SHRI SURENDRA KUMAR TRIPATHI,INDORE vs. ITO3(3), INDORE
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: HON’BLE RAJPAL YADAV & SHRI MANISH BORAD
PER MANISH BORAD, A.M
The above captioned appeal filed at the instance of the Assessee for Assessment Year 2015-16 is directed against the
order of Ld. Commissioner of Income Tax(Appeals) (in short ‘Ld. CIT],-1 Indore dated 11.02.2020 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the ‘Act’) dated
18.12.2017 framed by ITO-3(3), Indore.
Shri Surendra Kumar Tripathi ITA No.186/Ind/2020 The Assessee has raised following grounds of appeal in
ITANo.186/Ind/2020:
“1. On the facts and circumstances of the case and in law the ld. CIT(A) erred in confirming the demand under section 143(3) of the Act. The appellant prays that the said demand to be deleted. 2. Without prejudice the above, on the facts of the case and in law the Ld. CIT(A) erred in confirming the addition of Rs.13,45,000/- on account of disallowance U/S 41(1) OF THE Act as cessation of trading liability. While property against which addition is made, is not a stock-in-trade but is a fixed asset. The appellant prays that the said addition to be deleted. 3. Without prejudice the above, on the facts of the case and in law the Ld. CIT(A) has passed the assessment order without giving intimation regarding non-receipt of grounds of appeal along with appeal and even failed to call for grounds of appeal at the time of hearing. The appellant prays that the said demand to be deleted. 4. The appellant craves leave to add, to later, amend, modify substitute, delete and or rescind all or any of the grounds of appellant on or before final hearing, it necessary so arises. 2. Brief facts as culled out from the records are that the assessee
is an individual engaged in real estate business income of Rs.
5,95,150/- declared in the e-return of income filed on 24.09.2015
pertaining to A.Y. 2015-16. Case selected for through CASS for
limited scrutiny to verify the large increase in sundry creditors
with respect to turnover as compared to preceding year. Notices
u/s 143(2) & 141(1) of the Act duly served upon the assessee. Ld.
Shri Surendra Kumar Tripathi ITA No.186/Ind/2020 AO observed that under the head sundry creditors sum of
Rs.13,45,000/- was payable to Pride Construction. Information
called by Ld. AO by issuing notice u/s 133(6) of the Act was not
replied by Shri Pramod Kumar Jain Proprietor of Pride
Construction. Ld. AO wanted to treat it as a bogus entry.
Assessee submitted that he purchased plot from Pride
Construction of Rs.48,81,100/- during F.Y. 2011-12 and it is an
opening balance and a genuine creditor. Ld. AO was not satisfied
and he treated it as an income u/s 41(1) of the Act as deemed
cessation of trading liability and added it to the returned income
of the assessee. Income assessed at Rs.19,40,150/-.
Aggrieved assessee preferred an appeal before the Ld. CIT(A)
but failed to succeed.
Now the assessee is in appeal before the Tribunal. Ld. counsel
for the assessee made detailed submissions referring to the
written submission and relevant documents placed at pages 1 to
144 of the paper book on 16th July,2021.
Per contra ld. DR vehemently argued supporting the orders of
both lower authorities.
We have heard rival contentions and perused the records
placed before us. Assessee’s sole grievance is against the finding 3
Shri Surendra Kumar Tripathi ITA No.186/Ind/2020 of Ld. CIT(A) confirming the addition made by the Ld. AO u/s
41(1) of the Act for cessation of trading liability of Rs.13,45,000/-
We note that sundry creditor of Rs.13,45,000/- was appearing
as an amount payable to Pride Construction. Ld. AO could not
receive the information from Pride Construction in reply to notice
u/s 133(6) of the Act. Ld. AO and treated it as bogus entry liable
to tax u/s 41(1) of the Act.
We further observe that the assessee had purchased an office
premise from Pride Construction situated at G-1, Pride Meridian,
2-A, Shri Nagar NX, Indore for Rs.47,81,000/- on 16.03.2012.
Copy of registry is placed at pages 78 to 99. At page 6 of the
registry (paper book page 78) we find that the detail of purchase
consideration of Rs.44.35 lacs is mentioned. This detail consist of
4(four) payments including one of Rs. 13,45,000/- given by
cheque No.245003 dated 28.03.2012. The remaining 3 (three)
payments were encashed by seller but the cheque of
Rs.13,45,000/- remained un-presented.
We further observe that the alleged payment of Rs.13,45,000/-
is part of the purchase consideration utilized for purchase of
office which is shown as a fixed Assets in the balance sheet.
Shri Surendra Kumar Tripathi ITA No.186/Ind/2020 Books of accounts are audited. In schedule-V attached to balance
sheet dated 31.03.2015 in the fixed asset charged at serial No.1
office at Pride Meridian purchased at Rs.47,81,000/- is
appearing. No depreciation has been claimed. This fact shows
that the assessee has not claimed Rs.13,45,000/- as any trading
expenditure. It is also fact that the liability to pay the M/s Pride
Construction is still live as it is part of the registered sale deed.
Ld. AO has applied the provision of section 41(1) of the Act for
making the addition in the hands of assessee. Provision of section
41(1) comes into operation wherein allowance or deduction has
been made in the assessment for any year in respect of loss,
expenditure or trading liability incurred by the assessee. But on
perusal of the facts of the instant case we find that the alleged
amount is neither trading liability nor has been claimed as
expenditure in any of the year and no relief from tax has been
claimed. Therefore, under no circumstances the provisions of
section 41(1) of the Act are applicable on the transaction in
question.
We, therefore, under the given facts and circumstances of the
case, are of the considered view that the alleged payment is
merely a liability against purchase of Fixed Assets and cannot be 5
Shri Surendra Kumar Tripathi ITA No.186/Ind/2020 held to be a trading liability and therefore, both the lower
authorities erred in applying the provisions of section 41(1) of the
Act, on the alleged sum. No addition is thus called for u/s 41(1)
of the Act. We, accordingly set aside the finding of ld. CIT(A) and
delete the addition of Rs.13,45,000/- and allow ground no.2
raised on merit by the assessee.
Ground no.1 & 4 are general in nature which needs no
adjudication and ground no.3 is raised alternative to ground no.2
and the same becomes infructous as we have already allowed
ground no.2 raised by the assessee.
In the result, Assessee’s appeal in
ITANo.186/Ind/2020 is allowed.
The order pronounced as per Rule 34 of ITAT Rules, 1963
on 07.09.2021.
Sd/- Sd/-
(RAJPAL YADAV) (MANISH BORAD) VICE PRESIDENT ACCOUNTANT MEMBER
�दनांक /Dated : 07.09.2021 Patel/PS Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore 6
