Pr. Commissioner Of Income Tax I vs. Shri Sunil Kumar Jain

IN THE HIGH COURT OF MADHYA PRADESH AT INDORE BEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI & HON'BLE SHRI JUSTICE PRANAY VERMA ON THE 3rd OF OCTOBER, 2023 INCOME TAX APPEAL No. 78 of 2023 BETWEEN:- PR. COMMISSIONER OF INCOME TAX I ROOM NO.101, AAYKAR BHAWAN, OPP. WHITE CHURCH, INDORE (MADHYA PRADESH) .....PETITIONER (MS VEENA MANDLIK, LEARNED COUNSEL FOR THE PETITIONER) AND SHRI SUNIL KUMAR JAIN PROP. M/S SUNIL TRADERS KANWAN TEHSIL BADNAWAR DISTT. DHAR PAN ASSPJ4881P (MADHYA PRADESH) .....RESPONDENT (NONE PRESENT FOR THE RESPONDENT)

This appeal coming on for admission this day, Justice Sushrut Arvind Dharmadhikari passed the following: ORDER Heard on the question of admission. This appeal has been preferred by the appellant u/S 260-A of the Income Tax Act, 1961(for brevity 'the Act' hereinafter) being aggrieved by the order dated 21.11.2022 passed by the Income Tax Appellate Authority(ITAT), Bench Indore in ITA No. 793/Ind/2018 whereby the ITAT has dismissed the revenue's appeal finding no ambiguity in the order passed by the first appellate authority in 1 Signed by: SEHAR HASEEN Signing time: 10/10/2023 6:35:19 PM Signature Not Verified the matter of deleting the addition of Rs. 6,41,59,626/- made by the Assessing Officer u/S 41(1) of the Act and ignoring the findings of the remand report. 2. Brief facts of the case are that during the course of scrutiny proceedings, the assessee was asked to provide full details of sundry creditors mainly PAN number, name & address, mode of transaction and their credibility. The assessee was further directed to show cause as to why addition u/S 41(1) of the Act to the tune of Rs. 6,41,59,626 should not be made after disallowing the creditors shown on the ground that liability has ceased to exist. The assessee submitted the trading transaction in this case and the same is not covered u/S 41(1) of the Act. On 16.12.2016, notice u/S 142(1) of the Act was further issued to the assessee asking him to furnish the details already asked for mentioned herein above. As no reply was forthcoming , the learned Assessing Officer proceeded to deal with the matter ex-parte. Upon examining the documents, the sundry creditors amounting to Rs. 6,41,59,626 have been found to have entered in the balance sheet, therefore, the entire aforesaid amount has been added to the total income tax of the assesee u/S 41(1) of the Act. 3. Being aggrieved by the order of assessment, the assessee preferred an appeal before the Commissioner of Income Tax(Appeals), Indore. The CIT(A) vide its order dated 02.07.2018 deleted the addition of Rs. 6,96,00,947/- by holding that the assessee had already made payments to the creditors in succeeding years, therefore, neither there was any recession or remission of liability by the creditors nor had the appellant taken any benefit by writing off any liability in his books of accounts. Hence, the addition needs to be deleted and the appeal was allowed. 4. Being aggrieved by the order of CIT(A), the appellant preferred an appeal before the ITAT, Indore Bench. The ITAT vide its order dated 2 Signed by: SEHAR HASEEN Signing time: 10/10/2023 6:35:19 PM Signature Not Verified 21.11.2022 dismissed the appeal by holding that merely because the outstanding was more than three years, the amount cannot be added u/S 41(1) of the Act, particularly when the same has been disclosed in the balance sheet and payment was made in succeeding years. Thus, there was no assessment of liability by the creditors and found that neither the assessee has taken any benefit by writing off liability in his books of accounts. The learned ITAT dismissed the appeal upholding the order passed by the first appellate authority, hence this appeal has been preferred before this Court. 5. The learned ITAT in the order impugned has dealt with the aforesaid issue exhaustively in para 7 and 8 which are reproduced below: "7. It is evident from the remand report that the Ld. AO has checked identity of the creditors and also verified the payments made to them by the appellant. That has been done upon verification of the copies of Form 31A of VAT Rules, Madhya Pradesh which further establishes the business transactions between these parties and the appellant. There was no recording of adverse comment on the evidences adduced by the assessee is forthcoming from the remand report. Thus, it establishes that the assessee has proved the identity of the creditors and payments made to them. Thus, under the circumstances, merely because the outstanding was more than three years, the amount cannot be added under Section 41(1) of the Act, particularly, when the same has been disclosed in the balance sheet and the payment was made in succeeding years. On this issue relying upon the judgment 3 Signed by: SEHAR HASEEN Signing time: 10/10/2023 6:35:19 PM Signature Not Verified passed by the Hon'ble Delhi High Court in the matter of CIT Vs. Shri Vardhman Overseas Ltd. reported in [2011] 16 taxmann.com 351(Delhi), the Ld. CIT(A), therefore, granted relief by deleting the addition made by the Ld. AO as there was no cessation of liability by the creditors has been found and neither the assessee has taken any benefit by writing off liability in his books of accounts. We do not find any ambiguity in such order passed by the First Appellate Authority so as to warrant interference. The same is therefore upheld. Revenue's Appeal, thus, found to be devoid of any merit and dismissed." 6. The ITAT has recorded detailed reasons for coming to the conclusion. 7. It is a case of the appellant that ITAT has failed to consider the discrepancies noted by the Assessing Officer. The ITAT erred in overlooking the facts of remand report that Form - 31 A of the VAT Act produced by the assessee in order to establish genuineness of the transaction does not pertain to the assessment year under consideration. The ITAT also erred in not considering the bills, transport, delivery receipts etc. In absence of evidence, genuineness of transactions could not be established. Even, the additional evidence presented by the assessee before the CIT(A) does not satisfy any of the conditions stipulated under Rule 46(A) of the Income Tax Rules. In fact, the assessee was provided ample opportunities to furnish the genuineness of transaction, therefore, the additional evidence was not admissible. 8. In view of the aforesaid the following substantial question of law arises for consideration: 4 Signed by: SEHAR HASEEN Signing time: 10/10/2023 6:35:19 PM Signature Not Verified (S. A. DHARMADHIKARI) JUDGE (PRANAY VERMA) JUDGE "Whether in the facts and circumstances of the case, the CIT(A) was justified in deleting the addition of Rs. 64,15,926 made by the Assessing Officer u/S 41(1) of the Act and ignoring the findings of remand report." 9. Having heard, learned counsel for the appellant on the question of admission and on perusal of the order dated 26.12.2016 and the order dated 02.07.2018 passed by the Commissioner of Income Tax (Appeal) Indore, it is seen that the ITAT has dismissed the appeal while maintaining the order passed by the CIT(A) whereby the order passed by the Assessing Officer has been reversed by the CIT(A) which is based on material available on record and has also assigned specific reasons for doing so in the impugned order. The findings of ITAT as well as CIT(A) is based on due appreciation of documents and material available on record which cannot be found fault with. The learned counsel for the appellant is not able to point out any substantial question of law in the instant appeal. 10. Accordingly, we not not find any substantial question of law in this appeal warranting interference by this Court and, therefore, this appeal being devoid of merits is hereby dismissed. 11. No order as to cost. sh

5 Signed by: SEHAR HASEEN Signing time: 10/10/2023 6:35:19 PM Signature Not Verified