THE ITO, WARD - 1(2), Vijayawada V. Deepak Mittal, (HUF), Vijayawada

ITA 51/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1215 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Keywords: Additional evidence
• Section: 40A(3); 142(1)

Judgement Text

ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.51/VIZAG/2013 ( / ASSESSMENT YEAR: 2007-08) ITO , WARD - 1(2) , VIJAYAWADA VS. DEEPAK MITTAL (HUF) , VIJAYAWADA [PAN: AABHM6870 K ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SMT. D. KOMALI KRISHNA, DR / RESPONDENT BY : SHRI A.S.R.S.S. SIVA PRASA D, AR / DATE OF HEARING : 16.03.2016 / DATE OF PRONOUNCEMENT : 19.04.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A), VIJAYAWADA DATED 23.11.2012 AND IT PERTAINS TO THE ASSESSMENT YEAR 2007-08. ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A HUF ENGAGED IN THE BUSINESS OF TRADING IN BATTERIES AND RELATED PRODUCTS, FILED ITS RETURN OF INCOME FOR THE A.Y. 2007-08 ON 31.10.2007 DECLARING TOTAL INCOME OF RS.2,27,150/- . THE CASE HAS BEEN SELECT ED FOR SCRUTINY AND ACCORDINGLY, NOTICES U/S 143(2) & 142(1) OF THE INC OME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WERE ISSUED. IN RESPONSE TO NOTICE, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE BOOKS OF ACCOUNTS AND OTHER DETAI LS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS MADE CASH PAYMENTS AGAINST PURCHASE OF GOODS IN EXCESS OF THE THRESHOLD LIMIT OF RS.20,000/- PRESCRIBED UNDER SEC TION 40A(3) OF THE ACT. IT WAS OBSERVED THAT ON VERIFICATION OF BOOKS OF ACCOUNTS AND ALSO CONFIRMATION LETTER FILED BY THE CREDITORS, THE ASS ESSEE HAS MADE CASH PAYMENTS TO VARIOUS PARTIES. THEREFORE, ISSUED A S HOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE CASH PAYMENTS SHALL NOT BE DISALLOWED U/S 40A(3) OF THE ACT. SIMILARLY, FROM THE BOOKS OF AC COUNTS, THE A.O. NOTICED THAT THERE ARE MANY TRADE CREDITORS HAVING ONLY OPENING BALANCE AND NO TRANSACTIONS DURING THE RELEVANT FINANCIAL Y EAR. THEREFORE, ASKED TO EXPLAIN THE NATURE AND SOURCE OF CREDIT AND ALSO FILE NECESSARY CONFIRMATION LETTER FROM THE PARTIES. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE NEITHER APPEARED NOR FURNISHED ANY INF ORMATION. ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 3 THEREFORE, THE A.O. AFTER CONSIDERING THE RELEVANT INFORMATION AVAILABLE ON RECORDS, DISALLOWED 20% OF CASH PAYMENTS U/S 40A (3) OF THE ACT. SIMILARLY, THE A.O. HAS ADDED BACK A SUM OF RS.33,3 7,500/- U/S 41(1)(A) OF THE ACT AND BROUGHT TO TAX AS PROFIT CHARGEABLE TO TAX. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE FILED A WRITTEN SUBMISSION AND CONTENDED THAT THE ASSESSING OFFICER WAS ERRED IN DISALLOWING 20% OF CASH PAYMENTS MADE TO SUPPLIERS AGAINST PURCHASES U/S 40A(3) OF THE ACT. THE ASSESSEE FURTHER SUBMIT TED THAT IN FACT THESE PAYMENTS ARE MADE BY WAY OF DEMAND DRAFTS AND FURNI SHED NECESSARY PHOTOCOPIES OF DEMAND DRAFTS ISSUED BY THE BANKS. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS FILED CONFIRMATION LE TTER FROM THE PARTIES, WHEREIN PARTIES HAVE STATED THAT THEY HAVE RECEIVED THE AMOUNT BY WAY OF DEMAND DRAFTS. INSPITE OF FURNISHING CONFIRMATIO N LETTERS AND ALSO PROOF OF PAYMENT OF AMOUNT BY WAY OF DEMAND DRAFT, THE A.O. HAS TREATED THE ENTIRE AMOUNT PAID BY WAY OF DEMAND DRA FT AS CASH PAYMENTS AND INVOKED THE PROVISIONS OF SECTION 40A( 3) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS PURCHASED DE MAND DRAFTS FROM M/S. AGRASENA BANK AND ALSO IDBI BANK LTD AND PHOTO COPIES OF DEMAND DRAFTS HAVE BEEN FURNISHED TO THE A.O. THEREFORE, T HE A.O. WAS COMPLETELY ERRED IN DISALLOWING 20% UNDER SEC. 40(A )(3) OF THE ACT. ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 4 4. AS REGARDS THE ADDITION TOWARDS TRADE CREDITORS U/S 41(1)(A) OF THE ACT, THE ASSESSEE SUBMITTED THAT THE A.O. HAS MISIN TERPRETED THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT, AS IT HA S NEITHER DERIVED ANY BENEFIT FROM THE CREDITORS NOR THE PARTIES HAVE UNI LATERALLY WRITTEN OFF THE AMOUNT. THESE CREDITORS HAVE BEEN BROUGHT FORWARD F ROM THE EARLIER YEARS. TO THIS EFFECT, FILED NECESSARY CONFIRMATIO N LETTER FROM THE CREDITORS PROVING THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS. INSPITE OF FURNI SHING RELEVANT DETAILS, THE A.O. HAS DISOWNED THE EVIDENCES AND MADE ADDITI ON U/S 41(1)(A) OF THE ACT WHICH IS NOT CORRECT. 5. THE CIT(A), DURING THE COURSE OF APPELLATE PROCE EDINGS, FORWARDED THE WRITTEN SUBMISSIONS OF THE ASSESSEE ALONG WITH CONFIRMATION LETTERS TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE ASS ESSING OFFICER, VIDE HIS REMAND REPORT COMMENTING ON EACH AND EVERY ITEM OF TRADE CREDITORS HAD SUBMITTED THAT THE ADDITIONS MADE BY THE A.O. SHOULD BE SUSTAINED. SIMILARLY, AS REGARDS THE CASH PAYMENT I S CONCERNED THE A.O. HAS REITERATED THE STAND TAKEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE CIT(A) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE AND ALSO TAKEN INTO ACCOUNT THE REMAND REP ORT OF THE A.O. DELETED THE ADDITIONS MADE BY THE A.O. U/S 40A(3) O F THE ACT AND ALSO TOWARDS ADDITIONS MADE U/S 41(1)(A) OF THE ACT. THE CIT(A) FURTHER HELD ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 5 THAT IT IS SEEN FROM THE RECORDS THAT THE ASSESSEE HAS MADE THE PAYMENT TO ABOVE PARTIES BY WAY OF DEMAND DRAFTS. HOWEVER, IN TWO OCCASIONS, THE ASSESSEE HAS NOT ABLE TO SUBSTANTIATE THE PAYME NTS BY FURNISHING ANY EVIDENCES. THEREFORE, SUSTAINED THE ADDITIONS T O THE EXTENT OF RS.39,000/- AND DELETED THE BALANCE AMOUNT. AS REG ARDS THE ADDITIONS U/S 41(1)(A) OF THE ACT, THE CIT(A) HELD THAT THERE IS NO FINDING BY THE A.O. THAT THE IMPUGNED LIABILITIES WERE NO MORE IN EXISTENCE AT THE TIME OF COMPLETION OF ASSESSMENT PROCEEDINGS. IN THE CO URSE OF REMAND PROCEEDINGS, THE ASSESSEE HAS FILED NECESSARY EVIDE NCE TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE C REDITORS. ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, EXCEPT IN THE CASE OF BOMMIDI NARASIMHA RAO, THE OTHER CREDITORS HAVE BEE N CONFIRMED THE TRANSACTION WITH THE ASSESSEE BY FILING CONFIRMATIO N LETTERS. WITH THESE OBSERVATIONS, THE CIT(A) HAVE DELETED THE ADDITIONS MADE BY THE A.O. TO THE EXTENT OF RS.32,96,690/- AND SUSTAINED THE ADDI TION OF RS.40,810/-. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN AP PEAL BEFORE US. 6. THE LD. D.R. SUBMITTED THAT THE CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITIONS MADE BY THE A.O. U/S 40A(3) OF THE AC T TO THE EXTENT OF RS.2,95,678/-, AS THE ASSESSEE HAS NOT PROVED THE P AYMENT BY DEMAND DRAFT. THE D.R. FURTHER SUBMITTED THAT THE CONFIRM ATION LETTER FILED BY M/S. MICROTECH SEPARATORS PVT. LTD. HAS CLEARLY SPE CIFIED TRANSACTION ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 6 MADE IN CASH. THE AGRASEN BANK FROM WHERE DDS HAVE BEEN PURCHASED HAS NOT CONFIRMED THE DDS PURCHASED BY THE ASSESSEE IN THE LETTER ISSUED TO THE ASSESSING OFFICER. THEREFORE, THE CI T(A) COMPLETELY ERRED IN CONSIDERING THE ADDITIONAL EVIDENCES FILED BY TH E ASSESSEE WHILE DELETING THE ADDITIONS MADE U/S 40A(3) OF THE ACT. AS REGARDS THE ADDITION U/S 41(1)(A) OF THE ACT, THE D.R. SUBMITTE D THAT THE CIT(A) FAILED TO NOTE THAT ALL THE CREDITS OUTSTANDING AS AT THE BEGINNING OF THE FINANCIAL YEAR AMOUNTING TO RS.33,37,500/- WERE BEL OW RS.20,000/- AND REPAID IN CASH NEARLY AFTER TWO YEARS AND ALL THE S UPPLIERS ARE FROM OUT OF STATE AND THEREFORE, THE PAYMENT IN CASH IS NOT BELIEVABLE IN THE ABSENCE OF CONFIRMATION FROM THE CREDITORS. THE D. R. FURTHER SUBMITTED THAT THE LD. CIT(A) OUGHT TO HAVE SUSTAINED THE DIS ALLOWANCE, AS MOST OF THE CREDITORS HAVE NOT CONFIRMED THE CREDITS BY FIL ING NECESSARY CONFIRMATION LETTERS. THE D.R. FURTHER ARGUED THAT THE CIT(A) FAILED TO CONSIDER THAT THE UNSECURED LOANS OUTSTANDING IN TH E NAME OF 4 CREDITORS ARE NOT PROVED AS GENUINE IN THE ABSENCE OF IDENTIT Y OF THE CREDITORS, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITORS AS THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN CAS T ON IT. THEREFORE, REQUESTED TO UPHOLD THE ADDITIONS MADE BY THE A.O. TO SUPPORT HIS ARGUMENTS, THE D.R. PLACED HIS RELIANCE ON THE DECI SION OF ITAT, BANGALORE BENCH IN THE CASE OF SURESH KUMAR T. JAIN VS. ITO (128 ITD ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 7 74) AND SUBMITTED THAT THE ADDITIONS CAN BE MADE EV EN FOR THE BROUGHT FORWARD CREDITORS WHERE THE ASSESSEE FAILED TO PROV E THE GENUINENESS OF THE TRANSACTIONS. 7. ON THE OTHER HAND, THE LD. A.R. OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). THE LD. A.R. FURTHER SUBM ITTED THAT THE CIT(A) RIGHTLY DELETED THE ADDITIONS MADE BY THE A.O. U/S 40A(3) OF THE ACT, AS THE ASSESSEE HAS MADE THE PAYMENTS TO THE CREDITORS TOWARDS PURCHASE OF GOODS BY WAY OF DEMAND DRAFT AND FURNISHED NECES SARY PROOF BEFORE THE CIT(A). THE LD. A.R. FURTHER SUBMITTED THAT TH E A.O. WAS NOT CORRECT IN DISALLOWING THE AMOUNT U/S 40A(3) OF THE ACT AS THE ASSESSEE HAS FILED THE PROOF OF PAYMENT OF AMOUNT BY WAY OF DDS AND AL SO OBTAINED NECESSARY CONFIRMATION LETTER FROM THE PARTIES, WHE REIN THEY HAVE CATEGORICALLY STATED THAT THEY HAVE RECEIVED THE AM OUNT BY DEMAND DRAFTS. AS REGARDS THE ADDITION U/S 41(1)(A) OF THE ACT, THE A.O. COMPLETELY ERRED IN MAKING ADDITION U/S 41(1)(A) OF THE ACT TOWARDS TRADE CREDITORS AS THE ASSESSEE NEITHER DERIVED ANY BENEFIT FROM THESE CREDITORS NOR THE PARTIES HAVE UNILATERALLY WRITTEN OFF THE AMOUNT. THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT APPLIES W HERE THE ASSESSEE HAS DERIVED ANY BENEFIT IN THE PREVIOUS ASSESSMENT YEAR S AND SUBSEQUENTLY WRITTEN OFF THE AMOUNT IN THE BOOKS OF ACCOUNTS OR RECEIVED ANY AMOUNT IN CASH, THEN THE AMOUNT SO RECEIVED SHALL BE BROUG HT TO TAX AS PROFITS ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 8 CHARGEABLE TO TAX U/S 41(1)(A) OF THE ACT. THE ASS ESSEE FURTHER SUBMITTED THAT TO INVOKE THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT, EITHER THE ASSESSEE SHOULD DERIVE SOME BENEFITS IN THE PREVIOUS ASSESSMENT YEAR OR THERE WAS A REMISSION OR CESSATI ON OF SUCH LIABILITY ON ACCOUNT OF UNILATERAL WRITTEN OFF BY THE PARTIES . IN THE PRESENT CASE ON HAND, THE CREDITORS HAVE BEEN BROUGHT FORWARD FR OM PREVIOUS YEARS AND ASSESSEE HAS MADE THE PAYMENTS IN SUBSEQUENT FI NANCIAL YEARS, THEREFORE, THE A.O. WAS NOT CORRECT IN INVOKING THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT. THE CIT(A) HAS RIGHTLY DELETE D THE ADDITIONS AFTER CONSIDERING THE CONFIRMATION LETTER FILED BY THE AS SESSEE. THEREFORE, HIS ORDER SHOULD BE UPHELD. IN SUPPORT OF HIS ARGUMENT S, THE LD. A.R. RELIED UPON THE JUDGEMENT OF ITAT, AHMEDABAD BENCH DECISIO N IN THE CASE OF NITIN S. GARG VS. ACIT (2010) 40 SOT 253. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FIRST ISSUE CAME UP FOR OUR CONSIDERATION IS DISALL OWANCE OF CASH PAYMENTS TOWARDS PURCHASE OF GOODS U/S 40A(3) OF TH E ACT. THE A.O. DISALLOWED 20% OF CASH PAYMENTS FOR THE REASON THAT THE ASSESSEE HAS MADE CASH PAYMENTS IN EXCESS OF THRESHOLD LIMIT PRE SCRIBED U/S 40A(3) OF THE ACT. THE A.O. WAS OF THE OPINION THAT THE A SSESSEE HAS NOT FILED ANY EVIDENCE IN SUPPORT OF HIS ARGUMENTS THAT THE P AYMENTS HAVE BEEN ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 9 MADE BY WAY OF DEMAND DRAFTS. IT WAS THE CONTENTIO N OF THE ASSESSEE THAT ALL THE PAYMENTS HAVE BEEN MADE BY WAY OF DEMA ND DRAFTS AND FURNISHED NECESSARY PHOTOCOPIES OF DEMAND DRAFTS AN D ALSO CONFIRMATION LETTER FROM THE PARTIES. DURING THE COURSE OF HEAR ING, THE ASSESSEE HAS FURNISHED PAPER BOOK CONTAINING CONFIRMATION LETTER AND PHOTOCOPIES OF DEMAND DRAFTS PURCHASED FROM THE BANK. ON VERIFICA TION OF THE DETAILS FILED BY THE ASSESSEE, WE FIND THAT THE IMPUGNED PA YMENTS HAVE BEEN MADE BY WAY OF DEMAND DRAFT. WE ALSO FIND THAT THE A SSESSEE HAS OBTAINED CONFIRMATION LETTERS FROM PARTIES, WHEREIN THEY HAVE CONFIRMED HAVING RECEIVED THE AMOUNT BY WAY OF DEMAND DRAFTS. THEREFORE, THE A.O. WAS NOT CORRECT IN DISALLOWING THE AMOUNT BY I NVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAILS FURNISHED BY THE ASSESSEE DELETED THE ADDITIONS. WE DO NOT SEE ANY ERROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A). HENCE, WE INCLINED TO UPHOLD THE ORDER PASSED BY THE CIT(A ) AND REJECT THE GROUND RAISED BY THE REVENUE. 9. THE NEXT ISSUE ARISES FOR OUR CONSIDERATION IS A DDITIONS MADE U/S 41(1)(A) OF THE ACT. THE A.O. HAS MADE ADDITIONS U/ S 41(1)(A) OF THE ACT TOWARDS TRADE CREDITORS BROUGHT FORWARD FROM EARLIE R YEARS. THE A.O. WAS OF THE OPINION THAT ALL THE CREDITORS HAVE BEEN BROUGHT FORWARD FROM PREVIOUS YEARS AND THERE IS NO TRANSACTION DURING T HE RELEVANT FINANCIAL ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 10 YEAR. THEREFORE, OPINED THAT THESE CREDITORS ARE B OGUS AND NOT IN EXISTENCE AND HENCE, INVOKED THE PROVISIONS OF SECT ION 41(1)(A) OF THE ACT. THE A.O. FURTHER WAS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE PARTIES BY FILING NECESSARY CONFIRMATION LET TERS. IT WAS FURTHER OBSERVED THAT THE ASSESSEE HAS PAID CASH FOR ALL TH ESE PARTIES, THE PAYMENT HAS BEEN MADE AFTER TWO YEARS, SO IT IS HIG HLY IMPOSSIBLE TO MAKE THE PAYMENT IN CASH, AS ALL THE PARTIES ARE LO CATED OUTSIDE THE BUSINESS PLACE OF THE ASSESSEE. THEREFORE, HELD THA T THESE ARE BOGUS CREDITORS AND ACCORDINGLY DISALLOWED THE ENTIRE AMO UNT BY INVOKING THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT. IT WAS T HE CONTENTION OF THE ASSESSEE THAT THESE CREDITORS HAVE BEEN BROUGHT FOR WARD FROM EARLIER YEARS AND PAYMENT HAS BEEN MADE IN SUBSEQUENT FINAN CIAL YEARS. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS FURNISHED CO NFIRMATION LETTERS FROM THE PARTIES AND PROVED THE IDENTITY, CREDITWOR THINESS AND GENUINENESS OF THE TRANSACTIONS, THEREFORE, NO ADDI TIONS CAN BE MADE SIMPLY BY INVOKING THE PROVISIONS OF SECTION 41(1)( A) OF THE ACT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REAS ON THAT THESE CREDITORS HAVE BEEN BROUGHT FORWARD FROM EARLIER FI NANCIAL YEARS. ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, SUCH AS CONFIRMATION LETTERS AND LEDGER EXTRACT COPIES OF THE CREDITORS, WHICH WAS AVAILABLE IN ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 11 PAPER BOOK FILED BY THE ASSESSEE, WE FIND THAT ALL THE CREDITORS HAVE BEEN BROUGHT FORWARD FROM EARLIER YEARS. THE ASSESS EE HAS MADE THE PAYMENTS TO THE ABOVE CREDITORS IN THE SUBSEQUENT F INANCIAL YEARS. THE ASSESSEE ALSO FILED NECESSARY CONFIRMATION LETTERS AND PROVED THE IDENTITY, GENUINENESS OF THE TRANSACTIONS AND CREDI TWORTHINESS OF THE PARTIES. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS ERRED IN TREATING THE TRADE CREDITORS AS CESSATION OF LIABIL ITY BY INVOKING THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT. 10. THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT D EALS WITH CESSATION OR REMISSION OF LIABILITY, WHERE AN ALLOWANCE OR DE DUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE FIRST MENTIONED PERSON HAS OBTAINED, WHERE ANY CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF S UCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUED TO HIM, SHALL BE DEEME D TO BE THE PROFITS & GAINS OF THE BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO TAX IN THE PREVIOUS YEAR. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE DOCUMENTS AVAILABLE ON RECORD, WE FIND THAT ALL THE TRADE CREDITORS HAVE ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 12 BEEN BROUGHT FORWARD FROM EARLIER YEARS AND PAYMENT HAS BEEN MADE IN THE SUBSEQUENTLY YEARS. IT IS NOT A CASE OF A.O. TH AT THE PARTIES HAVE WRITTEN OFF THE LIABILITY IN THEIR BOOKS OF ACCOUNT S. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS INCORRECT IN ADDING T HE TRADE CREDITORS BY INVOKING THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAILS FILED BY THE ASSES SEE RIGHTLY DELETED THE ADDITIONS MADE BY THE A.O. WE DO NOT SEE ANY ERROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A). HENCE, WE INCLINED TO UPHOLD THE ORDER PASSED BY THE CIT(A) AND REJECT THE GROUND RAISED B Y THE REVENUE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19 TH APR16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 19.04.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO WARD-1(2), VIJAYAWADA 2. / THE RESPONDENT DEEPAK MITTAL (HUF), D.NO.12-3- 28, TARAPET, ONE TOWN, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA . + ( ) / THE CIT (A), VIJAYAWADA ITA NO.51/VIZAG/2013 DEEPAK MITTAL (HUF), VIJAYAWADA 13 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM