M/S Patidar Dinesh Kumar & Company, Indore V. THE ITO-3(2), Indore

ITA 32/IND/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2533 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-11-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 27-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P MORYA
• Assessee Lawyers: GIRISH AGRAWAL
• Keywords: Unexplained cash credit; Loose papers; Peak credit; Period of limitation; Time period of passing order
• Section: 143(3); 142(1); 133A

Judgement Text

PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.32/IND/2017 ASSESSMENT YEAR 2011-12 REVENUE BY S HRI R.P. MORYA, SR.DR ASSESSEE BY S HRI GIRISH AGRAWAL ,CA DATE OF HEARING 0 6 .11 . 2018 DATE OF PRONOUNCEMENT 13 . 1 1 .2018 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL IS FILED AT THE INSTANCE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2011-12 IS DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- III (IN SHORT LD.CIT(A)], INDORE DATED 20.10.2016 WHICH IS ARIS ING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHOR T THE ACT) DATED 15.01.2014 FRAMED BY ITO-3(2), INDORE. PATIDAR DI NESH KUMAR & COMPANY, 122, NEW SABJI MANDI, INDORE VS. ITO, 3(2) INDORE ( APPELLANT ) (RESPONDENT ) PAN NO. A AACFP0433A PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 2 2. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE B USINESS OF FOOD GRAIN AND COMMISSION AGENT. SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON 10.3.2011 AND VARIOUS DOCUMENTS WERE I MPOUNDED FOR LACK OF PROPER EXPLANATION. SUBSEQUENTLY ASSES SEE FILED HIS RETURN OF INCOME ON 26.9.11 DECLARING INCOME OF RS. 8,63,390/-. NOTICE U/S 143(2) OF THE ACT DATED 14.9.12 AS WELL AS U/S 142(1) OF THE ACT WERE DULY SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LEARNED ASSESSING OFFICER (I N SHORT LD.A.O) CONFRONTED THE ASSESSEE WITH THE IMPOUNDED DOCUMENT S WHICH CONTAINS THE NAME OF PERSONS ALONG WITH AMOUNT SHOW N AS CREDIT RECEIPT AND TOTAL OF THESE DETAILS PLACED AT ANNEXU RE-BI, BI2 WAS AT RS.6,02,895/-. IT WAS PLEADED BY THE ASSESSEE THAT THE FARMERS GIVES ADVANCE IN THE START OF THE DAY AND IF NO TRA NSACTIONS ARE TAKEN UP DURING THE DAY THESE AMOUNTS ARE REFUNDED BACK. SOME PARTS OF THE DETAILS APPEARING IN THE IMPOUNDED DOC UMENTS WERE ENTERED INTO THE BOOKS OF ACCOUNTS. LD.A.O WAS NOT CONVINCED AND UNMATCHED CREDIT ENTRIES WERE ADDED TO THE INCOME O F THE ASSESSEE AT RS.6,02,895/-. ADDITION U/S 41(1) OF THE ACT WA S ALSO MADE FOR SUNDRY CREDITORS TOTALING TO RS.4,27,723/- WHICH WE RE OUTSTANDING PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 3 FOR MORE THAN 3 YEARS. DISALLOWANCE OF EXPENSES OF RS.80,000/- WAS MADE ON AD-HOC BASIS. INCOME ASSESSEE AT RS.19 ,73,708/-. 3. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. C IT(A) AND PARTLY SUCCEEDED. 4. AGGRIEVED ASSESSEE IS NOW IN APPEAL BEFORE THE T RIBUNAL RAISING FOLLOWING GROUNDS OF APPEAL; IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A)-III, INDORE ERRED IN :- 1. PARTLY SUSTAINING THE ORDER PASSED BY LD.A.O WHICH IS CONTRARY TO THE MATERIAL ON RECORD AND PROVISIONS OF THE ACT, U NJUST AND BAD IN LAW. 2. SUSTAINING THE ADDITION OF RS.6,02,895 MADE BY LD.A O IN RESPECT OF ENTRIES RECORDED ON THE IMPOUNDED PAPERS UNDER THE HEAD INCOME FROM OTHER SOURCES BY HOLDING THAT PEAK CREDIT CANNOT BE ACCEPTED IN ABSENCE OF VERIFICATION OF THE EXPENSE SIDE ENTRIES. 3. PARTLY SUSTAINING ADDITION U/S 41(1) AMOUNTING TO R S.2,72,389/- WHICH IS UNJUST AND BAD IN LAW AS LIABILITY STILL E XISTS IN THE BOOKS AND HENCE CANNOT BE SAID TO BE CESSATION OF LIABILITY U /S 41(1), AND DESPITE HOLDING THAT LIABILITY TOWARDS M/S KARTIK TRADERS C ONTINUES. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR OTHERWISE RAISE ANY OTHER GROUND OF APPEAL 5. GROUND NO.1 IS GENERAL IN NATURE WHICH NEEDS TO ADJ UDICATION. PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 4 6. APROPOS GROUND NO.2 RELATING TO ADDITION OF RS.6,02 ,895/- MADE BY THE LD.A.O ON THE BASIS OF UNEXPLAINED CRED IT ENTRIES RECORDED IN THE IMPOUNDED PAPERS. 7. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE WRITT EN SUBMISSION SUBMITTED THAT BOTH THE LOWER AUTHORITIE S SHOULD HAVE NOTED THE FACT THAT IN THE IMPOUNDED DOCUMENTS ALON G WITH THE CREDIT ENTRIES THERE WERE DEBIT ENTRIES ALSO AND SE T OFF OF THE SAME SHOULD HAVE BEEN GIVEN AND AT THE MOST ADDITION FOR THE PEAK CREDIT SHOULD HAVE BEEN MADE. FURTHER FOLLOWING WRITTEN S UBMISSIONS WERE MADE BY THE LD. COUNSEL FOR THE ASSESSEE CHALL ENGING THE ADDITION OF RS.6,02,895/- 1. IT IS SUBMITTED THAT DURING SURVEY, CERTAIN BOO KS WERE IMPOUNDED BY THE DEPARTMENT AND MARKED AS BI-1 TO BI-10. DURING THE ASSESSMENT PROCEEDINGS, ADDITIONS FROM IMPOUNDED MATERIAL INVE NTORIZED AS 81-1 TO 81-3 WERE MADE. LD. AO HAS REPRODUCED THE RELEVANT PORTIONS IN THE ASSESSMENT ORDER FOR THE PURPOSE OF MAKING ADDITION . [PB 97 -164] 2. LD. AO ISSUED SHOW CAUSE NOTICE ON 26.12.2013, I N RESPONSE. TO WHICH ASSESSEE SUBMITTED THAT IT IS A REGULAR PRACTICE OF FARMERS TO KEEP TOKEN MONEY WITH ASSESSEE IN ANTICIPATION OF BUSINESS TRA NSACTION DURING THE DAY. IF THE TRANSACTION MATERIALIZES THEN ASSESSEE RECORDS THE TRANSACTION WITH ENTIRE AMOUNT (INCLUDING TOKEN AMOUNT ALREADY PAID) IN HIS BOOKS OF ACCOUNTS. IN CASE WERE THE TRANSACTION DOES NOT MAT ERIALIZE THE TOKEN AMOUNT IS REFUNDED AND NO ENTRY IS RECORDED. THE AD DITION AMOUNT OF RS. PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 5 6,02,895 IS OF THE FARMERS WITH WHOM THE TRANSACTIO NS DID NOT MATERIALIZE AND HENCE TOKEN AMOUNT WAS REFUNDED. [A D PAGE 5, 1 ST PARA AND PB 86 - 87] 3. LD. AO FAILED TO TAKE COGNIZANCE OF THE STATEMEN T OF SHRI SUNIL PATIDAR, PARTNER OF ASSESSEE FIRM, RECORDED UNDER OATH U/S 1 33 OF THE ACT ON 10.03.2011. IN THIS STATEMENT, IN RESPONSE TO QUEST ION NO. 7 THE NATURE OF THE ENTRIES RECORDED IN THE LOOSE PAPERS IMPOUND ED IN THE COURSE OF SURVEY IS EXPLAINED AS UNDER - FOR BI-1:THESE PAPERS PERTAIN TO TRANSACTIONS ENTER ED WITH FARMERS AND TRADERS FOR AMOUNTS RECOVERED AND RECEIVED. FOR BI-2:THESE PAPERS PERTAIN TO TRANSACTIONS ENTER ED WITH FARMERS FOR BOOKING OF POTATO SEEDS AND HAMMALI. FOR BI-3:THESE PAPERS ALSO PERTAIN TO TRANSACTIONS ENTERED WITH FARMERS FOR BOOKING OF POTATO SEEDS AND HAMMALI. THE ABOVE EXPLANATION WAS ALSO SUBMITTED BEFORE LD. LTD (TECHNICAL) IN RESPONSE TO NOTICE U/S 133A(3). [REFER PB 92] 4. LD. AO ERRED IN NOT CONSIDERING THE EXPLANATION GIVEN AND THE ABOVE REFERRED RESPONSE OF THE PARTNER OF ASSESSEE FIRM, IN PROPER PERSPECTIVE AND PROCEEDED TO ADD THE AMOUNT OF RS. 6,02,895 AS INCOME FROM OTHER SOURCES. [AO PAGE 5 1 ST PARA] 5. DURING THE PROCEEDINGS BEFORE LD. CIT(A), ASSESS EE HAD TAKEN SAME STAND THAT THE ENTRIES NOTED ON THE IMPOUNDED LOOSE PAPERS WERE MAPPED AND RECONCILED BEFORE LD. AO FROM THE BOOKS OF ACCOUNT. TRANSACTIONS WHICH DID NOT MATERIALIZE COULD NOT BE MAPPED IN THE BOOKS OF ACCOUNTS. FURTHER THESE BOOKS IMPOUNDED (B I-L TO BI-3) REFLECTS BOTH TOKEN MONEY RECEIVED AND ALSO EXPENSE ENTRIES, THESE UN-MAPPED PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 6 EXPENSES ENTRIES WERE NOT CONSIDERED BY LD. A.O [PB 99 -164 AND PB 86 - 87] 6. FURTHER, LD. AO CHARACTERIZED THESE RECEIPTS AS INCOME FROM OTHER SOURCES WHILE MAKING THE ADDITION WHICH IS GROSSLY INCORRECT. IT IS SUBMITTED THAT WHEN MOST OF THE ENTRIES ON THESE LO OSE PAPERS WERE MAPPED AND RECONCILED WITH THE REGULAR BOOKS OF ACC OUNT, THEY ALL ARE RELATED TO THE BUSINESS OF THE ASSESSEE. THUS, THOS E ENTRIES WHICH COULD NOT BE MAPPED FROM THE SAME LOOSE PAPERS THEY WOULD ALSO RELATE TO THE BUSINESS OF THE ASSESSEE. THE ONLY SOURCE OF INCOME FOR THE ASSESSEE FIRM IS OF BUSINESS OF COMMISSION AGENT FOR AGRICULTURE PRODUCE. ASSESSEE STRONGLY OBJECTS THIS RE-CHARACTERIZING OF THESE EN TRIES AS INCOME FROM OTHER SOURCES FOR THE PURPOSE OF MAKING ADDITION BY THE LD. AO. 7. IT WAS SUBMITTED BEFORE LD. CIT(A) THAT THE SAID IMPOUNDED DOCUMENTS CONTAIN ENTRIES RECORDED FOR RECEIPT AS W ELL AS PAYMENTS NOT ACCOUNTED IN THE REGULAR BOOKS OF ACCOUNTS FOR THE REASONS MENTIONED AFORESAID. FOR THESE UNACCOUNTED ENTRIES OF BOTH RE CEIPTS AND PAYMENTS, BY APPLYING PEAK THEORY, AS AN ALTERNATE, ADDITION CAN BE MADE ONLY TO THE EXTENT OF RS. 2,90,346 IN CONTRAST TO WHAT LD. AOP DID BY MAKING ADDITION OF THE ENTIRE SUCH RECEIPTS, MORE PARTICUL ARLY WHEN ALL OTHER ENTRIES ON THE IMPUGNED IMPOUNDED PAPERS HAVE BEEN FOUND DULY ACCOUNTED AND RECONCILED AND ASSESSEE HAS THIS BUSI NESS AS THE ONLY SOURCE OF INCOME. IT WAS FURTHER STATED THAT THE IMPUGNED LOOSE PAPER S ARE SPEAKING DOCUMENTS AND WITHOUT ANY SECOND INTERPRETATION REF LECTS DETAILS ABOUT THE TRANSACTIONS OF THE ASSESSEE WHICH ARE SIMILAR IN NATURE TO THOSE RECORDED IN REGULAR BOOKS OF ACCOUNTS OF THE ASSESS EE. 8. DETAILS OF WORKING OF RS. 2,90,346 (ADDITION COM PUTED CONSIDERING THE PEAK CREDIT THEORY) WAS TABULATED AND SUBMITTED BEF ORE THE LD. CIT(A), PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 7 REPRODUCED AT PAGE 4 & 5 OF THE ORDER. 9. IT WAS SUBMITTED BEFORE LD. CIT{A} THAT THE ADDI TION, IF AT ALL TO BE MADE, SHOULD BE OF THE PEAK I.E. RS. 2,90,346 AS AR RIVED AT PAGE 12 OF BI - 1. [CIT(A) PAGE 5] 10. RELIANCE IS PLACED ON FOLLOWING JUDICIAL PRECED ENTS FOR THE SUBMISSIONS MADE IN RELATION TO PEAK CREDIT WHICH A RE REPRODUCED IN THE ORDER OF LD. CIT{A}. 11. ASSESSEE PRAYED THAT CONSIDERING THE ABOVE MENT IONED FACTS AND CIRCUMSTANCES OF THE CASE AND THE APPLICABLE LAW, A DDITION IF ANY TO BE MADE SHOULD BE COMPUTED AS PER PEAK CREDIT, WHICH A MOUNTS TO RS. 2,90,346. 8. PER CONTRA THE DEPARTMENTAL REPRESENTATIVE VEHEMENT LY SUPPORTING THE ORDERS OF LOWER AUTHORITIES. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE REC ORDS PLACED BEFORE US. LD.A.O MADE ADDITION OF RS.6,02,8 95/- BY MAKING TOTAL OF CREDIT ENTRIES APPEARING IN THE IMPOUNDED DOCUMENTS WHICH WERE NOT ENTERED INTO THE BOOKS OF ACCOUNTS. IT IS PLEADED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE BEIN G COMMISSION AGENT AND IN THIS TYPE OF BUSINESS THERE IS A REGUL AR PRACTICE THAT FARMERS GIVE TOKEN MONEY IN ANTICIPATION OF THE POS SIBLE BUSINESS TRANSACTION DURING THE YEAR. PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 8 10. WE HAVE PERUSED THE IMPOUNDED DOCUMENTS APPEARING A T BI-1 TO BI-3 WHICH PERTAINS TO TRANSACTIONS ENTERED INTO WITH THE FARMERS WITH WHOM THE TRANSACTIONS DID NOT MATERIALIZE AND AMOUNT WAS REFUNDED BY THE BY THE ASSESSEE. WE OBSERVE THAT IN THESE IMPOUNDED DOCUMENTS THERE ARE CREDITS AND DEBIT ENT RIES. HOWEVER THIS FACT IS NOT DISPUTED THAT THE LD.A.O HAS MEREL Y MADE THE ADDITION IF THE UNEXPLAINED CREDIT ENTRIES WITHOUT GIVING ANY SET OFF OF UNEXPLAINED DEBIT ENTRIES APPEARING IN THESE DOC UMENTS. COMPLETE DETAILS OF SUCH DEBIT AND CREDIT ENTRIES W ERE PLACED BEFORE THE FIRST APPELLATE AUTHORITY AND THEY WERE DULY IN CORPORATED IN THE APPELLATE ORDERS OF LD.CIT(A). FROM PERUSAL THEREO F, WE FIND THAT THE PEAK CREDIT IS SHOWN AT RS. 2,90,346/-. THIS FI GURE OF PEAK CREDIT HAS NOT BEEN CONTROVERTED BY THE REVENUE AUT HORITIES. THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF TIRUPA TI CONSTRUCTION COMPANY 55 TAXMANN.COM 308 (2015) HAS UPHELD THE DECISION OF I.T.A.T AHMEDABAD BENCH HOLDING THAT ONLY PEAK OF DEBIT AND CREDIT ENTRIES OF THE SEIZED PAPERS/DIARY COULD BE ASSESSED AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE, AN D THERE WAS NO JUSTIFICATION FOR ADDING THE ENTIRE RECEIPT SIDE OF THE SEIZED PAPERS . PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 9 11. WE THEREFORE RESPECTFULLY FOLLOWING THE JUDGMENT OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF TIRUPATI CONST RUCTION COMPANY ( SUPRA ) AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE WHICH ARE SIMILAR TO THE FACT ADJUDICATED BY T HE HON'BLE COURT ARE OF THE CONSIDERED VIEW THAT BOTH THE LOWER AUTH ORITIES ERRED IN CONFIRMING THE ADDITION OF RS.6,02,895/- BEING THE TOTAL OF UNEXPLAINED CREDIT AMOUNT APPEARING IN THE IMPOUND ED DOCUMENTS AND SET OFF OF DEBIT ENTRIES APPEARING IN THE VERY SAME DOCUMENTS SHOULD HAVE BEEN GIVEN TO THE ASSESSEE. WE THEREFORE PARTLY ALLOW THE ASSESSEES GROUND NO.2 AND CONFIRM THE ADDITION AT RS.2,90,346/-. IN THE RESULT GROUND NO.2 OF THE AS SESSEE IS PARTLY ALLOWED. 12. APROPOS GROUND NO.3 RELATING TO ADDITION MADE U/S 4 1(1) OF THE ACT AT RS.2,72,389/- MADE BY THE LD.A.O AND CON FIRMED BY THE LD.CIT(A) BEING THE LIABILITY OUTSTANDING FOR MORE THAN 3 YEARS. L:D. COUNSEL FOR THE ASSESSEE MADE FOLLOWING WRITTEN SUB MISSION: 12. DURING THE ASSESSMENT PROCEEDINGS, LD. AO ASK ED ASSESSEE TO SUBMIT CONFIRMATION LETTERS OF THE CREDITORS WHOSE BALANCE S WERE OUTSTANDING FOR MORE THAN THREE YEARS. IN RESPONSE TO WHICH ASSESSE E SUBMITTED THAT THERE PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 10 ARE UNRESOLVED BUSINESS DISPUTES WITH THESE CREDITO RS AND HENCE NO CONFIRMATION LETTERS COULD BE FURNISHED. DETAILS OF THE SAME ARE AS UNDER - [AO PG 6 PARA 1] SR. NO NAME OF CREDITOR AMOUNT (RS.) CURRENT STATUS 1 DILIPJI KHEDA 4,578 DELETED BY CIT{A}, DEPT. NO T IN APPEAL 2 OM SHREE TRADERS 1,50,756 DELETED BY CIT{A}, DE PT. NOT IN APPEAL 3 KARTIK TRADERS 2,72,389 IN APPEAL BEFORE HON'BL E ITAT VIDE GROUND NO.3 13. ON APPEAL BEFORE LD. CIT(A), ADDITION MADE TO T HE EXTENT OF RS. 1,55,334 (I.E. OF DILIPJI KHEDA RS. 4,578 AND OM SH REE TRADERS RS. 1,50,756) WAS DELETED AND BALANCE OF RS. 2,72,389 O F KARTIK TRADERS WAS SUSTAINED. 14. IT WAS SUBMITTED BEFORE LD. CIT(A) THAT THE LIA BILITY OF KARTIK TRADERS EXISTED AS PAYABLE IN THE BOOKS OF ASSESSEE AND THE LIABILITY NEVER CEASED. 15. IT WAS SUBMITTED THAT PROVISIONS OF SECTION 41( 1) WOULD APPLY IN A CASE WHERE SOME BENEFIT HAS BEEN RECEIVED IN RESPEC T OF THE TRADING LIABILITY AND THERE HAS BEEN REMISSION OR CESSATION OF LIABILITY DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 16. IT WAS ALSO SUBMITTED BEFORE LD. CIT(A) THAT TH E BALANCE OF KARTIK TRADERS IS BEING CARRIED FORWARD TO THE SUBSEQUENT ASSESSMENT YEARS. THERE IS NO UNILATERAL ACT ON THE PART OF ASSESSEE TO CEASE THE LIABILITY. CESSATION OR REMISSION OF LIABILITY MAY OCCUR EITHE R BY REASON OF THE OPERATION OF LAW, I.E., ON THE LIABILITY BECOMING U NENFORCEABLE AT LAW BY THE CREDITOR AND THE DEBTOR DECLARING UNEQUIVOCALLY HIS INTENTION NOT TO PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 11 HONOR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY CRE DITOR, OR CONTRACT BETWEEN PARTIES, OR BY DISCHARGE OF THE DEBT - THE DEBTOR MAKING PAYMENT THEREOF TO HIS CREDITOR. [PB 175 - 179] . 17. LIABILITY TO PAY HAS BEEN CARRIED FORWARD TO SU BSEQUENT ASSESSMENT YEARS. THE PRINCIPLE OF EXPIRY OF PERIOD OF LIMITATION PRE SCRIBED UNDER THE LIMITATION ACT DOES NOT EXTINGUISH THE DEBT BUT PRE VENTS THE CREDITOR FROM ENFORCING THE DEBT. THUS, WHEN A DEBT BECOMES TIME BARRED IT DOES NOT BECOME EXTINGUISHED BUT ONLY UNENFORCEABLE IN A COURT OF LAW. BOTH LD. CIT(A) AND LD. AO FAILED TO BRING ANYTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS OBTAINED ANY BENEFIT WHETHER IN CASH OR IN ANY OTHER MANNER REGARDING THE LIABILITY IN THE INSTANT CASE OF KARTIK TRADERS TO DRAW AN INFERENCE OF CESSATION OF LIABILITY. 18. IT IS SUBMITTED THAT THE PRINCIPLE THAT EXPIRY OF PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT COULD NOT EXTIN GUISH THE DEBT BUT IT WOULD ONLY PREVENT THE CREDITOR FROM ENFORCING THE DEBT BY INSTITUTION OF A SUIT IN COURT OF LAW. THE SUPREME COURT IN BOMBAY DYEING & MFQ CO LTD 1958 AIR 328 - 20.12.1957- HAS POINTED OUT THAT THE EXPIRY OF THE LIMITATION PERIOD ONLY ~ CREDITOR OF HIS REMEDY TO INSTITUTE A SUIT IN A C OURT OF LAW TO RECOVER THE DEBT, BUT THE INDEBTEDNESS, NEVERTHELESS, CONTINUES . 19. IN ADDITION TO VARIOUS JUDICIAL PRECEDENTS WHIC H HAVE BEEN REPRODUCED IN THE ORDER OF LD. CIT(A) RELIANCE IS A LSO PLACED ON THE FOLLOWING DECISION OF THE JURISDICTIONAL HON'BLE IT AT- / HON'BLE ITAT BENCH OF INDORE IN THE CASE OF SHAPERS INDUSTRIES L IMITED - ITA NO. 112/LND/2016 - PARA 6 - ' NOTHING WAS BROUGHT ON RE CORD BY THE ASSESSING OFFICER TO HOLD THAT THE ASSESSEE IS NOT REQUIRED TO PAY THE PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 12 LIABILITY NOR WAS THERE ANY MATERIAL TO SUGGEST THA T THE ASSESSEE HAS WRITTEN OFF THE LIABILITY IN ITS BOOKS OF ACCOUNT. SINCE THESE WERE THE REGULAR CREDITORS APPEARING IN THE BOOKS OF ACCOUNT , WITHOUT THERE BEING CESSATION, NO ADDITION CAN BE MADE U/S 41(1) OF THE ACT. AT THE SAME TIME, IT IS NOT THE ALLEGATION OF THE ASSESSING OFF ICER THAT CREDITORS WERE NOT GENUINE OR THAT NO EXPENDITURE WAS ACCOUNTED FO R IN RESPECT OF SUCH TRANSACTIONS. ACCORDINGLY, ADDITION MADE BY THE ASS ESSING OFFICER U/S 41(1) WAS NOT JUSTIFIED. AS PER OUR CONSIDERED VIEW , IN RESPECT OF ANY TRADE CREDITORS APPEARING IN THE BOOKS OF ACCOUNTS, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THEY GENUINELY EXISTED AS AT THE END OF THE YEAR AND FOR WHICH THE ASSESSEE IS REQUIRED TO FILE THEI R CONFIRMATIONS .... ' [EMPHASIS SUPPLIED] CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF ~ SUBMISSIONS MADE, DOCUMENTS ON RECORD, APPLICABLE LAW AND JUDICIAL PR ECEDENTS, APPEAL OF THE ASSESSEE MAY PLEASE BE ALLOWED BY DELETING ADDI TIONS SUSTAINED BY LD. CIT( A). 13. PER CONTRA THE DEPARTMENTAL REPRESENTATIVE VEHEMENT LY SUPPORTING THE ORDERS OF LOWER AUTHORITIES. 14. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE REC ORDS PLACED BEFORE US. ASSESSEE IS AGGRIEVED WITH THE A DDITION OF SUNDRY CREDITOR NAMELY M/S KARTIK TRADERS HAVING OUTSTANDI NG BALANCE OF RS.2,72,389/- MADE BY THE LD.A.O U/S 41(1) OF THE A CT TREATING IT AS CESSATION OF LIABILITY. IT IS PLEADED BY THE LD. C OUNSEL FOR THE ASSESSEE THAT THE OUTSTANDING AMOUNT OF M/S. KARTIK TRADERS AT PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 13 RS.2,72,389/- EXISTED AS PAYABLE IN THE BOOKS AND T HE LIABILITY NEVER CEASED, COUPLED WITH THE FACT THAT NO BENEFIT HAVE BEEN RECEIVED IN RESPECT OF THE ALLEGED LIABILITY. 15. HON'BLE APEX COURT IN THE CASE OF BOMBAY DYEING & M FG CO LTD 1958 AIR 328 HAS POINTED OUT THAT EXPIRY OF THE LIMITATION PERIOD ONLY DEPRIVES THE CREDITOR OF HIS REMEDY TO INSTITUTE A SUIT IN A COURT OF LAW TO RECOVER THE DEBT, BUT THE INDEBTEDN ESS, NEVERTHELESS CONTINUES 16. WE FURTHER OBSERVE THAT THE CO-ORDINATE BENCH OF IN DORE IN THE CASE OF SHAPERS INDUSTRIES LIMITED I.T.A.NO.112/IND /2016 HELD THAT NOTHING WAS BROUGHT ON RECORD BY THE ASSESSING OFF ICER TO HOLD THAT THE ASSESSEE IS NOT REQUIRED TO PAY THE LIABIL ITY NOR WAS THERE ANY MATERIAL TO SUGGEST THAT THE ASSESSEE HAS WRITT EN OFF THE LIABILITY IN ITS BOOKS OF ACCOUNT. SINCE THESE WERE THE REGU LAR CREDITORS APPEARING IN THE BOOKS OF ACCOUNT, WITHOUT THERE BE ING CESSATION, NO ADDITION CAN BE MADE U/S 41(1) OF THE ACT. AT THE SAME TIME, IT IS NOT THE ALLEGATION OF THE ASSESSING OFFICER THAT CREDIT ORS WERE NOT GENUINE OR THAT NO EXPENDITURE WAS ACCOUNTED FOR IN RESPECT OF SUCH TRANSACTIONS. ACCORDINGLY, ADDITION MADE BY THE AS SESSING OFFICER U/S 41(1) WAS NOT JUSTIFIED. PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 14 17. AS PER OUR CONSIDERED VIEW, IN RESPECT OF ANY TRADE CREDITORS APPEARING IN THE BOOKS OF ACCOUNTS, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THEY GENUINELY EXISTED AS AT THE END OF THE YEAR AND FOR WHICH THE ASSESSEE IS REQUIRED TO FILE THEIR CONFIR MATIONS. 18. IT IS ALSO PERTINENT TO NOTE THAT LD.A.O HAS MERELY MADE ADDITION U/S 41(1) OF THE ACT BEING THE CREDITORS P ENDING FOR PAYMENTS MORE THAN 3 YEARS WITHOUT PROVIDING ON REC ORD ANY EVIDENCE TO PROVE THAT THE ALLEGED CREDITOR M/S. KA RTIK TRADERS IS NOT GENUINE. IN CASE THE INFORMATION WAS CALLED FO R BY THE REVENUE AUTHORITIES FROM M/S. KARTIK TRADERS AND IT REFUSED TO HAVE ANY SUCH OUTSTANDING LIABILITY THEN WOULD HAVE BEEN THE MERIT FOR THE ADDITION MADE BY THE LD. ASSESSING OFFICER. HOWEVE R IN THE INSTANT CASE THE GENUINENESS IS NOT CHALLENGED BY M/S. KART IK TRADERS AS THE CREDIT BALANCE OF ALLEGED SUNDRY CREDITORS APPE ARS IN AUDITED BALANCE SHEET. DURING THE FINANCIAL YEAR 2012-13 T HE ALLEGED AMOUNT HAS BEEN PAID BY THE ASSESSEE AS ON 31.01.20 01 AND THE OUTSTANDING BALANCE IS NIL. 19. IN THESE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE ABOVE REFERRED DECISIONS WE FAIL TO FIND ANY MERIT IN THE ADDITION CONFIRMED BY THE FIRST APPELL ATE AUTHORITY U/S PATIDAR DINESH KUMAR & COMPANY ITA NO.32/IND/2017 15 41(1) OF THE ACT AT RS2,72,389/-. THE SAME DESERVE S TO BE DELETED. WE ACCORDINGLY ORDER SO AND ALLOW GROUND NO.3 OF TH E ASSESSEE. 20. GROUND NO.4 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 21. IN THE RESULT GROUND NO.2 OF THE ASSESSEE IS PARTLY ALLOWED AND GROUND NO.3 IS ALLOWED. 22. THE ORDER PRONOUNCED IN THE OPEN COURT ON 13.11.2 018. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 13 NOVEMBER, 2018 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER ASSTT. REGISTRAR