Swapn Kumar Sarkar Prop. M/s Tarun Tools, Jamshedpur V. ACIT CIR-3, Jamshedpur

ITA 5/RAN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9691 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 11-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL J
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 05 / RAN / 2017 ASSESSMENT YEAR :2013-14 SHRI SWAPAN KUMAR SARKAR PROP. M/S TARUN TOOLS, TATA- KANDRA ROAD, ADITYAPUR, JAMSHEDPUR-831013 [ PAN NO.ADKPS 3837 L ] V/S . ACIT, CIRCLE-3, JAMSHEDPUR /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI DEVESH PODDAR, ADVOCATE /BY RESPONDENT SHRI P.K.MONDAL, JCIT-DR /DATE OF HEARING 07-01-2019 /DATE OF PRONOUNCEMENT 15-02-2019 / O R D E R PER BENCH:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2013-14 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-JA MSHEDPURS ORDER DATED 18.10.2016 PASSED IN CASE NO.136/JSR/2015-16, INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED 2. THE SOLE SUBSTANTIVE QUESTION THAT ARISES FOR OU R APT ADJUDICATION IN THE INSTANT APPEAL IS AS TO WHETHER BOTH THE LOWER AUTHORITIES HAVE RIGHTLY ITA NO.05/RAN/2017 A.Y. 2013-14 SH SWAPAN KR. SARKAR VS. ACIT CIR-3,JSR PAGE 2 INVOKED CESSATION OF LIABILITY ADDITION U/S 41(1) O F THE ACT REGARDING THE SUM OF RS.65.50 LAC CLAIMED AS SUNDRY CREDITORS LIA BILITY IN BOOKS OF ACCOUNT SINCE 2009-10. THEN IS NO DISPUTE BETWEEN T HE PARTIES THE VERY AMOUNT STOOD ALLOWED AS A LIABILITY IN THE PAST VER Y MANY ASSESSMENT YEARS INVOLVING BOTH SUMMARY AS WELL AS REGULAR ASS ESSMENTS. THE ASSESSEES BOOKS HAVE ALSO NOT INDICATED THE IMPUGN ED SUM AS A CASE OF CESSATION OF LIABILITY. WE NOTICE IN THIS BACKDR OP OF FACTS THAT TRIBUNALS CO-ORDINATE BENCH DECISION IN ACIT VS. M/S SOORAJMULL NAGARMULL IN ITA NO.1907/KOL/2016 DECIDED ON 20.07.2018 HOLDS AS UNDER:- 3. WE HAVE HEARD BOTH THE PARTIES REITERATING THEI R RESPECTIVE STANDS AGAINST AND IN SUPPORT OF IMPUGNED SECTION 41(1) REMISSION / CESSA TION OF LIABILITY INVOLVING THE AMOUNT OF RS.12,97,47,322/-. THE INSTANT PROCEEDING S APPEAR TO BE SECOND ROUND OF LITIGATION BETWEEN THE PARTIES QUA THE VERY ISSUE BEFORE THIS TRIBUNAL. EARLIER CO- ORDINATE BENCH HAD REMITTED THE INSTANT ISSUE BACK TO THE ASSESSING AUTHORITIES FOR AFRESH ADJUDICATION (SUPRA). 4. THE ASSESSING OFFICER TOOK UP CONSEQUENTIAL PROC EEDINGS. THERE IS NO DISPUTE ABOUT THE ASSESSEE TO HAVE BEEN CARRYING FORWARD TH E IMPUGNED LIABILITY IN ITS BOOKS FOR A TIME SPAN OF ALMOST THREE DECADES. IT IS AN A DMITTED FACT THAT THE DEPARTMENT DID NOT RAISE ANY ISSUE IN ALL INTERVENING ASSESSMENT Y EARS IN QUESTION. IT EMERGES THAT ASSESSING OFFICER HAD ISSUED SUMMONS TO SIX DIRECTO RS OF THE CONCERNED ENTITIES ON TEST CHECK BASIS IN THE INSTANT SECOND ROUND. FOUR OF THE SAID SIX ENTITIES DIRECTORS PUT IN APPEARANCE. THEY EXPRESSED THEIR IGNORANCE A BOUT ANY SUCH TRADING TRANSACTIONS WITH THE ASSESSEE IN THEIR RESPECTIVE STATEMENTS. THIS MADE THE ASSESSING OFFICER TO ISSUE A SHOW-CAUSE DATED 12.03 .2015 PROPOSING TO TREAT THE ABOVE SUM AS A MERE BOOK ENTRY AS CEASED U/S 41(1) OF THE ACT. THE ASSESSEE STATED REITERATED THE FACT OF HAVING CLAIMED THE IM PUGNED LIABILITY IN ITS BOOKS ALMOST THREE DECADES EARLIER FOR THE FIRST TIME FOLLOWED B Y SIMILAR TREATMENT IN THE INTERVENING ASSESSMENT YEARS WITHOUT ANY CHANGE RELEVANT IN FAC TS. ITS CASE WAS THAT NONE OF ITS CREDITORS HAD EVER REMITTED THEIR RESPECTIVE SUMS S O AS TO ATTRACT SECTION 41(1) OF THE ACT. IT HIGHLIGHTED THE FACT THAT ABOVE RANDOM CRED ITORS HAD SUPPORTED ITS CASE AS PER THEIR WRITTEN REPLIES IN RESPONSE TO THE RESPECTIVE SUMMONS. ALL THIS FAILED TO CONVINCE THE ASSESSING OFFICER. HE NOTICED THAT ONE OF THE S AID WRITTEN REPLIES DID NOT CONTAIN EVEN CONCERNED PARTYS SIGNATURES. HE THEREAFTER NA RRATED THE ENTIRE BACKDROP AND QUOTED FOUR OF THE TESTED CHECK PARTIES STATEMENTS TO CONCLUDE THAT THE IMPUGNED LIABILITY WAS NOT GENUINE ONE SO AS TO BE TAKEN AS SUBSISTING UPTO IMPUGNED ASSESSMENT YEAR. HE TOOK COGNIZANCE OF THE FACT THE THAT SAID FOUR DIRECTORS HAD EXPRESSED THEIR COMPLETE IGNORANCE ABOUT ANY CORRES PONDING TRANSACTIONS TO HAVE TAKEN PLACE IN THE PAST. RELEVANT INTERVENING PERIO D HAD ALSO NOT SEEN ANY PAYMENT FROM THE TAXPAYERS SIDE FOR A VERY LONG PERIOD OF TIME AS PER THE ASSESSING OFFICER. HE WAS THEREFORE OF THE VIEW THAT NEITHER THE CREDI TORS IN QUESTION HAD TAKEN ANY STEPS TO RECOVER THEIR RESPECTIVE DUES NOR THE INST ANT TAXPAYER HAD DISCHARGED EVEN A SINGLE PENNY OF THE IMPUGNED LIABILITY. ALL THIS FO RMED SUFFICIENT REASON FOR HIM TO OPINE THAT THE ASSESSEE HAD NO INTENTION TO PAY THA T MONEY IN QUESTION. HE ALLEGED CREDITORS NON CONFIRMATION AS WELL AS LACK OF THEIR IDENTITY IN HIS ASSESSMENT ORDER BASED ON AN ASSUMPTION THAT THEY HAD EITHER VANISHE D OR THERE WAS NO EFFORT AT THEIR ITA NO.05/RAN/2017 A.Y. 2013-14 SH SWAPAN KR. SARKAR VS. ACIT CIR-3,JSR PAGE 3 BEHEST TO CLAIM THIS LIABILITY SUM. THE ASSESSING O FFICER WAS FURTHER OF THE OPINION THAT HON'BLE DELHI HIGH COURTS DECISION IN CIT VS. CHIPSOFT TECHNOLOGY PVT. LTD. ON 20.07.2012 IN ITA NO. 598/2011 HAD MADE IT CLEAR THAT SECTION 41(1) EXPLANATION SUFFICIENTLY INDICATED THE SAME TO BE INCLUSIVE PRO VISION SINCE THE LEGISLATURE HAD NOT USED MEANS CLAUSE THEREIN. HE THEREFORE MADE THE IMPUGNED AD DITION U/S 41(1) ON CESSATION OF TRADING LIABILITY OF RS12,97,47,322/- IN QUESTION. 5. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) HAS RE VERSED THE ASSESSING OFFICERS ACTION IN HIS ABOVE EXTRACTED DETAILED DISCUSSION. THIS LEAVES THE REVENUE AGGRIEVED. 6. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY A RGUES IN THE LIGHT OF ASSESSING OFFICERS FINDINGS THAT ASSESSEES IMPUGN ED LIABILITY IS NOT A GENUINE ONE FIRST OF ALL AS PER THE FOUR PARTIESS DIRECTORS S TATEMENTS. HE THEREAFTER SUBMITS THAT IT CAN BE SAFELY ASSUMED THAT THE LIABILITY IN QUESTIO N AS CEASED U/S. 41(1) OF THE ACT. WE DO NOT FIND MERIT IN EITHER OF THESE TWO ARGUMEN TS. CASE FILE REVEALED THAT THE ASSESSEE HAS THROUGHOUT BEEN CLAIMING THE IMPUGNED LIABILITY FOR A TIME SPAN OF ALMOST THREE DECADES WITHOUT ANY SUCH OBJECTION FRO M DEPARTMENT. RELEVANT SUNDRY CREDITORS LIST RUNS INTO 96 PARTIES; AMOUNT AND ADD RESS-WISE, PARTICULARLY IN PAPER BOOK PAGES 55 TO 56 AS ON 31.03.2001. THE ASSESSEE PARTLY PAID THE SUM IN CASE OF FIVE OF THE SAID PARTIES INVOLVING GROSS AMOUNT OF RS21,95,04,000/-. PAPER BOOK PAGES 93 TO 95 AND 57 TO 59 CONTAINS THE SUMMARIZED STATEMENT OF LIABILITY IN QUESTION AS TO 31.03.2000 AND FROM 01.04.1989 TO 31 .03.2013 INVOLVING THE SUM OF RS12,87,24,079/-; RESPECTIVELY. 7. CASE FILE FURTHER SUGGESTS THAT THE IMPUGNED LIA BILITY CLAIM HAS NOWHERE BEEN DOUBTED IN PRECEDING OR SUCCEEDING ASSESSMENT YEARS INVOLVING REGULAR ASSESSMENT AT LEAST IN ASSESSMENT YEARS 1998-99, 2000-01, 2003 -04 AND 2004-05. THE CIT(A)S CLINCHING FINDINGS THAT FOUR DIRECTORS OF CORRESPON DING ENTITIES HAVE BEEN APPOINTED IN FINANCIAL YEAR 2001-02 ONLY WHEREAS THE IMPUGNED LI ABILITY DATES BACK TO ALMOST 30 YEARS; HAVE GONE UNREBUTTED FROM THE REVENUE SIDE. WE THEREFORE DO NOT SEE ANY MERIT IN REVENUES ABOVE TWIN SUBMISSIONS. ITS FORM ER PLEA THAT THE IMPUGNED LIABILITY IS NOT GENUINE AT THIS BELATED STAGE CARRIES NO WEI GHT. HON'BLE KARNATAKA HIGH COURTS DECISION IN CIT VS. ALVARES & THOMAS (2010) 69 TAXMAN 257 (KAR) HOLDS THAT MERE NONE VERIFICATION OF SUCH A LIABILITY FOR OR FOR TH AT ANY DOUBT RAISED THEREUPON DOES NOT ATTRACT CESSATION OF LIABILITY PRINCIPLE U/S 41(1) OF THE ACT AS THE SAME HAS TO BE A CASE OF CESSATION IN LAW ONLY. HON'BLE GUJARAT HIGH COUR TS JUDGMENT IN CIT VS. NITIN S GARG (2012) 22 TAXMAN 59 (GUJ) HAS PLACED RELIANCE ON MU CH A CELEBRATE JUDGMENT OF HON'BLE APEX COURT IN CIT VS. SUGAULI SUGAR WORKS (P) LTD. (1999) 236 ITR 518 (SC) TO HOLD THAT THE MERE FACT OF A LIABILITY HAVING CO NTINUED TO BE SHOWN FOR VERY MANY YEARS WOULD NOT ATTRACT SECTION 41(1) SINCE IT IS F OR THE ASSESSING OFFICER HAS WHO HAS TO SHOW THAT CONCERNED ASSESSEE HAS DRAWN ANY BENEF IT BY WAY OF CESSATION OR REMISSION THEREOF. WE FURTHER MAKE IT CLEAR THAT CI T(A)S ABOVE EXTRACTED DETAILED DISCUSSION HAS EXAMINED ALL THE FACTS AS WELL AS TH E RELEVANT LEGAL POSITION AT LENGTH WHICH HAS NOWHERE BEEN REBUTTED FROM THE REVENUE SI DE. WE THEREFORE CONCLUDE THAT THE CIT(A) HAS RIGHTLY REVERSED THE ASSESSMENT FINDINGS HOLDING THE AMOUNT IN QUESTION OF RS12,97,47,322/- TO BE A CASE OF CESSAT ION OF LIABILITY U/S 41(1) OF THE ACT. ITA NO.05/RAN/2017 A.Y. 2013-14 SH SWAPAN KR. SARKAR VS. ACIT CIR-3,JSR PAGE 4 WE ADOPT THE DETAILED DISCUSSION MUTATIS MUTANDIS T O CONCLUDE THAT THE IMPUGNED ADDITION REGARDING ASSESSEES SUNDRY CREDI TORS LIABILITY INCOME CASE OF M/S XYZ & CO. IS NOT SUSTAINABLE. THE SAME IS DELETED. 3. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN ACCORDANCE WITH RULE 34(4) OF THE ITAT RULES BY PUTTING ON NOTICE BOARD ON 15/02/2019 SD/- SD/- ( ) ('# ) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) RANCHI, *DKP SR.P.S $- 15 / 02 /2019 RANCHI / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SHRI SWAPAN KR. SARKAR, PROP: M/S TARUN TOOLS, TATA-KANDRA ROAD, ADITYAPUR, JAMSHED PUR-831013 2. /RESPONDENT-ACIT, CIRCLE-3, JAMSHEDPUR 3. 0 3 / CONCERNED CIT RANCHI 4. 3- / CIT (A) RANCHI 5. 6 ##0, 0, / DR, ITAT, RANCHI 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR.PS, I TAT, RANCHI