VAISHALI PHARMA PVT. LTD, MUMBAI V. DCIT CIR. - 13(3)(2), MUMBAI

ITA 5191/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1296 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KU MAR AGARWAL
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3); 142(1)

Judgement Text

I IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 5191/ MUM/2016 ( / ASSESSMENT YEAR : 2012-13) VAISHALI PHARMA PVT. LTD., 706-709, A WING, ARAVALI BUSINESS CENTRE, R.C. PATEL ROAD, BORIVALI (W), MUMBAI 400 092. / V. THE DY. COMMISSIONER OF INCOME TAX 13(3)(2), ROOM NO. 229, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. ./ PAN : AACCV7258G ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : MS. DINKLE HARIYA REVENUE BY : SHRI SANJAY KUMAR AGARWAL, DR / DATE OF HEARING : 12-04-2017 / DATE OF PRONOUNCEMENT : 20-04-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 5191/MUM/2016, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 23 RD MAY, 2016 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 21, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2012-13, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 20 TH FEBRUARY, 2015 PASSED BY LEARNED ASSESSING OFFICER ( HEREINAF TER CALLED THE AO) U/S 143(3) OF THE INCOME-TAX ACT,1961 (HEREINAFTER CALL ED THE ACT). ITA 5191/MUM/2016 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI (HER EINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) - 21 , MUMBAI ['THE ID. CIT (A)'], ERRED IN HOLDING THAT THE AS SESSMENT IS NOT TIME BARRED. 2.1 THE ID. CIT (A) ERRED IN CONFIRMING ADDITION OF RS. 2,02,403/- BEING SUNDRY CREDITORS (I.E. AJANTA ENTERPRISES RS.75 ,762 AND CALYX CHEMICALS & PHARMACEUTICALS RS. 1,26,641) OUTSTANDIN G FOR LAST FOUR YEARS, TO THE TOTAL INCOME AS CESSATION OF LIABILITY U/S 41(1)(A). 2.2 WHILE DOING SO, THE LD. CIT(A) FAILED TO APPRECIA TE THAT - (A) THE APPELLANT HAS NOT OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUNDRY C REDITORS OUTSTANDING. (B) MERELY BECAUSE THE LIABILITY TO SOME CREDITORS IS OUTSTANDING FOR MORE THAN FOUR YEARS AND THE LIABILITY IS SHOWN IN TH E ACCOUNTS OF THE APPELLANT, THE AMOUNT CANNOT BE ASSESSABLE AS INCOME U NDER SECTION 41 (1) OF THE IT ACT. (C) THE APPELLANT HAD NOT UNILATERALLY WRITTEN BACK TH E ACCOUNTS OF THE SUNDRY CREDITORS IN ITS PROFIT & LOSS ACCOUNT FOR TH E YEAR. (D) THE LIABILITY WAS SHOWN IN THE BALANCE SHEET AS O N 31.03.2012. THE ASSESSEE BEING A LIMITED LIABILITY COMPANY, THIS AMOUNTED TO ACKNOWLEDGING THE DEBT IN FAVOUR OF THE CREDITORS FOR PURPOSES OF SECTION 18 OF THE LIMITATION ACT, 1963. (E) THE APPELLANTS LIABILITY TO THE CREDITORS SUBSISTE D AND DID NOT CEASE NOR WAS IT REMITTED BY THE CREDITORS AS ON 31.0 3.1012. THE LIABILITY WAS ENFORCEABLE IN A COURT OF LAW. 2.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANC ES OF THE CASE, AND IN LAW, NO SUCH DISALLOWANCE IS CALLED FO R. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE TRADING OF BULK DRUG AND PHARMACEUTICAL PRODUCTS. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENTS AND ACCORDINGLY N OTICES U/S 143(2) AND 142(1) OF THE ACT WAS ISSUED TO THE ASSESSEE BY THE AO. THE DISPUTE WHICH ITA 5191/MUM/2016 3 HAD ARISEN BETWEEN THE PARTIES IS IN VERY NARROW CO MPASS. THE ASSESSEE WAS SHOWING CERTAIN SUNDRY CREDITORS IN ITS BALANCE SHE ET AS AT 31-03-2012 , HENCE, THE ASSESSEE WAS ASKED BY THE AO TO THE SUBM IT THE DETAILS AND FROM THE DETAILS SUBMITTED BY THE ASSESSEE, THE A.O. OBS ERVED THAT THE FOLLOWING PARTIES , INTER-ALIA, ARE APPEARING AS ITS SUNDRY C REDITORS FOR THE LAST FOUR YEARS AND THE DISPUTE BETWEEN THE REVENUE AND THE A SSESSEE IS NOW W.R.T. THESE UNDER MENTIONED PARTIES:- (IN RUPEES) SR NO. NAME OF THE PARTY AMT IN 2011-12 AMOUNT IN 2010-11 AMOUNT IN 2009- 10 AMOUNT IN 2008-09 1 AJANTA ENTERPRISES 75,762 75,762 75,762 75,762 2 CALYX CHEMICAL AND PHARMACEUTICAL 1,26,641 1,26,641 1,26,641 1,26,641 NO EXPLANATION WAS SUBMITTED BY THE ASSESSEE W.R.T. ABOVE CREDITORS OUTSTANDING IN ITS BOOKS OF ACCOUNTS FOR LAST FOUR YEARS, HENCE, THE A.O., INTER- ALIA, BROUGHT TO TAX THE ABOVE AMOUNT OF RS. 2,02,4 03/- AND , INTER- ALIA, ADDED THE AFORESAID SUM TO THE TOTAL INCOME OF THE ASSESSEE U/S 41(1)(A) OF THE ACT AS CESSATION OF THE LIABILITY, AS THE AFOR ESAID AMOUNT WAS OUTSTANDING FOR A VERY LONG TIME IN ASSESSEES BOOKS OF ACCOUNT S , VIDE ASSESSMENT ORDER DATED 20-02-2015 PASSED BY THE AO U/S 143(3) OF 196 1 ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 20-02-2 015 PASSED BY THE A.O. U/S 143(3) OF 1961 ACT, THE ASSESSEE FILED FIRST AP PEAL BEFORE THE LD. CIT(A) WHO ALSO CONFIRMED THE ADDITIONS MADE BY THE A,O. A S THE ASSESSEE DID NOT SUBMIT ANY EXPLANATIONS EVEN BEFORE THE LEARNED CIT (A), VIDE APPELLATE ORDER DATED 23 RD MAY, 2016 PASSED BY LEARNED CIT(A). THE LEARNED CI T(A) OBSERVED THAT THERE WERE NO TRANSACTIONS W.R.T. THESE TWO PA RTIES WITH THE ASSESSEE IN THE LAST FOUR YEARS. IT WAS ALSO OBSERVED BY LEARNE D CIT(A) THAT NO ITA 5191/MUM/2016 4 CONFIRMATIONS WERE FILED BY THE ASSESSEE FROM THESE CREDITORS AND THE LIABILITY CANNOT BE ALLOWED TO BE OUTSTANDING FOREVER IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH HAD CEASED TO EXIST AND WAS RIGHTLY BROUGHT TO TAX BY AO U/S 41(1)(A) OF 1961 ACT. 5. AGGRIEVED BY THE APPELLATE ORDER DATED 23-05-201 6 PASSED BY LD. CIT(A), THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID AMOUNTS ARE EXISTING IN ITS BOOKS OF ACCOUNT FOR LAST FOUR YEAR S AND THE SAID LIABILITY HAS ARISEN ON ACCOUNT OF RAW MATERIAL PURCHASED BY THE ASSESSEE FROM THE SAID PARTIES IN THE EARLIER YEARS AGAINST WHICH NO PAYME NT HAVE BEEN MADE BY THE ASSESSEE. IT IS SUBMITTED THAT THERE WAS NO CESSATI ON OF LIABILITY AS AT 31-03- 2012 AND EXISTENCE OF OUTSTANDING CREDIT IN ASSESSE ES BOOKS OF ACCOUNTS IS AN ACKNOWLEDGEMENT OF DEBT PAYABLE BY THE ASSESSEE WHICH CANNOT BE TREATED AS CESSATION OF LIABILITY OF THE ASSESSEE CHARGEABL E TO TAX U/S 41(1)(A) OF 1961 ACT. IT IS ALSO SUBMITTED BY LEARNED COUNSEL FOR TH E ASSESSEE THAT THE ASSESSEE HAS WRITTEN BACK/ADJUSTED THE SAID AMOUNT AND OFFER ED THE SAME FOR TAXATION IN THE ASSESSMENT YEAR 2015-16 WHICH CAN BE VERIFIE D BY AUTHORITIES BELOW, WHICH WERE EXISTING AS OUTSTANDING TO BE PAYABLE IN ITS BOOKS OF ACCOUNT AS AT 31-03-2015. THE ASSESSEE PLACED BEFORE US AS AN AD DITIONAL EVIDENCES VIDE COPY OF THE COMPUTATION OF INCOME FOR ASSESSMENT YE AR 2015-16 ALONG WITH BALANCE SHEET AS AT 31-03-2015 , P&L ACCOUNT FOR FI NANCIAL YEAR 2014-15 AND LEDGER ACCOUNT OF THE SAID TWO PARTIES FOR THE FINA NCIAL YEAR 2014-15. THE LEARNED COUNSEL FOR ASSESSEE WOULD ARGUE THAT THESE CREDIT BALANCES HAVE NOW SUFFERED TAXATION IN THE ASSESSMENT YEAR 2015-16 AN D HENCE ADDITIONS TO INCOME MADE IN THE IMPUGNED ASSESSMENT YEAR BE DELE TED. THESE ARE ADDITIONAL EVIDENCES WHICH WERE NOT PLACED BEFORE T HE A.O. AND LEARNED CIT(A). NOW, THESE DOCUMENTS ARE PLACED BEFORE THE TRIBUNAL VIDE PAGE NO. 19 TO 43. ITA 5191/MUM/2016 5 7. THE LD. D.R. RELIED UPON THE ORDERS OF AUTHORITI ES BELOW. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASSE SSEE IS IN THE BUSINESS OF TRADING IN BULK DRUGS AND PHARMACEUTICAL PRODUCTS. THERE ARE TWO CREDIT BALANCES APPEARING IN THE NAME OF M/S AJANTA ENTER PRISES OF RS. 75762/- AND M/S CALYX CHEMICAL AND PHARMACEUTICAL OF RS. 12 6641/- WHICH WERE APPEARING AS OUTSTANDING TO BE PAYABLE FOR LAST FOU R YEARS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS AT 31-03-2012. THE REVE NUE HAS BROUGHT TO TAX THE SAID AGGREGATE AMOUNT OF RS.2,02,403/- ON ACCO UNT OF CESSATION OF LIABILITY U/S 41(1)(A) OF THE ACT. THE ASSESSEE HA S CLAIMED THAT THESE WERE BONA FIDE PURCHASES OF RAW MATERIAL MADE IN EARLIER YEARS FOR WHICH PAYMENTS WERE NOT MADE BY THE ASSESSEE TO THESE PARTIES. THE ASSESSEE DID NOT GAVE EXPLANATION BEFORE THE AUTHORITIES BELOW NOR FILED ANY CONFIRMATIONS , BUT NOW HAS CLAIMED BEFORE THE TRIBUNAL THAT PURCHASES WERE GENUINE/BONAFIDE AND THESE LIABILITIES WERE OUTSTANDING TO BE PAYABLE AS AT 31-03-2012 WHICH WERE REFLECTED IN BOOKS OF ACCOUNTS AND THERE WERE NO CE SSATION OF LIABILITY. THE ASSESSEE HAS ALSO CLAIMED BEFORE US THAT THE ASSESS EE HAD ALREADY OFFERED THE SAID AMOUNT FOR TAXATION IN THE ASSESSMENT YEAR 201 5-16. THE CONTENTIONS OF THE ASSESSEE ABOUT GENUINENESS/BONAFIDE OF PURCHASE S AS WELL THAT THESE TWO ACCOUNTS STOOD ADJUSTED/WRITTEN BACK AND THE INCOME WAS OFFERED TO TAX IN ASSESSMENT YEAR 2015-16 , FOR WHICH NECESSARY VERIF ICATION NEEDS TO BE DONE BY THE AUTHORITIES BELOW AS TO SAID CLAIMS OF THE A SSESSEE. THUS, WE ARE INCLINED TO RESTORE THIS MATTER TO THE FILE OF THE A.O. FOR VERIFICATION OF THE AFORE-SAID CONTENTIONS OF THE ASSESSE AND DE NOVO D ETERMINATION OF THE ISSUES ON MERITS IN ACCORDANCE WITH LAW AFTER CONSIDERING THE SUBMISSIONS/EXPLANATIONS OF THE ASSESSEE IN THE LIG HT OF EVIDENCES FILED BY THE ASSESSEE. THE ASSESSEE IS DIRECTED TO PRODUCE ALL N ECESSARY AND RELEVANT EVIDENCES AND EXPLANATIONS BEFORE THE A.O. TO SUBS TANTIATE ITS CLAIM IN ITS ITA 5191/MUM/2016 6 DEFENSE WHICH SHALL BE ADMITTED BY THE AO IN THE IN TEREST OF JUSTICE . NEEDLESS TO SAY THAT PROPER AND ADEQUATE OPPORTUNITY OF BEIN G HEARD SHALL BE PROVIDED BY THE A.O. TO THE ASSESSEE IN ACCORDANCE WITH PRIN CIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. WE ORDER ACCORDINGLY. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN I TA NO. 5191/MUM/2016 FOR ASSESSMENT YEAR 2012-13 IS ALLOWED FOR STATISTI CAL PURPOSES AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH APRIL, 2017. # $% &' 20-04-2017 ( ) SD/- SD/- (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 20-04-2017 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI I BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI