SHREE PADMAVATI MARBLES PVT. LTD., Ajmer V. ITO, Kishangarh

ITA 596/JPR/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5163 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S DAGUR CIT DHK
• Assessee Lawyers: AJAY SOMANI
• Keywords: Business income; Depreciation; Deemed to accrue or arise in india; Additional evidence
• Section: 133(6); 194C; 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.596/JP/13 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 M/S SHREE PADMAVATI MARBLES PVT. LTD. C/O AJAY SOMANI, CHARTERED ACCOUNTANTS, 28, ASHOK MARG, ANA SAGAR LINK ROAD, AJMER. CUKE VS. THE INCOME TAX OFFICER, KISHANGARH LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCS 8801 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI AJAY SOMANI (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S DAGUR (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10.08.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : /08/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), AJMER DATED 28.03.2013 WHEREIN THE ASSESSEE HAS TA KEN FOLLOWING GROUNDS OF APPEAL: (I) THAT THE CONFIRMATION OF ADDITIONS (PARTLY) BY LD. CIT(A), AJMER ARE BAD IN LAW AND THE FACTS OF THE CASE AS NOT ALLOWING OF DEPRECIATION @ 80% REGARDING ALL CIVIL WORKS OF WINDMILL IS NOT JUSTIF IED AS THE ENTIRE CIVIL WORK HAS BEEN CARRIED OUT REGARDING WINDMILL. ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 2 (II) THAT THE CONFIRMATION OF DISALLOWANCE OF RS.4, 10,188/- UNDER SECTION 40A(IA) IS UNJUSTIFIED AS THE RECIPIENTS OF FREIGHT HAVE ALREADY BEEN PAID TAX ON THE INCOMES AND HAVE SUBMITTED THE REQUISITE DECLARATIONS (FORM 15D). (III) THE CONFIRMATION OF ADDITION NS U/S 41(1)(A) M/S TIRUPATI BALAJI MINERALS PVT. LIMITED (RS 3,16,553), M/S KAY JAY M ARBLES PVT. LTD. (RS.1,81,251) ARE UNJUSTIFIED AS THE APPELLANT HAS NOT OBTAINED ANY AMOUNT/BENEFIT IN ANY MANNER BY WAY OF REMISSION/CE SSATION OF TRADING LIABILITY CONTINUES IN BOOKS OF ACCOUNTS OF THE APP ELLANT. 2. FIRSTLY, THE ABOVE APPEAL WAS REJECTED BY THE CO ORDINATE BENCH VIDE ITS ORDER DATED 4 TH FEBRUARY 2016 ON ACCOUNT OF NON-APPEARANCE AND THE REAFTER, SAID ORDER OF THE COORDINATE BENCH WAS RECALLED BY THE SUBSEQUENT ORDER OF THE COORDINATE BENCH DATED 24 JUNE 2016 AND HENCE, THE PRESENT APPEAL BEFORE US. 3. DURING THE COURSE OF HEARING, THE LD. AR DIDNT PRESS FOR GROUND NO. 1. HENCE, THE GROUND NO. 1 IS DISMISSED AS NOT PRESSED . 4. IN RESPECT OF THE SECOND GROUND OF APPEAL, THE L D. CIT(A) HAS GIVEN HIS FINDING AS UNDER: I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN THAT THE APPELLANT HAS CLAIMED THAT ASSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE AGAINST THE ABOV E PAYMENTS TO THE TRUCK OWNERS AS FORM NO. 15-I WAS RECEIVED FROM THE SE PERSONS AND THEY HAVE FILED THEIR RETURNS. HOWEVER IT IS NOTED THAT AS PER PROVISIONS OF THE SEC. 194C, SECOND AND THIRD PROVISO READS AS UNDER : PROVIDED FURTHER THAT NO DEDUCTION SHALL BE MADE UNDER SUB-SECTION (2), FROM THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKE LY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF THE SUB-CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES, ON PRODUCTION OF A DECLARATION TO THE PERSON CONCERNED PAYING OR CREDITING SUCH SUM, IN THE PRESCRIBED FORM AND VERIFIED IN T HE PRESCRIBED MANNER AND WITHIN SUCH TIME AS MAY BE PRESCRIBED IF SUCH S UB-CONTRACTOR IS AN INDIVIDUAL WHO HAS NOT OWNED MORE THAN TWO GOODS C ARRIAGES AT ANY TIME DURING THE PREVIOUS YEAR. POVIDED ALSO THAT THE PERSON RESPONSIBLE FOR PAYING ANY SUM AS AFORESAID TO THE SUB-CONTRACTOR REFERRED TO IN THE SECOND PRO VISIO SHALL FURNISH TO ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 3 THE PRESCRIBED INCOME TAX AUTHORITY OR THE PERSON A UTHORISED BY IT SUCH PARTICULARS AS MAY BE PRESCRIBED IN SUCH FORM AND W ITHIN SUCH TIME AS MAY BE PRESCRIBED. IN VIEW OF ABOVE PROVISIONS, IT IS APPARENT THAT AS SESSEE BEING THE CONTRACTOR THE ABOVE PROVISIONS ARE NOT APPLICABLE IN HIS CASE AS HELD BY THE AO. IT MAY BE MENTIONED THAT THE ASSESSEE HAS NOT MADE ANY REQUEST FOR ADMISSION OF A ADDITIONAL EVIDENCE UNDER RULE 46A N OR THE REMAND REPORT HAS CALLED BY MY LD. PREDECESSOR REGARDING ADMISSI BILITY OF ABOVE EVIDENCE. IN ANY CASE AS THE SAID SECOND PROVISO T O SEC. 194C(3), HAS BEEN HELD TO BE NOT APPLICABLE IN THE CASE OF THE A SSESSEE BEING A CONTRACTOR, FILING OF ABOVE FORMS IS IMMATERIAL. FURTHER, THE ASSESSEES CONTENTION THAT SEC. 6 HAS INTRODUCED TO SUB SEC. 194C AS PER WHICH FURNISHING OF PAN NO. NO DEDUCTIO N OF TAX SHALL BE MADE. IT IS RELEVANT TO NOTE THAT SAID PROVISION I S NOT APPLICABLE TO THE A.Y. 2007-08 AND HAS BEEN INTRODUCED W.E.F. 01.10.2 009 AS HAS BEEN POINTED OUT BY THE AO IN THE REMAND REPORT. IN REJOINDER TO THE REMAND REPORT, THE ASSESSEE HAS POINTED OUT THE SECOND PROVISO ADDED TO SEC. 40(A)(IA) INTRODUCED I N FINANCE ACT 2012 CLAIMING THAT THE RELEVANT PAYEE HAS MADE THE PAYME NT AND THE SAID AMENDMENT IS CLARIFICATORY IN NATURE, HENCE IS RETR OSPECTIVELY APPLICABLE. THE ASSESSEES CONTENTIONS IN THIS REGARD ARE NOT A CCEPTABLE AS THE SAID SECOND PROVISO TO SEC.40(A)(IA) HAS BEEN INTRODUCED W.E.F. 01.04.2013. SAME HAS NOT BEEN SHOWN TO BE RETROSPECTIVELY APP LICABLE FOR A.Y., 2006-07. IN VIEW OF ABOVE DISCUSSION., THE DISALL OWANCE MADE BY THE AO U/S 40A(IA) IS CONFIRMED. 4.1 FIRSTLY, REGARDING THE LAST CONTENTION OF THE ASSESSEE REGARDING RETROSPECTIVE APPLICABILITY OF SECOND PROVISO TO SE C. 40(A)(IA) INTRODUCED BY THE FINANCE ACT 2012, THIS BENCH HAS RECENTLY HELD IN C ASE OF KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE-6, JAIPUR ITA NO . 172/JP/16 DATED _______ THE SAME TO BE RETROSPECTIVE IN NATURE. THE RELEVA NT FINDINGS ARE AS UNDER: 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE HONBLE SUPREME COURT IN HINDUSTAN COCA COLA ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 4 BEVERAGE PVT. LTD (SUPRA) HAS HELD THAT WHERE DEDUC TEE, RECIPIENT OF INCOME, HAS ALREADY PAID TAXES ON AMOUNT RECEIVED F ROM DEDUCTOR, DEPARTMENT ONCE AGAIN CANNOT RECOVER TAX FROM DEDUC TOR ON SAME INCOME BY TREATING DEDUCTOR TO BE ASSESSEE-IN-DEFAU LT FOR SHORTFALL IN ITS AMOUNT OF TAX DEDUCTED AT SOURCE. 2.6 THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN CASE OF PMS DIESEL (SUPRA) IS IN THE CONTEXT OF APPLICABILI TY OF PROVISIONS OF SECTION 40A(IA) TO AMOUNT PAID/PAYABLE DURING THE F INANCIAL YEAR AND THUS DOESNT SUPPORT THE CASE OF THE REVENUE. 2.7 REGARDING DECISION OF HONBLE KERALA HIGH COURT S DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT(SUPRA) AND HONBLE DE LHI HIGH COURT IN CASE OF ANSAL LAND TOWNSHIP PVT. LTD. (SUPRA), THER E ARE CONFLICTING DECISIONS ON THE ISSUE OF RETROSPECTIVITY OF SECOND PROVISIO TO SECTION 40A(IA). THE QUESTION THAT ARISES FOR CONSIDERATION IS WHERE THERE IS NO DECISION OF A JURISDICTIONAL HIGH COURT AND THERE A RE CONFLICTING VIEWS OF THE DIFFERENT HIGH COURT, WHICH VIEW SHOULD BE FOLL OWED. IN THIS REGARD, WE DRAW SUPPORT FROM THE JUDGEMENT OF HONBLE SU PREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. (1972) 8 8 ITR 192 (SC) WHEREIN THE HONBLE SUPREME COURT HAS LAID DOWN THE PRINCIP LE THAT F TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADO PTED. RECENTLY, AN IDENTICAL MATTER CAME UP BEFORE THE COORDINATE RAIP UR BENCH IN THE CASE OF RKP COMPANY VS. ITO WARD-1, KORBA IN ITA NO. 106 /RPR/2016 DATED 24.06.2016 WHEREIN THE COORDINATE BENCH HAS HELD TH E SECOND PROVISO TO SECTION 40A(IA) TO BE RETROSPECTIVE IN NATURE NOTIN G THE CONFLICTING DECISIONS OF HONBLE KERALA HIGH COURT AND HONBLE DELHI HIGH COURT AND ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 5 FOLLOWING THE PRINCIPLES LAID DOWN IN CASE BY THE H ONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. 2.8 IN VIEW OF THE ABOVE DISCUSSIONS, WE REMIT THE MATTER TO THE FILE OF THE AO FOR LIMITED VERIFICATION OF FORM NO. 26A PRE SCRIBED UNDER RULE 31ACB ON THE ASPECT AS TO WHETHER RECIPIENT OF PAYM ENT HAS INCLUDED THE SAME IN THEIR COMPUTATION OF BUSINESS INCOME OFFERE D TO TAX AND, IF FOUND TO BE SO, DELETE THE DISALLOWANCE IN QUESTION. WIT H THESE DIRECTIONS, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 4.2 IN LIGHT OF ABOVE DECISION ALREADY TAKEN BY THI S BENCH WHICH EQUALLY APPLIES TO THE FACTS OF THE PRESENT CASE, WE DONT THINK IT IS NECESSARY TO EXAMINE THE OTHER CONTENTIONS RAISED BY THE LD AR. WE REMIT THE MATTER TO THE FILE OF THE AO FOR LIMITED VERIFICATION OF WHETHER RECIPIENT OF PAYMENT HAS INCLUDED THE SAME IN THEIR COMPUTATION OF INCOME OF FERED TO TAX AND, IF FOUND TO BE SO, DELETE THE DISALLOWANCE IN QUESTION. WIT H THESE DIRECTIONS, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 5. NOW COMING TO GROUND NO. 3 OF THE APPELLANT WHER E THE APPELLANT HAS CHALLENGED THE ADDITION OF RS 4,97,804 UNDER SECTIO N 40(A)(IA) OF THE ACT. 5.1 FIRSTLY, REGARDING AMOUNT PAYABLE IN RESPECT OF M/S TIRUPATI BALAJI MINERALS PVT. LTD., THE LD. AR SUBMITTED THAT THE A PPELLANT COMPANY PURCHASED MARBLE BLOCKS FROM THE SAID COMPANY DURING FEBRUARY AND MARCH 2001 VIDE 17 BILLS TOTALLING TO RS. 3,16,555/- ON CREDIT. DUE TO QUALITY VARIATIONS, DISPUTES AROSE WITH THE SUPPLIER M/S TIRUPATI BALAJI MINERAL S PVT. LTD. DESPITE REPEATED REQUEST THE COMPANY DID NOT RESPOND EVEN ONCE. UNSE TTLED DISPUTES HAS LED TO NON PAYMENT OF THE BILLS BY THE APPELLANT COMPANY OF RS. 316553/-. SINCE F.Y. 2000-01, THE AMOUNT OF RS.3,16,553/-APPEARS AS OUTS TANDING DUE TO THE CREDITORS IN THE APPELLANT COMPANYS SUCCESSIVE BAL ANCE SHEETS. AS TILL DATE THE AMOUNT HAS NOT BEEN PAID & THE APPELLANT COMPANY DO ES NOT INTEND TO NOT TO MAKE PAYMENT, THE AMOUNT WAS CONTINUOUSLY APPEARED IN CREDITORS LIST IN THE BALANCE SHEET OF THE APPELLANT COMPANY. LD. AO HA S VERIFIED AND APPROVED ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 6 THE CREDIT APPEARING IN APPELLANT COMPANIES FINAL A CCOUNTS IN LAST A.Y. 2006-07 WHEN HE HAD PASSED SCRUTINY ASSESSMENT ORDER DATED 17.11.2008. THE APPELLANT COMPANY HAS NOT OBTAINED IN CASH OR IN AN Y OTHER MANNER ANY AMOUNT OR ANY BENEFIT ETC. FROM ANY PERSON REGARDIN G THE PURCHASES MADE BY THE COMPANY IN THE F.Y. 2000-01. IT IS NEITHER THE CASE THAT THE APPELLANT COMPANY HAS WRITTEN OFF THE OUTSTANDING DUES IN ITS BOOKS OF ACCOUNTS BY CREDITING THE AMOUNT TO PROFIT & LOSS ACCOUNT NOR H AS THE APPELLANT COMPANY AT ANY TIME REFUSED TO THE CREDITORS M/S TIRUPATH I BALAJI MINERALS PVT. LTD. THAT IT IS NOT WILLING TO MAKE PAYMENT. IN THE ONG OING DISPUTES, THE CREDITOR COMPANY HAS NEVER AGREED NOR EVEN HINTED TO THE AP PELLANT COMPANY ABOUT THE WAIVER OF THE OUTSTANDING AMOUNT. EVEN AT THE TIME OF CHANGE OF MANAGEMENT IN M/S TIRUPATHI BALAJI MINERALS PVT. LT D., THE APPELLANT COMPANY HAD CONFIRMED THE OUTSTANDING DUES FOR THE SUPPLIER S. IN SUCH CIRCUMSTANCES THE UNDISPUTED FACTS THAT EMERGE ARE APPELLANT COMP ANY PURCHASED GOODS IN F.Y. 2000-01 FROM THE CREDITOR COMPANY. THE APPELLA NT COMPANY HAS NOT MADE ANY PAYMENT TO THE CREDITOR AND THE AMOUNT IS OUTS TANDING TILL DATE DUE TO DISPUTES. THE APPELLANT COMPANY HAS NOT RECEIVED A NY COMMUNICATION REGARDING ANY WRITE OFF BY THE CREDITOR COMPANY NOR HAS RECEIVED ANY CREDIT NOTE REGARDING THE SAME. AS THE CREDITOR COMPANY HA S IN ITS BOOKS OF ACCOUNTS REMOVED THE OUTSTANDING TOWARDS THE APPELLANT COMPA NY, IT IS CLEARLY A UNILATERAL ACT OF THE CREDITOR WHICH MIGHT HAVE BE EN IN SOME PREVIOUS YEAR (CLEARLY NOT IN F.Y. 2006-07). 5.2 THE LD AR FURTHER SUBMITTED THAT FROM THE VARIO US EXPLANATIONS BY THE CREDITOR COMPANY (M/S TIRUPATHI BALAJI MARBLE PVT. LTD.), ONE CAN CLEARLY DERIVE AS UNDER: LETTER DATED 15.10.2009 EXTRACT REPRODUCED: WITH REFERENCE TO THE ABOVE, THIS IS TO SUBMIT THA T DURING A.Y. 2007-08 NO DEALINGS WITH M/S SHREE PADMAVATI MARBLES PVT. LTD. MADANGANJ KISHANGARH AND NO OPENING AS WELL AS CLOSING BALANCE EXIST WIT H US . DERIVATION: - THE CREDITOR HAS NO DEALING WITH THE APPELLANT COMPANY. THE OPENING BALANCE AS WELL AS CLOSING BALANCE WERE NIL FOR FINANCIAL YEAR 01.04.2006 TO 31.03.2007. THIS FACT DOES NOT MEAN THAT THE APPELLANT HAS RECEIVED ANY BENEFIT BY REMISSION OR CESSATION OF L IABILITY IN PREVIOUS YEAR 2006-07. AS THE OPENING BALANCE IN CREDITOR COMPAN YS BOOKS AS ON ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 7 01.04.2006 WAS NIL IT IMPLIES THAT THERE HAS BEEN N O REMISSION OR CESSATION OF LIABILITY IN PREVIOUS YEAR 2006-07. THUS NO INCOME BECOMES TAXABLE IN A.Y. 2007-08. LETTER DATED 16.10.2009 EXTRACT REPRODUCED: ON VERIFICATION OF FAX COPY OF ACCOUNT STATEMENT O F SHREE PADMAVATI MARBLES PVT. LTD. IN THIS MATTER THIS IS TO SUBMIT THAT N O SUCH AMOUNT IS PENDING/OUTSTANDING WITH THIS CONCERN. IN OUR LETTE R DATED 15.10.2009 SENT BY TIRUPATHI BALAJI MARBLES PVT. LTD. WE CLEARLY SUBMI T THAT NO OPENING AS WELL AS CLOSING BALANCE IS LYING WITH SHREE PADMAVATI MARBL ES PVT. LTD. FURTHER THIS IS TO SUBMIT THAT THERE IS NO TRANSACTION WITH THIS CONCE RN SINCE 5-7 YEARS. DERIVATION: - THERE WAS NO TRANSACTION WITH THE APPELLANT COMPA NY SINCE 5-7 YEARS. THIS FACT ALSO DOES NOT MEAN THAT THE APPEL LANT COMPANY HAS RECEIVED ANY BENEFIT IN PREVIOUS YEAR 2006-07 WHICH LEADS TO DEEMING INCOME UNDER SECTION 41(1). LETTER DATED. 22.11.2009 EXTRACT REPRODUCED: DURING THE F.Y. 2006-07 NO ACCOUNT OF SHREE PADMA VATI MARBLES PVT. LTD. IS APPEARING IN OUR BOOKS OF ACCOUNTS AS THERE IS NO T RANSACTION WITH THIS PARTY SINCE 7 YEARS. DERIVATION: (A) NO SUCH AMOUNT IS DUE FROM THE APPELLANT COMPA NY SINCE LONG BACK AND NO TRANSACTION SINCE LAST 9 YEARS. (B) DURING THE F.Y. 2006-07 NO ACCOUNT IS APPEARIN G IN THE CREDITOR COMPANYS BOOKS AS THERE IS NO TRANSACTION WITH THE COMPANY S INCE 7 YEARS IMPLYING THAT THERE IS NO WRITE OFF HAS BEEN MADE BY THE CREDITO R COMPANY IN F.Y. 2006-07. THUS NO AMOUNT IS CHARGEABLE UNDER SECTION 41(1). ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 8 AS THE APPELLANT COMPANY HAD PURCHASED GOODS ON CR EDIT IN F.Y. 2000-01 AND HAS NOT PAID THE OUTSTANDING TILL DATE, IT CAN BE R EASONABLY INFERRED THAT THE CREDITOR COMPANY MIGHT HAVE SUO-MOTTO CREDITED THE ACCOUNT OF THE APPELLANT COMPANY (FROM ITS OWN SOURCES) AND/OR MIGHT HAVE S QUARED OFF/WRITTEN OFF THE BALANCE DUE BY THE APPELLANT COMPANY IN F.Y. 20 00-01 ITSELF. IN SUCH SUO- MOTTO ACTION OF CREDITOR, SECTION 41(1) DOES NOT AP PLY AS FOR NO AMOUNTS REMISSION HAS BEEN OBTAIN BY THE APPELLANTS IN F.Y. 2006-07. 5.3 SECONDLY, REGARDING AMOUNT PAYABLE IN RESPECT O F M/S KAY JAY MARBLES CERAMICS PVT. LTD, THE LD AR SUBMITTED THAT THE APP ELLANT COMPANY HAD PURCHASED BLADES & SEGMENT FROM THE CREDITOR COMPA NY VIDE BILL NO. 01 DATED 31.05.2003 ON CREDIT. THE CREDITOR COMPANY WAS NE W IN THE LINE, PROBABLY WE WERE THEIR FIRST CUSTOMERS. THE GOODS WERE PURCHAS ED ON GUARANTEED PRODUCTION RESULTS WITH A STIPULATION THAT PAYMENT SHALL BE MADE ONLY ON SATISFACTORY PERFORMANCE. THE SELLER HAD ALSO GUA RANTEED FOR RECTIFICATION OF THE DEFECT FOR NO ADDITIONAL COST. BLADES AND SEGM ENTS ARE CONSUMABLES IN MARBLE CUTTING OPERATIONS. THE BLADES & SEGMENTS WE RE TO BE MOUNTED ON COMPANYS CUTTING MACHINES. FEW BLADES & SEGMENT WE RE ACCORDINGLY MOUNTED BUT THEIR ALIGNMENT WAS NOT PROPER, MOREOVE R THE CUTTING WAS ALSO NOT SMOOTH WHICH AFFECTED THE REALIZABLE VALUE OF F INISHED GOODS SUBSTANTIALLY . THE CREDITOR COMPANY DID NOT PROPE RLY RESPOND TO OUR CONCERNS AND FOR THIS REASON WE DID NOT USE THEIR BALANCE SU PPLIES AND REJECTED THE ENTIRE LOT AND HAD ASKED FOR REPLACEMENT. AS THE GO ODS HAD FAILED THE STIPULATED GUARANTEE NO PAYMENT HAS BEEN MADE AND T HE REJECTED GOODS ARE STILL LYING IN OUR STORES. THE ENTIRE VALUE (RS. 1, 81,251) CONTINUES TO BE PART OF OUR CLOSING STOCK AND IS BEING REFLECTED IN FINAL ACCOUNTS SINCE THEN. ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 9 IT BE KINDLY NOTED THAT THE PURCHASES FROM CREDITOR COMPANY APPEARED DEBITED IN OUR TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2004 AND CORRESPONDING AMOUNT WAS INCLUDED I N CLOSING STOCK AS ON 3.03.2004. THUS THE NET EFFECT OF THE DEBIT AND CRE DIT IN P&L IS NIL. IT IS NOT A CASE WHEREIN IT CAN BE SAID THAT THE LOSS OR EXPEND ITURE OR TRADING LIABILITY HAS BEEN ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF THE APPELLANT COMPANY IN ASSESSMENT YEAR 2004-05 OR ANY YEAR. THE FIRST CONDITION DOES NOT STAND FULFILLED AS NET DEBIT TO P&L FOR A.Y. 2004-05 IS NIL. THE LD AR FURTHER SUBMITTED THAT THE AO HAD AT NO S TAGE IN ASSESSMENT PROCEEDINGS DISCUSSED THE AMOUNT AS DEEMED INCOME C HARGEABLE TO TAX U/S 41(1). THE AO HAS NOT CLEARLY DISCHARGED THE ONUS OF PROVING THAT DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR. WE A RE ENCLOSING HEREWITH THE TRADING & PROFIT AND LOSS ACCOUNT ALONGWITH DETAIL S OF CLOSING STOCK FOR THE YEAR ENDING 31.03.2004 WHICH WILL LEAVE NO DOUBTS A S TO FACT OF NON DEDUCTION OF AMOUNT OF RS. 1,81,251/-. IN VARIOUS JUDICIAL PRONOUNCEMENTS, IT HAS BEEN REP EATEDLY HELD THAT UNLESS IT IS PROVED THAT AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT IN ANY PREVIOUS YEAR, IT IS NOT OPEN TO THE REVENUE TO INVOKE SECTION 41(1). RELIANCE IS PLACED ON THE DECISION IN CASE OF TIRUN ELVELI MOTOR BUS SERVICE CO. PVT. LTD. VS. CIT (1970) 78 ITR 55 (SC). FURTHER, I N STEEL AND GENERAL MILLS CO. LTD VS. CIT (1974) 96 ITR 438 (DELHI) IT HAS BEEN HELD THAT BURDEN LIES UPON THE DEPARTMENT TO PROVE THAT AN ALLOWANCE OR DEDUCTION HAD BEEN GIVEN FOR THIS AMOUNT TO THE ASSESSEE IN THE EARLIER ASSESSMENT YE ARS. ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 10 5.4 THE LD CIT(A) HAS GIVEN HIS FINDING AS UNDER: I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER. IT IS SEEN THAT ASSESSEE HAS SHOWN THE FOLL OWING CREDITORS IN HIS ACCOUNT: (I) M/S TIRUPATI BALAJI MINERAL PVT. LTD. RS.3,16,553/- (II) M/S KAY JAY MARBLES CERAMICS PVT. LTD. RS. 1,81,251/- AS REGARDING M/S TIRUPATI BALAJI PVT. LTD., ASSESS EES CLAIM IS THAT THE SAID AMOUNT IS OUTSTANDING AGAINST THE PURCHASES MADE FR OM M/S TIRUPATI BALAJI MINERAL PVT. LTD IN 2000-01 DUE TO DISPUTE REGARDIN G QUALITY OF MARBLE BLOCKS SUPPLIED BY THE SAID PARTY. FURTHER M/S KAY JAY MA RBLES GRANITES PVT. LTD. HAS BEEN SHOWN AS A CREDITOR FOR AMOUNT OF RS. 1,81,25 1/- CLAIMING THAT ASSESSEE HAS PURCHASED GANGSAW BLADES FROM THE SAID PARTY ON 31.05.2003. THE AO HAS MADE THE ENQUIRIES FROM BOTH THE PARTIES. M/S T IRUPATI BALAJI MINERAL PVT. LTD. HAS REPEATEDLY DENIED HAVING ANY OUTSTANDING AMOUNT PAYABLE BY THE ASSESSEE WHILE LETTERS SENT FOR ENQUIRY TO M/S KAY JAY MARBLES GRANITES PVT. LTD. WERE RECEIVED BACK BY THE AO AND SAID PARTY W AS NOT TRACEABLE AT THE ADDRESS GIVEN BY THE ASSESSEE. FURTHER IN BOTH THE CASES, THE ASSESSEES CLAIM THAT THERE WAS DISPUTE REGARDING THE QUALITY IS NO T SUPPORTED BY ANY EVIDENCE TO THIS EFFECT INSPITE OF MATTER BEING VERY OLD. IN VIEW OF ABOVE FACTS, IT IS CLEAR THAT THE ABOVE LIABILITY HAS CEASED IN THE CASE OF THE ASSESSEE IN TERMS OF SEC. 41(1)(A) OF THE IT ACT. THE AO HAS BROUGHT OUT AL L THE FACTS OF THE CASE IN DETAILS IN THE ASSESSMENT ORDER AND HAS CONFRONTED THE SAME TO THE ASSESSEE ALSO. THESE FACTS HAVE NOT BEEN CONTROVERTED BY TH E ASSESSEE BY WAY OF ANY EVIDENCE. IN VIEW OF THE ABOVE DISCUSSION AND FIND ING OF THE AO, THE ADDITION MADE BY THE AO IS CONFIRMED. 5.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, REGARDING M/S TIRUPATI BALAJI MINERAL PVT. LTD., IT HAS REPEATEDLY DENIED BY THE SAID COMPANY IN WRITING TO THE ASSESSING OFFICER THAT IT HAS NO OUTSTANDING AMOUNT WHICH IS RECOVERABLE F ROM AND PAYABLE BY THE ASSESSEE. AS AGAINST THAT, THE ASSESSEE HAS STATED THAT THE AMOUNT IS STILL OUTSTANDING AND PAYABLE AND THE SAME HAS NOT BEEN W RITTEN OFF IN ITS BOOKS OF ACCOUNTS. WHERE THE CREDITOR COMPANY IS CONFIRMING TO THE ASSESSING OFFICER NOT ONCE BUT ON COUPLE OF OCCASIONS THROUGH WRITTEN CONFIRMATIONS THAT THE AMOUNT IS NOT PAYABLE BY THE ASSESSEE, THERE IS NOT HING MORE THAT THE ASSESSING OFFICER CAN DO TO COME TO A CONCLUSION TH AT THE AMOUNT IS NO MORE PAYABLE BY THE ASSESSEE. IN OUR VIEW, GIVEN THAT TH E ASSESSEE IS STILL CLAIMING THE AMOUNT AS PAYABLE IN ITS BOOKS OF ACCOUNTS, IT IS A MATTER WHERE THE CREDITOR HAS TAKEN SOME UNILATERAL STEPS WHEREBY IT IS NOT DEMANDING OR ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 11 PRESSING FOR SUCH PAYMENT. THE REASON COULD BE UNI LATERAL WRITE OFF OF OLD OUTSTANDING AMOUNTS AS NOT RECOVERABLE FROM THE ASS ESSEE OR DUE TO SOME ACCOUNTING MISMATCH AS CLAIMED BY THE ASSESSEE. TH E FACT REMAINS THAT THE CREDITOR IS NO MORE DEMANDING ANY SUCH AMOUNT FROM THE ASSESSEE AND HAS CONFIRMED THE SAME TO THE ASSESSING OFFICER. IN LI GHT OF THESE FACTS, IT IS A CLEAR CASE OF UNILATERAL REMISSION OF LIABILITY IN THE HA NDS OF THE ASSESSEE. 5.6 THE NEXT QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER SUCH UNILATERAL REMISSION OF LIABILITY CAN BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION UNDER THE PROVISIONS OF SECTION 41(1)(A) AS INVOKED BY THE ASSESING OFFICER AND CO NFIRMED BY THE LD. CIT(A). IT WOULD BE RELEVANT TO EXAMINE THE PROVISIONS OF S ECTION 41(1)(A) WHICH STATES AS UNDER: SEC. 41 PROFITS CHARGEABLE TO TAX: (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE I N THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADI NG LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENT IONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR (A) THE FIRST MENTIONED PERSON HAS OBTAINED, WHETHE R IN CASH OR ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILIT Y BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PE RSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PRO FITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE T O INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEE N MADE IS IN EXISTENCE IN THAT YEAR OR NOT. 5.7 UNDISPUTEDLY, THE EXPENDITURE HAS BEEN CLAIMED IN THE EARLIER YEAR AND HENCE, THE FIRST CONDITION OF INVOKING SECTION 41(1 )(A) IS SATISFIED. THE SECOND CONDITION TALKS ABOUT THE YEAR OF TAXABILITY OF SUC H AMOUNT AND STATES THAT DURING ANY PREVIOUS YEAR, THE ASSESSEE HAS OBTAINED SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSA TION THEREOF, THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFI TS AND GAINS OF BUSINESS AND CHARGEABLE TO TAX AS INCOME OF THAT PREVIOUS YEAR. WHAT IS THEREFORE RELEVANT ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 12 IS TO DETERMINE THE YEAR OF OBTAINING THE BENEFIT A S THE BENEFIT CAN BE BROUGHT TO TAX IN THAT YEAR ITSELF AND NOT IN ANY OTHER YEA R. IN THE INSTANT CASE, M/S TIRUPATI BALAJI MINERAL PVT. LTD. HAS CONFIRMED THA T THERE ARE NO TRANSACTIONS DURING THE PREVIOUS YEAR UNDER CONSIDERATION AS WEL L AS THE FACT THAT THERE IS NO OPENING BALANCE IN THE ACCOUNT OF THE ASSESSEE M AINTAINED IN THEIR BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION. IT IS T HEREFORE CLEAR THAT THE UNILATERAL ACTION ON THE PART OF M/S TIRUPATI BALAJ I MINERAL PVT. LTD. IN REMITTING THE SUBJECT AMOUNT HAS NOT HAPPENED IN THE PREVIOUS YEAR UNDER CONSIDERATION. IN LIGHT OF THE SAME, EVEN WHERE THE ASSESSEE HAS OBTAINED THE BENEFIT BY WAY OF REMISSION OF ITS TRADE LIABILITY, THE SAME CANNOT BE BROUGHT TO TAX DURING THE YEAR UNDER CONSIDERATION AS THE EVEN T OF REMISSION HAS NOT HAPPENED DURING THE YEAR. HENCE, THE ADDITION OF R S 3,16,553 UNDER SECTION 41(1)(A) IS HEREBY DELETED. 5.8 REGARDING AMOUNT PAYABLE IN RESPECT OF M/S KAY JAY MARBLES CERAMICS PVT. LTD, IT IS THE CONTENTION OF THE REVENUE THAT THE AMOUNT IS VERY OLD RELATING TO THE YEAR 2003, THERE HAS BEEN NO CORRESPONDENCE FOR RECOVERY AND ALSO THERE HAS BEEN NO RESPONSE FROM M/S KAY JAY MARBLES CERAMICS U/S 133(6) OF THE ACT. ALL THESE FACTS LEAD THE ASSESSING OFFICE R TO TREAT THE AMOUNT AS TAXABLE UNDER SECTION 41(1)(A) OF THE ACT. THERE I S HOWEVER NO EVIDENCE TO SUPPORT THE PROPOSITION THAT THERE IS A UNILATERAL ACTION ON THE PART OF THE CREDITOR IN TERMS OF REMISSION OF LIABILITY UNLIKE THE CASE OF M/S TIRUPATI BALAJI MINERALS PVT LTD. FURTHER, THE ASSESSEE CONTINUES TO SHOW THE LIABILITY IN ITS BOOKS OF ACCOUNTS AND HAS ALSO NOT DONE ANY UNILATE RAL WRITE OFF IN ITS BOOKS OF ACCOUNTS. IN SUCH SITUATION, MERELY BECAUSE THE AM OUNT IS OUTSTANDING SINCE 2003, IT CANNOT BE INFERRED THAT THE LIABILITY HAS CEASED TO EXIST AND THE ASSESSEE HAS OBTAINED ANY BENEFIT BY WAY OF REMISSI ON OR CESSATION OF ITS TRADING LIABILITY. THERE HAS TO BE SOME POSITIVE E VIDENCE OR ACTION ON THE PART OF THE ASSESSEE OR THE CREDITOR TO SUPPORT THE THEO RY OF REMISSION OR CESSATION WHICH IS APPARENTLY NOT PRESENT IN THE INSTANT CASE . HAVING SAID THAT, WE DONOT FEEL THE NECESSITY TO EXAMINE THE CONTENTION OF THE ASSESSEE THAT SINCE THE PURCHASES ARE INCLUDED IN THE CLOSING STOCK, THERE HAS BEEN NO DEDUCTION THAT HAS BEEN CLAIMED BY THE APPELLANT. WE LEAVE THIS C ONTENTION OPEN. HENCE, IN LIGHT OF ABOVE, WE DONOT AGREE WITH THE POSITION AD OPTED BY THE REVENUE THAT IT IS CASE WHICH FALLS WITHIN THE FOUR CORNERS OF S ECTION 41(1)(A) OF THE ACT. HENCE, THE ADDITION OF RS 1,81,251 UNDER SECTION 41 (1)(A) IS HEREBY DELETED. THE GROUND NO. 3 IS ACCORDINGLY ALLOWED IN FAVOUR O F THE ASSESSEE. ITA NO. 596/JP/13 M/S SHREE PADMAVATI MARBLES PVT. LTD. AJMER VS. ITO , KISHANGARH. 13 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON /08/ 2016. ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- / 08/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S SHREE PADMAVATI MARBLES PVT. LT D., AJMER 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, KISHANGARH 3. VK;DJ VK;QDR@ CIT , AJMER 4. VK;DJ VK;QDRVIHY@ THE CIT(A), AJMER 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.596/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR