ITO, Bangalore V. Sri. K. Ramakrishna, Bangalore

ITA 835/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5660 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: H N KHINCHA
• Keywords: Opportunity of being heard; Onus to prove

Judgement Text

PAGE 1 OF 7 ITA NO.835/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.835/BANG/2010 (ASSESSMENT YEAR 2006-07) THE INCOME TAX OFFICER, WARD-11(2), BANGALORE. - APPELLANT VS SHRI K RAMAKRISHNA, #34, NETAJI ROAD, FRAZER TOWN, BANGALORE-5. - RESPONDENT APPELLANT BY : SMT. JACINTA ZIMIK VASHAI, ADDL. CIT RESPONDENT BY : SHRI H N KHINCHA, C.A. ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-I, BANGALORE DA TED 6/4/2010. THE ASST. YEAR CONCERNED IS 2006-07. 2. THE SOLITARY ISSUE THAT IS RAISED IN THE APPEAL IS WHETHER THE CIT(A) IS JUSTIFIED IN DELETING THE ADD ITION OF RS.8,90,880/- MADE BY THE AO U/S 41(1)(A) OF THE I T ACT. PAGE 2 OF 7 ITA NO.835/BANG/2010 2 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS AN INDIVIDUAL. HE IS THE DIRECTO R OF M/S JYOTHI KRISHNA TRADING CO. PRIVATE LIMITED. HE WAS THE PROPRIETOR OF M/S RAMAKRISHNA WINES. THE PROPRIETAR Y CONCERN M/S RAMAKRISHNA WINES WAS DEALING IN WHOLESALE DISTRIBU TOR OF INDIAN MADE FOREIGN LIQUOR. FOR THE CONCERNED ASST. YEAR, RETURN OF INCOME WAS FILED ON 30.10.2006 DECLARING AN INCOME OF RS.6,88,440/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. LATER, SCRUTINY ASSESSMENT WAS TAKEN UP BY ISSUANCE O F NOTICE U/S 143(2). IN THE COURSE OF SCRUTINY ASSESSMENT, IT WA S NOTICED THAT THERE WAS OUTSTANDING TRADE LIABILITY IN THE NAME O F M/S VENKATESHWARA DISTILLERS IN THE BOOKS OF ACCOUNTS O F THE PROPRIETARY CONCERN M/S RAMAKRISHNA WINES AMOUNTING TO RS.8,90,880/-. IT WAS FOUND BY THE AO THAT THE SAME IS OUTSTANDING SINCE 14/8/2001 (RELATING TO ASST. YEAR 2002-03). THE AO DIRECTED THE ASSESSEE TO FURNISH THE TRADE CREDI TOR DETAILS AS WELL AS CONFIRMATION LEDGER ACCOUNT FROM THE TRADE CREDITOR, NAMELY, M/S VENKATESHWARA DISTILLERIES. 3.1 THE ASSESSEE SUBMITTED THAT HE WAS RUNNING A WHOLESALE LIQUOR BUSINESS AND DURING THE COURSE OF BUSINESS, IT HAD PURCHASED GOODS FROM THE ABOVE DISTILLERIES AND THE RE WAS CERTAIN DISPUTE BETWEEN THE ASSESSEE AND THE DISTILLERIES A ND THE AMOUNTS WERE HELD BY THE ASSESSEE. IT WAS FURTHER CONTENDED THAT THERE WAS NO CLARITY TO THE DISPUTE AND THE AMOUNTS ARE ST ILL OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THUS, THE ACCOUNTS PAGE 3 OF 7 ITA NO.835/BANG/2010 3 ARE NOT CLOSED BUT IT IS STILL A LIABILITY IN THE HA NDS OF THE ASSESSEE. HOWEVER, THE AO REJECTED THE CONTENTION RAISED BY THE ASSESSEE AND ADDED A SUM OF RS.8,90,880/- BY OBSERVI NG THUS:- 6. IN THE ABSENCE O F ANY SUBSTANTIATING EVIDENCE PRODUCED TO THE FACT THAT A SUM OF RS.8,90,880/- RELATES TO THE PARTY M/S SRI VENKATESHWARA DISTILLERIES, SUCH AS PARTYS LEDGER ACCOUNT, BILLS, PAYMENT DETAILS, CONFIRMATION ETC., THE ASSESSEES CONTENTION THAT THIS AMOUNT IS STILL A LIABILITY IN THE HANDS OF THE ASSESSEE AND THEREFORE NOT A CESSATION OF LIABILITY CANNOT BE ACCEPTED. THE ASSESSEE WAS GIVEN SEVERAL OPPORTUNITY TO FURNISH THE PARTYS DETAILS SUCH AS NAME AND ADDRESS OR LEDGER ACCOUNT/CONFIRMATION FROM THE PARTY, BUT THE SAME WAS NOT FURNISHED. 7. IN THE CIRCUMSTANCES, THE ENTIRE AMOUNT OF RS.8,90,880/- IS TREATED AS CESSATION OF LIABILITY U/S 41(1)(A) OF THE I T ACT, 1961 AND IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THE ASSESSMENT, THE ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUT HORITY. 5. IT WAS SUBMITTED THAT THE AO HAS ADDED THE OUTSTANDING AMOUNT OF RS.8,90,880/- TO THE TOTAL IN COME OF THE ASSESSEE AS CESSATION OF LIABILITY U/S 41(1)(A) WITH OUT APPRECIATING THE FACT THAT THE LIABILITY IS STILL EXISTING AND UN CLEARED. IT WAS SUBMITTED THAT THE ASSESSEE HAD NOT CREDITED THIS A MOUNT IN ANY OF HIS PROFIT AND LOSS ACCOUNT AT ANY POINT OF TIME. THE AMOUNT IS CLEARLY SHOWN AS OUTSTANDING IN THE BALANCE SHEET. THUS, IT WAS PAGE 4 OF 7 ITA NO.835/BANG/2010 4 SUBMITTED THAT IT IS VERY CLEAR THAT THE SAID AMOUNT OF RS.8,90,880/- IS DUE TO M/S VENKATESHWARA DISTILLER IES AND IS NOT TO BE ADDED TO THE TOTAL INCOME U/S 41(1)(A), SINCE THERE WAS NO CESSATION OF LIABILITY. 6. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS:- 2.2 THE ABOVE WAS CONSIDERED. PROVISIONS OF S.41(1) OF I T ACT IS APPLICABLE WHEN TWO CONDITION S ARE FULFILLED. FIRSTLY, THE DEDUCTION MUST HAVE BEEN ALLOWED IN ANY OF THE EARLIER YEARS TO THE ASSESSEE IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE. AND SECONDLY, IN RESPECT OF SUCH TRADING LIABILITY, THE TAX PAYER IN THE CURRENT PREVIOUS YEAR MUST HAVE OBTAINED SOME BENEFIT BY WAY OF REMISSION OR CESSATION THEREOF. HERE THE FIRST CONDITION HAS BEEN ADMITTEDLY FULFILLED BUT NOT THE SECOND CONDITION. IN FACT, T HE ONUS IS ON THE REVENUE TO DISCHARGE ITS BURDEN TO PROVE THE FACTUM OF REMISSION OR CESSATION OF LIABILITY BY GIVING POSITIVE FINDINGS. THE ONUS CANNOT BE SHIFTED TO THE ASSESSEE IN THIS CASE BECAUSE IT IS THE REVENUE WHO IS ASSERTING THAT BENEFIT HAS ACCRUED TO THE ASSESSEE. IN THE CASE OF - CIT V SOUTHERN ROADWAYS LTD. (2006 282 ITR 379 (MAD.) IT HAD BEEN HELD THAT JUST BECAUSE AMOUNTS WERE BEING MERELY CARRIED FORWARD FOR YEARS AND NO DETAILS WERE SUBMITTED BY THE ASSESSEE, NO ADDITION THEREOF U/S 41(1) COULD BE MADE FOLLOWING THE RATIO OF DECISION IN THE CASE OF - PAGE 5 OF 7 ITA NO.835/BANG/2010 5 CIT V SUGAULI SUGAR WORKS (P) LTD. (1999) 236 ITR 518 (S.C.). 7. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. 8. THE LEARNED DR SUBMITTED THAT INSPITE OF SEVERA L OPPORTUNITIES THE ASSESSEE WAS NOT ABLE TO PRODUCE ANY DETAILS WITH REGARD TO THE TRADE CREDITOR. HENCE, THE AO HAD NO OTHER OPTION BUT TO ADD THE OUTSTANDING TRADE LIABILITY IN THE NA ME OF M/S VENKATESHWARA DISTILLERIES U/S 41(1) OF THE ACT. I T WAS ALSO SUBMITTED THAT THE BURDEN TO PROVE THE LIABILITY STI LL EXISTS AS ON THE CLOSING OF THE ACCOUNTING YEAR, IS ON THE ASSESS EE AND IT IS NOT FOR THE REVENUE TO PROVE THAT THE TRADING LIABILITY HAS CEASED TO EXIST. 9. THE LEARNED AR, ON THE OTHER HAND, SUPPORTED TH E FINDING OF THE CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. WE ARE OF THE VIEW THAT THE CI T(A) IS NOT CORRECT IN HOLDING THAT THE ONUS IS ON THE REVENUE TO DISCHARGE ITS BURDEN TO PROVE THE FACTUM OF REMISSION OR CESSATIO N OF LIABILITY BY GIVING POSITIVE FINDINGS . AS FAR AS THE TRADE CREDITOR APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IS CONCERNED, IT IS FOR THE ASSESSEE TO PROVE THAT THE TRADE LIABILITY STILL EX ISTS AS ON THE DATE OF CLOSING OF THE ACCOUNTS OF THE ASSESSEE. THE RE ASON STATED BY THE ASSESSEE IN NOT FURNISHING THE CONFIRMATION LET TER FROM THE PAGE 6 OF 7 ITA NO.835/BANG/2010 6 TRADE CREDITOR IS THAT THERE IS DISPUTE BETWEEN THE ASSESSEE AND THE TRADE CREDITOR AND THEREFORE, IT IS DIFFICULT T O GET THE CONFIRMATION LETTER. EVEN IF THE ASSESSEE IS NOT A BLE TO FURNISH THE CONFIRMATION LETTER, THE ASSESSEE COULD HAVE PRODUC ED THE INVOICES, THE NAME AND ADDRESSES, RELATED AND RELEVANT DETAIL S OF THE CREDITORS FOR ENABLING THE AO TO CARRY OUT FURTHER VERIFICATION FROM SUCH CREDITORS IN ADDITION TO THE INFORMATION AVAILABLE ON RECORD. FROM THE ORDER OF THE AO, WE FIND THAT INS PITE OF SEVERAL OPPORTUNITIES TO FURNISH THE PARTYS DETAILS, SUCH A S, NAME AND ADDRESS, THE LEDGER ACCOUNT, THE SAME WERE NOT FURN ISHED. THEREFORE, WE ARE OF THE VIEW THAT THE MATTER NEEDS TO BE REMITTED BACK TO THE FILE OF AO FOR FRESH CONSIDERA TION. THE ASSESSEE SHALL COOPERATE WITH THE AO FOR PROPER FRA MING OF THE ASSESSMENT AND THE SAME SHALL BE DRAWN UP AS EXPEDI TIOUSLY AS POSSIBLE. NEEDLESS TO SAY, THE ASSESSEE SHALL BE A FFORDED REASONABLE OPPORTUNITY OF BEING HEARD. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED ON FRIDAY, THE 8 TH DAY OF APRIL, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER PAGE 7 OF 7 ITA NO.835/BANG/2010 7 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/8/3. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.