M/s Nutan Traders, Bhopal V. The ITO, 3(2), Bhopal

ITA 628/IND/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53871 (ITAT-INDORE)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 20-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE SMC BENCH-1, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER ITA NO.628/IND/2010 A.Y. 2006-07 M/S. NUTAN TRADERS, BHOPAL PAN AAAFN 8052 D APPELLANT VS ITO-3(2), BHOPAL RESPONDENT APPELLANT BY : SHRI ANIL KHABYA, CA RESPONDENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 23.8.2011 DATE OF PRONOUNCEMENT : 23.8.2011 O R D E R THIS APPEAL IS BY THE ASSESSEES AGAINST THE ORDER D ATED 2.9.2010 OF THE LEARNED CIT(A)-II, BHOPAL, ON THE F OLLOWING GROUNDS: 1. THAT THE LD. CIT(A) ERRED IN MAINTAINING ADDITION OF RS.2,70,897/- MADE BY THE ASSESSING OFFICER INVOKING SEC. 68/41(1)(A) OF THE ACT. 2 2. THAT THE LD. CIT(A) ERRED IN MAINTAINING THE ADDITION OF RS.5,055/- U/S 41(1)(A) OF THE ACT. 3. THAT THE LD. CIT(A) ERRED IN MAINTAINING THE ADDITION OF RS.2,425/- U/S 68 OF THE ACT. 2. DURING HEARING OF THE APPEAL, I HAVE HEARD SHRI ANIL KHABYA, LD. COUNSEL FOR ASSESSEE AND SHRI ARUN DEWA N, LD. SR. DR. SO FAR AS THE FIRST GROUND MAINTAINING THE ADDI TION OF RS.2,70,897/- IS CONCERNED, THE CRUX OF ARGUMENTS O N BEHALF OF THE ASSESSEE IS THAT EVEN THE ASSESSING OFFICER IN HIS REMAND REPORT, SENT TO THE LD. CIT(A), HAS ADMITTED THAT S EC. 68 WAS WRONGLY INVOKED BUT DEFENDED THE INVOCATION OF SEC. 41(1)(A) OF THE ACT. THE LD. COUNSEL FOR ASSESSEE CONTENDED THA T THE ASSESSEE IS A DEALER IN PAINTS AND THE AMOUNT OF RS .1,73,755/- AND RS.97,142/- ARE THE TRADE LIABILITIES OF PREVIO US YEARS, AS SUCH, NO ADDITION COULD HAVE BEEN MADE BY THE ASSES SING OFFICER. THE CURRENT ADDRESSES OF THE PARTIES WERE NOT AVAILABLE WITH THE ASSESSEE. RELIANCE WAS PLACED UPON THE DEC ISION IN THE CASE OF CIT VS. SMT. SITA DEVI JUNEJA (2010) 32 5 ITR 593 (P & H). ON THE OTHER HAND, THE LD. SR. DR FAIRLY A DMITTED THAT IT 3 IS NOT A CASE OF INVOKING SEC. 68 OF THE ACT AND AL SO DID NOT CONTROVERT THE ASSERTION OF THE ASSESSEE THAT THE I MPUGNED AMOUNTS ARE TRADE LIABILITIES OF EARLIER YEARS. 3. I HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSES SEE FIRM IS DEALING IN PAINTS AND VARNISHES FOR THE LAST MANY Y EARS DECLARED TOTAL INCOME OF RS.2,00,497/- IN ITS RETUR N ALONG WITH TAX AUDIT REPORT. DURING ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS ASKED TO FURNISH THE COPY OF ACCOUNTS OF SUNDRY CREDITORS OF THE LAST FIVE YEARS ALONG WITH COMPLETE ADDRESSES A ND CONFIRMATION OF ACCOUNTS FROM THESE SUNDRY CREDITOR S. HOWEVER, THE ASSESSEE COULD NOT FILE CONFIRMATION AS BOTH TH E CREDITORS HAD CHANGED THEIR ADDRESSES. THE LD. ASSESSING OFFI CER MADE THE ADDITION U/S 68 OF THE ACT ALONG WITH INVOCATIO N OF SEC. 41(1)(A) OF THE ACT. FROM THE IMPUGNED ORDER, IT IS CLEAR THAT THE LD. CIT(A) SOUGHT THE REMAND REPORT FROM THE LD. AS SESSING OFFICER WHO FAIRLY ADMITTED THAT SEC. 68 WAS NOT IN VOKABLE UNDER THE FACTS OF THE PRESENT APPEAL. THE ASSERTION OF T HE ASSESSEE 4 THAT THESE ARE OLD TRADE LIABILITIES WAS ALSO NOT C ONTROVERTED BY THE REVENUE. THE IMPUGNED CREDITS HAVE BEEN SHOWN A S LIABILITIES IN THE BALANCE-SHEET ACKNOWLEDGING OF D EBTS PAYABLE BY THE ASSESSEE. IN VIEW OF THESE FACTS, THE DECISI ON FROM HONBLE P & H HIGH COURT IN THE CASE OF SMT. SITA D EVI JUNEJA (SUPRA) CLEARLY COMES TO THE RESCUE OF THE ASSESSEE . THE HONBLE HIGH COURT HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT IN THE ASSESSEES BALANCE-SHEET THE LIABILITIES PAYABLE TO THE SUNDRY CREDITORS BEEN SHOWN. SUCH LIABILITIES SHOWN IN THE BALANCE-SHEET INDICATED THAT ACKNOWLEDGEMENT OF THE DEBTS PAYABLE BY THE ASSESSEE. MERELY BECAUSE SUCH LIABILITY WAS OUTSTANDING FOR THE LAST SIX YEARS, IT COULD NOT BE PRESUMED THAT THE LIABILITIES HAD CEASED TO EXIST. THAT THERE WAS NO BILATERAL ACT OF THE ASSESSEE AND THE CREDITORS, WHICH INDICATED THAT THE LIABILITY HAD CEASED TO EXIST. THE ASSESSING OFFICER FAILED TO SHOW THAT IN ANY EARLIER YEAR, ALLOWANCE OF DEDUCTION HAD BEEN MADE IN RESPECT OF ANY TRADING LIABILITY INCURRED BY THE ASSESSEE. IT WAS ALSO NOT PROVED THAT ANY BENEFIT WAS OBTAINED BY THE ASSESSEE CONCERNING SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF DURING THE CONCERNED YEAR. SECTION 41 WAS NOT APPLICABLE AND THE DELETION OF ADDITION WAS JUSTIFIED. 5 WHILE COMING TO THE AFORESAID CONCLUSION, THE HONB LE HIGH COURT ALSO CONSIDERED THE FOLLOWING JUDICIAL PRONOU NCEMENTS: 1. AMBICA MILLS LTD. VS. CIT (1964) 54 ITR 167 (GUJ ); 2. CHIEF CIT VS. KESARIA TEA CO. LTD. (2002) 254 IT R 434 (SC); 3. CIT VS. SUGAULI SUGAR WORKS P. LTD. (1999) 236 I TR 518 (SC); 4. CIT VS. TAMILNADU WAREHOUSING CORPORATION (2007) 292 ITR 310 (MAD). IN VIEW OF THE ABOVE, IT CAN BE SAID THAT THE ADDIT ION U/S 41(1) OF THE ACT CAN BE SUSTAINED ONLY WHEN THERE I S REMISSION OR CESSATION OF ANY TRADE LIABILITY DURING THE YEAR AND AS SUCH, THE LIABILITIES ARE WRITTEN OFF IN THE BOOKS OF ACC OUNT AS NOT PAYABLE ESPECIALLY WHEN THE TRADE LIABILITIES ARE O UTSTANDING FOR MORE THAN THREE YEARS, THEREFORE, THE LIABILITIES H AVE CEASED MUCH EARLIER THAN FY 2005-06. IN ANY CASE, SINCE TH E ASSESSEE HAS WRITTEN OFF THESE LIABILITIES IN ITS BOOKS, PRO VISIONS OF SEC. 41(1) OF THE ACT CANNOT BE INVOKED. IT WILL ALSO CO VERED GROUND NO.2, MAINTAINING THE ADDITION OF RS.5,055/- ALSO. THEREFORE, BOTH THESE GROUNDS OF THE ASSESSEE ARE ALLOWED. 5. THE LAST GROUND PERTAINS TO ADDITION OF RS.2,42 5/- MADE U/S 68 OF THE ACT. AFTER HEARING THE RIVAL SUB MISSIONS AND 6 THE FACT THAT THE AMOUNTS OF RS.556/-, RS.506/-, RS .605/-, RS.202/-, RS.202/- AND RS.303/- (TOTAL RS.2,425/-) ARE OLD SMALL UNSECURED FAMILY LOANS OF CHILDREN OF PARTNERS AND NO AMOUNT HAS BEEN RECEIVED DURING THE FY 2005-06, WE ARE OF THE VIEW THAT SECTION 68 WAS WRONGLY INVOKED. EVEN OTHERWISE , THESE ARE SMALL ADDITIONS. THEREFORE, THIS GROUND OF THE ASSE SSEE IS ALSO ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 23 RD AUGUST, 2011. (JOGINDER SINGH) JUDICIAL MEMBER DATED: 23.8.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!