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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member ITA No. 3343/Ahd/2016 Assessment Year 2013-14
The ITO, Shri Jainal Ward-2(2)(2), Mayankbhai Shah, Ahmedabad Vs 3-B, Sumatinagar (Appellant) Society, Nr. Siddhi High School Road, Ahmedabad PAN: BRAPS6257B (Respondent)
Revenue by: Shri Sumeet Kr. Verma, D.R. Assessee by: Shri Tushar Hemani, A.R. Date of hearing : 28-01-2019 Date of pronouncement : 13-02-2019 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This revenue’s appeal for A.Y. 2013-14, arises from order of the CIT(A)-10, Ahmedabad dated 06-09-2016, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
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The brief fact of the case is that return of income declaring income of Rs. 12,95,270/- was filed on 20th Sep, 2013. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) on 5th Sep, 2015. The issues raised in the grounds of appeal from the additions made u/s 143(3) of the act are adjudicated as under.
Ground No. 1 [Deleting the addition of Rs. 2,74,67,344/- made by the assessing officer by invoking provisions of section 41(1)]
During the course of assessment proceedings on verification of sundry creditors shown in the balance sheet the assessing officer noticed that assessee has not furnished confirmation from the following three parties:- 1. M/s. Kumkum Enterprises 2. M/s. Navkar Impex 3. M/s. Dhara Enterprise The assessing officer stated that assessee has failed to file the confirmation from the aforesaid parties and also not made any payment to these parties during financial year 2012-13 relevant to assessment year under consideration. The assessee has provided copies of ledger of these parties in his books of account and also submitted that they have not made any purchase during the year from the above referred parties and it contained only the opening balance. The assessing officer has not accepted the explanation of the assessee and held that it was clearly established that liability from these three parties to the amount of Rs. 2,74,67,344/- was not existed as on 31st March, 2013. Therefore, such liability was treated as
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cessation of liability and added to the total income in terms of provisions of section 41(1) of the act.
Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. Relevant part of the decision of ld. CIT(A) is reproduced as under:- “Cessation of liability u/s. 41(1) of the I.T. Act, 1961 4.1 The Assessing Officer during the course of assessment proceedings noticed that despite being given the opportunities, the appellant could not furnish the confirmation from the following three parties:- 1. M/s. Kumkum Enterprise 2. M/s. Navkar Impex 3. M/s. Dhara Enterprise Therefore, it was held by the AO that since the appellant could not file the confirmation and no payments were made during the F.Y. 2012-13 relevant to A.Y. 2013-14, this clearly shows that the assessee has failed to discharge his burden to prove that the credit shown in his books as outstanding was not existed as on 31.03.2013. Since, the assessee has already got the reduction of purchases claimed by the assessee in earlier years, the outstanding balance shown by the assessee as credit balance in his books needs to be treated as cessation of liability in terms of provisions of Section 41(1) of the Income Tax Act. During the course of appeal proceedings, the appellant has filed detailed submissions including the copy of the ledger accounts of these creditors in his books of accounts, the details of payments made by the appellant to these parties, the confirmation from HDFC bank regarding the clearance of the cheques etc. which has been placed on record. It has also been certified by the appellant vide submissions dated 24.05.2016 that the appellant would like to highlight the fact that all the documentary evidences as relied by the appellant in support of the various grounds herein under have already been furnished before the AO at the time of assessment proceedings. Therefore, no new additional evidences whatsoever in nature has been filed in the appellate proceedings. The Party-wise details are being discussed as under.- 1. M/s. Kumkum Enterprise In case of M/s. Kumkum Enterprise, on a perusal of the ledger account maintained in the books of the appellant, it is seen that the first purchase was made by the appellant on 01-09-2010 which falls in the F.Y. 2010-11 relevant to AY. 2011-12. As per the ledger account submitted by the appellant during the F.Y. 2010-11 relevant to A.Y. 2011-12, the appellant has purchased goods worth Rs.1,25,85,385/- during the year and has made a payment of Rs.62,06,085/-. The closing balance as on 31.03.2012 in this account was Rs.63,79,300/-. Although, no transactions were carried out by the appellant in the F.Y. 2012-13 relating to A.Y. 2013-14, but the appellant has made various payments totaling to Rs.42,50,000/- by cheque to this party on various dates ranging from 02.04.2012 to 01.10.2014. The assessee has also submitted a certificate from HDFC bank confirming the cheque clearance in favour of M/s. Kumkum Enterprise paid by the appellant to the extent of Rs.41,00,000/-, since the appellant has paid money to M/s. Kumkum Enterprise in the later years by cheque which has also been cleared from the bank account of the appellant, the sum of money outstanding in the books of the appellant of M/s. Kumkum Enterprise in A.Y. 2013- 14 cannot be added as cessation of liabilities u/s. 41(1) of I.T. Act as has been done by the AO. In case of M/s. Kumkum Enterprise, the purchases were made by the appellant in the F.Y. 20ID-11 relevant to A.Y. 2011-12. Therefore, even on this account, 3 years have not elapsed from the date of purchase in the A.Y. 2013-14 when the AO made the addition on account of cessation of
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liabilities. The fact that payment of Rs.42,50,000/- has been made by the appellant by cheque to this party in the later years also confirms that the liability of payment did arise as far as the appellant is concerned. Therefore, the addition made cannot be sustained. 2. M/s. Navkar Impex In case of M/s. Navkar Impex, on a perusal of the ledger account maintained in the books of the appellant, it is seen that the first purchase was made by the appellant on 08.04.2010 which falls in the F.Y. 2010-11 relevant to A.Y. 2011-12. As per the ledger submitted by the appellant during the F.Y.2010-11 relevant to A.Y. 2011-12, total purchase to the extent of Rs.2,67,73,062/- were made by the appellant out which, the appellant has made a payment of Rs.73,63,123/- during the year. The balance remained as on 31.03.2011 was Rs.1,94,09,939/-. Subsequently, the appellant has made the payment on various dates starting from 02.02.2013 till 29.09.2014 totaling to Rs. 1,47,93,000/- were made by the appellant. In fact in this account, a total payment of Rs.24,73,000/- were actually made during the F.Y. 2012-13 relevant to A.Y. 2013-14 for which the addition has been made by the AO. Therefore, atleast in this account, there has been some payments by the appellant to this party in the same year in which the AO has made the addition on account of cessation of liabilities. The assessee has also submitted a certificate from HDFC bank confirming the cheque clearance in favour of M/s. Navkar Impex paid by the appellant to the extent of Rs.1,47,93,000/-. Since, the appellant has paid money to M/s. Navkar Impex in the later years by cheque which has also been cleared. 3. M/s. Dhara Enterprise As per the ledger account of M/s. Dhara Enterprise submitted by the appellant, the first purchase was made by the appellant on 02.05.2011. The purchases totaling to Rs.55,46,055/- has been made by the appellant during the period 02.05.2011 to 10.05.2011. These purchases were made in the F.Y. 2011-12 relevant to A.Y. 2012-13. Although no payment has been made by the appellant to this party, but these purchases were made only in the F.Y. 2011-12 relevant to A.Y. 2012-13. Even if the provisions of the Limitation Act are applied, the same can be written off only after a lapse of 3 years.. In this case, the purchases were made only during F.Y. 2011-12 relevant to A.Y. 2012- 13. Therefore, these purchases and consequent liabilities are older by a year only in the A.Y. 2013-14. Even on this ground, this liability cannot be taken as cessation of liability. Therefore, the same cannot be added u/s. 41(1) of the IT. Act for cessation of liabilities just because there are not transactions during the F.Y. 2012-13 relating to A.Y. 2013- 14. It cannot be said that the liabilities of the appellant on account of purchase of goods has leased to exist. Therefore, the addition made by the AO is not sustainable as far as this party is concerned. 4.2 In view of the aforesaid discussion, it is held that there is no case for the AO to add the amounts outstanding in the name of these three parties u/s. 41(1) of IT. Act for cessation of liabilities as these payments are only 1-2 years old. In case of M/s.Navkar Impex and M/s. Kumkum Enterprise substantial payments have been made by the appellant in the later years by cheque which has also been cleared from the bank account of the appellant. Therefore, additions made by the AO on this account are not sustained and the grounds taken by the appellant are allowed.”
During the course of appellate proceedings before us, ld. departmental representative has placed reliance on the order of assessing officer. On the other hand, ld. counsel has filed paper book containing documentary evidence of these parties i.e. copies of ledger account and bank certificate etc. The Ld. Counsel has also submitted the following information in respect of these three parties:-
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M/s. Kumkum Enterprise: > First purchase was made in FY 10-11 relevant to AY 11-12; > No purchases were made during the year under consideration; > Balance as at 31.03.12 was Rs.63,79,300/-; > Payments by cheque in FY 12-13 (o FY 14-15 were Rs.42,50,000/-; > Certificate from HDFC bank w.r.l. clearance of cheque was furnished; > Three years from the date of purchase has not elapsed; M/s. Navkar Impex: > First purchase was made in FY 10-11 relevant to AY 11-12; > Total purchases in FY 10-11 were Rs.2,67,73,062/- against which payment of Rs.73,63,123/- was made in that very year > Balance as at 31.03.11 was Rs. 1,94,09,939/-; > Payment of Rs. 13,28,500/- was made in FY 11-12 (AY 11-12); > Payment totaling to Rs. 1,54,43,000/- (Rs.24,73,000 + Rs. 1,16,70,000 + Rs. 13,00,000) was made in FY 12-13 to 14-15; > Certificate from HDFC bank w.r.t. clearance of cheque was furnished; M/s. Dhara Enterprise: > First purchase was made in FY 11-12 relevant to AY 12-13; > Total purchases in FY 11-12 were Rs.55,46,055/-; > No purchases were made during the year under consideration; > Three years from the date of purchase has not elapsed and the liability in question is hardly one year old;
With the assistance of ld. counsel, we have gone through the material on record and observed that there was nothing on record to suggest that there was remission or cessation of liability during the year under consideration. It is also noticed that substantial part of payment has been
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made by cheque in later year to the outstanding creditors which is evident and supported by the bank certificate produced by ld. counsel. The Ld. Counsel has also placed reliance on the decisions of:- i.CIT vs. Nitin S. Garg (2012) 22 taxmann.com 59 (Guj) ii.CIT vs. Bhogilal Ramjibhai Atara -(2014) 43 taxmann.com 55 (Guj) After considering the above facts and judicial finding, we consider that it is clearly established that the impugned liability was existing during the year and there is no material on record which suggest that there was cessation of liability. In the light of the above fact and judicial decision we do not find any infirmity in the decision of ld. CIT(A), therefore, this ground of appeal of the Revenue is dismissed.
Ground No. 2 (addition of Rs. 4,50,000/- u/s. 68 of the act)
During assessment , the assessing officer has made addition of Rs. 3 lac on the ground that loan amount obtained from Shri Mayank B Shah on 27th August, 2012 and another loan of Rs. 1,50,000/- obtained from Smt. Parul M. Shah on 29th August, 2012 were not reflected in the bank a/c statement of the depositors. Therefore, the assessing officer has treated the aforesaid amount totaling to Rs. 4,50,000/- as unexplained credit u/s. 68 of the act and added to the total income of the assessee.
Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal on this issue. Relevant part of decision of ld. CIT(A) is reproduced as under:- “6.1 During the course of appeal proceedings, the appellant has filed bank statement of Shri Mayank B. Shah for the period from 01.08.2012 to 30.11.2012 of Account No.2111 maintained
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with Ahmedabad District Co-operative Bank. On a perusal of this statement, it is seen that cheque No. 272010 has been debited in the bank statement on 27.08.2012 in favour of Shri C. Nanchand. Shri C. Nanchand is the name of the Proprietorship firm of the appellant. Therefore, an amount of Rs.3,00,000/- has actually been debited in the account of Shri Mayank B. Shah which is clearly reflected in the bank account discussed above. Likewise on a perusal of the bank statement of Smt. Parul M. Shah for the period from 01.08.2012 to 31.08.2012 in the Account No. 2258 maintained with Ahmedabad District Co-operative Bank, an amount of Rs. 1,50,000/- has been debited on 29.08.2012 in favour of Shri C. Nanchand. Shri C. Nanchand is the sole proprietorship firm of the appellant. Therefore, the amounts which have been shown by the appellant are duly reflected in the bank statement of Shri Mayank B. Shah & Smt. Parul M. Shah respectively as discussed above. Hence, the addition made by the AO on this account cannot be sustained and therefore deleted. The ground of the appeal is accordingly allowed.”
We have heard the rival contentions. The ld. counsel has submitted that the lenders have made their confirmations along with PAN and address as placed at page no. 38 of the paper book. He has also submitted that the loan amount was very well reflected in the bank a/c of the lenders and copies of bank statement were placed at page no. 39, page 41 to 43 of paper book which demonstrate that the assessing officer has incorrectly treated such amount of loan as unexplained. After considering the above submission and detailed filed of ld. CIT(A), we do not find any substance in the appeal of the revenue on this ground and the same is dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 13-02-2019
Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 13/02/2019 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:-
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Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद