M/s. Asian Exim International, Jalandhar V. The Dy.Commissioner of Income-tax, Jalandhar

ITA 673/ASR/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9642 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-05-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 14-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 143(3); 68

Judgement Text

ITA NO.673(ASR)/2015 A.Y. 2008-09 2 AO AND CIT(A) FAILED TO APPRECIATE THAT THERE WAS N O CESSATION OF ANY LIABILITY DURING THE YEAR. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AIR FIL TERS, FUEL FILTERS AND OIL FILTERS ETC., AND SALE THEREOF, HAD FILED ITS RETUR N OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29.09.2008, DECLARING A LOSS OF RS.18,17,467/-. THE ASSESSMENT WAS COMPLETED BY THE AO U/S 143(3) A T AN ASSESSED LOSS OF RS.12,02,752/-. HOWEVER, THE AO MADE THE FOLLOWI NG ADDITIONS TO THE RETURNED LOSS OF THE ASSESSEE COMPANY: I) ADDITION ON ACCOUNT OF CESSATION OF LIABILITY BY INVOKING PROVISIONS OF SECTION 41(1) OF THE AC T RS.30,984/- II) ADDITION ON A/C OF EXPENSES WHICH PERTAIN TO ASSESSMENT YEAR 2005-06 RS.1,731/- III) ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT SHOWN AS OUTSTANDING IN THE NAME OF PUREWELL FILTER INC CANADA BY INVOKING PROVISIONS OF SECTION 68 OF THE ACT. RS.5,82, 000/- 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ABOVE AD DITION. 4. ON BEHALF OF THE ASSESSEE, WITH REGARD TO GROUND NOS.1 & 2, IT HAS BEEN CONTENDED THAT THE ASSESSEE HAD FULLY DISCHARG ED HIS ONUS OF PROVING THE IDENTITY OF THE CREDITOR, WHO HAD SENT THE ADVANCE OF RS.15000 US$, I.E., RS.5,82,000/- BY FURNISHING THE COPY OF ACCOUNT OF CREDITOR OF EARLIER YEAR, WHERE THE ADVANCE WAS REC EIVED AND EXPORT SALES WERE MADE TO THE PARTY BY EXPORT INVOICES. THUS, TH E IDENTITY WAS CLEARLY ESTABLISHED. FURTHER, THE CONFIRMATORY LETTER FROM THE CREDITOR IN RESPECT ITA NO.673(ASR)/2015 A.Y. 2008-09 4 AS THE GENUINENESS OF THE TRANSACTION, THE ADDITION MADE TOWARDS UNEXPLAINED CREDIT IS LIABLE TO BE DELETED. 8. IN CIT VS. CHANDELA TRADING CO. P. LTD., 372 I TR 232 (CAL.), IT WAS HELD THAT THE OMISSION ON THE PART OF THE CREDITOR TO SUBJECT THEMSELVES TO THE ENQUIRY INITIATED BY THE REVENUE OR THEIR FA ILURE TO FURNISH ACCOUNTS WOULD NOT LEAD TO THE CONCLUSION THAT THE CREDITORS LACKED IDENTITY, WITHOUT ANY OTHER CONTRADICTION OF FACTS AND PARTICULARS OF THE TRANSACTIONS BETWEEN THEM FURNISHED BY THE ASSESSEE BEING UNCONTROVERTED. 9. IN MODE CREATIONS PVT. LTD. VS. ITO, 354 ITR 2 82 (DEL.), IT WAS HELD THAT THE PRESUMPTION THAT REPRESENT INCOME OF THE ASSESSEE IS REBUTTABLE; THAT THE INITIAL BURDEN IS ON THE ASSES SEE; THAT THE BURDEN SHIFTS ONCE THE ASSESSEE ESTABLISHES THE AUTHENTICI TY OF THE TRANSACTIONS; THAT WHEN THE ASSESSEE HAD DISCHARGED ITS INITIAL O NUS, IT WAS FOR THE REVENUE TO PROVE THAT THE CREDITS WERE A CIRCULAR R OUTE ADOPTED BY THE ASSESSEE TO PLOUGH BACK ITS OWN UNDISCLOSED INCOME INTO ITS ACCOUNTS; THAT THE AO WAS TO GATHER NECESSARY INFORMATION FRO M SOURCES TO WHICH THE INFORMATION WAS ATTRIBUTABLE; AND THAT IN THE ABSENCE OF SUCH EXERCISE, ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT S WAS NOT JUSTIFIED. ITA NO.673(ASR)/2015 A.Y. 2008-09 6 13. IT IS SEEN THAT THE AMOUNT IS OUTSTANDING ON A CCOUNT OF SALARY. IT WAS PAID TO SH. S.R.UPPAL ON 28.04.2011 & 30.04.201 1. THE COPY OF ACCOUNT OF SH. UPPAL FOR THE MONTH OF APRIL, 2011, AS PRODUCED BEFORE THE LD. CIT(A), HAS BEEN FILED BEFORE US ALSO. THE LD. CIT(A) DISBELIEVED THIS OBSERVATION THAT THE VOUCHERS WERE SELF MADE. 14. HOWEVER, THE ACCOUNT SHOWS THE PAYMENT AS HAVIN G BEEN MADE TO THE EMPLOYEE. ONCE THIS IS SO, OBVIOUSLY, THE AMOUN T CANNOT BE ADDED UNDER THE PROVISIONS OF SECTION 41(1). ACCORDINGLY, THE ADDITION CONFIRMED BY THE LD. CIT(A) IS DELETED. GROUND NO.3 OF THE A SSESSEE IS ACCEPTED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/0 7/ 2016. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 11/07/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. PUREWELL FILTERS LTD., PHAGWARA. 2. THE DCIT, CIRCLE, PHAGWARA 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.