ACIT, UDAIPUR V. Shri Laxmi Narayan Pandey, UDAIPUR

ITA 61/JODH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4892 (ITAT-JODHPUR)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: GAUTAM MUTHA
• Keywords: Unexplained cash credit; Business income; Income from undisclosed sources; Additional evidence; Onus to prove
• Section: 143(3); 142(1); 133(6); 68; 12

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 61/JODH/2013 (A.Y. 2009-10) ACIT, VS. SHRI LAXMI NARAYAN PANDEY, CIRCLE-1. PROP. M/S. PANDAY MINERALS UDAIPUR. & M/S. PANDAY CHEMICALS, 3 RD FLOOR, BAPU BAZAR, UDAIPUR. PAN NO. ABEPP9774D (APPELLANT) (RESPONDENT) C.O. NO. 17/JODH/2013 (A.Y. 2009-10) SHRI LAXMI NARAYAN PANDAY VS. ACIT, CIRCLE-1, C/O CA. SUDHIR MEHTA, UDAIPUR. C/O M/S. SAMPATI LAL BOHRA & CO., C.A. 39-40, A SHWINI BAZAR, UDAIPUR. PAN NO. ABEPP9774D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GAUTAM MUTHA DEPARTMENT BY : SHRI N.A. JOSHI- D.R. DATE OF HEARING : 19/09/2013. DATE OF PRONOUNCEMENT : 27/09/2013. 2 O R D E R PER N.K.SAINI, A.M THIS APPEAL BY THE DEPARTMENT AND C.O. BY THE ASSE SSEE ARE DIRECTED AGAINST THE ORDER DATED 01/11/2012 OF LD. CIT (A), UDAIPUR. IN THE DEPARTMENTAL APPEAL, THE FOLLOWING GROUNDS HAVE BEEN RAISED: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN 1. DELETING THE ADDITION OF RS.83,38,934/- U/S 41(1) OF THE L.T.ACT. 2. IGNORING THE FACT THE AO HAS ALREADY NOT TAKEN ADVERSE NOTE OF THE CREDITORS FOR WHICH EITHER PROPER CONFIRMATION IS F ILED OR AO ON HIS OWN MADE ENQUIRY U/S 133(6) AND FOUND THEM TO BE LI VE. 3. WITHOUT PREJUDICE TO ABOVE THE LD. CIT(A) HAS E RRED IN ACCEPTING THE FACTUALLY WRONG SUBMISSIONS OF THE ASSESSEE THAT CO NFIRMATION OF THE SUNDRY-CREDITORS TO THE EXTENT OF RS.37,47,815/- OU T OF CREDITORS OF RS. 53,99,687/- INTER-ALIA INCLUDED IN THE TOTAL AD DITION OF RS.83,38,934/- AS ABOVE, HAVE BEEN FILED, WHEREAS T HE AO HAS ONLY ADDED CREDIT BALANCE OF 4 PARTIES ONLY OUT OF THESE 20 PARTIES TOTALLING RS.37,47,815/- 4. WITHOUT PREJUDICE TO ABOVE THE LD. CLT(A) HAS I GNORED THAT EVEN IN THESE 4 CASES NAMELY SHRINGI MINERALS(2.05 LACS), M INE FIELD LNDIA (3.78 LACS), CHAHNA MINERALS (1.13 LACS) AND MINE F IELD LNDIA (PI), THE ASSESSEE HAS NEITHER FURNISHED COMPLETE ADDRESS AND NOR THE PAN IN THE SO CALLED CONFIRMATION FILED. 5. IGNORING THE SETTLED LAW THAT THE ONUS TO PROVE THE CREDITORS BEING GENUINE LAY ON THE ASSESSEE AND FURTHER IGNORING TH E FACT THAT IN SPITE OF REPEATED OPPORTUNITIES GRANTED TO ASSESSEE, THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE CREDITORS BY FILING TH E PROPER CONFIRMATION OF THESE OLD CREDITORS. 6. IGNORING THE FACT THAT ON DEATH OF THE ASSESSEE 'S SON AND DAUGHTER-IN- LAW, NOT ONLY THE LIABILITY BUT THE ASSETS CREATED OUT OF THE PROFIT MUST 3 HAVE ALSO COME TO THE ASSESSEE & THEREFORE, ADDITIO N ON ACCOUNT OF CESSATION OF LIABILITY HAS RIGHTLY BEEN MADE BY THE AO. 7. IGNORING THAT THE CASE OF THE ASSESSEE IS COVER ED BY WAY OF EXPLANATION 1 & 2 BELOW SECTION 41(1) OF THE L.T. A CT IN RESPECT OF LIABILITY TRANSFERRED FROM THE BOOKS OF HIS DECEASE D SON & DAUGHTER- IN-LAW. 8. DELETING THE ADDITION OF RS. 20,50,280/- IGNORI NG THE FACT THAT EVEN BEFORE THE CIT(A) THE ASSESSEE FAILED TO FILE CONFI RMATION FROM THE CREDITORS (BEING CLAIMED ADVANCE FROM CUSTOMERS) & HAS JUST FILED INCOMPLETE DETAILS AND ALSO IGNORING THE FACT THAT THE BUSINESS OF THE ASSESSEE WAS COMPLETELY CLOSED DURING THE ENTIRE FI NANCIAL YEAR THEREBY VERY REMOTE LIKELY HOOD OF ADVANCES FROM CU STOMERS. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DE LETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2 THE GRIEVANCE OF THE DEPARTMENT VIDE GROUNDS NO.2 TO 7 RELATES TO THE DELETION OF ADDITION OF RS. 83,38,934/- MADE BY THE ASSESSING OFFICER UNDER SECTION 41(1) OF THE I.T. ACT, 1961 (HEREINAF TER REFERRED TO AS ACT, FOR SHORT). 3. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT ASSESSEE FILED HIS RETURN OF INCOME ON 30/09/2009 DECLARING AN INCOME OF RS. 16,27,844/-, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 23/03/2010. LATER ON, CASE WAS SELECTED FOR SCRUTINY. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESS EE TO SUBMIT DETAILS OF SUNDRY CREDITORS, IN WHOSE NAMES A SUM OF RS. 50,00 0/- EACH WAS OUTSTANDING INCLUDING THE DETAILS OF ACCOUNTS SQUAR ED UP DURING THE YEAR. 4 THE ASSESSEE FURNISHED THE SAID DETAILS VIDE LETTER DATED 13/09/2011. THE ASSESSING OFFICER POINTED OUT THAT THE ASSESSEE ALTHOUGH FURNISHED CONFIRMATION IN RESPECT OF CERTAIN SUNDRY CREDITORS , HOWEVER, THE ADDRESSES AND PAN NUMBERS WERE NOT MENTIONED IN THE CONFIRMATION. THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS, BILLS AND VOUCHERS AND ALSO SUBMITTED COPY OF AUDIT REPORT UNDER SECTION 44AB O F THE ACT FOR THE A.Y. 2006-07 AND 2008-09. IT WAS STATED THAT FOR THE A. Y. 2010-11, THERE WAS NO AUDIT UNDER SECTION 44AB OF THE ACT, SINCE THERE WAS NO BUSINESS INCOME. THE ASSESSING OFFICER OBSERVED THAT THE AS SESSEE WAS THE PROPRIETOR OF M/S. PANDAY MINERALS AND M/S. PANDAY CHEMICALS AND THAT THE ASSESSEE WAS DOING TRADING ACTIVITY OF SOAPSTON E LUMPS AND POWDER & OTHER ALLIED ITEMS. THE ASSESSING OFFICER ALSO OBS ERVED THAT AS PER BALANCE SHEET OF M/S. PANDAY MINERALS THERE WERE SU NDRY CREDITORS OF RS. 1,58,52,734/- OUTSTANDING AS ON 31/03/2009. THE DE TAILS OF THE SAID CREDITORS HAS BEEN GIVEN AT PAGE NOS. 10 TO 13 OF T HE ASSESSMENT ORDER DATED 22/12/2011. FOR THE COST OF REPETITION, THE SAME IS NOT REPRODUCED HEREIN. HE FURTHER OBSERVED THAT THE ABOVE AMOUNT INCLUDED SUNDRY CREDITORS OF RS. 15,52,930/- BROUGHT FORWARD BY THE ASSESSEE FROM THE BALANCE SHEET OF M/S. PANDAY MINERALS AS ON 31/03/ 2006 AND SUNDRY CREDITORS OF RS. 83,38,935/- HAS BEEN BROUGHT FORWA RD BY THE ASSESSEE 5 FROM THE BALANCE SHEET OF M/S. PANDAY MINERALS AS O N 31/03/2007. THE DETAILS OF THE SAME HAD BEEN GIVEN AT PAGES NO. 13 TO 16 OF THE ASSESSMENT ORDER. THE SAME IS NOT REPRODUCED HEREI N. THE ASSESSING OFFICER POINTED OUT THAT NO PAYMENT HAD BEEN MADE T O THE SUNDRY CREDITORS OUTSTANDING FOR THE FINANCIAL YEARS 2006- 07, 2007-08 & 2008-09 AND THEY WERE OUTSTANDING AS SUCH. THE ASSESSING O FFICER OBSERVED THAT THE ASSESSEE DID NOT FURNISH COPY OF THE AUDIT REPO RT UNDER SECTION 44AB OF THE ACT AND BALANCE SHEET FOR THE A.Y. 2009-10. HE, THEREFORE, ASKED THE ASSESSEE TO SHOW-CAUSE AS TO WHY THE SUNDRY CRE DITORS AMOUNTING TO RS. 83,38,934/- SHOULD NOT BE ADDED AS PROFIT ON C ESSATION OF LIABILITY UNDER SECTION 41(1) OF THE ACT. IN RESPONSE, ASSES SEE SUBMITTED THAT ALL THE SUNDRY CREDITORS APPEARING IN THE BALANCE SHEET OF M/S. PANDAY MINERALS AS ON 31/03/2009 ARE GENUINE AND, IF ANY N EGATIVE INFERENCE WAS TAKEN ON ACCOUNT OF SUNDRY CREDITORS, THEN CORRESPO NDING CREDIT SHOULD BE GIVEN ON ACCOUNT OF SUNDRY DEBTORS. THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND CONCLUDED THAT SUNDRY CREDITORS AMOUNTING TO RS. 83,38,934/- RELATING TO EXPENSES C LAIMED BY THE ASSESSEE IN RESPECT OF PURCHASES IN THE EARLIER YEA RS I.E. F.Y. 2005-06 & 2006-07 AND AS THE LIABILITY WAS LYING UNCLAIMED FO R YEARS TOGETHER, THE LIABILITY CEASES TO EXIST AND THEREFORE, THE ASSESS EE SHOULD HAVE WRITTEN 6 BACK THE LIABILITY AND OFFER FOR TAXATION UNDER SEC TION 41(1) OF THE ACT. HE FURTHER OBSERVED THAT THE CASE OF THE ASSESSEE W OULD HAVE ATTRACTED THE PROVISIONS OF SECTION 41(1) OF THE ACT, IF SUCH LIABILITY WAS PAID OFF IN ANY OF THE YEARS. THERE WAS NOTHING ON RECORD TO S HOW THAT THE ABOVE SUNDRY CREDITORS ACTUALLY EXITS AS ON 31/03/2009. AS REGARDS SUBMISSIONS OF THE ASSESSEE THAT IF ANY NEGATIVE INFERENCE WAS TO BE DRAWN ON ACCOUNT OF SUNDRY CREDITORS, THEN CORRESPONDING CREDITS SHO ULD HAVE BEEN GIVEN ON ACCOUNT OF SUNDRY DEBTORS. THE ASSESSING OFFICER O BSERVED THAT THE SAME WAS NOT ACCEPTABLE UNDER THE PROVISIONS OF INCOME-T AX ACT. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD SHOW N RS. 76,48,088/- IN RESPECT OF M/S. PANDAY CHEMICALS, WHICH WAS UNDER T HE PROPRIETORSHIP OF THE ASSESSEE HIMSELF AND MORE OVER, THE ASSESSEE HA D SHOWN DEBTORS OF RS. 41,11,927/- IN RESPECT OF SISTER CONCERN M/S. P ANDAY MINERALS PVT. LTD. THEREAFTER, THE BALANCE SUNDRY DEBTORS APPEAR ING IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31/03/2009 WERE OF RS. 44,87,979/- ONLY. IN RESPECT OF CREDITORS APPEARING IN BALANCE SHEET OF M/S. PANDAY MINERALS AS ON 31/03/2009, THE ASSESSING OFFICER OBSERVED TH AT THE CREDITS WERE LYING FOR LONG PERIOD IN RESPECT OF MAJORITY OF SUN DRY CREDITORS, WITHOUT PAYMENT IN THE CURRENT ASSESSMENT YEAR OR IN THE PR ECEDING ASSESSMENT YEARS OR IN THE SUBSEQUENT ASSESSMENT YEARS AND THE REFORE, IT WAS EVIDENT 7 THAT THE SAME WERE NOT PAYABLE THOUGH THE EXPENSES IN RESPECT OF PURCHASES FROM THESE SUNDRY CREDITORS HAD BEEN CLAI MED BY THE ASSESSEE IN THE PRECEDING ASSESSMENT YEARS, THEREFORE, IT HA D BEEN CONCLUDED BY THE ASSESSING OFFICER THAT THOSE SUNDRY CREDITORS W ERE NO LONGER PAYABLE AND NO EVIDENCE HAS BEEN PRODUCED BY THE ASSESSEE T O THE FACT THAT THOSE CREDITORS WERE YET PAYABLE. THE ASSESSING OFFICER ACCORDINGLY, ADDED A SUM OF RS. 83,38,934/- UNDER SECTION 41(1) OF THE A CT. 4. BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER TO TH E LEARNED CIT(A) AND THE SUBMISSIONS MADE AS INCORPORATED IN THE PAR A 2.2 OF THE IMPUGNED ORDER ARE REPRODUCED VERBATIM AS UNDER:- 1. THAT THE LD. ACIT HAS GROSSLY ERRED IN MAKING A DDITION OF RS. 8338934.00 U/S 41(1)(A) OF THE I.T. ACT, 1961 OF RS . 8338934.00, WE WOULD LIKE TO STATE HERE THAT MAINLY THERE HAS THREE TYPE OF SUNDRY CREDITORS OUTSTANDING IN THE ASSESSEES CASE, THE DETAILS OF THE SAME ARE AS UNDER:- S.NO. AMOUNT RELATES TO PROPRIETOR REMARKS 1 5399687.97 ASSESSEE DIRECTLY ASSESSEE HIMSELF 2 1730069.00 M/S. PANDAY INSUTRIES ASSESSEES SON SHRI SUBHASH PANDAY AFTER DEATH OF HIS SON IN ROAD ACCIDENT, THE ASSESSEE TRANSFER THE ABOVE LIABILITIES IN HIS BOOKS OF ACCOUNTS. 3 1209178.00 M/S. AMRIT MINERALS INDUSTRIES ASSESSEES DAUGHTER-IN-LAW SMT. PRAGYA PANDAY AFTER DEATH OF HIS DAUGHTER IN LAW IN ROAD ACCIDENT, THE ASSESSEE TRANSFER THE ABOVE LIABILITIES IN HIS BOOKS OF ACCOUNTS. 8338934.97 8 1.1. IN RESPECT OF DISALLOWANCE OF TOTAL SUNDRY CREDITOR S OF RS. 8338934.97 U/S 41(1)(A) OF THE LT ACT, 1961, WE WOULD LIKE TO SUBMIT HERE AS UNDER: THAT MOST OF THE CONFIRMATIONS FROM SUNDRY CREDITOR S CONTAINING THEIR NAME, ADDRESS, PAN ETC, ARE FURNISHED DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. SOME OF THE CONFIRMATIONS WERE DIRECTL Y CALLED BY THE LD. ACIT DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 133 (6) OF THE LTACT, WHICH HAS BEEN DIRECTLY SEND BY THE CONCERNING PARTIES. L IST OF CONFIRMATIONS & CONFIRMATION LETTER THEREOF SUBMITTED DURING THE CO URSE OF ASSESSMENT PROCEEDINGS AND LATER STAGES ALSO ARE ENCLOSED HERE WITH FOR YOUR KIND PERUSAL & VERIFICATION. THAT THE REASON FOR DELAY IN OBTAINING CONFIRMATION S FROM THE SUNDRY CREDITORS IS THAT THE ASSESSEE IS VERY OLD AGE OF 8 2 YEARS & SUFFERING FROM PROSTATE CANCER ALSO. THAT THE SCRUTINY ASSESSMENT U/S143(3) OF THE LT AC T, 1961 IN THE ASSESSEES CASE FOR THE A.Y. 2007-08 HAS BEEN COMPLETED BY TH E THEN LD. ACIT, CIRCLE- 2, UDAIPUR ON 29/12/2009 (AFTER THE END OF RELEVANT F.Y. 2008-2009)) BY ACCEPTING THE RETURN INCOME FILED BY THE ASSESSEE. AT THAT TIME THE GENUINENESS OF SUNDRY CREDITORS WAS ALSO EXAMINED B Y THE THEN LD. ACIT, CIRCLE-2, UDAIPUR AND HE DOES NOT TAKE ANY NEGATIVE INFERENCE ON ACCOUNT OF IT. HENCE, ALL THE SUNDRY CREDITORS STATED IN THE BOOKS OF M/S PANDAY MINERALS FOR THE F.Y. 2008-2009 ARE GENUINE. THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS WHILE COMPLETING THE SCRUTINY ASSESSMENT U/S 143(3) OF TH E ITACT, 1961 IN THE ASSESSEE'S CASE, THE LD. ACIT DOES NOT POINT OUT AN Y DISCREPANCY WITH REGARDS TO THE GENUINENESS OF THE CREDITORS, HE ONL Y REQUIRED THE COMPLETE DETAILS OF SUNDRY CREDITORS EXCEEDING RS. 50000.00 CONTAINING THEIR NAME, ADDRESS & PAN, CONFIRMATION THEREOF IN THE PRESCRIB ED PERFORMA, WHICH WAS SUBMITTED TO HIM BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH ALSO PROVES THAT THE LIABILITY SUBSISTS ON THE ASSESSEE TO MAKE PAYMENT OF THE ALLEGED SUNDRY CREDITORS. THAT ON THE BASIS OF INFORMATION'S FURNISHED BY THE ASSESSEE, THE LD. ACIT MADE THE SEPARATE INQUIRY U/S 133(6) OF THE LT ACT, 1961, IN WHICH HE DOES NOT FOUND OR POINT OUT ANY DISCREPANCY ON ACCOUNT O F THE ALLEGED SUNDRY 9 CREDITORS. THE ABOVE THING ALSO PROVES THE GENUINEN ESS OF THE SUNDRY CREDITORS OUTSTANDING IN THE ASSESSEE'S BOOKS OF AC COUNTS. THAT THE ASSESSEE HAS NOT WRITTEN-OFF THE ABOVE SUN DRY CREDITORS IN ITS BOOKS OF ACCOUNTS UNILATERALLY AND THE SAME SHOULD NOT BE CONSIDERED TO BE THE INCOME OF THE ASSESSEE ON THE GROUND OF EXPIRY OF LIMITATION. FURTHER, UNDER LTACT, 1961, IT IS NOT MANDATORY FOR THE ASSE SSEE TO WRITE OFF THE UNPAID CREDITORS & CONSIDER THE SAME AS INCOME. LN ADDITION TO THE ABOVE, THE LD. ACIT DOES NOT ESTABLISH THAT THE LIABILITY HAVE CEASED FINALLY AND CEASED WITH NO CHANCE OF REVIVAL OF THE CLAIM BY TH E CREDITORS IN FUTURE AND ALSO THE LD. ACIT HAS NEITHER DISPROVE THE ASSESSEE S CLAIM RELATING TO THE ALLEGED SUNDRY CREDITORS NOR HE DISCHARGE HIS, ONUS TO PROVE THAT THERE IS CESSATION OF LIABILITIES & THE ASSESSEE OBTAINED BE NEFIT FINALLY. THAT IN THE ASSESSMENT ORDER AT PAGE 17, THE LEARNE D ACIT MENTIONED THAT, A SHOW CAUSE NOTICE U/S 142(1) OF THE IT ACT, 1961 DATED 20-12-2011 WAS ISSUED TO ASSESSEE TO SHOW CAUSE AS TO WHY THE ABOV E SUM OF RS. 8338934.00 SHOULD NOT BE ADDED AS PROFIT ON CESSATI ON OF LIABILITY U/S 41(1) OF THE LTACT, 1961, IN THIS RESPECT, WE WOULD LIKE TO DRAW YOUR HONOUR'S KIND ATTENTION THAT NO SUCH TYPE OF SHOW CAUSE NOTICE WA S ISSUED TO THE ASSESSEE TO EXPLAIN HIS CONTENTION IN THIS REGARD. HOWEVER, A NOTICE U/S 142(1) OF THE LTACT, 1961 DAT ED 16-12-2011 WAS ISSUED TO THE ASSESSEE, IN WHICH AT PARA NO 2 & 4, THE LD. ACIT ASKED/REQUIRED THE DETAILS OF SUNDRY CREDITORS IN T HE PRESCRIBED PERFORMA AND SHOW CAUSE AS TO WHY THE SUNDRY CREDITORS APPEA RING IN THE B/S OF M/S PANDAY MINERALS SHOULD NOT BE ADDED TO YOUR TOTAL I NCOME U/S 41(1)(A) OF THE IT ACT. IN COMPLIANCE TO THE AFORESAID NOTICE, VIDE REPLY DATED 20-12- 2012, THE ASSESSEE SUBMITTED ALL THE INFORMATION'S & EXPLANATIONS AS REQUIRED BY THE LD. ACIT, WHICH WAS ACCEPTED BY HIM AND NO FURTHER HEARING/SHOW CAUSE WAS GIVEN IN THE ASSESSEES CASE . HOWEVER, WHILE COMPLETING THE ASSESSMENT, THE LD. A CIT REACHED ON CONCLUSION THAT THE ALLEGED SUNDRY CREDITORS ARE NO LONGER PAYABLE & THE AFORESAID LIABILITY IS CEASED TO EXIST AND HE MADE ADDITION U/S 41(1) OF THE IT ACT, 1961. HENCE, THE ACTION TAKEN BY THE LD. ACIT WITHOUT GIVING THE REASONABLE OPPORTUNITY IN THIS REGARD IS UNWARRANTE D, UNJUSTIFIED & BAD IN LAW. 10 WE ALSO RELY UPON THE FOLLOWING JUDICIAL PRONOUNCEM ENTS TO SUBSTANTIATE THE AFORESAID FACTS: DSA ENGINEERS (BOMBAY) VS. LNCOME TAX OFFICER [(200 9) 30 SOT 31 (MUMBAI)]: WHERE THE ASSESSEE HAS NOT WRITTEN OFF THE LIABILIT IES REFLECTED IN SUNDRY CREDITORS ACCOUNT IT WAS NOT OPEN TO THE AO TO MAKE ADDITION INVOKING S. 41 WITHOUT PROVING THAT THERE WAS CESSATION OF LIABILI TIES OR DISPROVING THE CLAIM OF THE ASSESSEE THAT THE LIABILITIES WERE SUB SISTING. SHRI VARDHMAN OVERSEAS LTD. VS. ASSISTANT COMMISSIO NER OF INCOME TAX [(2008) 24 S0T 393 (DEL)] LN CASE OF BROUGHT FORWARD CREDIT BALANCES OF ASSES SEE, A LIMITED COMPANY, NO ADDITION CAN BE MADE UNDER S. 41(1) ON THE GROUN D OF EXPIRY OF LIMITATION. KAPS ADVERTISING VS. INCOME TAX OFFICER [(2011) 11 ITR (TRIB) 113 (DEL)] THE AMOUNT OF TAX LIABILITY HAS NOT BEEN WRITTEN OF F IN THE ACCOUNTS OF THE ASSESSEE, THE SAME CANNOT BE TAXED AS REMISSION OR CESSATION OF LIABILITY UNDER SECTION 41(1); NON AVAILABILITY OF THE CREDIT OR AND LACK OF ANY CORRESPONDENCE WITH THEM DOES NOT OBLIGATE THE DEBT , AS THE ASSESSEE CONTINUES TO SHOW THE SAME IN ITS BOOKS OF ACCOUNT. COMMISSIONER OF LNCOME TAX VS SMT. SITA DEVI JUNEJA [(2010) 33 DTR (P&H) 201: (2010) 325 ITR 593:: (2010) 187 TAXMAN 96] ASSESSEE HAVING SHOWN THE IMPUGNED LIABILITIES IN I TS BALANCE SHEET AND FILED COPIES OF ACCOUNTS OF SUNDRY CREDITORS SIGNED BY THE CONCERNED CREDITOR, SUCH LIABILITIES CANNOT BE TREATED TO HAV E CEASED MERELY BECAUSE THEY ARE OUTSTANDING FOR SIX YEARS AND, THEREFORE, THE ADDITION MADE BY INVOKING SEC 41(1) CANNOT BE SUSTAINED, MORE SO WHE N THE AO HAS FAILED TO SHOW THAT DEDUCTION HAS BEEN ALLOWED IN RESPECT OF ANY TRADING LIABILITY OR THAT THE ASSESSEE HAS OBTAINED ANY BENEFIT CONCERNI NG SUCH LIABILITIES BY WAY OF REMISSION OR CESSATION THEREOF IN THE RELEVA NT YEAR. DEPUTY COMMISSIONER OF LNCOME TAX VS. THAKKER DEVEL OPERS [(2008) 115 TTJ (PUNE) 841 : (2008) 6 DTR 238] 11 THERE BEING NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE WAS IN RECEIPT OF ANY AMOUNT OF BENEFIT, NO ADDITION U/S 41(1) COU LD BE MADE ON THE GROUND THAT AMOUNT SHOWN AS OUTSTANDING LIABILITIES HAD BECOME BARRED BY LIMITATION. EICHER MOTORS LTD. VS. DEPUTY COMMISSIONER OF LNCOM E TAX (ASST.) [(2004) 82 TTJ (LND) 61 : (2004) 1 SOT 1 (CHD)] SINCE THE AMOUNTS WERE PAYABLE AND HAD NOT BEEN WAI VED OFF BY THE CREDITORS, THE PROVISIONS OF SEC. 41(1) WERE NOT AP PLICABLE TO THE FACTS OF THE CASE. UTTAM AIR PRODUCTS (P) LTD' VS. DEPUTY COMMISSIONER OF LNCOME TAX [(2006) 99 TTJ (DEL) 718] LIABILITY TOWARDS UNMOVED CREDITOR HAVING BEEN SHOW N BY THE ASSESSEE IN ITS BALANCE SHEET AND THERE BEING NO MATERIAL EVIDE NCE WITH THE REVENUE TO SHOW THAT THE SUPPLIER (CREDITOR) HAD GIVEN UP ITS CLAIMS, NO ADDITION WAS CALLED FOR. COMMISSIONER OF LNCOME TAX VS, SOUTHERN ROADWAYS LT D. [(2006) 202 CTR (MAD) 279: (2006) 282 ITR 379 (MAD) : (2006) 155 TA XMAN 493] IN THE ABSENCE OF ANY EVIDENCE OF CESSATION OF LIAB ILITY, AMOUNT WHICH HAS BEEN MERELY CARRIED FORWARD FOR YEARS IN THE BOOKS OF ACCOUNTS IS NOT ASSESSABLE U/S 41(1). COMMISSIONER OF LNCOME TAX VS. GP INTERNATIONAL LTD . [(2010) 229 CTR (P&H) 86 : (2010) 325 ITR 25 (2010) 33 DTR 163] ASSESSEE HAVING SHOWN THE AMOUNT PAYABLE BY IT TO A NOTHER COMPANY AS AN EXISTING LIABILITY IN ITS BOOKS AND NOT WRITTEN-BAC K THE SAME, IT CANNOT BE SAID THAT THE AFORESAID LIABILITY HAS CEASED TO EXI ST AND, THEREFORE IT CANNOT BE TREATED AS INCOME BY INVOKING THE PROVISIONS OF SEC. 41(1). COMMISSIONER 0F INCOME TAX VS. PRE-STRESSED CONCRET E CO. (S.1.) (P) LTD. [(1986) 55 CTR (MAD) 380: (1986) 162 ITR 314 (MAD) : (1986) 28 TAXMAN 292] THE CIRCUMSTANCES THAT THE AMOUNT IS OUTSTANDING FO R LONG AND THE CREDITOR HAS NOT TAKEN STEPS FOR RECOVERY OF THE AMOUNT DUE TO IT BI THEMSELVES WOULD NOT LEAD TO THE INFERENCE OF CESSATION OF LIA BILITY U/S 41(1). 12 UNDER THE ABOVE FACT & CIRCUMSTANCES OF THE ASSESSE E'S CASE, WHEREIN, THE ASSESSEE HAS, NOT UNILATERALLY WRITTEN OFF THE SUND RY CREDITORS, NO QUESTION WOULD ARISE TO TREAT THE LIABILITY AS DEEMED PROFIT FOR THE RELEVANT F.Y. 2008- 2009. BUT THE LD. ACIT MADE THE ARBITRARY ADDITION OF RS. 8338934.97 ON ACCOUNT OF SUNDRY CREDITORS U/S 41(1) OF THE LTACT, 1961 WITHOUT GIVING THE REASONABLE OPPORTUNITY TO THE ASSESSEE TO PROVE HIS CLAIM AND ON THE BASIS OF-SHOW CAUSE NOTICE, WHICH WAS NEVER ISSUED TO THE ASSESSEE & PASSED THE ORDER IN VERY HAPHAZARD MANNER, HENCE ACTION TAKEN BY THE LD, ACIT IS BAD IN LAW AND ADDITION SO MADE IS LIABLE TO BE DELETED . THAT THE LD ACIT. HAS GROSSLY ERRED IN MAKING ADDIT ION SUNDRY CREDITORS OF RS. 1730069.00 & RS. 1209178.00, WHICH RELATES OF M /S. PANDAY INDUSTRIES (PROP: LATE SHRI SUBHASH PANDAY) & M/S AMRIT MINERA L INDUSTRIES (PROP.: LATE SMT. PRAGYA PANDAY) RESPECTIVELY TOTAL AMOUNTI NG TO RS. 2939247.00 INCLUDED IN THE TOTAL SUNDRY CREDITORS OF RS. 83389 34.97, WE WOULD LIKE TO STATE HERE AS UNDER: THAT THE ASSESSEE HAS NEVER CLAIMED ANY DEDUCTION/E XPENDITURE IN RESPECT OF THE ABOVE SUNDRY CREDITORS IN EARLIER ASSESSMENT YEARS AND THE ABOVE SUNDRY CREDITORS A/C HAS ACCOUNT FOR IN THE ASSESSE E'S BOOKS OF ACCOUNTS ONLY AFTER THE CLOSURE OF THE ABOVE PROPRIETORSHIP BUSINESS AFTER THE DEATH OF THEIR PROPRIETORS. THEREFORE, PROVISIONS OF SECT ION 41(1)(A) OF THE IT ACT, 1961 WOULD NOT BE APPLICABLE IN THE ASSESSEE'S CASE IN RESPECT OF THE ABOVE SUNDRY CREDITORS, FOR WHICH, THE ASSESSEE HAS NEITH ER CLAIM ANY EXPENSES NOR TAKING ANY BENEFITS IN THE INCOME COMPUTATION O F THE EARLIER ASSESSMENT YEARS. THAT THE ABOVE SUNDRY CREDITORS E XIST IN THE ASSESSEE'S BOOKS OF ACCOUNTS ONLY DUE THE SUCCESSION OF THE BO OKS OF ACCOUNTS OF THE CLOSED BUSINESS OF HIS SON & DAUGHTER-IN-LAW, WHO E XPIRED IN THE ROAD ACCIDENT IN THE YEAR 2004. THAT IN THE ASSESSMENT ORDER AT PAGE 18, THE LD. AC IT MENTIONED THAT, SUNDRY CREDITORS OF RS. 8338934.00 RELATES TO THE E XPENSES CLAIMED BY THE ASSESSEE IN RESPECT OF PURCHASES IN THE EARLIER YEA RS I.E, F.Y, 2005-06 & 2006-07, WHEREAS IN RESPECT OF ABOVE CREDITORS, THE ASSESSEE HAS NEVER CLAIMED ANY EXPENSES IN RESPECT OF PURCHASES IN THE EARLIER YEARS IN HIS COMPUTATION OF TOTAL INCOME. HENCE THE ABOVE SUNDRY CREDITORS DO NOT- REPRESENT THE TRADING LIABILITY OF THE ASSESSEE HIM SELF. THEREFORE, THE OBSERVATION OF THE LD. ACIT WAS BASELESS AND WITHOU T ANY FACT & FINDING AND ACTION OF THE LD, ACIT IS LIABLE TO BE DELETED. 13 WE ALSO RELY UPON THE FOLLOWING JUDICIAL PRONOUNCEM ENTS TO SUBSTANTIATE THE AFORESAID FACTS: (I) COMMISSIONER OF INCOME TAX VS. HUKUM CHAND MOHA N LAL [1972 CTR (SC) 273 : (1971) 82 LTR 624 (SC)] ANY AMOUNT RECEIVED BY A SUCCESSOR OR LEGAL REPRESE NTATIVE TO A BUSINESS ON ACCOUNT OF REMISSION OF ANY AMOUNT PAID AS A LIA BILITY BY THE PREVIOUS OWNER OF THE BUSINESS, CANNOT BE ASSESSED AS INCOME U/S41(1) OF LTACT, 1961. (II) NITIN S. GARG VS. ASSISTANT COMMISSIONER OF LN COME TAX [(2010) 40 SOT 253 (AHD)] WHERE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF THE EXPENDITURE IN ALL THE EARLIER ASSESSMENT YEARS, MERELY BECAUSE THE ASSESS EE OBTAINED BENEFIT OF DEDUCTION IN THE EARLIER YEARS AND BALANCES ARE CAR RIED FORWARD IN THE SUBSEQUENT YEARS, WOULD NOT PROVE THAT THE TRADING LIABILITIES OF THE ASSESSEE HAVE BECOME NON-EXISTENT, THEREFORE, PROVI SIONS OF S. 41(1)(A) HAVE BEEN WRONGLY APPLIED IN THE MATTER AND THE ADD ITIONS MADE BY LOWER AUTHORITIES HAD TO BE DELETED. (III) COMMISSIONER OF LNCOME TAX & ANR VS. COMPAQ E LECTRIC LTD. [(2012) 66 DTR (KAR)] SEC 41(1) IS NOT ATTRACTED TO WAIVER OF LOAN LIABILITY SINCE NO ALLOWANCE OR DEDUCTION WAS CLAIMED IN RESPECT OF TH E SAME. (IV) COMMISSIONER OF LNCOME TAX VS. MINERALS & META LS TRADING CORPN. OF INDIA LTD, [(1985) 47 CTR (DEL) 271: (1986) 187 ITR 371 (DEL): (1985) 23 TAXMAN 143] WHILE THE ASSESSEE TAKES OVER AN EXISTING BUSINESS AND REALISES SURPLUS ON THE TRANSFERRED LIABILITY THE SURPLUS IS NOT TAXABL E IN THE HANDS OF THE ASSESSEE U/S 41 (1). (V) COMMISSIONER OF LNCOME TAX VS. B. R. CHAWLA [(2 001) 166 CTR (DEL) 280: (2001) 248 ITR 205 (DEL): (2001) 116 TAXMAN 10 9 (DEL)] DEDUCTION OF ADDITIONAL LICENCE FEES IMPOSED BY EXC ISE DEPARTMENT HAVING BEEN ALLOWED TO A PARTNERSHIP FIRM, REFUND THEREOF COULD NOT BE CHARGED TO TAX UNDER S. 41(1) IN THE HANDS OF INDIVIDUAL ASSES SEE WHO SUCCEEDED TO THE BUSINESS OF THE FIRM. 14 (VI) COMMISSIONER OF LNCOME TAX VS. SADEN VIKAS IND IA LTD. [(2010) 236 CTR (DEL) 29 : (2010) 320 ITR 538 : (2010) 191 TAXM AN 162: (2010) 34 DTR 78] ASSESSEE HAVING WRITTEN BACK THE AMOUNT WHICH WAS R ECEIVED BY IT FROM ANOTHER COMPANY ON CAPITAL ACCOUNT AND NEVER ALLOWE D AS DEDUCTION IN THE COMPUTATION OF INCOME OF THE EARLIER YEARS, NOR IT REPRESENTED A TRADING LIABILITY, PROVISIONS OF SEC. 41(1) ARE NOT ATTRACT ED. (VII) SARASWATI INDUSTRIAL SYNDICATE LTD. VS. COMMI SSIONER OF INCOME TAX (1990) 88 CTR (SC) 61 : (1990) 186 ITR 278 (SC): (1 990) 53 TAXMAN 92] EXPRESS ITS VIEWS THAT, WHEN TWO COMPANIES ARE MERG ED AND ARE SO JOINED AS TO FORM A THIRD COMPANY OR ONE IS ABSORBED INTO OR BLENDED WITH ANOTHER, THE AMALGAMATING COMPANY LOSES ITS ENTITY AND ANY ALLOWANCE OR DEDUCTION ALLOWED TO AMALGAMATING COMPANY CANNOT BE TAXED UNDER SEC 41(1) IN THE HANDS OF AMALGAMATED COMPANY. (VIII) INCOME TAX OFFICER VS. SMT KAVITA KHURANA [( 2008) 20 SOT 464 (DEL)] LIABILITIES IN THE NATURE OF LOAN IN RESPECT OF WHI CH NO FINDING HAS BEEN RECORDED BY THE A0 WITH REGARD TO THE YEAR IN WHICH THE ASSESSEE HAS TAKEN BENEFIT OF DEDUCTION WHILE COMPUTING HER INCOME IN ANY OF THE EARLIER PREVIOUS YEAR, THE PROVISIONS OF SECTION 59(1), R/W SECTION 41 (1) WERE NOT APPLICABLE. (IX) LNCOME TAX OFFICER VS. BANSI LAL GUPTA [(2008) 113 TTJ (ASR) 898] ADDITION UNDER SECTION. 41(1) COULD NOT BE MADE BEC AUSE NO DEDUCTION OR ALLOWANCE IN RESPECT OF EXPENSES, LOSS OR TRADING L IABILITY HAD BEEN ALLOWED IN THE EARLIER ASSESSMENT YEARS. (X) LNCOME TAX OFFICER VS. BHAVESH PRINTS (P) LTD. [(2011) 142TTJ(AHD) 128: (2011) 64 DTR 401] MERELY BECAUSE CERTAIN AMOUNTS WERE OUTSTANDING IN THE BOOKS OF ASSESSEE DOES NOT MATCH TO THE INFERENCE THAT THIS AMOUNT WO ULD RELATE TO A TRADING LIABILITY OR TO A SUM ALREADY DEBITED IN THE P & L A/C IN ANY EARLIER YEAR OR CURRENT YEAR; SEC. 41(1) WAS NOT ATTRACTED ON THE F ACTS OF THE CASE. (XI) COMMISSIONER OF LNCOME TAX VS. JAIPUR JEWELLER S (EXPORT) [(2010) 187 TAXMAN 169 (DEL)] CONFIRMING THE ORDER OF TRIBUNAL, BASED ON THE FACTS, IT 15 WAS HELD THAT AS THERE IS NO CESSATION OF LIABILITY BY WRITING BACK OF LIABILITY PERTAINING TO THE AMOUNT PAYABLE BY THE ERSTWHILE F IRM, NO ADDITION CAN BE MADE U/S 41(1). (XII) BHAGAT PRASAD & CO. VS. COMMISSIONER OF INCOM E TAX [(1975) 99 ITR 111 (ALL)] THE ADVANCE RECEIVED BY THE ASSESSEE WAS NEVER ALLO WED OR A DEDUCTION GIVEN IN THE EARLIER YEAR SEC. 41(1) CANNOT BE REVO KED. UNDER THE ABOVE FACT & CIRCUMSTANCES AND VARIOUS RE GARD PRONOUNCEMENTS, THE LD. ACIT HAS NOT JUSTIFY IN MAKING ARBITRARY AD DITION U/S 41(1)(A) OF THE LT ACT, 1961 ON ACCOUNT OF SUNDRY CREDITORS OF RS. 1730069.00 & RS. 1209178.00 RELATES OF M/S PANDAY LNDUSTRIES (PROP.: LATE SHRI SUBHASH PANDAY) & M/S AMRIT MINERAL INDUSTRIES (PROP,: LATE SMT. PRAGYA PANDAY) RESPECTIVELY TOTAL AMOUNTING TO RS. 2939247.00, WHI CH WAS NOT THE TRADING LIABILITY OF THE ASSESSEE. THEREFORE, ACTION TAKEN BY THE LD. ACIT IS BAD IN LAW AND ADDITION SO MADE IS LIABLE TO BE DELETED. 1.1 OUT OF THE BALANCE SUNDRY CREDITORS OF RS. 5399 687.97, WHICH WAS DIRECTLY RELATES TO THE ASSESSEE, THE ASSESSEE HAS NOT WRITE OFF THE ABOVE CREDITORS IN HIS BOOKS OF ACCOUNTS AND THE SUNDRY C REDITORS HAS STILL ALIVE FOR PAYMENT. FURTHER, THE ASSESSEE HAS ALREADY BEEN FUR NISHED THE CONFIRMATION OF SUNDRY CREDITORS TOTAL AMOUNTING TO RS. 3747815.00 OUT OF RS. 5399687.97 DURING THE COURSE OF ASSESSMENT. PRO CEEDINGS, UNDER THESE CIRCUMSTANCES, IT COULD NOT BE SAID THAT THE SUNDRY CREDITORS HAS NOT SUBSIST AND LIABILITY IS CEASED TO EXIST. THEREFORE, ACTION TAKEN BY THE LD. ACIT IS BAD IN LAW AND ADDITION SO MADE IS LIABLE TO BE DELETED . 5. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER MADE THE ADDITI ON OF RS. 83,38,934/- UNDER SECTION 41(1)(A) OF THE ACT AS THE LIABILITY ON ACCOUNT OF SUNDRY CREDITORS WAS OUTSTANDING AS SUCH IN THE FINANCIAL YEARS 2006-07, 2007-08 AND 2008-09 AND NO PAYMENTS WERE MADE TO THE CREDIT ORS IN ANY OF THE 16 YEARS. HE FURTHER OBSERVED THAT THE ASSESSEE FILED CONFIRMATION FROM SOME OF THE CREDITORS AND IN SOME OF THE CASES, THE ASSESSING OFFICER OBTAINED CONFIRMATION DIRECTLY FROM THE SUNDRY CRED ITORS UNDER SECTION 133(6) OF THE ACT. LEARNED CIT(A) POINTED OUT THA T THE LIABILITY ON ACCOUNT OF SUNDRY CREDITORS TREATED BY THE ASSESSIN G OFFICER AS PROFIT UNDER SECTION 41(1) OF THE ACT CONSISTING OF THE FO LLOWING:- S.NO. AMOUNT OF SUNDRY CREDITORS RELATES PROPRIETOR REMARKS 1 53,99,687/- ASSESSEE DIRECTLY ASSESSEE HIMSELF ALIVE IN BOOKS 2 17,30,069/- M/S. PANDAY INDUSTRIES ASSESSEES SON SHRI SUBHASH PANDAY AFTER DEATH OF HIS SON IN ROAD ACCIDENT, THE ASSESSEE TRANSFER THE ABOVE LIABILITY IN HIS BOOKS OF ACCOUNT 3. 12,09,178/- M/S. AMRIT MINERALS INDUSTRIES ASSESSEES DAUGHTER IN LAW SMT. PRAGYA PANDAY AFTER DEATH OF HIS DAUGHTER-IN-LAW IN ROAD ACCIDENT, THE ASSESSEE TRANSFER THE ABOVE LIABILITIES IN HIS BOOKS OF ACCOUNT TOTAL 83,38,934/- 6. FROM THE ABOVE CHART, LEARNED CIT(A) OBSERVED T HAT THE SUNDRY CREDITORS AMOUNTING TO RS. 29,39,247/- WERE TRADE S UNDRY CREDITORS RELATING TO THE BUSINESS OF HIS SON AND DAUGHTER-IN -LAW, WHICH WERE TRANSFERRED TO THE BOOKS OF ACCOUNTS OF THE ASSESSE E DUE TO THEIR DEATH IN ROAD ACCIDENT. THEREFORE, IT COULD NOT BE SAID THA T THE ASSESSEE HAD CLAIMED THE EXPENDITURE ON SUCH SUNDRY CREDITORS DU RING THE EARLIER 17 YEARS. LEARNED CIT(A) HELD THAT THE SAID AMOUNT CA NNOT BE TREATED AS PROFIT OF THE ASSESSEE UNDER SECTION 41(1) (A) OF T HE ACT. RELIANCE WAS PLACED ON THE FOLLOWING CASE-LAWS:- 1. CIT VS. HUKUM CHAND MOHAN LAL (1971) 82 ITR 624 (SC ) 2. NITIN S. GARG VS. ACIT (2010) 40 SOT 253 (AHD) 7. THE LEARNED CIT(A) FURTHER OBSERVED THAT THE ABO VE SAID CREDITORS WERE EXEMPTED BY THE ACIT, CIRCLE-2, UDAIPUR WHILE COMPLETING THE ASSESSMENT FOR THE A.Y. 2007-08 DATED 29/12/2009 AN D NO ADVERSE INFERENCE WAS DRAWN IN RESPECT OF SUCH SUNDRY CREDI TORS. AS REGARDS ADDITION TO THE EXTENT OF RS. 53,99,687/- IN THE CA SE OF ASSESSEE, THE LEARNED CIT(A) MENTIONED THAT THE ASSESSEE HAD FIL ED CONFIRMATION FROM THE FOLLOWING CREDITORS TO THE EXTENT OF RS. 37,47, 815/-:- S.NO. PARTY NAME O/S CR. BALANCE 1 ABHISHEK MINERALS 163935.00 2 ARUN TAK 38110.00 3 ASHAPURA MINERALS & CHEMICALS 133446.00 4 CHAHNA MINERALS 113538.00 5 DILIP KOTHARI ENTERPRISES 70510.00 6 GLOBAL AGENCY 136250.00 7 GOVERDHAN SINGH JI 82392.00 8 JAI VAISHNAV MARBLES 159922.00 9 MINES FIELD INDIA 378486.00 10 MODI INDUSTRIES 639951.00 11 NEW MALVIYA MECHANICALS WORKS 55508.00 12 OAKASA CHEMICALS WORKS 103065.00 13. RAJ MINING WORKS 201023.00 14 ROHIT TRADERS 334300.00 15 SHREE TRIDEV TRADERS 52084.00 18 16. SHREE ADITYA GRIDNING MILLS 77500.00 17. SHREE DHARMRAJ ELECT WORKS 34545.00 18 SHRINGI MINERALS 205100.00 19. SUBH KHANJI 737260.00 20 TANK MINERALS 30890.00 TOTAL 3747815.00 LEARNED CIT(A) WAS OF THE VIEW THAT THE AFORESAID S UNDRY CREDITORS WERE GENUINE AND STILL ALIVE AND THEY DEMANDED AMOUNT FR OM THE ASSESSEE. HE FURTHER OBSERVED THAT IT WAS NOT THE CASE OF THE AS SESSING OFFICER THAT HE GOT CONDUCTED ENQUIRIES AND DURING THE COURSE OF EN QUIRY, IT WAS FOUND BY THE ASSESSING OFFICER THAT THE CREDITORS WERE NOT G ENUINE OR NOT SUBSIST. HE, THEREFORE, HELD THAT THE ASSESSING OFFICER MADE THE ADDITION UNDER SECTION 41(1)(A) OF THE ACT PURELY ON PRESUMPTION T HAT THE SUNDRY CREDITORS WERE NO LONGER PAYABLE WITHOUT BRINGING A NY EVIDENCE ON RECORD TO SUBSTANTIATE HIS FINDING THAT THE AFORESAID LIAB ILITY WAS CEASED TO EXIST. ACCORDINGLY, THE ADDITION OF RS. 83,38,934/- WAS DE LETED. NOW, THE DEPARTMENT IS IN APPEAL. 8. LEARNED D.R. STRONGLY SUPPORTED THE ORDER PASSE D BY THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT SINCE THE ASSESS EE DID NOT MAKE ANY PAYMENT TO THE CREDITORS FOR SO MANY YEARS, THEREFO RE, THE AMOUNT OUTSTANDING IN THE NAME OF SUNDRY CREDITORS CEASED TO EXIST AND IT WAS RIGHTLY ADDED TO THE INCOME OF THE ASSESSEE UNDER S ECTION 41(1)(A) OF THE ACT. 19 9. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A). RELIANCE WAS PLACED ON THE FOLLOWING CASE-LAWS:- 1) CIT VS.JAIN EXPORTS (P) LTD. (2013) 89 DTR 265 ( DEL.) (HC) 2) CIT VS. G.K. PATEL & CO. (2013) 212 TAXMAN 384 ( GUJ.) (HC) 3) CIT VS. NITIN S. GARG (2012) 71 DRT 73 (GUJ.) (H C) 4) CIT VS. SHRI VARDHAMAN OVERSEAS LTD. (2012) 69 D TR 379 (DEL.) (HC) 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSING OFFIC ER MADE THE ADDITION OF RS. 83,38,934/- BY INVOKING THE PROVISIONS OF SECTI ON 41(1)(A) OF THE ACT. THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT READ AS UNDER:- 41. (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN M ADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDI TURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REF ERRED TO AS THE FIRST- MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVI OUS YEAR, ( A ) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF S UCH TRADING 20 LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACC RUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INC OME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION I N RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS I N EXISTENCE IN THAT YEAR OR NOT; OR 11. FROM THE ABOVE PROVISIONS, IT IS CLEAR THAT IN ORDER TO ATTRACT THE PROVISION OF SECTION 41(1)(A) OF THE ACT, THERE SHO ULD HAVE BEEN AN IRREVOCABLE CESSATION OF LIABILITY WITHOUT ANY POSS IBILITY OF THE SAME BEING REVIVED. THE CESSATION OF THE LIABILITY HAS TO BE E ITHER BY THE REASON OF LAW I.E. LIABILITY BECOMING UNENFORCEABLE AT LAW BY THE CREDITORS AND THE DEBTOR ASSESSEE DECLARING UN-EQUIVOCALLY HIS INTENT ION NOT TO HONOUR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY THE CREDITORS . BUT IN THE PRESENT CASE, A SUM OF RS. 29,39,247/- WAS RELATING TO THE BUSINESS OF DECEASED SON AND DAUGHTER-IN-LAW OF THE ASSESSEE, WHO EXPIRE D IN ROAD ACCIDENT AND THE AMOUNT WAS TRANSFERRED IN THE BOOKS OF THE ASSESSEE AND THOSE CREDITORS WERE EXAMINED BY THE ACIT, CIRCLE-2, UDAI PUR WHILE FRAMING ASSESSMENT UNDER SECTION 143(3) OF THE ACT FOR THE A.Y. 2007-08 ON 29/12/2009, THEREFORE, IT CANNOT BE SAID THAT LIABI LITY CEASED IN RESPECT OF THOSE CREDITORS. IN THE PRESENT CASE, THE ASSES SEE FURNISHED THE CONFIRMATION FROM THE SUNDRY CREDITORS, WHO CLAIMED THAT THE AMOUNT 21 WAS RECOVERABLE FROM THE ASSESSEE. THE ASSESSING OF FICER ALSO OBTAINED CONFIRMATION DIRECTLY FROM SOME OF THE SUNDRY CREDI TORS UNDER SECTION 133(6) OF THE ACT, THEREFORE, IT CANNOT BE SAID THA T THERE WAS CESSATION OF LIABILITY WHICH IS PRIME CONDITION TO INVOKE THE PR OVISIONS OF SECTION 41(1) OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE HAD NOT WRITTEN OFF THE LIABILITIES REFLECTED AS SUNDRY CREDITORS AND NOTHI NG IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THERE WAS CESSATION OF LIABILI TIES, THEREFORE THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT WERE NOT ATTRACTED TO THE FACTS OF THE PRESENT CASE. ON A SIMILAR ISSUE, THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT. SEETA DEVI JUNEJA (SUPRA) HELD AS UNDER:- ASSESSEE HAVING SHOWN THE IMPUGNED LIABILITIES IN I TS BALANCE SHEET AND FILED COPIES OF ACCOUNTS OF SUNDRY CREDITORS SI GNED BY THE CONCERNED CREDITOR, SUCH LIABILITIES CANNOT BE TREA TED TO HAVE CEASED MERELY BECAUSE THEY ARE OUTSTANDING FOR SIX YEARS A ND, THEREFORE, THE ADDITION MADE BY INVOKING SEC 41(1) CANNOT BE S USTAINED, MORE SO WHEN THE AO HAS FAILED TO SHOW THAT DEDUCTION HA S BEEN ALLOWED IN RESPECT OF ANY TRADING LIABILITY OR THAT THE ASS ESSEE HAS OBTAINED ANY BENEFIT CONCERNING SUCH LIABILITIES BY WAY OF R EMISSION OR CESSATION THEREOF IN THE RELEVANT YEAR. 12. IN THE PRESENT CASE ALSO, ALTHOUGH THE LIABILIT Y WAS OUTSTANDING FOR THE EARLIER YEARS, BUT THE ASSESSEE HAD SHOWN THE L IABILITY IN HIS BALANCE SHEET AND FILED COPIES OF ACCOUNT AND CONFORMATION FROM SUNDRY CREDITORS AND THE ASSESSING OFFICER HIMSELF OBTAINED THE CONF IRMATION UNDER SECTION 22 133(6) OF THE ACT FROM FEW OF THE CREDITORS, THEREF ORE, THE ADDITION MADE BY INVOKING THE PROVISIONS OF SECTION 41(1)(A) OF T HE ACT WAS NOT JUSTIFIED AND THE LEARNED CIT(A) RIGHTLY DELETED THE SAME. THEREFORE, BY CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIE D IN DELETING THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. 13. VIDE GROUND NO. 8 THE GRIEVANCE OF THE DEPARTME NT RELATES TO THE DELETION OF ADDITION OF RS. 20,50,280/- ON ACCOUNT OF ADVANCE FROM THE CUSTOMER TREATING THE SAME WAS AS UNEXPLAINED CREDI T UNDER SECTION 68 OF THE ACT. 14. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD SHOWN TO HAVE RECEIVED THE FOLLOWING ADVANCES F ROM THE CUSTOMERS:- S.NO. PARTICULARS AMOUNT 1 BHAVIN TRADERS 40000 2 BHAWANI TILES 15185 3 CITIZEN CERAMICS 30421 4 COMMANDAR CERAMICS IND. 12644 5 DECOGOLD GLAZED TILES LTD. 60118 6 DIGITAL CERAMICS PVT. LTD. 98623 7 FACT PAPER MILL PVT. LTD. 52000 8 JAI STAR MINERALS 139676 9 JAYSON CERAMIC (AMI) 74333 23 10 MARK GALZE TILES 88382 11 NOVA GOLD SANITARYWAR (P) LTD. 40000 12 OPAL CERAMICS IND 45965 13 PAVIT CERAMIC PVT. LTD. 100000 14 PENGVIN CERAMICS 2742 15 SAMI CERAMICS PVT. LTD. 313693 16 SAGUN CERAMICS 15533 17 SMARCH TRADE LINK 210000 18 SOHNI CERAMICS, HIMMATNAGAR 312093 19 SONATA CERAMICS 60064 20 SUNHILL CERAMICS PVT. LTD. 221618 21 SUNSHINE CERAMICS 55007 22 UTTAM CERAMICS 62183.60 TOTAL 2050280.60 56. THE ASSESSING OFFICER FOUND THAT NO TRANSACTION HAVE BEEN CARRIED OUT AGAINST THE ABOVE SAID ADVANCES. HE, THEREFORE , ASKED THE ASSESSEE TO SHOW-CAUSE AS TO WHY THE SAID ADVANCES SHOULD NO T BE TREATED AS UNEXPLAINED CREDIT. THE ASSESSING OFFICER OBSERVE D THAT THE ASSESSEE DID NOT OFFER ANY EXPLANATION/CLARIFICATION AND NO TRAN SACTION HAD BEEN MADE BY THE ASSESSEE WITH THE ABOVE SAID PERSONS. HE FU RTHER OBSERVED THAT NO MANUFACTURING ACTIVITIES WERE CARRIED OUT BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION AND THERE WAS NO PURCHASE OF RA W-MATERIAL OR FINISHED GOODS IN M/S. PANDAY MINERALS DURING THE Y EAR UNDER CONSIDERATION. HE ALSO OBSERVED THAT THE ASSESSEE DID NOT HAVE SUFFICIENT OPENING STOCK AND THAT THE OPENING STOCK OF RAW-MAT ERIAL AVAILABLE WITH 24 THE ASSESSEE AS PER PROFIT & LOSS ACCOUNT OF M/S. P ANDAY MINERALS WAS OF RS. 20,89,743/- ONLY, OUT OF WHICH THE ASSESSEE HAD SOLD RAW MATERIAL OF RS. 15,84,329/- TO M/S PANDAY CHEMICALS WHICH IS AN OTHER PROPRIETORSHIP CONCERN OF THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE WAS NO NEED TO RECEIVE ANY ADVANCE FOR BUSINESS ACT IVITIES WITH THOSE PARTIES PARTICULARLY WHEN THE ASSESSEE WAS NOT INTE NDING TO MAKE ANY BUSINESS TRANSACTIONS WITH THOSE CREDITORS. ACCORD ING TO HIM, THE ASSESSEE HAD INTRODUCED HIS UNACCOUNTED INCOME IN T HE BOOKS OF ACCOUNTS IN THE GUISE OF FICTITIOUS NAMES OF PERSONS AS ADVA NCES FROM CUSTOMERS SO AS TO ESCAPE FROM THE PROVISIONS OF SECTION 68 OF T HE ACT. HE, THEREFORE, MADE THE ADDITION OF RS. 20,50,280/- ON ACCOUNT OF ADVANCES FROM THE CUSTOMERS CONSIDERING THE SAME AS UNEXPLAINED. 16. BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND THE SUBMISSIONS AS INCORPORATED IN PARA 3.2 OF THE ORDER ARE REPRODUCED VERBATIM AS UNDER:- 'THAT THE LD. ACIT HAS GROSSLY ERRED IN MAKING ADDI TION OF RS. 2050280.00 ON ACCOUNT OF ADVANCE FROM CUSTOMERS FOR PURCHASES U/S 68 OF THE LT ACT, 1961 TREATING THE SAME AS BOGUS CREDITORS, WE WOULD LIKE TO STATE HERE AS UNDER: THAT DURING THE RELEVANT F.Y. 2008-2009, THE ASSESS EE CLOSE THE TRADING & BUSINESS ACTIVITIES IN THE TRADE NAME M/S PANDAY MI NERALS, HOWEVER DUE TO POPULAR TRADE NAME THE CUSTOMERS SEND THE ADVANCE F OR PURCHASE IN THE NAME OF M/S PANDAY MINERALS. 25 THAT ALL THE ADVANCES MENTIONED IN THE ASSESSMENT O RDER ARE THE GENUINE ADVANCES OF THE ASSESSEE AND RELATES TO THE RELEVAN T F.Y, 2008-2009 ONLY. FOR WHICH PAYMENT OR SUPPLY OF THE GOODS WERE MADE IN THE CURRENT OR NEXT FINANCIAL YEARS FROM THE BOOKS OF ASSESSEES SISTER /GROUP CONCERNS I.E. M/S PANDAY CHEMICALS & M/S PANDAY MINERALS PVT. LIMITE D, BECAUSE THE ASSESSEE CLOSE THE TRADING & BUSINESS ACTIVITIES IN THE TRADE NAME M/S PANDAY MINERALS DURING THE RELEVANT F.Y. 2008-2009. DETAILS CHART PROVING THE ASSESSEE'S CONTENTION IN THIS REGARD ALONGWITH LEDGER ACCOUNTS & CONFIRMATIONS ETC. ARE ENCLOSED HEREWITH FOR YOUR K IND PERUSAL & VERIFICATION. AS SEEMS FROM THE ABOVE CHART, IT APPEARS THAT MOST OF THE ADVANCES WERE OUTSTANDING IN THE BOOKS OF M/S PANDAY MINERALS, ON THE OTHER SIDE THEIR DEBIT BALANCES ARE LYING OUTSTANDING IN THE BOOKS O F ASSESSEES SISTER/GROUP CONCERNS I.E. M/S PANDAY CHEMICALS & M/S. PANDEY MI NERALS PVT. LIMITED., WHICH ULTIMATELY SET OFF THE OUTSTANDING CREDIT BAL ANCES AND FINALLY NO BALANCES HAS PAYABLE TO THE SUNDRY CREDITORS. THAT THE ASSESSEE MADE ALL THE SUPPLY OF GOODS IN T HE CURRENT OR NEXT FINANCIAL YEARS FROM THE BOOKS OF ASSESSEES SISTER /GROUP CONCERNS I.E. M/S PANDAY CHEMICALS & M/S. PANDEY MINERALS PVT. LIMITE D. DETAILS OF THE SAME ALONGWITH LEDGER ACCOUNTS & CONFIRMATIONS ARE ENCLO SED HEREWITH FOR YOUR KIND PERUSAL & VERIFICATION. THAT ALL AMOUNT RECEIVED UNDER THE HEAD ADVANCE FRO M CUSTOMER WAS RECEIVED BY ACCOUNT PAYEE CHEQUES DURING THE RELEVA NT F.Y. 2008-2009 ONLY, FOR WHICH THE SUPPLY OF GOODS WAS MADE DURING THE RELEVANT FINANCIAL YEAR OR IN THE NEXT FINANCIAL YEARS. THAT THE AMOUNT WHAT SO EVER RECEIVED BY THE ASSESS EE IS RECEIVED IN RELATION TO HIS TRADING ACTIVITY & RECEIVED AS ADV ANCE FOR PURCHASES, AND IT DOES NOT AMOUNT TO BE TREATED AS CASH CREDIT AND LOAN OR DEPOSIT FOR THE ASSESSEE. HENCE, DOES NOT COME UNDER THE PURVIEW OF SECTION 68 OF THE ACT, 1961. SECTION 68 OF THE IT ACT, 1961 SPECIFY FOR ANY SUM IS FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF ANY ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NA TURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN OPINIO N OF THE ASSESSING OFFICER SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 26 LN THE ASSESSEE'S CASE, THE LD. ACIT HAS NOT GIVEN THE REASONABLE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE NATURE O F THE ADVANCE RECEIVED FROM THE CUSTOMER OF RS. 2050980.00 AND MADE THE AR BITRARY ADDITION ON ACCOUNT OF IT WHEREAS THE ABOVE SUM RELATES TO THE TRADING RECEIPT OF THE ASSESSEE, WHICH WAS ULTIMATELY PAID BY THE ASSESSEE THROUGH SALE OR OTHERWISE. DETAILS OF THE SAME ARE ENCLOSED HEREW ITH FOR YOUR KIND PERUSAL & VERIFICATION. THAT IN THE ASSESSMENT ORDER AT PAGE 21, THE LD. AC IT MENTIONED THAT, A SHOW CAUSE NOTICE U/S .142(1) OF THE IT ACT, 1961 D ATED 02/12/2011 WAS ISSUED TO ASSESSEE REQUIRED TO SHOW CAUSE AS TO WHY THE ABOVE CREDITS SHOWN AS ADVANCE FROM CUSTOMER IN THE BOOKS OF ACCO UNTS BE NOT TREATED AS UNEXPLAINED CREDITS. LN THIS RESPECT, WE ONCE AG AIN WOULD LIKE TO DRAW YOUR HONOUR'S KIND ATTENTION THAT NO SUCH TYPE OF S HOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE TO EXPLAIN HIS CONTENTION IN THIS REGARD. HOWEVER, A NOTICE U/S L42(1) OF THE LT ACT, 1961 DA TED 02-12-2011 WAS ISSUED TO THE ASSESSEE, IN WHICH AT PARA NO 7, THE LD. ACIT ASKED/REQUIRED THE DETAILS OF ADVANCE FROM CUSTOMER OF RS. 2050280 .00. LN COMPLIANCE TO THE AFORESAID QUERY, THE ASSESSEE VIDE REPLY DATED 08/12/2012 SUBMITTED ALL THE INFORMATION'S & EXPLANATIONS AS REQUIRED BY THE LD, ACIT & FURNISHED SOME CONFIRMATIONS AND PRODUCED BOOKS OF ACCOUNTS F OR VERIFICATION, WHICH WAS EXAMINED ON TEST CHECK BASIS AND REPLY WAS ACCE PTED BY HIM. LN THIS REGARD, WE WOULD LIKE TO STATE HERE THAT DU E TO THE POPULAR TRADE NAME, THE CUSTOMERS SEND THE ADVANCE FOR PURCHASE I N THE NAME OF M/S PANDAY MINERALS, FOR WHICH, PAYMENT OR SUPPLY OF TH E GOODS WERE MADE IN THE CURRENT OR NEXT FINANCIAL YEARS FROM THE BOOKS OF ASSESSEE'S SISTER/GROUP CONCERNS I.E. M/S PANDAY CHEMICALS & M/S PANDAY MIN ERALS PVT. LIMITED. THAT OUT OF THE TOTAL ADVANCES OF RS. 2050280.00, T HE ADVANCES OF RS. 540432.00 STANDS AS OPENING BALANCE FOR THE RELEVAN T F.Y. 2008-2009, FOR WHICH NO ADDITION SHOULD BE MADE FOR THE RELEVANT F .Y. 2008-2009, BUT THE LD' ACIT ALSO MADE ADDITIONS OF RS. 540432.00, WHIC H IS LIABLE TO BE DELETED. DETAILS OF THE SAME ARE ENCLOSED HEREWITH FOR YOUR KIND PERUSAL & VERIFICATION. WE ALSO RELY UPON THE FOLLOWING JUDICIAL PRONOUNCEM ENTS TO SUBSTANTIATE THE AFORESAID FACTS: 27 SHRI VARDHMAN OVERSEAS LTD. VS. ASSISTANT COMMISSIO NER OF LNCOME TAX [(2008) 24 S0T 393 (DEL)] ALL CREDIT ENTRIES BEING OPENING BALANCES, THERE IS NO QUESTION OF ADDITION UNDER SECTION 68. LNCOME TAX OFFICER VS. BANSI LAL GUPTA [(2008) 113 TTJ (ASR) 898] OLD CREDIT BALANCES BROUGHT FORWARD FROM ASSESSMENT YEAR 1995-96 COULD NOT BE MADE SUBJECT MATTER OF ADDITION U/S 68 FOR A .Y. 2001-02. COMMISSIONER OF INCOME TAX VS. SAHIBGANJ ELECTRIC C ABLES (P) LTD. [(1978) 115 ITR 408 (CAL)] HOWEVER, WHILE COMPLETING THE ASSESSMENT, THE LD. A CIT REACHED ON CONCLUSION THAT THE ASSESSEE HAS NOT CARRIED OUT AN Y MANUFACTURING ACTIVITIES. FURTHER, NO PURCHASE OF RAW MATERIAL OR FINISHED GOODS WAS MADE BY THE ASSESSEE IN M/S_PANDAY MINERALS DURING F.Y. 2008-2009 AND MADE THE ARBITRARY ADDITION OF RS. 2050280.00 TO THE TOT AL INCOME TREATING THE SAME AS UNEXPLAINED CREDIT U/S 68 OF THE IT ACT, 19 61 WITHOUT GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE TO PROVE HIS CONTENTION IN THE REGARD OR WITHOUT MAKING ANY INQUIRY & WITHOUT ANY FACT & FINDING AND ON THE BASIS OF SHOW CAUSE NOTICE, WHICH WAS NEVER ISS UED TO THE ASSESSEE & PASSED THE ORDER IN VERY HAPHAZARD MANNER, HENCE AC TION TAKEN BY THE LD. ACIT IS BAD IN LAW AND ADDITION SO MADE IS LIABLE T O BE DELETED. LN LIEU OF FACTS OF THE CASE WE HUMBLY REQUEST YOUR HONOUR TO ACCEPT OUR SUBMISSION AND IT WOULD BE VERY KIND TO THE ASSESSE E FOR DELETING THE ADDITIONS OF RS. 10399214.00 MADE BY THE LD. ITO. THE ASSESSEE ALSO FILED ADDITIONAL EVIDENCE UNDER RULE 46A(D) OF THE I.T. RULES 1962 AND REQUESTED THE LEARNED CIT(A) T O ADMIT THE SAME. LEARNED CIT(A) FORWARDED THOSE ADDITIONAL EVIDENCE TO THE ASSESSING OFFICER FOR HIS COMMENTS AND REPORT. THE ASSESSING OFFICER VIDE HIS REMAND REPORT DATED 25/07/2012 SUBMITTED AS UNDER:- 28 2. IN THIS CONNECTION , IT IS SUBMITTED THAT THE PERMISSION SOUGHT FOR BY THE ASSESSEE TO SUBMIT ADDITIONAL EVIDENCE UNDER RU LE 46A OF THE IT RULES IS NOT PERMISSIBLE BY LAW AS SUFFICIENT AND AMPLE OPPO RTUNITIES WERE ACCORDED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS TO SUBMIT THE DETAILS/CLARIFICATION/EVIDENCES AND THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSE E DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAVE BEEN CAREFULLY CONSI DERED AT THE TIME OF PASSING THE ORDER. IT IS THEREFORE REQUESTED THAT T HE ADDITIONAL EVIDENCES NOW SUBMITTED BY THE ASSESSEE MAY NOT BE CONSIDERED UNDER RULE 46A OF THE L.T ACT. 3. WITHOUT PREJUDICE TO THE ABOVE, WITH REGARD TO THE MERITS TO THE EASE, THE COMMENTS IS SUBMITTED AS UNDER:- (A) THE ASSESSEE HAS ARGUED THAT REASONABLE OPPORTU NITY WAS NOT GIVEN TO HIM AT THE TIME OF ASSESSMENT TO PROVE THE GENUINEN ESS OF ADVANCES RECEIVED FROM CUSTOMERS. THIS GROUND OF THE ASSESSE E IS FAR FROM THE TRUTH AS THE AMPLE OPPORTUNITIES HAVE BEEN GIVEN TO THE A SSESSEE WHICH WAS DULY MENTIONED IN THE ASSESSMENT ORDER AS WELL AS IN THE ORDER SHEET AND THE DETAILS OF THE SAME ARE AS FOLLOWS:- 'THE ASSESSEE WAS VIDE PARA 27 OF NOTICE U/S 142(1) DATED 03/02/2001 FIXING THE HEARING ON 17.02.2011 REQUESTED TO PRODU CE HIS BOOKS OF ACCOUNTS, BILLS/VOUCHERS AND ALL OTHER MATERIAL EVI DENCE WHICH HE MAY RELY UPON IN SUPPORT OF THE RETURN OF INCOME FILED BY HI M FOR THE A.Y. 2009-10, THE ASSESSEE HAS NOT COMPLIED WITH THE SAID NOTICE EITHER BY ATTENDING PERSONALLY OR THROUGH A.R. NOR ANY WRITTEN SUBMISSI ON FILED BY HIM. THEREAFTER FURTHER OPPORTUNITY GIVEN TO THE ASSESSE E VIDE NOTICE U/S 142(1) DATED 31.03.2011 FIXING THE HEARING ON 12/04/2011. THE A.R. OF THE ASSESSEE FILED AN ADJOURNMENT LETTER IN TAPPAL ON 1 4.04.2011. THEREAFTER, FURTHER OPPORTUNITY WAS GIVEN TO THE ASSESSEE VIDE NOTICE U/S.142(1) DATED 01.06.2011 FIXING THE HEARING ON 15.06.2011. THERE WAS NO COMPLIANCE ON THE PART OF THE ASSESSEE ON 15/06/2011. THEREAFTER, FURTHER OPPORTUNITY WAS GIVEN TO THE ASSESSEE VIDE NOTICE U/S.142(1) DA TED16.06,2011 FIXING THE 29 HEARING ON 22/06/2011. THERE WAS NO COMPLIANCE ON THE PART OF THE ASSESSEE ON 15. 6.2011. THEREAFTER, FURTHER OPPOR TUNITY WAS GIVEN TO THE ASSESSEE VIDE NOTICE DATED 13/07/2011 FIXING THE HE ARING ON 25.07.2011. THERE WAS NO COMPLIANCE ON THE PART OF THE ASSESSEE ON 25.07.2011. THEREAFTER, ON 13.09.2011, SHRI SUDHIR MEHTA C.A. A ND A.R. ATTENDED AND SUBMITTED DETAILS AS PER LETTER DATED 13/09/2011 AT PARA 15 OF THE LETTER DATED 13.09.2011 THE A/R MENTIONED THAT HE IS PRODU CING HEREWITH COMPLETE BOOKS OF ACCOUNT I.E. CASH BOOK, LEDGER, J OURNAL BOOK, PURCHASE AND SALE VOUCHERS, EXPENSES VOUCHERS FOR VERIFICATI ON. HOWEVER, HE HAD NOT PRODUCED THE SAME AND THE FACT THAT HE HAS NOT PROD UCED THE BOOKS OF ACCOUNTS, BILLS/VOUCHERS HAS BEEN DULY RECORDED IN THE ORDER SHEET ENTRY DATED 13.09.2011 WHICH HAS BEEN DULY SIGNED BY SUDH IR MEHTA CA & A.R, VIDE ORDER SHEET ENTRY DATED 13.09.2011 THE A.R. WA S REQUESTED TO PRODUCE THE BOOKS OF ACCOUNTS, BILLS/VOUCHERS, COPIES OF AC COUNTS OF SUNDRY CREDITORS AND CONFIRMATIONS OF THE CREDITORS ON 20. 09.2011, THERE WAS NO COMPLIANCE ON 20.09.2011. THEREAFTER, FURTHER OPPOR TUNITY WAS GIVEN VIDE NOTICE DATED 25.09.2011 FIXING THE HEARING ON 29.09 .2011. THE A.R. FILED AN ADJOURNMENT LETTER ON TAPPAL ON 26.09.2011. THEREAF TER, FURTHER OPPORTUNITY WAS GIVEN VIDE NOTICE U/S. 142(1) DATED 30.09.2011 FIXING THE HEARING ON 07.10.2011 THERE WAS NO COMPLIANCE ON 07 .10.2011. THEREAFTER FURTHER OPPORTUNITY WAS GIVEN VIDE NOTICE U/S.142(1 ) DATED 07.10.2011 FIXING THE HEARING ON 14/10/2011. ON 14.10.2011, S HRI SUDHIR MEHTA C.A. & A.R ATTENDED AND SUBMITTED DETAILS VIDE LETTER DATE D 14.10.2011 HOWEVER, IT WAS NOTICED THAT THE AR DID NOT SUBMIT THE CONFI RMATION OF SUNDRY CREDITORS THOUGH SPECIFICALLY CALLED FOR AND ALSO D ID NOT PRODUCE BOOKS OF ACCOUNTS, BILLS/VOUCHERS. IT WAS ALSO NOTICED THAT THE AR DID NOT SUBMIT THE CONFIRMATION OF SUNDRY CREDITORS THOUGH SPECIFICALL Y CALLED FOR AND ALSO DID NOT PRODUCE BOOKS OF ACCOUNTS, BILLS/VOUCHERS. IT W AS ALSO NOTICED THAT THE AR DID NOT SUBMIT THE DETAILS OF SUNDRY CREDITORS O F PANDAY MINERALS IN THE PRESCRIBED PERFORMA THE AR SUBMITTED THAT HE WILL S UBMIT THE REMAINING DETAILS ON 18.10.2011 AND SHALL ALSO PRODUCE BOOKS OF ACCOUNT, BILLS/VOUCHER ON 8.10.2011. ONCE AGAIN VIDE PARA 4 OF THE SAID LETTER THE AR SUBMITTED THAT HE IS PRODUCING HEREWITH THE COMPLET E BOOKS OF ACCOUNT I.E. 30 CASH BOOK, LEDGER, JOURNAL, PURCHASE AND SALE VOUCH ER, EXPENSES VOUCHER FOR VERIFICATION BUT THE SAME WAS NOT PRODUCED BEFO RE ME. THIS FACT HAS BEEN DULY RECORDED IN THE ORDER SHEET ENTRY DATED 0 3.11.2011 AND SIGNED BY SHRI SUDHIR MEHTA CA. AND A/R. ON 03/11/2011 CA SE WAS ADJOURNED TO 17.11.2011. THERE WAS NO COMPLIANCE ON 17.11.2011. THEREAFTER FURTHER OPPORTUNITY WAS GIVEN VIDE NOTICE DATED 02.12.2011 FIXING THE HEARING ON 08.12.2011. ON 08.12.2011 THE A/R. FILED AN ADJOU RNMENT LETTER AND THE CASE WAS ADJOURNED TO 13.12.2011. 0N GOING THROUGH THE DETAILS IT IS CLEAR THAT THE ASSESSEE HAS NOT COMPLIED WITH THE SAID NOTICES GIVEN TO HIM. AS THE CASE WAS GETTING TIME BARRED ON 31.12.2011 THEREFORE, THE AO HAD NO OTHER OPTIONS BUT TO COMPLETE THE ASSESSMENT AS PER DETAILS AVAILABLE ON RECORD. (B) THE ASSESSEE HAS STATED IN PARA F OF THE SUBMIS SION AS STATED THAT A SHOW CAUSE NOTICE WAS NOT PRODUCED TO THE ASSESSEE BEFORE MAKING THE SAID ADDITION. HOWEVER, THE A0 INDEED PROVIDED AN OPPORTUNITY VIDE NOTICE U/S.142(1) DATED 02.12.2011 (COPY ENCLOSED) TO THE ASSESSEE TO SUBMIT CONFIRMATION IN RESPECT OF RS. 20,50,280/- SHOWN AS ADVANCES FROM CUSTOMERS IN BALANCE SHEET OF PANDEY MINERALS AS ON 31.03.2009. IN COMPLIANCE TO SAID NOTICE THE ASSESSEE IN HIS REPLY DATED 13.12.2011 FAILED TO PROVIDE DETAILS REGARDING THE SAME. THE ONUS WAS ON THE ASSESSEE TO UTILIZE THE OPPORTUNITY PROVIDED TO PROVIDE DETAILS IN DEFENCE OF HIS CONTENTION. THUS, THE A0 WAS JUSTIFIED TO ADD THE S AME AS UNEXPLAINED CREDIT OF THE ACT. (C) THE ASSESSEE HAS ARGUED THAT HE HAS PRODUCED CO MPLETE BOOKS OF ACCOUNT I.E. CASHBOOK, LEDGER JOURNAL, PURCHASE AND SALE VOUCHER, EXPENSES VOUCHER FOR VERIFICATION ON 08.12.2011 AND AFTER DU LY VERIFICATION THE AO ACCEPTED IT. THIS GROUND OF THE ASSESSEE IS ALSO FA R FROM THE TRUTH AS THE ASSESSEE'S AR HAS FILED AN ADJOURNMENT LETTER ON 08 .12.2011 STATING THEREIN THAT DUE TO CRICKET TOURNAMENT HE WAS NOT ABLE TO A TTEND THE HEARING AND THE CASE WAS ADJOURNED TO 13.12.2011. (COPY ENCLOSE D). FURTHER ON 13.12.2011 SHRI SUDHIR MEHTA CA & AR ATTENDED AND S UBMITTED DETAILS VIDE 31 LETTER DATED 13.12.2011, IN PARA-S OF THE SAID LETT ER THE AR MENTIONED THAT HE IS PRODUCING HEREWITH COMPLETE BOOKS OF ACCOUNT I.E. CASH BOOK, LEDGER, JOURNAL BOOK, PURCHASE AND SALES VOUCHER, EXPENSES VOUCHERS. HOWEVER, ONCE AGAIN THE AR HAD NOT PRODUCED THE BOOKS OF ACC OUNT AND BILLS/VOUCHER EXCEPT THE CASH BOOKS OF PANDAY MINERALS. THIS FACT HAS BEEN DULY RECORDED IN THE ORDER SHEET ENTRY DATED 13.12.2011 AND HAS B EEN SIGNED BY SHRI SUDHIR MEHTA CA & AR (COPY ENCLOSED). MOREOVER, THE A/R. HAS NOT - FURNISHED ANY DETAILS IN RESPECT OF ADVANCES RECEIV ED FROM CUSTOMERS OF RS. 20,50,280 IN THE LETTER SUBMITTED ON13.12.2011. IN FACT, THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION/ CLARIFICATION OR ANY D OCUMENTARY EVIDENCE IN THIS REGARD DURING THE COURSE OF ASSESSMENT PROCEED ING. FURTHER, DURING THE YEAR UNDER CONSIDERATION NO TRANSACTIONS HAVE BEEN MADE BY THE ASSESSEE WITH THE ABOVE PERSONS FROM WHOM ADVANCES HAS BEEN SHOWN TO HAVE BEEN RECEIVED. LT IS ALSO NOTICED THAT IN THE YEAR UNDER CONSIDERATION, THERE NO MANUFACTURING ACTIVITIES WERE CARRIED OUT BY THE AS SESSEE. CONSIDERING THE ABOVE FACTS AN ADDITION OF RS. 20,50,280 WAS MADE O N ACCOUNT OF UNEXPLAINED CREDITS U/S 68 OF THE ACT. (D) ON GOING THROUGH THE DETAILS FURNISHED BY THE ASSESSEE ON THAT BASIS THE REMAND REPORT CALLED FOR VIDE YOUR OFFICE LETTE R NO.430 DATED 17.01.2012. IT IS NOTICED THAT THE ASSESSEE HAS ON LY GIVEN COPY OF LEDGER ACCOUNTS OF THE CUSTOMERS FROM WHOM HE RECEIVED ADV ANCES OF RS.20,50,280 AGAINST SUPPLY OF GOODS. IT IS PERTINE NT TO MENTION HERE THAT THE ASSESSEE HAS NOT GIVEN ANY DETAIL LIKE ADDRESS, PAN ETC. IN RESPECT OF THESE CUSTOMERS; THEREFORE THE GENUINENESS OF THESE TRANSACTION CANNOT BE DETERMINED. MOREOVER, THE ASSESSEE HAS CLAIMED THAT A SUM OF RS. 540432 PERTAINS TO A.Y. 2008-09 BUT ON VERIFICATION OF THE BALANCE SHEET FOR THE A.Y. 2008-09 WHICH WAS SUBMITTED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS NO SUCH CUSTOMERS COULD BE TRACED THERE IN, COPY OF THE SAME IS ENCLOSED FOR YOUR READY REFERENCE. IN VIEW OF THESE FACTS THE ADDITIONAL EVIDENCE MAY NOT BE ADMITTED AND THE ADDITION MAY KINDLY BE SUSTAINED. 32 17. THE ASSESSING OFFICER VIDE LETTER DATED 17/08/2 012 REQUESTED TO MAKE CERTAIN CORRECTIONS IN THE REMAND REPORT ON TH E FOLLOWING POINTS:- 'WITH REFERENCE TO THE ABOVE MENTIONED SUBJECT FOLL OWING ERROR IN THE SAID REMAND REPORT MAY KINDLY BE CORRECTED. 1. IN THE ABOVE REMAND REPORT, IT WAS MENTIONED THA T THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, AFTER GOING THROUGH PAGE NO.9 OF THE ASSESSMENT ORDER, IT IS SEEN THAT THE ASSESSEE HAS INDEED PROD UCED THE BOOKS OF ACCOUNTS ON 20.12.2011 (WRONGLY MENTIONED AS 2012) TO THE ASSESSING OFFICER. 2. FURTHER, IN THE REMAND REPORT, IT WAS INCORRECT LY MENTIONED THAT THE OPENING BALANCES OF CUSTOMER AMOUNTING TO RS. 54043 2.00 COULD NOT BE TRACED OUT FROM THE BALANCE SHEET FOR THE A.Y. 2008 -09. HOWEVER, THE ABOVE OPENING BALANCES ARE STATED IN THE SUNDRY DEB TORS GROUP' IN THE BALANCE SHEET FOR THE A.Y. 2008-09. IN VIEW OF THE ABOVE FACTS, THE ABOVE KINDLY BE COR RECTED'. 18. THE LEARNED CIT(A) PROVIDED REMANDED REPORT REC EIVED FROM THE ASSESSING OFFICER TO THE ASSESSEE TO REPLY AND THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS:- '1 THAT IN RESPECT OF ALLEGATION FOR NON-PRODUCING THE BOOKS OF ACCOUNTS IN THE ASSESSEE'S CASE, WE WOULD LIKE TO STATE HERE TH AT THOUGH IT IS VERY LATE, BUT THE ASSESSEE PRODUCED THE COMPLETE BOOKS OF ACC OUNTS OF M/S PANDAY MINERALS & M/S PANDAY CHEMICALS ON 20-12-2012, WHIC H WAS EXAMINED BY THE LD. ACIT DURING THE COURSE OF ASSESSMENT PROCEE DINGS. THE ABOVE THING HAS ALSO MENTIONED AT PAGE NO. 9 OF THE ASSESSMENT ORDER. 33 2. THAT IN RESPECT OF SHOW CAUSE NOTICE U/S 142(1) OF THE LT ACT, 1961 DATED 02-12-2011 WAS ISSUED TO ASSESSEE REQUIRED TO SHOW CAUSE AS TO WHY THE ABOVE CREDITS SHOWN AS ADVANCE FROM CUSTOMER IN THE BOOKS OF ACCOUNTS BE NOT TREATED AS UNEXPLAINED CREDITS, WE. ONCE AGAIN DRAW YOUR HONOURS KIND ATTENTION THAT NO SUCH TYPE OF SHOW CAUSE NOTICE WA S ISSUED TO THE ASSESSEE FOR EXPLAIN HIS CONTENTION THIS REGARD . IN THAT NOTICE THE ONLY CONFIRMATION IN RESPECT OF ABOVE ADVANCES WAS SOUGHT FOR. FURTHE R, THE LD. ACIT ALSO ADMITTED THE ABOVE FACTS IN HIS REMAND REPORT AT PA RA (B) THAT '(B)THE ASSESSEE HAS STATED IN PARA F OF THE SUBMISSION AS STATED THAT A SHOW CAUSE NOTICE WAS NOT PROVIDED TO THE ASSESSEE BEFORE MAKI NG THE SAID ADDITION. HOWEVER, THE AO INDEED PROVIDE AN OPPORTUNITY VIDE NOTICE ITS U/S 142(1) DATED 02.12.2011 TO THE ASSESSEE TO SUBMIT CONFIRMA TION IN RESPECT OF RS. 2050280.00 SHOWN....' HENCE, FROM THE ABOVE SUBMISS ION, IT IS ESTABLISHED THAT THE FACT MENTIONED IN THE ORDER IS STILL FAR F ROM THE TRUTH IN THIS REGARD. 19. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD RECEIVED ADVANCES FR OM THE FOLLOWING PARTIES AGAINST SUPPLY OF GOODS:- S.NO PARTY NAME ADDRESS PAN PANDAY MINERALS OPENING BALANCE PANDAY MINERALS (CR.) 1 BHAVIN TRADERS TARNETAR ROAD, AMRAPAR THANGADH (GUJ.) 40000.00 2 BHAWANI TILES TARNETAR ROAD, AMRAPAR THANGADH (GUJ.) 15185.00 3 CITIZEN CERAMICS AMRELI ROAD, MORVI (GUJ.) 30421.00 4 COMMANDAR CERAMICS LTD NK.H. 8 A, OPPORTUNITY. GEB SUB STATION, LALPAR, MORVI (GUJ.) 12644.00 34 5 DECO GOLD GLAZED TILES LTD. OLD GHUNTU ROAD, MORVI (GUJ.) AAACD986 9K 60118.00 60118.00 6 DIGITAL CERAMICS PVT. LTD. NH 8 LAKHDIRPUR ROAD, MORVI (GUJ.) AABCB813 9K 98623.00 7 FACT PAPER MILL PVT. LTD. NH 8 A, LILAPLAR ROAD, MORVI (GUJ.) 52000.00 8 JAI STAR MINERALS NH 8 A, DHUVA, WANKANER (GUJ.) 139676.00 9 JAYSON CERAMICS (SISTER CONCERN OR JAI STAR) NH8A, DHUVA WANKANER (GUJ.) 74333.00 10. MARK GALZE TILES OLD GHUNTU ROAD, MORVI (GUJ.) AADCM65 26B 88382.00 11 NOVA GOLD SANITARYWAR PVT. LTD. RAJKOT ROAD, DISTRICT MULI, SURENDRA NAGAR (GUJ.) AABCN789 5G 40000.00 12 OPAL CERAMICS IND NH 8A,MAKANSAR MORVI (GUJ.) AAAF0326 7D 45965.00 13 PAVIT CERAMICS PVT. LTD. 303, CAMPS CORNER-II, AHMEDABAD (GUJ.) AABCV112 2A 100000.00 14 PENGVIN CERAMICS NH 8A, OPPORTUNITY BANDU NAGAR, DHUVA (GUJ.) AAGFP429 7E 2742.00 15 SACMI CERAMICS PVT. LDT OLD GHUNTU ROAD, MORVI (GUJ.) AAGCS185 4D 33221.00 313693.00 16 SHAGUN CERAMICS OLD GHUNTU ROAD, MORVI (GUJ.) 15533.00 17 SMARCH TRADE LINK MORVI (GUJ.) 210000.00 210000.00 18 SOHNI CERAMICS NH8A HIMMAT NAGAR (GUJ.) 237093.00 312093.00 19 SONATA CERAMICS NH 8A PANELI ROAD MORVI (GUJ.) AAXFS012 4J 60064.00 20 SUNHIL CERAMICS PVT. LTD. (SISTER CONCERN OF JAI NH 8A, DHUVA, WANKANER (GUJ.) 221618.00 35 STAR) 21 SUNSHINE CERAMICS (SISTER CONCERN OF JAI STAR) NH8A, DHUVA WANKANER (GUJ.) 55007.00 22 UTTAM CERAMICS OLD GHUNTU ROAD, MORVI (GUJ.) AAACV633 8G 62183.00 TOTAL 540432.00 20 50280.00 20. FROM THE ABOVE TABLE, THE LEARNED CIT(A) NOTIC ED THAT A SUM OF RS. 5,40,432/- WAS OPENING BALANCE OF THE ADVANCES RECE IVED BY THE ASSESSEE IN CASE OF 04 CUSTOMERS, WHICH HAD BEEN CONFIRMED B Y THE ASSESSING OFFICER IN HIS REMAND REPORT. THEREFORE, NO ADDITI ON OF THIS AMOUNT COULD HAVE BEEN MADE BEING THE OPENING BALANCE IN THE YEA R UNDER CONSIDERATION. AS REGARDS THE OTHER ADVANCES AMOUN TING TO RS. 15,09,848/-, THE LEARNED CIT(A) POINTED OUT THAT T HOSE ADVANCES WERE RECEIVED BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQ UES FROM VARIOUS CUSTOMERS AGAINST SUPPLY OF GOODS AS THE ASSESSEE H AD NOT MADE ANY SUPPLY OF GOODS TO THE PERSONS/PARTIES FROM WHOM TH E ADVANCES WERE RECEIVED. THE LEARNED CIT(A) POINTED OUT THAT THE ASSESSEE, AS REGARDS NON-SUPPLY OF GOODS, EXPLAINED TO THE ASSESSING OFF ICER THAT THE BUSINESS IN THE NAME OF M/S. PANDAY MINERALS, UDAIPUR WAS CL OSED DUE TO ILL HEALTH OF THE ASSESSEE AND IT IS A FACT ON RECORD THAT THE ASSESSEE GOT SUPPLIED THE GOODS THROUGH OTHER CONCERN NAMELY M/S PANDAY C HEMICALS PVT. LTD., 36 IN WHICH THE ASSESSEE HAD SUBSTANTIAL INTEREST. IT IS ALSO POINTED OUT THAT THE ASSESSEE HAD TRANSFERRED THE AMOUNT RECEIVED AS ADVANCE FROM THE PARTIES TO THE CONCERNS THROUGH WHICH THE GOODS WER E GOT SUPPLIED. IN THIS REGARD, LEARNED CIT(A) GAVE THE DETAILS AT PAG E 31 & 32 OF THE IMPUGNED ORDER. FOR THE COST OF REPETITION, THE SAM E IS NOT REPRODUCED HEREIN. LEARNED CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAD NOT MADE ANY INDEPENDENT ENQUIRIES OF HIS OWN TO BRING SOME EVIDENCE ON RECORD TO ESTABLISH THAT THE ASSESSEE HAD USED THE BANK CHANN EL TO BRING HIS CONCEALED INCOME IN THE BOOKS OF ACCOUNT AS ADVANCE S AGAINST SUPPLY OF THE GOODS. HE FURTHER OBSERVED THAT THE ASSESSING OFFICER SIMPLY MENTIONED THAT THE ASSESSEE HAD INTRODUCED HIS CONC EALED INCOME IN THE BOOKS OF ACCOUNT BY SHOWING THE SAME AS ADVANCES RE CEIVED FROM THE CUSTOMERS. THE LEARNED CIT(A) WAS OF THE VIEW THAT ALL THE AMOUNTS HAD BEEN RECEIVED THROUGH ACCOUNT PAYEE CHEQUES, SO THE RE WAS NO CASE FOR MAKING ANY DOUBT ABOUT GENUINENESS OF THE TRANSACTI ONS UNTIL AND UNLESS SOME EVIDENCE WERE BROUGHT ON RECORD TO ESTABLISH T HAT THE ASSESSEE HAD INTRODUCED HIS CONCEALED/BLACK MONEY IN THE FORM OF ADVANCES IN FICTITIOUS NAMES. THEREFORE, LEARNED CIT(A) DELETE D THE ADDITION MADE BY THE ASSESSING OFFICER. NOW, THE DEPARTMENT IS IN AP PEAL. 21. LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF TH E AUTHORITIES BELOW. 37 22. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR T HE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A). 23. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSING OFFICER MADE THE IMPUGNED ADDITION BY PRESUMING THAT THE ASSESSEE HAD NOT MADE ANY SUP PLY AGAINST THE ADVANCES RECEIVED. HE ALSO CONSIDERED THE OPENING B ALANCE OF THE ADVANCES AMOUNTING TO RS. 5,40,430/-, WHICH WAS BRO UGHT FORWARD. IN OUR OPINION WHEN THOSE ADVANCES AMOUNTING TO RS. 5,40,4 32/- WERE CONSIDERED AS GENUINE IN THE PRECEDING YEAR, THEN T HERE WAS NO OCCASION TO TREAT THE SAME AS UNEXPLAINED IN THE YEAR UNDER CONSIDERATION. AS REGARDS TO THE REMAINING ADVANCES OF RS. 15,09,848/ -, IT IS TRUE THAT THE ASSESSEE DID NOT MAKE ANY SUPPLY OF THE GOODS FROM THE PROPRIETORY CONCERN M/S. PANDAY CHEMICALS, UDAIPUR I.E. CONCERN IN WHICH ADVANCES WERE RECEIVED, FOR THE REASON THAT THE BUSINESS IN THE NAME OF M/S. PANDAY CHEMICALS WAS CLOSED DUE TO ILL HEALTH OF TH E ASSESSEE. HOWEVER, THE ASSESSEE TRANSFERRED THOSE ADVANCES IN OTHER PR OPRIETORSHIP CONCERN OF THE ASSESSEE NAMELY M/S. PANDAY CHEMICALS AND M/ S. PANDAY 38 CHEMICALS PVT. LTD. I.E. THE COMPANY IN WHICH THE A SSESSEE WAS HOLDING 75% SHARES AND WAS HAVING SUBSTANTIAL INTEREST, FRO M THE ABOVE SAID PARTNERSHIP FIRM AND THE COMPANY THE ASSESSEE SUPPL IED THE GOODS, THE DETAILS HAS BEEN GIVEN BY THE LEARNED CIT(A) AT PAG E 31 & 32 OF THE IMPUGNED ORDER. FROM THE ABOVE NARRATED FACTS, IT IS CLEAR THAT THE ASSESSING OFFICER WITHOUT MAKING ANY PROPER ENQUIRY AND VERIFICATION TREATED THE IMPUGNED AMOUNT AS UNEXPLAINED. WE, TH EREFORE, ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS JUSTIFIED, AFTER A PPRECIATING THE FACTS ON RECORD, IN DELETING THE IMPUGNED ADDITION. ACCORDI NGLY, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE APPEAL. 24. AS REGARDS CROSS OBJECTIONS OF THE ASSESSEE IN C.O. NO. 17/JODH/2013, LEARNED COUNSEL FOR THE ASSESSEE DURI NG THE COURSE OF HEAIRNG STATED THAT HE RECEIVED INSTRUCTION NOT TO PRESS THE CROSS OBJECTION AND GAVE IN WRITING ON THE ORDER SHEET AS UNDER:- CO NOT PRESSED SD/- XXXXXX 19/09/2013 25. IN VIEW OF THE ABOVE, THE CROSS OBJECTION IS DI SMISSED AS NOT PRESSED. 39 26. IN THE RESULT, APPEAL OF THE DEPARTMENT AND CRO SS OBJECTION OF THE ASSESSEE ARE DISMISSED. (ORDER PRONOUNCED IN THE COURT ON 27 TH SEPTEMBER, 2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH SEPTEMBER, 2013. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.