Mangal Chand & Sons, Kolkata V. ITO, Wd-35(4), Kolkata, Kolkata

ITA 755/KOL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99742 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2014
• Court: TRIBUNAL
• Department Lawyers: MD GHAYASUDDIN JCIT LD
• Assessee Lawyers: VARSHA JALAN LD
• Keywords: Opportunity of being heard; Deemed to accrue or arise in india
• Section: 143(3); 133(6)

Judgement Text

ITA NO . 755 / /KOL/1 4 SMC - MVS M/S. MANGAL CHAND & SONS 1 IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH: KOLKATA BEFORE HON BLE SRI MAHAVIR SINGH, JM I.T.A NO . 755 /KOL/201 4 A.Y 200 7 - 08 M/S. MANGAL CHAND & SONS V S. I.T.O W - 35(4), KO LKATA PAN: A AFFM1939D ( APPELLANT ) ( RESPONDENT ) FOR THE APPELLANT/ASSESSEE: S MT.VARSHA JALAN, ADVOCATE, LD.AR FOR THE RESPONDENT/DEPARTMENT : MD. GHAYASUDDIN, JCIT / LD. SR. DR DATE OF HEARING: 31 - 07 - 2015 DATE OF PRONOUNCEMENT : 31 - 07 - 201 5 10/9/2015 ORDER TH IS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF C IT(A) , KOLKATA IN APPEAL NO. 156 /CIT(A) - XX/WD - 35(4)/2009 - 10/KOL DATED 31 - 01 - 2014. ASSESSMENT WAS FR AMED BY ITO, WARD 35(4), KOLKATA FOR ASSESSMENT YEAR 200 7 - 08 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 30 - 11 - 2009 . 2. T HE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRM ING THE ADDITION OF RS. 5,11,700/ - MADE BY AO U/S. 41(1) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING THREE GROUNDS : - 1) THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) XX/KOLKATA IS ARBITRARY BASED ON SURMISES AND BAD IN LAW AS WE LL AS ON FACTS. 2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AS WELL AS IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.5,11,700/ - WRONGLY MADE U/S. 41(1) OF THE INCOME TAX ACT, 1961. 3) TH AT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PASSED THE ORDER WITHOUT ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD. 3 . BRIEFLY STATED FACTS ARE THAT TO VERIFY THE SUNDRY CREDITORS SHOWN BY THE ASSESSEE, NOTICES/LETTERS U/S. 133(6) OF THE ACT WERE I SSUED BY THE AO. IN ALL THE CASES THE NOTICES RECEIVED BACK UNSERVED WITH THE POSTAL REMARK NOT KNOWN EXCEPT IN THE CASE OF NARAYAN CHANDRA GORAI, HE CONFIRMED NIL BALANCE IN THE NAME OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO GIVE PRESENT WHEREABOUTS O F THE CREDITORS OR TO PRODUCE THEM FOR VERIFICATION BUT ITA NO . 755 / /KOL/1 4 SMC - MVS M/S. MANGAL CHAND & SONS 2 EVEN AFTER ALLOWING OPPORTUNITY TO THE ASSESSEE TO GET VERIFIED THE SAME, THEY CHOSE NOT TO COMPLY WITH THE AO S NOTICES. IN SUCH CIRCUMSTANCES, THE ASSESSEE WAS ALLOWED AN OPPORTUNITY TO SHOW CAUSE AS TO WHY THE ENTIRE AMOUNT OF RS.5,11,700/ - OUT OF DECLARED SUNDRY CREDITORS AS LIABILITY TO THE TUNE OF RS. 6,71,700/ - , WHICH REMAINED UNVERIFIABLE WILL BE ADDED TO THE TOTAL INCOME BEING BOGUS LIABILITY SHOWN AS SUNDRY CREDITORS FOR EXPENSES. SINCE ASSESSEE FAILED TO SUBSTANTIATE THE CLAIM AS GENUINE, THE AO ADDED THE SAID SUM OF RS.5,11,700/ - TO THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX U/S. 41(1) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO CONFIRMED THE ACTION OF THE AO B Y OBSERVING AS UNDER: 3.2 I HAVE PERUSED THE ASSESSMENT ORDER AND CONSIDERED THE SUBMISSION OF THE APPELLANT. THE FACT OF THE CASE IS THAT TO VERIFY THE SUNDRY CREDITORS SHOWN BY THE APPELLANT, NOTICES/LETTERS U/S. 133(6) WERE ISSUED BY THE AO. THE AO F OUND THAT IN OTHER CASES, THE NOTICES RECEIVED BACK UN - SERVED WITH THE POSTAL REMARKS NOT KNOWN , IN THE CASE OF NARAYAN CHANDRA GORAI, HE CONFIRMED NIL BALANCE IN THE NAME OF THE APPELLANT. THE APPELLANT WAS ASKED TO GIVE PRESENT WHEREABOUTS OF THOSE CREDITORS OR TO PRODUCE THEM FOR VERIFICATION, HOWEVER, EVEN AFTER ALLOWING OPPORTUNITIES OF THE APPELLANT TO GET VERIFIED THE SAME, THEY CHOSE NOT TO COMPLY WITH. THE BUSINESS OF THE APPELLANT WAS TRADING IN SHARES. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT COULD NOT PRODUCE ANY NEW FACTS/DETAILS/DOCUMENTS TO REBUT THE CONCLUSION DRAWN BY THE AO. ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE CLEARLY SHOW THAT THERE WAS NO LIABILITY EXISTED TO PAY TO THE SAID CREDITORS DURING THE YEAR. IN SUCH CIR CUMSTANCES, THE AO WAS JUSTIFIED TO MAKE ADDITION U/S. 41(1) OF THE I.T ACT. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE ITAT. 4 . I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. I FIND FROM THE ABOVE FACTS THAT THESE ARE TRADE CREDITORS ADMITTEDLY COMING FROM EARLIER YEARS BEING OPENING BALANCE. I ALSO FIND FROM THE RECORD THAT THE ASSESSEE HAS NOT WRITTEN - OFF THE LIABILITY OR LIABILITY HAS NOT CEASED OR REMITTED. IN SUCH CIRCUMSTANCES, NOW I HAVE TO GO TO THE PROVISIONS OF SECTION 41(1) OF THE ACT AND SEE THE LEGAL POS ITION . SECTION 41 (1) OF THE ACT WOULD APPLY IN A CASE WHERE THERE HAS BEEN REMISSION OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION SUBJECT TO THE CONDITIONS CONTAINED IN THE STATUTE BEING F ULFILLED. ADDITIONALLY, SUCH CESSATION OR REMISSION HAS TO BE DURING THE PREVIOUS 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 ITA NO . 755 / /KOL/1 4 SMC - MVS M/S. MANGAL CHAND & SONS 3 OR CESSAT ION OF LIABILITY THAT TOO DURING THE PREVIOUS YEAR 2006 - 07 RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 WHICH WAS THE YEAR UNDER CONSIDERATION. IT IS UNDOUBTEDLY A CURIOUS CASE. EVEN THE LIABILITY ITSELF SEEMS UNDER SERIOUS DOUBT. THE AO UNDERTOOK THE EXERCISE TO VERIFY THE RECORDS OF THE SO CALLED CREDITORS. MANY OF THEM WERE NOT FOUND AT ALL IN THE GIVEN ADDRESS EXCEPT IN THE CASE OF NARAYAN CHANDRA GORAI AND M/S. STESALIT LIMITED . THESE INQUIRIES WERE MADE EX PARTE AND IN THAT VIEW OF THE MATTER, THE ASSESSEE WOULD BE ALLOWED TO CONTEST SUCH FINDINGS. NEVERTHELESS, EVEN IF SUCH FACTS WERE ESTABLISHED THROUGH BI - PARTE INQUIRIES, THE LIABILITY AS IT STANDS PERHAPS HOLDS THAT THERE WAS NO CESSATION OR REMISSION OF LIABILITY AND THAT, THEREFORE, THE AMOUNT IN QUES TION CANNOT BE ADDED BACK AS A DEEMED INCOME UNDER SECTION 41(1) OF THE ACT. HENCE, I HAVE NO ALTERNATIVE EXCEPT TO DELETE THE ADDITION AS MADE BY AO AND CONFIRMED BY CIT(A). I ORDER ACCORDINGLY. APPEAL OF ASSESSEE IS ALLOWED. 5 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 - 07 - 2015 10/09/2015 SD/ - DATED : 31 - 07 - 2015 [ MAHAVIR SINGH, JUDICIAL MEMBER ] *PP /SR.P.S. 10/09/2015 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT - M/S. MANGAL CHAND & SONS 14 POLLOCK STREET 1 ST FL., KOL - 700001. 2 RESPONDENT : I T O W 35(4), AAYKAR BHAWAN POORVA 110 SHANTI PALLY, EM BY PASS, KOL - 107. 3 . THE CIT, 4 . THE CIT(A), KOLKATA 5 . D R, KOLKATA BENCHES, KOLKATA TRUE COPY, / BY ORDER ASSTT. REGISTRAR