The DCIT(OSD)Circle-9, Ahmedabad V. M/s. Shashin Construction Co., Ahmedabad

ITA 329/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1522 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 17-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G C PIPARA
• Keywords: Unexplained cash credit; Rejection of books of accounts
• Section: 40A(3); 143(3); 142(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI KUL BHARAT, JM, & SHRI MANISH BORAD, AM. ITA NO.329 /AHD/2013 ASST. YEAR: 2009-10 DCIT(OSD), CIRCLE-9, AHMEDABAD. VS. M/S SHASHIN CONSTRUCTION CO., 57, SHAYMSUNDAR SOCIETY, OPP. KARMACHARI SCHOOL, RANNAPARK, AHMEDABAD. APPELLANT RESPONDENT PAN AAFFS 5177F APPELLANT BY SHRI MUKESH SHARMA, SR.DR RESPONDENT BY SHRI G. C. PIPARA, AR DATE OF HEARING: 17.5.2016 DATE OF PRONOUNCEMENT: 24/5/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-XV, AHMEDABAD, DATED.29/11/2012 IN APPEAL NO .CIT(A)- XV/ACIT(OSD)/CIR-9/462/11-12, PASSED AGAINST ORDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT), FOR ASST. YEAR 2009-10 ON 29/12/2011 BY ACIT(OSD) CIR-9, AHMEDABAD. 2. BRIEFLY STATED THE FACTS OF THE CASE AS CULLED O UT FROM THE ASSESSMENT ORDER ARE THAT THE ASSESSEE IS A PARTNER SHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONTRACT. RETURN O F INCOME WAS E- ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 2 FILED ON 28.09.2009 DECLARING TOTAL INCOME AT RS.74 ,04,760/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER CAS S AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 30.08.2010 FOLL OWED BY NOTICE U/S 142(1) OF THE ACT ON 15.4.2011 AND FURTHER DUE TO C HANGE OF INCUMBENT NOTICE U/S 143(2) OF THE ACT WAS ISSUED O N 11.7.2011. NECESSARY DETAILS WERE SUBMITTED BEFORE LD. ASSESSI NG OFFICER. DURING ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT IN THE FINANCIAL STATEMENT AS ON 31.3.2007 THERE ST OOD OUTSTANDING SUNDRY CREDITORS AT RS.1,46,27,060/- WHICH WERE UNP AID SINCE 31.3.2007. IN REPLY TO THE OBSERVATIONS MADE BY THE LD. ASSESSING OFFICER WHEREIN IT WAS OBSERVED THAT MANY OF THE NA MES STANDING IN THE LIST OF IMPUGNED SUNDRY CREDITORS OF RS.1,46,27 ,060/- WERE REPAID BY CASH AFTER REMAINING DUE FOR 3 TO 4 YEARS AND AL SO NO EVIDENCE TO PROVE THE GENUINENESS AND IDENTITY OF THE SUNDRY CR EDITORS WERE PLACED ON RECORD AND, THEREFORE, LD. ASSESSING OFFI CER WENT AHEAD TO MAKING DISALLOWANCE U/S 41(1) OF THE ACT AND ADDED BACK RS.1,46,27,060/- TO THE INCOME OF ASSESSEE. ALSO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBS ERVED THAT CREDIT AMOUNT OF RS.80,55,680/- SHOWN AS LABOUR ADVANCES W AS REDUCED FROM THE LOANS AND ADVANCES STANDING UNDER THE HEAD CURRENT ASSETS. TO THIS OBSERVATION OF LD. ASSESSING OFFIC ER ASSESSEE SUBMITTED THAT THE AMOUNT OF LABOUR ADVANCES OF RS. 80,55,680/- ARE THE CREDIT BALANCE WITH STAFF MEMBERS ON ACCOUNT OF UNPAID SALARY AS WELL AS SECURITY DEPOSIT TAKEN FROM THE STAFF AND T HE SAME ARE REPAYABLE BACK YEAR AFTER YEAR. HOWEVER, LD. ASSESS ING OFFICER WAS NOT CONVINCED WITH THE REPLY OF ASSESSEE AND WAS OF THE VIEW THAT HOW CAN A STAFF, WHO IS EMPLOYED FOR A MEAGRE SALAR Y, TO GIVE SECURITY ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 3 DEPOSIT TO THE EMPLOYER OR TO KEEP THE SALARY OUTST ANDING TO BE RECEIVED AND, THEREFORE, ADDED BACK THE CREDIT BALA NCE OF RS.80,55,680/- TO THE INCOME OF ASSESSEE. ACCORDING LY INCOME OF ASSESSEE WAS ASSESSED AT RS.3,00,87,500/- AFTER MAK ING ADDITION U/S 41(1) OF THE ACT FOR CESSATION OF LIABILITY AT RS.1 ,46,27060/- AND UNEXPLAINED CREDIT BALANCE OF LABOUR ADVANCES OF RS .80,55,680/-. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) WHO DELETED ADDITION U/S 41(1) OF THE ACT AT RS.1,46,27 ,060/- AND ALSO DELETED ADDITION ON ACCOUNT ON UNEXPLAINED CREDIT B ALANCE RELATING TO LABOUR ADVANCES OF RS.80,55,680/-. 4. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL. REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,46,27,060/- MADE ON ACCOUNT OF CESSATION OF LIABILITY U/S.41 (1) OF THE ACT. 2) THE LD. CIT(A)-XV, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS.80,55,680/- MADE ON ACCOUNT OF L ABOUR ADVANCES. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-XV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASS ESSING QFFICER. 4) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . CIT(A)-XV, AHMEDABAD MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. FIRST WE TAKE UP GROUND NO.1 WHICH READS AS UNDE R :- 1) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,46,27,060/- MADE ON ACCOUNT OF CESSATION OF LIABILITY U/S.41 (1) OF THE ACT. ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 4 6. LD. DR REFERRED AND RELIED ON THE ORDER OF LD. A SSESSING OFFICER. 7. ON THE OTHER HAND, LD. AR SUBMITTED THAT THE ASS ESSEE FIRM IS A CIVIL CONTRACTOR AND ENGAGED IN THE CONSTRUCTION LI NE ACTIVITIES WITH THE PROJECT(S) CONTINUED ALMOST 2-3 YEARS AND PAYMENTS ARE MADE TO THE CONCERNED CREDITOR(S) AS PER THE WORK COMPLETED BY THEM, SIMILAR TO THE PAYMENT RECEIVED BY THE ASSESSEE FROM THE VARIO US AWARDERS OF CONTRACT AND, THEREFORE, WHEN WORK IS COMPLETED OF A PARTICULAR CREDITOR THEN FINAL PAYMENT IS MADE TO IT AND THE S AME GETS SUPPORT BY THE FACT THAT AS ON 31.3.2008 OUTSTANDING SUNDRY CREDITORS AMOUNTED TO RS.2,98,46,070/- AND DURING THE FINANCI AL YEAR 2008-09 I.E. ASST. YEAR 2009-10 NEW CREDITORS WERE ADDED AM OUNTING TO RS.2,83,14,261/- AND TOTAL PAYMENTS MADE TO CREDIT ORS DURING F.Y. 2008-09 WAS AT RS.3,09,30,820/- AND OUTSTANDING BA LANCE IN CREDITORS IS OF RS.2,72,29,511/-. LD. AR FURTHER SU BMITTED THAT SINCE PAYMENTS WERE IN SUBSEQUENT YEARS AND THERE WAS HAR DLY ANY OUTSTANDING OUTSTANDING BALANCE AFTER THE PAYMENTS WERE MADE, IT CANNOT BE A CESSATION OF LIABILITY AND ALSO THE OUT STANDING BALANCE WERE AS PER NORMAL COURSE OF BUSINESS AND THE ASSES SEE HAS BEEN CONTINUOUSLY SHOWING THE LIABILITY AS TRADING LIABI LITY IN ITS BOOKS OF ACCOUNTS AND, THEREFORE, LD. CIT(A) HAS RIGHTLY DEL ETED THE ADDITION BY NOT TREATING THE UNPAID SUNDRY CREDITOR AS CESSATIO N OF LIABILITY U/S 41(1) OF THE ACT AT RS.1,46,27,060/-. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND REVENUE HAS OBJECTED THE ACTION OF LD. CIT(A) FOR DELETING THE ADDITION OF RS.1,46,27, 060/- MADE ON ACCOUNT OF CESSATION OF LIABILITY U/S 41(1) OF THE ACT. DURING THE COURSE ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 5 OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBS ERVED THAT SUNDRY CREDITOR AT RS.1,46,27,060/- WERE OUTSTANDIN G TO BE PAID PRIOR TO 31.3.2007 WHICH WAS ALMOST MORE THAN 3 YEARS AND WAS UNABLE TO GET CONVINCED THAT THESE WERE GENUINE SUNDRY CREDIT ORS AND ACCORDINGLY WENT AHEAD TO MAKE THE ADDITION U/S 41( 1) OF THE ACT FOR CESSATION OF LIABILITY AND ADDED THE SAME TO THE IN COME OF ASSESSEE. HOWEVER, LD. CIT(A) DELETED THE ADDITION BY OBSERVI NG AS UNDER :- 5.1. GROUND NO.1 WITH ITS SUB-CLAUSES ARE THE GROUN DS AGAINST THE ADDITION MADE BY A.O. OF RS.1,46,27,060 U/S.41(1) OF THE ACT BOTH ON TECHNICAL AS WELL AS ON MERIT. THE A.O.'S MAIN CONTENTION FOR SUCH ADDITION IS ON ACCOUNT OF FACT THAT HUGE SUM WAS FOUND OUTSTANDING IN THE NAME OF INDIV IDUAL LABOUR WHICH IS BEING REDUCED BY APPELLANT THROUGH PAYMENT IN CASH AFTER THREE TO FOUR YEARS AND NEW NAMES ARE ADDED UNDER A 'MODUS OPERANDI' ADOPTED BY APPELLANT. FURTHER, THE APPELLANT FAILED TO SUPPLY THE EVIDENCES IN THE FOR M OF GENUINENESS AND IDENTITY OF SAME LABOURERS, THE SAME ARE NOT GENUINE CREDITO R. AS AGAINST THIS, THE APPELLANT HAS GIVEN DETAILED EXPLANATION BOTH ON LE GAL POINT AS WELL AS ON MERIT POINT. THE FIRST & FOREMOST IS IN RESPECT OF UNAMBI GUOUS PROVISIONS OF SECTION 41(1) OF THE ACT ITSELF, WHICH DEALS WITH THE NECES SARY CONDITION OF DRAWING IN ACTUAL DIRECT OR IN DIRECT ADVANTAGE OUT OF ANY BUS INESS LIABILITY FOR INVOKING SECTION 41(1) OF THE ACT ITSELF. THE A.O. FAILED TO DEMONSTRATE EVEN BY A SINGLE INSTANCE THAT ANY SUCH ADVANTAGE WAS ACCRUING OR AC CRUED TO APPELLANT. ON THE OTHER HAND IT APPEARS THAT AO IS IN TWO MINDS, I.E. ON ONE HAND HE ACCEPT THAT THESE ARE TRADING/BUSINESS LIABILITIES AND THEREBY INVOKING THE SECTION 41(1) OF THE ACT WHILE ON THE OTHER HAND HE DOUBTS ABOUT THE GEN UINITY AND IDENTITY OF CREDITOR. THE A.O. IF HAVE DOUBT ABOUT THE IDENTITY AND GENUI NENESS OF THESE CREDITORS, HE SHOULD HAVE TEST CHECKED THE SAME AND REJECTED THE BOOKS OF ACCOUNTS TO ACCEPT GROSS PROFIT OR SHOULD HAVE PROCEEDED TO RE-ASST. P ROCEEDINGS TO DISALLOW SUCH EXPENDITURE IN THE YEAR IN WHICH THE SAME IS CLAIME D. BUT, THE A.O. HAS NOT DONE ANY OF SUCH INQUIRY OR TAKEN ANY SUCH ACTION. THE A PPELLANT BY DETAILED SUBMISSION EXPLAINED THE REASONS OF SUCH HUGE LIABI LITIES AND GIVEN DETAILS OF SUBSEQUENT PAYMENT TO DISCHARGE SUCH LIABILITIES. I N THE ABSENCE OF ANY INQUIRY FROM A.O. OR EVIDENCES TO SUPPORT HIS CONTENTION, T HE CONCLUSION THAT THESE LIABILITIES ARE NO LONGER EXISTING SINCE APPELLANT HAD ALREADY PAID THEM IN CASH CAN ONLY BE ATTRIBUTED AS AN ASSUMPTION AND THE ADD ITION SO MADE CAN BE TREATED AS MADE ON CONJECTURE OR SURMISES. THE A.O. HAS NO EVIDENCE TO SUPPORT HIS CONTENTION THAT APPELLANT ADOPTED SOME MODUS OPERAN D! ASSUMED BY HIM. THE APPELLANT'S BOOKS OF ACCOUNTS ARE REGULARLY AUDITED AND THEREFORE A.O.'S CONTENTION OF A MODUS OPERAND! ADOPTED BY APPELLANT CANNOT BE ACCEPTED WITHOUT ANY EVIDENCES GATHERED CONTRARY TO THE AUDI T REPORT. IF THE A.O.'S CONTENTION OF SETTLING OF TRADE LIABILITIES THROUGH CASH ARE ACCEPTED, THEN THOSE ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 6 TRANSACTION WILL BE COVERED BY PROVISIONS OF SECTIO N 40A(3) OF THE ACT AND AUDITOR HAS TO REPORT THE SAME IN HIS AUDIT REPORT IN FORM NO.3CB & 3CD IRRESPECTIVE OF THE FACT WHETHER THE EXPENDITURE RELATED TO SAME WA S CLAIMED AND ALLOWED IN EARLIER YEAR BECAUSE AS PER PROVISIONS OF SECTION 4 0A(3) OF THE ACT, THOSE ALLOWED EXPENDITURE WILL BE DISALLOWED THROUGH RECTIFICATIO N IN THE YEAR WHEN SUCH TRADE LIABILITIES ARE SETTLED IN CASH. THE A.O. HIMSELF H AS NOT CONSIDERED THESE PROVISIONS INDICATING THAT HIS CONTENTIONS ARE NOT SUPPORTED BY FACTS OR EVIDENCES AND MERELY ASSUMPTIONS BASED ON CONJECTURE AND SURM ISES. THE APPELLANT VIDE SUBMISSION DATED 04.07.2012 WITH DETAILS IN A PAPER BOOK SUBMITTED DETAILS ABOUT HOW THOSE CREDITOR AS TABULATED AND DISCUSSED BY A.O. IN THE ASSTT. ORDER WERE SETTLED IN SUBSEQUENT YEARS. (ANNEXURE A-1 OF THE PAPER BOOK). AS FAR AS LEGAL POSITION ON THIS ISSUE IS CONCERNED, THE A.O. HAS NOT PUT FORWARD ANY SUCH PROPOSITION TO SUBSTANTIATE HIS CONTENTION, ON THE OTHER HAND THE APPELLANT SUBMITTED AND RELIED ON VARIOUS LEGAL PROPOSITION A S DISCUSSED IN EARLIER PARAS 4B & 4C OF THIS ORDER TO SUBSTANTIATE CONTENTIONS . I AM THEREFORE INCLINED TO ACCEPT THE CONTENTIONS O F THE APPELLANT THAT ALL THE SUNDRY CREDITORS ARE EXISTING IN THE BOOKS OF A PPELLANT AND RESPECTIVE LIABILITY WERE DISCHARGED SUBSEQUENTLY THEREFORE THERE IS NO CESSATION OF SUCH LIABILITY. THESE LIABILITIES WERE DISCHARGED MOSTLY THROUGH PA YMENT BY ACCOUNT PAYEE CHEQUES. MOST OF THE PARTIES RE APPELLANT'S REGULA R SUB-CONTRACTORS AND THERE ARE CONTIGUOUS TRANSACTIONS OF LABOUR BILLS RAISED BY THEM, DEDUCTION OF TDS BY APPELLANT ETC. THE APPELLANT DURING THE COURSE OF ASST. PROCEEDING S SUBMITTED AN EXPLANATION WITH COPIES OF SUCH LEDGER ACCOUNTS AND A.O. HAS NOT POINTED OUT ANY ADVERSE FINDINGS. CONSIDERING THE NATURE OF APP ELLANT'S BUSINESS AND VOLUME, SUCH HUGE CREDITORS ARE NOT UNUSUAL FEATURE AND THE SAME ARE SETTLED AS PER BUSINESS PRACTICE IN THE FIELD OF APPELLANT. I AM A LSO INCLINED WITH THE LEGAL PROPOSITION IN THIS REGARD AS SUBMITTED BY APPELLAN T. HON'BLE GUJARAT HIGH COURT IN THE CASE OF SILVER COTTON MILLS CO. LTD. (2002) 125 TAXMAN 741 EMPHASIZED THAT FOR INVOCATION OF PROVISIONS OF SECTION 41(1) OF THE ACT, THERE SHOULD BE EITHER REMISSION OF THE LIABILITY BY THE CONCERNED CREDITO R SO THAT THE LIABILITY WITH REGARD TO MAKING PAYMENT COMES TO AN END, OR THERE SHOULD BE CESSATION OF LIABILITY. HON'BLE SUPREME COURT IN THE CASE OF SUGAULI SUGAR WORKS (P)LTD. (SUPRA) HELD THAT 'THE OBTAINING BY THE ASSESSEE OF A BENEFIT BY VIRTUE OF REMISSION OR CESSATION IS SINE QUO NON FOR THE APPLICATION OF SE CTION 41(1) OF THE ACT. THE HON'BLE GUJARAT HIGH COURT IN ITS LANDMARK JUDG EMENT OF BHARAT IRON & STEEL INDUSTRIES (SUPRA) HELD THAT 'SECTION 41(1) I NTRODUCES A FICTION AND THE SAME IS INDIVISIBLE ONE I.E. IT CANNOT BE ENLARGED OR AP PLIED TO FOR ANOTHER FICTION. THE ONLY MEANING THAT CAN BE ATTACHED TO THE WORDS 'OBT AINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE 'INCURRED IN ANY PREVIOUS YEAR, CLEARLY REFERS TO T HE ACTUAL RECEIVING OF THE CASH OF THAT AMOUNT. HON'BLE ITAT AHMEDABAD 'C' BENCH IN ITS ORDER DATED 16.9.2011 IN THE CASE OF M/S.V.K.PATEL & CO. V. ACIT RANGE-9, AHMEDABAD (ITA ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 7 NO.3106/AHD/2010) FOLLOWING ITS EARLIER ORDER IN TH E CASE OF DCIT VS. G.K. PATEL & CO. (ITA NO.2938/AHD/2009) AND IN THE CASE OF M/S.S UPRIYA TEXTILES INDUSTRIES V.LTO (ITA NO.3228/AHD/2011) HELD THAT - 'THE FACTS OF THE ASSESSEE'S CASE ARE IDENTICAL. IN THE CASE OF THE ASSESSEE ALSO THERE IS NO ACTUAL FINDING OF REMISSI ON OR CESSATION OF LIABILITY. THE A.O. MADE ADDITION ON THE PRESUMPTIO N THAT SINCE THE LIABILITY IS VERY OLD, IT MUST HAVE CEASED. FOR THE PURPOSE O F APPLICABILITY OF SECTION 41(1), THE LIABILITY BEING OLD IS NOT SUFFICIENT TO TAX THE ASSESSEE UNDER SECTION 41 (1). THERE HAS TO BE CESSATION OR REMISS ION OF THE LIABILITY. IN VIEW OF THE ABOVE, WE HOLD THAT THE A.O. WAS NOT JU STIFIED IN MAKING THE ADDITION OF RS.94,53,513U/S.41(1).' THE FACTS OF THE APPELLANT ARE ALSO SAME AND THE CO NTENTION OF A.O. FOR MAKING SUCH ADDITION IS SIMILAR TO THIS CASE. CONSIDERING VARIOUS FACTS AS DISCUSSED ABOVE AND LEGAL PROPOSITION RELIED ON BY APPELLANT AND DISCUSSED ABOVE, THE ADDITION MADE 'BY A.O. IN THE CASE OF APPELLANT OF RS.1,46,27,060 U/S.41(1) OF THE ACT IS NOT JUSTIFIED. THE A.O. IS DIRECTED TO DELET E SUCH ADDITION. THE APPELLANT GETS RELIEF ACCORDINGLY. 9. CERTAINLY THE BASIS FOR MAKING ADDITION BY LD. A SSESSING OFFICER WAS THE PRESUMPTION THAT SINCE THE LIABILITIES WERE VERY OLD THEN THEY MUST CEASE BUT AS RIGHTLY OBSERVED BY LEARNED CIT(A ) REFERRING TO VARIOUS JUDGMENTS, WE FIND THAT THE LIABILITY SHOWN BY THE ASSESSEE DID NOT GET EXTINGUISHED OR WIPED OFF UNLESS AND UN TIL THE ASSESSEE HAS WRITTEN OFF THE SAME IN ITS BOOKS OF ACCOUNT OR THE SUNDRY CREDITORS DENY FOR ANY CLAIM ON THE ASSESSEE. NOW L OOKING TO THIS ASPECT LET US GO THROUGH THE PROVISIONS OF SECTION 41(1) OF THE ACT WHICH READS AS UNDER :- 41. [ (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MA DE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILIT Y INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBS EQUENTLY 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 E XPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITYBY WAY OF REMISSIO N OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACC RUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 8 INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHE THER 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 I N 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 O F THE TRADING LIABILITY REFERRED TO IN CLAUSE ( A ) BY WAY OF REMISSION OR CESSATION THEREOF, THE AMO UNT OBTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRU ING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSI NESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR. [ EXPLANATION 1. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSI ON 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIAB ILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUDE THE REMISSION OR CESSATION O F ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE ( A ) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE ( B ) OF THAT SUB-SECTION BY WAY OF WRITING OFF SUCH LIABILI TY IN HIS ACCOUNTS.] [ EXPLANATION 2 ].FOR THE PURPOSES OF THIS SUB-SECTION, 'SUCCESSOR IN BUSINESS' MEANS, ( I ) WHERE THERE HAS BEEN AN AMALGAMATION OF A COMPANY WITH ANOTHER COMPANY, THE AMALGAMATED COMPANY; ( II ) WHERE THE FIRST-MENTIONED PERSON IS SUCCEEDED BY ANY OTHER PERSON IN THAT BUSINESS OR PROFESSION, THE OTHER PERSON; ( III ) WHERE A FIRM CARRYING ON A BUSINESS OR PROFESSION IS SUCCEEDED BY ANOTHER FIRM, THE OTHER FIRM;] [( IV ) WHERE THERE HAS BEEN A DEMERGER, THE RESULTING CO MPANY.] APPLYING THE PROVISIONS OF SECTION 41(1) OF THE ACT TO THE FACTS OF THE CASE OF ASSESSEE, WE OBSERVE THAT IN MOST OF THE IM PUGNED OUTSTANDING SUNDRY CREDITORS ASSESSEE HAS DEMONSTRA TED THROUGH ITS REGULAR BOOKS OF ACCOUNT THAT THE SUNDRY CREDITORS HAVE BEEN PAID OFF IN THE FOLLOWING YEAR I.E. IN F.Y.2009-10 AS AND WH EN THE REVENUE WAS GENERATED IN LIQUIDITY MODE THEN CERTAINLY THE CONT ENTION OF THE ASSESSEE CAN BE ACCEPTED THAT THE IMPUGNED SUNDRY C REDITORS WERE GENUINE. WE FURTHER OBSERVE THAT OUT OF THE LIST OF IMPUGNED OUTSTANDING SUNDRY CREDITORS WHICH IS HAVING 37 NAM ES SHOWING TOTAL OUTSTANDING AT RS.1,46,27,060/-, EXCEPT IN THE CASE OF 5 SUNDRY CREDITORS HAVING TOTAL OUTSTANDING LIABILITY OF RS. 9,35,976/- IN ALL THE ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 9 REMAINING 32 ACCOUNTS, ASSESSEE HAS BEEN ABLE TO SH OW THROUGH COPIES OF LEDGER ACCOUNT OF THE IMPUGNED SUNDRY CRE DITORS THAT THEY HAVE BEEN PAID OFF IN THE FOLLOWING YEARS(MOSTLY DU RING FINANCIAL YEAR 2009-10) EITHER BY ACCOUNT PAYEE CHEQUES OR BY CASH . BUT IN CASE OF 5 PARTIES ASSESSEE HAS BEEN UNABLE TO PUT ON RECORD ANY EVIDENCE AS TO WHETHER THEY HAVE BEEN REPAID IN THE FOLLOWING Y EARS OR CONFIRMATION BY THE SUNDRY CREDITORS CONFIRMING THE OUTSTANDING BALANCE BECAUSE WE ARE OF CERTAIN BELIEF, THAT IF A SUNDRY CREDITOR IS GENUINE AND LEGITIMATE AMOUNT IS UNPAID, THEN HE WI LL CERTAINLY GIVE CONFIRMATION TO THE BUYER WHICH IN THE CASE IS ASSE SSEE ABOUT HIS RIGHTFUL CLAIM TO THE OUTSTANDING AMOUNT AND BOTH O F THESE REQUIREMENTS ARE NOT FULFILLED IN THE CASE OF FOLLO WING FIVE PARTIES :- 1. C. G. TRANSPORT RS.3,67,530/- 2. KESAR KALU KHANT WORK DEPOT RS.32,992/- 3. MOHAN VANZARA RS.1,72,862/- 4. OM TRANSPORT RS.1,50,033/- 5. RAGHUNATH RABARI RS.2,12,559/- ------------------- RS.9,35,976/- WITH THIS OBSERVATION, WE ARE OF THE VIEW THAT ADDI TION U/S 41(1) OF THE ACT IN THE CASE OF ASSESSEE IS TO BE SUSTAINED AT R S.9,35,976/- AS THE ASSESSEE HAS BEEN UNABLE TO PROVE THE GENUINENESS O F THE UNPAID SUNDRY CREDITORS NOR ANY PAYMENT HAS BEEN MADE IN T HE NORMAL COURSE OF BUSINESS EVEN WHEN THESE ARE OUTSTANDING PRIOR TO 31.3.2007/ ACCORDINGLY, THIS GROUND OF REVENUE IS P ARTLY ALLOWED. ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 10 10. NOW WE TAKE UP GROUND NO.2 WHICH READS AS UNDER :- 2) THE LD. CIT(A)-XV, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS.80,55,680/- MADE ON ACC OUNT OF LABOUR ADVANCES. 11. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LD . ASSESSING OFFICER OBSERVED THAT ASSESSEE FIRM BEING A CIVIL C ONTRACTOR AND CERTAIN LOANS AND ADVANCES AS WORKERS/LABOURERS IN THE BALANCE SHEET WERE VERY UNCOMMON IN THIS TYPE OF BUSINESS T HAT TOO FROM LABOUR WHO ARE PAID AN AVERAGE SALARY BETWEEN RS.6 TO 7 THOUSAND ON MONTHLY BASIS AND THE ONLY REPLY SUBMITTED BY AS SESSEE BEFORE LD. ASSESSING OFFICER READS AS BELOW :- '4. DETAILS OF THE LABOUR ADVANCE CREDIT BALANCE IS OF THE STAFF OF THE FIRM. THIS AMOUNT IS KEPT AS SECURITY DEPOSIT OR DE POSIT AS THE STAFF HAS AGREED FOR THE SAME. THE SAME IS NOT A PERMANENT DE POSIT, WHICH IS PAYABLE EVERY YEAR TO THEM AND AGAIN NEW DEDUCTION IS MADE FROM THEIR MONTHLY SALARY TOWARDS DEDUCTION. THIS DEDUCT ION IS ALSO ACCUMULATED FOR THE ENTIRE YEAR FROM THEIR MONTHLY SALARY.' 12. ABOVE REPLY WAS NOT SUFFICIENT TO SATISFY LD. A SSESSING OFFICER AS ALONG WITH THIS REPLY NO PROVE OF PAYMENT TO ITS ST AFF NOR ANY AGREEMENT OF TAKING SECURITY DEPOSIT WAS PLACED ON RECORD AND LD. ASSESSING OFFICER WAS OF THE BELIEF THAT THE ASSESS EE HAS TRIED TO CREATE LIABILITY TO GENERATE LESSER PROFIT AND ACCO RDINGLY ADDED RS.80,55,680/- TO THE INCOME OF ASSESSEE. ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 11 13. LD. CIT(A) HAS DELETED THE ADDITION. 14. LD. DR SUPPORTED THE VIEW TAKEN BY LD. ASSESSIN G OFFICER. 15. ON THE OTHER HAND, LD. AR SUPPORTED THE ORDER O F LD. CIT(A) AND ALSO REFERRED TO THE GROUP SUMMARY OF LABOUR, AS WE LL AS LEDGER ACCOUNT FOR ASST. YEAR 2009-10 AND COPY OF LEDGE AC COUNT OF WORKERS/LABOUR FOR FINANCIAL YEAR 2008-09 AND 2009- 10 AND SUBMITTED THAT THERE WERE REGULAR TRANSACTION OF FLOW AND OUT FLOW IN THIS ACCOUNT OF LABOUR/WORKERS RELATING TO SALARY AND PAYMENTS T HEREOF. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND REVENUE HAS OBJECTED THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION OF RS.80,55,680 /- MADE ON ACCOUNT OF LABOUR ADVANCES WHICH WERE TREATED AS UNEXPLAINE D BY LD. ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS BECAUSE OF UNCOMMON FEATURE OF THESE ADVANCES BEING SHOWN TO BE TAKEN FROM WORKERS/LABOURERS WORKING ON A MEAGER SA LARY OF RS.6 TO 7 THOUSAND PER MONTH. LD. CIT(A) WHILE DELETING THE ADDITION HAS OBSERVED AS UNDER :- 5.2. GROUND NO.2 IS RELATED TO ADDITION MADE BY A.O . FOR AN AMOUNT OF RS.80,55,680 BEING UNCOMMON PRACTICE OF HUGE ADVANC ES AS ON* / 31.3.2009 TO WORKERS/LABOURERS IN THE BUSINESS OF APPELLANT OF C IVIL CONTRACTOR. THE APPELLANT DURING THE COURSE OF ASSTT. PROCEEDINGS CONTENDED B EFORE A.O. THAT SUCH ADVANCES ARE MAINLY RELATED TO STAFF WHO HAD LEFT T HEM AS ONE TIME DEPOSIT WITH APPELLANT AND THROUGH REGULAR DEDUCTION THE SAME AR E RECOVERED. THE A.O. REJECTED THE APPELLANT'S CLAIM SINCE ASSESSEE HAS N OT SUBMITTED ANY PROOF OF PAYMENT OF SALARY TO HIS STAFF FROM WHICH IT COULD BE ASCERTAINED THAT ANY DEDUCTION SUCH A SECURITY DEPOSIT IS BEING MADE FRO M MONTHLY SALARY. THE A.O. ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 12 FURTHER CONTENDED THAT IN THE ABSENCE OF ANY BENEFI T GENERATED OUT OF SUCH DEPOSIT, NO STAFF MEMBER WILL LIKE TO SUCH DEDUCTIO N OUT OF HIS MEAGER SALARY .THE A.O. THEREFORE MADE DISALLOWANCES FOR THE LIABILITY SHOWN AS ADVANCES FROM LABOURERS AMOUNTING TO RS.80,55,680. THE APPELLANT MADE DETAILED SUBMISSION WITH LEDGER ACCOUNTS OF ALL THESE PARTIES AND A RECONCILIATION STATEMENT TO SHOW THAT SUCH OU TSTANDING LIABILITIES WERE PAID / SETTLED SUBSEQUENTLY. IT WAS FURTHER CONTENDED BY APPELLANT THAT IN THE ABSENCE OF ANY EXPRESS PROVISION APPLIED BY A.O. FOR DISALL OWANCE, THE SAME AS PER THE LANGUAGE ADOPTED BY A.O. CAN BE DISCERNED AS U/S.41 (1) OF THE ACT, I.E. A.O. DOUBTED ABOUT THE EXISTENCE OF THOSE LIABILITY. THE APPELLANT CONTENDED THAT A.O.'S CONTENTION THAT SUCH ADVANCES FROM STAFF/LAB OUR ARE UNCOMMON IN THE TRADE OF APPELLANT IS BASED ON CONJECTURE AND SURMI SES SINCE IT IS NOT UNCOMMON THAT SOME AMOUNT OUT OF REGULAR/MONTHLY PAYMENT TO STAFF, SOME AMOUNT REMAINED UNPAID OR OTHERWISE FOR RETAINING SOME OF THE LABOUR/STAFF A PORTION OF HIS PAYMENT KEPT BACK SO THAT WHENEVER HE GOES ON L EAVE, HE SHOULD COME BACK FOR THAT MONEY. THE APPELLANT THROUGH DETAILS IN TH E FORM OF A RECONCILIATION CHART AND LEDGERIZED ACCOUNT DEMONSTRATED THAT IN NONE OF THE CASE THERE IS ANY UNCOMMON OR HUGE ADDITION, RATHER THE SAME IS GENER ALLY RS.10,000 TO RS.25,000 PER YEAR IN MOST OF THE CASES. IT WAS ALS O CONTENDED THAT NONE OF SUCH ACCOUNT IS STICKY I.E. THERE ARE REGULAR RECEIPTS A ND PAYMENT WHICH IS A NORMAL PHENOMENON IN THE BUSINESS OF CIVIL CONTRACTOR WHER E PAYMENT ARE MADE TO LABOUR CONTRACTOR/STAFF AS PER AVAILABILITY OF FUND WHICH IS DEPENDENT ON THE STAGE OF COMPLETION OF PROJECT/CONTRACT. I AM INCLINED WITH THE CONTENTION OF THE APPELLANT THAT A.O. WITHOUT PROPERLY APPRECIATING THE EXPLANATION AND DETAILS AND WITHOU T SUPPORTING HIS CONTENTION WITH ANY EVIDENCES OR INQUIRY MADE SUCH ADDITION. E VEN A.O. HAS NOT APPLIED ANY SPECIFIC SECTION FOR SUCH ADDITION. AS DISCUSSED IN PREVIOUS PARA 5.1, THE A.O. THOUGH MADE DISALLOWANCES ABOUT SUCH LIABILITIES WH ICH ARE COVERED UNDER ONLY AND SPECIFIC PROVISIONS OF SECTION 41(1) OF THE ACT BUT IN THE ABSENCE OF ANY EVIDENCES, OR INQUIRY REMAINED SILENT TO QUOTE THE SECTION. THE A.O.'S SUCH CONTENTIONS CAN THEREFORE BE NOTHING BUT ASSUMPTION S AND THE ADDITION SO MADE IS HELD AS MADE ON THE BASIS OF CONJECTURE AND SURM ISES. IT IS A SETTLED LEGAL PROPOSITION THAT ASSESSEE IS THE BEST JUDGE AND MAN AGER OF HIS BUSINESS AND ASSESSING OFFICER CANNOT DIRECT THE ASSESSEE ABOUT HOW HE SHOULD CONDUCT THE BUSINESS. THE A.O. SIMPLY TAKEN THE LIABILITY OUTST ANDING AS ON 31.3.2009 BUT FAILED TO CONSIDER THE DETAILS ABOUT OPENING BALANC E, TRANSACTION DURING PREVIOUS YEAR AND THEREBY HOW THIS FINAL BALANCE ARRIVED AT. IF THE A.O. HAS DOUBT ABOUT THE EXISTENCE OF SUCH LIABILITY THEN THE TRANSACTION MA DE IN THOSE NAME DURING THE PREVIOUS YEAR ARE NOT GENUINE AND THESE HAS TO BE D ISALLOWED IN TOTALITY OR ALTERNATIVELY THE BOOKS OF ACCOUNTS OF APPELLANT BE REJECTED FOR ESTIMATION OF CORRECT PROFIT. THE A.O. WITHOUT REJECTING THE BOOK S OF ACCOUNTS, ACCEPTED THE GROSS PROFIT AND NET PROFIT BUT MADE SUCH ADDITION WHICH CANNOT BE JUSTIFIED ON ANY GROUND. THE APPELLANT BY DETAILS SO FILED DURIN G THE APPEAL PROCEEDINGS ABLE ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 13 TO DEMONSTRATE THAT IN ALL THESE ACCOUNTS OUT OF CR EDIT OF SALARY/LABOUR CHARGES AND PERIODIC WITHDRAWALS ETC. THERE REMAINS SOME AM OUNT WHICH IS EITHER ADDED OR GOT SUBTRACTED FROM OPENING BALANCE REPRESENTED IN THE FORM OF SUCH LIABILITIES. IT IS FURTHER DEMONSTRATED BY APPELLANT THAT OUT OF SUCH OUTSTANDING LIABILITIES OF RS.80,55,680 AS ON 31.3.2009, THE APPELLANT CREDITE D AN AMOUNT OF RS.82,57,862 IN VARIOUS SUCH ACCOUNT AND DEBITED RS.1,44,55,742 THEREBY THERE LEFT A BALANCE OF RS.18,57,800 CREDIT AS ON '31.3.2010. IT IS THER EFORE EVEN IF IT IS TAKEN THAT SUCH DISALLOWANCES AND ADDITIONS ARE MADE ON THE LI NE OF SECTION 41(1) OF THE ACT, THE SAME DOES NOT SURVIVE BECAUSE THERE IS NO CESSATION OF LIABILITY AND APPELLANT HAS NOT GOT ANY ADVANTAGE IN CASH OR OTHE RWISE DIRECTLY OR INDIRECTLY. IT IS THEREFORE THE A.O. IS DIRECTED TO DELETE SUCH AD DITION OF RS.80,55,680. THE APPELLANT GETS RELIEF ACCORDINGLY. 17. FROM GOING THROUGH THE FINANCIAL STATEMENT OF T HE ASSESSEE WE OBSERVE THAT IN THE BALANCE SHEET AS ON 31.3.2009 U NDER THE HEAD CURRENT ASSETS LOANS AND ADVANCES IN SCHEDULE VI THERE IS A SPECIFIC SUB-HEAD OF LOANS AND ADVANCES SHOWN AT RS.6,34,46, 949.67 AND GOING THROUGH THE SCHEDULE -6 TO THE BALANCE SHEET TO GET THE DETAIL OF THESE AMOUNTS, WE OBSERVE THAT UNDER THE HEAD LO ANS AND ADVANCES A SUM OF RS.8,11,41,643.37 IS SHOWN AS A G ROSS ADVANCE TO VARIOUS AWARDERS, BANKS, UNDER-GOING PROJECTS ET C. (AS SHOWN IN THE LIST AT PAGES 29 TO 32 OF THE PAPER BOOK) AND F ROM THIS AMOUNT A SUM OF RS.1,76,94,964 INCLUSIVE OF AMOUNT OF LABOUR ADVANCES OF RS.80,55,680/-, HAS BEEN REDUCED IN THE NAME OF AD VANCES FROM CREDITORS AND REMAINING AMOUNT I.E. RS.96,39,284/- IS DULY FIGURED OUT UNDER VARIOUS NAMES AT PAGES 32 33 OF PAPER BOOK. GOING THROUGH THESE FACTS AND FIGURES OF THE BALANCE SHEET, WE FI ND THAT A LUMP SUM OF LABOUR ADVANCE OF RS.80,55,680/- HAS BEEN SHOWN. GENERALLY AT THE TIME OF PREPARATION OF BALANCE SHEET, IF THERE ARE OUTSTANDING SUNDRY CREDITORS OR OUTSTANDING LIABILITIES TOWARDS EXPENDITURE THEY ARE FIGURED OUT UNDER THE HEAD CURRENT LIABILITIES AND PROVISIONS BUT SURPRISINGLY IN THE CASE OF ASSESSEE THEY HAVE BEEN SHOWN AS ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 14 DEDUCTION FROM LOANS AND ADVANCES WHICH MEANS THAT THE IMPUGNED AMOUNT OF RS.80,55,680/- SEEMS TO BE LOANS TAKEN FR OM WORKERS/LABOURS. FURTHER OBSERVING THE LEDGER ACCOU NT OF LABOURERS/WORKERS COVERED UNDER IMPUGNED LIST OF RS .80,55,680/- WE FIND THAT IN MAJORITY OF CASES THERE IS NO TRANSACT ION OF SALARY/LABOUR EXPENSES WITH THESE LABOURERS/WORKERS DURING THE YE AR UNDER APPEAL AND MOST OF THE PAYMENTS HAVE BEEN PAID IN CASH. 18. FROM GOING THROUGH THE ASSESSMENT ORDER WE OBSE RVE THAT LD. ASSESSING OFFICER HAS MADE ADDITION BY OBSERVING TH AT THE ASSESSEE HAS TRIED TO PUT IN ITS ACCOUNT IS NOTHING BUT CREA TION OF A LIABILITY TO GENERATE LESSER PROFIT WHICH MEANS THAT LD. ASSESSI NG OFFICER WAS OF THE BELIEF THAT RS.80,55,680/- IS ON ACCOUNT OF LAB OUR CHARGES WHICH REMAINED UNPAID AND WERE NOT GENUINE. IT WAS JUST E NTERED IN THE EARLIER YEARS FOR REDUCTION OF PROFITS. ON THE OTHE R HAND, SUBMISSIONS MADE BY ASSESSEE DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, WERE FOCUSING ON THE FACT THAT THIS AMOUNT OF RS.80 ,55,680/- WAS KEPT AS SECURITY DEPOSIT OR DEPOSIT, AS THE STAFF HAVE A GREED FOR THE SAME. WHILE REFERRING TO THE OBSERVATIONS OF LD. ASSESSIN G OFFICER AND THE SUBMISSIONS OF ASSESSEE, WE WANT TO POINT OUT THAT IT IS NOT CLEAR AS TO WHAT IS THE NATURE OF THIS IMPUGNED AMOUNT OF RS.80 ,55,680/- AS TO WHETHER IT IS IN THE NATURE OF LOANS OR DEPOSITS FR OM LABOURS/WORKERS OR THEY ARE OUTSTANDING LIABILITIES TOWARDS IMPUGNE D EXPENSES. IF WE LOOK FROM THE ANGLE OF ACCOUNTING, ASSESSEE HAS DIS PLAYED THE AMOUNT OF RS.80,55,680/- AS LOANS/DEPOSITS AND HAS REDUCED THE SAME FROM LOANS AND DEPOSITS GIVEN DURING THE YEAR WHEREAS IF WE LOOK FROM THE ANGLE OF OBSERVATIONS OF LD. ASSESSIN G OFFICER IT SEEMS ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 15 THAT HE WAS OF THE BELIEF THAT THESE ARE NON-GENUIN E EXPENDITURE BOOKED IN EARLIER YEARS TO GENERATE LESSER PROFIT. THEREFORE, THERE IS A DIFFERENCE OF OBSERVATION AND WHAT HAS BEEN SUBMITT ED BY ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS READ AL TOGETHER WITH THE AUDITED FINANCIAL STATEMENTS AND THE OBSERVATIO NS MADE BY LD. ASSESSING OFFICER WHILE MAKING ADDITION THOUGH BOTH ARE NOT REFERRING TO A COMMON FACT. 19. WE FURTHER OBSERVE THAT ASSESSEE HAS PASSED THR OUGH THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. SECTION 14 7 OF THE ACT FOR ASST. YEAR 2008-09 AS WELL AS SCRUTINY ASSESSMENT U /S 143(2) FOR ASST. YEARS 2010-11 AND 2011-12 AND HAS SUBMITTED B Y LD. AR THAT NO ADDITION SHOULD HAVE BEEN MADE TOWARDS THE UNPAI D LOANS AND ADVANCES NOR ANY ADDITION HAS BEEN MADE ON ACCOUNT OF LABOUR/WORKERS EXPENSES. THIS MEANS THAT EXPENDITUR E BOOKED BY ASSESSEE FOR ASST. YEAR 2008-09 HAS BEEN ACCEPTED B Y THE DEPARTMENT AND DURING THE YEAR UNDER APPEAL THERE I S ANNUAL OUTSTANDING LIABILITY IN THE FORM OF UNPAID SALARY/ WAGES HAS BEEN MADE. 20. IN VIEW OF OUR ABOVE DISCUSSION, WE OBSERVE THA T THERE CAN BE POSSIBLY FOUR SITUATIONS RELATING TO THIS AMOUNT OF RS.80,55,680/-. FIRSTLY, IF THEY ARE IN THE NATURE OF LOANS AND DEP OSITS TAKEN BY THE ASSESSEE IN PREVIOUS YEAR I.E. BEFORE F.Y. 2008-09 THEN ALSO ADDITION IN THE HANDS OF ASSESSEE COULD NOT BE SUSTAINED BEC AUSE THEY COULD BE ADDED ONLY IN THE YEAR WHEN THEY WERE RECEIVED. SECONDLY, IF THE IMPUGNED AMOUNT OF RS.80,55,680/- WAS IN THE NATURE OF LOANS AND ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 16 DEPOSITS IN PREVIOUS YEAR THEN IN THE YEAR UNDER AP PEAL THERE COULD HAVE BEEN A POSSIBILITY FOR ADDITION ON ACCOUNT OF PROVISIONS OF SECTION 269T OF THE ACT FOR REPAYMENT OF LOANS OR D EPOSITS OTHERWISE THAN BY ACCOUNT PAYEE CHEQUES OR DRAFTS, AS IN MAJO RITY OF AMOUNTS OF LOANS AND ADVANCES HAS BEEN MADE IN CASH BUT THE SA ME COULD NOT BE SUSTAINED BECAUSE I.E. NOT THE CASE OF REVENUE A ND SO IN THIS SITUATION ALSO NO ADDITION COULD BE SUSTAINED. THIR DLY IF THE IMPUGNED AMOUNT OF RS.80,55,680/- IS ON ACCOUNT OF UNPAID SA LARY THEN ALSO WE OBSERVE THAT IN THE YEAR UNDER APPEAL IN MOST OF TH E CASES NO SUCH EXPENDITURE HAS BEEN BOOKED AND THE BALANCES ARE BR OUGHT FORWARD FROM F.Y.2007-08 AND THE EXPENDITURE, IF ANY, WOULD HAVE BEEN BOOKED IN THE PREVIOUS YEAR AND NO SUCH ADDITION HA S EVEN BEEN MADE IN THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT IN THE CASE OF ASSESSEE FOR ASST. YEAR 2008-09. LASTLY I.E. IN THE FOURTH SITUATION COULD HAVE ARISEN FOR ADDITION U/S 41(1) OF THE ACT FOR REMISSION OR CESSATION OF LIABILITY BUT THAT ALSO C OULD NOT BE SUSTAINED BECAUSE ALL THE PARTIES COVERED UNDER THE IMPUGNED LIST OF ADVANCES AT RS.80,55,680/- HAVE BEEN PAID OFF IN THE FOLLOWI NG YEARS AND MOSTLY DURING THE YEAR UNDER APPEAL ITSELF AND ALSO THERE IS A COMPLETE ABSENCE OF ANY EVIDENCE OR ENQUIRY WHICH C OULD PROVE THAT THE IMPUGNED LIABILITY OF RS.80,55,680/- WAS NOT GE NUINE. 21. THEREFORE, WE ARE OF THE VIEW THAT LD. CIT(A) H AS RIGHTLY DELETED THE ADDITION OF RS.80,55,680/- AND NO INTERFERENCE IS CALLED FOR IN HIS ORDER. THIS GROUND OF REVENUE IS DISMISSED. 22. OTHER GROUNDS ARE OF GENERAL NATURE. ITA NO. 329/AHD/2013 ASST. YEAR 2009-10 17 23. IN THE RESULT, APPEAL OF REVENUE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY, 2016 SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 24/5/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 23/05/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 24/05/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 24/5/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: