The ACIT, 3(1), V. M/s Prestige Food Marketing (India) Pvt. Ltd.,

ITA 388/IND/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1418 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-04-2009
• Assessment Year: misc
• Appeal Filed On: 11-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T K SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI V.K.GUPTA,A.M. PAN NO. : AABCP-7721K I.T.A.NO. 388/IND/2007. ACIT , 3(1) INDORE M/S PRESTIGE FOOD MARKETING (I) PVT. LTD, 32-II, NEW PALASIA, NEAR SARVODAYA NAGAR, INDORE VS APPELLANT RESPONDENT APPELLANT BY : SH T.K.SHAH, CIT, DR RESPONDENT BY : SHRI ASHISH GOYAL, CA O R D E R PER V.K.GUPTA, AM THIS APPEAL, FILED BY THE ASSESSEE, ARISES OUT OF O RDER OF LD. CIT DATED 28.03.2007. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PER USED THE MATERIAL ON RECORD. 3. THE FACTS, IN BRIEF, ARE THAT THE AO, FROM THE P ERUSAL OF BALANCE SHEET AS ON 31.03.2004 NOTED THAT SUNDRY CREDITORS OF VAR IOUS UNITS STOOD AT RS. 89,60,479.50. THE AO REQUIRED THE ASSESSEE TO EXPLA IN THE NATURE OF SUCH SUNDRY CREDITORS. THE AO, ON THE BASIS THE DETAILS SUBMITTED BY THE ASSESSEE 2 FOUND THAT MOST OF THE CREDITS WERE MORE THAN 03 YE AR OLD. THE AO ACCORDINGLY TREATED THE BALANCE OF SUCH CREDITORS A S UNCLAIMED LIABILITY AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE CIT (A) WH EREIN DETAILED SUBMISSIONS WERE MADE AS REGARD TO LEGAL PROVISIONS AND NON CHARGEABILITY OF SUCH CREDITORS AS INCOME BECAUSE THE LIABILITY H AD NOT CEASED. THE ASSESSEE ALSO SUBMITTED DETAILS OF PAYMENT MADE TO SOME OF PARTIES IN LATER YEARS AND NATURE OF TRANSACTIONS BEING OF CURRENT A CCOUNT WITH SEVERAL PARTIES. THE CIT (A) AFTER CONSIDERING THE SUBMISSI ON OF THE ASSESSEE SUSTAINED AN ADDITION OF RS. 2,70,819/- AND DELETED THE BALANCE ADDITION OF RS.86,89,660/-. THE RELEVANT FINDINGS OF THE LD CIT (A) ARE AS UNDER:- FACTS ON RECORD, FINDINGS RECORDED BY THE AO AND T HE CONTENTION PUT FORWARD BY THE APPELLANT ARE CAREFULLY TAKEN INTO CONSIDERATIO N . 4.1. AT THE OUTSET, IT HAS TO BE NECESSARILY OBSERV ED THAT THE HUGE ADDITION OF RS.89.60 LAKHS HAS BEEN MADE BY AO IN A VERY CASUAL AND ARBI TRARY MANNER WITHOUT EXAMINING THE BASIC FACTS SURROUNDING SUCH OUTSTANDING AMOUNT S AS TO FOR HOW LONG SUCH AMOUNTS WERE OUTSTANDING, WHETHER PAYMENTS HAVE BEE N MADE TO SUCH PARTIES IN THE SUBSEQUENT FINANCIAL YEARS, AS SUCH DETAILS WOULD H AVE BEEN READILY AVAILABLE AS MORE THAN 2 FINANCIAL YEARS HAVE ALREADY BEEN OVER WHEN THE ASSESSMENT PROCEEDINGS WERE TAKEN UP BY THE AO AND FURTHER AO SHOULD HAVE ASCER TAINED WHAT WERE THE REASONS FOR SUCH AMOUNT REMAINING OUTSTANDING. IF AO WOULD HAVE CARED TO EXAMINE SUCH MINIMUM NECESSARY DETAILS AND FACTS, HE WOULD NOT H AVE RESORTED TO SUCH HUGE UNWARRANTED ADDITION IN THE CASE OF THE APPELLANT. IF AO WAS OF THE VIEW THAT 2 UNITS OF THE APPELLANT BEING UNIT I & II HAS NOT CONTINUED BUSINESS DURING THE YEAR UNDER CONSIDERATION AND IF HE HAS DRAWN INFERENCE ON THAT BASIS, THE OUTSTANDING AMOUNT OF SUCH UNITS WERE PERHAPS NOT PAYABLE (OF COURSE PRIM A FACIE THERE WAS NO VALID REASON TO DRAW SUCH INFERENCE) THERE WAS ABSOLUTELY NO FUR THER REASON FOR MAKING ADDITION FOR OUTSTANDING BALANCES OF UNIT III INDORE AND LUDHIANA, WHEREIN BY AO'S OWN CONCLUSION BUSINESS TRANSACTION WERE CARRIED OUT BY APPELLANT DURING THE YEAR UNDER 3 CONSIDERATION. IT IS INTERESTING TO NOTE THAT THE O UTSTANDING BALANCES FOR MOST OF THE LUDHIANA PARTIES WERE OUTSTANDING NOT ONLY ON ACCOU NT OF TRANSACTIONS DURING THE RELEVANT PREVIOUS YEAR ITSELF BUT IN MOST OF THESE CASES SUCH AMOUNTS WERE PAID IN THE NEXT FINANCIAL YEAR ITSELF. IT WILL BE EVIDENT FROM THE CHART (INCLUDED AT PAGE 81 OF COMPILATION FILED), WHICH IS EXTRACTED HERE UNDER: LUDHIYANA SUNDRAY CREDITORS 2003-04 2002-03 2001-02 ARORA & CO 570.00 0.00 0.00 BALAJI BROKERS 3541.00 0.00 0.00 DAMINI ENTERPRISES 799231.00 0.00 0.00 DARSHANLAL 5065.50 0.00 0.00 GOLDEN PACKING STORES 45554.00 0.00 0.00 H.K. SALES 675.00 0.00 0.00 KARAMCHAND HIRACHAND 210500 0.00 696700.00 PRADEEP TRADERS 1006128.00 505750.00 0.00 RAMESH CHAND 220012.00 0.00 0.00 SHREE VALLABH OILS MILLS LTD 386208.00 0.00 0.00 VARDESH OFFSET PRINTERS 30706.00 11720.00 17710.00 VIDHYA ASSOCIATES 29629.00 0.00 0.00 2737819.50 517470.00 714410.00 5314604.3 4.2. IN VIEW OF THE AFORESAID DISCUSSION, THERE WAS ABSOLUTELY NO CASE FOR MAKING ADDITION FOR OUTSTANDING BALANCE OF LUDHIANA PARTIES BY INVO KING PROVISION OF 41(1) WHERE ALL SUCH ACCOUNTS WERE CURRENT AND RUNNING ACCOUNTS. SO ALSO, IN VIEW OF THE EXPLANATION OFFERED AND FINANCIAL CONSTRAINTS OF THE APPELLANT, IF THE PAYMENT COULD NOT BE MADE TO SISTER CONCERNS AGGREGATING RS.49,37,217/- AS PER C HART EXTRACTED ON PAGE-9 OF APPEAL ORDER, THERE COULD NOT HAVE BEEN ANY JUSTIFICATION FOR MAKING ADDITION BY INVOKING PROVISIONS OF SECTION 41(1). 4.3. HOWEVER, THE EXPLANATION OFFERED BY THE APPELL ANT FOR OTHER PARTIES WHERE THE AMOUNT WERE OUTSTANDING FOR MORE THAN 3 YEARS AGGRE GATING TO RS.L,78,118/-, ARE NOT FOUD 4 TO BE AT ALL CONVINCING AND PRIMA FACIE IT APPEARS THAT SUCH AMOUNT WERE NO LONGER PAYABLE AND SUCH POSITION IS IN A WAY ACCEPTED BY A PPELLANT AND ACCORDINGLY ADDITION TO THE EXTENT OF RS.L,78,918/- FOR AMOUNTS OUTSTANDING FOR MORE THAN 3 YEARS THE A DDITION IS CONFIRMED RELYING ON THE DECISION IN THE FOLLOWING DECISIONS OF HON'BLE SUPREME COURT: 1. CIT VS. KARAM .CHAND THAPAR & OTHERS 222 ITR 112 (S C) 'IT CANNOT BE LAID DOWN THAT, AS A MATTER OF LAW, A NY AMOUNT WHICH WAS INITIALLY NOT RECEIVED AS A TRADING RECEIPT, CAN NE VER BECOME A TRADING RECEIPT. 2. CIT VS. T.V. SUNDARAM IYENGAR & SONS LTD. 222 ITR 344 (SC). 'IF AN AMOUNT IS RECEIVED IN THE COURSE OF A TRADIN G TRANSACTION, EVEN THOUGH IT IS NOT TAXABLE IN THE YEAR OF RECEIPT AS BEING OF REVENUE CHARACTER, THE AMOUNT CHANGES ITS CHARACTER WHEN TH E AMOUNT BECOMES THE ASSESSEE'S OWN MONEY BECAUSE LIMITATION OR BY A NY OTHER STATUTORY OR CONTRACTUAL RIGHT. WHEN SUCH A THING HAPPENS, COMMO N SENSE DEMANDS THAT THE AMOUNT SHOULD BE TREATED AS INCOME OF THE ASSESSEE. ' 4.4. FURTHER STILL, IN RESPECT OF AMOUNTS OUTSTANDI NG FOR LESS THAN 3 YEARS AGGREGATING TO RS.I0,97,715/- IT IS SEEN THAT WITH MOST OF SUCH PA RTIES THERE WERE TRANSACTION IN SUBSEQUENT YEARS RESULTING IN TOTAL OR PARTIAL PAYMENT EXCEPT IN THE CASE OF SAHARA ROADWAYS WHERE THE AMOUNT OF RS.8,500/- REMAINED OU TSTANDING TILL DATE AS WELL AS IN THE CASE OF SHRIRAM DISTRIBUTORS BHOPAL WHERE AN AMOUNT OF RS.83,400/- REMAINED OUTSTANDING TILL DATE. THERE IS NO PROPER EXPLANATI ON AVAILABLE WITH THE APPELLANT FOR TOTAL NONPAYMENT TO THESE TWO PARTIES AND HENCE FURTHER A DDITION TO THE EXTENT OF RS.91,900/- IN RESPECT OF OUTSTANDING BALANCE OF THESE 2 PARTIES A RE ALSO CONFIRMED. 4.5. AS A RESULT OF THE AFORESAID DISCUSSION ADDITI ON TO THE EXTENT OF RS.L,78,919/- AND RS.91,900/- I.E. RS.2,70,819/- IS CONFIRMED AND THE BALANCE ADDITION TO THE EXTENT OF RS.86,89,660/- IS DIRECTED TO BE DELETED/ . 5 4. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFO RE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVES NARRATED TH E FACTS AND PLACED STRONG RELIANCE ON THE ORDER OF AO. 6. THE LD COUNSEL FOR THE ASSESSEE, ON THE OTHER HA ND, PLACE RELIANCE ON THE ORDER OF LD CIT (A). 6. WE HAVE CONSIDERED THE SUBMISSION MADE BY THE BO TH THE SIDES, MATERIAL ON RECORD ORDERS OF THE REVENUE AUTHORITIE S. WE FIND THAT OUTSTANDING BALANCES OF LUDHIANA PARTIES HAVE BEEN PAID IN SUBSEQUENT YEARS, HENCE, THE SAME CAN NOT BE TREATED AS A CEAS ED LIABILITY. FURTHER, THE BALANCE OF RS. 49,37,217/- PERTAINS TO SISTER CONCE RNS WHICH HAS NOT BEEN PAID DUE TO FINANCIAL CONSTRAINTS. THE FINDINGS OF THE CIT (A) HAVE REMAINED UNCONTROVERTED BEFORE US. THUS, IN OUR VIEW, THE LD . CIT HAS RIGHTLY DELETED THE ADDITION MADE BY AO AFTER EXAMINING THE MATTER IN DETAIL. HENCE, WE CONFIRM THE ORDER OF CIT (A).THUS, THIS GROUND OF A PPEAL IS DISMISSED. 8. IN RESULT THE APPEAL OF REVENUE IS DISMISSED 9. ORDER PRONOUNCED IN THE OPEN COURT ON 27.11.2009 SD/- SD/- (JOGINDER SINGH) (V.K.GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : *KONGE* 6