Shri Dharampal Lalchand Chugh, Surat V. The Income tax Officer,Ward-3(3), Surat

ITA 3376/AHD/2010

• Counselvise Citation: 337620514 RSA 2010
• Duration Of Justice: 3 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: MK PATELAR
• Keywords: Opportunity of being heard; Non compliance
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., ! '# '# '# '# SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ! ) & ! ) & ! ) & ! ) ITA NO. 3376/AHD/2010 ASSESSMENT YEAR :2007-08 SHRI DHARAMPAL LALCHAND CHUGH H. NO.50, JANTA NAGAR, NEW CIVIL ROAD, BEHIND KAPADIA HEALTH CLUB, SURAT. V/S . INCOME TAX OFFICER, WARD-3(3) SURAT. PAN NO. A B MPC1474F (APPELLANT) .. (RESPONDENT) *+ , - & / BY APPELLANT SHRI M. K. PATEL, A.R. ./*+ , - & /BY RESPONDENT SHRI P. L. KUREEL, SR. D.R. 0 , 1%' /DATE OF HEARING 24.02.2014 234 , 1%' /DATE OF PRONOUNCEMENT 26.02.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE CIT(A)-II, SURAT, ORDER DATED 01.10.2010 FOR A.Y. 2007-08. TH E EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. THE ASSESSEE HAS WRITTEN-OFF UNPAID CREDITORS O F A.Y. 2003-04 WORTH RS.1,37,80,024=00 IN A.Y. 2009-10 WHICH SHOWN IN AUDIT REPORT OF C.A. KRISHNA DESAI & ASSOCIATES PROP. KRI SHNA DESAI AND IN INCOME TAX RETURN LOSSES ARE SET-OFF BY WRIT TEN OFF UNPAID CREDITORS WHICH I.T. RETURN FOR A.Y. 2009-10 WAS FI LLED ON DT.22/09/2009 IN WARD 3 (3), SURAT WIDE ACKNOWLEDGE MENT NO.0303006312. IN BALANCE NO CREDITORS ARE PENDING IN BALANCE SHEET OF DT.31/03/2009. ITA NO. 3376/AHD/2010 A.Y. 07-08 SHRI DHARAMPAL LALCHAND CHUGH VS. ITO PAGE 2 2. THE ASSESSING OFFICER HAVE NOT APPLY INDIAN LIMI TATION ACT BECAUSE THE UNPAID CREDITORS CAN FILE SUIT AGAINST ASSESSED AT ANY TIME UNDER SECTION 5 OF LAW OF INDIAN LIMITATION ACT WHI CH STATE THAT THE APPELLANT OR THE APPLICANT SATISFIES THE COURT THAT HE HAD SUFFICIENT CAUSE FOR NOT PREFERRING THE APPEAL OR MAKING THE A PPLICANT WITHIN SUCH PERIOD BEFORE EARING ADDITION IN ASSESSMENT. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADI NG OF ART SILK CLOTH. THE ASSESSEE IS ALSO PROPRIETOR IN VARIOUS CONCERNS I.E. NILKANTH FABRICS & RAJESH TEXTILES, BUT NO SALES HAD BEEN SHOWN IN THE SE CONCERNS AND IN CURRENT YEAR, THE TURNOVER HAD BEEN SHOWN AT RS.9.7 3 LACS. IN HIS PROPRIETARY CONCERN I.E. KIRAN SILK MILLS. LD. A.O. ASKED TO G IVE NAME, ADDRESS AND DETAILS OF SUNDRY CREDITORS SHOWN IN THE BALANCE SHEET OF R S.1,37,80,024/- BUT NO DETAILS WERE PRODUCED BY THE ASSESSEE DURING THE CO URSE OF ASSESSMENT PROCEEDING. AS PER ADDRESS AVAILABLE IN THE FILE, THE LD. A.O. ISSUED NOTICE U/S.133(6) OF THE IT ACT TO ALL THE SUNDRY CREDITOR S. OUT OF THESE NOTICES, ALL WERE RETURNED UNSERVED, EXCEPT IN CASE OF M/S. ASHO K TRADING COMPANY. THE REPLY OF M/S. ASHOK TRADING COMPANY WAS RECEIVED BY THE A.O. AND IT WAS MENTIONED BY IT THAT NO TRANSACTIONS WERE MADE WITH THE ASSESSEE IN THE YEAR 06-07, 07-08 & 08-09 AND NO OUTSTANDING BALANCE HAD BEEN SHOWN AGAINST THE ASSESSEE FOR THESE YEARS. THE LD. A.O. GAVE RE ASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH WAS AFFORDED BY TH E ASSESSEE VIDE LETTER DATED 25.11.2009. AFTER CONSIDERING THE ASSESSEES REPLY, THE A.O. OBSERVED AS UNDER: * DESPITE GIVING SEVERAL OPPORTUNITIES THE ASSESSE E FILED TO PROVIDE THE DETAILS OF THESE CREDITORS. EVEN THE BASIC DET AILS SUCH AS COPIES ITA NO. 3376/AHD/2010 A.Y. 07-08 SHRI DHARAMPAL LALCHAND CHUGH VS. ITO PAGE 3 OF THEIR LEDGER ACCOUNTS, DETAILS IN THE REQUESTED FORMAT WERE NOT PROVIDED BY THE ASSESSEE. * DESPITE GIVING OPPORTUNITY, THE ASSESSEE FAILED A GAIN AND AGAIN TO SUBMIT ANY CONFIRMATION FROM THESE CREDITORS IN ORD ER TO JUSTIFY THE EXISTENCE OF SUCH LIABILITIES. THE CURRENT ADDRESS ES OF THESE SUNDRY CREDITORS ARE ALSO NOT AVAILABLE WITH THE ASSESSEE WHICH PROVES THAT THE ASSESSEE HAS NO CONNECTION/RELATION EVEN IN THE PRESENT. *. DURING THE COURSE OF HEARING THE ASSESSEE HAS PR ODUCED TWO LEGAL NOTICES WHICH WERE RECEIVED FROM M/S S.A. & CO. AND M/S BLUE SKY SYNTHETICS THROUGH ONE LAWYER SHRI SUNII R. TAILOR DATED 08.12.2007. ON BEING ASKED REGARDING THE REPLY OF T HESE NOTICES AND COURT CASE NO. PENDING AGAINST THOSE PARTIES TH E ASSESSEE REPLIED THAT NO SUCH CASE WAS PENDING IN THE COURT OF LAW NEITHER ANY REPLY WAS FILED FROM THE SIDE OF THE ASSESSES. * FOR VERIFICATION, A NOTICE U/S. 133(6} OF THE ACT WAS ISSUED TO SHRI SUNIL R..TAILOR, SHRI SUNIL R. TAILOR, ADVOCATE IN HIS REPLY DATED 02.12.2009 HAS STATED THAT NO REPLY WAS RECEIVED FR OM THE SIDE OF ASSESSEEWHICH CLEARLY PROVES, IF ANY LIABILITY EXIS TS IN ACTUAL AGAINST THESE CREDITORS, THE ASSESSEE MUST HAVE FILED HIS R EPLY BUT ASSSESSCE HAS NOT BOTHER TO FILE ANY REPLY AGAINST THE LEGAL NOTICE. FURTHER NO CIVIL CASE WAS FILED IN THE CIVIL COURT, AGAINST SHRI DHARAMPAL CHUGH FOR NON COMPLIANCE OF LEGAL NOTICE AND ALSO FOR NON-PAYMENT OF DUES. IF ANY LIABILITY EXISTS IN ACC TUAL THE CREDITORS SHOULD HAVE FILED THE CASE IN THE COURT OF LAW AGAI NST THE ASSESSSEE. BUT NEITHER THE REPLY WAS GIVEN TO THESE CREDITORS NOR ANY CASE WAS FILED BY THE CREDITORS AS ON DATE WHIC H SHOWS THAT THE LIABILITY DOES NOT EXISTS. * THE PRESENT WHERE ABOUT OF THESE CREDITORS I.E. M /S S.A. & CO. AND M/S BLUE SKY SYNTHETICS ARE ALSO NOT KNOWN TO THEIR LAWYER WHICH LEAD THIS OFFICE TO CONDUCT FURTHER VERIFICATION IN THIS REGARD. THEREFORE CREDITORS M/S S.A, & CO. AND M/S BLUE SKY SYNTHETICS ARE PROVED TO BE NOT IN EXISTENCE ALONGWITH OTHER CREDI TORS. ITA NO. 3376/AHD/2010 A.Y. 07-08 SHRI DHARAMPAL LALCHAND CHUGH VS. ITO PAGE 4 * FURTHER THE ASSESSEE WAS ALSO VERY SPECIFICALLY A SKED WHETHER ANY REPLY WAS GIVEN TO PARTIES FROM WHOM THE LEGAL NOTI CE WAS RECEIVED OR ANY CIVIL CASE WAS SUED AGAINST HIM FROM THE PAR TIES. M/S S.A. & CO. AND M/S BLUE SKY SYNTHETICS, DURING THE HEARING ON 25.11.2009 THE ASSESSEE AND HIS AR REPLIED THAT NO REPLY WAS G IVEN NEITHER ANY CASE WAS FILED AGAINST HIM FROM THESE PARTIES I N ANY COURT OF LAW. IT SHOWS THAT THE LIABILITY DOES NOT EXIST SO THAT THE PARTIES WERE NOT SUED AGAINST ASSESSEE FOR RECOVERY OF THEIR DUE S. * THE ASSESSEE HAS SUBMITTED THE CORRESPONDENCES OF CENTRAL EXCISE DEPARTMENT WHICH ONLY PROVED THAT THE ASSESS EE WAS IN THE BUSINESSS OF MANUFACTURING OF TEXURISING YARN UNDER NAME & STYLE OF M/S VIBHA IMPEX WHICH IS NOT 'IN DISPUTE. BUT NO SUBSTAINTIAL MATERIAL IS PRODUCED BY THE ASSESSEE WHICH CAN LEAD TO CONCLUSION THAT THE LIABILITY IS IN EXISTENCE. * BURDEN IS ON ASSESSEE TO PROVE THAT LIABILITY SUB SISTS - WHETHER THE LIABILITY OF THE ASSESSEE HAS BEEN FULLY DISCHARGED IS WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. HE HAS TO PROVE THAT IN FACT THE LIABILITY SUBSISTS. WHERE THE CONDUCT AND SURROUNDI NG CIRCUMSTANCES DEMONSTRATE THAT THE AMOUNT HAS BEEN REMITTED OR FORGONE OR THE SUM HAS CEASED TO BE CLAIMABLE AGAIN ST THE ASSESSEE, IT WOULD BE A CLEAR CASE OF REMISSION OR CESSATION OF THE LIABILITY OF THE ASSESSEE. KESORAM INDUSTRIES & C OTTON MILLS LTD. V. CIT [1992] 196 ITR 845 (CAL.). * DESPITE GIVING OPPORTUNITY, THE ASSESSEE FAILED T O SUBMIT ANY CONFIRMATION FROM THESE CREDITORS IN ORDER TO JUSTI FY THE EXISTENCE OF SUCH LIABILITIES. THE ASSESSEE EVEN DID NOT BOTHER TO SUBMIT THE REASONS FOR WHICH THE PAYMENTS TO THESE PARTIES WER E OUTSTANDING SINCE MANY YEARS. 10. IN VIEW OF THE ABOVE DISCUSSION IT IS CLEA RLY CONCLUDED THAT THE LIABILITY IS CEASED TO BE EXISTS: A. ALTHOUGH THE BUSINESS ACTIVITY IN THE PROPRIETOR CONCERN OF ASSESSSEE I.E. M/S. VIBHA IMPEX IS NOT PERFORMED IN THE PERIOD UNDER CONSIDERATION. THE PROVISIONS OF SECTI ON 41(1) ITA NO. 3376/AHD/2010 A.Y. 07-08 SHRI DHARAMPAL LALCHAND CHUGH VS. ITO PAGE 5 OF THE ACT ARE APPLICABLE EVEN IF THE BUSINESS IS N OT EXISTENCE. B. AS THE ASSESSEE ITSELF IS NOT IN POSSESSION OF THE DETAILS /PRESENT WHEREABOUTS OF THE CREDITORS ARE IN QUESTI ON, IT CAN BE VERY WELL INFERRED THAT THERE IS NO NEED FOR THE ASSESSEE TO REPAY BACK THESE SUMS TO THESE NON-EXISTING CRED ITORS. UNDER SUCH CIRCUMSTANCES, IT IS ALSO NOT CLEAR AS T O HOW THE ASSESSEE WILL REPAY BACK THE SUMS TO VARIOUS CREDIT ORS, EVEN IF HE WISHES TO DO SO. C. BY THIS IT CAN BE SAFELY INFERRED THAT ALL THES E CREDITORS ARE SIMPLY EXIST ON PAPER: THUS, HE MADE ADDITION OF RS.1,37,80,024/- ON ACCOU NT OF LIABILITY IS NOT IN EXISTENCE. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD DISMISSED THE ASSE SSEES APPEAL BY OBSERVING AS UNDER: 5.1 I HAVE DULY CONSIDERED THE SUBMISSION OF THE A PPELLANT AND FIND THAT THE APPELLANT HAS ONLY REITERATED THE SUBMISSION MA DE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HAS NOT FURNISHED ANY EVIDENCE TO SHOW THAT HIS LIABILITY TOWARDS UNPAID CREDITORS FOR PUR CHASE WERE EXISTING AS ON 31.03.2007. IF, FOR THE SAKE OF ARGUMENT, THE APPE LLANTS CONTENTION THAT THE CREDITORS ARE GENUINE AND EXISTING AND HE IS NO T ABLE TO MAKE PAYMENT OF THE AMOUNT MENTIONED IN THE BALANCE SHEET ONLY B ECAUSE OF THE LOSSES INCURRED, IS ACCEPTED, THEN NOTHING PREVENTS THE AP PELLANT TO ESTABLISH PURCHASE TRANSACTIONS MADE FROM THE OUTSTANDING CRE DITORS BY FILING COPY OF CONTRA ACCOUNTS FROM THEIR BOOKS OF ACCOUNTS AND BY OBTAINING ALL INFORMATION FROM THEM. THE FACT THAT ONE OF THE PAR TIES M/S. ASHOK TRADING COMPANY MADE A CATEGORICAL REPLY THAT NO TRANSACTIO NS WERE MADE WITH THE APPELLANT DURING THE F.YS. 2006 - 07 TO 2008-09 AND THE NON-SERVICE OF THE NOTICES ISSUED ON UNDER SECTION 133(6) TO 7 OTH ER PARTIES BY THE POSTAL ITA NO. 3376/AHD/2010 A.Y. 07-08 SHRI DHARAMPAL LALCHAND CHUGH VS. ITO PAGE 6 AUTHORITIES ON THE ADDRESSES PROVIDED BY THE APPELL ANT CLEARLY ESTABLISH THAT THE OUTSTANDING LIABILITIES ON ACCOUNT OF PURC HASES ARE NO LONGER EXISTING. IF THE OUTSTANDING LIABILITY ACTUALLY EXI STED, THE PURCHASERS WHO HAVE TO TAKE MONEY FROM THE APPELLANT WILL NOT ONLY PURSUE THE RECOVERY, BUT ALSO ENSURE THAT THE APPELLANT HAS THEIR LATEST AND CORRECT ADDRESS. IN THIS SITUATION, OBTAINING CONFIRMATION OF ACCOUNT F ROM THE OUTSTANDING 7 CREDITORS CANNOT BE SAID TO BE A DIFFICULT TASK FOR THE APPELLANT I. THEREFORE HOLD THAT THE APPELLANT HAS NOT ESTABLISHED THE EXI STENCE OF THE LIABILITY TOWARDS UNPAID CREDITORS FOR PURCHASE TO THE EXTENT OF RS.1,37,80,024 AND CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER. THE GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE DISMISSED. 4. NOW THE ASSESSEE IS BEFORE US. LD. A.R. FOR THE ASSESSEE ARGUED THAT THE ASSESSEE HAD PAID THESE LIABILITIES IN A.Y. 09- 10 AND ALSO ASSESSEE HAD NOT WRITTEN OFF THE LIABILITY IN BOOKS ACCOUNTS. TH EREFORE, IT IS NOT COVERED U/S. 41(1) OF THE IT ACT. HE FURTHER RELIED UPON THE DE CISION OF HONBLE GUJARAT HIGH COURT IN CASE OF CIT-III VS. BHOGILAL RAMJIBHAI ATARA IN TAX APPEAL NO. 588 OF 2013, ORDER DATED 04.02.2014 , WHEREIN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY FOLLOWING THE DECI SION OF HONBLE SUPREME COURT IN CASE OF SUGAULI SUGAR WORKS (P) LTD., WHER EIN IT WAS HELD THAT CESSATION OR REMISSION OF LIABILITY IS TO BE THERE AND IN CASE, ANY ENQUIRY IF IT IS FOUND DOUBTFUL, THE ASSESSEE WOULD BE ALLOWED TO CO NTEST SUCH FINDING. AT THE OUTSET, LD. SR. D.R. RELIED UPON THE ORDER OF CIT(A ) AND REQUESTED TO CONFIRM THE ADDITION. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ON GIVEN ADDRESSES OF THE CREDITORS, THE L ETTERS WERE RETURNED BACK UNSERVED AND IN ONE CASE, NAMELY, M/S. ASHOK TRADIN G COMPANY HAD DENIED ITA NO. 3376/AHD/2010 A.Y. 07-08 SHRI DHARAMPAL LALCHAND CHUGH VS. ITO PAGE 7 HAVING BEEN ANY BUSINESS TRANSACTION WITH THE ASSES SEE. THE CREDITORS HAD BEEN SHOWN AS LIABILITY IN THE BALANCE SHEET DURING THE YEAR UNDER CONSIDERATION AS PER ASSESSEES SUBMISSION, IT WAS PERTAINED TO A.Y. 03-04, WHEREAS THE CIT(A) CONFIRMED THE ADDITION ON ACCOUN T OF NON EXISTENCE OF LIABILITY. THE FACTS SHOW THAT OUTSTANDING REMAINE D TO PAY FOR MORE THAN 4 YEARS WHICH IS NOT POSSIBLE, HOWEVER, ASSESSEES A. RS ARGUMENT THAT THIS HAS BEEN PAID IN A.Y. 09-10. THEREFORE, IN THE INTERES T OF JUSTICE, WE DIRECT THE A.O. TO VERIFY FROM THE RECORD OF A.Y. 09-10, WHETH ER THESE CREDITORS HAVE BEEN PAID OR NOT AND TAKE DECISION AS PER LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE SET ASIDE THE ORDER TO THE A.O. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON 26.02.2014 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &5 &5 &5 &5 , ,, , .16 .16 .16 .16 7&641 7&641 7&641 7&641 / COPY OF ORDER FORWARDED TO:- 1. *+ / APPELLANT 2. ./*+ / RESPONDENT 3. ## 1 ; / CONCERNED CIT 4. ;- / CIT (A) 5. 6? .1 , , / DR, ITAT, AHMEDABAD 6. A BC / GUARD FILE. BY ORDER/ &5 &, / # , )