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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 930/JP/2017
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 930/JP/2017 fu/kZkj.k o"kZ@Assessment Years : 2012-13 cuke Shri Anil Kumar Manak Bohra The ITO, Vs. E-344B, VKI Area, Ward-4(2), Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACTPM 0682 M vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Ram Swaroop Jajoo (Adv.) jktLo dh vksj ls@ Revenue by : Shri J.C.Kulhari (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 01/05/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 03/05/2018 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-2, Jaipur dated 25.09.2017 for Assessment Year 2012-13 wherein the assessee has challenged the action of the ld CIT(A) in confirming the addition of Rs. 12,05,182/- u/s 41(1) of the Act.
Briefly, the facts of the case are that the assessee is engaged in manufacturing and trading of Cast Iron casting in the name and style of
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M/s Govind Metal Works and during the year under consideration, the AO observed that amount in respect of four sundry creditors totalling to Rs. 12,05,182/- was outstanding and the assessee was asked to explain why in the case of the creditors who have not been repaid, it should not be held that there was cessation of liability. In response, the assessee furnished a letter along with the affidavits issued by the proprietor of the four firms. However, the same were not acceptable to the Assessing Officer as these affidavits were made on similar papers and formats with the same handwriting. Further, the letters issued u/s 133(6) of the I.T. Act as on 24.02.2015 to these parties were returned by the Postal Department with remark “Incorrect address no such firm on this address”. It was accordingly held by the AO that these sundry creditors amounting to Rs. 12,05,182/- remained unverified and the same were brought to tax u/s 41(1) of the I.T. Act.
Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and submitted that during the financial year 2010-11 certain job works were done by these four firms and they raised the bills but work was not done to the satisfaction of the assessee. Accordingly, the payment was held up and subsequently when the work was completed in accordance with the specification required, their payments were released in the financial year 2013-14 relevant to assessment year 2014-15. The assessee also relied on the affidavits filed earlier before the Assessing Officer. Further, the assessee filed the confirmations obtained from these four firms before the ld. CIT(A) confirming the amount as receivable at the year end from the assessee. However, the said confirmations were not considered by the ld. CIT(A)
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as these confirmations were not filed before the Assessing Officer and no reason whatsoever was given by the assessee for not filing the same before the AO. In this regard, the ld. CIT(A) further observed that the address on these confirmations is the same on which the letter sent by the AO has been returned back with remark that these addresses were incorrect and no firms existed on these addresses. It was accordingly held by the ld. CIT(A) that in the absence of any reliable evidence for the payments of these parties made in the subsequent year and the changing stand of the assessee wherein it was initially stated that payments were made by cheque and latter on when details of cheque payments were called for, it was stated that the same had been paid in cash which shows that the assessee could not substantiate the payments claimed to have been made. In view of the same, the disallowance made by the AO u/s 41(1) of the Act was confirmed.
Now the assessee in this appeal before us. The ld. AR of the assessee has submitted that during the financial year 2010-11 relevant to assessment year 2011-12, certain job works were done by these four firms and they raised the bills but work was not done to the satisfaction of the assessee. It was submitted that as a result, the payment was stopped and subsequently when the work was completed in accordance with the specification required, the payments were released in the financial year 2013-14 relevant to assessment year 2014-15. It was further submitted that the addresses of all the four parties which were submitted before the AO are complete addresses and all these firms have Permanent account. It was submitted that when the AO asked for the information about these parties, complete address along with
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affidavits were submitted during the course of assessment proceedings. It was further submitted that when the letters issued by the AO u/s 133(6) were returned back, the AO could have deputed his Inspector to carry out the necessary verification which has not happened in the instant case. Further, the AO did not issue the summons u/s 131 of the Act to these parties and further no opportunity was given to the assessee to call on these parties to confirm the fact that they have received the payment in the subsequent financial year 2013-14. It was further submitted that during the course of appellate proceedings, besides the affidavits submitted earlier, the necessary confirmation from these four firms were submitted which shows that at the year end, the amount was due and payable at the year end and there was no remission or cessation of liability, a fact which is subsequently proved by the fact that payments have been made in the subsequent financial year.
The ld. DR has relied upon the findings of the lower authorities.
We have heard the rival contention and perused the material available on record. The fact of the case are that an amount of Rs. 12,05,182/- was shown under the head “sundry creditors” in the name of four firms who have carried certain job works and raised bills on the assessee during the financial year 2010-11 relevant to assessment year 2011-12. The incurrence of the expenditure in the earlier year is therefore, not in dispute and no such contention has been raised before us. The only dispute is whether there is remission or cessation of such liability during the year, by virtue of which, the provisions of Section
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41(1) of the Act can be invoked in the year under consideration. During the course of appellate proceedings before the ld CIT(A), the assessee has submitted copy of confirmations obtained from these four firms confirming that the amounts were outstanding as on the first and last day of the financial year 2011-12 relevant to impunged assessment year. However, the ld. CIT(A) has not considered the same for the reasons that they were not filed before the Assessing Officer. In such a scenario, in our view, the ld CIT(A) could have called for the remand report from the AO who could have carried out the necessary verification. Further, certain apprehension has been raised regarding mode of discharge of the outstanding liability during the subsequent financial year 2013-14 relevant to assessment year 2014-15 and on account of the fact that letters issued by the AO under section 133(6) have been returned unserved.
In our view, for the purposes of invoking the provisions of section 41(1) of the Act, what is relevant to determine is whether there is remission or cessation of liability in respect of expenditure which has been claimed in the earlier year. The liability towards these four firms pertains to immediately preceding financial year and has been shown as payable and not written off by the assessee in his books of accounts and the same continue to exist at the year end. Further, we have pursued the confirmations obtained from these four firms available at assessee’s paper book wherein these firms have given their name and address, PAN number and have confirmed that the amount is outstanding at the beginning and at the end of the financial year 2011- 12 relevant to impunged assessment year. In light of the above, it
6 ITA No. 930/JP/2017 Anil Kumar Manak Bohra vs. ITO prima facie appears that there is no remission or cessation of liability which can be brought to tax by invoking section 41(1) of the Act. However, given that there is no specific finding recorded by either the AO or the ld CIT(A), we are setting aside the matter to the file of the ld CIT(A) with a direction to determine whether there is remission or cessation of liability during the year under consideration and where on verification, it is found that there is no remission or cessation of the liability, allow the necessary relief to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 03/05/2018. Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 03/05/2018. *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shri Anil Kumar Manak Bohra, Jaipur. 2. izR;FkhZ@ The Respondent- ITO, Ward- 4(2), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { ITA No. 930/JP/2017} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत