ITO 16(1)(3), MUMBAI V. PUKHRAJ S. JAIN, MUMBAI

ITA 3360/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2710 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 09-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR SINGH
• Keywords: Period of limitation; Additional evidence; Time period of passing order
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.3360/MUM/2014 ASSESSMENT YEAR- 2010-11 ITO-16(1)(3), R. NO.220, 2 ND FLOOR, MATRU MANDIR, TARDEO RD. MUMBAI-400007 / VS. SHRI PUKHRAJ S. JAIN, 8, GROUND FLR, GURU RAJENDRA HOUSE, 135 TRIMBAK PARSHURAM ST. 6 TH KUMBHARWADA LANE, MUMBAI-400004 ( / REVENUE) ( ! /ASSESSEE) PAN. NO. AAJPJ8080C / REVENUE BY SHRI PRADEEP KUMAR SINGH- DR ! / ASSESSEE BY SHRI PIYUSH CHATURVEDI ' # $ ! % / DATE OF HEARING : 04/11/2015 $ ! % / DATE OF ORDER: 10/11/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 05/02/2014 OF THE LD. FIRST APPELLATE AUTHORITY, M UMBAI. ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO DELET ING THE ADDITION MADE BY THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT AND FURTHER BY ADMITTING SHRI PUKHRAJ S. JAIN ITA NO.3360/MUM/2014 2 ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TA X RULES, 1962 (HEREINAFTER THE RULES). 2. DURING HEARING OF THIS APPEAL LD. DR SHRI PRADEE P K SINGH, ADVANCED HIS ARGUMENTS WHICH ARE IDENTICAL T O THE GROUND RAISED BY CONTENDING THAT PROVISIONS OF SECT ION 41(1) OF THE ACT WAS RIGHTLY INVOKED BY THE ASSESSING OFF ICER AND ALSO THE LD. COMMISSIONER OF INCOME TAX (APPEALS) A DMITTED ADDITIONAL EVIDENCE, WITHOUT PROVIDING SUFFICIENT O PPORTUNITY TO THE ASSESSING OFFICER, THUS, IT IS VIOLATION OF RULE 46A OF THE RULES. ON THE OTHER HAND, SHRI PIYUSH CHATURVED I, LD. COUNSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION AR RIVED AT IN THE IMPUGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. FACTS IN BRIEF AR E THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FERROUS AND NON FERROUS METALS, DECLARED TOTAL INCOME OF RS. 32,799 /- IN ITS RETURN OF INCOME FILED ON 30.09.2010, WHICH WAS COM PLETED ON 21.03.2013, DETERMINING TOTAL INCOME AT RS. 1,81,72,450/, U/S 143(3) OF THE ACT. DURING ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESS EE TO FURNISH THE DETAILS OF SUNDRY CREDITORS WHICH WERE OUTSTANDING FOR MORE THAN THREE YEARS. THE ASSESSEE VIDE LETTER DATED 7.12.2012, 10.01.2013 AND 21 ST JAN 2013 FURNISHED THE DETAILS. AFTER GOING THROUGH THESE LE TTERS, THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE LIABILITIES OF OVERSEAS CREDITORS, WHICH ARE CONTINUOUSLY OUTST ANDING, SHOULD NOT BE TAXED AS INCOME OF THE ASSESSEE AS PE R THE SHRI PUKHRAJ S. JAIN ITA NO.3360/MUM/2014 3 PROVISIONS OF SECTION 41(1) OF THE ACT. THE EXPLANA TION OF THE ASSESSEE WAS THAT THE DUE TO FINANCIAL CONSTRAINTS THE ASSESSEE COULD NOT PAY THE SAID SUMS TO THE OVERSEA S PARTIES. HOWEVER, PERIODICAL PAYMENTS TO SUCH PARTIES WERE M ADE FROM TIME TO TIME. THE ASSESSEE ALSO OPPOSED INVOKI NG SECTION 41(1) OF THE ACT ON THE PLEA THAT MERELY BE CAUSE PERIOD OF LIMITATION HAS ALREADY EXPIRED, IT CANNOT BE INVOKED AS THE LIMITATION PERIOD ONLY PREVENTS THE CREDITOR S FROM ENFORCING AGAINST THE ASSESSEE. THE ASSESSEE ALSO EXPLAINED BEFORE THE ASSESSING OFFICER THAT FOR THE LAST FOUR TO FIVE YEARS THE FINANCIAL POSITION OF THE ASSESSEE IS BAD AND T HE ASSESSEE HAS ALSO STARTED REPAYING THE CREDITORS FROM SUBSEQ UENT ASSESSMENT YEARS. HOWEVER, THE ASSESSING OFFICER, N OT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, INV OKED THE PROVISIONS OF SECTION 41(1) OF THE ACT. 4. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE FACTS WERE EXAMINED AND FOLLOWING TH E VARIOUS DECISIONS FROM HONBLE JURISDICTIONAL HIGH COURTS A ND APEX COURT DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ADDITION MADE BY THE ASSESSING OFFICER WAS NOT JUST IFIED. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS T RIBUNAL. 5. IF OBSERVATION MADE IN THE ASSESSMENT ORDER, CON CLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, AND THE ASSERTIONS MADE BY THE LD. RESPECTIVE COUNS ELS, IF, KEPT IN JUXTAPOSITION AND ANALYZED. WE NOTE THAT TH E LD. ASSESSING OFFICER MADE THE ADDITION TO THE TOTAL IN COME AS HE FOUND THAT THERE WERE HUGE SUNDRY CREDITORS OUTSTAN DING FOR SHRI PUKHRAJ S. JAIN ITA NO.3360/MUM/2014 4 A SUBSTANTIAL PERIOD OF ALMOST MORE THAN THREE YEAR S AND THAT TOO TO THE OVERSEAS PARTY. THERE IS NO DISPUTE TO T HE FACT THAT THE ASSESSEE FURNISHED THE DETAILS AS CALLED FOR AN D EXPLAINED THE REASON OF NON-PAYMENT/PART PAYMENT OR DELAY WHI CH WAS CLAIMED TO BE DUE TO LOSSES IN THE BUSINESS. THE AS SESSEE ALSO EXPLAINED AS TO WHY THE PROVISIONS OF SECTION 41(1) OF THE ACT SHOULD NOT BE IMPOSED. WE FIND THAT MAJOR IMPORT FR OM THE OVERSEAS PARTIES WAS DURING FINANCIAL YEAR 2007-08, DURING WHICH THE SALES TURNOVER OF THE ASSESSEE WAS RS. 16 .93 CRORES AND OUT OF THAT SALES PROCEEDS (SUNDRY DEBTORS) WAS TO BE RECOVERED ONLY RS. 1.19 CRORE. IN SUBSEQUENT YEAR ( A.Y. 2009-10), THE ASSESSEES SHOWED SUNDRY CREDITORS OF RS. 3.10 CRORES AND THE SALE PROCEEDS TO BE RECOVERED WERE O NLY TO THE TUNE OF RS. 27.89 LACS. DURING THE YEAR, THE ASSESS EE HAD ONLY BUSINESS OF RS. 1.12 CRORES AND THE SALE PROCE EDS TO BE RECOVERED WAS ONLY RS. 11.24 LACS ONLY. IT CLARIFY THE POSITION OF THE ASSESSEE THAT TO CLEAR OFF THE LIABILITIES, NO CURRENT ASSET HAD LEFT WITH THE ASSESSEE. IT IS ALSO NOTED THAT BEFORE THE LD. FIRST APPELLATE AUTHORITY, THE ASSESSEE FIL ED ADDITIONAL EVIDENCE, CONTAINING 36 PAGES (INCLUDING INVOICES, DEBIT VOUCHERS, DIRECT INVOICE OF IMPORT, DIRECT REMITTAN CE OF HDFC BANK FOR US DOLLARS IN RESPECT OF FIVE PARTIES TO W HOM THE PAYMENTS WERE DUE FOR MANY YEARS) UNDER RULE 46A O F THE RULES, WHICH WAS DULY FORWARDED FOR THE COMMENTS, OBJECTIONS AND REPORT FROM THE ASSESSING OFFICER. T HIS ADDITIONAL EVIDENCE WAS DULY SENT TO THE ASSESSING OFFICER WHO VIDE REPORT DATED 22.01.2014 WAS DULY CONSIDERE D. THE ASSESSEE ALSO FILED REJOINDER TO THE REPORT, WHICH HAS BEEN SHRI PUKHRAJ S. JAIN ITA NO.3360/MUM/2014 5 REPRODUCED AT PAGE 10 ONWARDS OF THE IMPUGNED ORDER , THEREFORE, NOT REPEATED IN THIS ORDER, BEING MATTER OF RECORD. THUS, SO FAR AS THE CONTENTION OF THE LD. DR THAT T HERE IS A VIOLATION OF RULE 46A OF THE RULES, IS CONCERNED, W E FIND NO SUCH VIOLATION AS THE OPPORTUNITY WAS GRANTED TO TH E ASSESSING OFFICER AND IN-TURN, DULY REPORT WAS SENT . EVEN OTHERWISE, AS PER THE PROVISIONS OF THE ACT, THE LD . FIRST APPELLATE AUTHORITY IS ENTITLED TO ADMIT ADDITIONAL EVIDENCE AND FURTHER TO DECIDE IN ACCORDANCE WITH LAW. OUR V IEW IS FORTIFIED BY THE DECISION AND RATIO LAID DOWN THERE IN IN CIT VS. RANJIT KUMAR CHOUDHARY 288 ITR 179 (GAUHATI) AND BY RAMJI & COMPANY VS. CIT 11 ITR 286 (NAGPUR), CIT VS. P.S. JAIN & COMPANY LTD 322 ITR 320 (DEL.), SMT. PRABHAVATI S. SHAH VS. CIT 231 ITR 1 (BOM.) SO FAR AS INVOKING SECTION 41 OF THE ACT IS CONCERN ED. THE ASSESSEE HAS EXPLAINED THE REASONS FOR MAKING THE P AYMENTS WHICH WERE ON ACCOUNT OF LACK OF FUNDS AND FURTHER THE ASSESSEE ESTABLISHED THAT THE CREDITORS TO THE TUNE OF RS. 1.54 CRORES OUT OF RS. 1.79 CRORES WERE ACTUALLY PAID IN LATER YEARS AND FURTHER DEMONSTRATED THAT THE LIABILITY HAS NEV ER CEASED. IN VIEW OF THIS FACTUAL POSITION, WE ARE SATISFIED WITH THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT INVOCATION OF SECTION 41(1) WAS MERE LY BASED ON ARBITRARY DECISION OF THE LD. ASSESSING OFFICER. OUR VIEW FINDS SUPPORT FROM THE DECISION IN CIT VS. JAIN EXP ORTS PVT. LTD., FROM HONBLE DELHI HIGH COURT (ITA NO. 235/20 13) ORDER DATED 24.05.2013, WHEREIN, THE DECISION FROM HONBL E APEX SHRI PUKHRAJ S. JAIN ITA NO.3360/MUM/2014 6 COURT IN SUGAULI SUGAR WORKS PVT. LTD. 236 ITR 518 (SC), BOMBAY DYING & MFG. LTD. VS. STATE AIR 1958 (SC) 3 28 AND J.K. CHEMICALS VS. CIT 62 ITR 34 (BOM.) WERE DULY CONSIDERED. THE PROVISION AND INVOCATION OF SECTION 41 (1) HAS BEEN DULY EXPLAINED BY HONBLE APEX COURT I N SUGAULI SUGAR WORKS LTD. (SUPRA). THE CRUX OF THE AFORESAID DECISION IS THAT CESSATION OF LIABILITY MAY OCCUR EITHER BY THE REASON OF LIABILITY BECOMING UNENFORCEABLE IN LAW BY THE CRED ITOR COUPLED WITH DEBTOR DECLARING HIS/THEIR INTENTION N OT TO OWNER HIS LIABILITY OR BY A CONTRACT BETWEEN THE PA RTIES OR BY DISCHARGE OF THE DEBT. WE NOTE THAT THE LD. ASSESSI NG OFFICER INVOKED THE PROVISIONS OF SECTION 41(1) BY ADDING A SUM BEING AGGREGATES OF AMOUNTS, SHOWN AS PAYABLE, TO VARIOUS SUNDRY CREDITORS AS INCOME U/S 41(1). THE LD. ASSESSING OF FICER CAME TO A PARTICULAR CONCLUSION ONLY ON THE PREMISE THAT SINCE THE OUTSTANDING BALANCES REMAINED STATIC, IN THE BOOKS OF THE ASSESSEE, FOR SEVERAL YEARS, THEREFORE, THERE WAS N O POSSIBILITY OF ANY CLAIM BEING MADE BY THE CREDITORS, THEREFORE , HE ADDED TO THE INCOME OF THE ASSESSEE. WE FURTHER NOTE THAT THE GENUINENESS OF THE TRANSACTIONS ENTERED IN THE BOOK S HAS NOT BEEN QUESTIONED BY THE ASSESSING OFFICER HERSELF. F OR INVOKING THE PROVISIONS OF SECTION 41, THERE SHOULD BE AN IRREVOCABLE CESSATION OF LIABILITY WITHOUT ANY POSS IBILITY OF BEING REVIVED. IN THE PRESENT APPEAL, THE ASSESSEE HAVING ACKNOWLEDGES LIABILITY SUCCESSIVELY OVER THE YEARS REFLECTED IN HIS BOOKS AS PAYABLE, THEREFORE, WE FIND NO INFIRMI TY IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS), THEREFORE, HIS STAND IS AFFIRMED. SHRI PUKHRAJ S. JAIN ITA NO.3360/MUM/2014 7 FINALLY THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 04/11/2015. SD/- SD/- ( ASHWANI TANEJA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ' # MUMBAI; ' DATED : 10/11/2015 F| FA P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. )*+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / ' 0! ( )* ) / THE CIT, MUMBAI. 4. / / ' 0! / CIT(A)- , MUMBAI 5. 23 -! , / )*% ) 4 , ' # / DR, ITAT, MUMBAI 6. 5 6# / GUARD FILE. / BY ORDER, .2*! -! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ' # / ITAT, MUMBAI.