ITO, Ward - 35(4), Kolkata, Kolkata V. Moinul Haque Molla, Kolkata

ITA 423/KOL/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7228 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 11-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: MURTHY; JEETENDRA KUMAR AM
• Keywords: Assessment record
• Section: 68

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [ . . . . , ,, , . .. . ! ! ! !. .. . , , , , '# '# '# '# , '# '# '# '# ] [BEFORE SHRI N. VIJAYAK UMARAN, JM & SHRI C. D. RAO, AM] $ $ $ $ / I.T.A NO.423/KOL/2011 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER/WARD-35(4) -VS.- MOINUL HAQUE MOLLA KOLKATA. KOLKATA [PAN : AI MPM 4877 F] [ *+ *+ *+ *+ /APPELLANT ] ]] ] [ -.*+ -.*+ -.*+ -.*+/ // / RESPONDENT ] ]] ] *+ *+ *+ *+ / FOR THE APPELLANT : SHRI S. K. ROY -.*+ -.*+ -.*+ -.*+ / FOR THE RESPONDENT : S/SHRI M.S. MURTHY & JEETENDRA KUMAR AMAR / / / / 0 !# 0 !# 0 !# 0 !# /DATE OF HEARING : 13.10.2011 1' 0 !# 1' 0 !# 1' 0 !# 1' 0 !# /DATE OF PRONOUNCEMENT : '2 /ORDER . . . . , PER N. VIJAYA KUMARAN, J. M. THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST O RDER OF LD. CIT(A)-XX, KOLKATA DATED 31.12.2010 FOR ASSESSMENT YEAR 2007-07. 2. THE GROUNDS ADJUDICATED BY THE REVENUE ARE AS UN DER :- (1) THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.11,18,900/- MADE AS UNDISCLOSED SOURCE ON THE BASIS OF THE SUBM ISSIONS OF THE ASSESSEE AND WITHOUT GIVING WEIGHTAGE TO THE POINT OF CREDITWORTHINESS OF THE LOAN CREDITORS. (2) THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.33,96,030/- ON ACCOUNT OF SUNDRY CREDITORS IGNORING THE FACT THAT THE IDENTIFICATION OF THE CREDITORS AND GENUINENESS OF TRANSACTIONS WERE NOT ESTABLISHED IN COURSE OF ASSESSMENT PROCEEDINGS. (3) THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.19,46,313/- AND RS.1,54,655/- ON THE BASIS OF THE CONSIDERING THE S UBMISSION OF THE ASSESSEE AND WITHOUT TAKING INTO ACCOUNT THE VIEW O F THE A.O. [ ITA NO. 423/KOL/2011] 2 3. THE THIRD GROUND RELATES TO THE DELETION OF TWO ADDITIONS. THE FIRST ADDITION IS RS.1,54,655/- ON ACCOUNT OF DIFFERENCE IN SALES MADE TO M/S. VISH AL RETAIL LIMITED. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE PROPRIETARY CONCERN HAS SHOWN TOTAL HIGHER SALES TO M/S. VISHAL RETAIL LIMITED IN ITS BOOKS OF ACCOUNT. HOWEVER, THE SAID PARTY INFORMED THE ASSESSING OFFICER THAT ONLY LESSER AMOUNT WERE REFLECTED IN ITS BOOKS. IN THE A BSENCE OF RECONCILIATION, ASSESSING OFFICER WORKED OUT THE DIFFERENCE WHICH COMES TO RS.1,54,65 5/-. ASSESSING OFFICER ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 3.1 ON APPEAL TO THE LD. CIT(A), IT WAS FOUND THAT THE FIGURE RECORDED WITH THE BOOKS OF THE ASSESSEE IS OF HIGHER FIGURE AND FROM THE CONCERNED PARTIES ONLY LOWER FIGURE. IF AT ALL THE DIFFERENCE IS TO BE RECONCILED BY THE CONCERNED PAR TY M/S. VISHAL RETAIL LIMITED, THE ASSESSEE HAS CREDITED MORE REVENUE IN THE PROFIT & LOSS ACCOUNT. HOWEVER, ONLY LESSER AMOUNT IS SHOWN IN THE CONCERNED PARTY ACCOUNT OF M/S. VISHAL RETAIL LIMIT ED. THEREFORE, LD. CIT(A) DELETED THE ADDITION WHICH WE ALSO AGREE AFTER CONSIDERING THE RIVAL SUB MISSIONS. 4. THE SECOND DELETION IN GROUND NO.3 IS OF AN ADDI TION OF RS.19,46,313/-. THIS IS UNDER THE HEAD CLOSING STOCK. ASSESSING OFFICER OBSERVED THAT ASSESSEE PROPRIETARY CONCERN M/S. MEGHA ENTERPRISES HAS RAISED TOTAL BILLS OF RS.2,41,57,73 7/- ON M/S. VISHAL RETAIL LIMITED DURING THE PERIOD FROM 19.12.2006 TO 10.03.2007. HERE WE WANT TO MENTION THAT THE PREVIOUS YEAR ENDED ON 31.03.2007, RELEVANT TO THE ASSESSMENT YEAR UNDER A PPEAL BEFORE US. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE TOTAL WORK WAS COMPLETED ON OR BEFORE 10.03.2007. HENCE, THESE PURCHASES FROM 19.12.2006 TO 10.03.2007, WHICH WERE MADE AFTE R THE FINAL BILL, WHICH WAS RAISED ON M/S. VISHAL RETAIL LIMITED TO APPEAR IN THE PROFIT & LOS S ACCOUNT AS A CLOSING STOCK ACCORDING TO ASSESSING OFFICER. HOWEVER, THE ASSESSEE HAS SHOWN NIL CLOSING STOCK. THIS ADDITION WAS MADE AS UNDISCLOSED CLOSING STOCK. 4.1 ON APPEAL TO THE LD. CIT(A), THE FIRST OBJECTIO N OF THE ASSESSEE WAS THAT THE ASSESSING OFFICER WAS NOT GIVEN OPPORTUNITY. FURTHER, THERE W AS NO OTHER RUNNING CONTRACT AT THAT TIME AND NO CLOSING STOCK WAS SHOWN IN THE ACCOUNT. THIS MADE T HE LD. CIT(A) TO CALL FOR THE REMAND REPORT. IN THE REMAND REPORT, ASSESSING OFFICER REITERATED THE SAME. THE LD. CIT(A) FOUND THAT THE MATERIAL SO PURCHASED THROUGH THE BILL FOR THE PERI OD 22.03.2007 TO 31.03.2007 WERE ACTUALLY RECEIVED BEFORE THE COMPLETION OF THE CONTRACT. SIN CE THE MATERIALS WERE CONSUMED IN THE CONTRACT, [ ITA NO. 423/KOL/2011] 3 NATURALLY, IT CAN NOT BE AVAILABLE AS A CLOSING STO CK. LD. CIT(A) AFTER CONSIDERING THE RELEVANT DOCUMENTS AND ON PERUSAL OF THE REMAND REPORT CAME TO THE CONCLUSION THAT THE MATERIAL PURCHASED THROUGH THE BILLS HAVE BEEN SUFFICIENTLY EXPLAINED AS THEY WERE CONSUMED IN THE CONTRACT AND IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THAT SUCH MATERIAL WERE NOT CONSUMED IN COMPLETION OF THE CONTRACT. HENCE, LD. CIT(A) SUPPORTED HIS DECIS ION IN FAVOUR OF THE ASSESSEE BY DELETING THE ADDITION AND WE FIND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ON THIS ISSUE, HENCE, GROUND NO.3 IS DECIDED AGAINST THE REVENUE A ND IN FAVOUR OF THE ASSESSEE. 5. COMING TO THE SECOND GROUND, THIS IS AN ADDITION OF RS.33,96,030/- UNDER THE HEAD SUNDRY CREDITORS. ASSESSING OFFICER ADDED THIS BY INVOKING SECTION 41(1) OF THE ACT. ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE HAD SHOWN OUTSTANDING LIABILITY OF THE ABOVE AMOUNT ON ACCOUNT OF LABOUR CHARGES IN THE NAME OF 11 CREDITORS. ASSESSI NG OFFICER WAS OF THE VIEW THAT ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE LIABILITIES STILL O UTSTANDING BY INVOKING SECTION 41(1) OF THE ACT. ASSESSING OFFICER ADDED THIS AS INCOME OF THE ASSES SEE. 5.1 ON APPEAL TO THE LD. CIT(A), LD. CIT(A) FOUND T HAT THE COMPLETE ADDRESS OF THE CREDITORS WERE NOT FILED IN THE COURSE OF APPELLATE PROCEEDIN GS. LD. CIT(A) ALSO FORWARDED IT TO THE ASSESSING OFFICER. IT WAS ALSO EXPLAINED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT COMPLETE ADDRESS OF THE CREDITORS WERE NOT AVAILABL E DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS THE USUAL CONTRACT WAS ON THEIR MOBILE PHONES ON LY. THE ASSESSEE HAS DISCHARGED THE BURDEN OF PROVING THE GENUINENESS AND THE EXPENSES OF LIABILI TY BY PRODUCING BILLS ISSUED BY THE CREDITORS. FOR VERIFICATION OF THEIR ADDRESS, IT ALSO APPEARS IN THEIR PAN, SALES TAX NUMBER, SERVICE TAX NUMBER. IN THE REMAND REPORT, LD. CIT(A) FOUND THAT THE PAYMENTS WERE MADE THROUGH BANKING CHANNELS, THE IDENTITY AND GENUINENESS OF THE CREDI TORS WERE ESTABLISHED. ASSESSING OFFICER HIMSELF ALLOWED THE PAYMENT OF RS.18,27,000/- MADE TO THE C REDITORS DURING THE YEAR WHICH ITSELF GOES TO SHOW THE ACCEPTANCE OF GENUINENESS OF THE CREDITORS . FURTHER, THE FACT THAT THE OUTSTANDING LIABILITY WAS PAID UP IN THE SUBSEQUENT YEAR. HENCE, THE LIAB ILITY DID ACTUALLY EXIST ON THE RELEVANT DATE AND THERE IS NO CESSATION OF LIABILITY BY RELYING ON TH E DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. TAMILNADU WAREHOUSING CORPORATION [ 2007] 292 ITR 310 (MADRAS). LD. CIT(A) DELETED THE ADDITION. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT SECTION 41(1) HAS BEEN [ ITA NO. 423/KOL/2011] 4 WRONGLY INTERPRETED BY THE ASSESSING OFFICER AND TH ERE IS LIABILITY IN EXISTENCE AND IT IS AMPLY PROVED THAT THERE IS NO EXTINGUISHMENT, THEN IT CAN NOT BE BROUGHT UNDER THE PURVIEW OF PROFIT CHARGEABLE TO TAX. IT IS ON THE REVENUE TO PROVE TH AT THE LIABILITY IS CEASED TO EXIST. IN OTHER WORDS , THERE IS CESSATION OF LIABILITY WHICH IS MORE VITAL TO INVOKE SECTION 41(1) OF THE ACT. 6.1 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PRECEDENTS. WE ARE OF THE VIEW THAT L D. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT AS IT IS CLEARLY ESTABLISHED THAT THE LIABILITY IS OUTSTANDING AS ON DATE AND IT IS CLEARLY PROVED THA T THIS LIABILITY HAS BEEN DISCHARGED IN SUBSEQUENT YEARS THROUGH BANKING CHANNELS FORTIFIES THE CONTEN TION OF THE ASSESSEE. HENCE, BY ACCEPTING THE CONTENTION OF THE ASSESSEE AND BY REJECTING THE ARG UMENTS OF THE LD. DEPARTMENTAL REPRESENTATIVE, WE CONFIRM THE ORDER OF LD. CIT(A) ON THIS GROUND N O.2. IN THE RESULT, REVENUE FAILS ON THIS GROUND ALSO. 7. COMING TO THE FIRST GROUND, BEING THE LAST ISSUE AS ARRAYED IN THE GROUNDS OF APPEAL BY THE REVENUE, THE DELETION OF ADDITION IS RS.11,18,900/- , BUT IT IS NOT NUMERICALLY CORRECT. LD. CIT(A) DELETED THE ADDITION OF RS.9,21,900/- AND CONFIRMED THE BALANCE AMOUNT OF RS.1,97,000/- BEING THE CREDIT IN THE NAME OF 11 CREDITORS. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, IT IS A SETTLED LAW THAT WHEN THE CREDIT IS APPEARING IN THE BOOKS OF THE ASSESSEE HAS TO PROVE THE GENUI NENESS OF THE CREDIT, IDENTITY OF THE CREDITORS AND THE CAPACITY OF THE CREDITORS. LD. CIT(A) AFTER CAL LING FOR THE REMAND REPORT FOUND THAT ASSESSING OFFICER HAD NOT DISPUTED THE GENUINENESS OF THE LOA N CONFIRMATIONS PRODUCED BY THE ASSESSEE. PAN OF THE LOAN CREDITOR WAS GIVEN. IT IS NOT THE DEPAR TMENTS CASE THAT LOANS SHOWN BY THE ASSESSEE WERE NOT VERIFIABLE FROM THE ASSESSMENT RECORD OF T HE LOAN CREDITORS. IN THE REMAND REPORT ALSO, IT IS ONLY A REITERATION OF THE SAME STATEMENT. LD. CIT(A ) FOUND THAT 49 LOAN CREDITORS HAVE CONFIRMED THEIR LOAN TRANSACTIONS. PA NUMBERS ALSO AVAILABLE BEFORE HIM. THEY CONFIRMED THE LOAN. LD. CIT(A) WAS OF THE VIEW THAT ASSESSEE HAD DISCHARGED THE BURDEN IN RESPECT OF 49 LOAN CREDITORS. THEREFORE, HE GRANTED RELIEF TO THE EXTENT WHEREIN THE ASSESSEE DULY DISCHARGED THE BURDEN THAT COMES TO RS.9,21,000/-. REGARDING 11 LOAN CREDITORS , LD. CIT(A) FOUND THAT ASSESSEE COULD NOT DISCHARGE THE BURDEN TO ESTABLISH THE GENUINENESS O F THE LOAN TRANSACTIONS. HE, THEREFORE, SUSTAINED THE BALANCE AMOUNT OF RS.1,97,000/-. [ ITA NO. 423/KOL/2011] 5 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PRECEDENTS. WE ARE OF THE VIEW THAT S ECTION 68 WILL BE ATTRACTED WHEN THE ASSESSEE FAILED TO DISCHARGE THE BURDEN. THREE CONDITIONS I. E. GENUINENESS OF THE TRANSACTIONS, CAPACITY AND IDENTITY OF THE PARTIES HAS TO BE PROVED TO THE SAT ISFACTION OF THE ASSESSING OFFICER. AS OBSERVED BY THE LD. CIT(A), 49 LOAN CREDITORS AND THE CREDIT PA RTICULARS AMPLY ESTABLISHED THAT THE ASSESSEE HAD DISCHARGED THE BURDEN IN RESPECT OF 49 CREDITORS. H ENCE, LD. CIT(A) AFTER MAKING THE DETAILED ENQUIRY DELETED THE ADDITION AFTER BEING SATISFIED WITH THE CONFIRMATION FROM THE 49 LOAN CREDITORS AND ALSO BEING SATISFIED WITH THE REMAND REPORT THA T THE ASSESSEE HAD DISCHARGED THE BURDEN AS REQUIRED UNDER SECTION 68 OF THE ACT. ABOVE ALL, LD . CIT(A) WAS OF THE VIEW THAT IN RESPECT OF BALANCE 11 LOAN CREDITORS, NO CONFIRMATION WAS PROD UCED IN RESPECT OF 7 OTHER LOAN CREDITORS AND 4 LOAN CREDITORS DENIED OF GIVING OF LOAN. THEREFORE, LD. CIT(A) WAS OF THE VIEW THAT IN RESPECT OF [7+4] = 11 CREDITORS, ASSESSEE COULD NOT DISCHARGE THE BURDEN TO THE SATISFACTION OF THE DEPARTMENT. THEREFORE, HE SUSTAINED THE ADDITION ONLY TO THE EX TENT OF RS.1,97,000/- THAT BEING THE POSITION. 9.1 WE ARE IN FULL AGREEMENT WITH THE FINDINGS OF T HE LD. CIT(A) THAT LD. CIT(A) HAS CORRECTLY APPLIED THE PROVISIONS AND DECIDED THE ISSUE IN ACC ORDANCE WITH LAW WHICH REQUIRES NO INTERFERENCE. HENCE, GROUND NO.1 IS ALSO DECIDED AG AINST THE REVENUE. 10. IN THE RESULT, REVENUE APPEAL IS DISMISSED. '2 '2 '2 '2 #' #' #' #' 3 4 56 3 4 56 3 4 56 3 4 56 !# !# !# !# ORDER PRONOUNCED IN THE COURT ON 14.10.2011. SD/- SD/- [ . .. . ! ! ! !. .. . , ,, , '# '# '# '# ] [ . . . . , ,, , ] [ C. D. RAO ] [ N. VIJAYAKUMARAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER D ATED : 14TH OCTOBER, 2011. [ ITA NO. 423/KOL/2011] 6 '2 0 -%% 7''/ COPY OF THE ORDER FORWARDED TO: 1. *+ /APPELLANT : INCOME TAX OFFICER/WARD-35(4), 18, RA BINDRA SARANI, PODDAR COURT, 3 RD FLOOR, KOLKATA-700 001. 2 -.*+ / RESPONDENT : MOINUL HAQUE MOLLA, 12-B, N. S. ROA D, KOLKATA700 001. 3. %2 - / CIT, 4. %2 ()/ CIT(A), KOLKATA. 5. ?%4 -%/ DR, KOLKATA BENCHES, KOLKATA [. -%/ TRUE COPY] '2/ BY ORDER, /ASSTT REGISTRAR [KKC AB %C %D /SR.PS]