M/s. Haji Latif Gani Kacchi, Nagpur V. Deputy Commissioner of Income Tax,Circle-4, Nagpur

ITA 50/NAG/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3917 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 22-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI
• Assessee Lawyers: S K JAISWAL; V V SARAMJAME
• Keywords: Opportunity of being heard
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR E-BENCH, NAGPUR (THROUGH VIDEO CONFERENCE AT MUMBAI) BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.50/NAG/2011 (AY: 2007-2008) M/S HAJI LATIF GANI KACCHI , NEAR DESHMUKH SCHOOL, SHANTI NAGAR, NAGPUR PAN:AABFH0413M VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE-4, ROOM NO.301, 3RD FLOOR, SARAF CHAMBER, SADAR, NAGPUR-440001. (APPELLANT) (RESPONDENT) ASSESSEE BY : S.K. JAISWAL & V.V.SARAMJAME. REVENUE BY : DR. MILIND BHUSARI, CIT - DR DATE OF HEARING: 11.03.2013 DATE OF PRONOUNCEMENT : 5 .4.2013 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)- II, NAGPUR DATED 29.07.2011. THE GROUNDS OF APPEAL READ AS UNDER: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED DCIT WAS NOT JUSTIFIED IN ADDING ADDITIONAL WAGES PAYABLE AT RS. 2,00,30,385/- AND THE HONOURABLE COMMISSIONER OF APPEALS II WAS NOT JUSTI FIED IN CONFIRMING THE ADITION. (II) WITHOUT PREJUDICE TO THE GROUND NO.1, THE LEARNED D .C.I.T. WAS NOT JUSTIFIED IN LAW IN NOT GIVING THE DETAILS REGARDING THE DEMAND OF RS. 89,63,524/- AND THE LEARNED CIT APPEALS II WAS NOT JUSTIFIED IN CONFIRM ING NTHE SAME. (III) WITHOUT PREJUDICE TO GROUND NO.2 THE LOWER AUTHORIT IES WERE NOT JUSTIFIED IN CHARGING INTEREST U/S 234B & 234C OF THE I.T. ACT. (IV) THAT, ANY OTHER GROUND WITH THE PERMISSION OF THE H ONOURABLE MEMBERS OF THE TAX APELLATE TRIBUNAL, NAGPUR BENCH AS PER LAW MIGH T BE TAKEN. 2. BRIEFELY STATED THE RELEVANT FACTS OF THE CASE A RE THAT THE ASSESSEE CLAIMED THE FOLLOWING AS OUTSTANDING ADDITIONAL WAGES AMOUN TING TO RS. 2,00,30,385/- THE BREAK UP IS AS FOLLOWS: F.YR. AMOUNT IN (RS.) 1997-98 18,55,507 1998-99 26,79,551 1999-00 33,41,753 2000-01 36,18,308 I.T.A. NO.50/N AG/2011-M/S HAJI LATIF GANI KACCHI 2 2001-02 38,34,486 2002-03 28,82,406 2003-04 18,18,372 2,00,30,385 2.1. AO NOTICED THAT THE ABOVE SUMS ARE CLAIMED BY THE ASSESSEE AS PAYABLE TO THE LABOURERS AS ADDITIONAL WAGES. HOWEVER, AFTE R ENQUIRIES, AO CONCLUDED THAT SOME LABOURERS ARE ALREADY DEAD AND MANY OTHER S HAVE DENIED OF HAVING KNOWLEDGE OF SUCH LIABILITIES BY THE ASSESSEE. IN F ACT, AO RECORDED STATEMENTS OF 23 SUCH LABOURERS ON 10.12.09 WHO DENIED OF ANY AMO UNT BEING RECEIVABLE BY THEM FROM THE ASSESSEE IN THE NAME OF THE ADDITIONA L WAGES. FINALLY, AO CAME TO THE CONCLUSION THAT THE OUTSTANDING WAGES CONSTITUT ES NON-GENUINE LIABILITIES/FICTITIOUS LIABILITIES. ACCORDINGLY, AO INVOKED THE PROVISIONS OF SECTION 41(1) OF THE ACT AND CONCLUDED THAT IT IS A CASE OF CESSATION OF LIABILITIES. FURTHER, ON THE ISSUE OF DISPUTE PENDING FOR ADJUDICATION BE FORE THE LABOUR COURTS, AO NOTICED THAT THE ASSESSEE FAILED TO PROVE WITH EVID ENCES THE EXISTENCE OF ANY DISPUTE IN THIS REGARD IN RESPECT OF THE ABOVE SAID ADDITIONAL WAGES. THUS, THE AO MADE ADDITION OF RS. 2,00,30,385/- IN THE ASSESS MENT. 3. AGGRIEVED WITH THE ABOVE, ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT (A), ASSESSEE SUBMITTED THAT CONSIDE RING THE FACT THAT THE DISPUTE EXISTS IN THIS LABOUR COURT ON THIS ISSUE, THERE IS NO REMISSION OF LIABILITIES AND THEREFORE, THE CLAIM OF ASSESSEE IS ALLOWABLE. THE ASSEESSEE FILED A WRITTEN STATEMENT DATED 07.12.2010 IN THIS REGARD, WHICH IS EXTRACTED IN PARA 3.5 OF THE IMPUGNED ORDER. CIT (A) CONSIDERED THE ABOVE SUBMI SSIONS OF THE ASSESSEE AND PERUSED THE PAPERS PLACED BEFORE HER AND ALSO THE D ISPUTE EXISTING IN THE LABOUR COURT AND CAME TO THE CONCLUSION THAT THE DISPUTE I S ONLY WITH REGARD TO AN AMOUNT OF RS. 44,784/-. THE DETAILS ON THIS ISSUE A RE AVAILABLE IN PARA 3.3 AND 3.4 OF THE IMPUGNED ORDER. AFTER CONSIDERING THE R ELEVANT DETAILES, CIT(A) IS OF THE OPINION THAT THE SAID AMOUNT OF RS. 44,784/-, I S ALSO DISPUTED BY THE ASSESSEE AS NOT PAYABLE. THE CIT(A) NOTED THAT 40 L ABOURERS HAVE EXPIRED AND 23 LABOURERS HAVE DENIED THE KNOWLEDGE OF ANY ADDIT IONAL WAGES PAYABLE TO I.T.A. NO.50/N AG/2011-M/S HAJI LATIF GANI KACCHI 3 THEM. THUS, CIT(A) CAME TO THE CONCLUSION THAT THER E IS A CESSATION OF LIABILITY AS THE LIABILITY HAS CEASED TO EXIST AND ACORDINGLY, C ONFIRMED THE ADDITION OF RS. 2,00,30,384/- FOR WANT OF EVIDENCES. FOR THE ABOVE PROPOSITION, CIT (A) RELIED ON THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF POLYFLEX (INDIA) (P) LTD. [2002] 257 ITR 343 PAGE FOR THE EXPLANATION ON THE PROVISIONS OF SECTION 41(1) OF THE ACT AND HELD THAT THE SAID EXPLANATION COVER S THE FACTS OF THE PRESNT CASE AGAINST THE ASSESSEE. 4. AGGRIEVED WITH THE ABOVE, ASSESSEE FILED THE PRESEN T APPEAL BEFORE US. ASSESSEE ALSO FILED THE PAPER BOOK CONTAINING COPIE S OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUGAUL I SUGAR WORKS (P) LTD. (1999) 236 ITR 518 (SC) AND THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. POLYFLEX (INDIA) PVT. LTD (2001 ) 251 ITR 527. BEFORE US, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THESE AMOUN TS WERE NOT WRITTEN OFF IN THE BOOKS OF ACCOUNTS, THEREFORE, THIS IS NOT A CAS E OF CESSATION OF LIABILITIES AND RELIED ON THE SUPREME COURT JUDGMENT IN THE CASE SU GAULI SUGAR WORKS PVT. LTD. 236 ITR 518 (SUPRA) IN SUPPORT OF HIS ARGUMENT. 5. PER CONTRA, LD DR FOR THE REVENUE RELIED ON THE ORDER OF THE A O AS WELL AS THE CIT (A) AND MENTIONED THAT THE ORDER OF THE CIT (A) NEED NOT BE DISTURBED. FURTHER, LD DR STATED THAT, IN THE MATTERS OF THIS KIND, THE ONUS IS ON THE ASSESSEE THAT THE ADDITIONAL WAGES HAVE ACCRUED AND ASCERTAINABLE AND THEY ARE NOT FICTIOUS. HE SHOULD ALSO FILE EVIDENCE IN SUPPO RT OF THE CLAIM MENTIONING THAT THE SAME ARE STILL PAYABLE TO THE LABOURERS. IN THE CIRCUMSTANCES, WHERE THE VERY PAYABILITY IS DENIED BY THE LABOURERS AND WHEN SOME OF THE LABOURERS ARE NO LONGER ALIVE OR WHERE MANY OTHER ARE NOT AVAILABLE FOR VERIFICATIONS OR CLAIM THE OUTSTANDING NATURE OF THE IMPUGNED AMOUNTS AND THER E IS NO EVIDENCE THAT THE SAID AMOUNTS ARE PAYABLE EVEN TO THEIR LEGAL HEIRS, WHICH IS OF COURSE, NOT THE CASE OF THE ASSESSEE, THE CLAIM OF THE ASSESSEE CAN NOT BE ALLOWED. AS PER THE LEARNED D.R., THE AMOUNT WHICH IS IN DISPUTE BEFOR E THE LEARNED LABOUR COURT IS I.T.A. NO.50/N AG/2011-M/S HAJI LATIF GANI KACCHI 4 ONLY TO THE TUNE OF RS. 44,484/- I.E. WHICH IS ALSO BEING CONTESTED BY THE ASSESSEE BEFORE THE COURT. IN SUCH CIRCUMSTANCES, T HE CLAIM OF THE ASSESSEE THE DECISION OF THE CIT(A) SHOULD NOT BE INTERFERED WIT H. 6. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF REVENUE IN THE LIGHT OF THE DECISIONS PLACED BEFORE US IN THE FORM OF TH E PAPER BOOK FURTHER WE HAVE GONE THROUGH THE DISCUSSION GIVEN BY THE CIT(A) IN PARA 3.5 AND 4 : 3.5. -----IT IS RELEVANT TO NOTE THAT THE APPELLAN T HAS ONLY SHOWN THAT THE AMOUNT UNDER DISPUTE IS RS. 44,784/-, WHICH IS THE AMOUNT CLAIMED BY 11 BIDI ROLLERS VIDE THEIR PETITION BEFORE THE LABOUR COURT , BHANDARA DT. 03.09.2007. EVEN THIS IS BEING CHALLENGED BY THE APPELLANT. THE APPELLANT HAS NOT MADE ANY ATTEMPT TO SHOW THAT THE ENTIRE AMOUNT OF RS. 2,00, 30,385/- IS ACTUALLY DISPUTED AND IS PAYABLE BY THEM. IN FACT, THE STATEMENT RECO RDED BY THE A.O. REVEALS THAT THE BIDI WORKERS WERE NOT EVEN AWARE THAT ANY AMOUN TS WERE DUE TO THEM. FURTHER, AS STATED BY THE A.O. IN THE ASSESSMENT OR DER, 40 BIDI WORKERS ARE NO MORE AND NO AMOUNTS WOULD BE PAYABLE TO THEM. SECTI ON 41(1) IS A DEEMING PROVISION AND CREATES A FICTION WHEREBY WHAT IS NOT INCOME IN THE ORDINARY SENSE OF THE TERM IS DEEMED TO BE INCOME UNDER THIS PROVI SION. IN THIS CASE, THE APPELLANT HAS CLAIMED AND HAS BEEN ALLOWED EXPENDIT URE ON ACCOUNT OF ADDITIONAL WAGES AND THESE AMOUNTS APPEAR AS AN OUTSTANDING LI ABILITY IN THE BALANCE SHEET. THE ISSUE TO BE DECIDED IS WHETHER THERE IS ANY REM ISION OR CESSATION OF THIS OUTSTANDING LIABILITY. ACCORDING TO THE APPELLANT T HERE IS NO REMISSION BECAUSE THIS AMOUNT IS ACTUALLY OUTSTANDING. THERE IS NO EVIDENCE THAT THE APPELLANT HAS CHALLENGED EITHER THE NOTIFICATION OF LABOUR DEPART MENT, MAHARASHTRA GOVERNMENT DATED 18.03.1997 ITSELF BEFORE ANY COURT OF LAW. THE ONLY EVIDENCE FURNISHED IS THE DISPUTE OF AN AMOUNT OF RS. 44,784 /- BY 11 BIDI ROLLERS BEFORE THE LABOUR COURT AT BHANDARA, WHICH IT ITSELF BEING CHALLENGED AS NOT MAINTAINABLE BY THE APPELLANT. AS POINTED OUT BY TH E A.O. THE DISPUTE IS PENDING FOR OVER A DECADE DURING WHICH TIME 40 LABOURERS HA VE EXPIRED . THE 23 LABOURERS EXAMINED BY THE A.O. HAVE ALSO DENIED EVEN HAVING ANY KNOWLEDGE OF ADITIONAL WAGES PAYABLE TO THEM. I AM, THEREFORE, O F THE CONSIDERED OPINION THAT THERE IS A CESSATION OF LIABILITY AS THE LIABILITY HAS CEASED TO EXIST. THE CONSIDERATION WHETHER THE APPELLANT MAY BE CALLED U PON IN THE FUTURE TO PAY ADDITIONAL WAGES IS NOT RELEVANT AT THIS MOMENT AS THERE IS NO EVIDENCE OF ENTIRE AMOUNT OF RS. 2,00,30,384/- BEING CHALLENGED IN ANY COURT OF LAW. 4.0. THIS DECISION SQUARELY APPLIES TO THE APPELLAN TS CASE. IN THE APPELLANTS CASE, THE APPELLANTS HAS CLEARLY OBTAINED A BENEFIT IN TE RMS OF THE WAGES OUTSTANDING AS APPELLANT HAS NO EXPRESS COMMITMENT OT PAY THESE WAGES. THERE IS ALSO NO EVIDENCE OF THE JUDICIAL DISPUTE FURNISHED TO SHOW THAT A FUTURE JUDICIAL DECISION WOULD PUT AN OBLIGATION ON THE APPELLANT TO PAY THE SE AMOUNTS AS ADDITIONAL WAGES TO THE LABOURERS. THE ACTION OF THE A.O. IS H EREBY SUSTAINED. 7. FROM THE ABOVE, WE FIND THAT SUSTAINING OF THE A DDITION BY THE CIT (A) WAS PRIMARILY FOR THE REASON OF ASSESSIES FAILURE TO EVIDENCE THE VERY EXISTENCE OF THE LIABILITIES OF ADDITIONAL WAGES AND THE GENUINENESS. IN OUR I.T.A. NO.50/N AG/2011-M/S HAJI LATIF GANI KACCHI 5 OPINION, AS STATED BY THE INCOME TAX AUTHORITIES, T HE ONUS IS ON THE ASSESSEE TO SUBSTANTIATE SUCH CLAIMS. ASSESSEE SHOULD DEMONSTRA TE THAT THE LIABILITIES REALLY ARE ACCRUED AND ASCERTAINABLE. FAILURE TO DO SO, IN OUR OPINION, A.O. IS JUSTIFIED IN MAKING THE DECISION OF RS. 2,00,30,384/-. FURTHER, IT IS AN UNDISPUTED FACT THAT THERE ARE NO CLAIMENTS TO THE SAID WAGES AS SOME OF THEM ARE NO MORE AND OTHERS HAVE DENIED THE LIABILITIES. AS SUCH, THE AS SESSEE IS NOT DISPUTING THE APPLICABILITY OF NOTIFICATIONS IN RESPECT OF THE SU M OF RS. 44,484/-. THUS THE LIABILITY IS NOT ASCERTAINABLE. IN OUR OPINION THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY GROUND I IS DISMISSED . 8. GROUND 2 IS RAISED WITHOUT PREJUDICE TO GROUND 1 AND THE SAME RELATES TO THE DEMAND OF RS. 89,63,524/- RAISED BY THE AO. FRO M THE PERUSAL OF RECORDS, WE FIND THAT THE SAME IS NOT ADJUDICATED BY THE CIT (A) DESPITE THE GROUND WAS RAISED BY THE ASSESSEE AS EVIDENT FROM FORM 35 OF T HE APPEAL PAPERS FILED BEFORE THE CIT(A). ON HEARING THE PARTIES, WE FIND THAT TH E GROUND 2 SHOULD BE SET ASIDE TO THE CIT (A) FOR ADJUDICATION AFTER GRANTING REAS ONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. GROUND 3 IS CONSEQUENTIAL IN NATURE; THEREFORE, IT DOES NOT CALL FOR ANY SEPARATE ADJUDICATION. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF APRIL, 2013. SD/- SD/- (R.K. GUPTA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 5.4.2013 AT :MUMBAI SK I.T.A. NO.50/N AG/2011-M/S HAJI LATIF GANI KACCHI 6 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE DCIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR NAGPUR, BENCH, ITAT, NAGPUR. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI