ITO, Faridabad V. Sh. Satish Kumar, Faridabad

ITA 3698/DEL/2010

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2784 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 06-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 03-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY TRIPATHI
• Keywords: Bogus purchase; Deemed to accrue or arise in india; Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES G: DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER ITA.NO.3698/DEL./2010 ASSESSMENT YEAR 2007-08 ITO , WARD II(1) NEW CGO COMPLEX, B-BLOCK, NH-IV, FARIDABAD. VS. SATISH KUMAR, PROP. M/S GAURAV STEELS, MAIN ROAD, MUJESSAR, SECTOR-24, FARIDABAD. AAVPK4726E (APPELLANT) (RESPONDENT) FOR REVENUE SHRI SANJAY TRIPATHI, SR. DR FOR ASSESSEE SHRI SOMIL AGARWAL, ADV. DATE OF HEARING 31 .10.2018 DATE OF PRONOUNC EMENT 06 .1 1 .2018 ORDER PER DR. MITHA LAL MEENA, A.M. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORD ER DATED 28.05.2010 OF THE LD. CIT(A), FARIDABAD FOR A Y 2007-08 ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDIT ION OF RS. 2 ITA.NO.3698/DEL./2010 1,33,56,101/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF BOGUS PURCHASES ESPECIALLY WHEN THE ASSESSEE HAD FAILED T O DISCHARGE HIS ONUS TO PROVE THE IDENTITY OF THE ALLEGED SUPPLIER AND THE GENUINENESS OF THE ALLEGED TRANSACTIONS DESPITE GRA NTING NUMEROUS OPPORTUNITIES AND EVEN TOTAL FAILURE ON ASSESSEES PART TO EVEN FURNISH COPIES OF GRS, CHALLANS OR ANY OTHER EVIDEN CE REGARDING DELIVERY OF GOODS, OR EVEN THE COPIES OF PURCHASE B ILLS LEADS TO THE CONCLUSION THAT THE ASSESSEE FAILED TO PROVE THE SA ME WHICH RESULTED INTO ADDITION ON ACCOUNT OF BOGUS PURCHASES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LEARNED CIT(A) IS PERVERSE AND CONTRARY TO THE EVID ENCE AVAILABLE ON RECORD IN HOLDING THAT THE ASSESSING OFFICER HAS NO T BEEN ABLE TO MAKE OUT HIS CASE AGAINST THE PROGRESSIVE TRADING R ESULT DECLARED BY THE ASSESSEE AND HAS DECLARED THE PURCHASES WORTH R S. 1,33,56,101/- AS BOGUS BY RELYING ON INSPECTORS RE PORT, WHICH WAS NOT EVEN CONFRONTED TO THE ASSESSEE AS ON FACTS IN AS MUCH AS THE INSPECTORS REPORT WAS DULY CONFRONTED TO THE COUNS EL ON 04-12-2009 AND THIS FACT IS DULY MENTIONED IN THE VERY FIRST L INE OF PARA: 6 AT PAGE 3 OF THE ASSESSMENT ORDER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE S TATEMENT OF SH. VINOD GOYAL WAS RECORDED IN ANOTHER CASE AND WAS NO T CONFRONTED TO THE ASSESSEE, HENCE IT HAD NO EVIDENTIARY VALUE- ESPECIALLY INSPITE OF REPEATED OPPORTUNITIES, THE ASSESSEE DID NOT PRO DUCE THE PARTY M/S MAA DURGA TRADING CO. NOR APPRISED ANY DIFFICUL TY IN DOING SO AND IN ANOTHER CASE WITH SIMILAR FACTS, THIS PERSON NAMELY SH. VINOD GOYAL WAS FOUND TO BE HAVING THE SAME PAN AS MENTIO NED IN THE ALLEGED CONFIRMATION FURNISHED BY THE ASSESSEE AND SH. VINOD GOYAL DENIED HAVING ANY CONCERN WITH M/S MAA DURGA TRADIN G CO. AND THE ASSESSEE DID NOT COOPERATE IN DISCLOSING THE WH EREABOUTS OF SH. VINOD GOYAL, THEREFORE, HE COULD BE TRACED ONLY TOW ARDS THE END OF LIMITATION AND THERE WAS NO TIME TO CONFRONT THE AS SESSEE ON THIS ISSUE AFTER 29-12-2009. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE A SSESSING OFFICERS CASE FALLS FLAT ON THE INHERENT WEAKNESS OF HIS ACT ION IN ACKNOWLEDGING THE FACT THAT THE SALES HAVE BEEN ACC EPTED BY THE 3 ITA.NO.3698/DEL./2010 ASSESSING OFFICER, WHICH WERE NOT POSSIBLE WITHOUT PURCHASES AND THEREFORE, THE IMBALANCE IN THE TRADING VERSION EFF ECTED BY THE ASSESSING OFFICER WAS UNSUSTAINABLE DISREGARDING TH E FACT THAT THERE CANNOT BE ANY SUSTAINABLE ADDITION WHICH STRAYS BEY OND A FEW DECIMALS OF THE GP RATE DECLARED BY THE ASSESSEE, B ECAUSE EVERY ADDITION IS FOUND TO INFLATE THE GP RATE, GOING BY THE LD. CIT(A)S LOGIC, NO ASSESSING OFFICER WILL BE ABLE TO MAKE AN Y ADDITION. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDIT ION OF RS. 14,43,239/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF, BOGUS LIABILITY WITHOUT GIVING ANY INDEPENDENT FINDINGS A ND HAS PURELY RELIED ON THE CONTENTIONS OF THE A.R. OF THE ASSESS EE, AS REPRODUCED BY THE LD. CIT(A) IN HIS ORDER. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING TH E ADDITION OF RS. 14,43,239/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF BOGUS LIABILITY ESPECIALLY WHEN THE ASSESSEE HAS FAILED T O DISCHARGE THE PRIMARY ONUS TO PROVE THE IDENTITY AND THE GENUINEN ESS OF LIABILITY REFLECTED IN HIS ACCOUNT BOOKS DESPITE GRANTING OPP ORTUNITIES. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 14 ,43,239/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS LIABILITY IN PRESUMING THAT THE ONUS TO BE UPON THE ASSESSING OFFICER, WHICH WAS NOT THE CASE. 8. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD , DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING OF APPEAL. 2. THERE ARE TWO EFFECTIVE ISSUES ARE IDENTIFIED FO R ADJUDICATION AS UNDER: 1) BOGUS PURCHASES OF RS. 1,33,56,101/- AND 2) BOGUS LIABILITY OF RS. 14,43,239/-. 4 ITA.NO.3698/DEL./2010 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT RETURN D ECLARING INCOME OF RS. 1,75,440/- WAS FILED BY THE ASSESSEE ON 12.10.2007 AND THE ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE ACT ON 29.12.2009 AT AN INCOME OF RS. 1,49,74,7 80/-. THE AO MADE TWO ADDITIONS OF RS. 1,33,56,101/- AND RS. 14,43,239/- TO THE ASSESSEES RETURNED INCOME, ON A CCOUNT OF BOGUS PURCHASES AND BOGUS LIABILITY RESPECTIVELY. THE AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT( A), FARIDABAD, WHO VIDE IMPUGNED ORDER DATED 28.05.2010 IN APPEAL NO. 238/09-10, DELETED THE SAID ADDITIONS BY OBSERVING AS UNDER: 8. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE IMPUGNED ORDER OF ASSESSMENT. I FI ND THAT THE AO HAS NOT BEEN ABLE TO MAKE OUT HIS CASE AGAIN ST THE APPELLANTS PROGRESSIVE TRADING RESULTS DECLARED AN D HAS BLATANTLY DECLARED THE PURCHASES OF RS. 1,10,38,298 /- AND RS. 23,17,803/- FROM M/S MAA DURGA TRADING COMPANY AND M/S OM TRADING COMPANY RESPECTIVELY AS BOGUS ONLY ON TH E MISCONCEIVED AND FALLACIOUS BASIS THAT THEY DID NOT EXIST AT THE GIVEN ADDRESSES, RELYING UPON THE REPORT OF THE INSPECTOR WHICH WAS NOT CONFRONTED WITH THE ASSESSEE DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, AND UPON THE ALLEGED DEN IAL BY 5 ITA.NO.3698/DEL./2010 SHRI VINOD KUMAR GOYAL, PROP. M/S MAA DURGA TRADING COMPANY. AS CONTENDED BY LD. AR, THE STATEMENT OF SHRI VINOD KUMAR GOYAL HAD BEEN RECORDED AT THE BACK OF THE ASSESSEE AND IT WAS ALSO NOT RECORDED IN THE CASE O F THE APPELLANT, AS SHRI VINOD KUMAR GOYAL APPEARED IN SO ME OTHER CASE BEFORE THE AO ON 29.12.2009. THEREFORE, SUCH STATEMENT OF THE THIRD PARTY HAS NO EVIDENTIARY VALUE. MOREO VER, IN DECLARING SUCH HUGE AMOUNT OF PURCHASES AS BOGUS OR IN GENUINE, THE AO HAS NOT DISCHARGED HIS ONUS U/ 69 I N BRINGING MATERIAL ON RECORD WHICH MAY PROVE BEYOND ANY SHRED OF DOUBT THAT SUCH PURCHASES WERE NOT ACTUALLY MADE BY THE ASSESSEE. FURTHER, THE AOS CASE FALLS FLAT ON THE INHERENT WEAKNESS OF HIS ACTION IN ACKNOWLEDGING THE FACT TH AT THE SALES HAVE BEEN ACCEPTED BY THE AO, WHICH CAN BE MA DE OUT OF PURCHASES ONLY WHICH IF NOT ACCOUNTED FOR, WOULD LEAD TO NON-EXISTENCE OF SALES TO THAT EXTENT. THEREFORE, THE IMBLANACE IN THE TRADING VERSION EFFECTED BY THE AO, IS WHOLL Y IMAGINARY AND BASELESS AND HENCE UNSUSTAINABLE. THE AO HAS A LSO NOT INVOKED ANY SECTION OR LEGAL SANCTION UNDER THE I.T . ACT, 1961 UNDER WHICH THESE PURCHASES COULD BE DISALLOWED BEI NG INGENUINE OR NOT EXPENDED. THUS, THE ENTIRE ADDITI ON OF RS. 1,33,56,101/- BEING MERITLESS ON BOTH FACT AND LAW STANDS DELETED. 11. I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LD. AR AND PERUSED THE IMPUGNED ORDER OF ASSESSMENT. I FI ND THAT THE AO HAS IN A VERY MECHANICAL AND CURSORY MANNER MADE THE ADDITION OF RS. 14,43,239/- WITHOUT ANY PROPER FINDING OR DISCUSSION ON RECORD. THE VERY FACT THAT THE BALAN CE AMOUNT OF RS. 14,43,239/- WAS OUTSTANDING AS ON 31.03.2007 FROM 6 ITA.NO.3698/DEL./2010 M/S HINDUSTAN TRADING CO. SHOWS THAT THE LIABILITY EXISTED AS SUCH AS ON 31.03.2007 AND HENCE AS PER THE ELABORAT E DEFENSE AND DISCUSSION UNDERTAKEN BY THE LD. AR ON THIS ISSUE, BOTH ON FACTS AND LAW, THE ADDITION OF RS. 1 4,43,239/- CAN IN NO WAY BE ASSESSED AS DEEMED INCOME U/S 41(1 ) OF THE INCOME TAX ACT, 1961. SIMILARLY, SUCH CREDIT BALAN CE CANNOT ALSO BE BY ANY STRETCH OF IMAGINARY TREATED AS BOGU S WHEN THE AO HAS NOT DISCHARGED HIS BURDEN IN ESTABLISHIN G THE NON- GENUINENESS OF SUCH CREDIT OR, WHICH MAY BE SUBJECT ED TO THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 196 1. IN FACT, THE ENTIRE DISALLOWANCE IS WHOLLY WITHOUT ANY LEGAL SUPPORT OR FACTUAL MATERIAL ON RECORD. HENCE, IT STANDS CANCE LLED. 4. THE LD. DR. SUPPORTED THE ASSESSMENT ORDER CONT ENDING THAT THE ORDER OF THE LEARNED CIT(A) IS PERVERSE AN D CONTRARY TO THE EVIDENCE AVAILABLE ON RECORD IN HOLDING THAT TH E ASSESSING OFFICER HAS NOT BEEN ABLE TO MAKE OUT HIS CASE AGAI NST THE PROGRESSIVE TRADING RESULT DECLARED BY THE ASSESSEE AND HAS DECLARED THE PURCHASES WORTH RS. 1,33,56,101/- AS B OGUS BY RELYING ON INSPECTORS REPORT, WHICH WAS NOT EVEN C ONFRONTED TO THE ASSESSEE AS ON FACTS IN AS MUCH AS THE INSPECTO RS REPORT WAS DULY CONFRONTED TO THE COUNSEL ON 04-12-2009 AN D THIS FACT IS DULY MENTIONED IN THE VERY FIRST LINE OF PA RA: 6 AT PAGE 3 7 ITA.NO.3698/DEL./2010 OF THE ASSESSMENT ORDER; THAT THE STATEMENT OF SH. VINOD GOYAL WAS RECORDED IN ANOTHER CASE AND WAS NOT CONFRONTED TO THE ASSESSEE, HENCE IT HAD NO EVIDENTIARY VALUE-ESPECIA LLY, INSPITE OF BEING GIVEN REPEATED OPPORTUNITIES, THE ASSESSEE DID NOT PRODUCE THE PARTY M/S MAA DURGA TRADING CO. NOR APP RISED ANY DIFFICULTY IN DOING SO AND IN ANOTHER CASE WITH SIMILAR FACTS, THIS PERSON NAMELY SH. VINOD GOYAL WAS FOUND TO BE HAVING THE SAME PAN AS MENTIONED IN THE ALLEGED CON FIRMATION FURNISHED BY THE ASSESSEE; THAT SH. VINOD GOYAL DEN IED HAVING ANY CONCERN WITH M/S MAA DURGA TRADING CO. AND THE ASSESSEE DID NOT COOPERATE IN DISCLOSING THE WHEREA BOUTS OF SH. VINOD GOYAL, THEREFORE, HE COULD BE TRACED ONLY TOWARDS THE END OF LIMITATION AND THERE WAS NO TIME TO CONF RONT THE ASSESSEE ON THIS ISSUE AFTER 29-12-2009 AND THAT TH E ASSESSING OFFICERS CASE FALLS FLAT ON THE INHERENT WEAKNESS OF HIS ACTION IN ACKNOWLEDGING THE FACT THAT THE SALES HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. 8 ITA.NO.3698/DEL./2010 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). HE SUBMITTE D THAT THE AO HAS NOT DISPUTED THE SALES OF THE ASSESSEE. THAT SHRI VINOD KUMAR GOYAL APPEARED IN SOME OTHER CASE BEFOR E THE AO ON 29.12.2009 AND HE ALLEGEDLY STATED THAT HE HA D NO CONCERNED WITH M/S MAA DURGA TRADING COMPANY. IT W AS FURTHER SUBMITTED THAT NEITHER THE COPY OF THE SAID STATEMENT WAS EVER MADE AVAILABLE TO THE ASSESSEE NOR ANY OPP ORTUNITY TO CROSS EXAMINE SH. VINOD KUMAR GOYAL WAS ALLOWED TO THE ASSESSEE. THUS, ANY STATEMENT OF SH. VINOD KUMAR G OYAL RELIED UPON BY LD. AO CANNOT BE ADMITTED AS EVIDENC E AND, THEREFORE, NEEDS TO BE EXCLUDED FROM CONSIDERATION IN VIEW OF 125 ITR 713 (SC) AND 288 ITR 345 (DEL.). AS REGARD S TO THE INSPECTORS REPORT AS TO THE NON-EXISTENT OF THE PA RTIES WHICH WAS SUBMITTED THAT COPY OF THE SAID REPORT WAS NOT AVAILABLE TO THE ASSESSEE. THEREFORE, THIS REPORT CANNOT BE REL IED UPON. HE FURTHER ARGUED THAT EVEN IF IT IS CONSIDERED, THOUG H DENIED THAT ASSESSEE HAS NOT MADE PURCHASES FROM THESE TWO PART IES YET THE FACTUM OF PURCHASE PER SE CANNOT BE DENIED. HO W COULD 9 ITA.NO.3698/DEL./2010 THE SALES BE EFFECTED WITHOUT PURCHASES? THIS FACT CANNOT BE LOST SIGHT OF THAT ASSESSEE IS A TRADER AND HAS MAD E SALES OF 2,58,167 KGS. OF SHEET AND PLATE AND 3,71,995 KGS. OF STRUCTURE AND WHICH HAS BEEN ACCEPTED BY THE LD. AO ALSO. ASSESSEE HAD MADE SALES, IT COULD NOT HAVE BEEN MAD E WITHOUT THE CORRESPONDING PURCHASES. THEREFORE, THIS ALLEG ATION OF LD. AO THAT PURCHASES TO THE TUNE OF RS. 1,33,56,101/- HAS NOT BEEN MADE CANNOT BE JUSTIFIED ON ANY SCORE AND CANN OT BE SUSTAINABLE. 6. HEARD. IT IS UN DISPUTED FACT ON RECORD THAT THE AO TREATED M/S MAA DURGA TRADING COMPANY AS BOGUS ENTI TIES ON THE BASIS OF INSPECTORS REPORT WHICH WAS NOT CONFR ONTED TO THE ASSESSEE. THE AO NOTED THAT THE ASSESSEE DID NOT CO OPERATE IN ASSESSMENT PROCEEDINGS BY NOT DISCLOSING THE WHEREA BOUTS OF SH. VINOD GOYAL, THEREFORE, HE COULD BE TRACED ONLY TOWARDS THE END OF LIMITATION AND THERE WAS NO TIME WITH TH E AO TO CONFRONT THE ASSESSEE ON THIS ISSUE AFTER 29-12-200 9. 10 ITA.NO.3698/DEL./2010 7. WE FIND THAT THE LD. CIT(A) ERRED IN OBSERVING THE AO WAS NOT ABLE TO MAKE OUT HIS CASE AGAINST THE PROGR ESSIVE TRADING RESULTS DECLARED BY THE ASSESSEE AND THAT T HE PURCHASES WORTH RS. 1,33,56,101/- WAS TREATED AS BO GUS BY THE AO, RELYING ON INSPECTORS REPORT, WHICH WAS NO T EVEN CONFRONTED TO THE ASSESSEE IN AS MUCH AS THE INSPEC TORS REPORT WAS DULY CONFRONTED TO THE COUNSEL ON 04-12- 2009 AND THIS FACT IS DULY MENTIONED IN THE VERY FIRST LINE OF PARA: 6 AT PAGE 3 OF THE ASSESSMENT ORDER. THE LD.AR SUBMISSIO N THAT THE STATEMENT OF SH. VINOD GOYAL WAS RECORDED IN AN OTHER CASE AND WAS NOT CONFRONTED TO THE ASSESSEE, IN NO WAY R EDUCE ITS EVIDENTIARY VALUE, ESPECIALLY IN AS MUCH AS REPEATE D OPPORTUNITIES, THE ASSESSEE DID NOT PRODUCE THE PAR TY M/S MAA DURGA TRADING CO. NOR APPRISED ANY DIFFICULTY I N DOING SO AND IN ANOTHER CASE WITH SIMILAR FACTS, THIS PERSON NAMELY SH. VINOD GOYAL WAS FOUND TO BE HAVING THE SAME PAN AS MENTIONED IN THE ALLEGED CONFIRMATION FURNISHED BY THE ASSESSEE. ON THE FACT, THE LD. CIT(A) OUGHT TO HAVE EXAMINED 11 ITA.NO.3698/DEL./2010 VERACITY OF THE STATEMENT OF STATEMENT OF SH. VINOD GOYAL AND THE INSPECTORS REPORT BEFORE LANDING ON THE SUCH CO NCLUSIONS. 8. THE COUNSEL FOR THE ASSESSEE CONTENDED THAT THE AO HAS TREATED THE PURCHASES OF RS. 1,10,38,298/- AND RS. 23,17,803/- FROM M/S MAA DURGA TRADING COMPANY AND M/S OM TRADING COMPANY RESPECTIVELY AS BOGUS ONLY ON TH E MISCONCEIVED AND FALLACIOUS BASIS THAT THEY DID NOT EXIST AT THE GIVEN ADDRESSES, RELYING UPON THE REPORT OF THE INS PECTOR WHICH WAS NOT CONFRONTED WITH THE ASSESSEE DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, AND UPON THE ALLEGED DEN IAL BY SHRI VINOD KUMAR GOYAL, PROP. M/S MAA DURGA TRADING COMPANY. AS CONTENDED BY LD. AR, THE STATEMENT OF SHRI VINOD KUMAR GOYAL HAD BEEN RECORDED AT THE BACK OF THE ASSESSEE AND IT WAS ALSO NOT RECORDED IN THE CASE O F THE APPELLANT, AS SHRI VINOD KUMAR GOYAL APPEARED IN SO ME OTHER CASE BEFORE THE AO ON 29.12.2009. THEREFORE, SUCH STATEMENT OF THE THIRD PARTY HAS NO EVIDENTIARY VALUE. 12 ITA.NO.3698/DEL./2010 9. CONSIDERING THE LD. AR CONTENTION THAT THE PURC HASES WERE TREATED AS BOGUS ONLY ON THE MISCONCEIVED AND FALLACIOUS BASIS THAT THEY DID NOT EXIST AT THE GIVEN ADDRESSE S, RELYING UPON THE REPORT OF THE INSPECTOR WHICH WAS NOT EVEN CONFRONTED WITH THE ASSESSEE DURING THE COURSE OF A SSESSMENT PROCEEDINGS, AND UPON THE ALLEGED DENIAL BY SHRI VI NOD KUMAR GOYAL, PROP. M/S MAA DURGA TRADING COMPANY WHOSE STATEMENT HAD BEEN RECORDED AT THE BACK OF THE ASSE SSEE. THE LD. SR. DR. HAS NOT CONTROVERTED THESE CONTENTIONS RAISED BY THE COUNSEL FOR THE ASSESSEE. THUS, THE ASSESSEE WA S PREVENTED BY SUFFICIENT CAUSE IN NOT PRODUCING THE NECESSARY DOCUMENTS/EVIDENCES AS REQUIRED BY THE AO, WHICH TH E LD. CIT(A) HAS NOT ADJUDICATED WHILE ADDRESSING THE ISS UE OF BOGUS PURCHASES, THOUGH, IT WAS DULY CONFRONTED TO THE AS SESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE PA RA 6, PAGE 8 OF THE ASSESSMENT ORDER. THEREFORE, WE FIND IT D EEM FIT TO RESTORE THE ISSUE BACK TO THE CIT(A), FOR DECIDING THE MATTER PERTAINING TO BOGUS PURCHASES AFTER GRANTING DUE OP PORTUNITY AFRESH OF BEING HEARD TO BOTH THE ASSESSEE AND THE AO. 13 ITA.NO.3698/DEL./2010 10. IN THE ABOVE VIEW, THE CASE IS RESTORED TO THE CIT(A), FOR AFRESH CONSIDERATION AND EXAMINATION OF THE ISSUE O F BOGUS PURCHASE OF RS. 1,33,56,101/- WITH THE FOLLOWING OB SERVATION: I. TO EXAMINE THE STATEMENT OF SHRI VINOD KUMAR GOYAL, PROP. M/S MAA DURGA TRADING COMPANY RECORDED AT THE BACK OF THE ASSESSEE, AND INSPECTOR REPORT, CONFRONT THE ASSESSEE WITH THE SAME. II. CALL FOR REMAND REPORT FROM THE AO ON THE SUBMISSION OF THE ASSESSEE. III. NO DOUBT, THE ASSESSEE SHALL COOPERATE IN THE AFRES H PROCEEDINGS, BEFORE THE CIT(A). IV. ALL PLEAS AVAILABLE UNDER THE LAW SHALL REMAIN SO AVAILABLE TO THE ASSESSEE IN THE FRESH PROCEEDINGS BEFORE THE LD. CIT(A). 11. THE NEXT ISSUE PERTAINS TO THE BOGUS LIABILITY OF AN AMOUNT OF RS. 14,43,239/-. THE AO MADE THE ADDITIO N AS AN OUTSTANDING LIABILITY OF M/S HINDUSTAN TRADING COMP ANY AS 14 ITA.NO.3698/DEL./2010 ON 31.03.2007 BY WAY OF BOGUS AND NON-EXISTENT LIAB ILITY AND HENCE, ADDED IT TO THE ASSESSEES TAXABLE INCOME. 12. THE COUNSEL SUBMITTED THAT IT WAS OUT OF THE OP ENING BALANCE CARRIED FORWARD FROM THE EARLIER YEARS THAT ITSELF ACKNOWLEDGE THE LIABILITY ON RECORD (APB,71). THE C IT(A) HAS RIGHTLY HELD THAT THE CREDIT BALANCE OF RS. 14,43,2 39/- CANNOT BE ASSESSED AS DEEMED INCOME U/S 41(1) OF THE INCOM E TAX ACT, 1961 BY ANY STRETCH OF IMAGINATION AS BOGUS LI ABILITY WHEN THE AO HAS NOT ESTABLISHED THE NON-GENUINENESS OF SUCH CREDIT, HOW IT COULD BE SUBJECTED TO THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961. IN THIS REGARD, HE REITERATED THE SUBMISSION MADE BEFORE THE CIT(A), (PB 71-77) A S UNDER: A) THE AMOUNT IN QUESTION IS OPENING BALANCE AND THERE ARE NO PURCHASES FROM M/S HINDU TRADING COMPANY DURING THE IMPUGNED YEAR AND, THEREFORE, NO ADDITIO N IS CALLED FOR. B) APPLICATION OF SECTION 41(1) REQUIRES A POSITIVE FI NDING FROM THE LD. AO THAT THE IMPUGNED LIABILITY IS A TRADING LIABILITY AND IF AT ALL THE SAID LIABILITY HAS CEASED TO EXIST, IT HAS CEASED TO EXIST IN IMPUGNED 15 ITA.NO.3698/DEL./2010 YEAR. FURTHER MERELY BECAUSE CREDITOR IS NOT TRACEABLE CANNOT BE THE REASON FOR APPLICATION OF SECTION 41(1) AS HELD IN THE FOLLOWING JUDICIAL DECISIONS: SATPAL & SONS (HUF) VS. ACIT, IN ITA NO. 388/DEL/2015, DATE OF ORDER 29.08.2017, ITAT DELHI BENCH. CIT VS. ALVARES & THOMAS (2016) 69 TAXMANN.COM 257 (KAR.). CIT VS. ALVARES & THOMAS (2015) 62 TAXMANN.COM 286, ITAT BANGALORE BENCH. DCIT VS. RATNAMANI METALS & TUBES PVT. LTD., IN ITA NO. 3783/AHD./2008, DATE OF ORDER 01.10.2010, ITAT AHMEDABAD. CIT VS. BHOGILAL RAMJIBHAI ATARA., (2014) 222 TAXMAN 0313 (GUJ.). C) THE VERY FACT THAT THE LIABILITY IS APPEARING IN TH E BALANCE SHEET AT PB 10 READ WITH PB 13 , IS A STRONG ACKNOWLEDGEMENT OF DEBT PAYABLE BY ASSESSEE. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS: CIT VS. SITA DEVI JUNEJA (2010) 325 ITR 0593 (P&H). CIT VS. TAMIL NADU WAREHOUSING CORPN., (2007) 292 ITR 0310 (MAD.) 16 ITA.NO.3698/DEL./2010 13. WE FIND THAT THE AO DID NOT BROUGHT ANY EVIDEN CE ON RECORD TO HOLD THAT SUCH LIABILITY HAS CEASED TO EX IST OR REMITTED BY THE CREDITOR; THAT THE SAID LIABILITY I S BEING SHOWN AS PAYABLE BY THE ASSESSEE IN HIS BALANCE SHEET REF LECTS THAT THIS LIABILITY IS PAYABLE BY THE ASSESSEE AND THAT THE CONFIRMATION FROM M/S HINDUSTAN TRADING COMPANY WHI CH WAS DULY SIGNED BY THE SAID PARTY FURTHER GOES TO P ROVE THAT SUCH SUM HAS NOT BEEN REMITTED BY THE CREDITOR. 14. IN VIEW OF ABOVE FACT, THE ENTIRE DISALLOWANCE ON ACCOUNT OF BOGUS LIABILITY OF RS. 14,43,239/- IS BAD IN LAW IN THE ABSENCE FACTUAL MATERIAL ON RECORD. AS SUCH, WE FI ND NO ERROR IN FINDING OF CIT(A) ON THIS ISSUE AND ACCORDINGLY CONFIRM FINDING OF CIT(A) ON THIS ISSUE. ALL THE GROUNDS PE RTAINING TO BOGUS LIABILITY ARE REJECTED. 17 ITA.NO.3698/DEL./2010 15. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 06.11.2018 SD/- SD/- (H.S. SIDHU) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED 06.11.2018 *KAVITA ARORA COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI. DATE OF DICTATION 31.10.2018 /01.11.18 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 01.11.18/05.11.18 DATE ON WHICH THE TYPED DRAFT IS PLAC ED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 06.11.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 06.11.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 06.11.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORD ER 18 ITA.NO.3698/DEL./2010