Manoj Singh, Kolkata V. DCIT, CIR-51, KOLKATA, Kolkata

ITA 455/KOL/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9577 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 04-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2015
• Court: TRIBUNAL
• Department Lawyers: ARVINDAM BHATTACHARYA
• Assessee Lawyers: V N PUROHIT
• Keywords: Depreciation; Onus to prove
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAI NI, AM ./ ITA NO.455/KOL/2015 ( / ASSESSMENT YEAR:2007-2008) MANOJ SINGH, 47, B.T.ROAD, KHARDAH, 24 PGS (N), KOLKATA-700116 VS. DCIT, CIR-51/KOL, UTTARAPAN, KOLKATA-700054 ./ ./PAN/GIR NO.: ALTPS 9206 J ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI V.N.PUROHIT, ADVOCATE REVENUE BY : SHRI ARVINDAM BHATTACHARYA, JCIT / DATE OF HEARING : 03/01/2017 /DATE OF PRONOUNCEMENT 20/01/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAIN ING TO THE ASSESSMENT YEAR 2007-08, IS DIRECTED AGAINST THE OR DER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-15, KOLKATA, I N APPEAL NO.252/CIT(A)-15/14-15/CIR-51/KOL, DATED 23.02.2015 , WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFI CER (AO) UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961, (IN SHOR T THE ACT), DATED 29.12.2009. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME OF RS.8,97,213/- ASESSEES CASE WAS SELECTED FOR SCRUTINY U/S.143(3) AND THE AO HAS COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT BY M AKING THE ADDITION ON ACCOUNT OF REMISSION OF LIABILITY U/S.41(1) AT RS.9,00,690/-. THE ASSESSEE RUNS A TRANSPORT BUSINESS UNDER THE NAME M /S MA KALI ITA NO.455/15 MANOJ SINGH 2 TRANSPORT CORPORATION AND A TRADING BUSINESS OF AUT OMOBILE PARTS UNDER THE NAME M/S MA KALI AUTOMOBILE. WHILE MAKING THE A SSESSMENT U/S.143(3) OF THE ACT, THE AO MADE AN ADDITION OF R S.9,00,690/- OBSERVING THE FOLLOWINGS :- ASSESSEE CLAIMED TO HAVE PAID RS.9,00,690/- DURING THE RELEVANT PREVIOUS YEAR. THE A/ R. OF THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF THE PAYMENTS TO THE OUTSTANDING SUNDRY C REDITORS MADE DURING THE YEAR. THE A.R. OF THE ASSESSEE FILED DUR ING THE COURSE OF HEARING A COPY OF LEDGER A/C UNDER THE HEAD VEHICLE OPERATING EXPENSES WHICH SHOWS PAYMENTS IN CASH DURING THE PE RIOD FROM 10.04.2006 TO 30.03.2007. WHEN THE ASSESSEE WAS ASK ED TO PRODUCE THE EVIDENCES OF THOSE PAYMENTS, THE A.R OF THE ASSESSEE PRODUCED SOME SELF MADE VOUCHERS SHOWING PAYMENTS T O SOME PERSONS WHO ARE CLAIMED TO BE THE DRIVERS TO WHOM T HE AMOUNT WAS PAYABLE IN EARLIER YEARS. THE LIABILITIES TO THOSE DRIVERS WERE BROUGHT FORWARD 'AS CLAIMED BY THE ASSESSEE' FROM THE F.Y 2 004-05. THE ASSESSEE FAILED TO FURNISH THE NAMES & ADDRESSES OF THE PERSONS TO WHOM PAYMENTS WERE MADE. THE ASSESSEE CLAIMED THAT THE PAYMENTS WERE OUTSTANDING TO THE DRIVERS WHO TRANSP ORTED THE GOODS TO DIFFERENT PLACES IN THE F.Y.2004-05 AND TH E AMOUNT WERE PAYABLE TO THEM. THE NATURE OF PAYMENTS WERE SHOW T HAT THE PAYMENTS WERE MADE IN CASH AND MOST OF THE PAYMENTS ARE WITHIN RS. 5000/-. IT IS AGAINST THE HUMAN PROBABILITY THA T THE DRIVERS WHO LIVE ON THEIR PETTY INCOME WAITED MORE THAN ONE YEA R TO RECEIVE THEIR REMUNERATION AND THE PAYMENTS DURING THE RELEVANT P REVIOUS YEARS IN NUMBER OF INSTALLMENTS TO SAME PERSONS. IN REPLY TO THE SHOW CAUSE LETTER DATED 16.12.09 THE ASSESSEE STATED THA T THE AMOUNT CONSISTED OF REMUNERATION OF DRIVERS AND IT INCLUDE D LORRY HIRE CHARGES PAYABLE TO LORRY OWNERS THROUGH THEIR DRIVE RS AND THE PAYMENTS DELAYED MORE THAN ONE YEAR DUE FINANCIAL S TRINGENCY. BUT THE ASSESSEE FAILED TO GIVE THE NAMES AND ADDRESSED OF THOSE PERSONS WHO WERE THE STATED TO BE THE OWNERS OF THE VEHICLES. THE ASSESSEE ALSO FAILED TO SPECIFY WHETHER ANY T.D.S W AS MADE AGAINST THE THOSE PAYMENTS. UNDER THE CIRCUMSTANCES I AM OF THE OPINION THAT THE ASSESSEE FAILED TO JUSTIFY THAT TH ERE WAS ANY GENUINE LIABILITY AND THE PAYMENTS WERE ACTUALLY PA ID TO ANY PERSONS. THIS IS ACTUALLY A UNILATERAL REMISSION OF TRADING LIABILITY WHICH NEVER EXISTED. IT THEREFORE ATTRACTS PROVISIO N UNDER SECTION 41(1) OF THE IT. ACT 1961. I THEREFORE, TREAT AN AM OUNT OF RS.9,00,690/- AS THE PROFIT OF BUSINESS OF THE ASSE SSEE OF THE RELEVANT F.Y.AND ADD TO THE TOTAL INCOME. ITA NO.455/15 MANOJ SINGH 3 3. AGGRIEVED FROM THE ORDER OF THE AO, ASSESSEE FIL ED AN APPEAL BEFORE THE CIT(A), WHO DISMISSED THE APPEAL FILED B Y THE ASSESSEE OBSERVING THE FOLLOWINGS :- IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ADDI TION OF RS. 9,00,690/- U/S 41(1) OF THE ACT. THE ASSESSEE HAD A N OPENING BALANCE OF SUNDRY CREDITORS AT RS. 28,99,544/- AND OUT OF THE SAME THE ASSESSEE HAD CLAIMED TO HAVE PAID OUT RS. 9,00, 6901- DURING THE YEAR TO ITS CREDITORS IN CASH BELOW RS. 5000/- AT A TIME. THE AO HAS HELD ONLY THIS SUM OF RS.9,00,690/- AS CESSATIO N OF LIABILITY OUT OF THE TOTAL OPENING SUNDRY CREDITORS BALANCE OF RS .21,55,581/- THE A.O. DISPUTED THE POSSIBILITY OF THE SUNDRY CREDITS AS HAVING BEEN DISCHARGED AND THE A.O. HELD THAT THE ASSESSEE IS U NABLE TO PRODUCE THE NAMES AND ADDRESSES OF THE VEHICLE OWNE RS WHO WERE SO PAID OFF. THE CLAIM OF THE ASSESSEE THAT IT CAN DRAW SUPPORT FROM THE SUPREME COURT DECISION OF SUGAULI SUGAR WORKS (P) L TD 236 ITR 518 (SC) IS MISPLACED. IT IS NO DOUBT TRUE THAT IT WAS HELD BY THE HON'BLE SUPREME COURT IN THE AFORESAID CASE THAT OB TAINING BENEFIT BY THE ASSESSEE BY VIRTUE OF REMISSION OR CESSION O F LIABILITY IS A CONDITION PRECEDENT FOR THE APPLICATION OF SECTION 41 (1) AND THE MERE FACT THAT ASSESSEE HAS MADE AN ENTRY OF TRANSF ERRING ITS ACCOUNTS UNILATERALLY WILL NOT ENABLE THE DEPARTMEN T TO SAY THAT SECTION 41 (1) WOULD APPLY. SUPREME COURT WAS 1965- 66 AND EXPLANATION 1 TO SECTION 41 (1) INSERTED BY THE FIN ANCE ACT NO. 2, 1996 WITH EFFECT FROM 1-4-1997 WAS NOT APPLICABLE. HOWEVER WHEN THE ASSESSEE CLAIMS TO HAVE PAID THE S UNDRY CREDITORS AND WHEN THE A.O. HAS RAISED SPECIFIC QUE RIES ABOUT THE SAME, IT WAS INCUMBENT ON THE ASSESSEE TO ADDUCE EV IDENCE AND TO PRESENT THE DETAILS BEFORE THE A.O. IT IS ALL THE M ORE NECESSARY TO VERIFY THE DETAILS, WHEN THE ASSESSEE CLAIMS TO HAV E LIQUIDATED THE LIABILITY IN CASH. IN THE ABSENCE OF ANY VERIFIABLE RECORD, THE A.O. HAD NO OPTION BUT TO DISBELIEVE THE CLAIM. THE A.O. HELD THAT IT IS NOT POSSIBLE TO BELIEVE THAT THE PETTY DRIVERS AND LORR Y OWNERS WOULD HAVE WAITED FOR THEIR DUES FOR SO LONG AND IT IS NO T POSSIBLE TO ACCEPT THAT THE LIABILITY OF OVER RS. 9 LAKHS WAS LIQUIDAT ED BY WAY OF CASH PAYMENT ALL BELOW RS. 5000/- IN EACH CASE WITH NO N AMES OR ADDRESSES AVAILABLE WITH THE ASSESSEE. IN THE APPEL LATE PROCEEDINGS ALSO THE ASSESSEE IS UNABLE TO PRODUCE ANY EVIDENCE. THEREFORE THE ADDITION OF RS. 9,00,690/- IS CONFIRM ED AND THE ASSESSEE'S GROUND OF APPEAL NO. 2 IS DISMISSED. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUND S OF APPEAL :- ITA NO.455/15 MANOJ SINGH 4 1. THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE A RBITRARY, UNREASONED, INVALID AND ERRONEOUS TO THE EXTENT TO WHICH THEY ARE AGAINST THE INTERESTS OF THE APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO MAKE AN ENHANCE MENT IN THE MATTER OF DEPRECIATION ALLOWANCE WITHOUT GIVING ANY PROPER NOTICE TO THE APPELLANT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.9,00,6 90/- MADE BY THE AO U/S.41(1) OF THE INCOME TAX ACT, 1961. 4.1 IN THIS APPEAL, THE ASSESSEE HAS RAISED THREE G ROUNDS OF APPEAL, BUT AT THE TIME OF HEARING THE MAIN GRIEVANCE OF TH E ASSESSEE HAS BEEN CONFINED TO GROUND NO.3 ONLY AND OTHER GROUNDS WERE NOT PRESSED. THE MAIN GRIEVANCE OF THE ASSESSEE IN THIS APPEAL, IS ADDITION MADE BY THE AO AT RS.9,00,690/- TREATING T HE REMISSION OF TRADING LIABILITY U/S.41(1) OF THE I.T.ACT. 4.2. LD. AR FOR THE ASSESSEE HAS SUBMITTED BEFORE U S THAT THE AO HIMSELF HAS DISCUSSED AT PARAGRAPH 4 OF THE ASSESSM ENT ORDER THAT THE AMOUNT OF RS.9,00,690/- UNDER CONSIDERATION WAS BRO UGHT FORWARD IN THE LIST OF SUNDRY CREDITORS FROM LAST YEAR. THIS IS NO T A NEW CREDIT IN THIS YEAR. THE A.O. ALSO HAS DISCUSSED THAT AS PER THE ACCOUNT S, THIS AMOUNT WAS PAID BY THE ASSESSEE, TO THE CREDITORS DURING THE Y EAR UNDER CONSIDERATION. THERE ARE EVIDENCES IN THAT REGARD, LIKE ENTRIES IN THE CASH BOOK, VOUCHERS ETC. THE A.O. HAS DISBELIEVED THE PA YMENT ON THE GROUND THAT THE NAMES AND ADDRESSES OF THE PAYEES COULD NO T BE FURNISHED AND THAT THE PAYMENTS WERE IN 'CASH' AND EVIDENCED BY S ELF-MADE VOUCHERS ONLY. THE APPELLANT HAS ALREADY EXPLAINED BEFORE TH E A.O. THAT THE CREDITORS WERE MOSTLY DRIVERS OF TRUCKS WHOSE PAYME NTS REMAINED ITA NO.455/15 MANOJ SINGH 5 WITHHELD IN PAST ON ACCOUNT OF FUND CRUNCH. HOWEVER , THE A.O. HELD THAT THERE WAS ACTUALLY UNILATERAL REMISSION OF TRADING LIABILITY WHICH NEVER EXISTED. THAT IS WHY HE ADDED BACK THE AMOUNT U/S 4 1(1) OF THE ACT. IN THIS CONNECTION, IT HAS GOT TO BE ARGUED THAT THE L EARNED A.O. IS OF THE VIEW THAT THE LIABILITY TO THE EXTENT OF RS.9,00,690/- N EVER EXISTED. SINCE THESE REPRESENT CREDIT ENTRIES, HE SHOULD HAVE DISALLOWED THEM U/S 68 OF THE ACT IN THE YEAR IN WHICH THESE LIABILITIES FIRST CAME I NTO THE BOOKS. IT IS AN ADMITTED FACT THAT THESE LIABILITIES HAVE BEEN BROU GHT FORWARD FROM THE EARLIER YEARS. HENCE, THEY CANNOT BE ADDED BACK AS' 'BOGUS CREDIT ENTRIES' IN THIS YEAR; IF, ACCORDING TO THE LEARNED A.O., TH E LIABILITIES NEVER EXISTED, THEN THERE IS NO QUESTION' OF REMISSION OF THE SAID LIABILITY. SECTION 41 (1) OF THE ACT APPLIES ONLY WHEN THERE IS A CESSATION O R REMISSION OF AN EXISTING LIABILITY, WHICH WAS ALLOWED AS DEDUCTION IN THIS OR IN ANY EARLIER YEAR AND THE ASSESSEE DERIVED BENEFIT TO THAT EXTEN T. IT IS FOR THE A.O. TO ESTABLISH ALL THESE POINTS FOR THE PURPOSE OF APPLI CABILITY OF SECTION 41(1) OF THE ACT. IN THIS PARTICULAR CASE, THE LEARNED A. O. HIMSELF SAYS THAT THERE WAS NO EXISTING LIABILITY BUT HE CONTRADICTS HIMSEL F SAYING THAT THERE WAS CESSATION OF THE LIABILITY, WHICH ARE CONTRADICTORY ARGUMENTS. IT IS FURTHER BEING SUBMITTED THAT 'PAYMENT' IS NOT 'CESSATION' O F THE LIABILITY. FURTHERMORE, THE APPELLANT (APPELLANT'S BUSINESS) D ID NOT DERIVE ANY BENEFIT OUT OF THE ALLEGED CESSATION/ REMISSION OF THE LIABILITY IN AS MUCH AS NEITHER THE AMOUNT UNDER CONSIDERATION HAS BEEN BRO UGHT TO THE BOOKS BY WAY OF WRITING BACK OF THE LIABILITY NOR AS CASH IN TRODUCED. HENCE, ALL THE REQUIREMENTS FOR APPLICATION OF SECTION 41 (1) OF T HE ACT, ARE NOT FULFILLED ITA NO.455/15 MANOJ SINGH 6 IN THIS CASE AND HENCE, THE ADDITION U/S 41 (1) OF THE ACT IS SURELY UNWARRANTED AND ILLEGAL. FURTHERMORE, LD. AR SUBMITTED THAT AS PER THE A.O. THIS IS ACTUALLY A UNILATERAL REMISSION OF TRADING LIABILITY. IN THIS CONNECTION, RELIANCE IS BEING PLACED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF SUGAULI SUGAR WORKS (P) LTD. [236 ITR 518], IN WHICH CASE I T HAS BEEN HELD THAT ANY UNILATERAL ACTION ON THE PART OF THE ASSESSEE L IKE WRITING BACK THE LIABILITY AMOUNT IN HIS BOOKS DOES NOT AMOUNT TO CE SSATION OR REMISSION OF THE LIABILITY. HENCE, THERE CANNOT AT ALL, BE ANY C ASE OF CESSATION OR REMISSION OF LIABILITY IN THIS CASE AND HENCE, THE PROVISIONS OF SECTION 41 (1) OF THE ACT, WOULD NOT BE APPLICABLE. HERE, ACCO RDING TO THE BOOKS OF ACCOUNTS OF THE APPELLANT, THERE WERE PAYMENTS TO T HE CREDITORS. THERE ARE ALSO EVIDENCES IN THAT REGARD LIKE CASH VOUCHERS. S IMPLY ON THE BASIS OF THE FACT THAT THE ASSESSEE COULD NOT IMMEDIATELY FU RNISH THE NAMES AND ADDRESSES OF THE PAYEES, THE A.O. HAS COME TO THE C ONCLUSION THAT THERE WAS NO ACTUAL PAYMENT. THERE IS NO POSITIVE EVIDENC E IN SUPPORT OF HIS SUPPOSITION IN THIS REGARD. THE SUPREME COURT HAS H ELD IN THE CASE OF DAULAT RAM RAWATMULL [87 ITR 349] THAT THE ONUS TO PROVE THAT THE APPARENT IS NOT REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. HERE, THE LEARNED A. O. HAS ACTED ON THE BASIS OF HIS SUPPOSI TION ONLY WITHOUT PROVING HIS CONTENTION ALTHOUGH THE ONUS IN THAT RE GARD WAS WITH HIM TO DO SO. FURTHERMORE, THE ENTIRE ADDITION IS BASED ON TH E SURMISE OR CONJECTURE THAT THERE WAS NO ACTUAL PAYMENT OF THE AMOUNTS. TH E SUPREME COURT ITA NO.455/15 MANOJ SINGH 7 HAS FURTHER HELD IN THE CASE OF DHAKESWARI COTTON M ILLS LTD. [26 ITR 775] THAT AN INCOME TAX ASSESSMENT CANNOT BE BASED ON AN Y CONJECTURE OR SURMISE. 4.3. ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS REITERATED THE STAND TAKEN BY THE AO, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 4.4. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMI SSIONS OF LD. AR FOR THE ASSESSEE. AS THE PROPOSITION CANVASSED BY LD. AR FO R THE ASSESSEE ARE SUPPORTED BY THE FACTS NARRATED BY HIM ABOVE. AS LD . AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD OLD LIABILITY IN HIS BALAN CE SHEET AND IN THE YEAR UNDER CONSIDERATION HE PAID TO THE CREDITORS. THE P AYMENT HAD BEEN MADE BY THE ASSESSEE BELOW RS.20,000/-, THEREFORE, TDS PROVISION DO NOT APPLY TO THE ASSESSEE. LD. AR POINTED OUT THAT LIAB ILITY ALREADY INCURRED BY THE ASSESSEE AND IT WAS GIVING IN THE BOOKS OF ACCO UNT AS AN OPENING BALANCE AND THE ASSESSEE HAS PAID THESE LIABILITY D URING THE YEAR UNDER CONSIDERATION. THE AO DID NOT REJECT THE BOOKS OF A CCOUNTS OF THE ASSESSEE ALSO AND THE AO TREATED RS.9,00,690/- AS A CESSATION OF LIABILITY AS PER SECTION 41(1) OF THE ACT, WHICH IS ENTIRELY WRONG. LD. AR ALSO ARGUED THAT SINCE THESE LIABILITY WERE THERE IN THE BOOKS OF ACCOUNT AND HAVE BEEN BROUGHT FROM THE EARLIER YEAR, THEREFORE, THE ASSESSEE CANNOT ADDED BACK AS BOGUS CREDIT ENTRIES IN THE YEAR UNDE R CONSIDERATION. IF ACCORDING TO THE AO, THE LIABILITIES NEVER EXISTED THEN THERE IS NO QUESTION OF REMISSION OF LIABILITY. SECTION 41(1) OF THE ACT APPLIES ONLY WHEN THERE IS ITA NO.455/15 MANOJ SINGH 8 A CESSATION OR REMISSION OF AN EXISTING LIABILITY, WHICH WERE ALLOWED AS DEDUCTION IN THIS OR IN ANY EARLIER YEAR AND THE AS SESSEE DERIVED BENEFIT TO THAT EXTENT. THE ASSESSEE MADE PAYMENT TO THE CREDI TORS AND THERE ARE EVIDENCE IN THIS REGARD LIKE CASH VOUCHERS DULY SIG NED BY THE RECIPIENT. THEREFORE, CONSIDERING THE FACTUAL POSITION AND THE PRECEDENT CITED BY LD. AR FOR THE ASSESSEE, WE ARE OF THE VIEW THAT THE AD DITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A), NEEDS TO BE DELETE D. ACCORDINGLY, WE DELETE THE ADDITION. 4.5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20/01 /2017. S D/ - (S.S.VISWANETHRA RAVI) S D/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 20/01/2017 ' $%& /PRAKASH MISHRA , 0 . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, 1. / THE APPELLANT-MANOJ SINGH 2. / THE RESPONDENT.-DCIT, CIR.51, KOLKATA 3. 1 ( ) / THE CIT(A), KOLKATA. 4. 1 / CIT 5. 23 4 0056 , 56 , / DR, ITAT, KOLKATA 6. 4 78 / GUARD FILE. 2 0 //TRUE COPY//