Olakara Marketing P.Ltd, Trichur V. ACIt, Tirur

ITA 399/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64781 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2011
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Keywords: Business income
• Section: 69; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO.399/COCH/2011 ASSESSMENT YEAR: 2006-07 OLAKARA MARKETING PVT. LTD., KODUR, MALAPPURAM DISTRICT. PIN 676 504. [PAN: AAAC0 3813G] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), TIRUR. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI SHAJI POULOSE, CA REVENUE BY SMT. A.S.BINDHU, SR. DR DATE OF HEARING 11/09/2012 DATE OF PRONOUNCEMENT 14/09/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16.03.2011 PASSED BY LD. CIT, KOZHIKODE U/S 263 OF THE ACT FOR THE ASSES SMENT YEAR 2006-07. THE ASSESSEE IS ASSAILING THE VALIDITY OF THE REVISION ORDER PAS SED BY LD CIT. 2. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A LOSS OF RS.11,50,456/-. IT IS STATED THAT THE SAID LOSS OF RS.11,50,456/- IS BROUGHT FOR WARD LOSS FROM EARLIER YEARS. IT APPEARS THAT THE SAME LOSS WAS SHOWN AS CARRIED FOR WARD TO THE SUCCEEDING YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO EXAMINED THE SUNDRY CREDITORS ACCOUNT AND ADDED A SUM OF RS.1.84,795/- RELATING T O TWO CREDITORS TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDINGLY THE LOSS TO BE CARRIE D FORWARD TO THE SUCCEEDING YEAR WAS REDUCED TO RS.9,65,661/- (11,50,456 (-) 1,84,795). IN EFFECT, THE AO CONSIDERED THE ADDITION MADE BY HIM AS BUSINESS INCOME AND ALLOW ED SET OFF OF THE SAME AGAINST THE I.T.A. NO.399/COCH/2011 2 BROUGHT FORWARD LOSS. HOWEVER, THE LD CIT TOOK THE VIEW THAT THE AMOUNT ADDED BY THE AO REPRESENTS THE MONEY SETTLED BY THE ASSESSEE OUTSIDE THE BOOKS AND HENCE THE AMOUNT SO SETTLED REPRESENTS UNDISCLOSED MONEY LI ABLE TO BE TAXED U/S 69A OF THE ACT UNDER THE HEAD INCOME FROM OTHER SOURCES, IN WHIC H CASE, THE SAME CANNOT BE SET OFF AGAINST THE BROUGHT FORWARD LOSS. ACCORDINGLY, HE SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO REDO THE ASSESSMENT BY CONSIDERI NG THE OBSERVATIONS MADE IN THE REVISION ORDER. AGGRIEVED, THE ASSESSEE IS IN APPE AL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE AO HAS ADDED THE SUM OF RS.1,84,795/- TO THE TOTAL INCOME OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS:- THE LIABILITY TOWARDS SUNDRY CREDITORS INCLUDED A SUM OF RS.1,05,755/- PAYABLE TO M/S SURCHEM FINISHERS PVT. LTD., BANGALORE AND A NOTHER RS.79,040/- PAYABLE TO M/S MICHAEL ENTERPRISES, CHENNAI. WHEN QUESTIONE D ABOUT THE DETAILS OF SETTLEMENT OF THESE LIABILITIES, IT WAS STATED THAT THESE AMOUNTS WERE PAID FULLY BY CASH ON VARIOUS DATES DURING OCTOBER 2007 TO MARCH 2008. BUT FURTHER DETAILS AND PROOF OF SUCH PAYMENTS WERE NOT FILED BY THE AS SESSEE. IN VIEW OF THE ABOVE, I HAVE NO ALTERNATIVE OTHER THAN TO DISALLOW THE LIABILITIES CLAIMED AS ABOVE. 4. THE VIEW TAKEN BY LD CIT IS EXPRESSED AS UND ER IN PARAGRAPH 3 OF HIS ORDER:- IN THE INSTANT CASE THE SUNDRY CREDITORS ARE LINKE D TO PURCHASES, AND THERE IS NO REMISSION OR CESSATION OF LIABILITY. THE ASSESSEE HAS DISCHARGED THE LIABILITIES. DISCHARGE OF LIABILITIES CONSTITUTES INVESTMENTS. THE INVESTMENTS BEING UNEXPLAINED ARE ASSESSABLE U/S SEC. 69 UNDER THE HE AD INCOME FROM OTHER SOURCES. ASSESSING OFFICER HAS THEREFORE ADDED THI S AMOUNT TO THE INCOME RETURNED, U/S 69A AS UNEXPLAINED MONEY. THIS BEING SO THAT SET OFF OF CARRIED FORWARD LOSS IS NOT CORRECT. 5. A CAREFUL READING OF BOTH THE ORDERS EXTRACT ABOVE WOULD SHOW THAT THE AO DID NOT TREAT THE IMPUGNED SUNDRY CREDITORS BALANCE AS UNE XPLAINED INVESTMENT. THE AO HAS SIMPLY TREATED THE OUTSTANDING BALANCES AS THE INCO ME OF THE ASSESSEE. SINCE THE SAID BALANCES WERE RELATED TO TRADING TRANSACTIONS, IT I S POSSIBLE TO PRESUME THAT THE AO HAS TREATED THE SAID ADDITION AS BUSINESS INCOME OF T HE ASSESSEE. EVEN OTHERWISE, THE DETAILS AS TO THE DATE OF SETTLEMENT OF THESE BALAN CES ARE NOT AVAILABLE ON RECORD. IN FACT, THE SUBMISSION OF THE ASSESSEE WAS THAT THESE CREDITOR BALANCES WERE SETTLED DURING THE PERIOD OCTOBER 2007 TO MARCH 2008 RELATI NG TO THE ASSESSMENT YEAR 2008-09 I.T.A. NO.399/COCH/2011 3 AND NOT DURING THE YEAR UNDER CONSIDERATION. UNDER THESE CIRCUMSTANCES, THERE IS NO BASIS FOR THE VIEW ENTERTAINED BY LD CIT THAT THE S ETTLEMENT OF THE OUTSTANDING BALANCES HAS TAKEN PLACE DURING THE YEAR UNDER CONS IDERATION. 6. UNDER THESE CIRCUMSTANCES, WE ARE OF THE OPI NION THAT THE VIEW TAKEN BY THE AO IS ONE OF THE POSSIBLE VIEWS. HENCE, AS PER THE RATIO OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. CS. CIT (243 ITR 83) , REVISION IS NOT POSSIBLE IN THESE CIRCUMSTANCES. ACCORDINGLY, WE SET ASIDE THE IMPUG NED REVISION ORDER PASSED BY LD CIT. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 14-09-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 14TH SEPTEMBER, 2012 GJ COPY TO: 1. OLAKARA MARKETING PVT. LTD., IV/157, CHELUR, KOD UR, MALAPPURAM DISTRICT PIN 676504. PIN 676 504. 2.THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE- 2(2), TIRUR. 3.THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN