Sh. Gurjeet Singh, Amritsar. V. The Income Tax Officer, Amritsar.

ITA 597/ASR/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6559 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 16-11-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Onus to prove
• Section: 40A(3); 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 597/ASR/2015 AS SESSMENT YEAR: 2010-11 GURJEET SINGH, H. NO. 7, STREET NO. 2, PAWAN NAGAR, AMRITSAR. [PAN: AQHPS 8775M] VS. INCOME TAX OFFICER, WARD 4(2), AMRITSAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SATISH BANSAL ( C.A.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 21.02.2019 DATE OF PRONOUNCEMENT: 30.04.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AMRITSAR (' CIT(A)' FOR SHORT) DATED 02.8.2015, PARTLY ALLOWING THE ASSESSEES APPEAL CO NTESTING HIS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREI NAFTER) DATED 13.3.2013 FOR THE ASSESSMENT YEAR (AY) 2010-11. 2. THE SHORT QUESTION ARISING IN THE INSTANT CASE I S IF SECTION 41(1) IS APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASS ESSEE CLAIMS TO HAVE PAID THE IMPUGNED SUM, DISCHARGING HIS TRADE LIABILITY TO TH E SUPPLIER, M/S. COSMO DIAGNOSTICS, CHENNAI THROUGH ITS REPRESENTATIVE, L IQUIDATING, THUS, THE TRADE ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 2 LIABILITY OF RS.5.19 LACS OUTSTANDING THERETO AS AT THE BEGINNING OF THE YEAR. THE LD. CIT(A) HAS CONFIRMED THE ADDITION BY HOLDING AS UND ER: (III) THE GROUND OF APPEAL NO. 3 IS AGAINST THE DI SALLOWANCE OF OPENING BALANCE OF RS. 5,19,320/- U/S. 41(1) BY TREATING THE SAME AS CESSA TION OF LIABILITY. AS PER THE ASSESSMENT ORDER IT WAS NOTICED BY THE AO THAT A SUM OF RS 394 ,320/- WAS SHOWN AS PAYABLE TO M/S. COSMO DIAGNOSTIC, 14/31, TRICHI ROAD, AMRITSAR AS O N 31-03-2010. ACCORDINGLY, THE AO ISSUED LETTER U/S. 133(6) OF THE ACT BY SPEED POST TO M/S COSMO DIAGNOSTIC BUT THE LETTER WAS RECEIVED BACK FROM POSTAL AUTHORITIES AS UNDELIVER ED. THE AO ASKED THE ASSESSEE TO FURNISH THE LATEST COR RESPONDENCE ADDRESS OF M/S COSMO DIAGNOSTIC AS THE LETTER SENT BY SPEED POST HAD RET URNED UNSERVED, IN RESPONSE TO WHICH THE ASSESSEES COUNSEL VIDE LETTER DATED 27-01-2013 STA TED THAT THE ASSESSEE HAD MADE PURCHASES FROM M/S. COSMO DIAGNOSTIC THROUGH ITS DEALER IN NE W DELHI AND ALL THE PAYMENTS HAD BEEN MADE AGAINST RECEIPTS. THAT IT HAS COME TO THEIR NO TICE THAT THE PARTY HAS ABSCONDED. HOWEVER, THE CORRESPONDENCE ADDRESS HAD ALREADY BEE N SUBMITTED VIDE LETTER DATED 10.10.2012. THE AO ASKED THE ASSESSEE TO FURNISH THE COPIES OF PURCHASE BILLS RECEIVED BY HIM FROM M/S. COSMO DIAGNOSTIC IN RESPECT OF WHICH THE AMOUNT HAS BEEN SHOWN AS PAYABLE IN THE BALANCE SHEET AND THE COPIES OF YEAR WISE RECEI PTS WHICH HAVE BEEN ISSUED BY THE SAID COMPANY OR ON ITS BEHALF AGAINST THE PAYMENTS MADE BY HIM INCLUDING THE PAYMENTS OF RS. 1,25,000/- MADE BY THE ASSESSEE IN CASH DURING THE YEAR UNDER CONSIDERATION. DESPITE REPEATED REQUESTS MADE BY THE AO, THE ASSES SEE DID NOT SUBMIT THE COMPLETE ADDRESS OF M/S. COSMO DIAGNOSTIC AND THE NAME AND C OMPLETE ADDRESS OF THE PERSON WHO RECEIVED THE PAYMENT FROM THE ASSESSEE ON BEHALF OF M/S. COSMO DIAGNOSTIC . THE AO HAD ALSO ASKED THE ASSESSEE TO SUBMIT THE DOCUMENTARY E VIDENCE THAT THE PERSON TO WHOM THE PAYMENTS OF RS 1,25,000/- HAVE BEEN MADE IN CASH DU RING THE YEAR WAS DULY AUTHORIZED BY M/S. COSMO DIAGNOSTIC, WHICH WAS HOWEVER NOT FURNIS HED. THE ASSESSEE HAD SHOWN A SUM OF RS 3,94,320/- AS PA YABLE IN THE BALANCE SHEET AS ON 31-03-2010 TO M/S. COSMO DIAGNOSTIC 14/31, 1 ST FLOOR, SHIVA COMPLEX, TRICHY ROAD, CHENNAI. THE AO OBSERVED THAT DESPITE SEVERAL REQUE STS MADE BY THE AO, THE ASSESSEE HAD NEITHER PRODUCED THE PERSON WHO RECEIVED THE PAYMEN TS OF RS 1,25,000/- NOR FURNISHED ANY EVIDENCE THAT THE PERSON TO WHOM THE PAYMENTS WERE MADE IN CASH DURING THE YEAR WAS DULY AUTHORIZED BY M/S. COSMO DIAGNOSTIC. THE ASSESSEE ALSO DID NOT FURNISH THE NAME AND ADDRESS OF THE PERSON AT DELHI WHO RECEIVED PAYMENT FROM THE ASSESSEE ON BEHALF OF M/S. COSMO DIAGNOSTIC NOR THE LATEST COMPLETE POSTAL ADD RESS OF M/S. COSMO DIAGNOSTIC . ACCORDINGLY THE AO HELD THAT THE CASH PAYMENTS OF R S 1,25,000/- MADE TO M/S COSMO DIAGNOSTIC WAS NOT VERIFIABLE. SECONDLY THE ASSESSE E HAD HIMSELF ADMITTED THAT M/S COSMO DIAGNOSTIC IS ABSCONDING AND, THEREFORE, THERE WAS CLEARLY A CESSATION OF LIABILITY OF RS 5,19,320/- AND THE SAME WAS ASSESSED U/S 41(1) OF T HE ACT AND ADDED TO THE TAXABLE INCOME. ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 3 IN THE WRITTEN SUBMISSIONS FILED DURING THE APPEAL PROCEEDINGS, THE ASSESSEE HAD PURCHASED BLOOD TEST KIT FROM M/S COSMO DIAGNOSTI C DURING THE YEAR ENDING 31-03-2008 FOR RS 7,39,320/-. SINCE THE KITS WERE NOT SUCCESSF UL THE ASSESSEE DELAYED THE PAYMENT. THAT EARLIER ASSESSMENT YEARS FOR AY 2008-09 AND 2009-10 WERE FRAMED U/S 143(3) AND THE RELEVANT EXPENSES CLAIMED WERE ALLOWED. THE APPELLA NT SUBMITTED THAT THE PAYMENTS WERE BEING MADE IN PART FROM YEAR TO YEAR AS UNDER:- A Y AMOUNT 2009-10 RS.2,20,000/- 2010-11 RS.1,25,000/- 2011-12 RS.3,94,320/- RS.7,39,320/- THE APPELLANT SUBMITTED THAT THE TOTAL PAYMENT HAS ALREADY BEEN MADE TO THE PARTY THROUGH ITS REPRESENTATIVE. THAT THERE CANNOT BE AN Y CESSATION OF LIABILITY FOR WHICH PAYMENT HAS ALREADY BEEN MADE AND THE RECEIPTS ISSUED BY TH E REPRESENTATIVE WERE FILED DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT SUBMITTED IT HAD ADMITTED BEFORE THE AO THAT M/S COSMO DIAGNOSTIC IS ABSCONDING WHEREAS ALL THE PAYM ENTS TO THE THIRD PARTY HAVE ALREADY BEEN MADE AND THE LAST PAYMENT WAS MADE ON 22-02-20 11 TO ITS REPRESENTATIVE. THAT THE BOOKS OF ACCOUNTS WERE DULY AUDITED. THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT WERE CONSIDERED. IT IS OBSERVED THAT EVEN IN THE PRESENT APPEAL PROCEED INGS, THE APPELLANT HAS NOT FURNISHED THE NAME AND COMPLETE ADDRESS OF THE PERSONS WHO RECEIVED CASH PAYMENTS OF RS 1,25,000/- FROM THE APPELLANT ON BEHALF OF M/S COSMO DIAGNOSTI C NOR FURNISHED ANY EVIDENCE THAT THE PERSON TO WHOM SUCH PAYMENTS WERE MADE IN CASH DURI NG THE YEAR WAS DULY AUTHORIZED BY THE M/S. COSMO DIAGNOSTIC TO RECEIVE THE PAYMENT. FURTHER IT IS OBSERVED THAT DESPITE SEVERAL REQUEST S MADE BY THE AO IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD NEITHER PRODUCED THE PERSON WHO RECEIVED THE PAYMENTS OF RS1,25,000/- FROM HIM ON BEHALF OF M/S COSMO DIAGNOSTIC. MOREOV ER THE LATEST COMPLETE POSTAL ADDRESS OF M/S COSMO DIAGNOSTIC WAS NOT PROV IDED BY THE APPELLANT TO THE AO OR IN THE PRESENT APPEAL PROCEEDINGS AND THE APPELLANT HA D HIMSELF ADMITTED THAT M/S COSMO DIAGNOSTIC IS ABSCONDING. ACCORDINGLY, I AM IN AGREEMENT WITH THE AO THAT THE CASH PAYMENTS OF RS 1,25,000/- MADE TO M/S COSMO DIAGNOSTIC WAS NOT VERIFIABLE. SINCE THE GENUINENESS OF PAYMENTS AMOUNTING TO RS 125,000/- CLAIMED TO HAVE BEEN MADE TO M/S COSMO DIAGNOSTIC DURING THE YEAR UNDER CONSIDERATION WAS NOT ESTABLISHED IN VIE W OF THE ABOVE FACTS AND THE APPELLANT HAD HIMSELF ADMITTED THAT M/S COSMO DIAGNOSTIC IS A BSCONDING , THEREFORE IN MY OPINION THE AO WAS JUSTIFIED HOLDING THAT THERE WAS CLEARLY A C ESSATION OF LIABILITY OF RS 5,19,320/- AND THE SAME WAS RIGHTLY ASSESSED U/S 41(1) OF THE ACT. THE ADDITION OF RS 5,19,320/- (IS) THEREFORE CONFIRMED. ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 4 THE GROUND OF APPEAL NO. 4 IS AGAINST THE DISALLOWA NCE OF RS 2,16,831/- ON ACCOUNT OF DIFFERENCE IN OPENING CAPITAL. 3. THE ASSESSEES CASE BEFORE ME IS THAT THE AVAIL ABILITY OF CASH WITH HIM (THE ASSESSEE) FOR MAKING THE PAYMENT/S, EVIDENCED BY CA SH RECEIPTS (NOT FORMING PART OF THE RECORD, THOUGH, TO BE FAIR, ON BEING ASKED T O DURING HEARING, WERE PRODUCED BY THE LD. COUNSEL FOR THE ASSESSEE, SH. BANSAL), I S NOT IN DOUBT. WHERE IS THE QUESTION OF ANY BENEFIT ON ACCOUNT OF REMISSION OF THE LIABILITY ARISING TO THE ASSESSEE WHEN HE HAS MADE THE PAYMENT/S, I.E., THE CASH GOING OUT OF HIS BOOKS? IT IS THE CASE OF THE DEBIT ENTRY AND NOT CREDIT ENTRY . THE REVENUES CASE, ON THE OTHER HAND, IS OF IT BEING A CLEAR CASE OF CESSATION OF L IABILITY IN VIEW OF THE ASSESSEE FAILING, DESPITE ABUNDANT OPPORTUNITY TO HIM, TO PR OVE THE GENUINENESS OF THE CASH PAYMENTS AND, THUS, CLAIM OF DISCHARGE OF LIABILITY , WITH THE TRADE CREDITOR BEING ADMITTEDLY ABSCONDING. 4. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. 4.1 SECTION 41|(1) IN ITS RELEVANT PART READS AS UN DER: PROFITS CHARGEABLE TO TAX. 41. (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY I NCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR E XPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSA TION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHAL L BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE T O INCOME-TAX AS THE INCOME OF THE PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION I N RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEA R OR NOT; OR (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED, EXPLANATION 1. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSIO N LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILI TY BY WAY OF REMISSION OR CESSATION THEREOF SHALL INCLUDE THE REMISSION OR CESSATION O F ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 5 MENTIONED PERSON UNDER CLAUSE ( A ) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE ( B ) OF THAT SUB- SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. EXPLANATION 2. FOR THE PURPOSES OF THIS SUB-SECTION, SUCCESSOR IN BUSINESS MEANS, THE RESOLUTION OF THE DISPUTE, AS APPARENT, RESTS O N THE PROVING OR OTHERWISE OF THE GENUINENESS OF THE ASSESSEES CLAIM OF PAYMENT/S TO THE CREDITOR, STATED TO BE IN PART DURING THE CURRENT YEAR (RS.1.25 LACS). THE REASON IS SIMPLE. IF THE PAYMENTS/S IS PROVED, THE LIABILITY STANDS DISCHARGED UPON CONSID ERATION, SO THAT THERE IS NO QUESTION OF ANY BENEFIT IN ITS RESPECT ON ACCOUNT O F REMISSION OR CESSATION. IF NOT, THE LIABILITY, OUTSTANDING AT RS. 5.19 LACS AT THE BEGINNING OF THE YEAR AND, ADMITTEDLY, NOT AS ON 31/3/2011, A BENEFIT TO THAT EXTENT HAS ACCRUED TO THE ASSESSEE. 4.2 THE MATTER, THEREFORE, IS CLEARLY AND PRINCIPAL LY FACTUAL, AND TOWARD WHICH IT MAY BE RELEVANT TO RECOUNT BRIEFLY, THE FACTS OF TH E CASE. GOODS (BLOOD TEST KITS) WORTH RS.7,39,320 WERE PURCHASED BY THE ASSESSEE, A JALANDHAR BASED PATHOLOGICAL LAB, FROM M/S. COSMO DIAGNOSTICS, CHENNAI (CD FOR SHORT) DURING THE PREVIOUS YEAR RELEVANT TO AY 2008-09, WHICH AMOUNT WAS ACCOR DINGLY CLAIMED AS DEDUCTION IN COMPUTING THE BUSINESS INCOME FOR THAT YEAR. THE GOODS WERE STATED TO BE NOT OF ACCEPTABLE QUALITY. NO PAYMENT WAS ACCORDINGLY MADE DURING THAT YEAR, EVEN AS A PART OF PAYMENT OF RS.2.20 LACS WAS MADE IN THE FOL LOWING YEAR, WHICH EXPLAINS THE CREDIT OF RS.5,19,320 AS AT THE BEGINNING OF THE CU RRENT YEAR. IT IS THE PAYMENTS FOR RS. 5.19 LACS, CLAIMED TO BE MADE DURING THE CU RRENT AND THE FOLLOWING YEAR, BEING THE THIRD AND THE FOURTH YEAR OF THE PURCHASE , THAT HAVE BEEN DOUBTED FOR THEIR GENUINENESS BY THE REVENUE. WHAT, THEREFORE, IS REL EVANT IS WHETHER THERE ARE VALID GROUNDS FOR DOUBTING THE SAME, I.E., THE GENUINENES S OF THE STATED CASH PAYMENTS. PER CONTRA, WHETHER THE ASSESSEE HAS ESTABLISHED TH E SAID PAYMENTS IN-AS-MUCH AS THE BURDEN TO PROVE HIS RETURN AND THE CLAIMS PREFE RRED THEREBY IS ONLY ON HIM ( CIT ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 6 V. CALCUTTA AGENCY LTD. [1951] 19 ITR 191 (SC); CIT V. R. VENKATA SWAMY NAIDU [1956] 29 ITR 529 (SC)). 4.3 THE ASSESSEE HAS NOT REBUTTED ANY OF THE OBSERV ATIONS BY THE LD. CIT(A) PER THE IMPUGNED ORDER, REPRODUCED SUPRA, OR OTHERWISE SHOWN THEM TO BE NOT RELEVANT. THE PRIMARY FACTS OF THE CASE ARE, IT NEEDS TO BE A PPRECIATED, ONLY IN THE KNOWLEDGE OF THE ASSESSEE, SO THAT WHERE HE IS UNABLE TO LEAD EVIDENCE TOWARD THE SAME, JUSTIFYING OR SUBSTANTIATING HIS CASE, AN ADVERSE I NFERENCE WOULD, IN LAW, FOLLOW (REF: UNION OF INDIA V. RAI DEB SINGH BIST [1973] 88 ITR 200 (SC); KALAYANI MEDICAL STORE V. CIT [2016] 386 ITR 387 (CAL)). FURTHER, EXAMINING THE ASSESSEES CLAIMS AND THE MATERIAL ON RECORD, THE SAME, I.E., THE SAID PAYMENTS, ARE COMPLETELY UNPROVED, WHICH EXAMINATION SHALL FORM THE ENSUING PART OF THIS ORDER. 4.4 THERE IS, TO BEGIN WITH, NO CONFIRMATION OF ACC OUNT WHICH, I.E., THE CONFIRMATION OF PAYMENT/S, IS THE PRIMARY DOCUMENT REQUIRED FOR CLAIMING THE SAME. IT IS ONLY WHEN THIS BASIC DOCUMENT STANDS FU RNISHED, THAT THE REVENUE, WHERE IN DOUBT, I.E., IN VIEW OF THE ATTENDING OR S URROUNDING FACTS AND CIRCUMSTANCES OF THE CASE, MAY SUBJECT THE SAME TO FURTHER VERIFICATION, OR REQUIRE THE ASSESSEE WHERE THERE ARE SUFFICIENT OR VALID REASONS TO DOUBT THE AUTHENTICITY OF THE CONFIRMATION, TO FURNISH FURTHER CORROBORATI VE EVIDENCE/S. EVEN DE HORS THE CONFIRMATION, THE BASIS OF THE CLAIM OF DISCHARGE OF THE TRADE LIABILITY IS PAYMENT/S . THE CASH RECEIPTS ARE STATED TO BE ISSUED BY THE COMPANYS (CDS) REPRESENTATIVE/AGENT, WHOSE NAME, THOUGH, IS NOT CLEAR FROM THE RECEIPT/S. THE PERSON/S TO WHOM THE PAYMENT/S IS MADE IS EVEN OTHERWISE NOT STATED, MUCH LESS HIS IDENTITY/S PROVED. TO WHOM, THEN, THE PAYMENTS HAVE BEEN MADE ? COULD A PAYMENT POSSIBLY BE MADE WITHOUT KNOWING THE PERSON, NAY ESTABLISHING THE IDENTITY OF THE PAYEE? ITS ABSENCE , WHOLLY QUIZZICAL, UNEXPLAINED AT ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 7 ANY STAGE, MAKES THE ASSESSEES CLAIM OF PAYMENTS T O CD, THE TRADE CREDITOR, LUDICROUS. THE ASSESSEES CASE RESTS ON THE EDIFICE OF PAYMENT S TO CD, WHICH, THEREFORE IS RENDERED AS WITHOUT BASIS . CLEARLY, IT IS ONLY WHERE PAYMENTS ARE MADE TO CD OR ITS AUTHORIZED REPRESENTATIVE, I.E., SHOW N TO BE SO, THAT IT COULD BE SAID TO BE IN DISCHARGE OF LIABILITY THERETO, PRECLUDING SE CTION 41(1). FURTHER STILL, I MAY NEXT EXAMINE THE EVIDENCE ADDU CED AS TO, AS WELL AS THE MANNER OF, PAYMENT/S. THERE IS NOTHING TO SHOW THAT THE PAYMENT WAS MADE TO A PERSON ITSELF UNDEFINED, AUTHORIZED FOR THE PURPO SE. AS AFORE-NOTED, THE RECEIPTS DO NOT BEAR THE NAME (IDENTITY) OF THE PERSON RECEI VING THE SAME. HOW DOES, FURTHER, THE ASSESSEE ENSURE THAT THE PAYMENT WAS I NDEED MADE TO THE SUPPLIER INASMUCH AS ONLY THAT WOULD OPERATE TO DISCHARGE HI S LIABILITY? WHY, RATHER, ONE WONDERS, WAS THE PAYMENT NOT MADE DIRECT, I.E., THR OUGH A BANK TRANSFER/S, WHICH WOULD BY ITSELF CONFIRM THE RECEIPT. THIS IS PARTIC ULARLY SO CONSIDERING THAT THE PAYMENTS WERE BEING MADE NOT IN THE NORMAL COURSE O F BUSINESS, BUT ONLY IN PURSUANCE TO THE RESOLUTION OF A DISPUTE, OUTSTANDI NG SINCE LONG, WITH A VIEW TO SETTLE A TRADE LIABILITY AND, BESIDES, OVER A LONG DISTANCE (FROM JALANDHAR TO CHENNAI), ENTAILING PROBLEMS QUA TRANSMISSION OF CASH. ALL THESE ASPECTS GET MITIGATED IN CASE OF A BANK TRANSFER, WHICH IS EVEN OTHERWISE SUPERIOR BY FAR, I.E., IN TERMS OF RISK, SPEED AND BUSINESS PRUDENCE, BESIDES BEING LEGALLY MANDATED PER S.40A(3) R/W S. 40A(4). RATHER, COMPANIES, TO AVOID RISK OF MISAPPROPRIATION, INSIST THAT PAYMENTS ARE MADE DIRECT. THE CASH RECEIPTS IN SUCH A CASE, STRONGLY ADVISED AGAINST, BEAR A STATEMENT TO THE EFFECT OF BEING ON LY A PROVISIONAL RECEIPT, MADE AT THE COST AND RISK OF THE PAYER. FURTHER, THE CASH P AYMENTS HAVE BEEN MADE OVER A PERIOD OF NEARLY THREE YEARS THE LAST, AFTER THE FIRST ON 10/6/2008, BEING ON 22.02.2011. RATHER, THE LIABILITY BEING DISPUTED BY THE ASSESSEE, THE PAYMENTS WOULD BE MADE ONLY ON ARRIVING AT A SETTLEMENT OR A GREEMENT AND, TWO, DULY ACCEPTED/ACKNOWLEDGED. THIS IS ALSO INFERABLE FROM THE FACT OF THE FIRST PAYMENT, ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 8 FOR GOODS PURCHASED IN F.Y. 2007-08, BEING MADE ONL Y ON 10/6/2008 AND, FURTHER, STOPPED AFTER 20/10/2008, ONLY TO COMMENCE IN OCT OBER, 2009. THERE IS NOTHING ON RECORD TO EVIDENCE THE SAID SETTLEMENT; RATHER, EVEN OF THE GOODS BEING DEFECTIVE. IN FACT, THE PAYMENT BEING ALREADY DELAYED AND, PRE SUMABLY, ONLY UPON ARRIVING AT AN AGREEMENT IN ITS RESPECT INASMUCH AS THERE IS NO REASON TO MAKE THE PAYMENT, WITHHELD FOR SUPPLY OF OK GOODS, IN ITS ABSENCE, WO ULD BE MADE AT THE AMOUNT SETTLED, AND THE TRANSACTION CLOSED, OBTAINING A RE CEIPT, ALSO CONFIRMING THE DISCHARGE OF THE DEBT IN FULL. IN FACT, THE PAYMENT FOR THE ENTIRE AMOUNT CONTRADICTS THE ASSESSEES CLAIM OF THE GOODS BEING DEFECTIVE A ND THE LIABILITY, RESULTANTLY, DISPUTED. IF THE PAYMENT WAS TO BE, EVEN IF BELATED LY, MADE IN FULL, WHAT PURPOSE DID DEFERRING THE SAME SERVE? THERE IS NOTHING TO E VIDENCE THE DISPUTE, MUCH LESS ITS RESOLUTION, OR ITS BASIS, AS WHERE THE DEFECTIV E GOODS WERE REPLACED WITH OK GOODS. ANY PERSON SETTLING A LIABILITY, NOT TO SPEA K OF A DISPUTED ONE, WOULD DO SO ON THE BASIS OF AN AGREEMENT SO AS NOT TO RISK ANY LEGAL ACTION (FOR SHORT PAYMENT AND/OR COMPENSATION FOR DELAY) FROM THE CREDITOR. T HE CONDUCT OF THE ACCOUNT (PLACED AT PB PGS. 1 - 3) WOULD SUGGEST THAT THE AG REEMENT FOR FULL PAYMENT, WAS REACHED MUCH EARLIER, THOUGH THE ASSESSEE SOUGHT T IME TO PAY, MAKING THE PAYMENT OVER NEARLY THREE YEARS, I.E., AFTER IT STA RTED ON 10.6.2008, UP TO 22.02.2011. WERE THE PAYMENTS TO DIFFERENT REPRESEN TATIVES OR ONLY ONE? FURTHER, THE PAYMENTS WERE MADE ON SEVERAL OCCASIONS ON SUCC ESSIVE DAYS, AT RS.20,000 EACH, AS IF TO BEAT THE PROVISION OF SECTION 40A(3) /(3A) WHICH WOULD OTHERWISE STAND ATTRACTED. THE ASSESSEE, DESPITE AVAILABILITY OF FUNDS, YET, CHOOSES TO PAY IN CASH, RISKING MISAPPROPRIATION AND, IN ANY CASE, NO N-CONFIRMATION OF RECEIPT, WHICH CONTINUES TO OBTAIN. IN FACT, PAYMENT ON A DAILY BA SIS IS INCONSISTENT WITH HIS SEEKING TIME FOR MAKING PAYMENT, WHICH IS IN FULL, AND ITSELF INCONSISTENT WITH THE CLAIM OF THE GOODS BEING DEFECTIVE, SO THAT THE SAM E WOULD STAND TO BE REPLACED, OF WHICH THERE IS THOUGH NO MENTION OR WHISPER. ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 9 4.5 THE NEXT QUESTION IS IF THE LIABILITY UNDER REF ERENCE, OUTSTANDING AT RS. 3,94,320/- AS ON 31/3/2010, THE YEAR-END, IN THE AS SESSEES BOOKS OF ACCOUNT, ACTUALLY EXISTS, TO ANY EXTENT, AS ON THAT DATE. TH E BURDEN TO PROVE THE TRUTH OF HIS ACCOUNTS AND, THUS, THE EXISTENCE OF THE LIABILITY AS AT THE YEAR-END, IS ON THE ASSESSEE, AND WHICH HE COULD BY, AMONG OTHERS, ESTA BLISHING THE PAYMENT/S, CLAIMED TO BE MADE SUBSEQUENTLY. THE FACTS IN RELAT ION TO THE IMPUGNED PAYMENT/S, DISCUSSED IN DETAIL IN THE FORE-GOING PART OF THIS ORDER, AND FOUND COMPLETELY UNPROVED, APPLIES EQUALLY TO THE PAYMENTS MADE DURI NG THE FOLLOWING YEAR, I.E., AS IT DOES TO THE PAYMENT/S CLAIMED TO BE MADE DURING THE CURRENT YEAR. NO PART OF THE PAYMENT/S MADE DURING THE CURRENT OR THE FOLLOWING YEAR, STATED TO BE AT RS. 5.19 LACS, AND, ACCORDINGLY, LIABILITY TO THAT EXTENT, I S PROVED. IT THEREFORE ONLY FOLLOWS THAT NO PART OF THE TRADE LIABILITY UNDER REFERENCE EXISTS AS AT THE YEAR-END, I.E., 31/3/2010. THE INFERENCE DRAWN BY THE REVENUE TO TH IS EFFECT IS ACCORDINGLY IN ORDER AND VALID. HERE IT MAY BE RELEVANT TO STATE THAT THE COPY OF ACCOUNT OF CD IN THE ASSESSEES BOOKS (FROM 1/4/2006 TO 31/3/2014/ P B PGS. 1 3), REFLECTS THE LAST DATE OF PAYMENT (AT RS. 14,320/-) ON 08/9/2010, I.E ., AS AGAINST 22/2/2011 (AT PG. 9 OF THE IMPUGNED ORDER). THE LATTER DATE, TOWARD WHI CH NO OBJECTION HAS BEEN TAKEN BY THE ASSESSEE, WOULD PRESUMABLY ONLY BE ON THE BA SIS OF THE MATERIAL/S FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A). ADOPTING THE FORMER DATE REDUCES THE TIME SPAN OVER WHICH PAYMENT STANDS MADE TO THE SAID C REDITOR TO 26 MONTHS. THE PAYMENT FOR THE GOODS, WHICH WOULD NORMALLY BE MADE INSIDE FEW WEEKS OF THEIR PURCHASE, IS MADE ONLY IN PURSUANCE OF AN UNEVIDENC ED RESOLUTION AND, FURTHER, IN CASH AND IN SUMS IN WHICH IT IS, AGAIN UNEVIDENCED, MAKES IT HIGHLY SUSPECT. THE SAID REDUCTION, ASSUMING SO, ACCORDINGLY DOES NOT M ATERIALLY IMPACT THE OBSERVATIONS AND THE CONSEQUENT FINDINGS PER THE FO RE-GOING PART OF THIS ORDER. ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 10 IN SUM 5. BOTH THE CREDITOR AND ITS REPRESENTATIVE/S, IN T OUCH WITH THE ASSESSEE FOR FOUR YEARS, INASMUCH AS ONLY THAT, COUPLED WITH, RATHER, THEIR CONSTANT PERSUASION, WOULD HAVE LED TO THE RESOLUTION OF THE DISPUTE, SURPRISI NGLY DISAPPEAR WHEN REQUIRED FOR CONFIRMATION OF THE TRANSACTION/S. THERE IS, HOWEVE R, STRANGELY, NOTHING ON RECORD TO SHOW EITHER THE SAID PERSUASION; THE MANNER AND BASIS OF RESOLUTION, NOR INDEED THE RESOLUTION ITSELF. THE CREDITORS REPRESENTATIV E/S, INCLUDING THE DELHI BASED DEALER (THROUGH WHOM THE GOODS ARE STATED TO HAVE B EEN PURCHASED), IS NOT SPECIFIED, AND WHICH CANNOT BE, MUCH LESS THEIR ROL ES CLARIFIED. IT IS NOT EVEN CLEAR IF IT WAS NOT THE SAME AGENT (I.E., THROUGH WHOM TH E GOODS WERE SUPPLIED) OR A DIFFERENT ONE/S, WHO COLLECTED THE MONEY, AGAIN, SU RPRISINGLY, IN THE SUMS OF RS.20,000 EACH, I.E., IN A SUM JUST SUFFICIENT NOT TO BREACH THE LIMIT THAT WOULD ATTRACT DISALLOWANCE U/S. 40A(3)/(3A). THE DISPUTE, AND MORE IMPORTANTLY, ITS RESOLUTION, IS UNDOCUMENTED/UNEVIDENCED. THAT, THOU GH, THERE WAS SOME DISPUTE IS BORNE OUT OF CONDUCT. THIS IS AS IN THE NORMAL COUR SE THE PAYMENT WOULD HAVE BEEN MADE IN FULL WITHIN A FEW MONTHS, IF NOT A FEW WEEK S OF THE PURCHASE OF GOODS, ON WHICH THERE IS THOUGH NO DOUBT. WAS THE REPRESENTAT IVE/S CHENNAI BASED OR LOCAL, IS, AGAIN, NOT KNOWN. HOW DID THE ASSESSEE IDENTIFY THE REPRESENTATIVE, PARTICULARLY CONSIDERING THAT IT DID NOT UNDERTAKE ANY FURTHER B USINESS WITH THE SAID FIRM. DID HE COME FROM CHENNAI EACH TIME, OR WAS ON A REGULAR TO UR TO THE AREA. THE ASSESSEES CLAIM OF PAYMENT/S (I.E., AFTER 20/1 0/2008, THE LAST DATE OF PAYMENT DURING FY 2008-09), AND THE CONCOMITANT FAC T OF EXISTENCE OF LIABILITY, INASMUCH AS THE TWO CANNOT CO-EXIST, WHICH IS THE F ACT-IN-ISSUE, IS, IN VIEW OF THE FORE-GOING, WHOLLY UNPROVED, IF NOT DISPROVED. THE OUTGO OF CASH IN THE ASSESSEES BOOKS, AS CONTENDED, IS, IN VIEW THEREOF, OF NO CON SEQUENCE. THIS WOULD ALSO MEET THE ARGUMENT OF IT BEING A CASE OF DEBIT ENTRY AND NOT CREDIT ENTRY, ADVANCED BY SH. BANSAL DURING HEARING. IN FACT, IT DID NOT THEREFOR E REQUIRE, I.E., IN THE ABSENCE OF ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 11 EVEN THE PRIMARY EVIDENCES, A DETAILED ANALYSIS OF THE FACTS, AS MADE, TO UNDERSCORE THE SAME, AND WHICH HAS BEEN ONLY TO HIGHLIGHT THE SEVERAL ASPECTS TO THE MATTER, THAT STAND TO ARISE, THOUGH REMAIN COMPLETELY UNADD RESSED. THE CLAIM IS BOTH UNEVIDENCED AND UNTENABLE. NONE OF THE VARIOUS FIND INGS BY THE ASSESSING AND THE FIRST APPELLATE AUTHORITY ARE REBUTTED, OR OTHERWIS E SHOWN TO BE EITHER INFIRM OR NOT RELEVANT. THE ABSENCE OF CONFIRMATION; ABSENCE OF A N AGREEMENT OR THE BASIS OF THE RESOLUTION OF THE DISPUTE; PAYMENTS IN CASH, MADE OVER A PERIOD OF OVER TWO (OR NEARLY THREE) YEARS, TO UNKNOWN/UNAUTHORIZED PERSON S; CONDUCT OF THE ACCOUNT, ETC., MAKE THE ENTIRE CLAIM COMPLETELY SUSPECT. NO EVIDEN CE IN REBUTTAL TO ANY OF THESE OBSERVED FACTS HAS BEEN ADDUCED AT ANY STAGE, INCLU DING BEFORE THE TRIBUNAL, TO SOME OF WHICH THOUGH REFERENCE WAS EVEN MADE DURING HEARING. THE TRADE LIABILITY, ADMITTEDLY OUTSTANDING AS AT THE BEGINNING OF THE Y EAR, IS FOUND, DESPITE BEING NOT SHOWN TO BE DISCHARGED WHILE BEING ADMITTEDLY PAI D, SO THAT IT EXISTS NO MORE, AS NOT EXISTING AS AT THE YEAR-END. THERE HAS THUS BEE N CESSATION OF LIABILITY DURING THE YEAR, OF WHICH THERE IS THEREFORE NO BASIS, EXCEPT THE TRUTH OF THE ASSESSEES ACCOUNTS WHICH ARE COMPLETELY UNPROVED IN THAT RESP ECT. THE ASSESSEE, THUS, DESPITE HAVING NOT ACCOUNTED FOR THE SAME IN HIS BOOKS OF A CCOUNT, HAS DEFINITELY DERIVED A BENEFIT IN ITS RESPECT, VALIDATING THE APPLICATION OF S. 41(1). I DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN CO URT ON APRIL 30, 2019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 30.04.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: GURJEET SINGH, H. NO. 7, STR EET NO. 2, PAWAN NAGAR, ITA NO. 597/ASR/2015 (AY 2010-11) GURJEET SINGH V. ITO 12 AMRITSAR (2) THE RESPONDENT: INCOME TAX OFFICER, WARD-4( 2), AMRITSAR (3) THE CIT(APPEALS)-2, AMRITSAR (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER