Shri Rameshbhai Tulsidas Agrawal, Vapi V. The ACIT.,Vapi Circle, Vapi

ITA 4064/AHD/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60577 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 17-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAVSR
• Section: 143(3); 133A; 69

Judgement Text

ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AH MEDABAD (BEFORE SHRI MUKUL KR.SHRAWAT JM & SHRI ANIL CHATUR VEDI A.M.) I.T.A. NO. 40 64/AHD/2008. (ASSESSMENT YEAR: 2005 -06 ) SHRI RAMESHBHAI T. AGRAWAL PROP. MANISH SCRAP TRADERS, PLOT NO.320/15, G.I.D.C., VAPI (APPELLANT) VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE, VAPI. (RESPONDENT) PAN: ABEPA 6573 F APPELLANT BY : MR. TUSHAR HEMANI RESPONDENT BY : MR. B.L. YADAV,SR.D.R. ( )/ ORDER DATE OF HEARING : 8-6-2012 DATE OF PRONOUNCEMENT : 6 -7-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF LD. CIT (A)- VALSAD DATED 28-9-2008 FOR THE ASSESSMENT YEAR 2005 -06. 2. THE ASSESSEE HAS RAISED AS MANY AS 9 GROUNDS OF APPEAL AS UNDER:- 1. THE HONBLE CIT (A), VALSAD HAS ERRED IN LAW AN D ON FACTS IN CONFIRMING THE ADDITION OF RS.89,21,481/-. THE TOTA L RETURNED INCOME WAS RS.15,75,070/- AS AGAINST THE LD. A.O. HAS DETE RMINED THE TOTAL INCOME OF RS.1,04,96,551/- U/S. 143(3) ON 28-9-2007 FOR A.Y. 2005- 06. ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 2 2. THE HONBLE CIT (A) HAS ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.74,83,056/- WHICH WAS MADE BY THE LD. A. O. ON ACCOUNT OF ALLEGED EXCESS STOCK FOUND IN S URVEY U./S. 133A OF THE ACT, THOUGH THE SURVEY PARTY HAS ONLY ESTIMA TED THE STOCK AND IT HAS NOT TAKEN ACTUAL WEIGHT OF THE STOCK. THUS THE SURVEY PROCEEDINGS HAVE ALSO BEEN AB-INITIO VOID. 3. THE HONBLE CIT (A) HAS ALSO ERRED IN LAW AND ON FACTS IN HOLDING THAT NO INFERENCE CAN BE DRAWN FROM THE FAC T OF EXCESS STOCK FOUND DURING THE COURSE OF SALES TAX DEPARTMENTS S URVEY ON 5-3-05 AS THE INCOME TAX SURVEY U/S. 133A WAS CARRIED OUT FOUR DAYS SUBSEQUENT TO THAT AND WITHIN FOUR DAYS, THE APPELL ANTS STOCK LEVEL HAS DEFINITELY CHANGED AND AS A RESULT OF ACTUALITI ES, THE APPELLANT HAS SURRENDERED THE EXCESS STOCK OF RS.78,54,090/- IN HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY ACTION AND THU S DISMISSED THE APPEAL ON THE ISSUE. IN FACT, THE LD. A.O. DOES NOT HAVE ANY JURISDICTION TO GO BEYOND THE VALUE OF CLOSING STOC K DECLARED BY THE ASSESSEE AND ACCEPTED BY THE COMMERCIAL TAX DEPARTM ENT. THIS VIEW IS SUPPORTED BY THE HONBLE MADRAS HIGH COURT S DECISION IN THE CASE OF CIT VS. ANANDHA METAL CORPORATION 273 ITR 2 62. 4. THE HONBLE CIT (A) HAS ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.2,88,124/- ON ACCOUNT OF SUNDRY CREDITORS THOUGH THE REVENUE HAD FAILED TO SHOW THA T LIABILITIES WHICH WERE APPEARING IN BALANCE SHEET CEASED FINALLY AND THERE WAS NO POSSIBILITY OF THEIR REVIVAL. THE IMPUGNED ADDITION COULD NOT BE MADE U/S. 41(1) OF THE I. T. ACT. 5. THE HONBLE CIT (A) HAS ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION U/S. 41(1) OF RS.11,27,771/ - ON ACCOUNT OF ADVANCE AGAINST SUPPLY THOUGH TRADING LIABILITY REA LLY EXIST AS ON 31-3- 05. THE HONBLE CIT (A) HAS NOT APPRECIATED THE PRI NCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF C.I.T. VS. SUGAULI SUGAR WORKS (P) LTD. 236 ITR 518 AND IN THE CASE OF C.I.T . VS. KESARIA TEA CO. LTD. 254 ITR 434.. 6. THE HONBLE CIT (A) HAS ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.22,530/- MADE ON ACCOUNT OF BELATED PAYMENT THOUGH THE SAME HAS BEEN PAID BEFOR E THE DUE DATE ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 3 OF FILING THE RETURN OF INCOME AND HENCE THE SAME I S ALLOWABLE AS PER HONBLE KARNATAKA HIGH COURTS DECISION IN THE CASE OF C.I.T. VS. SABARI ENTERPRISES (2007 ) 213 CTR 269. 7. THE HONBLE CIT (A) HAS ALSO ERRED IN LAW AND ON FACTS IN DIRECTING TO THE LD. A.O. TO CHARGE THE INTEREST AS PER LAW THOUGH THE APPELLANT IS NOT ANTICIPATED THAT THE LD. A.O. WOUL D MAKE THE HUGE ADDITION IN THE TOTAL INCOME. THE HONBLE GUJARAT H IGH COURT HAS HELD IN THE CASE OF C.I.T. VS. BHARAT MACHINERY AND HARD WARE MART; 136 ITR 875, THAT INTEREST IS NOT CHARGEABLE IN SUCH CI RCUMSTANCES. 8. THE HONBLE CIT (A) HAS ALSO ERRED IN LAW AND ON FACTS IN NOT GIVING FINDING/OBSERVATION ABOUT THE INITIATION OF PENAL PROCEEDINGS U/S. 271(1) (C). 9. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER OR DE LETE ANY OF THE ABOVE GROUNDS OF APPEAL, WITH THE KIND PRIOR PERMIS SION OF THE HONBLE TRIBUNAL, ON OR BEFORE THE DATE OF HEARING. 3. GROUND NO.2 & 3 ARE INTER CONNECTED AND ARE THER EFORE CONSIDERED TOGETHER. 4. THE ASSESSEE IS A PROPRIETOR OF M/S. MANISH SCRA P TRADERS AND IS ENGAGED IN THE TRADING OF ALL TYPES OF SCRAP. THE A SSESSEE FILED HIS RETURN OF INCOME ON 19-12-2005 DECLARING A TOTAL INCOME OF RS .15,75,070/-. A SURVEY ACTION U/S.133A WAS CARRIED OUT ON 9-3-205. DURING THE COURSE OF SURVEY EXCESS STOCK OF 586.826 MT. WORTH RS.78,54,090/- AN D EXCESS CASH OF RS.6,49,627/- WERE FOUND AS COMPARED TO THE BOOK RE SULTS. THE ASSESSEE ADMITTED IT AS ITS ADDITIONAL INCOME IN THE STATEME NT RECORDED ON OATH DURING THE COURSE OF SURVEY. DURING THE COURSE OF A SSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS N OT OFFERED FOR TAX THE EXCESS STOCK OF RS.78,54,090/- THAT WAS DISCLOSED D URING THE COURSE OF ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 4 SURVEY. THE ASSESSEE SUBMITTED THAT A SURVEY WAS CA RRIED OUT BY THE SALES TAX AUTHORITIES ON 5-3-2005 I.E. 3 DAYS PRIOR TO TH E SURVEY BY THE INCOME TAX DEPARTMENT. THE SALES TAX DEPARTMENT HAD WORKED OUT THE QUANTITY OF STOCK AS ON 5-3-2005 AT 97.540 MT. AFTER ADJUSTING THE SALES AND PURCHASE IN THE INTERVENING PERIOD I.E. BETWEEN 5.3.2005 AND 9.3.2005 THE STOCK AS PER ASSESSEE WORKED OUT TO 160.210 MT. AS AGAINST 5 86.826 MT. ESTIMATED BY THE INCOME TAX DEPARTMENT. IT WAS ALSO THE CONTE NTION OF THE ASSESSEE THAT THE STOCK WAS ESTIMATED BY THE INCOME TAX DEPA RTMENT AND NOT ACTUALLY WEIGHTED DURING THE COURSE OF SURVEY. THE ASSESSEE THEREFORE OFFERED AMOUNT OF RS.3,71,034/- ONLY FOR TAX OUT OF RS. 78, 54,090/- DECLARED ON ACCOUNT OF EXCESS STOCK. THE A.O. DID NOT ACCEPT TH E CONTENTIONS OF THE ASSESSEE AND ADDED RS.78,54,056/- AS TOTAL INCOME O F THE ASSESSEE. AGGRIEVED BY THE ACTION OF THE A.O. THE ASSESSEE PR EFERRED APPEAL BEFORE THE CIT (A). CIT (A) DID NOT AGREE WITH THE CONTEN TIONS MADE BY THE ASSESSEE MAINLY FOR THE REASON THAT THE ASSESSEE HA D HIMSELF ADMITTED THE EXISTENCE OF EXCESS STOCK DURING THE COURSE OF SURV EY AND IN THE STATEMENT MADE ON OATH. HE THEREFORE UPHELD THE ADDITION MADE BY THE A.O. AGAINST THE ORDER OF CIT (A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US IT WAS SUBMITTED BY THE LD. A.R. THAT SALES TAX AUTHORITIES HAD CARRIED OUT SURVEY ON 5-3-2005 WHERE THE EXCESS STOCK FOUND WAS TO THE EXTENT OF 34.310 MT. INCOME TAX AUTHORITIES CAR RIED OUT SURVEY PROCEEDINGS IMMEDIATELY ON 9-3-2005 (I.E. IMMEDIATE LY AFTER 3 DAYS OF SURVEY BY THE SALES TAX AUTHORITIES) AND ESTIMATED THE PHYSICAL STOCK OF 586.826 MT. AS AGAINST THE ACTUAL BOOK STOCK OF 160 .210 MT. THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S. 133A WHERE THE AS SESSEE UNDER PRESSURE ADMITTED TO THE DISCREPANCY OF STOCK TO TH E EXTENT OF 426.616 MT. ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 5 THE ASSESSEE RETRACTED THE STATEMENT BY FILING A DU LY NOTARIZED AFFIDAVIT ON 26-11-2007. THE LD. A.R. SUBMITTED THAT THE INCOME TAX AUTHORITIES DID NOT CARRY OUT THE PHYSICAL WEIGHMENT OF STOCK BUT MADE ADDITION ONLY ON THE BASIS OF STATEMENT OF THE ASSESSEE. THE LD. A.R. SU BMITTED THAT AFTER THE SURVEY ACTION BY THE SALES TAX AUTHORITIES, THERE W ERE TWO HOLIDAYS ON ACCOUNT OF MAHASHIVARATRI AND SUNDAY AND SO THERE W AS EFFECTIVELY ONLY ONE WORKING DAY BETWEEN THE TWO SURVEYS. IT WAS THE REFORE IMPOSSIBLE FOR THE ASSESSEE TO PURCHASE THE STOCK OF 426.616 MT. I N ONE SINGLE DAY. TO PROVE THAT THE ASSESSEE COULD NOT HAVE PURCHASED 42 6.616 MT. IN A SINGLE DAY, THE LD. A.R. SUBMITTED THAT DURING THE ENTIRE FINANCIAL YEAR THE MINIMUM PURCHASE WAS OF 3.340 MT. IN THE MONTH OF A UGUST AND THE MAXIMUM PURCHASE WAS OF 134.480 MT. IN THE MONTH OF MARCH. HE PLACED ON PAGE 37 TO 40 THE COPY OF THE STOCK SUMMARY. HE SUBMITTED THAT TO PURCHASE THE QUANTITY OF STOCK OF 426.616 MT. IN A SINGLE DAY THE FUND REQUIREMENT WOULD BE TO THE TUNE OF APPROXIMATELY R S. 72 LACS. IT WAS THUS SUBMITTED BY THE LD. A.R. THAT THE ASSESSEE DID NOT HAVE TIME, MONEY AND PLACE TO PURCHASE AND STORE THE ALLEGED QUANTITY OF STOCK. HE ALSO PLACED ON RECORD THE ENGLISH TRANSLATION OF THE SALES TAX ASSESSMENT ORDER WHICH STATES THAT THE DISCREPANCY OF 34.310 MT. STOCK WAS DETECTED AT THE TIME OF SURVEY. HE SUBMITTED THAT THE ADDITION TO STOCK HAS BEEN MADE ONLY ON THE BASIS OF STATEMENT RECORDED U/S.133A AND IN THAT CO NNECTION IT WAS SUBMITTED BY THE LD. A.R. THAT IT IS A SETTLED LAW THAT THE STATEMENT RECORDED U/S133A DOES NOT HAVE ANY EVIDENTIARY VALUE. FOR TH E PROPOSITION THAT NO ADDITION TO STOCKS CAN BE MADE ON GUESS WORK, HE RE LIED ON THE DECISIONS OF CIT VS. NARMADA GINNING AND PRESSING FACTORY (20 08) 203 TAXATION 475 (MP), CIT VS. VIKAS ELECTRONICS (INTERNATIONAL) LTD . (2008) 204 TAXATION 148 (DEL.). FOR THE PROPOSITION THAT THE STATEMENT DURI NG SURVEY HAS NO ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 6 EVIDENTIARY VALUE UNLESS IT IS SUPPORTED BY SOME MA TERIAL, HE RELIED ON THE DECISION OF ITAT AHMEDABAD IN THE CASE OF ACIT VS. DHARA ASSOCIATES (ITA NO.1945-1951/AHD/2007).. 6. ON THE OTHER HAND THE LD. D.R. SUBMITTED THAT TH E EXISTENCE OF EX CESS STOCK WAS CONFIRMED BY THE ASSESSEE IN THE STA TEMENT MADE BY THE ASSESSEE HIMSELF DURING THE COURSE OF SURVEY PROCEE DINGS. HE ACCORDINGLY RELIED ON THE ORDER OF THE A.O. AND CIT (A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTUAL MATRIX OF THE CASE IS THAT SALE S TAX AUTHORITIES HAD CARRIED OUT SURVEY AT THE ASSESSEES PREMISES ON 5- 3-2005 WHEREIN EXCESS STOCK TO THE EXTENT OF 34.310 MT. WAS FOUND. INCOME TAX AUTHORITIES ALSO CARRIED OUT SURVEY PROCEEDINGS IMMEDIATELY ON 9-3-2 005 (I.E. IMMEDIATELY AFTER 3 DAYS OF SURVEY BY SALES TAX AUTHORITIES) AN D THEY RECORDED THE STATEMENT OF ASSESSEE AND ESTIMATED THE PHYSICAL ST OCK OF 586.826 MT. BETWEEN THE DATES OF BOTH THE SURVEYS THERE WAS A G AP OF THREE DAYS. THESE THREE DAYS INCLUDED TWO HOLIDAYS ON ACCOUNT M AHASHIVRATRI AND SUNDAY AND THERE WAS EFFECTIVELY ONLY ONE WORKING D AY. FROM THE STOCK OF 586.826 MT. THAT WAS ESTIMATED, IF ADJUSTMENT OF AC COUNT OF OPENING STOCK AND SALES IS MADE, THE PURCHASES DURING THE PERIOD 5.3.2005 TO 9.3.2005 WOULD WORK OUT TO THE TUNE OF 426.616 MT. THE PURCH ASES OF 426.616 MT SEEMS TO BE FAR FETCHED PROPOSITION IN VIEW OF THE FACT THAT THE PURCHASES OF EACH MONTH DURING THE YEAR RANGED BETWEEN MINIMUM P URCHASE OF 3.340 MT. AND MAXIMUM OF 134.480 MT. FURTHER THE CASH RE QUIREMENT FOR THE PURCHASE OF AFORESAID QUANTITY WOULD BE TO THE EXTE NT OF APPROX. RS.72 LACS APART FROM THE LARGE STORAGE SPACE REQUIRED TO STOR E THE GOODS. IT IS ALSO A ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 7 FACT THAT THE SALES TAX AUTHORITIES HAVE COMPLETED THE SALES TAX ASSESSMENT AFTER CONSIDERING THE STOCK OF 34.310 MT. IN THE CA SE OF CIT VS. ANANDHA METAL CORPORATION (2005) 273 ITR 262 (MAD.), THE HO NBLE MADRAS HIGH COURT HAS HELD THAT RETURN ACCEPTED BY THE COMMERC IAL TAX DEPARTMENT UNDER THE TAMIL NADU GENERAL SALES TAX ACT IS BINDI NG ON THE I.T. AUTHORITIES AND THE A.O. HAS NO JURISDICTION TO GO BEYOND THE VALUE OF THE CLOSING STOCK DECLARED BY THE ASSESSEE AND ACCEPTED BY THE COMMERCIAL TAX DEPARTMENT. AND CONSEQUENTLY NO ADDITION U/S. 6 9 COULD BE MADE IN RESPECT OF UNEXPLAINED DIFFERENCE BETWEEN THE VALUE OF CLOSING STOCK AS FOUND NOTED IN A SEIZED DOCUMENT AND THE VALUE ADMI TTED BY ASSESSEE. IN THE PRESENT CASE THE REVENUE HAS ESTIMATED THE STOC K ON THE BASIS OF THE STATEMENT OF THE ASSESSEE RECORDED U/S. 133A. IT IS ALSO A FACT THAT THE ASSESSEE HAS RETRACTED THE STATEMENT MADE U/S. 133A BY MEANS OF NOTARIZED AFFIDAVIT. IT IS A SETTLED LAW THAT THE S TATEMENT MADE U/S. 133A DOES NOT CARRY EVIDENTIARY VALUE. THE REVENUE HAS A PART FROM THE STATEMENT OF ASSESSEE NOT BROUGHT ANY OTHER MATERIA L ON RECORD TO PROVE ITS CONTENTION THAT THE STOCK ON THE DATE OF SURVEY WAS 586.826 MT. IN VIEW OF THE TOTALITY OF THE FACTS MENTIONED HEREINBEFORE AN D RESPECTFULLY FOLLOWING THE DECISION OF THE HIGH COURT, WE ARE OF THE VIEW THAT IT IS NOT POSSIBLE FOR ASSESSEE TO PURCHASE AND STORE THE STOCK AS ESTIMAT E BY A.O. IN VIEW OF THESE FACTS THE ADDITION OF STOCK TO THE EXTENT OF RS.78,54,056/- (CALCULATED ON THE BASIS OF 586.826 MT.) IS UNCALLED FOR AND TH EREFORE DIRECTED TO BE DELETED. THE GROUND NO.2 & 3 OF THE ASSESSEE ARE TH US ALLOWED. 8. GROUND NOS. 4 AND 5 ARE WITH RESPECT TO SUNDRY C REDITORS OF RS.2,88,124/- AND ADVANCE AGAINST SUPPLY RS. 11,27, 771/-. ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 8 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. OBSERVED THAT IN THE BALANCE SHEET RS.2,88,124/- AND RS.11,27,771/- WAS SHOWN AS LIABILITY. ASSESSEE WAS ASKED TO FURNISH THE ADDRESSES OF THE CREDITORS. ASSESSEE DID NOT FURNISH THE SAME BUT STATED THAT THE LIABIL ITY OF THE ASSESSEE HAS NOT CEASED TO EXIST AND THE ASSESSEE ACCEPTS THE LIABIL ITY TO PAY. THE A.O. DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND WAS O F THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE THE PRIMARY ONUS THAT THE SUNDRY CREDITORS WAS ACTUAL LIABILITY AND HAVE NOT CEASED TO EXIST. HE ACCORDINGLY MADE ADDITION U/S. 41(1) OF RS.2,88,124/-. WITH RESPECT TO RS.11,27,771/- IT WAS CONTENDED BY THE ASSESSEE THAT IT REPRESENTS THE AD VANCE RECEIVED FOR SUPPLY OF GOODS. SINCE THE GOODS HAVE NOT BEEN SUPP LIED DUE TO BAD FINANCIAL CONDITION, THE AMOUNT IS SHOWN AS LIABILI TY AND THE ASSESSEE ACKNOWLEDGES ITS DEBT. THE A.O. DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE. HE WAS OF THE VIEW THAT NO PARTY WOULD WA IT FOR A LONG PERIOD EITHER WITHOUT THE SUPPLY OF OR WITHOUT ASKING BACK THE ADVANCE. ACCORDING TO THE A.O. SINCE THE ASSESSEE HAS NOT DISCHARGED I TS PRIMARY ONUS OF FURNISHING OF THE ADDRESSES OF THE PARTIES SO AS TO ENABLE HIM TO ASCERTAIN THE CORRECTNESS OF THE CLAIM, HE ADDED THE AMOUNT O F RS.11,27,771/- U/S. 41(1). AGGRIEVED BY THE ADDITION, THE ASSESSEE PREF ERRED APPEAL BEFORE CIT (A). CIT (A) CONFIRMED THE ACTION OF THE A.O. BY H OLDING AS UNDER:- 5.3. I HAVE CONSIDERED THE CONTENTION OF THE APPE LLANT AS WELL AS THE OBSERVATION OF THE A.O. IN THE REMAND REPORT AND TH E ASSESSMENT ORDER. I FIND THAT THE APPELLANT HAS NOT GIVEN ANY SUBMISSIONS TO PROVE GENUINENESS OF THE CREDITORS REFLECTED IN THE BALAN CE SHEET AGGREGATING TO RS.2,88,124/- AND THE ADVANCES AGAIN ST SUPPLIES OF RS.11,27,771/- EVEN DURING THE COURSE OF THE APPELL ATE PROCEEDINGS. THE APPELLANT WOULD HAVE AT LEAST FILED THE COMPLET E ADDRESSES OF THESE CREDITORS AND SHOULD HAVE ALSO FILED THE CONF IRMATIONS EVEN ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 9 DURING THE REMAND REPORT STAGE. THE UNILATERAL CONT ENTION OF THE APPELLANT THAT THE A.O. HAS MADE THE ADDITION OF TH E CREDITORS TO WHOM LIABILITY STILL EXISTS IS NOT ENOUGH AS THE AP PELLANT HAS FAILED TO SHOW THAT WHO ARE THESE PARTIES AND WHAT ARE THEIR WHEREABOUTS. I AM THEREFORE OF THE CONSIDERED VIEW THAT THERE IS A SUBSTANCE IN THE ACTION OF THE A.O. IN MAKING ADDITION OF RS.2,88,12 4/- ON ACCOUNT OF SUNDRY CREDITORS AND RS.11,27,771/- ON ACCOUNT OF A DVANCES. THE APPELLANTS GROUND NO.4 AND 5 ARE DISMISSED. 10. THE ASSESSEE IS NOW IN APPEAL BEFORE US. BEFORE US, THE LD. A.R. CONTENDED THAT THE ASSESSEE HAS SHOWN AS ITS LIABIL ITY IN THE BALANCE SHEET THE AMOUNT OF SUNDRY CREDITORS AND ALSO ADVANCE FOR SALE AND THEREFORE ACKNOWLEDGES ITS DEBT TO PAY. IT WAS FURTHER STATED THAT THE AMOUNT HAS NOT BEEN WRITTEN BACK IN THE BOOKS OF ACCOUNTS. IN THES E CIRCUMSTANCES, THERE CAN BE NO ADDITION U/S. 41(1). HE ALSO RELIED ON TH E DECISION OF RAJESH SHAH(ITA NO.424 & 609/AHD/2003) AND OF GUJARAT HIGH COURT IN THE CASE OF CHETAN CHEMICALS (2004) 267 ITR 770 (GUJ.). 11. ON THE OTHER HAND THE LD. D.R. RELIED ON THE OR DERS OF THE A.O. AND CIT (A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACT IS THAT THE ASSESSEE SH OWS THE ADVANCE FROM CUSTOMERS AND SUNDRY CREDITORS AS ITS LIABILITY IN THE BALANCE SHEET. MERELY BECAUSE THE LIABILITIES ARE OUTSTANDING FOR MANY YE ARS, IT CANNOT BE INFERRED THAT THE SAID LIABILITIES HAVE CEASED TO EXIST. THE ASSESSEE HAS NOT WRITTEN BACK THE AMOUNT AND THE OUTSTANDING LIABILITIES ARE STILL IN EXISTENCE WOULD PROVE THAT THE ASSESSEE ACKNOWLEDGES ITS LIABILITY AS PER THE BOOKS OF ACCOUNTS. THE REVENUE HAS ALSO NOT BROUGHT ANY MATE RIAL ON RECORD TO ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 10 PROVE THAT THE PURCHASES & ADVANCE ARE NOT GENUINE AND THE CREDITORS HAVE REMITTED THE AMOUNTS DUE TO THEM. SECTION 41(1) IS ATTRACTED WHEN THERE IS CESSATION OR REMISSION OF A TRADING LIABILITY. TH E CO-ORDINATE BENCH IN THE CASE OF RAJESH M. SHAH (ITA NO.424/AHD/2006), RELYI NG ON THE DECISION OF CIT VS. SILVER COTTON MILLS CO. LTD., 254 ITR 728 ( GUJ.), SUGAULI SUGAR WORKS (P) LTD. (1999) 236 ITR 518 (SC), CIT VS. CHA SE BRIGHT STEEL LTD., 177 ITR128 (BOM.) AND BOMBAY DYEING AND MANUFACTURI NG CO. LTD. VS. STATE OF BOMBAY AIR 1958 SC 328 HELD AS UNDER:- IN THE LIGHT OF VIEW TAKEN BY THE HONBLE SUPREME COURT AND JURISDICTIONAL HIGH COURT IN THE AFORESAID DECISION S, IT IS APPARENT THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE I S A REMISSION OF LIABILITY BY THE CREDITOR, THE LIABILITY SUBSISTS AND, THEREF ORE, EVEN IF THE ENTRIES ARE MADE TO WRITE BACK THE EXPENDITURE, THE AMOUNT SO WRITTEN BACK CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE AS PE R THE PROVISIONS OF SECTION 41(1) OF THE ACT. IN THE INSTANT CASE, T HERE IS NOTHING TO SUGGEST THAT THE ASSESSEE HAS OBTAINED ANY BENEFIT EITHER BY WAY OF REMISSION OR CESSATION OF ANY LIABILITY WHILE THE A FORESAID LIABILITIES ARE CONTINUALLY ADMITTED BY THE ASSESSEE IN THEIR BALAN CE SHEET. IN THESE CIRCUMSTANCES, WE HAVE NO ALTERNATIVE BUT TO VACATE THE FINDINGS OF THE LD. CIT (A) AND DELETE THE ADDITION SUSTAINED B Y THE LD. CIT (A). THEREFORE, GROUND NOS. 3 TO 5 IN THE APPEAL OF THE ASSESSEE ARE ALLOWED WHILE GROUND NOS.1 AND 2 IN THE APPEAL OF T HE REVENUE ARE DISMISSED. 13. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE A.O. IS NOT CALLED FOR AND THEREFORE WE DELETE THE ADDITION MADE. IN THE RESULT, THIS GROUND OF THE ASSESSEE IS ALLOWED. 14. GROUND NO.6 & 7 PERTAINS TO BELATED PAYMENT OF PROVIDENT FUND AND ESIC. ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 11 15. THE A.O. OBSERVED THAT THERE WAS DELAY ON THE P ART OF THE ASSESSEE IN DEPOSITING THE EMPLOYEES CONTRIBUTION OF PROVID ENT FUND AND EMPLOYEES STATE INSURANCE. THE CONTRIBUTION FOR THE MONTH OF APRIL,2004 TO DECEMBER, 2004 WAS PAID ON 25-2-2005 AND FOR JANUARY, 2005 WA S PAID ON 10-3-2005. THE A.O. ACCORDINGLY ADDED RS.22,530/- U/S./ 2(24) R.W.S. 36(VA). CIT (A) SUSTAINED THE DISALLOWANCE. 16. BEFORE US, THE LD. A.R. CONTENDED THAT AMOUNT O F CONTRIBUTION HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN A ND THEREFORE ALLOWABLE. HE ALSO RELIED ON THE DECISION OF APEX COURT IN THE CA SE OF CIT VS. SABRI ENTERPRISES 213 CTR 69, CIT VS. VINAY CEMENT LTD. 2 13 CTR 268 , CIT VS. ALOM EXTRUSION. ON THE OTHER HAND THE LD. D.R. RELI ED ON THE ORDER OF A.O. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE UNDISPUTED FACT IS THAT THE EMPLOYEES CONTRIBUTIO N WAS PAID BELATEDLY BUT BEFORE THE FILING OF RETURN. IN CASE OF SABRI ENTER PRISES (SUPRA) THE HONBLE HIGH COURT HAS HELD THAT DEDUCTION OF STATUTORY LIA BILITY TOWARDS PROVIDENT FUND AND OTHER FUNDS REFERRED TO IN CLAUSE (B) OF S EC.43B IS PERMISSIBLE IF THE PAYMENTS ARE MADE BY THE ASSESSEE BEFORE THE DU E DATE OF SUBMISSION OF RETURN U/S. 139(1) EVEN IF THE CONTRIBUTIONS ARE PAID BEFORE THE DUE DATES UNDER THE RESPECTIVE STATUTORY ENACTMENTS. RESPECTF ULLY FOLLOWING THE DECISION OF THE HONBLE HIGH COURT WE ARE OF THE VI EW THAT SINCE THE AMOUNTS OF PROVIDENT FUND AND EMPLOYEES STATE INSU RANCE CONTRIBUTION HAVE BEEN PAID BEFORE THE DUE DATE OF FILING OF RET URN THE SAME IS ALLOWABLE. WE THEREFORE DELETE THE ADDITION MADE BY THE A.O. THIS GROUND OF APPEAL IS ALLOWED. ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 12 18. GROUND NO.8 RELATES TO INITIATION OF PENALTY U /S. 271(1) (C ) OF THE ACT, AS THE SAME IS CONSEQUENTIAL THE SAME IS NOT ADJUDI CATED. 19. GROUND NO.9 IS GENERAL IN NATURE AND HENCE NOT ADJUDICATED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON 6 - 7 - 201 2. SD/- SD/- (MUKUL KUMAR SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT M EMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS),VALSAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO 4064 /AHD/2008 A.YR.. 2005 -06 13 1.DATE OF DICTATION 13 - 6 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 3-5 / 7 / 2012 MEMBER.OTHER MEMBER . 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 5 - 7 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 6 - 7 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6 - 7 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..