ITO, Ludhiana V. M/s Bhel Steel Traders, Ludhiana

ITA 406/CHANDI/2011

• Counselvise Citation: 40621514 RSA 2011
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 19-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B M MONGA; RAVI SANKAR
• Keywords: Unexplained cash credit; Non compliance
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: A BENCH: CH ANDIGARH BEFORE SHRI H L KARWA, VP AND SHRI D K SRIVASTAVA, AM ITA NO. 406/CHD/2011 ASSESSMENT YEAR 2007-08 I.T.O. W-V(1), LUDHIANA V M/S BHEL STEEL TRADERS NAND PURI, GILL ROAD LUDHIANA AABFB 3682 N APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT BY: S/SHRI RAVI SANKAR AND B.M. MONGA DATE OF HEARING: 17.1.2012 DATE OF PRONOUNCEMENT: 20.01.2012 ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE DEPARTMENT ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 1.2.2011, ON THE FOLLOWING GROUNDS: 1. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS. 5,50,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/S 68 OF THE INCOME-TAX A CT, 1961. 2. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON F ACTS IN DELETING ADDITION OF RS. 14,72,318/- MADE BY THE AO ON ACCOUNT OF CESSATION OF TRADE LIABILITY U/S 41(1)(A) OF THE IN COME-TAX ACT, 1961. 3. THAT THE ORDER OF THE LD. CIT(A)-II BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN OF INCOME ON 5.11.2007 RETURNING TOTAL INCOM E AT RS. 1,07,130/-. AFTER PROCESSING, THE RETURN WAS TAKEN UP FOR SCRUT INY AS A RESULT OF WHICH THE ASSESSMENT WAS COMPLETED U/S 143(3) ASSES SING THE TOTAL INCOME AT RS. 21,29,450/-. 3. APROPOS GROUND NO. 1, THE AO WHILE COMPLETING TH E ASSESSMENT NOTICED THAT THERE WERE THREE UNSECURED LOANS AMO UNTING TO RS. 1,90,000/- AND RS. 1,80,000/- IN THE NAME OF MS. SW ATI BEHL AND M/S DAVINDER KUMAR & SONS (HUF) AND RS. 1,80,000/- IN T HE NAME OF M/S ITA NO. 406/CHANDI/2011 ITO V. BHEL STEEL TRADERS . 2 RANBIR KUMAR & SONS (HUF). ON BEING CALLED UPON TO EXPLAIN THE NATURE AND SOURCE OF THE IMPUGNED CASH CREDITS, THE ASSESS EE FILED CONFIRMED COPIES OF ACCOUNT, COPIES OF BANK ACCOUNT FROM WHER E FUNDS WERE TRANSFERRED AND COPIES OF THE ACKNOWLEDGEMENT IN RE SPECT OF INCOME TAX RETURNS OF CONCERNED PARTIES FOR AY 2007-08. FOR T HE REASONS GIVEN IN THE ASSESSMENT ORDER, THE AO WAS NOT SATISFIED WITH THE GENUINENESS AS REGARDS THE NATURE AND SOURCE OF THE AFORESAID CASH CREDITS. HE THEREFORE TREATED THE SAME AS UNEXPLAINED U/S 68 OF THE ACT. 4. ON APPEAL, THE LD. CIT(A) HAS DELETED THE IMPUGN ED ADDITION WITH THE FOLLOWING OBSERVATIONS:- 3 I HAVE GONE THROUGH THE WRITTEN SUBMISSIONS OF T HE APPELLANTS COUNSEL AND ALSO PERUSED THE RELEVANT A SSESSMENT RECORD. THE AO HAS MADE AN ADDITION OF RS. 5,50,000 /- U/S 68 OF THE INCOME-TAX ACT, 1961 RECEIVED FROM THREE DIFFER ENT PERSONS. THE COUNSEL HAS SUBMITTED THAT THE CREDITORS HAVE T HEIR SOURCE OF INCOME AND INCOME TAX ASSESSES AND THE AMOUNT HAS B EEN LENT TO THE APPELLANT BY ACCOUNT PAYEE CHEQUE. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE FACT A S IS EVIDENT FROM THE RECORD IS THAT THE AO HAS NOT BEEN ABLE TO PROV E ANY NEXUS THAT THE CASH DEPOSITED BY THE BROKER IN HIS ACCOUN T WAS IN FACT BELONGING TO THIS APPELLANT FIRM. THE BROKER ITSEL F IS A REGISTERED ONE AND AN INCOME TAX ASSESSEE AND HE HAS ALLEGEDLY GIVEN PROFIT TO VARIOUS PARTIES WHO HAS OWNED AND CONFIRMED TO B E THEIR PROFIT AND HAS OFFERED IT IN THEIR RESPECTIVE INCOME TAX R ETURNS. SO, IN THE CASE OF THIS APPELLANT FIRM, THE AO HAS TRIED T O ADD THE AMOUNT BELONGING TO THE SOURCE OF THE SOURCE AND THAT TOO WITHOUT PROVING ANY NEXUS. UNDER THE CIRCUMSTANCES AND IN THE LIGH T OF THE VARIOUS CASE LAWS CITED AS ABOVE, IN THE CASE OF THE APPELL ANT FIRM, THE ADDITION CANNOT BE SUSTAINED AND AS SUCH, HOWEVER W ITH A SPECIFIC DIRECTION THAT, THE AO SHOULD TAKE REMEDIAL ACTION IN THE CASE OF THE THOSE PARTIES/PERSONS WHO HAVE ADVANCED LOANS T O THIS APPELLANT FIRM AND ALSO BY INTIMATING TO THE RESPEC TIVE AO OF THE SAID PARTIES/PERSONS FOR NECESSARY ACTION FOR BRING ING TO TAX THE AMOUNT IN THEIR HANDS. THE AO SHOULD ALSO INTIMATE THE AO OF RESPECTIVE SHARE/COMMODITY BROKERS FOR TAXING IT IN THEIR HANDS AND IF PURSUANT TO ANY CONCRETE ENQUIRIES OR BASED ON MATERIAL IF IT IS PROVED THAT THIS MONEY BELONGED TO THIS APPELLAN T FIRM THEN THE AO CAN TAX IT IN THE HANDS OF THIS APPELLATE FIRM. SUBJECT TO ABOVE THIS ADDITION IN THE HANDS OF THE APPELLANT FIRM IS HEREBY DELETED. ITA NO. 406/CHANDI/2011 ITO V. BHEL STEEL TRADERS . 3 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. IN OUR VIEW THE LD. CIT(A) HAS CORRECT LY APPRECIATED THE FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LA W WHILE DELETING THE IMPUGNED ADDITION. WE ARE IN AGREEMENT WITH HIS OR DER. HIS ORDER IN THIS BEHALF IS THEREFORE CONFIRMED. GROUND NO. 1 I S DISMISSED. 6. APROPOS GROUND NO. 2, THE LD. CIT(A) HAS DELETED THE IMPUGNED ADDITION MADE BY THE AO U/S 41(1) OF THE ACT WITH T HE FOLLOWING OBSERVATIONS:- 5 I HAVE GONE THROUGH THE RELEVANT ASSESSMENT ORDE R AND RIVAL SUBMISSIONS OF THE APPELLANT IN THIS CONTEXT. REGA RDING THIS ADDITION, THE AO HAS RELIED MAINLY UPON THE FOLLOWI NG ASPECTS: I) THE APPELLANT FAILED TO FILE THE CONFIRMATION FR OM THE CREDITORS. II) THE NOTICES WERE SENT TO THE CREDITORS U/S 133( 6() AND THE SAME REMAINED NON COMPLIED. III) THE AVERAGE AGE OF THE CREDITORS WAS 5-6 YEARS ON THE DATE OF ASSESSMENT. ON THE BASIS OF THE ABOVE OBSERVATION THE AO CONCLU DED THAT THE LIABILITY CEASED TO EXIST. THERE IS NO OTHER EVIDE NCE BROUGHT ON RECORDS TO PROVE THAT THE LIABILITIES CEASED TO EXI ST. 5.1 FURTHER, FOLLOWING CONDITIONS MUST BE SATISFIED FOR INVOKING SECTION 41(1):- I) IN RESPECT OF ASSESSMENT OF AN ASSESSEE, AN ALLO WANCED OR DEDUCTION HAS BEEN MADE IN RESPECT OF ANY LOSS, EXP ENDITURE, OR TRADING LIABILITY INCURRED BY HIM II) ANY AMOUNT OBTAINED BY THE ASSESSEE IN RESPECT OF SUCH LOSS OR EXPENDITURE OR, III) ANY BENEFIT IS OBTAINED BY THE ASSESSEE IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. IV) SUCH AMOUNT OR BENEFIT IS OBTAINED IN SUBSEQUEN T YEAR. 5.2 CESSATION OF LIABILITY IS VERY CRUCIAL IN THE G IVEN CASE. IN UOI V. JK SYNTHETICS LTD (1993) 199 ITR 14 (SC) HON'BLE APEX COURT HELD THAT A CESSATION OF LIABILITY FOR THE PURPOSE OF SEC 41(1) MEANS IRREVOCABLE CESSATION SO THAT THERE IS NO POSSIBILI TY OF THE LIABILITY ITA NO. 406/CHANDI/2011 ITO V. BHEL STEEL TRADERS . 4 BEING REVIVED IN FUTURE. IF THERE IS SUCH A POSSIB ILITY THEN THE CESSATION IS NOT COMPLETE AND SEC 41(1) IS NOT ATTR ACTED. 5.3 IN DHAWAN (M.R) V CIT (1984) 149 ITR 160 (DEL) IT WAS HELD THAT REMISSION OF THE LIABILITY ARISES WHEN THE CRE DITOR VOLUNTARILY GIVES UP THE CLAIM. THE CESSATION OF THE LIABILITY ARISES ONLY WHEN IT CEASES TO EXIST IN THE EYES OF LAW FOR ALL INTENTS AND PURPOSES. WHEN A DEBT BECOME BARRED BY TIME, THE CREDITOR WOU LD NOT COME TO AN END NOR WILL THE LIABILITY CEASE. SECTION 41 (1) IS NOT ATTRACTED IN SUCH CASE. 5.4 ANALYSIS OF THE AGING OF THE CREDITORS CLEARLY SHOWS THAT AGE OF THE CREDITORS WAS RANGING FROM 1 YEAR TO 4 YEAR. IF AGE OF CREDITORS WAS TO BE TAKEN ANY CRITERIA THEN ALL THE CREDITORS HAVING DIFFERENT AGE CANNOT BE TREATED SIMILARLY WHICH THE AO HAS DONE. IN THE CASE OF CIT V. SITA DEVI JUNEJA (2010) 187 T AXMAN 96 THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT L IABILITIES CANNOT BE TREATED AS CEASED MERELY BECAUSE THEY ARE OUTSTANDING FOR MORE THAN SIX YEARS. 5.5 REGARDING THE APPELLANTS FAILURE TO GET THE CO NFIRMATION FROM THE CREDITORS OR THE NON COMPLIANCE OF THE NOTICES U/S 133(6) THE MATTER HAS BEEN SETTLED BY THE HON'BLE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF CIT V. G.P. INTERNATIONAL LTD (2010) 229 CTR 86. THE FACTS OF THE CASE SQUARELY APPLICABLE TO T HE GIVEN CASE. FURTHER, THE APPELLANT HAS WRITTEN BACK THESE BALAN CES IN THE FINANCIAL YEAR 2010-11. THIS GROUND OF THE APPELLA NT IS ALSO HEREBY ALLOWED. 7. WE HAVE HEARD THE PARTIES. THE LD. CIT(A) HAS F OLLOWED THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT V. G.P. INTERNATIONAL LTD, 325 ITR 25 (P &H) FOR DELET ING THE IMPUGNED ADDITION. WE ARE IN AGREEMENT WITH HIS DECISION. GROUND NO. 2 IS DISMISSED. 8. GROUND NOS. 3 AND 4 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. ITA NO. 406/CHANDI/2011 ITO V. BHEL STEEL TRADERS . 5 9. APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED ON 20.01.2012 SD/- SD/- (H L KARWA) (D K SRIVAST AVA) VICE PRESIDENT ACCOUNANT MEMBER CHANDIGARH, 20.01.2012 SURESH COPY TO: 1. THE APPELLANT, ITO 2. THE RESPONDENT, BEHL STEEL TRADERS 3. THE CIT, LUDHIANA 4. THE CIT(A), LUDHIANA 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH ASSISTANT REGISTRAR, ITAT, CHANDIGARH