ITO 25(1)(4), MUMBAI V. DISHA DEVELOPERS, MUMBAI

ITA 7808/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70905 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 07-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 12-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHEKHAR L GAJBHIYE
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.7808/M/2010 ( / ASSESSMENT YEAR : 2007-2008 ) ITO-25(1)(4), R.NO. 308, 3 RD FLOOR, BLDG-C10, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051. / VS. M/S. DISHA DEVELOPERS, OFFICE NO.1, TIRUPATI APARTMENT, BABRI NAKA, L.T. ROAD, BORIVALI (E), MUMBAI 400 092. ./PAN : AADFD 3487 H ( /APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : SHRI SHEKHAR L. GAJBHIYE, DR / RESPONDENT BY : NONE ! /DATE OF HEARING : 7.8.2013 '# ! /DATE OF PRONOUNCEMENT : 30.8.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 12.11.2010 IS AGAINST THE ORDER OF CIT (A)-35, MUMBAI DATED 29.1.2010 FOR THE ASSESSMENT Y EAR 2007-2008. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROU NDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) HAS DELETED THE ADDITION MADE U/S 41(1) OF THE ACT WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAS FAILED TO PROVE THE EXISTENCE OF THE LIABILITY AT ASSESSMENT STAGE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A ) ON THE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. BEFORE US, NONE APPEARED TO REPRESENT THE CASE O F THE ASSESSEE. NOTICE OF HEARING WAS SERVED ON THE ASSESSEE THROUGH SERVICE BY AFFIXTURE VIDE THE REPORT DATED 16.4.2013 BY THE ITI-25(1)(4), MUMBAI. THE CO PY OF THE REPORT IS PLACED ON RECORD. CONSIDERING THE SERVICE OF THE NOTICE, WE P ROCEED TO ADJUDICATE THE REVENUES APPEAL IN THE FOLLOWING PARAGRAPHS. 4. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS A BUILDER AND DEVELOPER AND FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. NIL. 2 ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT DETE RMINING THE TOTAL INCOME AT RS. 36,69,050/-. DURING THE ASSESSMENT PROCEEDINGS, AO NOTICED THAT THE SUNDRY CREDITORS AND THE GENUINENESS OF THESE CREDITORS IS REQUIRED TO BE PROBED. ACCORDINGLY, HE CALLED FOR THE DETAILS FROM THE ASS ESSEE. IN RESPONSE, THE ASSESSEE, SUBMITTED THAT THE SAID CREDITORS APPEAR IN THE SUB SEQUENT YEARS ALSO AND ASSESSEE HAS NOT CLEARED THE CREDITS AS THERE WAS SOME DISPU TE WITH REGARD TO THE QUALITY OF THE MATERIAL SUPPLIED TO THE ASSESSEE BY THE SAID C REDITORS. ASSESSEE FILED AN AFFIDAVIT IN THIS REGARD AND THE CONTENTS OF THE AF FIDAVIT ARE REPRODUCED IN PARA 10.3 OF THE ASSESSMENT ORDER. FROM THE AFFIDAVIT, IT IS EVIDENT THAT THESE CREDITORS ARE APPEARING IN THE BOOKS IN VIEW OF CERTAIN DISPUTE WITH REGARD TO THE QUALITY OF THE BUILDING MATERIAL PURCHASED BY THE ASSESSEE. ACCORDINGLY, AO INVOKE D THE PROVISIONS OF SECTION 41(1) OF THE ACT AND MENTIONE D THAT CONSIDERING THE ABSENCE OF THE DETAILS ABOUT THE LIABILITIES, AO MADE ADDITION OF RS. 36,10,264/-. PARA 10.9 AND 10.10 PROVIDE SOME BASIC REASONS ADDITION WHICH REA D AS FOLLOWS. 10.9. IN THIS CASE, IT IS SEEN THAT HE SUNDRY CREDI TORS RS. 2,96,853/- TOWARDS NINANIYA CORPORATION RS. 8,52,478/- TOWARDS SHEETAL BUILDING SUPPLIER ARE OUTSTANDING SINCE AY 2005-06. THE SUNDRY CREDITORS RS. 5,02,682/- TOWARDS DHANESH G PAREKH AND RS. 19,58,251/- TOWARDS SHAH & PAREKH ENTERPRISES ARE OUTSTANDING SINCE AY 2006-07. THE ASSESSEE DID NOT HAVE THE ADD RESSES OF THE CREDITORS TO WHOM THE SO-CALLED LIABILITY IS PAYABLE. THERE IS NO EV IDENCE OF ANY CLAIM EVER FILED BY ANY CREDITOR BEFORE THE ASSESSEE OR ANY COURT OR AUTHOR ITY CLAIMING THE PAYMENT OF ANY AMOUNT AGAINST SUCH LIABILITY. FOR ANY LIABILITY, T HERE HAS TO BE A CLAIMANT. HERE IN RESPECT OF THE SO CALLED LIABILITY OF SUNDRY CREDIT ORS, THERE ARE NO CLAIMANTS IN EXISTENCE, AT LEAST IT HAS NOT BEEN PROVED TO BE IN EXISTENCE IN THE YEAR UNDER CONSIDERATION. 10.10. ON THE BASIS OF TOTALITY OF THESE FACTS AS D ISCUSSED IN PARA 10.1 AND 109 ABOVE, THE AMOUNT OF SUNDRY CREDITORS FOR PURCHASES & EXPENSES RS. 36,10,264/- IS ADDED TO THE TOTAL INCOME AS CESSATION OF LIABILITIES U/S 41(1). PENALTY U/S 271(1)(C) IS INITIATED SEPARATELY FOR FURNISHING IN ACCURATE PARTICULARS OF INCOME. 5. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE SUBMITTED THAT THESE LIABILITIES PERTAIN TO THE EARLIER ASSESSMENT YEARS AND THE LIABILITIES ARE EXISTING IN VIEW OF THE DISPUTES ON QUALIFY OF THE MATERIAL. A SSESSEE MENTIONED THAT THE LIABILITIES ARE STILL BORNE IN THE RECORDS AND THEY ARE NOT WRITTEN OFF IN THE BOOKS OF ACCOUNTS AND THEREFORE, THIS IS NOT THE CASES OF CE SSATION OF LIABILITIES. HENCE PROVISIONS OF SECTION 41(1) ARE WRONGLY INVOKED BY THE AO. FURTHER, ASSESSEE MENTIONED THAT THE ASSESSEE MADE PART PAYMENTS TO A COUPLE OF PARTIES DURING THE 3 YEAR WHICH SHOWS THE EXISTENCE OF THESE LIABILITIES . ASSESSEE ALSO RELIED ON ORDER OF THE ITAT, LUCKNOW IN THE CASE OF DCIT VS. ALLIED LE ATHER FINISHERS (P) LTD [2009] (32 SOT 549) TO ADVANCE HIS ARGUMENT. CIT (A) DISCUSSED THIS ISSUE AND FOUND THAT AO INVOKED THE PROVISIONS OF SECTION 41(1) MERELY FOR ASSESSEES FAILURE TO FILE THE CONFIRMATION LETTERS FROM THE SAID PARTIES. HE ALS O DISCUSSED THE FACT ABOUT THE SUBSTANTIAL PAYMENTS MADE DURING THIS YEAR TO M/S. SHAH & PAREKH ENTERPRISES AND DHANESH G PAREKH. IT IS ALSO MENTIONED THAT WHEN T HE PAYMENTS ARE MADE DURING THE YEAR, THE PROVISIONS OF SECTION 41(1) SHOULD NO T BE INVOKED. FINALLY, THE CIT (A) GRANTED RELIEF GIVING FOLLOWING REASONS. IN VIEW OF THE ABOVE, I ACCEPT THE PLEA OF THE REPR ESENTATIVE THAT MERELY BECAUSE THE APPELLANT COULD NOT FILE CONFIRMATION FOR THE REASONS BEYOND ITS CONTROL SUBMITTED IN THE AFFIDAVIT, THE AO WAS NOT JUSTIFIE D IN CONCLUDING THAT THERE WAS CESSATION OF LIABILITY AND, THEREFORE, THE ADDITION MADE BY THE AO IS DELETED. 6. DURING THE PROCEEDINGS BEFORE US, THERE WAS NONE TO REPRESENT THE ASSESSEE DESPITE THE SERVICE OF THE NOTICE BY THE DEPARTMENT . IT IS AN UNDISPUTED FACT THAT THERE ARE FOUR OUTSTANDING CREDITORS APPEARING IN T HE BOOKS TOTALING TO RS. 36,10,264/-. IN THE CASE OF SHAH & PAREKH ENTERPRISES AND DHARMESH G PAREKH , ASSESSEE MADE PART-PAYMENTS IN THE YEAR UNDER CON SIDERATION. BY NO STRETCH OF IMAGINATION, THESE TWO CREDITORS CANNOT BE CONSIDERED AS THE CASE OF CESSATION OF LIABILITIES. THEREFORE, THE DECISION OF THE CIT (A) WITH REGARD TO THESE TWO ACCOUNTS STANDS CONFIRMED . REGARDING THE OTHER TWO ACCOUNTS NAMELY NINANIYA CORPORATION (RS. 2,96,853/-) AND SEETAL BUILDING SUPPLIERS (RS. 8,52,478/-), IT IS EVIDENT THAT NO EVIDENCE WHATSOE VER WAS FURNISHED IN SUPPORT OF THE ALLOWABILITY OF THESE LIABILITIES. IN ALL FAIR NESS, WE REMIT THESE TWO PARTIES TO THE FILES OF THE AO TO EXAMINE THE ISSUE AFRESH AND DEC IDE THE SAME AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE ASSESSEE IS DIRECTED TO FILE RELEVANT EVIDENCES SUCH AS CONFIRMATION LETTER S ETC TO DEMONSTRATE THE EXISTENCE OF THE LIABILITIES TO THEM. ACCORDINGLY, GROUNDS RA ISED BY THE REVENUE ARE PARTLY ALLOWED . 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2013. SD/- SD/- (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; $% 30.8.2013 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & ( ) / THE CIT(A)- 4. & / CIT 5. '() * , ! * , / DR, ITAT, MUMBAI 6. )+ , / GUARD FILE. ' //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI