THE CASE OF THE REVENUE IS THAT SEVERAL YEAR HAVING PAS SED THE RECOVERY OF THE DEBTS IN QUESTION HAVE BECOME TIME BARRED AND H ENCE BY OPERATION OF LAW THERE IS CESSATION OF THE LIABILIT Y, THEREBY ATTRACTING SECTION 41(1). RESPECTFULLY FOLLOWING THE ABOVE, THE ADDITION MAD E BY AO AND SUSTAINED BY LD. CIT(A) BY INVOKING PROVISION OF SEC. 41(1) O F THE ACT IS HEREBY DELETED. THIS GROUND OF ASSESSEES APPEAL IS ALLOW ED. 9. GROUND NO. 2 RELATES TO ADDITION OF RS. 50,000/- U/S. 68. AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT ASSESSEE HAS SHOWN UNSECURED LOAN OF RS. 50,000/- FROM M/S JAY CONSTRUCTION. SINCE ASSE SSEE COULD NOT FILE ANY I.T.A NO.3127/AHD/2010 A.Y. 2007-08 PAGE NO MUKTABEN N. SANGHVI VS. ITO 6 CONFIRMATION IN RESPECT OF THIS PARTY, THE AO ADDED THIS AMOUNT U/S. 68 OF THE ACT. 10. IN APPEAL LD. CIT(A) HAS CONFIRMED THIS ACTION OF THE AO. 11. BEFORE US LEARNED COUNSEL OF THE ASSESSEE SUBM ITTED THAT DURING THE APPELLATE PROCEEDINGS BEFORE LD. CIT(A) CONFIRMATIO N FROM M/S. JAY CONSTRUCTION WAS FILED BUT LD. CIT(A) HAS NOT CONSI DERED THIS CONFIRMATION WHILE CONFIRMING THE ACTION OF AO. (COPY OF THE C ONFIRMATION WAS ALSO FILED BEFORE US.) HE THEREFORE PRAYED THAT THE MAT TER MAY KINDLY BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER VERIFYING THE CONFIRMATION OF M/S. JAY CONSTRUCTION. LD. DR RELIED ON THE ORD ER OF LOWER AUTHORITIES. 12. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD AND IN VIEW OF THE FACT THAT ASSESSEE HAS FILED CONFIRMATION FROM M/S. JAY CONSTRUCTION, WE DEEM IT PROPER THAT MATTER BE SENT BACK TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER VERIFYING THE CONFIRMATION FILED BY THE ASSESSEE OF M/S. JAY CONSTRUCTION. WE HOLD ACCORDINGLY. THIS GROU ND IS ALLOWED FOR STATISTICAL PURPOSE. 13. THIRD GROUND RELATES TO ADDITION OF RS. 12,34,6 40/- TREATING THE LABOUR AND FREIGHT EXPENSES AS BOGUS BY THE AO WHICH HAS B EEN CONFIRMED BY LD. CIT(A). 14. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THA T ASSESSEE HAS SHOWN AN OUTSTANDING BALANCE OF RS. 15,10,030/- UND ER THE HEAD FREIGHT, CARTAGE AND LORRY BHADA. HE FURTHER FOUND THAT AS SESSEE HAS PREPARED I.T.A NO.3127/AHD/2010 A.Y. 2007-08 PAGE NO MUKTABEN N. SANGHVI VS. ITO 7 VOUCHERS FOR THE SUM OF RS. 18,750/-, RS. 19550/-, RS. 17,890/- ETC IN THE NAME OF 42 LABOURERS AND THERE WERE 18 VOUCHERS IN THE NAME OF FREIGHT TRANSPORTERS. OUT OF THE ABOVE, A SUM OF RS. 12,3 4,640/- PERTAINED TO FREIGHT AND LORRY BHADA. THE AO ASKED THE ASSESSEE TO GIVE DETAILS OF THESE ASSESSEES BY GIVING NAMES AND ADDRESSES OF THESE PA RTIES/LABOURERS. THE AO ISSUED NOTICE U/S. 133(6) TO LABOURERS AS WELL AS F REIGHT CREDITORS. MAJORITY OF LETTERS WERE RECEIVED BACK WITH REMARK OF POSTAL AUTHORITIES AS NOT KNOWN. THE AO THEREFORE ASKED TO PRODUCED ALL THE SE LABOURERS AND FRIGHT TRANSPORTERS. THE AO ALSO ASKED THE ASSESSEE TO PR ODUCE EVIDENCE OF PAYMENT MADE TO THESE PARTIES WHICH MIGHT HAVE BEEN PAID AFTER THE END OF YEAR. THE ASSESSEE FAILED TO PRODUCE THESE PARTIES AND ALSO DID NOT GIVE ANY EVIDENCE OF PAYMENT TO THESE PARTIES. THE ASSESSE E SIMPLY STATED THAT THE SUM HAS BEEN PAID BACK IN THE YEAR PERTAINING TO AS SESSMENT YEAR 2008-09. NO PROOF OF PAYMENT TO THE LABOURERS AND TRANSPORTE RS WERE GIVEN. THUS, AO TREATED THESE EXPENSES AS BOGUS AND ADDED THE SA ME TO THE INCOME OF THE ASSESSEE. 15. IN APPEAL THIS ACTION OF THE AO WAS CONFIRMED B Y LD. CIT(A). 16. BEFORE US LEARNED COUNSEL OF THE ASSESSEE MADE THE SAME SUBMISSION AS MADE BEFORE THE LOWER AUTHORITIES THAT PAYMENTS WERE MADE TO THE PARTIES/LABOURERS DURING THE ASSESSMENT YEAR 2008-0 9. IN SUPPORT OF THIS SUBMISSION ZEROX OF LEDGER ACCOUNT OF EACH PARTY FR OM FINANCIAL YEAR 01-04- 2006 TO 31-03-2007, 31-03-2008, 31-03-2009, 31-03-2 010 OF 42 PARTIES WAS FILED IN THE FORM OF PAPER BOOKS SHOWING THAT THE P AYMENT WAS MADE IN THE SUBSEQUENT YEARS. HOWEVER THESE DETAILS REQUIRE VE RIFICATION AT THE END OF AO AND FOR THIS PURPOSE THE MATTER IS RESTORED BACK TO THE FILE OF AO FOR I.T.A NO.3127/AHD/2010 A.Y. 2007-08 PAGE NO MUKTABEN N. SANGHVI VS. ITO 8 FRESH ADJUDICATION. THIS GROUND OF ASSESSEES APPE AL IS ALLOWED FOR STATISTICAL PURPOSE. 17. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R. MEENA) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 25/10/2013 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,