G.B.IMPEX, Jaipur V. ITO, Jaipur

ITA 430/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4911 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Rejection of books of accounts; Business income; Retrospective amendment; Non-deduction of tax
• Section: 133(6)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH ,-MH-TSU]] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI A.D.JAIN, JM & SHRI VIKRAM SINGH YADAV , AM VK;DJ VIHY LA-@ ITA NO.430/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 M/S G.B. IMPEX , B-172 RAJENDRA MARG, BAPU NAGAR, JAIPUR CUKE VS. THE INCOME TAX OFFICER, WARD 5(4), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAGFG 3052 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R,A. VERMA (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14. 09.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 17/11/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), II JAIPUR DATED 26.02.2016 WHEREIN THE ASSESSEE HAS TA KEN FOLLOWING GROUNDS OF APPEAL: (1). THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING REJECTION OF BOOKS OF ACCOUNTS BY APPLYING THE PROVISIONS OF SE CTION 145(3) OF THE IT ACT. (1.1) THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION OF RS. 13,00,447/- BY APPLYING G.P. RATE O F 4% AS AGAINST GP RATE OF 2.27% DECLARED BY THE ASSESSEE. (2) THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE TRADING ADDITION OF RS.63,50,246/- U/S 41(1) OF THE IT ACT BY HOLDING THAT THE LIABILITY IN RESPECT OF CREDITORS CEASED TO EXIST. ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 2 (3) THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE OF RS.50,000/- U/S 40(A)(IA) ON A/C OF NON-DEDUCTION OF TAX AT SOURCES ON LEGAL AND PROFESSIONAL FEES PAID TO M /S KALANI & COMPANY. 2. IN RESPECT OF GROUND NO.1 OF THE ASSESSEES APPE AL, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BU SINESS OF TRADING AND EXPORT OF PRECIOUS AND SEMI PRECIOUS STONES. DURING THE YE AR UNDER CONSIDERATION, IT DECLARED G.P. RATE OF 2.27% ON TURNOVER OF RS.7.51 CRORES AS COMPARED TO G.P. RATE OF 2.48% ON TURNOVER OF RS.18.73 CRORES DECLAR ED IN THE PREVIOUS YEAR. THE AO OBSERVED THAT ASSESSEE HAS NOT PRODUCED PURC HASE BILL, SALE BILL, STOCK REGISTER, LEDGER, CASH BOOK AND BOOKS OF ACCOUNTS. THE ASSESSEE SUBMITTED DETAILS OF PURCHASE/SALE BUT THE SAME IS NOT SUFFIC IENT TO VERIFY THE TRADING RESULTS. HE, THEREFORE, INVOKED SECTION 145(3) AND MADE TRADING ADDITION OF RS.20,51,880/- BY APPLYING G.P. RATE OF 5% AFTER GO ING THROUGH G.P OFFERED BY THE ASSESSEE AND APPLIED BY THE AO IN THE PREVIOUS ASSESSMENT YEARS. 2.1 THE LD. CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNTS BUT CONSIDERING THAT THERE IS A DRASTIC REDUCTION IN TURNOVER AS CO MPARED TO THE LAST YEAR WHEN G.P. RATE OF 2.48% WAS DECLARED, SHE DIRECTED TO ES TIMATE THE INCOME BY APPLYING G.P. RATE OF 4% ON THE TURNOVER DECLARED B Y THE ASSESSEE. THE FINDING OF THE LD. CIT(A) ARE STATED AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSME NT ORDER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT . THE ASSESSEE DEALS IN SALE AND PURCHASES OF PRECIOUS STONES AND SEMI PRECIOUS STON ES. THE AO RECORDED THAT INSPITE OF SEVERAL OPPORTUNITIES, THE ASSESSEE DID NOT COMPLY AND FILED WRITTEN SUBMISSION AND PART DETAILS ON 27.02. 2015. HOWEVER, ON SUBSEQUENT DATES THERE WAS AGAIN NO COMPLIANCE AND THE DETAILS CALLED FOR LIKE PURCHASE BILLS, SALE BILLS AND STOCK REGI STER WERE NOT PRODUCED FOR VERIFICATION. IT IS FURTHER NOTED THAT IN THE ABS ENCE OF PRODUCTION OF COMPLETE BOOKS OF ACCOUNTS AND DETAILS, THE AO CONC LUDED THAT THE BOOKS OF ACCOUNT ARE NOT RELIABLE AND REJECTED THE SAME U NDER SECTION 145(3) OF ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 3 THE ACT. SUBSEQUENT TO THE SAME, THE AO OBSERVED THAT FROM 2008-09 ONWARDS THE GROSS PROFIT PERCENTAGE HAS BEEN OVER 5 % EXCEPT IN A.Y. 2011-12 WHEN IT WAS 2.48%. FURTHER IT WAS ALSO FOU ND THAT ON THESE RESULTS, ADDITIONS HAD BEEN MADE DUE TO IRREGULARIT IES IN THE ACCOUNTS AND GROSS PROFIT RATE AFTER INCLUDING THE SAME WAS MORE THAN 9%. THE CHART IN THE AOS ORDER AT PAGE NO.3 SHOWS THAT GR OSS PROFIT RATES FOR ASSESSMENT YEAR 2007-08 TO 2012-13. THE AO THEN APP LIED THE GROSS PROFIT RATE AT 5% FOR THE YEAR INSTEAD OF THE RETUR NED GROSS PROFIT OF 2.27%. IN THE PROCEEDINGS BEFORE ME, THE ASSESSEE HAS SUBM ITTED THAT IT HAD FILED ALL DETAILS VIDE LETTERS DATED 13.11.2014 AND 03.03.2015. I HAVE GONE THROUGH THESE LETTERS BUT THEY ONLY SHOW THAT REQUEST WAS MADE THAT BOOKS OF ACCOUNTS AND RESULTS SHOULD BE ACCEPT ED BUT NO DETAILS OF BOOKS MAINTAINED AND PRODUCED HAS BEEN MENTIONED. THE AOS REJECTION OF BOOKS OF ACCOUNTS IS THUS UPHELD. NOW COMING TO THE GROSS PROFIT PERCENTAGE ADOPTED BY THE ASSESSING OFFICER, IT IS TRUE THAT RIGHT FROM ASSESSMENT YEAR 2008-09 THE GROSS PROFIT PERCENTAGE IS MORE THAN 5%. HOWEVER, IN A.Y. 2011-12 THE GROSS PROFIT PERCENTAG E IS ABOUT 2.48% ON A TURNOVER OF ABOUT RS. 18 CRORE AND IN THE RELEVANT YEAR THE TURNOVER HAS DECREASED TO ABOUT RS. 7.5 CRORES. THE AUTHORISED REPRESENTATIVE IN THE PRESENT PROCEEDINGS HAS SUBMITTED THAT DUE TO REC ESSION IN THE MARKET, THE TURNOVER HAS GOT RIGHTLY REDUCED AND THIS ALSO COULD BE MAINTAINED ONLY BY REDUCTION IN SELLING PRICE. WHILE IT IS TR UE THAT IN THE PREVIOUS YEARS, THE GROSS PROFIT PERCENTAGE HAS BEEN BETTE R THAN 5% BUT IN THOSE YEARS THE TURNOVER WAS MORE THAN DOUBLE, THAN IN THIS YEAR, WHICH INDICATED THAT THE BUSINESS WAS DOING WELL. IN TH E CURRENT YEAR THERE IS DRASTIC REDUCTION IN THE TURNOVER AND SCALE OF BUSI NESS AND CONSIDERING THAT THE GROSS PROFIT PERCENTAGE IN THE PREVIOUS YE AR WAS ONLY 2.48%, IT WILL BE REASONABLE TO ESTIMATE THE SAME AT 4% OF TH E TURNOVER FOR THIS YEAR. 2.2 THE LD AR SUBMITTED THAT THE ASSESSEE IS MAIN TAINING COMPLETE BOOKS OF ACCOUNTS ON DAY TO DAY BASIS. THESE BOOKS ARE DULY SUPPORTED BY BILLS AND VOUCHERS. ALL TRANSACTION OF PURCHASE AND SALES ARE FULLY VERIFIABLE FOR WHICH DETAILS WERE FILED WHICH IS ACCEPTED BY THE AO ALSO . THE EXPORT SALES ARE SUBJECT TO CONTROL OF CUSTOM AUTHORITIES AND RBI. T HE SALES IS ACCEPTED BY THE AO. THE QUANTITATIVE DETAILS IS AVAILABLE AT PB 20- 21. DURING THE YEAR, ASSESSEE ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 4 ONLY DID THE TRADING ACTIVITY. NO DEFECT IN THE QUA NTITATIVE DETAILS IS FOUND. HENCE THE REJECTION OF BOOKS OF ACCOUNTS AND THE CO NSEQUENT TRADING ADDITION CONFIRMED BY CIT(A) IS UNJUSTIFIED. WITHOUT PREJUD ICE TO ABOVE, IT MAY BE NOTED THAT IN THE IMMEDIATELY PRECEDING YEAR, THE G.P. RATE DECLARED IS 2.48% ON TURNOVER OF RS.18.73 CRORES. DURING THE YEAR, TH E G.P. RATE IS 2.27% ON TURNOVER OF RS.7.51 CRORES. THE DECLINE IN G.P. RAT E IS DUE TO RECESSION IN THE MARKET BECAUSE OF WHICH ASSESSEE HAS TO REDUCE THE SELLING PRICE TO ACHIEVE THE TURNOVER. THE ENTIRE SALE OF THE ASSESSEE IS EX PORT SALE. THE ASSESSEE FURNISHED THE DETAILS OF PURCHASE AND SALES AS ACCE PTED BY THE AO IN THE ASSESSMENT ORDER. THE OPENING AND CLOSING STOCK IS ALSO ACCEPTED. THUS, WHEN ALL THE COMPONENTS OF TRADING ACCOUNT I.E. OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK IS ACCEPTED AND THE SAME IS ALSO BACK ED BY THE QUANTITATIVE DETAILS, THE APPLICATION OF SECTION 145(3) AND THE CONSEQUENT TRADING ADDITION IS UNCALLED FOR. RELIANCE IN THIS CONNECTION IS PLA CED ON THE FOLLOWING CASES:- MALANI RAMJIVAN JAGANNATH VS. ACIT 316 ITR 120 (RAJ .) PR. CIT VS. HUES INDIA LTD. 2015-TIOL-2275 (RAJ.) CIT V. GOTAN LIME KHANIZ UDYOG 256 ITR 243 (RAJ) 2.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE LD AR HAS CONTENDED THAT THE ASSESS EE IS MAINTAINING COMPLETE BOOKS OF ACCOUNTS ON DAY TO DAY BASIS. THESE BOOKS ARE DULY SUPPORTED BY BILLS AND VOUCHERS. ALL TRANSACTION OF PURCHASE AND SALES ARE FULLY VERIFIABLE AND DULY SUBMITTED TO THE AO. AS PER THE AO, THE ASSESSEE H AS NOT PRODUCED PURCHASE BILL, SALE BILL, STOCK REGISTER, LEDGER, CASH BOOK AND BOOKS OF ACCOUNTS. THE ASSESSEE SUBMITTED DETAILS OF PURCHASE/SALE BUT THE SAME WAS NOT SUFFICIENT TO VERIFY THE TRADING RESULTS. WHERE THE ASSESSEE HAS MAINTAINED COMPLETE BOOKS ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 5 OF ACCOUNTS AND THE AO HAS SPECIFICALLY ASKED THE A SSESSEE TO PRODUCE THE SAME FOR VERIFICATION, NO JUSTIFIABLE REASON HAS BE EN BROUGHT TO OUR NOTICE WHICH STOPPED THE ASSESSEE IN PRODUCING ITS BOOKS O F ACCOUNTS BEFORE THE AO FOR VERIFICATION. THE AO IS WELL WITHIN HIS POWERS TO ENQUIRE ABOUT THE DETAILS OF TRANSACTIONS OF PURCHASE AND SALE UNDERTAKEN DUR ING THE YEAR AND ASKING THE ASSESSEE TO PRODUCE LEDGERS OF PURCHASE AND SALE AN D BILLS MAINTAINED BY THE ASSESSEE. MERELY BY SUBMITTING THE BROAD QUANTITAT IVE DETAILS OF PURCHASE AND SALES WOULD NOT DISCHARGE THE BURDEN ON THE ASSESSE E IN RESPECT OF MAINTENANCE AND PRODUCTION OF BOOKS OF ACCOUNTS. U NLESS THE AO GOES THROUGH THE LEDGER AND BILLS, THE DETAILS OF VARIOU S TRANSACTIONS AND THEIR AUTHENCITY THEREOF CANNOT BE VERIFIED. IT IS NOT T HE CASE OF THE ASSESSEE THAT IT HAS PRODUCED THE LEDGERS AND VOUCHERS FOR SOME MONT HS/PERIOD ATLEAST BEFORE THE AO. THE DECISION OF HONBLE RAJASTHAN HIGH COU RT IN CASE OF MALANI RAMJIVAN JAGANNATH VS. ACIT 316 ITR 120 (RAJ.) DOES NT SUPPORT THE CASE OF THE ASSESSEE. IN THAT CASE, THE QUANTUM AND VALUE OF P URCHASES AND SALES HAD NOT BEEN IN DISPUTE IN AS MUCH AS THEY WERE HELD TO BE FULLY VOUCHED. VALUE OF OPENING STOCK ALSO CANNOT BE DISPUTED AS IT CAME FR OM CLOSING STOCK OF PREVIOUS YEAR. THE INVENTORIES OF CLOSING STOCK WER E ALSO NOT FOUND TO BE INCORRECT. THAT IS TO SAY ACTUAL STOCK POSITION WAS NOT IN DISPUTE. HOWEVER, IN THE INSTANT CASE, IN ABSENCE OF PRODUCTION OF LEDGE RS AND BILLS, THERE IS NO FINDING THAT THE PURCHASE AND SALES ARE FULLY VOUCH ED AND SIMILARLY, THERE IS NO FINDING THAT THE CLOSING STOCK HAS BEEN EXAMINED BY THE AO AFTER TAKING INTO CONSIDERATION THE OPENING STOCK, PURCHASES AND SALE S. SIMILAR, THE CASE OF PR. CIT VS. HUES INDIA LTD. 2015-TIOL-2275 (RAJ.) AND C IT V. GOTAN LIME KHANIZ UDYOG 256 ITR 243 (RAJ) DOESNT SUPPORT THE CASE OF THE ASSESSEE. IN LIGHT OF THAT, WE CONFIRM THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 6 2.4 NOW, COMING TO ESTIMATION OF PROFITS AFTER REJE CTION OF THE BOOKS, THE AO HAS ESTIMATED THE G.P RATE OF 5% AS AGAINST 2.27% O FFERED BY THE ASSESSEE. THE LD CIT(A) HAS CONSIDERED THE FACT THAT IN THE CURRE NT YEAR THERE IS REDUCTION IN THE TURNOVER AND SCALE OF BUSINESS AND CONSIDERING THAT THE G.P PERCENTAGE IN THE PREVIOUS YEAR WAS ONLY 2.48%, SHE HAS HELD 4% G .P RATE TO BE REASONABLE. WE HAVE GONE THROUGH THE PAST ASSESSMENT HISTORY OF THE ASSESSEE RIGHT FROM AY 2007-08 TILL 2011-12. IT IS NOTED THAT FROM AY 2007-08 TILL AY 2010-11, THE ASSESSEE HAD A TURNOVER RANGING FROM 17.40 CR TO 19 .71 CR AND G.P WHICH HAS BEEN UPHELD RANGES FROM 8.32% TO 9.98%. AY 2009-10 SEEMS TO BE AN EXCEPTIONAL YEAR WHERE G.P WAS 5.8% ON THE TURNOVER OF RS 18.78 CR AND SIMILARLY, AY 2011-12, WHERE ON TURNOVER OF RS 18.7 2 CR, THE ASSESSEE HAS REPORTED A G.P OF 2.48%. IN THE INSTANT YEAR, THE ASSESSEE HAS REPORTED A TURNOVER OF RS 7.5 CR WHICH IS ALMOST 38% OF PEAK T URNOVER ACHIEVED IN THE PAST YEARS AND WE WERE TO WORK OUT THE COMPARATIVE G.P, KEEPING ALL OTHER THINGS CONSTANT, IT WILL RESULT IN G.P OF 3.64%. IN ABSEN CE OF ANY OTHER CREDITABLE DATA ON RECORD IN TERMS OF FALL IN G.P RATE SUBMITTED BY THE ASSESSEE AND BASED ON THE PAST ASSESSMENT HISTORY OF THE ASSESSEE, WE ACC ORDINGLY CONFIRM THE G.P RATE OF 3.64% TO BE APPLIED ON THE TURNOVER OF RS 7 .51 CR. THE GROUND OF APPEAL IS THUS PARTLY ALLOWED. 3. IN RESPECT OF GROUND NO.2, BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO FROM THE DETAILS OF SUNDRY CREDITORS FILED BY THE A SSESSEE OBSERVED THAT THE CREDITORS TOTALLING TO RS.63,50,246/- AGAINST THE N AME OF 8 PARTIES ARE OUTSTANDING FOR MORE THAN 3 TO 5 YEARS. THE ASSESSE E EXPLAINED VIDE LETTER DT. 25.03.2015 THAT DUE TO CRISIS AND DOWNFALL IN THE I NTERNATIONAL MARKET THERE IS DELAY IN MAKING PAYMENT TO THESE PARTIES. FURTHER, DUE TO DISPUTES RELATING TO QUALITY, ETC, PAYMENTS OF THESE PARTIES HAVE BEEN W ITHHELD. THE AO, HOWEVER, ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 7 HELD THAT ASSESSEE HAS NOT FURNISHED ANY EVIDENCE I N SUPPORT OF ITS CONTENTION, WHICH CAN PROVE THAT CREDITORS ARE EXISTING AND NO SOLID REASON/EVIDENCE IS FURNISHED FOR NON-PAYMENT TO THESE CREDITORS. HE, THEREFORE, MADE ADDITION OF RS.63,50,246/- U/S 41(1) HOLDING THAT THE CREDIT ORS SHOWN IN THE BOOKS OF ACCOUNT HAVE CEASE TO EXIST. 3.1 THE LD. CIT(A) OBSERVED THAT ASSESSEE COULD NOT ADDUCE ANY EVIDENCE OR EXPLANATION AS TO WHY THE IMPUGNED AMOUNT WAS NOT P AID IN THE NORMAL COURSE, THEREFORE IT HAS TO BE CONCLUDED THAT LIABI LITY NO LONGER EXISTS AND ASSESSEE OBTAINED A BENEFIT BY WAY OF CESSATION OF LIABILITY. HE PLACED RELIANCE ON CERTAIN JUDGMENTS OF ITAT MUMBAI BENCH AND ACCOR DINGLY CONFIRMED THE ADDITION. THE FINDING OF THE LD. CIT(A) IS GIVEN AS UNDER: I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSM ENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE AO NOTICED THAT T HE ASSESSEE HAD A VERY LARGE NUMBER OF CREDITORS AND WHEN THE SAME WE RE EXAMINED, IT WAS FOUND THAT THE CREDITORS AS LISTED BY THE AO HA D THE AMOUNTS OUTSTANDING FROM 31.03.2010 ONWARDS. THE ASSESSE E COULD NOT PRODUCE ANY COGENT REASON FOR THE OUTSTANDING FOR ALMOST MO RE THAN SIX YEARS. THE ASSESSEE HAS TAKEN THE PLEA OF FINANCIAL CRISI S FOR THE AMOUNTS BEING OUTSTANDING, HOWEVER, THE A.O. FOUND THAT LOCAL PUR CHASES ARE BEING MADE CONTINUOUSLY AND THESE PARTIES ARE BEING REGUL ARLY PAID AS WELL AS ADVANCES ARE BEING GIVEN TO THEM. FURTHER THE ASSE SSES CONTENTION THAT RESERVE BANK CONTROLS THESE PAYMENTS WAS FOUND TO B E INCORRECT AS THE RESERVE BANK VERIFIES THE FOREIGN EXCHANGE TRANSACT IONS BUT DOES NOT MONITOR WHETHER CREDITORS ARE BEING MADE. IN VIEW OF THE ABOVE AND NO CONVINCING EXPLANATION OF THE ASSESSEE, THE AO DID NOT ACCEPT THESE AMOUNTS AS OUTSTANDING AND ADDED THE SAME UNDER SEC TION 41(1) AS CESSATION OF LIABILITIES. IN THE PRESENT PROCEEDINGS, THE APPELLANT SUBMITTED THAT THE APPELLANT HAD NOT WRITTEN BACK THESE CREDITORS WHICH INDICATE D THAT THE BUSINESS WAS GOING ON WITH THESE CONCERNS AND AO DID NOT BR ING ON RECORD ANY MATERIAL TO PROVE THE LIABILITY HAS CEASED TO EXIST . HE ALSO PLACED RELIANCE ON A FEW DECISIONS. IT IS NOTED THAT THE AMOUNTS H AVE BEEN OUTSTANDING ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 8 SINCE 31.03.2010 NO PAYMENTS WHATSOEVER HAVE BEEN M ADE SINCE THEN, THE PLEA OF FINANCIAL CRISES CANNOT BE AGREED TO A S REGULAR PAYMENTS ARE BEING MADE FOR LOCAL PURCHASES. THE ASSESSEE HAS N OT FILED ANY CONVINCING EVIDENCE TO DEMONSTRATE THE AMOUNTS WERE STILL OUTSTANDING. FURTHER IT IS IMPORTANT TO NOTE THAT INSPITE OF SEV ERAL OPPORTUNITIES AND SPECIFIC QUERIES THE ASSESSEE HAS NOT PRODUCED ANY DETAILS OF PAYMENTS, ANY NEW ADDRESS OR ANY FURTHER EVIDENCE TO SUBSTANT IATE IF ANY PAYMENT HAD BEEN MADE TO THESE PARTIES IN ANY PREVIOUS YEAR S OR EVEN TILL THE DATE OF ASSESSMENT PROCEEDINGS. THE TWO MAIN ISSUES IN MY OPINION, WHICH NEED TO BE SEEN, ARE WHETHER (I) THE AMOUNTS COULD BE TREATED AS CESSATION OF LI ABILITY & (II) AND SINCE THE SAME WERE OUTSTANDING IN PAST SEVERAL YEARS, C ESSATION OR RECESSIONS COULD BE DEEMED TO OCCUR IN THE RELEVANT YEARS. TH E DISCUSSION AS ABOVE HAS CLEARLY BROUGHT OUT THAT THE SUNDRY CREDITORS W ERE ABNORMALLY HIGH, THE ASSESSEE COULD NOT ADDUCE ANY MATERIAL OR EVIDE NCE OR EVEN EXPLANATION AS TO WHY IMPUGNED AMOUNTS WERE NOT PAI D IN NORMAL COURSE. IN THE ABOVE CIRCUMSTANCES THE CONCLUSION HAS TO BE, THAT THE LIABILITY NO LONGER EXISTS AND THE ASSESSEE HAS OBT AINED A BENEFIT BY WAY OF CESSATION OF THE LIABILITY. RELIANCE IS PLACED O N THE CASE OF NATURAL GAS COMPANY (P) LTD. VS. DCIT (2015) 61 TAXMAN.COM 297 (MUMBAI TRIB) . AS REGARDS THE YEAR OF TAXABILITY AND YEAR OF CESS ATION, THE PERSON IN COMPLETE KNOWLEDGE OF THE AFFAIRS IS THE ASSESSEE B UT WHEN HE DOES NOT PROVIDE THE REQUIRED EVIDENCES, THEN THE CESSATION, HAS TO BE TAKEN TO BE IN THE YEAR WHEN THESE ENQUIRIES ARE MADE AND THE CIRCUMSTANCES POINT THAT THE LIABILITY NO LONGER EXIST WHICH IN THE PR ESENT CASE IS THIS ASSESSMENT YEAR. THE LD. CIT(A) HAS PLACED FOLLOWING FURTHER RELIAN CE ON FOLLOWING DECISIONS AND THE ADDITION U/S 41(1) WAS CONFIRMED: BHARAT DANA BERA V. ITO WARD 19(1) (3)MUMBAI 56 TAX MANN.COM 388 (MUM) ASHA LAXMI DIAMOND & JEWELLERY VS. ITO 21(1)(1) MUM BAI 59 TAXMANN.COM 430 (MUM) ITO 13(2)(4) MUMBAI VS. SAJJAN KUMAR DIDWANI 47 TAX MANN.COM 381 (MUM). ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 9 3.2 AT THE OUTSET, THE LD AR OF THE ASSESSEE DRAWN OUR REFERENCE TO THE PROVISIONS OF SECTION 41(1)(A) WHICH READ AS UNDER: - (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE I N THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIA BILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENTIONED PER SON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LO SS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY B Y WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSI NESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WH ICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEA R OR NOT; OR EXPLANATION 1.FOR THE PURPOSES OF THIS SUB-SECTION , THE EXPRESSION 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILAT ERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OF THAT SUB-SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. FROM THE PLAIN READING OF THE SECTION, IT CAN BE NO TED THAT SECTION 41(1) WOULD BE ATTRACTED ONLY WHEN THERE IS A REMISSION O R CESSATION OF A TRADING LIABILITY. BY EXPLANATION 1 TO THIS SECTION A UNILA TERAL WRITE OFF OF SUCH LIABILITY IN THE ACCOUNTS IS ALSO CONSIDERED AS REMISSION OR CESSATION OF THE LIABILITY. IT WAS FURTHER SUBMITTED THAT ASSESSEE FIRM IS ENGA GED IN THE BUSINESS OF GEM & JEWELLERY. IN COURSE OF SUCH BUSINESS IT MADE PUR CHASES FROM VARIOUS PARTIES. OUT OF TOTAL CREDITOR OF RS.2,54,03,182/-, AO HAS P ICKED UP 8 CREDITORS AMOUNTING TO RS.63,20,246/- WHO ARE OUTSTANDING FOR MORE THAN THREE YEARS TO INVOKE SECTION 41(1). THIS IS NOT AS PER LAW AS THE ASSESSEE HAS NOT WRITTEN BACK ANY OF THESE CREDITORS NOR AO HAS BROUGHT ON R ECORD ANY MATERIAL TO PROVE ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 10 THAT THE LIABILITY HAS CEASED TO EXIST. THEREFORE T HE ADDITION MADE U/S 41(1) IS NOT AS PER LAW. IT WAS FURTHER SUBMITTED THAT IN THE TRADE OF GEMS AND JEWELLERY, IT IS A NORMAL PHENOMENA THAT THE AMOUNT REMAINS OUTSTANDIN G FOR MORE THAN THREE TO FIVE YEARS. THE DEBTORS OF THE ASSESSEE AR E OF RS.4,80,54,552/- OUT OF WHICH MOST OF THEM ARE OUTSTANDING FOR MORE THAN TH REE YEARS. SIMPLY BECAUSE THE DEBTORS ARE OUTSTANDING FOR MORE THAN T HREE YEARS, THE SAME CAN'T BE ALLOWED AS DEDUCTION UNLESS THE SAME IS WR ITTEN OFF IN THE BOOKS OF ACCOUNTS, ON THE SAME ANOLOGY ONLY BECAUSE CREDITOR S ARE OUTSTANDING FOR MORE THAN THREE YEARS, THE SAME CAN'T BE BROUGHT TO TAX U/S 41(1) UNLESS THE ASSESSEE HAS WRITTEN BACK SUCH AMOUNT TO THE INCOME . IT WAS FURTHER SUBMITTED THAT THE AO HAS OBSERVED T HAT ASSESSEE HAS NOT SUBMITTED DOCUMENTS TO PROVE THAT THE OUTSTANDING C REDITORS ARE OF PURCHASES. IF THIS IS SO, HOW HE COULD INVOKE SECTI ON 41(1). FROM THE COPY OF ACCOUNTS OF THESE CREDITORS IT CAN BE NOTED THAT AL L THESE CREDITORS ARE TOWARDS PURCHASES. ONLY FOR THE REASON THAT ASSESSE E HAS NOT FURNISHED EVIDENCE TO PROVE THAT IT WILL MAKE PAYMENT TO THE CREDITOR OR THE EVIDENCE ABOUT THE DISPUTE WITH THE CREDITOR CAN'T BE REASON TO INVOKE SECTION 41(1) IGNORING THAT IN THIS LINE OF BUSINESS, THE CREDIT PERIOD IS RANGING FROM THREE TO FIVE YEARS. FURTHER ONLY BECAUSE ASSESSEE HAS NO T PRODUCED EVIDENCES AS TO THE DISPUTE CAN'T BE A REASON TO INVOKE SECTION 41(1) PARTICULARLY WHERE THE LIABILITY TO PAY THE CREDITOR CONTINUE TO BE SH OWN IN THE BOOKS OF ACCOUNTS AND THE CREDITOR HAS NOT BEEN WRITTEN BACK . COPIES OF SOME OF THE CORRESPONDENCE BETWEEN ASSESSEE AND CREDITORS FILED BEFORE CIT(A) IS AT PB 28-39. TO BRING AN AMOUNT TO TAX U/S 41(1), THE AO HAS TO PROVE THE SAME BY ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 11 POSITIVE EVIDENCE THAT LIABILITY HAS CEASED TO EXIS T. THIS HAS NOT BEEN DONE AND THEREFORE SECTION 41(1) IS NOT ATTRACTED. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) PRESUM ED THAT ONCE THE ASSESSEE COULD NOT ADDUCE EVIDENCE AS TO WHY THE CREDITORS W ERE NOT PAID IN THE NORMAL COURSE, THE SAME AMOUNT TO CESSATION OF LIAB ILITY. HE RELIED ON CERTAIN JUDGMENTS OF MUMBAI TRIBUNAL BUT SHE HAS NOT GIVEN ANY FINDING ON THE VARIOUS DECISIONS OF HIGH COURT RELIED BY THE ASSES SEE ON THIS ISSUE. THE CASES RELIED BY CIT(A) ARE DISTINGUISHABLE ON FACTS IN AS MUCH AS AO HAS NOT MADE ANY ENQUIRY FROM THESE CREDITORS TO CONFIRM WHETHER THEY HAVE GIVEN UP THEIR DUES FROM THE ASSESSEE. HENCE, WITHOUT ANY MA TERIAL ON RECORD, IT CANNOT BE PRESUMED THAT LIABILITY HAS CEASED TO EXI STS. IN THIS CONNECTION, RELIANCE IS PLACED ON THE FOLLOWING CASES:- CIT VS. HOTLINE ELECTRONICS LTD. (2012) 80 CCH 156 (DEL) (HC): CIT VS. SMT. SITA DEVI JUNEJA (2010) 325 ITR 593 (P &H) (HC) CIT VS. G.K. PATEL & CO. (2013) 212 TAXMAN 0384 (GU J) (HC) CIT VS. SHRI VARDHAMAN OVERSEAS LTD. (2012) 343 ITR 408(DEL.)(HC) CIT VS. ALVARES & THOMAS (2016) 239 TAXMAN 0456 (KA R.) (HC) IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) HAS AL SO HELD THAT CESSATION HAS TO BE TAKEN TO BE IN THE YEAR WHEN ENQUIRIES ARE MA DE AND THE CIRCUMSTANCES POINT THAT LIABILITY NO LONGER EXISTS . HOWEVER, HONBLE DELHI HIGH COURT IN CASE OF CIT VS. JAIN EXPORTS PVT. LTD . 89 DTR 265 HAS OBSERVED THAT WHERE OUTSTANDING BALANCE IS PAYABLE TO A CRED ITOR AND SUCH OPENING BALANCE ARE BEING CARRIED FORWARD FOR SEVERAL YEARS , THE ISSUE AS TO THE GENUINENESS OF A CREDIT ENTRY COULD BE EXAMINED IN THE YEAR IN WHICH THE LIABILITY WAS RECORDED AS ARISEN AND SUCH ISSUE DOE S NOT ARISE IN ANY OTHER ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 12 YEAR AND THAT AO HAVING ACCEPTED BALANCES OUTSTANDI NG FOR YEARS, IT WAS NOT OPEN FOR THE LD. CIT(A) TO CONFIRM THE ADDITION. FO LLOWING THIS DECISION, HONBLE ITAT AMRITSAR BENCH IN CASE OF MODERN DISTR IBUTORS VS. ITO 46 CCH 452 ORDER DT. 12.04.2016 DELETED THE ADDITION MADE U/S 41(1). AGAIN KOLKATA TRIBUNAL IN CASE OF ITO VS. MARCOPOLO PRODUCTS PVT. LTD. 159 ITD 266 HELD THAT THERE ARE TWO CONDITIONS TO BE FULFILLED IN OR DER TO ATTRACT PROVISIONS OF SECTION 41; FIRSTLY THERE SHOULD BE CESSATION OR RE MISSION OF LIABILITY AND SECONDLY IT SHOULD BE CEASED TO BE SO DURING PREVIO US YEAR. EVEN WHERE AN AMOUNT REMAINED UNCLAIMED BY SUNDRY CREDITORS FOR A CONSIDERABLE PERIOD OF TIME AND SAID LIABILITY WAS CARRIED FORWARD FOR MAN Y YEARS AND THERE WAS NO CESSATION OR REMISSION DURING THE PREVIOUS YEAR, SA ME COULD NOT BE ADDED TO INCOME. 3.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. AS PER THE ASSESSEE, THE LIAB ILITY CONTINUES TO EXIST AS SHOWN IN ITS BALANCE SHEET WHICH INDICATE THE ACKNO WLEDGMENT OF THE DEBTS PAYABLE BY THE ASSESSEE AND THERE IS NO UNILATERAL WRITE BACK IN ITS BOOKS OF ACCOUNTS AND DUE TO FINANCIAL CRISES, THE PAYMENTS COULD NOT BE MADE IN THE PAST IN RESPECT OF SUBJECT CREDITORS. AS PER THE AO , THE ABOVE LIABILITIES ARE OUTSTANDING FOR MORE THAN SIX YEARS AND NOT A SINGL E PAYMENT HAS BEEN MADE TO THESE PARTIES AGAINST THE PURCHASES, NO DOCUMENT WAS SUBMITTED WHICH CAN PROVE THAT CREDITORS ARE EXISTING AND FURTHER N O EVIDENCE IS FURNISHED FOR NON-PAYMENT OF THESE CREDITORS. AS PER LD CIT(A), THE PLEA OF FINANCIAL CRISES TAKEN BY THE ASSESSEE CANNOT BE AGREED TO AS REGULA R PAYMENTS ARE BEING MADE FOR LOCAL PURCHASES. THE ASSESSEE HAS NOT FIL ED ANY CONVINCING EVIDENCE TO DEMONSTRATE THE AMOUNTS WERE STILL OUTS TANDING. FURTHER, LD CIT(A) HAS HELD THAT INSPITE OF SEVERAL OPPORTUNITI ES AND SPECIFIC QUERIES, THE ASSESSEE HAS NOT PRODUCED ANY DETAILS OF PAYMENTS, ANY NEW ADDRESS OR ANY ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 13 FURTHER EVIDENCE TO SUBSTANTIATE IF ANY PAYMENT HAD BEEN MADE TO THESE PARTIES IN ANY PREVIOUS YEARS OR EVEN TILL THE DATE OF ASSESSMENT PROCEEDINGS. 3.4 IN OUR VIEW, THE FACT THAT LIABILITY IS OUTSTAN DING FOR COUPLE OF YEARS AND THERE IS NON-PAYMENT FOR ONE REASON OR ANOTHER IS N OT SUFFICIENT ENOUGH TO HOLD THAT THE LIABILITY HAS CEASED TO EXIST OR MORE PARTICULARLY, IN THE CONTEXT OF SECTION 41(1), THERE IS REMISSION OR CESSATION O F LIABILITY. FOR A LIABILITY TO BE REMITTED, THERE HAS TO BE A POSITIVE ACT ON THE PART OF THE CREDITOR WHEREBY HE DECIDES TO REMIT THE LIABILITY AND MONEY NO LONGER REMAIN PAYABLE BY THE ASSESSEE. SIMILARLY, THERE HAS TO B E A POSITIVE ACT ON THE PART OF THE ASSESSEE WHERE HE WRITE OFF SUCH LIABILITIES IN ITS BOOKS OF ACCOUNTS. FURTHER, THERE COULD BE SITUATIONS WHERE THERE ARE MUTUAL UNDERSTANDING BETWEEN THE PARTIES WHERE THE LIABILITY NO LONGER R EMAIN PAYABLE. GIVEN THAT THE LIABILITIES HAD ARISEN IN THE EARLIER YEARS REL ATING TO THE PURCHASES WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS AN EXPENDITURE, THE RECOURSE TO TAX SUCH EXPENDITURE IS PROVIDED UNDER SECTION 41(1) PROVIDE D THERE IS REMISSION OR CESSATION OF SUCH LIABILITY. IN THE INSTANT CASE, IT IS THUS CLEAR THAT THERE IS NO CESSATION OF LIABILITY. THE QUESTION THEREFORE REM AINS REGARDING WHETHER THERE IS REMISSION OF SUCH LIABILITY BY THE TRADE C REDITORS AND IN THAT REGARD, WE REFER TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. HOTLINE ELECTRONICS LTD. (2012) 80 CCH 156 (DEL) (H C) WHERE IT WAS HELD THAT: 'IN THE PRESENT CASE, THE AO HAS NOT ISSUED ANY NOT ICE TO THE CREDITORS TO CONFIRM FROM THEM WHETHER THEY HAVE GIVEN UP THEIR DUES FROM THE ASSESSEE. IT MUST BE REMEMBERED THAT THE DEBTS WERE NOT WRITT EN BACK IN THE ASSESSEE'S ACCOUNTS AS FOUND BY THE TRIBUNAL. EXCEP T FOR THE FACT THAT THE AMOUNTS WERE OUTSTANDING, THERE WAS NO MATERIAL OR EVIDENCE TO SHOW THAT THERE WAS REMISSION OR CESSATION OF LIABILITY. IT I S THE ASSESSING OFFICER WHO ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 14 HAS INVOKED SECTION 41(1). IT IS HE WHO HAS STATED THAT THERE WAS A REMISSION OR CESSATION OF THE ASSESSEE'S LIABILITY. IT WAS, T HEREFORE, INCUMBENT UPON HIM TO MAKE INQUIRY AND BRING ON RECORD MATERIAL. BY VI RTUE OF THE POWERS VESTED IN HIM UNDER SECTION 133(6) OR ANY OTHER PROVISION OF THE INCOME-TAX ACT TO SEEK CLARIFICATION OR CONFIRMATION FROM THE CREDITO RS, THE SAID MATERIAL/EVIDENCE COULD HAVE BEEN ASCERTAINED. 3.5 IN THE INSTANT CASE, IT IS THEREFORE IMPERATIVE ON THE PART OF THE AO TO CARRY OUT NECESSARY ENQUIRIES WITH THE TRADE CREDIT ORS INDEPENDENTLY IN ORDER TO DETERMINE WHETHER THERE IS REMISSION OF LIABILIT Y OR NOT. WE, ACCORDINGLY, SET-ASIDE THE MATTER TO THE FILE OF THE AO TO CARRY OUT THE NECESSARY EXAMINATION/ENQUIRY FROM THE TRADE CREDITORS AND EX AMINE THE MATTER A FRESH AS PER LAW AND AFTER PROVIDING REASONABLE OPP ORTUNITY TO THE ASSESSEE. NEEDLESS TO SAY, THE ASSESSEE SHALL COOPERATE AND P ROVIDE ALL RELEVANT INFORMATION AND LATEST CONTACT DETAILS OF THE CREDI TORS SO THAT THE MATTER MAY BE DECIDED EXPEDITIOUSLY. THE GROUND IS THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 4. NOW WE TAKE UP THE GROUND NO.3 OF THE ASSESSEES APPEAL. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO OBSERVED THAT ASSESSEE PAID PROFESSIONAL FEE OF RS.50,000/- TO M/S KALANI & CO. ON WHICH TAX IS NOT DEDUCTED AT SOURCE U/S 194J. HE THEREFORE, MADE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 4.1 THE LD CIT(A) HAS HELD THAT KERALA HIGH COURT I N CASE OF THOMAS GEORGE MUTHOOT VS. CIT HAS HELD THAT SECOND PROVISO TO SEC TION 40(A)(IA) INTRODUCED W.E.F. 01.04.2013 IS ONLY PROSPECTIVE AND FURTHER T HAT EVEN IF THE AMOUNT IS ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 15 PAID, NO RELIEF FROM THE PROVISION OF SECTION 40(A) (IA) CAN BE GIVEN AND HER RELEVANT FINDINGS ARE REPRODUCED AS UNDER: I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSME NT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE THIRD GROUND RELATES TO DISA LLOWANCE OF RS. 50,000/- BY APPLYING PROVISIONS OF SECTION 40(A)(IA). THE AMOUN T RELATES TO PAYMENTS MADE TO KALANI & COMPANY THERE IS NO DISPUTE THAT THE A PPELLANT HAD NOT DEDUCTED THE TDS AND IN FACT BEFORE ASSESSING OFFICER THEY S UBMITTED THAT IT WAS AN INADVERTENT EVER(ERROR). IN THE PRESENT PROCEEDING S IT IS PLEASED(PLEADED) THAT M/S KALANI & COMPANY IS AN INCOME TAX ASSESSEE AND HAS INCLUDED THE INCOME OF RS. 50,000/- IN ITS RETURN OF INCOME AND COPY OF CA CERTIFICATE WAS FILED BEFORE THE AO. THE ASSESSEE HAS TAKEN A PLEA THAT SINCE THE AMOUNT S OF WHICH TDS HAD TO BE DEDUCTED HAVE BEEN SHOWN AS INCOME BY THE RECIPIEN TS, PROVISIONS OF SECTION 40(A)(IA) WILL NOT BE APPLICABLE. I HAVE DULY CONSI DERED THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. THE A R RELIED ON THE DECISION OF HONBLE ITAT, JAIPUR IN THE CASE OF GIRDHARILAL BHA RGOTI DATED 10.04.2015. IT WAS OBSERVED THAT THE HONBLE ITAT HAS NOT DECIDED THE ISSUE ON MERITS AND OBSERVED THAT DIFFERENT COURTS HAVE TAKEN DIFFERENT VIEWS ON THE ISSUE, THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. THE CASE WAS DECIDED I N FAVOUR OF THE APPELLANT. THE LD CIT(A) HAS FURTHER RELIED UPON THE DECISION OF THE HONBLE P&H HIGH COURT IN THE CASE OF P.M.S. DIESELS VS. CIT (2015) 277 CTR 491, HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (2013) 216 TAXMAN 258 (CAL.), HONBLE HIGH COURT OF HIMACHAL PRADESH IN THE CASE OF PALAM GAS SERVICES VS. CIT (2014) 89 CCH 0123 HPHC/(2015)370 ITR 0740 (HP) AND ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 16 JUDGEMENT OF HONBLE KERALA HIGH COURT IN THE CASE OF THOMAS GEORGE MUTHOOT VS. CIT KOTTAYAM 2015 (63 TAXMANN.COM 99) W HERE IT HAS BEEN CLEARLY HELD THAT SECOND PROVISO TO SECTION 40(A)( IA) INTRODUCED WITH EFFECT FROM 01.04.2013 IS ONLY PROSPECTIVE. IN VIEW OF TH E ABOVE, THE DISALLOWANCE U/S 40(A)(IA) WAS SUSTAINED. 4.2 THE LD AR SUBMITTED THAT SECOND PROVISO TO SEC TION 40(A)(IA) INSERTED BY FINANCE ACT, 2012 W.E.F. 01.04.2013 PROVIDES THAT W HERE AN ASSESSEE FAILS TO DEDUCT TAX ON THE SUM PAID TO THE RESIDENT BUT SUCH RESIDENT PAYEE HAS FURNISHED THE RETURN AND HAS PAID THE TAX DUE ON TH E INCOME DECLARED BY HIM THEN IT WILL BE DEEMED THAT ASSESSEE HAS DEDUCTED A ND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN BY THE RESI DENT PAYEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DT. 03.03.2015 HAS SUBMITTED THE CA CERTIFICATE CERTIFYING THAT THIS A MOUNT HAS BEEN CONSIDERED BY THE PAYEE IN ITS RETURN OF INCOME. THE SECOND PR OVISO TO SECTION 40(A)(IA) INSERTED W.E.F. 01.04.2013 HAS RETROSPECTIVE EFFECT AS HELD BY DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PVT . LTD. (2015) 377 ITR 0635. FURTHER, RAJASTHAN HIGH COURT IN CASE OF CIT VS. HA RISH CHAND AHUJA 125 DTR 184 WITH REFERENCE TO AMENDMENT MADE BY THE FA, 201 0 IN SECTION 40(A)(IA) HAS HELD THAT THE AMENDMENT IS CURATIVE IN NATURE A ND THE SAME IS TO BE HELD RETROSPECTIVE. HOWEVER, KERALA HIGH COURT IN CASE O F THOMAS GEORGE MUTHOOT VS. CIT HAS HELD THAT SECOND PROVISO TO SECTION 40( A)(IA) IS PROSPECTIVE IN NATURE. THUS, WHEN TWO VIEWS ARE POSSIBLE ON AN ISS UE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFERRED AS HELD BY SUPREME COURT IN CASE OF CIT VS. VEGETABLE PRODUCTS LTD. 88 ITR 192. ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 17 THE LD AR FURTHER PLACED RELIANCE ON THE FOLLOWING CASES WHERE IT IS HELD THAT ANY AMENDMENT MADE IN THE ACT WHICH IS INTENDED TO REMOVE UNINTENDED AND UNDUE HARDSHIP SHOULD BE GIVEN RETROSPECTIVE EFFECT :- CIT VS. VATIKA TOWNSHIP PVT. LTD. 367 ITR 466/ 109 DTR 33 (SC) ALLIED MOTORS PVT. LTD. VS. CIT 224 ITR 677 (SC) CIT VS. ALOM EXTRUSIONS LTD. 319 ITR 306 (SC) 4.3 THE LD DR RELIED UPON THE ORDER OF THE LOWER AU THORITIES. 4.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. REGARDING RETROSPECTIVE APPLICABILITY O F SECOND PROVISO TO SEC. 40(A)(IA) INTRODUCED BY THE FINANCE ACT 2012, RECEN TLY THE COORDINATE BENCH IN CASE OF KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIR CLE-6, JAIPUR ITA NO. 172/JP/16 DATED 03.08.2016 HAS HELD THE SECOND PROV ISO TO SEC. 40(A)(IA) TO BE RETROSPECTIVE IN NATURE. THE RELEVANT FINDINGS ARE AS UNDER: 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE HONBLE SUPREME COURT IN HINDUSTAN COCA COLA BEVERAGE PVT. LTD (SUPRA) HAS HELD THAT WHERE DEDUCTEE, RECIPIENT OF INCOME, HAS ALREADY PAID TAXES ON AMOUNT RECEIVED FROM DEDUCTOR, DEPARTMENT ONCE AGAIN CANNOT RECOVER TAX FROM DEDUCTOR ON SAME INCOME BY TREATIN G DEDUCTOR TO BE ASSESSEE- IN-DEFAULT FOR SHORTFALL IN ITS AMOUNT OF TAX DEDUC TED AT SOURCE. 2.6 THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN CASE OF PMS DIESEL (SUPRA) IS IN THE CONTEXT OF APPLICABILITY O F PROVISIONS OF SECTION 40A(IA) TO AMOUNT PAID/PAYABLE DURING THE FINANCIAL YEAR AND T HUS DOESNT SUPPORT THE CASE OF THE REVENUE. 2.7 REGARDING DECISION OF HONBLE KERALA HIGH COURT S DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT(SUPRA) AND HONBLE DELHI HIGH COURT IN CASE OF ANSAL LAND TOWNSHIP PVT. LTD. (SUPRA), THERE ARE CONFLICT ING DECISIONS ON THE ISSUE OF ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 18 RETROSPECTIVITY OF SECOND PROVISIO TO SECTION 40A(I A). THE QUESTION THAT ARISES FOR CONSIDERATION IS WHERE THERE IS NO DECISION OF A JU RISDICTIONAL HIGH COURT AND THERE ARE CONFLICTING VIEWS OF THE DIFFERENT HIGH C OURT, WHICH VIEW SHOULD BE FOLLOWED. IN THIS REGARD, WE DRAW SUPPORT FROM T HE JUDGEMENT OF HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. (1972) 88 ITR 192 (SC) WHEREIN THE HONBLE SUPREME COURT HAS LAID DOWN THE PRINCIPLE THAT F TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADO PTED. RECENTLY, AN IDENTICAL MATTER CAME UP BEFORE THE COORDINATE RAIP UR BENCH IN THE CASE OF RKP COMPANY VS. ITO WARD-1, KORBA IN ITA NO. 106/RP R/2016 DATED 24.06.2016 WHEREIN THE COORDINATE BENCH HAS HELD THE SECOND PR OVISO TO SECTION 40A(IA) TO BE RETROSPECTIVE IN NATURE NOTING THE CONFLICTING D ECISIONS OF HONBLE KERALA HIGH COURT AND HONBLE DELHI HIGH COURT AND FOLLOWI NG THE PRINCIPLES LAID DOWN IN CASE BY THE HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. 2.8 IN VIEW OF THE ABOVE DISCUSSIONS, WE REMIT THE MATTER TO THE FILE OF THE AO FOR LIMITED VERIFICATION OF FORM NO. 26A PRESCRIBED UNDER RULE 31ACB ON THE ASPECT AS TO WHETHER RECIPIENT OF PAYMENT HAS INCLU DED THE SAME IN THEIR COMPUTATION OF BUSINESS INCOME OFFERED TO TAX AND, IF FOUND TO BE SO, DELETE THE DISALLOWANCE IN QUESTION. WITH THESE DIRECTIONS, T HE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 4.2 IN LIGHT OF ABOVE DECISION TAKEN BY THE COORDIN ATE BENCH WHICH EQUALLY APPLIES TO THE FACTS OF THE PRESENT CASE, RESPECTFU LLY FOLLOWING THE SAME AND GIVEN THAT THE RECIPIENT OF INCOME M/S KALANI & CO HAS INCLUDED THE INCOME OF RS. 50,000/- IN ITS RETURN OF INCOME AND A COPY OF CA CERTIFICATE WAS FILED ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 19 BEFORE THE AO, WE DELETE THE DISALLOWANCE IN QUESTI ON. HENCE, GROUND NO. 3 OF THE ASSESSEES APPEAL IS ALLOWED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17/1 1/2016. SD/- SD/- ( A.D. JAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 17/11/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S G.B. IMPEX , JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD 5(4), JAIPUR 3. VK;DJ VK;QDR@ CIT II, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-II, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.430/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO.430/JP/16 M/S G.B. IMPEX, JAIPUR VS. ITO WARD 5(4), JAIPUR 20