SMT. SUMITRA DEVI AGARWAL, Jaipur V. ITO, Kishangarh

ITA 687/JPR/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99329 (ITAT-JAIPUR)
• Duration Of Justice: 4 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA CIT DHK
• Keywords: Deemed to accrue or arise in india; Assessment record
• Section: 133(6); 27

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 687/JP/2011 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 SMT. SUMITRA DEVI AGARWAL PROP. AGARWAL TEXCO INDUSTRIES, SUBHASH COLONY, MADANGANJ, KISHANGARH CUKE VS. THE ITO KISHANGARH LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AANPA 8990 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA, ADDL. CIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21/09/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 1/10/2015 VKNS'K@ ORDER PER VIKRAM SINGH YADAV, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A), AJMER DATED 27-05-2011 FOR THE ASSESSMENT Y EAR 2007-08 WHEREIN THE SUBSTANTIAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF R S. 1,51,930/- LEVIED U/S 271(1)(C) OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT IN THE QUANTUM PROCEEDINGS, CREDIT BALANCE SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSES SEE IN THE NAME OF ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 2 M/S. MAYANK FABRICS WAS HELD BOGUS AND THE AMOUNT O F RS. 5,18,000/- WAS TREATED AS ASSESSEES INCOME U/S 41(1)(A) OF I. T. ACT AND ADDED TO THE TOTAL INCOME BY THE AO. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A) WITHOUT ANY SUCCESS AND THE MATTER HAS SINCE ATTAINED FINALITY AS NO FURTHER APPEAL WAS FILED BEFORE THE TRIBUNAL. T HE AO THEREAFTER LEVIED PENALTY OF RS. 1,51,930/- U/S 271(1)(C) OF THE ACT WHICH THE ASSESSEE APPEALED UNSUCCESSFULLY BEFORE THE LD CIT(A). THE ASSESSEE IS NOW BEFORE US AGAINST THE LEVY OF SAID PENALTY. 2.1 BEFORE WE PROCEED TO EXAMINE THE MATTER OF LEVY OF PENALTY, IT WOULD BE RELEVANT TO NOTE THE FACTS WHICH HAVE A BE ARING ON THE MATTER IN MORE DETAIL, THE AOS ACTION AND RESPONSE/EXPLANATI ON OF THE ASSESSEE. 2.2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON EXAMINATION OF BALANCE SHEET, AO FOUND THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITS OF RS. 5,18,000/- IN THE NAME AND STYLE OF M/S. MAYANK FAB RICS. INFORMATION U/S 133(6) WAS CALLED FROM M/S. MAYANK FABRICS. M/S. MA YANK FABRICS FILED A WRITTEN REPLY DATED 21-08-2009 STATING THAT NO AC COUNT IS AVAILABLE IN THE NAME OF M/S. AGARWAL TEXCO INDUSTRIES DURING TH E FINANCIAL YEAR 2006-07 IN THEIR BOOKS OF ACCOUNT. AGAIN VIDE OFFIC E LETTER NO. 965 DATED 25-08-2009, M/S. MAYANK FABRICS WAS PROVIDED COPY O F ACCOUNT IN THE BOOKS OF ASSESSEE AND REQUESTED TO EXPLAIN THE DIFF ERENCE. IN RESPONSE TO THIS QUERY, VIDE LETTER DATED 4-09-2009 THEY HAVE R EITERATED WHAT WAS ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 3 STATED IN THE EARLIER LETTER THAT NO ACCOUNT IS THE RE IN THEIR BOOKS IN THE NAME OF M/S. AGARWAL TEXCO INDUSTRIES. 2.3 THESE FACTS WERE MADE KNOWN TO THE ASSESSEE VID E ORDER SHEET ENTRY DATED 13-10-2009 AND REQUESTED TO EXPLAIN WHY THE A MOUNT SHOWN IN THE NAME OF M/S. MAYANK FABRICS SHOULD NOT BE TREATED AS INCOME OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE FILED REPLY DA TED 3-11-2009 STATING AS UNDER:- THERE IS CREDIT BALANCE OF M/S. MAYANK FABRICS OF RS. 5,18,000/- IN THE BOOKS OF ASSESSEE. THIS BALANCE C OMES FROM PRECEDING FINANCIAL YEAR 2005-06. A COPY OF ITS AC COUNTS FROM PRECEDING YEAR IS ENCLOSED. AS PER THE SAME, THREE CHEQUES WERE RECEIVED FOR RS. 5,38,000/- AND ONE CHEQUE ISSUED F OR RS. 20,000/- IN THAT YEAR AND BALANCE OF RS. 5,18,000/- REMAINED . A COPY OF OUR CASH BOOK OF THE ABOVE DATES IS ALSO ENCLOSED SHOWI NG THE DETAILS OF CHEQUE NO. AMOUNT AND THE SAID CHEQUES WERE CREDITE D IN THE BANK ACCOUNT. HENCE, THE OUTSTANDING BALANCE IS CORRECT, WE COULD NOT UNDERSTAND WHY MAYANK FABRICS DENIED FOR NOT HAVING ANY ACCOUNT. WHILE ALL THE TRANSACTIONS ARE THROUGH CHE QUES ONLY. HENCE, THE BALANCE SHOWN IN OUR BOOKS ARE CORRECT. . 2.4. AO, ON EXAMINATION OF THE COPY OF LEDGER FILED BY THE ASSESSEE ALONGWITH REPLY DATED 03-11-2009 FOUND THAT THERE W AS CREDITS INTO THE ACCOUNT OF ASSESSEE ON FOLLOWING DATES TOTALING TO RS. 5,38,000/-. CHEQUE NO. DATE AMOUNT 482199 8-04-2005 2,29,000 482200 8-04-2005 2,00,000 482188 11-04-2005 1,09,000 5,38,000 ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 4 THEREFORE, IN ORDER TO VERIFY THE CORRECTNESS OF AS SESSEE'S CLAIM AND THAT OF M/S. MAYANK FABRICS, INFORMATION U/S 133(6) OF THE ACT WAS CALLED FROM BRANCH MANAGER, SBI, MADANGANJ-KISHANGARH REQUESTIN G THEM TO PROVIDE THE DETAILS OF ACCOUNT HOLDER FROM WHOSE ACCOUNT TH E ABOVE CHEQUES WERE ISSUED AND CREDITED INTO ASSESSEE'S ACCOUNT. SIMILA RLY, M/S. MAYANK FABRICS WAS AGAIN REQUESTED TO SUPPLY A COPY OF THE IR BANK STATEMENT FOR THE ABOVE PERIOD I.E. FROM 01-04-2005 TO 15-04-2005 . A REPLY WAS RECEIVED VIDE LETTER NO. BM DATED 10-11-2009 FROM B RANCH MANAGER, STATE BANK OF INDIA, MADANGANJ-KISHANGARH STATING T HAT THE ABOVE CHEQUES WERE ISSUED BY M/S. VIKAS INDUSTRIES, SUBHA SH COLONY, MADANGANJ-KISHANGARH. IN THE MEANTIME, M/S. MAYANK FABRICS HAVE ALSO FILED COPY OF THEIR BANK STATEMENT MAINTAINED WITH ORIENTAL BANK OF COMMERCE FOR THE PERIOD 1-04-2005 TO 15-04-2005. ON EXAMINATION OF THE SAME, IT IS FOUND THAT NO CHEQUE HAS BEEN ISSUE D TO M/S. AGARWAL TEXCOM INDUSTRY IN THESE DATES. 2.5. THE ABOVE FACTS WERE MADE KNOWN TO THE ASSESSE E AND IN RESPONSE, THE ASSESSEE FILED A WRITTEN REPLY ON 20-11-2009AS UNDER:- (1) AS PER OUR RECORDS WE HAVE THE CREDIT BALANCE OF RS. 5,18,000/- IN OUR BOOKS IN THE ACCOUNT OF M/S. MAYA NK FABRICS FOR THE YEAR ENDED ON 31-03-2007. ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 5 (2) AS THE PARTY IS NOT ACKNOWLEDGING THE SAME, HEN CE, WE HEREBY SURRENDERED THE BALANCE OF RS. 5,18,000/- FO R TAXATION TO PURCHASE THE PEACE AND TO AVOID FURTHER LITIGATION. ; 2.6. IN LIGHT OF ABOVE FACTS, THE AO HELD THAT THE CREDIT BALANCE SHOWN IN THE NAME OF M/S. MAYANK FABRICS WAS BOGUS AND THE A MOUNT OF RS. 5,18,000/- WAS TREATED AS ASSESSEES INCOME U/S 41( 1)(A) OF I.T. ACT AND ADDED TO THE TOTAL INCOME. 2.7 BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DISMISSED THE APPE AL OF THE ASSESSEE BY OBSERVING (PARA 4.22) AS UNDER:- WHEN THE PRESENT CASE IS EXAMINED IN VIEW OF THIS LEGAL POSITION, IT IS FOUND THAT APPELLANT CLAIMED BOGUS LIABILITY IN RESPECT OF SUNDRY CREDIT BALANCES OF RS. 5.18 LACS IN THE RETURN FILED BY HER. IT WAS ONLY WHEN AO MADE ENQUIRY FROM MAYAN K FABRICS THAT APPELLANT AGREED TO SURRENDER THIS AMOUNT. IN SUCH A SITUATION AO HAS RIGHTLY CONCLUDED THAT APPELLANT FURNISHED I NACCURATE PARTICULARS OF HER INCOME, IN THE RETURN FILED BY H ER. IT CANNOT BE HELD THAT THE SURRENDER OF INCOME BY APPELLANT WAS VOLUNTARY, BECAUSE THE SURRENDER WAS MADE ONLY AFTER DETECTION OF THE SAME BY AO. UNDER THE PRESENT SCHEME OF THINGS ONLY A MI NUSCULE PERCENTAGE OF RETURNS ARE SELECTED FOR SCRUTINY AND IN ALL OTHER CASES, INCOME DECLARED BY THE ASSESSEE IS ACCEPTED U/S 143(1) WITHOUT MAKING ANY FURTHER ENQUIRY. APPELLANT WAS W ELL AWARE OF THIS AND TRIED TO MAKE UNDUE ADVANTAGE OF THIS SCHE ME OF THE DEPARTMENT. IT IS OBVIOUS THAT IF HER WAS NOT SELEC TED FOR SCRUTINY, SHE WOULD HAVE NEVER SURRENDERED THE AMOUNT OF RS. 5,18,000/-. IN THIS CASE, IT IS NOT ESTABLISHED THAT THE CONDUCT A ND EXPLANATION OF APPELLANT WAS BONA FIDE. THE LEVY OF PENALTY U/S 27 1(1) IS THEREFORE, JUSTIFIED IN THIS CASE PURSUANT TO THE D ECISION OF DHARMENDRA TEXTILES. ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 6 2.8 THE LD. AR IN THE WRITTEN SUBMISSION STATED THA T CHEQUES WERE RECEIVED BY THE ASSESSEE FROM M/S. MAYANK FABRICS O NLY AND THUS THE AMOUNT OF RS. 5,38,000/- WAS CREDITED IN THE BOOKS OF ASSESSEE IN THE NAME OF M/S. MAYANK FABRICS. THOUGH, THE CHEQUES WE RE ISSUED BY ANOTHER PARTY I.E. M/S. VIKAS INDUSTRIES TO M/S. MA YANK FABRICS HOWEVER, THE SAME WERE ENDORSED BY M/S. MAYANK FABRICS TO TH E ASSESSEE AND THUS, WERE RECEIVED BY ASSESSEE FROM M/S. MAYANK FABRICS AND ACCORDINGLY WERE CREDITED IN ITS NAME IN THE BOOKS OF ASSESSEE. MERELY BECAUSE THE CHEQUES WERE NOT ISSUED BY M/S. MAYANK FABRICS BUT WERE ENDORSED BY IT TO THE ASSESSEE, IT CANNOT BE ALLEGED THAT THE AMOU NT WAS NOT RECEIVED BY ASSESSEE IN VIEW OF THE FACT THAT RECEIPT OF THE AM OUNT BY ASSESSEE WAS NOT DOUBTED SINCE THE SAME HAS BEEN RECEIVED THROUGH BA NKING CHANNEL. FURTHER, THE PARTY ISSUING CHEQUES IS AN EXISTING C ONCERN IDENTITY OF WHICH IS NOT DOUBTED AND THUS THE SOURCE OF THE AMOUNT ST ANDS PROVED. THUS, IT REMAINS A FACT THAT THE AMOUNT WAS IN FACT RECEIVED BY ASSESSEE THROUGH CHEQUE AND WAS PARTLY REPAID IN THE F.Y. 2005-06 AN D COMPLETE REPAYMENT WAS DONE IN SUBSEQUENT YEARS. THUS, IT CA NNOT BE ALLEGED THAT THE ASSESSEE HAS SHOWN A FALSE LIABILITY IN ITS BOO KS OF ACCOUNTS. FURTHER NEITHER IN THE YEAR UNDER APPEAL NOR IN PRECEDING A SSESSMENT YEAR, ANY ENTRY IN RESPECT OF ANY FUNDS FROM M/S. VIKAS INDUS TRIES IS WRITTEN IN THE BOOKS OF ASSESSEE. ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 7 2.9 THE LD. AR FURTHER SUBMITTED THAT THE LAW IS WE LL SETTLED THAT THOUGH THE FINDING RECORDED IN THE ASSESSMENT ORDERS ARE R ELEVANT FOR PENALTY PROCEEDINGS, BUT THESE CANNOT BE THE FOUNDATION FOR HOLDING THE ASSESSEE GUILTY OF CONCEALMENT OF PARTICULARS OF INCOME MORE PARTICULARLY WHEN NO AMOUNT WHATSOEVER WAS RECEIVED DURING THE YEAR UNDE R APPEAL AND THE AMOUNT FOR WHICH THE ASSESSEE IS HELD AS CONCEALING THE PARTICULARS OF INCOME WAS THE OPENING BALANCES FOR WHICH THE CREDI T ENTRIES WERE MADE IN THE BOOKS OF ACCOUNTS IN PRECEDING ASSESSMENT YE ARS. HONBLE APEX COURT IN THE CASE OF EILLY LILLY & COMPANY REPORTED IN 312 ITR 225 HAS HELD THAT THE PENALTY U/S 27(1)(C) IS NOT AN AUTOMA TIC OR MANDATORY FALLOUT OF THE ADDITION MADE DURING THE ASSESSMENT PROCEEDI NGS. MERELY BECAUSE AN ADDITION HAD BEEN MADE DURING ASSESSMENT PROCEED INGS DOES NOT IPSO FACT CONSTITUTE DEFAULT OF CONCEALMENT ON PART OF T HE ASSESSEE, THEREFORE, THE SAME SHOULD NOT BE LEVIED IN ROUTINE MANNER. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD RECEIVED A SUM OF RS. 5,38,000/- T HROUGH CHEQUES IN THE F.Y. 2005-06 RELEVANT TO A.Y. 2006-07 OUT OF WHICH AN AMOUNT OF RS. 20,000/- WAS REPAID IN THE SAME YEAR TO M/S. MAYANK FABRICS (CREDITOR) THROUGH PAYEES ACCOUNT CHEQUE WHICH AS PER THAT TH E PARTY I.E. M/S. MAYANK FABRICS WAS NOT ACCOUNTED FOR IN ITS BOOKS O F ACCOUNTS. HOWEVER, SUCH PAYMENT IS NOT DOUBTED BY THE LD. AO WHILE MAK ING ASSESSMENT FOR A.Y. 2006-07. THUS, THE FACT REMAINED THAT ASSESSEE HAD MADE PART ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 8 REPAYMENT TO THE CREDITOR DURING THE SAME YEAR OF C REDIT AND THE SAME WAS NOT DOUBTED BY THE LD. AO. THUS, CLEAR A DUAL APPRO ACH HAS BEEN ADOPTED BY THE LD. AO WHICH IS EVIDENT FROM THE FACT THAT O N THE ONE HAND HE HAS ACCEPTED THE PAYMENT MADE (THROUGH CHEQUE) AND ON T HE OTHER HAND HAS DOUBTED THE CLOSING BALANCE SOLELY ON THE BASIS OF THE SO CALLED INFORMATION RECEIVED FROM THIRD PARTY WITHOUT IN AN Y MANNER MAKING ANY VERIFICATION ABOUT THE CORRECTNESS AND TRUTHFULNESS OF SUCH INFORMATION. 2.10 THE LD. AR OF THE ASSESSEE FURTHER RELIED ON F OLLOWING CASE LAWS:- (I) NARANGS INTERNATIONAL HOTELS (P) LTD. VS. DCIT, CIRCLE- 1(2), MUMBAI, 137 ITD 53 (II) NATIONAL TEXTILE VS. CIT, 249 ITR 125 (GUJ.) (III) SMT. DURGA DEVI SOMANI (ITA NO. 672/JP/2011 D ATED 31-10-2014) (IV) ASHISH GUPTA (ITA NO. 671/JP/2011 DATED 17-10- 2014) (V) ASHOK KUMAR KAMDHAR (ITA NO. 684/JP/2011 DATED 18-11-2011) (VI) CIT VS. RELIANCE PETROPRODUCTS (P) LTD. 36 DTR 449 (SC) (VII) GOSWAMI SMT. CHANDRALATA, 125 ITR 700 (RAJ.) (VIII) ACIT VS. ARBRIL PHARMACEUTICALS (P) LTD. 70- ITD-206/212 (VIII) ITO VS. GURCHARAN SINGH & CO. (CHD.) 72 TTJ 774 (IX) CIT VS. ASHOK TAKAR ,170 TAXMAN 471 (DEL.) (X) CIT VS. HARYANA WAREHOUSING CORP. (ITA NO. 871 OF 2008- PUNJ. & HAR.) (XI) ACIT VS. MALU ELECTRODES (P) LTD. , 127 TTJ 59 9 (NAG.) (XII) ADDL. CIT VS. AGARWAL MISTHAN BHANDAR, 131 IT R 619 (RAJ.) (XIII) CIT VS. SURESH CHANDRA MITTAL, 251 ITR 9 (SC ) ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 9 2.11 THE LD. DR RELIED ON THE ORDERS OF THE AO AND THE LD CIT(A). 2.12 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD INCLUDING THE WRITTEN SUBMISSIO N OF THE ASSESSEE. IN THE INSTANT CASE, THE AO HAS MADE AN ADDITION OF RS . 5.18 LACS CLAIMING THE SAME TO BE A BOGUS LIABILITY AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S 41(1)(A) OF THE ACT. IN THIS REGA RD, FROM THE PERUSAL OF THE BALANCE SHEET, IT IS NOTED THAT THE ASSESSEE'S HAS SHOWN PARTICULARS OF M/S. MAYANK FABRICS AMOUNTING TO RS. 5.18 LACS UNDER THE HEAD SUNDRY CREDITORS. THE PARTICULARS OF TRADE CREDITS IN NA ME OF M/S MAYANK FABRICS WERE THUS APPARENT AND VISIBLE ON THE FACE OF THE BALANCE SHEET. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS RECEIVED THREE CHEQUES TOTALING TO RS. 5.38 LACS DURING THE FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR 2006-07. THIS FACT SHOWS THAT THESE TRADE CREDITS FORM PART OF THE OPE NING BALANCE AT THE START OF THE FINANCIAL YEAR 2006-07 RELEVANT TO SUBJECT A SSESSMENT YEAR 2007-08 AND THESE WERE NOT TRADE CREDITS WHICH WERE RECEIVE D DURING THE SUBJECT ASSESSMENT YEAR. THUS, LEGALLY SPEAKING, IF TRADE CREDITS ARE TREATED AS CREDITS WHOSE LIABILITY HAS CEASED TO EXIST, THE RE LEVANT ENTRIES EXISTS IN BOOKS OF ACCOUNTS AND IF THEY ARE HELD AS BOGUS, TH EY BELONG TO EARLIER FINANCIAL YEAR 2005-06 AND NOT TO THE YEAR UNDER CO NSIDERATION. FURTHER, ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 10 IF THAT BE THE CASE, WHETHER THE SAID BOGUS LIABILI TY CAN BE BROUGHT TO TAX IN THE YEAR UNDER CONSIDERATION AND PROVISIONS OF S ECTION 41(1) CAN COME TO THE RESCUE OF THE AO AS HAS BEEN DONE IN THE INS TANT CASE. IN THIS REGARD, REFERENCE IS INVITED TO THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS BHOGILAL RAMJIBHAI ATARA IN T AX APPEAL NO. 588 OF 2013. IN THE INSTANT CASE, THE FACTS ARE THAT FOR THE ASSESSMENT YEAR 2007- 08, THE ASSESSEE FILED RETURN OF INCOME WHICH SHOWE D, BESIDES OTHERS, A SUM OF RS.37.52 LACS BY WAY OF HIS DEBT. THE ASSESS ING OFFICER INQUIRED INTO SUCH OUTSTANDING DUES OF THE ASSESSEE. THE ASS ESSEE SUPPLIED DETAILS OF 27 DIFFERENT CREDITORS. THE ASSESSING OFFICER IS SUED SUMMONS TO ALL THESE SO CALLED CREDITORS AND QUESTIONED THEM ABOUT THE ALLEGED CREDIT TO THE ASSESSEE. IN DETAIL, THE ASSESSING OFFICER IN H IS ORDER OF ASSESSMENT RECORDED THAT NUMBER OF PARTIES WERE NOT FOUND AT T HE GIVEN ADDRESS. MANY OF THEM STATED THAT THEY HAD NO CONCERN WITH T HE ASSESSEE . SOME OF THEM CONVEYED THAT THEY DID NOT EVEN KNOW THE ASSES SEE. ON THE BASIS OF SUCH FINDINGS AND CONSIDERING THAT THE DEBTS WERE O UTSTANDING SINCE SEVERAL YEARS, THE ASSESSING OFFICER APPLIED SECTIO N 41(1) OF THE INCOME TAX ACT, 1961 AND ADDED THE ENTIRE SUM AS INCOME OF THE ASSESSEE. THE ASSESSING OFFICER HELD THAT LIABILITIES HAVE CEASED TO EXIST WITHIN THE MEANING OF SECTION 41(1) OF THE ACT AND THEREFORE, THE SAME SHOULD BE ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 11 DEEMED TO BE THE INCOME OF THE ASSESSEE. IN THE CON TEXT OF ABOVE FACTS, THE HON'BLE GUJARAT HIGH COURT HELD AS UNDER:- WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL. SECTION 41(1)OF THE ACT AS DISCUSSED IN THE ABOVE THREE DEC ISIONS WOULD APPLY IN A CASE WHERE THERE HAS BEEN REMISSION OR C ESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION SUBJE CT TO THE CONDITIONS CONTAINED IN THE STATUTE BEING FULFILLED . ADDITIONALLY, SUCH CESSATION OR REMISSION HAS TO BE DURING THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . IN THE PRESENT CASE, BOTH ELEMENTS ARE MISSING. THERE WAS NOTHING ON RECORD TO SUGGEST THERE WAS REMISSION OR CESSATION OF LIABILI TY THAT TOO DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2 007-08 WHICH WAS THE YEAR UNDER CONSIDERATION. IT IS UNDOUBTEDLY A CURIOUS CASE. EVEN THE LIABILITY ITSELF SEEMS UNDER SERIOUS DOUBT . THE ASSESSING OFFICER UNDERTOOK THE EXERCISE TO VERIFY THE RECORD S OF THE SO CALLED CREDITORS. MANY OF THEM WERE NOT FOUND AT ALL IN TH E GIVEN ADDRESS. SOME OF THEM STATED THAT THEY HAD NO DEALING WITH T HE ASSESSEE. IN ONE OR TWO CASES, THE RESPONSE WAS THAT THEY HAD NO DEALING WITH THE ASSESSEE NOR DID THEY KNOW HIM. OF COURSE, THES E INQUIRIES WERE MADE EXPARTE AND IN THAT VIEW OF THE MATTER, THE AS SESSEE WOULD BE ALLOWED TO CONTEST SUCH FINDINGS. NEVERTHELESS, EVE N IF SUCH FACTS WERE ESTABLISHED THROUGH BI-PARTE INQUIRIES, THE LI ABILITY AS IT STANDS PERHAPS HOLDS THAT THERE WAS NO CESSATION OR REMISSION OF LIABILITY AND THAT THEREFORE, THE AMOUNT IN QUESTIO N CANNOT BE ADDED BACK AS A DEEMED INCOME UNDER SECTION 41(C) F THE A CT. THIS IS ONE OF THE STRANGE CASES WHERE EVEN IF THE DEBT ITSELF IS FOUND TO BE NON- ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 12 GENUINE FROM THE VERY INCEPTION, AT LEAST IN TERMS OF SECTION 41(1) OF THE ACT THERE IS NO CURE FOR IT. BE THAT AS IT M AY, INSOFAR AS THE ORDERS OF THE REVENUE AUTHORITIES ARE CONCERNED, TH E TRIBUNAL NOT HAVING MADE ANY ERROR, THIS TAX APPEAL IS DISMISSED . IN OUR VIEW, THE REASONING OF THE ABOVE DECISION CA N BE SQUARELY APPLIED TO THE FACTS UNDER CONSIDERATION. THE AO HAS QUESTI ONED THE GENUINENESS OF THE LIABILITY AND IN ABSENCE OF THE REQUISITE CO NFIRMATION, HAS HELD THE SAME TO BE A BOGUS LIABILITY. WHERE THE LIABILITY ITSELF HAS BEEN HELD TO BE A BOGUS LIABILITY, WHERE IS THE QUESTION OF REMISSI ON OR CESSATION THEREOF. THUS, IN THE INSTANT CASE, WHERE THE ADDITION ITSEL F IS DOUBTFUL UNDER THE PROVISIONS OF SECTION 41(1), THE SAME CANNOT FORM T HE BASIS FOR LEVY OF PENALTY. 2.13 FURTHER, WE HAVE NOTED THE EARLIER DECISIONS O F THE COORDINATE BENCHES IN THE CASES OF SMT. DURGA DEVI SOMANI VS. ITO , SHRI ASHISH GUPTA VS. ITO AND SHRI ASHOK KUMAR KAMDAR VS. ITO (SUPRA) WHERE SIMILAR ISSUE HAS BEEN DEALT WITH IN DETAIL AND WE ARE IN AGREEMENT WITH THE REASONING IN THE SAID DECISIONS. THUS, IN CONS IDERATION OF ENTIRETY OF FACTS, CIRCUMSTANCES AND CASE LAWS AS RELIED ON BY ASSESSEE, WE DELETE THE PENALTY OF RS 1,51,930 LEVIED UNDER SECTION 271(1)( C) OF THE ACT. ITA NO. 687/JP/2011 SMT. SUMITRA DEVI AGARWAL VS. ITO, KISHRANGARH 13 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/10/201 5. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 01/10/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SMT. SUMITRA DEVI AGARWAL, KISHANGA RH 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, KISHANGARH 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.687/JP/2011) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR