M/s. Hardik Fabrics, Surat V. The Income tax Officer,Ward-2(4), Surat

ITA 58/AHD/2011

• Counselvise Citation: 5820514 RSA 2011
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R N VEPARI
• Section: 143(3); 234B; 250

Judgement Text

, , . .. . . .. . , , , , ! ! ! ! ' '' '# ## # ' ' ' '. .. .$ #$ $ #$ $ #$ $ #$ , %& ' %& ' %& ' %& ' % ! % ! % ! % ! IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD BEFORE HONBLE SHRI G.C.GUPTA, V.P. & HONBLE SHRI A.MOHAN ALANKAMONY, A.M.) # # # #. ITA NO. 58 / AHD./2011 : ()- 2007-2008 M/S. HARDIK FABRICS, SURAT -V S- I.T.O., WARD-2(4), SURAT (,- /APPELLANT) ( ./,- /RESPONDENT ) (PAN: AADFH 2873H) ,- 0 1 % / APPELLANT BY : SHRI R.N.VEPARI, A.R. ./,- 0 1 % / RESPONDENT BY : SHRI VINOD TANWANI, SR.D.R. 2 0 34& / DATE OF HEARING : 30/11/2011 5$( 0 34& / DATE OF PRONOUNCEMENT : 16/12/2011 %6 %6 %6 %6 / ORDER PER SHRI A. MOHAN ALANKAMONY, A.M. : THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT IN AP PEAL NO. CAS-II/262/09-10/190 DATED 14.12.2010 FOR THE ASSESSMENT YEAR 2007-2008 PASSED UNDER SECTION 250 R.W.S.143(3) OF THE I.T. ACT, 1961. 2. THE ASSESSEE HAS RAISED MAINLY TWO GROUNDS IN I TS APPEAL, WHICH IS CONCISED AS FOLLOWS: I) THE LEARNED C. I. T. (APPEALS) ERRED IN CONFIRM ING ADDITION OF RS.45,72,591/- IN RESPECT OF CREDITORS WHERE THERE HAS BEEN NO CESSATION OR REMISSION OF LIABILITY. II) NO INTEREST IS CHARGEABLE UNDER SECTION 234B OF THE ACT. 3. IN REGARD TO GROUND NO.2 WITH RESPECT TO CHARGEA BILITY OF INTEREST UNDER SECTION 234B OF THE ACT; SINCE IT IS CONSEQUENTIAL AND MAND ATORY, WE DISMISS THIS GROUND RAISED IN THE APPEAL. ITA NO. 58-AHD-11 2 4. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F MANUFACTURING OF ART SILK CLOTH. DURING THE YEAR, THE ASSESSEE HAD NO BUSINES S ACTIVITIES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 06.12.2007. SUBSEQUENTLY, THE C ASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED ON 30.12.2009 UNDER SE CTION 143(3) OF THE ACT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE LD. A .O. DIRECTED THE ASSESSEE TO FURNISH CONFIRMATION STATEMENT FOR THE SUNDRY CREDITORS SHO WN IN THE BALANCE-SHEET AS RS.62,83,167/-. THE ASSESSEE COULD FURNISH CONFIRMA TION STATEMENTS ONLY IN REGARD TO FOUR PARTIES AGGREGATING TO RS.17,10,576/-. SINCE T HE ASSESSEE COULD NOT FURNISH CONFIRMATION STATEMENT FOR THE OTHER SUNDRY CREDITO RS, AN AMOUNT OF RS.45,72,591/- BEING DIFFERENCE OF RS.62,83,167/- AND RS. 17,10,57 6/- WAS ADDED TO THE INCOME OF THE ASSESSEE UNDER SECTION 41(1) OF THE ACT, CONSIDERIN G THE AMOUNT TO BE CESSATION OF LIABILITY. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT IT HAD TRIED TO OBTAIN C ONFIRMATION STATEMENT FROM ALL THE CREDITORS BUT FEW OF THEM REFUSED TO COOPERATE. THE ASSESSEE HAD FURTHER SUBMITTED THAT SOME CREDITORS FAILED TO COOPERATE SINCE THE ASSESS EE COULD NOT MAKE PAYMENT TO THEM WITHIN IN THE PERIOD DUE. HOWEVER, THE LD. CIT(A) H ELD THAT THE EXPLANATION OF THE ASSESSEE IN ITSELF IS SELF REVEALING AND SELF DEFEA TING BECAUSE THE SUNDRY CREDITORS WERE SHOWN IN THE BOOKS AS A RESULT OF PURCHASES MADE BY THE ASSESSEE AND THESE SUNDRY CREDITORS WILL NOT REMAIN SILENT FOR SO LONG FOR NO T RECEIVING THE PAYMENT. NO SUNDRY CREDITORS WILL FOREGO THE CLAIM IN ORDER TO PUT THE ASSESSEE IN EMBARRASSING POSITION BEFORE THE I.T. AUTHORITIES. FURTHER THE LD. CIT(A) REFUSED TO RELY UPON THE CIRCULAR OF CBDT NO.762 DATED 18.02.1998, POINTED OUT BY THE AS SESSEE AND ALSO BRUSHED ASIDE THE CASE LAWS RELIED UPON BY THE ASSESSEE BECAUSE T HOSE DECISIONS WERE NOT FOUND TO BE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE SINC E THE ASSESSEE HAD NOT PRODUCED ANY DOCUMENTARY EVIDENCE OR OTHERWISE TO SHOW THAT THE SUNDRY CREDITORS TO THE EXTENT OF RS.45,72,951/-WERE REALLY AND ACTUALLY EXISTING TIL L DATE. DUE TO THE ABOVE REASONS, THE LD. CIT(A) UPHELD THE ADDITION MADE BY THE LD. A.O. 6. THE LD. A.R. SUBMITTED BEFORE US THAT THE ASSESS EE HAD NO TRADING ACTIVITIES DURING THE PREVIOUS YEAR UNDER CONSIDERATION. SUNDR Y CREDITORS SHOWN IN THE BALANCE- ITA NO. 58-AHD-11 3 SHEET WERE GENUINE AND WERE ACCUMULATED OVER THE PA ST FEW YEARS. HE FURTHER SUBMITTED THAT THE DETAILED LIST OF ALL THE SUNDRY CREDITORS WERE PRODUCED BEFORE THE REVENUE AUTHORITIES AND ALSO DISCLOSED IN THE BALAN CE-SHEET. SINCE MOST OF THE SUNDRY CREDITORS WERE NOT PAID IN TIME, THEY WERE AGGRIEVE D AND DID NOT COOPERATE WITH THE ASSESSEE IN SUBMITTING THE CONFIRMATION STATEMENT. HE FURTHER ARGUED STATING THAT THE REVENUE COULD HAVE DIRECTLY SUMMONED THE SUNDRY CRE DITORS AND VERIFIED THE BONA FIDE CLAIM OF THE ASSESSEE. THE REVENUE FAILED TO MAKE A NY INVESTIGATION ON THAT REGARD. THE LD. A.R. SUBMITTED THE GIST OF CASE LAWS BEFORE US IN SUPPORT OF HIS ARGUMENT, IN PARTICULAR THE ORDER OF THE TRIBUNALS AHMEDABAD BE NCH REPORTED IN [2011] 46 SOT 268 (AHD.), WHEREIN THE TRIBUNAL HELD AS FOLLOWS: I) FOR TREATING AMOUNT OF OUTSTANDING CREDIT AS TA XABLE UNDER SECTION 41(1), THERE HAS TO BE A POSITIVE ACT ON THE PART O F CREDITOR IN CURRENT YEAR WHICH WOULD PROVIDE BENEFIT TO ASSESSEE BY WAY OF REMISSION MERELY BECAUSE CERTAIN AMOUNT IS OUTSTANDING FOR NU MBER OF YEARS WILL NOT BE CASE FOR HOLDING THAT THERE IS A CESSATION O R REMISSION. II) WHETHER REVENUE HAD FAILED TO SHOW THAT ASSESSE E HAD OBTAINED ANY BENEFIT BY WAY OF REMISSION DURING CURRENT YEAR; AN D THAT AMOUNT IN QUESTION WAS IN FACT TAKEN INTO ACCOUNT IN ANY EARL IER YEAR EITHER IN TRADING ACCOUNT OR IN PROFIT AND LOSS ACCOUNT, OUTS TANDING BALANCES IN BOOKS OF ASSESSEE COULD NOT BE TAXED UNDER SECTION 41(1). 7. THE LD. SR.D.R. RELIED UPON THE ORDERS OF THE RE VENUE AUTHORITIES AND SUBMITTED THAT SUFFICIENT OPPORTUNITY WAS GIVEN TO THE ASSESS EE FOR PRODUCING CONFIRMATION STATEMENTS FROM THE CREDITORS. HOWEVER, THE ASSESSE E COULD PRODUCE CONFIRMATION STATEMENTS ONLY WITH RESPECT OF FOUR PARTIES. THE O THER CREDITORS APPARENTLY WERE NOT PURSUING TO COLLECT THE DEBTS DUE FROM THE ASSESSEE . SINCE THE ASSESSEE HAD NO BUSINESS ACTIVITIES DURING THE YEAR, IT APPEARS THAT EITHER SUNDRY CREDITORS WERE NOT SERIOUS IN COLLECTING THE DUES OR NOT GENUINE. THEREFORE, THE LD. D.R. PRAYED THAT THE ORDER OF THE REVENUE AUTHORITIES MAY BE UPHELD. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD AND THE PAPER BOOK SUBMITTED BY THE ASSESSEE RUNNING FR OM 1 TO 30 PAGES. FROM THE FACTS BEFORE US, IT IS EVIDENT THAT THE ASSESSEE HAD FURN ISHED THE LIST OF SUNDRY CREDITORS BEFORE THE REVENUE ALONG WITH THE BALANCE-SHEET AND OTHER PARTICULARS. THE ASSESSEE HAS ITA NO. 58-AHD-11 4 ALSO FURNISHED CONFIRMATION STATEMENT TO THE EXTENT OF RS.17 LAKHS FROM FOUR PARTIES. THE ASSESSEE HAD NOT CONDUCTED ANY BUSINESS ACTIVIT IES DURING THE PREVIOUS YEAR. THEREFORE IT IS APPARENT THAT ALL THE SUNDRY CREDIT ORS PERTAINED TO THE EARLIER YEARS WHICH REMAIN TO BE PAID. THE ASSESSEES SUBMISSION THAT T HE CREDITORS DID NOT CO-OPERATE WITH THE ASSESSEE TO FURNISH CONFIRMATION STATEMENT SINC E THEY WERE AGGRIEVED FOR NOT BEING PAID IN DUE TIME BY THE ASSESSEE, CANNOT BE BRUSHED ASIDE. WHEN ALL THE FACTS WERE BEFORE THE REVENUE, THE REVENUE HAD ENOUGH AUTHORIT Y TO MAKE SOME ENQUIRIES ON THE BONA FIDE OF THE CREDITORS. FURTHER, THE REVENUE HAS NOT BROU GHT ANYTHING ON RECORD TO SHOW THAT THE SUNDRY CREDITORS HAD FORGONE THEIR DE BTS IN FAVOUR OF THE ASSESSEE. FROM THE CASE LAWS RELIED UPON BY THE ASSESSEE SUPRA, IT IS OBVIOUS THAT SUCH ADDITION UNDER SECTION 41(1) OF THE ACT CANNOT BE MADE BY THE REVE NUE IN THESE CIRCUMSTANCES. 8.1 FROM THE FACTS AND CIRCUMSTANCES OF THIS CASE, RELYING UPON VARIOUS DECISIONS CITED BY THE ASSESSEE AND FROM THE ABOVE DISCUSSION S, WE HAVE NO HESITATION TO DELETE THE ADDITION MADE BY THE LD. A.O. FOR RS. 45,72,591 /- UNDER SECTION 41(1) OF THE ACT WHICH WAS FURTHER CONFIRMED BY THE LD. CIT(A). IT I S ORDERED ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 7 %6 0 5$( 8#) 16 / 12 /2011 $ 9 0 2 : SD/- SD/- (G.C.GUPTA) (A.MOHAN ALANKAMONY) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 16/12/2011 %6 %6 %6 %6 0 00 0 .3; .3; .3; .3; <%;(3) <%;(3) <%;(3) <%;(3)- -- - 1. ,- 2. ./,- 3. ## 3 @ 4. @- - 5. ;C .3 , , : 6. E F7 %6 %, / # , : TALUKDAR/ SR. P.S. ITA NO. 58-AHD-11 5