M/s Gulf Steel And Minerals, V. ITO, Jamshedpur

ITA 57/RAN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7791 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA; RAJESH AGARWAL S LD ARS
• Keywords: Unexplained cash credit; Question of law
• Section: 40A(3); 133(6); 68; 28

Judgement Text

1 ITA NO.57/RAN/16 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIA L MEMBER I.T.A NO. 57/RAN/16 A.Y 2010-11 M/S. GULF STEEL & MINERALS PAN: AAHEG8248 APPELLANT VS. I.T.O., WARD 1(4), JAMSHEDPUR RESPONDENT FOR THE APPELLANT : S/SHRI S.M. SURANA & RAJESH AGARWAL, ADVOCATES, LD.ARS FOR THE RESPONDENT : SHRI P.K. MONDAL, JCIT SHRI T. VASANTHAN, CIT, LD.DR DATE OF HEARING : 27-02-2018 DATE OF PRONOUNCEMENT : 04-05-2018 ORDER PER BENCH: THIS APPEAL BY ASSESSEE IS AGAINST THE ORDER DT. 18 -12-2015 OF CIT(A), JAMSHEDPUR FOR THE ASSESSMENT YEAR 2010-11, WHEREIN HE CONFIRMED THE ORDER OF THE AO ON ACCOUNT OF ADDITIO NS MADE BY THE AO BEING SUNDRY CREDITORS MADE U/S. 68 OF THE ACT, WHILE ACCEPTING ALL THE CREDIT PURCHASES AS GENUINE EXPENDITURE. THE IS SUE BEFORE US IS WHETHER THE CREDIT PURCHASES CAN BE ADDED U/S. 68 O F THE ACT, WHEN ALL THE PURCHASES HAVE BEEN ACCEPTED AS GENUINE 2. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND PAPER BOOK FILED BEFORE US, WE FIND THAT THE ISSUE IN HAND IS RELATING TO ADDITION MADE ON ACCOU NT OF SUNDRY CREDITOR. DURING THE COURSE OF ARGUMENTS BEFORE US THE LD.AR REFERRED TO PAGE-5 OF THE PAPER BOOK AND ARGUED THAT THE DET AILS OF PURCHASES WERE VERIFIED BY THE AO AND FOUND SATISFIED WITH T HE SAME AND ACCEPTED THE EXPENDITURE INCURRED TO THAT EFFECT. THE AO IS WRONG IN MAKING THE IMPUGNED ADDITION ON ACCOUNT OF SUNDRY C REDITOR, WHICH 2 ITA NO.57/RAN/16 ARE RELATED TO PURCHASES AND THE SAME ALSO ACCEPTED BY THE AO AS GENUINE. WITHOUT REJECTING THE PURCHASES, THE SUNDR Y CREDITORS CANNOT BE TREATED AS INCOME OF ASSESSEE AND IN SUPPORT OF THE CONTENTION, THE ASSESSEE RELIED ON THE ORDER DT. 07-09-2016 OF THE CO-ORDINATE BENCH, ITAT, KOLKATA IN THE CASE OF MS/ STANDARD L EATHER PVT. LTD IN ITA NO. 2620/KOL/2013 FOR A.Y 2010-11, COPY OF THE SAME IS ON RECORD AND REFERRED TO PARAS 10-13 OF THE SAID ORDE R. WE FIND THAT THE FACTS OF THE CASE IN M/S. STANDARD LEATHER PVT. LTD SUPRA AS RELIED ON BY THE ASSESSEE ARE SIMILAR AND IDENTICAL TO THE FACTS OF THE PRESENT CASE. THE LD.DR HAS RELIED ON THE ORDERS OF THE AO AND CIT-A. 3. WE FIND THAT THE ISSUE IN HAND IS COVERED IN FAV OUR OF ASSESSE BY THE ABOVE SAID ORDER OF THE CO-ORDINATE BENCH, I TAT, KOLKATA. RELEVANT PORTION OF SAID ORDER ARE REPRODUCED HEREI N BELOW:- 10. THE ASSESSEE HAS SHOWN SUNDRY CREDITORS IN IT S BOOKS OF ACCOUNT FOR RS.6,24,70,343/- AS ON 31.03.2010. THE AO DURING TH E COURSE OF ASSESSMENT PROCEEDING SENT THE NOTICE AT THE ADDRESSES GIVEN BY ASSESSEE U/S. 133(6) OF THE ACT BUT ALL OF THEM RETURNED UNSERVED. ON QUESTION BY THE AO THE ASSESS EE SUBMITTED THAT THE SUNDRY CREDITORS RELATES TO THE PURCHASES WHICH IS GENUINE , THEREFORE, THE CREDITORS WITHOUT REJECTING THE PURCHASES CANNOT BE TREATED AS INCOME OF THE ASSESSEE. HOWEVER, THE AO DISREGARDED THE CLAIM OF ASSESSEE BY OBSERVING THAT THE ONUS LIES UPON THE ASSESSEE TO PROVE IDENTITY, GENUINETY AND CREDITWORTHINESS. ACC ORDINGLY, AO DISALLOWED THE CREDITOR FOR RS.4,29,02,130/- ON ACCOUNT OF NON-EXISTENT AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 11. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- '5.3.5 I HAVE GONE THROUGH THE ASSESSMENT ORDER, SU BMISSION OF THE AR, PERUSE THE FACT OF THE CASE AND OTHER MATERIALS BROUGHT ON RECORD A ND I AM OF THE VIEW THAT FOR THE FOLLOWING REASONS RS.4,29,02,130/- CANNOT BE ADDED TO THE INCOME OF THE APPELLANT EITHER BY APPLYING THE PROVISIONS OF SECTION 41(1) OR 68 OF THE ACT.:- (I) THAT THE PURCHASE OF THE HIDES FROM THE SUNDRY CREDITORS IS EVIDENT FROM THE PURCHASE BILLS AND BOOKS OF ACCOUNTS MAINTAINED BY THE APPEL LANT. AS REGARDS THE TREATMENT OF THE SAME AS BOGUS CREDITORS BY THE AO, I FIND THAT THE AO HAS TREATED THE CREDITORS FOR PURCHASE MADE DURING THE YEAR AS BOGUS AND NOT EXIS TING. THE AO WAS OF THE VIEW THAT THE NOTICES U/S 133(6) ISSUED TO THE CREDITORS CAME BACK UNSERVED AND THEREFORE THE CREDITORS WERE BOGUS. IT IS HOWEVER FOUND THAT THE AO HAS TREATED THE PURCHASE MADE DURING THE YEAR FROM THE SAME VERY PERSONS AS GENUI NE. THE PAYMENT MADE TO THEM WAS ALSO TREATED AS GENUINE AND DISALLOWANCE WAS MADE O NLY BY APPLYING THE PROVISIONS OF SECTION 40A(3) . I ALSO FIND THAT SUCH SUNDRY CREDITORS FOR SUPPLY OF RAW HIDES AND SKINS REMAINED OUTSTANDING AT THE END OF EVERY YEAR AND W ERE DULY ACCEPTED IN EARLIER YEARS. EVEN WHILE COMPLETING THE ASSESSMENT FOR THE ASSESS MENT YEAR IN QUESTION, SUNDRY CREDITORS OF THE EARLIER YEARS HAVE BEEN ACCEPTED B Y THE AO. I ALSO FIND THAT THERE WERE SUNDRY DEBTORS OF EQUAL AMOUNT IN THE BALANCE SHEET WHICH SHOWS THAT IN THIS TRADE THERE REMAIN OUTSTANDING SUNDRY CREDITORS AND DEBTO RS. WHEN PURCHASE WAS ACCEPTED AS GENUINE THEN THE SUNDRY CREDITORS CANNOT BE TREATED AS BOGUS. VII) REGARDING APPLICABILITY OF PROVISIONS OF SECTION 68 , I FIND THAT THE APPELLANT HAS BROUGHT SUBSTANTIAL MATERIAL ON RECORD TO SHOW THAT THESE ARE SUNDRY CREDITOR FOR PURCHASES PAID IN SUBSEQUENT YEARS AND THAT PART OF THE PURCHASES FROM THE VERY PARTIES WERE ALREADY ACCEPTED BY THE ASSESSING OFFICER.EVID ENTLY, THE CREDITORS WERE HELD TO BE BOGUS ON THE GROUND THAT ENQUIRY LETTERS UNDER SEC. 133(6) OF THE ACT WERE RECEIVED BACK UNSERVED WITH THE REMARKS 'NOT KNOWN' LEAVING THE ASSESSING OFFICER TO CONCLUDE 3 ITA NO.57/RAN/16 THAT THE APPELLANT HAS FAILED TO DISCHARGE HIS ONUS OF PROVING THE CAPACITY OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. APPARENTLY, IN MY OPINION, THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS OF THE CASE IN ITS EN TIRETY. THIS IS A CASE, WHERE THE BOOKS ARE NOT OUTRIGHTLY REJECTED, THERE IS NO ADVERSE IN FERENCE DRAWN REGARDING QUANTUM OF PURCHASES OR SALES AND EVEN THE PURCHASE ACCOUNTS O F THE SUNDRY CREDITORS HAVE NOT BEEN DISTURBED. THE ACT THAT THE ASSESSEE MAINTAINE D REGULAR BOOKS OF ACCOUNT INCLUDING STOCK REGISTER IS ALSO NOT NEGATED. THE ASSESSING OFFICER HAD NOT DISALLOWED THE PURCHASES FROM THOSE CREDITORS NOR THE TRADING RESU LTS WERE DISTURBED. IN CIT VS. RITU ANURAG AGGARWAL -IT APPEAL NO. 325 OF 2008 DATED 22 /7/2009, DEALING WITH SECTION 68 OF THE IT ACT IN A SIMILAR CASE, THE HON'BLE DELHI HIGH COURT OBSERVED ' ....PROCEEDING ON THIS BASIS, THE ITAT OBSERVED THA T THE SALES, PURCHASES AS WELL AS GROSS PROFITS AS DISCLOSED BY THE ASSESSEE HAVE BEEN ACCE PTED BY THE ASSESSING OFFICER. 4. ONCE THIS IS ACCEPTED, WE ARE OF THE OPINION THA T THE APPROACH OF THE ITAT WAS CORRECT INASMUCH AS THE ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT WHILE MAKING ADDITIONS OF THE SUNDRY CREDITORS UNDER SECTION 68 OF THE INCOME TAX ACT. AS THERE WAS NO CASE FOR DISALLOWANCE FOR RESPONDING PURCHASES, NO ADDITION COULD BE MADE UNDER SECTION 68 INASMUCH AS IT IS NOT IN DISPUTE THAT THE CREDITOR S' OUTSTANDING RELATED TO PURCHASES AND THE TRADING RESULTS WERE ACCEPTED BY THE ASSESS ING OFFICER.' VIII) AS REGARDS APPLICABILITY OF PROVISIONS OF SECTION 41(1) , THE FACTS CLEARLY SHOW THAT THE APPELLANT DID NOT WRITE BACK THE SUNDRY CREDITORS T O ITS PROFIT AND LOSS ACCOUNT. IN CIT V. VARDHMAN OVERSEAS LTD . IN ITA NO. 774//2009 DECIDED ON 23.12.2011, (2012 ) 343 ITR 408 (DEL), THE DELHI HIGH COURT, REFERRING TO ITS J UDGMENT IN THE CASE OF JAY ENGINEERING WORKS LTD. V. CIT (22009) 311 ITR 299 (DEL) AND APPLYING THE RATIO L AID DOWN THE CASE OF CIT V. T.V. SUNDARAM IYENGAR & SONS LTD . (1996) 222 ITR 344 (SC) UNDER SEC. 28 OF THE IT ACT , CONSIDERED THE APPLICABILITY OF CLAUSE (A) OF SUB -SECTION (1) OF SECTION 41 AS TO WHAT WOULD CONSTITUTE REMISSIONS OR CESSATION OF TR ADING LIABILITY. THE HON'BLE COURT NOTED THAT IN THE REPORTED CASE, THE ASSESSEE HAS N OT UNILATERALLY WRITTEN BACK THE ACCOUNTS OF THE SUNDRY CREDITORS IN ITS PROFIT AND LOSS ACCOUNT. THEREFORE, THE HIGH COURT ANSWERED THE SUBSTANTIAL QUESTION OF LAW IN THE NEG ATIVE AND IN FAVOUR OF THE ASSESSEE. THE FACTS OF THE PRESENT CASE ARE SIMILAR THOSE OF THE CASE OF VARDHMAN OVERSEAS LTD. (SUPRA). THEREFORE, IT IS ABUNDANTLY CLEAR THAT THE PROVISION OF SEC. 41(21) (A) ARE NOT APPLICABLE. NO ADDITION COULD BE MADE FOR REMISSION OR CESSATION OF TRADING LIABILITY AS ENVISAGED UNDER SECTION 41(1) OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION. IX) IN VIEW OF ABOVE DISCUSSED LEGAL AND FACTUAL PO SITION, I AM OF THE CONSIDERED VIEW THAT THE SUNDRY CREDITORS OF RS.4,29,02,130/- CANNO T BE TREATED AS BOGUS SUNDRY CREDITORS AND CANNOT BE ADDED TO THE INCOME OF THE APPELLANT. ACCORDINGLY, THE IMPUGNED ADDITION MADE BY THE AO IS HEREBY DIRECTED TO BE DE LETED AND THUS, THESE GROUNDS OF THE APPEAL OF THE APPELLANT ARE ALLOWED.' BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 12. BEFORE US LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO WHEREAS LD. AR SUBMITTED THAT THE AO HAS MADE FURTHER ADDITION OF RS. 4,29,0 2,130/- FROM SUNDRY CREDITORS. IT IS SUBMITTED THAT THESE CREDITORS STOOD IN THE BOOKS O F THE COMPANY AND THE AMOUNT WAS NEVER WRITTEN OFF. THE PURCHASES OF GOODS FROM THES E PARTIES HAVE BEEN ACCEPTED TO BE GENUINE. THERE WAS NO EVIDENCE TO SUGGEST THAT NO L IABILITY TO SUNDRY CREDITORS WAS PAYABLE. THE DETAILS OF THESE SUNDRY CREDITORS WERE FILED. THE AO HAS ALSO ACCEPTED THAT THE PAYMENTS TO THESE PARTIES WERE MADE BY BEARER C HEQUES. HOWEVER, AS PER THE AO THAT PAYMENT BY BEARER CHEQUES CAUSES A SERIOUS DOU BT THAT SUNDRY CREDITORS DID NOT EXIST. SIMPLY BECAUSE THE AO DOUBTED THE SAID SUNDR Y CREDITORS EVEN THOUGH ACCEPTING THAT THE PAYMENTS WERE MADE BY CHEQUE, THE DOUBT WI LL NOT ENTITLE THE AO TO TREAT THE SAID SUNDRY CREDITORS AS BOGUS CREDITORS. IT MAY BE SUBMITTED THAT SOME OF THE PURCHASES FROM THESE SUNDRY CREDITORS WERE MADE DUR ING THE YEAR ITSELF AND PURCHASES FROM ALL OF THEM HAVE BEEN ACCEPTED TO BE GENUINE, FOUND RECORDED IN THE BOOKS OF ACCOUNTS SUCH PURCHASE OF RAW MATERIALS WAS ALSO FO UND TO CONSUMED, THE DISALLOWANCE FOR PURCHASE WAS MADE ONLY BY APPLYING SECTION 40A(3) WHEREVER THE PAYMENT WERE IN EXCESS OF RS. 20,000/. THEREFORE SUNDRY CREDITORS C ANNOT BE SAID TO BE BOGUS AND NO ADDITION CAN BE MADE AS BOGUS CREDITORS. IT IS FURT HER SUBMITTED THAT EVEN IF IT IS PRESUMED THAT THERE WERE UNCONFIRMED CREDITORS, THE N WHETHER THE PROVISION OF SECTION 68 OR SECTION 41(1) CAN BE INVOKED AND WHETHER SUCH CREDITORS CAN BE T REATED AS BOGUS WARRANTING ADDITION IN THE INCOME OF THE ASSESSEE. IT IS AGAIN SUBMITTED THAT THERE IS NO DISPUTE THAT THE GOODS HAVE BEEN PURCHASED AND THE GENUINITY OF THE PURCHASE HAVE NOT BEEN DISPUTED AND IT WAS BECAUSE THAT THE PROVISION S OF SECTION 40A(3) HAVE BEEN APPLIED. MOREOVER, THE ASSESSEE MAINTAINED DAY-TO-D AY STOCK REGISTER WHEREIN THE RAW MATERIAL PURCHASED WERE ENTERED INTO AND THE FINISH ED GOODS PRODUCED HAVE BEEN ACCEPTED. THEREFORE, IN SO FAR AS THE PURCHASE DURI NG THE YEAR AND THE CORRESPONDING OUTSTANDING BALANCE AS CREDITORS WHICH RELATES THE ASSESSMENT YEAR IN QUESTION, ADDITION 4 ITA NO.57/RAN/16 U/S 68 CANNOT BE MADE. IN SO FAR AS THE BALANCES BR OUGHT FORWARD FROM EARLIER YEARS ARE CONCERNED ADDITION CANNOT BE MADE U/S 68 SINCE AS P ER SECTION 68 CREDITS IN THE BOOKS SHOULD APPEAR DURING THE ASSESSMENT YEAR RELEVANT P REVIOUS YEAR FOR INVOKING PROVISION OF SECTION 68 OF THE ACT. 13. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE AFORESAID DISCUSSION WE FIND THAT THE ADDI TION WAS CONFIRMED BY THE AO ON ACCOUNT OF NON-SERVICE OF NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT FOR THE PURPOSE OF THE CONFIRMATION OF SUNDRY CREDITORS. HOWEVER WE FIND THAT THE AO HAS CONFIRMED THE ADDITION OF THE SUNDRY CREDITORS WITHOUT DISALLOWIN G THE CORRESPONDING PURCHASES. FROM THE ABOVE IT IS CLEAR THAT THE PURCHASES IN THE INS TANT CASE HAVE BEEN ADMITTED BUT THE CORRESPONDING SUNDRY CREDITORS HAVE BEEN ADDED AS T OTAL INCOME OF THE ASSESSEE. IN OUR CONSIDERED VIEW THE ACTION OF THE AO FOR MAKING THE ADDITION OF THE SUNDRY CREDITORS WITHOUT DISALLOWING THE PURCHASES IS BASED ON WRONG INTERPRETATION OF INCOME TAX LAWS. THE SUNDRY CREDITORS CAN BE ADDED AS INCOME UNDER SECTION 41(1) OF THE ACT ONCE IT IS WRITTEN OFF IN THE BOOKS OF ACCOUNTS. IN THE INSTAN T CASE THE SAME HAS NOT BEEN WRITTEN OFF AND VERY MUCH REFLECTING IN THE BOOKS OF THE AS SESSEE. THEREFORE IN OUR CONSIDERED VIEW THE SUNDRY CREDITORS REFLECTING IN THE BOOKS O F ACCOUNTS CANNOT BE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN THE I NSTANT CASE, THE BALANCES OF MANY OF THE SUNDRY CREDITORS WERE OUTSTANDING COMING FROM E ARLIER YEARS. PAYMENTS WERE MADE TO SOME OR THE CREDITORS DURING THE YEAR. THE SAID PAYMENTS HAVE BEEN ACCEPTED BY THE AO WHICH MEANS GENUINITY OF THE PAYMENTS TO THESE C REDITORS AS WELL AS THE GENUINITY THEREOF TILL LAST YEAR HAVE NOT DISPUTED BY THE AO. IN THE INSTANT CASE THE FIRSTLY THE AO HAS NOT SPECIFICALLY INVOKED THE PROVISIONS OF SECTION 41 (1). FURTHER IN ANY CASE NO SUCH ADDITION CAN BE MADE U/S 41. IN THIS CONNECTION WE ARE PUTTING OUR RELIANCE IN THE JUDGMENT IN THE CASE OF DSA ENGINEERS. IN THE CASE OF DSA ENGINEERS V. ITO 30 SOT 31 (MUM-TRIB), THE AO FOUND THAT THERE WERE CREDITOR B ALANCES WHICH IN MANY CASES WERE 3 YEARS OR MORE THAN 3 YEARS OLD. AS PER THE ASSESSEE THE BALANCES REPRESENTED AMOUNTS DUE TO VARIOUS PARTIES AND THE LIABILITY WAS SUBSIS TING. THE TRIBUNAL HELD THAT IN THE ABSENCE OF CESSATION OF LIABILITIES AND ON THE MERE FACT THAT THE AMOUNTS WERE OUTSTANDING FOR MORE THAN 3 YEARS, THE PROVISIONS O F SECTION 41 (1) COULD NOT BE APPLIED. IN THE CASE OF DHAWAN (M.R.) V. CIT 149 ITR 160 (DE L), IT WAS OBSERVED THAT THE REMISSION OF THE LIABILITY ARISES WHEN THE CREDITOR VOLUNTARILY GIVES UP THE CLAIM. THE CESSATION OF SUCH LIABILITY ARISES ONLY WHEN IT CEA SES TO EXIST IN THE EYES OF LAW FOR ALL INTENTS AND PURPOSES. IN THE CASE OF UOI V.J. K.. SYNTHETICS LTD . (1993) 199 ITR 14 (SC), THE HON'BLE COURT HELD THAT ITA NO.2620/KOL/2013 A. Y. 2010-11 ITO WD-12(1), KOL. VS. M/S STANDARD LEATHER PVT. LTD. PAGE 15 CESSATION OF LIABILITY FOR THE PURPOSE OF SECTION 41(1) MEANS IRREVOCABLE CESSATION SO THAT THERE IS NO PO SSIBILITY OF THE LIABILITY BEING REVIVED IN FUTURE. IF THERE IS SUCH A POSSIBILITY, THEN THE CESSATION IS NOT COMPLETE AND SECTION 41 (1) IS NOT ATTRACTED. IN THE CASE OF SHRI VARDHMAN OVERSEAS LTD. VS. ASSTT . CIT 24 SOT 393 (DEL 'H'-TRIB), THE FACTS OF THE CAS E WERE THAT THE AO ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF SOME SUNDRY CREDITORS. THE ASSESSEE DID NOT FILE CONFIRMATIONS OF SAID SUNDRY CREDITORS, EXCEPT ONE. THEREFORE, AO AFTER GIVING VARIOUS OPPORTUNITIES TREATED THE BALANCE AMOUNT AS INCOME OF ASSESSEE ON ACCOUNT OF UNEXPLAINED CASH CREDITS AND ADDED THE SAME BALANCE AMOUNT TO THE INCOME OF ASSESSEE. IT WAS HELD THAT ALL THE PARTIES WITH REG ARD TO WHICH THE ADDITION HAS BEEN MADE, NO NEW AMOUNT WAS FOUND CREDITED IN ITS ACCOU NT DURING THE YEAR UNDER CONSIDERATION HENCE SECTION 68 CANNOT BE APPLIED. IT WAS ALSO HELD THAT THE BALAN CES WERE BROUGHT FORWARD BALANCES AND IF THE SAME WERE ADDED ON ACCOUNT OF THEIR NON- GENUINENESS, THEN ALSO THESE AMOUNTS COULD NOT BE A DDED TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS THE QUESTION OF GENUINENESS THEREOF CAN BE EXAMINED ONLY IN THE YEAR IN WHICH THEY WERE CREDITED IN THE ACCOUNT OF THE ASSESSEE. IT WAS ALSO HELD THAT THE DEPARTMENT COULD NOT PROVE THAT THE D EBT CANNOT BE SAID TO BE UNENFORCEABLE. IT WAS HELD THAT THE ONUS HAD WRONGL Y BEEN SHIFTED BY THE REVENUE ON THE ASSESSEE. IT WAS HELD THAT THE LIABILITY EXISTED SI NCE TILE ASSESSEE HAD SHOWN THE LIABILITIES OUTSTANDING IN ITS BALANCE SHEET. THEREFORE, THERE WAS NO OCCASION TO TREAT THE SAID AMOUNT AS TAXABLE UNDER SECTION 41 (1) AND IF DEPARTMENT INTENDS TO ASSESS THE SAME B Y APPLYING THE PROVISIONS OF SECTION 41 (1), THEN THE ONUS WILL BE ON THE REVENUE TO SHOW THAT THE LIABILITY WHICH IS APPEARING IN THE BALANC E SHEET HAS CEASED FINALLY AND THERE IS NO POSSIBILITY OF THE REVIVAL OF THE LIABILITY. HEN CE, ADDITION COULD NOT BE SUSTAINED UNDER SECTION 41(1) . THE SAID JUDGMENT OF THE TRIBUNAL WAS CONFIRMED B Y DELHI HIGH COURT ON 23-12-2011 IN THE CASE OF NATIONAL INSULAT ED CABLE CO. V. ITO ITA NO. 421/DEL/2011 DT. 8-7-2011 (DEL 'E'-TRIB) IT WAS HEL D THAT THE FACT THAT THE CREDITORS WERE OLD CREDITORS BROUGHT FORWARD FROM EARLIER YEARS HA S NOT BEEN DISPUTED BY THE DEPARTMENT. THESE CREDITORS HAVE NOT BEEN INTRODUCE D DURING THE YEAR UNDER CONSIDERATION. THERE IS NO EVIDENCE OR MATERIAL ON RECORD TO ESTABLISH THAT THE ASSESSEE LIABILITY TO PAY THE AMOUNT TO THE CREDITORS HAVE B EEN CEASED DURING THE YEAR UNDER CONSIDERATION. FURTHER, THE AMOUNT PAYABLE TO THESE CREDITORS CAN BE ADDED TO THE ASSESSEE'S TOTAL INCOME IN THE YEAR IN WHICH THE AS SESSEE'S LIABILITY TO PAY THE AMOUNT CEASED OR EXTINGUISHED AND NOT IN THE YEAR UNDER CO NSIDERATION WHERE ASSESSEE HAS ADMITTEDLY SHOWN THE LIABILITY IN THE BALANCE SHEET . IT HAS BEEN HELD IN THE CASE OF G P INTERNATIONAL LTD. (P & H) REPORTED IN 325 ITR PAGE 25 THAT PROVISIONS OF SECTION 41 CANNOT BE APPLIED IF THE ASSESSEE IS STILL SHOWING THE LIABILITY. IT HAS BEEN HELD IN THE 5 ITA NO.57/RAN/16 CASE OF BHAVESH PRINTS REPORTED IN 142 TTJ PAGE 128 THAT SIMPLY BECAUSE SOME OF THE CREDITORS WERE NOT TRACEABLE IT CANNOT BE HELD THAT THE LIABILITY IS NOT PAYABLE. IN THE CASE OF TAMINADU WARE HOUSING CORPORATION REPORTED IN 29 2 ITR 310, IT WAS HELD THAT SO LONG THE ASSESSEE HAD SHOWN THE LIABILITY IN THE BALANCE SHEET IT CANNOT BE SAID THAT THE LIABILITY HAS CEASED TO EXIST. IN THE CASE OF WILLS ON AND CO. LTD REPORTED IN 121 TTJ 258 (CHENNAI TRIBUNAL), IT WAS HELD THAT UNLESS IT WAS SHOWN BY THE DEPARTMENT THAT THE LIABILITY CEASED TO EXIST DURING THE ASSESSMENT YEA R IN QUESTION IT CANNOT PARTAKE THE CHARACTER OF INCOME DURING THE ASSESSMENT YEAR IN Q UESTION. SIMILARLY IN THE CASE OF DY. CIT V. AMOD PETROCHEM (P) LTD. (2008) 23 (I) ITCL 145 (GUJ- HC) : (2008) 217 CTR (GUJ) 401, IT WAS HELD THAT AS PER SECTION 68 , THERE SHOULD BE CASH CREDITS OF PREVIOUS YEAR. THE SECTION PROVIDES FOR A DEEMING FICTION OF TREATING THE SUM FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAIN ED FOR ANY PREVIOUS YEAR, BEING CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR, PROVIDED (I) THE ASSESSEE OFFERS NO EXPLANATION AS TO THE NATURE AND SOURCE OF THE CREDITS, OR (II) THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY. THE CRUX OF THE ISSUE, THEREFORE IS, THERE HAVE TO BE CREDITS OF ANY SUM IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOU S YEAR, ONLY THEN THE SUM SO CREDITED CAN BE BROUGHT TO TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR; IN OTHER WORDS, FIRST OF ALL, THERE HAVE TO BE CREDITS IN A PREVIOUS YEAR AND ONLY IN THE ASSESSMENT RELATABLE TO THAT PREVIOUS YEAR, NAMELY, YEAR OF CREDIT, THE SUM CAN BE BROUGHT TO TAX. IN CIT V. USHA STUD AGRICULTURAL FARMS LTD . (2008) 301 ITR 384 (DEL) : (2009) 183 TAXMAN 277 (DEL), IT WAS HELD THAT SINCE IT IS A FINDING OF FACT RECORDED BY THE COMMISSIONER (APPEALS) THAT THE CREDIT BALANCE APPEARING IN THE ACCOUNTS OF ASSESSEE, DID NOT PERTAIN TO THE YEAR UNDER CONSIDE RATION, UNDER THESE CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING T HE IMPUGNED ADDITION U/S 68 AND AS SUCH NO FAULT COULD BE FOUND WITH THE ORDER OF THE TRIBUNAL WHICH HAD ENDORSED THE DECISION OF COMMISSIONER (APPEALS). IN MAHABIR PRAS AD PREM CHAND JAIN V. ITO (1988) 40 TAXMAN 35 (DEL- TRIB )(TAX MAG), IT WAS HELD THA T AMOUNTS FOUND IN THE BOOKS OF ASSESSEE WERE IN EXISTENCE MUCH PRIOR TO THE BEGINN ING OF THE ACCOUNTING PERIOD CORRESPONDING TO THE RELEVANT ASSESSMENT YEAR AND T HE SAME COULD NOT, THEREFORE, BE TREATED AS THE INCOME OF ASSESSEE EARNED DURING THE RELEVANT PREVIOUS YEAR. IN NUCHEM LTD. V. DY. CIT (2004) 87 TTJ (DEL-TRIB) 166, IT WAS HELD THAT REV ENUE HAD FAILED TO PROVE THAT THE AMOUNTS WERE CREDITED TO THE BOOKS O F ACCOUNT OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THESE AMOUNTS WERE BROUGH T FORWARD FROM EARLIER YEARS AND IT IS SETTLED LAW THAT THE ADDITION UNDER SECTION 68 COULD BE MADE ONLY IF THE AMOUNT WAS CREDITED IN THE ACCOUNTS OF THE ASSESSEE IN THE REL EVANT FINANCIAL YEAR. IN SHRI VARDHMAN OVERSEAS LTD. V. ASSTT . CIT (DEL-TRIB): 24 SOT 393, IT WAS HELD THAT NO N EW AMOUNT HAD BEEN CREDITED BY ASSESSEE IN ITS ACCOUNT DURING THE YEAR UNDER CONSIDERATION. THEREFORE, APPLICABILITY OF SECTION 68 OF THE ACT IS ALSO RULED OUT AND ADDITION COULD NO T BE MADE UNDER SECTION 68 OF THE ACT. IN VIEW OF ABOVE WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). HENCE THIS GROUND OF REVENUE IS DISM ISSED. 4. THE AO IN OUR VIEW WAS CONFUSED. HE AT PARA (3) OF HIS ORDER STATES THAT THE ADDITION U/S 68 OF THE ACT AND AT P ARA 3.6 STATES THAT HE IS DISALLOWING SUNDRY CREDITORS. THE LD. CIT-A ALSO DID NOT DISPUTE THE FACTS THAT THE PURCHASE IS GENUINE. WHILE SO SE C 68 OF THE ACT CANNOT BE INVOKED. 5. IN VIEW OF ABOVE, WE ARE OF THE VIEW, THE TRIBUN AL HAS ANALYZED THE ISSUE WITH VARIOUS CASE LAWS. THE CASE LAWS ARE ALSO RELEVANT TO THE PRESENT FACTS OF THE CASE. THUS, THE CIT-A WAS NOT JUSTIFIED IN CONFIRMING THE IMPUGNED ADDITIONS CHALLENGED IN GRO UND NOS. 2 TO 7 OF THE APPEAL. THUS, THE ORDER OF THE CIT-A IS SET ASIDE AND DIRECT THE AO TO DELETE THE ADDITIONS INVOLVED IN GROUND NOS. 2 TO 7 OF THE APPEAL RAISED BY THE ASSESSEE BEFORE US. 6 ITA NO.57/RAN/16 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 57/RAN/2016 FOR THE A.Y 2010-11 IS ALLOWED. ORDER PRONOUNCED ON 04-05-2018 SD/- SD/- J. SUDHAKAR REDDY S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 04-05-2018 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. GULF STEEL & MINERALS C/O PREM NAT H PODDAR, STATION ROAD, NAWAMUNDI-833218. 2 RESPONDENT INCOME TAX OFFICER, WARD 1(4), 47 C.H A REA, JAMSHEDPUR-831001. 3 . THE CIT(A), RANCHI 4. 5. CIT , RANCHI DR, ITAT RANCHI BENCHES, RANCHI. / TRUE COPY, BY ORDER, SR.PS ITAT, RANCHI