ITO 24(2)(2), MUMBAI V. SUNDHA DIAMONDS, MUMBAI

ITA 3886/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9010 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 11-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: R C MODI
• Keywords: Business income
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLAIYA (A.M.) ITA NO. 3886/MUM /2011 ASSESSMENT YEAR : 2007-08 ITO 24(2)(2), ROOM NO. 604, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, MUMBAI 400 051. VS. M/S SUNDHA DIAMONDS, 302, AJAY APARTMENT, BACHANI NAGAR, MALAD (W), MUMBAI - 400 097. PAN AAJFS6565K (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI V. KRISHNAMOORTHY ASSESSEE BY : SHRI R.C. MODI DATE OF HEARING 11-9-2012 DATE OF PRONOUNCEMENT 14-9-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DTD. 9-3-2011 PASSED BY THE LD. CIT(A) 34,MUMBAI FOR THE A.Y. 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE FIRM IS ENGAGED IN THE BUSINESS OF IMPORTING, MANUFACTURING , TRADING AND EXPORTING OF DIAMONDS. DURING THE COURSE OF ASSESS MENT PROCEEDING IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS SHOW N LIABILITY ON ACCOUNT OF SUNDRY CREDITORS RS. 22,43,122/- IN THE NAME OF M/S VIJAYBHAV. THE ASSESSEE WAS ASKED TO PROVIDE THE N AME AND FULL ADDRESS ITA NO. 3886/MUM/2011 2 AND COPY OF THE LEDGER ACCOUNT IN THE ASSESSEES BO OKS. IN RESPONSE, THE ASSESSEE HAS PRODUCED THE DETAILS. FOR VERIFICATIO N OF THE LIABILITY, THE A.O. ISSUED NOTICE U/S 133(6) OF THE INCOME TAX ACT 1961, (THE ACT) TO M/S VIJAYBHAV. THE SAID NOTICE RETURNED BY THE POS TAL AUTHORITIES WITH THE REMARK LEFT PLACE. THE WARD INSPECTOR WAS DE PUTED TO SERVE THE NOTICE TO THE PARTY WHO HAS REPORTED THAT THE SAID PARTY IS NOT AVAILABLE AT THE GIVEN ADDRESS. THE ASSESSEE WAS ASKED TO PR OVIDE NEW ADDRESS AND CONFIRMATION FROM THE PARTY ALONG WITH PAN. IN THE ABSENCE OF ANY COMPLIANCE BY THE ASSESSEE, THE A.O. TREATED THE AM OUNT OF RS. 22,43,122/- AS INCOME AS PER PROVISIONS OF SECTION 41(1) OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AND ACCORDINGLY COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 23,37, 682/- VIDE ORDER DTD. 16-12-2009 PASSED U/S 143(3) OF THE ACT. ON A PPEAL THE LD. CIT(A) WHILE OBSERVING THAT CESSATION OF LIABILITY IS NOT AN UNILATERAL ACT, THERE IS NO ADVERSE MATERIAL AVAILABLE ON RECORD TO SUGGEST THAT THE CREDITOR HAS DENOUNCED HIS RIGHT TO RECEIVE THE IMPUGNED AMOUNT DUE FROM THE APPELLANT, NEITHER THE APPELLANT HAS WRITTEN BACK T HE AMOUNTS IN THE P&L ACCOUNT TREATING THE LIABILITY NOT PAYABLE, DELETED THE ADDITION MADE BY THE A.O. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 22 ,43,122/- MADE BY THE ITA NO. 3886/MUM/2011 3 A.O. U/S 41(1) AS CESSATION OF LIABILITY BY IGNORIN G THE FACT OF THE CASE THAT THE ASSESSEE HAD FAILED TO DISCHARGE HIS PRIMA RY ONUS OF PROVING THE EXISTENCE AND GENUINENESS OF CREDITORS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ADMITTING A FALSE PAN INFORMATI ON WITH RESPECT TO CREDITOR ASSESSEE M/S VIJAYBHAV, WHICH ACTUALLY PER TAINS TO SHRI GYANCHAND GANESHLAL JAIN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ALSO ERRED IN ADMITTING ADDITIONAL EVIDE NCES BY IGNORING RULE 46A(1) OF I.T. RULES. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE GROUND BE SET ASIDE AND MATTER MAY BE DECIDED ACCORDING TO LAW. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD NE W GROUND WHICH MAY BE NECESSARY. 4. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS THE ORDER OF THE A.O. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE SUPPORTS THE ORDER OF THE LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE AMOUNT DUE TO SUNDRY CREDITOR M/S VIJAYBHAV HAD BEEN ALLOWED I N THE EARLIER ASSESSMENT YEARS AS PURCHASE PRICE IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THE A SSESSEE HAD NOT UNILATERALLY WRITTEN BACK THE ACCOUNT OF THE CREDIT OR M/S VIJAYBHAV IN ITS P&L ACCOUNT. THE LIABILITY WAS SHOWN IN THE BALANC E SHEET AS ON 31-3- 2007 WHICH SHOWS THAT THE LIABILITY IS SUBSISTED AN D DID NOT CEASE NOR WAS IT REMITTED BY THE CREDITOR. THE LIABILITY WAS ENFORCEABLE IN A COURT OF LAW. IN THIS VIEW OF THE MATTER AND KEEPING IN VIE W THAT THE ASSESSEE HAS ITA NO. 3886/MUM/2011 4 MADE THE REPAYMENT OF THE SAID LIABILITY BY A/C PAY EE CHEQUES FROM 25-2- 2010 TO 24-4-2010 AND ALSO FURNISHED THE PAN OF THE CREDITOR I.E. ACWPJ0987F, WE ARE OF THE VIEW THAT THE AMOUNT IS N OT ASSESSABLE U/S 41(1) OF THE ACT AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD. CIT(A) IN DELETING THE SAME. THE GROUNDS T AKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED ON 14-9-2012. SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 14-9-2012. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 34, MUMBA I 4. COMMISSIONER OF INCOME TAX CENTRAL - 24 MUMBA I 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI