SAND PLAST INDIA LIMITED, Alwar V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, Alwar

ITA 714/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1814 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 22-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREM PRAKASH MEENA JCIT DHK
• Keywords: Principle of natural justice
• Section: 133(6)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 714/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. M/S SAND PLAST INDIA LTD., VILLAGE GUNTI, NH-8, BEHROR ALWAR (RAJASTHAN) CUKE VS. DY. COMMISSIONER OF INCOME TAX CIRLCE-2, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAFCS 2228 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VINOD KUMAR GUPTA (C.A) JKTLO DH VKSJ LS@ REVENUE BY : SHRI PREM PRAKASH MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20.12.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 22/12/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM . THIS APPEAL I.E. ITA NO. 714/JP/2017 BY THE ASSESS EE IS DIRECTED AGAINST THE ORDER OF LD. CIT (A)-22, ALWAR DATED 03/08/2017 PER TAINING TO ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. IMPUGNED ORDER PASSED U/S 250 IS BAD IN LAW AND ON FACTS BEING AGAINST THE PRINCIPAL OF NATURAL JUSTICE AND FOR MA NY MORE OTHER REASONS. 2. UNDER THE FACTS AND CIRCUMSTANCES, LD. CIT(A) HA S ERRED IN SUSTAINING ADDITION OF RS. 37,56,733/- MADE BY LD. AO UNDER SE CTION 41(1) ON 2 ITA NO. 714/JP/2017 M/S SAND PLAST INDIA LTD., ALWAR. ACCOUNT OF BOGUS LIABILITY AND LIABILITY CEASE TO E XIST. THE DISALLOWANCE CONFIRMED IS UNJUSTIFIED, ILLEGAL OR EXCESSIVE. 3. THAT THE APPELLANT CRAVES YOUR INDULGENCE TO ADD , AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEAR ING. 2. BRIEF FACTS GIVING RISE TO THIS CASE ARE THAT, T HE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT ISSUED A QUERY DATED 21/10/2013 CALL ING UPON TO THE ASSESSEE TO FURNISH THE DETAILS OF SUNDRY CREDITORS WITH NAME A ND COMPLETE ADDRESS. IT WAS OBSERVED BY THE AO, THAT NO REPLY WAS RECEIVED IN T HE CASE OF 9 CREDITORS OUT OF 17 LETTERS ISSUED. THEREFORE, THE ASSESSING OFFICER W AS OF THE VIEW THAT THE LIABILITY CEASED TO EXIST AND THE ASSESSEE HAS MADE A BOGUS C LAIM OF LIABILITY. ACCORDINGLY, HE INVOKED THE PROVISIONS OF SECTION 41(1) OF THE ACT AND MADE ADDITION OF RS. 65,50,706/-. AGGRIEVED BY THIS, THE ASSESSEE PREFE RRED AN APPEAL BEFORE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWE D THE APPEAL. THEREBY, THE LD. CIT(A) DELETED THE ADDITION RELATED TO THE LIABILIT Y OF TWO PSUS AND ONE PRIVATE PARTY, HOWEVER, THE REMAINING ADDITION WAS SUSTAINED. AGA INST THIS, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. 3. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT GROUND NOS. 1 AND 3 ARE GENERAL IN NATURE. THEREFORE, HE IS NOT PRESSING THE SAME. THUS, GROUND NOS. 1 AND 3 ARE DISMISSED AS NOT PRESSED. 4 . GROUND NO. 2 IS AGAINST SUSTAINING THE ADDITION OF RS. 37,56,73 3/- OUT OF THE TOTAL ADDITION OF RS. 65,50,706/- MADE BY THE ASSES SING OFFICER BY INVOKING THE PROVISION OF SECTION 41(1) OF INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3 ITA NO. 714/JP/2017 M/S SAND PLAST INDIA LTD., ALWAR. 4.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE IN THE WRITTEN SYNOPSIS. HE SUBMITTED THAT DURING THE ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER ISSUED NOTICE U/S 133(6) OF THE A CT TO 17 CREDITORS. OUT OF WHICH, 6 RETURNS BACK UN-SERVED, OUT OF REMAINING, 9 DID N OT RESPOND AND TWO RESPONDED. THE ASSESSING OFFICER DID NOT ACCEPT THE RESPONSE O F TWO AND INFERRED THAT LIABILITIES TOWARDS THESE 16 CREDITORS ARE BOGUS AND CEASED TO EXIST. HE SUBMITTED THAT SUBSEQUENT PAYMENT BY BANKING CHANNEL CLEARLY ESTAB LISHES THE EXISTENCE OF THE PARTY AS WELL AS LIABILITY, OTHERWISE, NEITHER PAYM ENT IS REQUIRED TO BE MADE NOR PAYMENT CAN BE MADE THROUGH BANKING CHANNEL. LD. C OUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE SUPR EME COURT IN THE CASE OF BOMABY DYEING & MANUFACTURING CO. LTD. VS. STATE OF BOMBAY, AIR 1958 SC 328. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE BINDING PRECEDENTS THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN SUSTAINING THE ADDITION. 4.2 ON THE CONTRARY, LD. D/R OPPOSED THE SUBMISSION S. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFFICER HAS INV OKED THE PROVISION OF SECTION 41(1) OF THE ACT, WHICH DEALS WITH THE SITUATION WH ERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR; THE ASSESSEE OBTAIN WHETHER IN CASH OR IN OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUN T OBTAINED BY SUCH PERSONS OR 4 ITA NO. 714/JP/2017 M/S SAND PLAST INDIA LTD., ALWAR. THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEME D TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE T O INCOME- TAX AS THE INCOME OF THAT YEAR, WHETHER THE BUSINESS OR PROFESSION IN RE SPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEA R OR NOT. NOW, COMING TO THE FACTS OF THE PRESENT CASE, THE A SSESSING OFFICE WAS OF THE VIEW THAT LIABILITIES ARE BOGUS AND CEASED TO EXIST. IN OUR VIEW, THE LIABILITIES WHICH ARE BOGUS WOULD NOT BE WITHIN THE PURVIEW OF SECTION 41 (1) OF THE ACT; HOWEVER, THE TRADING LIABILITIES WHICH CEASED TO EXIST WOULD FAL L WITHIN THE PURVIEW OF SECTION 41(1) OF THE ACT. THEREFORE, BOTH LIABILITIES WHICH ARE BOGUS CANNOT BE TREATED AS LIABILITY WHICH CEASED TO EXIST IN FACT CESSATION OF LIABILIT Y WOULD BE WHERE IF TRADING LIABILITY WAS EXISTED. IN THE CASE OF BOGUS LIABILITY, WHICH WAS NOT IN EXISTENCE FROM THE TIME OF INCEPTION, CANNOT BE TREATED TO BE CEASED TO EXI ST. HENCE, THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THIS ASPECT OF THE MATTER . ADMITTEDLY, THE LD. CIT(A) HAS NOT ACCEPTED THE EXPLANATION THAT SUCH LIABILITY WA S DISCHARGED IN SUBSEQUENT YEARS BY MAKING PAYMENT THROUGH BANKING CHANNELS. THE REL EVANT CONTENTS OF THE FINDING OF THE LD. CIT(A) ARE REPRODUCED HERE IN BELOW FOR THE SAKE OF CLARITY. HOWEVER, FOR THE REMAINING CREDITORS, EITHER THEY HAVE NOT REPLIED OR THE NOTICES CAME BACK UN-SERVED. JUST BECAUSE, SUBSEQU ENTLY, CERTAIN PAYMENTS WERE MADE TO THEM BY THE APPELLANT DOES NOT ABSOLVE D HIM FROM DISCHARGING THE ONUS OF PROVING THE EXISTENCE OF SUCH PARTIES. NO CONFIRMATIONS OR THEIR ITRS HAVE BEEN FILED BY THE APPELLANT. THEREFORE, THE AO IS JUSTIFIED IN ADDING THE BALANCE AMOUNTS OUTSTANDING AGAINST THEIR NAMES UNDER SECTION 41(1) OF THE ACT THE BALANCE AMOUNT CEASE TO EXIST. ACCORDI NGLY, THE ADDITION U/S 5 ITA NO. 714/JP/2017 M/S SAND PLAST INDIA LTD., ALWAR. 41(1) OF THE ACT IS REDUCED TO RS. 37,56,733/-. AP PELLANT GROUND OF APPEAL ON THE ISSUE IS PARTLY ALLOWED. WE ARE UNABLE TO SUSTAIN THIS FINDING OF THE LD. CI T(A) FOR THE SIMPLE REASONS THAT THE BANKING ACCOUNTS CANNOT BE OPENED IN VACUUM. WE THEREFORE, DIRECT THE AO TO DELETE THIS DISALLOWANCE. THUS, THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 22 ND DAY OF DECEMBER 2017. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 22/12/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S SAND PLAST INDIA LTD., ALWAR. 2. THE RESPONDENT- DCIT, CIRCLE-2, ALWAR. 3. THE CIT 4. THE CIT (A), 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 714/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR