M/s A.D.H. Agencies, Chandigarh V. DCIT, Chandigarh

ITA 449/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63926 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 23-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: TEJ MOHAN SINGH
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 449/CHD/2012 (ASSESSMENT YEARS : 2007-08) M/S A.D.H. AGENCIES, VS. THE D.C.I.T., # 193, SECTOR 45-A, CIRCLE 5(1), CHANDIGARH. CHANDIGARH. PAN: AABFA7269E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI N.K.SAINI, DR DATE OF HEARING : 11.09.2012 DATE OF PRONOUNCEMENT : 14.09.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 13.03.2012 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORD ER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW IN AS WELL AS ON FACTS IN UPHOLDING TH E ADDITION OF RS.2,84,568/- ON ACCOUNT OF FREIGHT PAYMENTS BEI NG MADE IN VIOLATION OF SECTION 40A(IA) OF THE ACT IN AS MU CH AS THERE WAS NO VIOLATION OF SECTION 40A(IA)OF THE ACT WHICH IS ARBITRARY & UNJUSTIFIED. 2. THAT IN ANY CASE, PROVISIONS OF SECTION 40(A)(IA) A RE ATTRACTED ONLY IN RESPECT OF AMOUNTS PAYABLE AND NOT ON THE A MOUNTS WHICH HAVE ACTUALLY BEEN PAID AND AS SUCH THE ADDIT ION UPHELD ON AMOUNTS ACTUALLY HAVING BEEN PAID IS ILLE GAL, ARBITRARY AND UNJUSTIFIED. 2 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN LAW IN AS WELL AS ON FACTS IN UPHO LDING ADDITION OF RS. 1,86,333/- TREATING SUNDRY CREDITOR S TO BE BOGUS AND RESORTING TO THE PROVISIONS OF SECTION 41(1) OF THE ACT CONSIDERING IT TO BE DEEMED PROFIT IN UTTER DISREGA RD OF THE EXPLANATIONS RENDERED WHICH IS ARBITRARY & UNJUSTIF IED. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDI NG THE ADDITION OF RS.1,40,000/- ON ACCOUNT OF DAMAGED STO CK WHICH IS ARBITRARY & UNJUSTIFIED. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN CHARGING INTEREST THE UNDER SECTIO NS 234-B & 234-C OF THE ACT WHICH IS NOT CHARGEABLE IN THE F ACTS OF THE CASE. 6. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS) IS ERRONEOUS, ARBITRARY, OPPOSED TO THE F ACTS OF THE CASE AND IS UNSUSTAINABLE IN LAW. 3. THE ISSUE IN GROUND NOS. 1 AND 2 RAISED BY THE A SSESSEE IS AGAINST THE ADDITION MADE BY INVOKING THE PROVISIONS OF SEC TION 40A(IA) OF THE ACT. THE ASSESSEE DURING THE YEAR UNDER CONSIDERAT ION HAD CLAIMED EXPENDITURE ON ACCOUNT OF FREIGHT PAYMENTS OF RS.2, 84,568/- OUT OF WHICH NO TAX WAS DEDUCTED AT SOURCE. THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT HELD T HE ASSESSEE TO BE IN DEFAULT AND MADE ADDITION OF RS.2,84,568/-. 4. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESS ING OFFICER. 5. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY POINTED OUT THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH OF VISHAKHAPATNAM REPORTED IN ACIT VS. MERILYN SHIPPIN G & TRANSPORTS[136 ITD 23(SB)(VISHAKHAPATNAM)]. 3 6 THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORD. THE ADDITION IN THE HANDS OF THE ASSESSEE IS MADE ON AC COUNT OF DISALLOWANCE OF FREIGHT PAYMENTS AMOUNTING TO RS.2,84,568/- BY I NVOKING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE ISSU E NOW STANDS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH OF VIS HAKHAPATNAM REPORTED IN ACIT VS. MERILYN SHIPPING & TRANSPORTS[ 136 ITD 23(SB)(VISHAKHAPATNAM)] WHEREIN IT WAS HELD AS UNDE R: WHERE THE AMOUNTS HAVE BEEN PAID DURING THE YEAR U NDER CONSIDERATION ITSELF AND NOTHING IS PAYABLE AT THE CLOSE OF THE Y EAR, NO DISALLOWANCE WAS WARRANTED UNDER SECTION 40(A)(IA) OF THE ACT FO R NON DEDUCTION OF TAX AT SOURCE OUT OF SUCH AMOUNT PAID DURING THE YE AR. 9. FOLLOWING THE ABOVE SAID PARITY OF REASONING, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE STAND OF THE ASSESS EE AND IN CASE THE SAID AMOUNTS HAVE BEEN PAID BY THE ASSESSEE DURING THE Y EAR UNDER CONSIDERATION, NO DISALLOWANCE IS WARRANTED OUT OF SAID PAYMENTS IN LINE WITH THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. REASONABLE OPPORTUNITY OF HEARING SHALL BE AFFORDED TO THE ASS ESSEE BY THE ASSESSING OFFICER FOR ADJUDICATING THE ISSUE. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 10. THE ISSUE IN GROUND NO.3 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.1,86,333/- MADE BY RESORTING TO THE PROVISIONS OF SECTION 41(1) OF THE ACT. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD SHOWN SUNDRY CREDITORS OF RS.1,86,333/ - WHICH ADMITTEDLY WERE BROUGHT FORWARD FROM THE PRECEDING YEAR. THE ASSESSEE FAILED TO FURNISH ANY CONFIRMATION IN RESPECT OF THE SAID CRE DITORS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OF FICER CONSEQUENTLY 4 INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT AND HOLDING THE SAID CREDIT TO BE TAXABLE, MADE ADDITION OF RS.1,86,333/ -. THE CIT (APPEALS) CONFIRMED THE SAME. 11. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIAN CE ON THE RATIO LAID DOWN ON THE UNDERMENTIONED CASES: 1) CIT VS. SITA DEVI JUNEJA [325 ITR 593 (P&H)] 2) UTTAM AIR PRODUCTS (P) LTD. VS. DCIT [99 TTJ 718 (DELHI) 3) NEW COMMERCIAL MILLS CO. LTD. VS. DCIT [125 TAXMAN 179 (AHD)(MAG)] 4) SHRI VARDHMAN OVERSEAS LTD. VS. ACIT [24 SOT 393 (DELHI)] 12. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT.SITA DEVI JUNEJA (SUPRA) HAD HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT IN THE ASSESSEE' S BALANCE-SHEET THE LIABI-LITIES PAYABLE TO THE SUNDRY CREDITORS BEEN S HOWN. SUCH LIABILITIES SHOWN IN THE BALANCE-SHEET INDICATED THE ACKNOWLEDG MENT OF THE DEBTS PAYABLE BY THE ASSESSEE. MERELY BECAUSE SUCH LIABI LITY WAS OUTSTANDING FOR THE LAST SIX YEARS, IT COULD NOT BE PRESUMED T HAT THE LIABILITIES HAD CEASED TO EXIST. THAT THERE WAS NO BILATERAL ACT OF THE ASSESSEE AND THE CREDITORS, WHICH INDICATED THAT THE LIABILITY HAD C EASED TO EXIST. THE ASSESSING OFFICER FAILED TO SHOW THAT IN ANY EARLIE R YEAR, ALLOWANCE OF DEDUCTION HAD BEEN MADE IN RESPECT OF ANY TRADING L IABILITY INCURRED BY THE ASSESSEE. IT WAS ALSO NOT PROVED THAT ANY BENEFIT W AS OBTAINED BY THE ASSESSEE CONCERNING SUCH TRADING LIABILITY BY WAY O F REMISSION OR CESSATION THEREOF DURING HE CONCERNED YEAR. SECTION 41 WAS N OT APPLICABLE AND THE DELETION OF ADDITION WAS JUSTIFIED. 13. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATIO N HAD DULY RECOGNIZED IT LIABILITY VIS--VIS SUNDRY CREDITOR T OTALING RS.1,86,333/- WHICH WERE BROUGHT FORWARD FROM THE PRECEDING YEAR. THE DISCLOSURE OF THE SAID LIABILITY IN THE BALANCE SHEET OF THE ASSE SSEE FOR THE YEAR ENDING 31.3.2007 REFLECTS THE ACKNOWLEDGEMENT OF DEBTS TO BE PAID BY THE ASSESSEE. IN VIEW THEREOF, WE FIND NO MERIT IN THE INVOCATION OF 5 PROVISIONS OF SECTION 41(1) OF THE ACT AND THE ADDI TION OF RS.1,86,333/- IS THUS DELETED. GROUND NO.3 RAISED BY THE ASSESSE E IS ALLOWED. 14. THE ISSUE IN GROUND NO.4 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.1,40,000/-. THE ASSESSEE HAD CLAIME D DEDUCTION ON ACCOUNT OF DAMAGED STOCK OF RS.1,40,000/- AND VALUE TO THAT EXTENT WAS REDUCED FROM THE CLOSING STOCK. THE PLEA OF THE AS SESSEE WAS THAT IT WAS DEALING IN SALE AND PURCHASE OF PLASTIC GRANULES, W HICH BECAME DIRTY AND WAS LYING WITH THE ASSESSEE FOR THE PAST SEVERAL YE ARS. AS THE SAID ITEMS WERE NOT SALEABLE, THE ASSESSEE HAD DEBITED THE SAI D STOCK OF ABOUT 1.881 MT VALUED AT RS.1,40,000/- BEING THE COST PRICE IN ITS ACCOUNTS. THE SAID CLAIM OF THE ASSESSEE WAS REJECTED BY THE ASSE SSING OFFICER AS THE ASSESSEE FAILED TO FURNISH BILL-WISE DETAILS OF THE DAMAGED STOCK FOR VERIFICATION BEFORE THE ASSESSING OFFICER. THE CIT (APPEALS) UPHELD THE DISALLOWANCE. THE LEARNED A.R. FOR THE ASSESSEE HA S DRAWN OUR ATTENTION TO THE DETAILS OF DAMAGED MATERIAL ALONGWITH COPIES OF THE PURCHASE BILLS PLACED AT PAGES 32 TO 55 OF THE PAPER BOOK. HOWEVE R, IN THE ABSENCE OF THE STOCK REGISTER IT IS NOT POSSIBLE TO EXACTLY PI NPOINT THE EXACT YEAR TO WHICH THE SAID DAMAGED STOCK RELATES. IT WAS STRES SED BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE OFFER MADE TO THE AS SESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS TO VERIFY THE EXISTENCE OF THE DAMAGED STOCK AT THE PREMISES OF THE ASSESSEE, WAS NOT VERIFIED B Y THE ASSESSING OFFICER. IN THE ENTIRETY OF THE FACTS AND CIRCUMST ANCES OF THE CASE AND IN THE ABSENCE OF THE REQUISITE DETAILS BEING MAINTAIN ED BY THE ASSESSEE IN THIS REGARD, THE CLAIM OF THE ASSESSEE IS NOT VERIF IABLE. THOUGH IT IS THE ASSESSEE, WHO IS THE BEST JUDGE OF THE QUALITY OF T HE GOODS AVAILABLE WITH HIM, BUT IN THE ABSENCE OF THE REQUISITE DETAILS/EV IDENCES BEING FILED BY THE ASSESSEE, WE RESTRICT THE DISALLOWANCE TO RS.70 ,000/- AND THE BALANCE 6 OF RS.70,000/- IS ALLOWED IN THE HANDS OF THE ASSES SEE. THE GROUND NO.4 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 15. THE GROUND NO.5 RAISED BY THE ASSESSEE AGAINST THE CHARGING OF INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT IS CONSEQUENTIAL AND HENCE THE SAME IS DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DAY OF SEPTEMBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14 TH SEPTEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7