Shri Keshavbhai B. Tandel, Vapi v. The Income tax Officer,Vapi Ward-2,, Vapi

ITA 1215/AHD/2007 | 2003-2004
Pronouncement Date: 09-09-2010 | Result: Partly Allowed

Appeal Details

RSA Number 121520514 RSA 2007
Assessee PAN AARPT2993A
Bench Ahmedabad
Appeal Number ITA 1215/AHD/2007
Duration Of Justice 3 year(s) 5 month(s) 17 day(s)
Appellant Shri Keshavbhai B. Tandel, Vapi
Respondent The Income tax Officer,Vapi Ward-2,, Vapi
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 09-09-2010
Date Of Final Hearing 31-08-2010
Next Hearing Date 31-08-2010
Assessment Year 2003-2004
Appeal Filed On 22-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. N. PAHUJA AM) ITA NO.1215/AHD/2007 AND 3266/AHD/2009 A. Y.: 2003-04 SHRI KESHAVBHAI B. TANDEL PROP. TEJAL GASES AND CHEMICALS PLOT NO.771/1 40 SHED AREA GIDC VAPI SURAT VS THE INCOME TAX OFFICER WARD-2 VAPI PA NO. AARPT 2993A (APPELLANT) (RESPONDENT) APPELLANT BY MRS. URVASHI SHODHAN AR RESPONDENT BY SHRI K. M. MAHESH DR O R D E R PER BHAVNESH SAINI: THE APPEAL IN ITA NO.1215/AHD/2007 BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE L EARNED CIT(A) VALSAD DATED 29-11-2006 FOR ASSESSMENT YEAR 2003-04 CHALLE NGING THE ADDITION ON MERIT. HOWEVER THROUGH THE APPEAL IN ITA NO.326 6/AHD/2009 THE ASSESSEE CHALLENGED THE ORDER OF THE LEARNED CIT(A) VALSAD DATED 28-08- 2009 FOR ASSESSMENT YEAR 2003-04 CHALLENGING LEVY O F T4HE PENALTY U/S 271 (1) ( C ) OF THE IT ACT ON THE SAME FACTS ON WH ICH ADDITION ON QUANTUM HAS BEEN MAINTAINED. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND T HE MATERIALS AVAILABLE ON RECORD. ITA NO.1215/AHD/2007 3. GROUND NO.1 OF THE APPEAL READS AS UNDER: 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT IN CONFIRMING THE ADDITION MADE BY THE AO OF RS.3 81 4 03/- AS BUSINESS INCOME OUT OF TOTAL AGRICULTURAL INCOME OF ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 2 RS.9 08 000/- RETURNED BY THE APPELLANT FOR THE RAT E PURPOSE ON ESTIMATE BASIS. BOTH THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN NOT BELIEVING THE EXPLANATION OF THE APPEL LANT WHO IS CULTIVATING THE FARM AND HAVE ASSUMED THE ROLE OF A N EXPERT BY ESTIMATING THE AGRICULTURAL OUTPUT AND INCOME SI MPLY ON THE BASIS OF GENERIC DATA PUBLISHED BY AGRICULTURAL UNIVERSITY NAVSARI. THIS ACTION OF CIT(A) BEING ARBITRARY HAR SH AND WITHOUT ANY BASIS OUGHT TO BE QUASHED. 4. THE ASSESSEE HAD DECLARED AGRICULTURAL INCOME OF RS.9 08 000/-. THE ASSESSEE DID NOT MAINTAIN PROPER EVIDENCES IN S UPPORT OF AGRICULTURAL INCOME AND EXPENDITURE. THEREFORE THE AO HAD NO OPTION BUT TO RESORT TO ESTIMATE THE AGRICULTURAL INCOME F ROM THE DATA PUBLISHED BY AGRICULTURAL UNIVERSITY NAVSARI. THE AO IN THE COMPANY OF WARD INSPECTOR VISITED THE FARM OF THE ASSESSEE AND FOUN D THAT THERE WERE MANGO AND CHIKU TREES IN THE FARM OF THE ASSESSEE. THE AO ESTIMATED THE AGRICULTURAL INCOME AS PER INCOME AND COST DATA PUB LISHED BY AGRICULTURAL UNIVERSITY NAVSARI AND WORKED OUT THE INCOME AND EXPENDITURE AS DISCUSSED IN PARA 4.2 4.3 AND 4.4 O F THE ASSESSMENT ORDER. AS PER THE SCIENTIFIC ESTIMATE MADE BY THE A O THE AGRICULTURAL INCOME OF THE ASSESSEE WAS WORKED OUT TO RS.5 26 59 7/- AS AGAINST RETURNED AGRICULTURAL INCOME OF RS.9 08 000/-. AT T HE SAME TIME THE AO ALSO OBSERVED THAT DURING THE YEAR UNDER REFERENCE THE ASSESSEE HAS SUPPRESSED HIS GROSS PROFIT IN THE BUSINESS ACTIVIT Y IN HIS PROPRIETARY CONCERN M/S. TEJAL GASES AND CHEMICALS. THE ASSESSE E HAS DECLARED GROSS PROFIT AT 11.85% AS AGAINST GROSS PROFIT OF 1 4.37% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSEE FAILED TO OFFER SATISFACTORY EXPLANATION FOR FALL IN THE GROSS PROF IT AND THEREFORE THE AO MADE THE ADDITION OF RS.3 81 403/- AFTER CONCLUDING THAT THE ASSESSEE HAS CAMOUFLAGED HIS BUSINESS INCOME IN THE GUISE OF AGRICULTURAL INCOME. 5. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED C IT(A) AND IT WAS ARGUED THAT THE ASSESSEE HAD ENOUGH NUMBER OF MANGO AND CHIKU TREES IN HIS FARM AND THEREFORE AGRICULTURAL RETURNED IN COME SO DECLARED IS ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 3 JUSTIFIED. THE ASSESSEE SUBMITTED THAT THE AO HAS C ONSIDERED CERTAIN MANAGERIAL AND INTEREST COST WHICH THE ASSESSEE IN FACT NOT INCURRED. THEREFORE ASSESSEES AGRICULTURAL PROFIT IS HIGHER THAN THAT ESTIMATED BY THE AO. THE LEARNED CIT(A) CONSIDERING THE SUBMISSI ON OF THE ASSESSEE NOTED THAT THE ASSESSEE DID NOT PRODUCE DOCUMENTARY EVIDENCES IN SUPPORT OF AGRICULTURAL INCOME AND EXPENDITURE. THE REFORE THE AO HAS RIGHTLY ESTIMATED THE INCOME. THE LEARNED CIT(A) AL SO NOTED THAT THE AO HAD NO OPTION BUT TO RESORT TO A SCIENTIFIC BASIS O N WHICH HE RELIED UPON AND ESTIMATED INCOME AFTER ADOPTING THE RATES SUPPL IED BY THE AGRICULTURAL UNIVERSITY NAVSARI. THE LEARNED CIT(A ) ACCORDINGLY NOTED THAT SINCE THE ASSESSEE SUPPRESSED HIS BUSINESS INC OME BY DECLARING EXCESSIVE AGRICULTURAL INCOME THEREFORE THE CLAIM OF THE ASSESSEE HAS NO MERIT. THE APPEAL OF THE ASSESSEE WAS ACCORDINGLY D ISMISSED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T WIFE OF THE ASSESSEE ALSO HOLDING AGRICULTURAL LAND AND IS ALSO HAVING MANGO AND CHIKU TREES WHICH WERE SITUATED AT THE SAME PLOT. C OPY OF THE LANDHOLDING WAS FILED BEFORE THE AUTHORITIES BELOW IN SUPPORT OF THE CONTENTION. THE LEARNED COUNSEL FOR THE ASSESSEE HO WEVER STATED THAT NO BOOKS FOR AGRICULTURAL INCOME WERE PRODUCED AND THA T ADDITION IS EXCESSIVE IN NATURE. THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT AGRICULTURAL LAND OF THE ASSESSEE IS SAME FROM WHIC H AGRICULTURAL INCOME WAS EARNED AND IN ASSESSMENT YEAR 2002-03 THE ASSES SEE HAS DECLARED AGRICULTURAL INCOME AT RS.11 79 326/- (COPY OF COMP UTATION OF INCOME FILED). IN THE ASSESSMENT YEAR 2004-05 THE ASSESSE E DECLARED AGRICULTURAL INCOME IN A SUM OF RS.9 34 110/- ON WHICH THE AO M ADE ESTIMATED ADDITION OF RS.25 000/- AND THE LEARNED CIT(A) DELE TED THE SAME ADDITION. COPY OF THE COMPUTATION OF INCOME ASSESS MENT ORDER AND THE ORDER OF THE LEARNED CIT(A) FOR ASSESSMENT YEAR 200 4-05 ARE FILED ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO R EFERRED TO THE WRITTEN ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 4 SUBMISSION FILED IN THE PAPER BOOK. ON THE OTHER HA ND THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS RIGHTLY ADOPTED THE SCIENTIFIC METHOD FOR ES TIMATING THE AGRICULTURAL INCOME BECAUSE NO PROPER EVIDENCE IN S UPPORT OF AGRICULTURAL INCOME HAS BEEN FILED. THE LEARNED DR SUBMITTED THAT THE AO ESTIMATED THE AGRICULTURAL INCOME AS THE DATA PU BLISHED BY THE AGRICULTURAL UNIVERSITY AND AGRICULTURE DIRECTORATE OF GUJARAT. THE LEARNED DR THEREFORE SUBMITTED THAT THE ADDITION IS RIGHTLY MADE ON THIS ACCOUNT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. IN THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE HAS SHOWN AGRICULTURAL INCOME OF RS.9 08 000/- RECEIVED BY CH EQUES ON VARIOUS DATES DURING THE YEAR AS IS NOTICED BY THE AO. THE ASSESSEE HAS FILED DETAILS OF PROFIT & LOSS ACCOUNT FOR AGRICULTURAL I NCOME AND EXPLAINED THAT HE WAS SELLING THE AGRICULTURAL PRODUCTS. THE AO HA S HOWEVER NOTED THAT THE ASSESSEE HAS NOT PRODUCED ANY BILLS OR VOUCHERS FOR AGRICULTURAL EXPENSES AND THAT NO DOCUMENTARY EVIDENCE IN SUPPOR T OF SALE OF AGRICULTURAL PRODUCE HAS BEEN FILED. THE ASSESSEE H AS ALSO NOT CLAIMED ANY OTHER EXPENSES LIKE DIESEL PLOUGHING AND TRANS PORTATION ETC. IN THE PROFIT & LOSS ACCOUNT. THE AO THEREFORE NOTED THA T AGRICULTURAL INCOME DECLARED BY THE ASSESSEE AS IT IS CANNOT BE ACCEPTE D. THE AO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE MATERIAL ON RECORD TAKEN THE AID OF THE DATA PUBLISHED BY THE AGRICULT URAL UNIVERSITY NAVSARI AND AGRICULTURAL DIRECTORATE OF GUJARAT GOV ERNMENT FOR THE PURPOSE OF ESTIMATING THE AGRICULTURAL INCOME OF TH E ASSESSEE. IT WOULD THEREFORE PROVE THAT NO BOOKS OF ACCOUNT FOR AGRIC ULTURAL INCOME HAVE BEEN PRODUCED. NO SALE BILLS FOR AGRICULTURAL INCOM E HAVE BEEN PRODUCED. NO DIESEL EXPENSES CLAIMED. THE BANK DEPOSITS ARE L ESS AS COMPARED TO THE AGRICULTURAL INCOME. THEREFORE THE AO HAS RIGH TLY GATHERED THE DETAILS FROM THE AGRICULTURAL UNIVERSITY AND AGRICU LTURAL DIRECTORATE OF ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 5 THE GUJARAT GOVERNMENT IN ORDER TO ESTIMATE NET AGR ICULTURAL INCOME OF THE ASSESSEE. THE AO ALSO SPECIFICALLY NOTED THAT G ROSS PROFIT OF THE ASSESSEE ON BUSINESS INCOME HAS FALLEN AS COMPARED TO THE EARLIER YEARS. NO SATISFACTORY EXPLANATIONS HAVE BEEN FILED. THE A BOVE FACTS WOULD JUSTIFY THE ACTION OF THE AO IN ESTIMATING THE AGRI CULTURAL INCOME OF THE ASSESSEE. DURING THE COURSE OF ARGUMENTS ALSO THE L EARNED COUNSEL FOR THE ASSESSEE DID NOT DISPUTE THE ESTIMATION OF AGRI CULTURAL INCOME IN VIEW OF THE FACTS AND CIRCUMSTANCES MENTIONED ABOVE. HOW EVER THE LEARNED COUNSEL FOR THE ASSESSEE HAS BEEN ABLE TO DEMONSTRA TE THAT WIFE OF THE ASSESSEE IS ALSO ASSESSED TO AGRICULTURAL INCOME AS WAS EXPLAINED BEFORE THE AUTHORITIES BELOW WHICH HAVE NOT BEEN ADVERSELY COMMENTED UPON BY THE LEARNED CIT(A). HOWEVER CONSIDERING THE HISTOR Y OF THE ASSESSEE WE ARE OF THE VIEW THAT ESTIMATION THE AGRICULTURAL IN COME BY THE AO IN THE ASSESSMENT YEAR UNDER APPEAL IS STILL ON LOWER SIDE . THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR 2002-03 DECLARED AGRICULT URAL INCOME OF RS.11 79 326/- WHICH HAS NOT BEEN DISPUTED BY THE A O. IN THE ASSESSMENT YEAR 2004-05 THE ASSESSEE HAS DECLARED AGRICULTURAL INCOME OF RS.9 34 110/- ON WHICH THE AO IN THE ASSESSMENT ORDER U/S 143(3) OF THE IT ACT MADE THE ADDITION OF RS.25 000/- WHICH H AS BEEN DELETED BY THE LEARNED CIT(A) VIDE ORDER DATED 15-10-2009. THE LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE ON THE BASI S OF THE DETAILS SHOWN IN THE ASSESSMENT YEAR 2002-03. IT WOULD THEREFORE SHOW THAT IN THE EARLIER YEARS AS WELL AS IN SUBSEQUENT ASSESSMENT Y EARS THE ASSESSEE HAS DECLARED MORE AGRICULTURAL INCOME FOR RATE PURPOSE. THEREFORE CONSIDERING THE HISTORY OF THE ASSESSEE AND THAT WI FE OF THE ASSESSEE IS ALSO HAVING AGRICULTURAL INCOME WE ARE OF THE VIEW THAT ADDITION OF RS.3 81 403/- IS ON EXCESSIVE SIDE. THEREFORE KEEP ING IN MIND THAT THERE IS A FALL IN GROSS PROFIT IN THE BUSINESS INCOME OF THE ASSESSEE IT WOULD BE PROPER TO SUSTAIN REASONABLE ADDITION IN THE MATTER . WE THEREFORE PARTLY CONFIRM THE FINDINGS OF THE AUTHORITIES BELOW FOR E STIMATING THE AGRICULTURAL INCOME. HOWEVER CONSIDERING THE HISTO RY OF THE ASSESSEE ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 6 THE ADDITION OF RS.3 81 403/- IS MODIFIED TO RS.1 5 0 000/- IN ALL. WE ACCORDINGLY MODIFY THE ORDERS OF THE AUTHORITIES B ELOW AND RESTRICT THE ADDITION TO RS.1 50 000/- AS AGAINST MADE BY THE AU THORITIES BELOW IN A SUM OF RS.3 81 403/-. IN THE RESULT THE APPEAL OF THE ASSESSEE ON THIS GROUND IS PARTLY ALLOWED. 8. GROUNDS NO. 2 AND 3 OF THE APPEAL READ AS UNDER : 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING ADDITION OF RS.88 623/- MADE BY AO AS DE EMED INCOME UNDER THE PROVISION OF SECTION 41 (1) OF THE ACT WITHOUT CONSIDERING THE EXPLANATION OF THE APPELLANT THAT T HE OUTSTANDING AMOUNT OF RS.88 623/- PAYABLE TO BINA T RANSPORT WAS WRITTEN BACK IN THE BOOKS OF ACCOUNTS FOR F. Y. 2003/04. BOTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THE SUBMISSIONS AND CONTENTION OF THE APPELLANT THAT A TYPOGRAPHICA L ERROR RESULTED IN SHORTAGE IN WRITING BACK THE TRADING LI ABILITY THAT WAS WRITTEN BACK IN THE SUBSEQUENT YEAR. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.1 29 747/- MADE BY AO ON ACCOUNT OF ALLEGED CESSATION OF LIABILITY AND TREAT ING THE SAME AS DEEMED INCOME U/S 41 (1) OF THE ACT. LD. CIT(A) HAS COMPLETELY MISINTERPRETED THE CONTENTION OF THE APP ELLANT THAT A PERSISTENT LIABILITY THOUGH TIME BARRED MAY NOT B E TAXED SINCE IT IS STILL SHOWN AS OUTSTANDING IN THE BOOKS OF ACCOUNTS. LTD. CIT(A) OUGHT TO HAVE DELETED ADDITION MADE BY AO THAT IS UNJUST UNLAWFUL AND AGAINST THE PRINCIPLES OF LAW . 9. AS REGARDS GROUND NO.2 IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE HAS ACTUALLY RETURNED BACK THE AM OUNT OUTSTANDING IN RESPECT OF CREDITORS RS.6 92 312/- IN THE BOOKS IN FINANCIAL YEAR 2003-04. IT WAS CONTENDED THAT THE ADDITION MADE BY THE AO B Y LOCATING SHORTAGE IN WRITING BACK TRANSPORTATION EXPENSES CANNOT BE S USTAINED. IT WAS ARGUED THAT NET PROFIT OF RS.4 47 685/- HAS BEEN SH OWN AS AGAINST ACTUAL PROFIT OF RS.5 36 308/- FOR THE FINANCIAL YEAR 2002 -03 AND DUE TO THE TYPOGRAPHICAL ERROR THE SHORTAGE OF RS.88 623/- IN WRITING BACK THE AMOUNT OF RS.6 93 392/- IS RESULTED. THE AO DID NOT ACCEPT THE ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 7 CONTENTION OF THE ASSESSEE AND OBSERVED THAT THERE IS CLEAR CUT SHORTAGE IN WRITING BACK TRADING LIABILITIES. THE SAME WAS A DDED TO BE TAXED. THE LEARNED CIT(A) NOTED THAT THE ASSESSEE HAS NOT DISP UTED WITH THE OUTSTANDING BALANCE IN THE NAME OF THE CONCERN CRED ITORS IS MORE THAN 3 YEARS OLD AND SAME REQUIRES WRITE BACK AS PER PROVI SIONS OF SECTION 41(1) OF THE IT ACT. ADDITION OF RS.88 623/- WAS CONFIRME D. AS REGARDS GROUND NO.3 THE ASSESSEE HAS SHOWN LIABILITY IN RESPECT O F TWO CREDITORS AS ON 31-03-2003 IN THE NAME OF TRANS AMMONIA PVT. LTD. RS.1 29 746/- AND QUALITY CHEMICALS RS.13 26 285/-. THE AO WHILE EXAM INING THE LIABILITY IN RESPECT OF THESE TWO CREDITORS HAS OBSERVED THAT THE ASSESSEE HAS WRITTEN BACK THE LIABILITY OF RS.13 26 285/- IN RES PECT OF QUALITY CHEMICALS IN THE FINANCIAL YEAR 2004-05 BUT THE LIA BILITY IN RESPECT OF TRANS AMMONIA PVT. LTD. RS.1 29 747/- HAS NOT BEEN WRITTEN BACK IN THE ACCOUNTS. THE AO ASKED THE ASSESSEE TO PRODUCE THE CREDITORS AND TO FILE CONFIRMATION OF THE LIABILITIES FAILING WHICH ADDI TION OF RS.1 29 746/- U/S 41 (1) OF THE IT ACT WAS MADE. IT WAS SUBMITTED BEF ORE THE LEARNED CIT(A) THAT LIABILITY OF THE AFORESAID COMPANY IS STILL PE RSISTING AND THE ASSESSEE HAS TO REPAY THE AMOUNT THEREFORE IT CANNOT BE CH ARACTERIZED AS REMISSION OR CESSATION OF LIABILITY. THE LEARNED CI T(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND NOTED THAT AS THE AS SESSEE HAS NOT WRITTEN BACK THE LIABILITY AND FAILED TO FILE CONFIRMATION OF THE LIABILITY THEREFORE ADDITION IS JUSTIFIED. 10. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ABOVE AMOUNTS WERE BALANCE OUTSTANDING FROM EARLIER YEARS AND THAT LIABILITY WAS STILL PERSISTING IN THE ACCOUNTS OF THE ASSESSE E. THEREFORE THE SAME WOULD NOT FALL WITHIN THE PURVIEW OF SECTION 41 (1) OF THE IT ACT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIN CE THE ASSESSEE ACKNOWLEDGED THE LIABILITY IN THE BOOKS OF ACCOUNT THEREFORE BOTH THE ADDITIONS ARE UNJUSTIFIED . THE LEARNED COUNSEL RELIED UPON THE ORDER OF THE ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 8 ITAT AHMEDABAD BENCH IN THE CASE OF SHRI RAJESH MUK UNDLAL SHAH IN ITA NO.424/AHD/2006 DATED 08-01-2010 IN WHICH IT WA S HELD AS UNDER: 9.5 IN THE LIGHT OF THE VIEW TAKEN BY THE HONBLE SUPREME COURT AND JURISDICTIONAL HIGH COURT IN THE AFORESAID DECISIONS IT IS APPARENT THAT UNLESS THERE IS A CE SSATION OF LIABILITY OR THERE IS A REMISSION OF LIABILITY BY T HE CREDITOR THE LIABILITY SUBSISTS AND THEREFORE EVEN IF THE ENTR IES ARE MADE TO WRITE BACK THE EXPENDITURE THE AMOUNT SO WRITTE N BACK CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE AS PE R THE PROVISIONS OF SECTION 41(1) OF THE ACT. IN THE INST ANT CASE THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE HAS OBTAINE D ANY BENEFIT EITHER BY WAY OF REMISSION OR CESSATION OF ANY LIABILITY WHILE THE AFORESAID LIABILITIES ARE CONTINUALLY ADM ITTED BY THE ASSESSEE IN THEIR BALANCE SHEET. IN THESE CIRCUMSTA NCES WE HAVE NO ALTERNATIVE BUT TO VACATE THE FINDINGS OF T HE LD. CIT(A) AND DELETE THE ADDITION SUSTAINED BY THE LD. CIT(A) . THEREFORE GROUND NOS. 3 TO 5 IN THE APPEAL OF THE ASSESSEE AR E ALLOWED WHILE GROUND NOS. 1 & 2 IN THE APPEAL OF THE REVENU E ARE DISMISSED. 11. ON THE OTHER HAND THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIALS AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT OUTS TANDING LIABILITY IS SHOWN BY THE ASSESSEE IN THE BALANCE SHEET. THUS T HE ASSESSEE ACKNOWLEDGED THE LIABILITY IN THE BOOKS OF ACCOUNTS . THE BALANCES WERE COMING FROM EARLIER YEARS AND HAVE BEEN SHOWN AS LI ABILITY IN THE ACCOUNTS. THE IDENTICAL ISSUE WAS CONSIDERED BY ITA T AHMEDABAD B BENCH IN THE CASE OF SHRI NITIN S. GARG IN ITA NOS. 169 170 171 AND 172/AHD/2009 DATED 04-06-2010 AND THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED. THE FINDINGS OF TRIBUNAL IN PARA 8 TO 12 ARE REPRODUCED AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. SECTION 41 (1) (A) OF THE IT A CT READS AS UNDER: ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 9 41. (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS EXP ENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINA FTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR (A) THE FIRST-MENTIONED PERSON HAS OBTAINED WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CE SSATION THEREOF THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFI TS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHA RGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR WHE THER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLO WANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR 8.1 HONBLE MADRAS HIGH COURT IN THE CASE OF TAMILN ADU WAREHOUSING CORPORATION (SUPRA) HELD AS UNDER: THE ASSESSEE FILED ITS RETURN FOR THE ASSESSMENT Y EAR 1989-90 AND ASSESSMENT ERAS COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961. THE ASSESSEE HA D SURRENDERED THE GROUP GRATUITY SCHEME WITH LIC AND RECEIVED A SUM OF RS.8 22 925/- DURING THE YEAR REL EVANT TO THE ASSESSMENT YEAR 1989-90. AS THERE WAS NO PRO PER ENQUIRY MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED ON JANUARY 21 1992 THE COMMISSIONER PASSED ORDER UNDER SECTION 263 OF THE ACT AND SET ASIDE THE ASSESSMENT WITH A DIRECTION TO TH E ASSESSING OFFICER TO ASSESS THE SAID AMOUNT UNDER SECTION 41(1) OF THE ACT FOR THE ASSESSMENT YEAR 19 89- 90. THE TRIBUNAL SET AIDE THE ORDER OF THE COMMISSIONER. ON APPEAL TO THE HIGH COURT: HELD THAT THE ASSESSEE HAD CONTINUED TO SHOW THE ADMITTED AMOUNT OF RS.8 22 925 AS LIABILITY IN THE BALANCE-SHEET. THE UNDISPUTED FACT WAS THAT IT WAS A LIABILITY REFLECTED IN THE BALANCE-SHEET. ONCE IT W AS SHOWN AS LIABILITY BY THE ASSESSEE THE COMMISSIONE R WAS WRONG IN HOLDING THAT IT WAS ASSESSABLE UNDER SECTION 41(1) OF THE ACT. UNLESS AND UNTIL THERE IS A CESSATION OF LIABILITY SECTION 41 IS NOT APPLICABL E. ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 10 8.2 HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CA SE OF SMT. SITA DEVI JUNEJA (SUPRA) HELD AS UNDER: IT IS THE CONCEDED POSITION THAT IN THE ASSESSEES BALANCE SHEET THE AFORESAID LIABILITIES HAVE BEEN S HOWN WHICH ARE PAYABLE TO THE SUNDRY CREDITORS. SUCH LIABILITIES SHOWN IN THE BALANCE SHEET INDICATE T HE ACKNOWLEDGEMENT OF THE DEBTS PAYABLE BY THE ASSESSE E. MERELY BECAUSE SUCH LIABILITY IS OUTSTANDING FOR T HE LAST SIX YEARS IT CANNOT BE PRESUMED THAT THE SAID LIABILITIES HAVE CEASED TO EXIST. IT IS ALSO CONCED ED POSITIN THAT THERE IS NO BILATERAL ACT OF THE ASSES SEE AND THE CREDITORS WHICH INDICATES THAT THE SAID LIABIL ITIES HAVE CEASED TO EXIST. IN ABSENCE OF ANY BILATERAL A CT THE SAID LIABILITIES COULD NOT HAVE BEEN TREATED TO HAV E CEASED. 8.3 ITAT AHMEDABAD BENCH IN THE CASE OF N. R. CHAUH AN (SUPRA) HELD AS UNDER: THE LD. COUNSEL FOR THE ASSESSEE SPECIFICALLY DRAW N OUR ATTENTION TO THE ACCOUNT COPIES AND STATED THAT THE SE ARE OUTSTANDING AS ON DATE AND THIS AMOUNT ARE NOT WRITTEN OFF IN THE BOOKS OF ACCOUNT. ACCORDINGLY T HE SAME CANNOT BE ADDED U/S. 41(1) OF THE ACT AS THE LIABILITY OF OUTSTANDING AND THE PARTIES ARE IN EXI STENCE. WE ARE IN FULL AGREEMENT WITH THE ARGUMENT OF THE L D. COUNSEL FOR THE ASSESSEE AS IS SEEN FROM THE DOCUM ENTS AND PAPERS FILED BEFORE US THAT THE PARTIES DO EXIS T AND THESE AMOUNTS ARE OUTSTANDING IN THE BOOKS OF THE ASSESSEE AS PAYABLE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES WE FEEL THAT THESE AMOUNTS CANNOT BE ADDED EITHER U/S. 68 OR 41(1) OF THE ACT. WE DELETE THE ADDITION AND THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 8.4 ITAT LUCKNOW BENCH IN THE CASE OF DCIT VS ALLIE D LEATHER FINISHERS (P) LTD. (SUPRA) HELD AS UNDER: 21.7 A LIABILITY COULD NOT BE TREATED AS A CESSATION IF IT WAS BEING MERELY CARRIED FORWARD FO R YEARS. A NON-GENUINE NON-TRADING LIABILITY STANDING IN THE BALANCE SHEET CAN BE TAXED BUT UNDER SECTION 68 IF IT CAME IN THE BOOKS IN THE CURRENT YEAR. IF SUCH N ON- GENUINE NON-TRADING LIABILITY CAME IN THE BOOKS IN AN EARLIER YEAR THAN SAME CANNOT BE TAXED IN THE CURRE NT ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 11 YEAR EVEN UNDER SECTION 68. A NON-GENUINE TRADING LIABILITY CAN BE CONSIDERED IN THE CURRENT YEAR IF IT IS RELATED TO CURRENT YEARS TRADING/MANUFACTURING OR PROFIT & LOSS ACCOUNT BUT NOT UNDER SECTION 41(1) O R UNDER SECTION 68. IT CAN BE CONSIDERED ONLY UNDER SECTION 28 I.E. IT CAN BE CONSIDERED FOR DISALLOWA NCE WHILE EXAMINING THE CLAIM OF EXPENSES OR OUTGOINGS AGAINST REVENUE RECEIPTS. CURRENT YEARS GENUINE TRADING LIABILITIES WAVED/REMITTED OR CEASED TO EX IST IN THE CURRENT YEAR ITSELF WILL NOT FORM PART OF TRADING/MANUFACTURING OR P/L ACCOUNT EXCEPT A NOTE APPENDED TO THEM AS DISCLOSURE OF INFORMATION. 21.10 EVEN IN A CASE WHERE A LIABILITY CEASED TO EXIST DUE TO LIMITATION I.E. THE CLAIM OF THE CREDI TOR IS BARRED BY LIMITATION UNDER LIMITATION ACT OF 1963 BUT IF THE LIABILITY SUBSIST OR HAS NOT BEEN WRITTEN OF F BY THE ASSESSEE OR THE ASSESSEE DOES NOT ABSOLVE HIMSELF FROM THE LIABILITY THOUGH NOT LEGALLY ENFORCEABLE IT C ANNOT BE TAXED UNDER SECTION 41(1). 8.5 THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS PRAMESHWAR BOHRA (SUPRA) HAS HELD AS UNDER: THE ASSESSEE ON THE FIRST DAY OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1993-94 I.E. ON APR IL 1 1992 CREDITED AN AMOUNT OF INVESTMENT/CASH CREDIT OF RS.1 55 316 IN HIS BOOKS OF ACCOUNT. THE ASSESSING OFFICER ADDED THIS AMOUNT IN THE INCOME OF THE ASSE SSEE AS UNEXPLAINED INVESTMENT IN THE ASSESSMENT YEAR 1993-94. THE TRIBUNAL HELD THAT THIS WAS NOT A CASE OF CASH CREDIT ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE DURING THE YEAR BUT IT WAS A CASE IN WHICH THE ASSESSEE HAD INVESTED THE CAPITAL IN THE BUSINESS A ND THIS AMOUNT WAS SHOWN AS A CLOSING CAPITAL AS ON MARCH 31 1992 AND ON APRIL 1 1992 IT WAS AN OPEN ING BALANCE. THEREFORE THE TRIBUNAL HELD THAT WHAT WAS ALREADY CREDITED IN THE BOOKS OF ACCOUNT ENDING ON MARCH 31 1992 FOR FINANCIAL YEAR 1991-92 RELEVANT TO ASSESSMENT YEAR 1992-93 COULD NOT BE UNEXPLAINED CA SH CREDIT OR INVESTMENT IN THE BOOKS OF ACCOUNT MAINTA INED FOR THE FINANCIAL YEAR 1992-93 THE ACCOUNTING PERI OD FOR WHICH ENDED ON MARCH 31 1993. ON APPEAL: ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 12 HELD DISMISSING THE APPEAL THAT THE CARRIED FORWARD AMOUNT OF THE PREVIOUS YEAR DID NOT BECOME AN INVESTMENT OR CASH CREDIT GENERATED DURING THE RELE VANT YEAR 1993-94. THIS ALONE WAS SUFFICIENT TO SUSTAIN THE ORDER OF THE TRIBUNAL IN DELETING THE AMOUNT OF R.1 55 316 FROM THE ASSESSMENT FOR THE ASSESSMENT YEAR 1993-94. 8.6 ITAT MUMBAI BENCH IN THE CASE OF ACIT VS VIP INDUSTRIES (SUPRA) HELD AS UNDER: SECTION 41(1) IS ATTRACTED WHEN THERE IS CESSATION FOR REMISSION OF A TRADING LIABILITY. SIMPLY BECAUSE A PERIOD OF THREE YEARS HAS EXPIRED AND THE CREDITOR CANNOT LAWFULLY ENFORCE HIS CLAIM IT DOES NOT MEAN THAT THERE IS A CESSATION OR REMISSION OF LIABILITY. THE RE MAY BE SEVERAL SITUATIONS WHEN THE MONEY IS NOT CLAIMED OR PAID BY ONE PARTY TO ANOTHER WITHIN THREE YEARS AND THEREAFTER THE CLAIM IS MADE AND HONOURED BY THE OT HER. SO SIMPLY BECAUSE A PARTICULAR AMOUNT IS OUTSTANDI NG FOR A PERIOD OF MORE THAN THREE YEARS THAT DOES NO T CONSTITUTE INCOME UNDER SECTION 41(1). 9. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE PROVISIONS AND THE DECISION REFERRED TO ABOVE IT IS CLEAR THAT THE EXPENDITURE CLAIMED AS DEDUCTION IN THE EA RLIER YEAR HAVE NOT BEEN DISALLOWED IN THE EARLIER YEAR IN WHI CH THEY WERE CLAIMED. EVEN THE AO IN THE EARLIER YEAR HAS N OT DOUBTED THE EXISTENCE OF THE PARTIES. THE LEARNED COUNSEL F OR THE ASSESSEE FILED COPIES OF BALANCE SHEET OF THE ALL Y EARS UNDER APPEAL AS WELL AS PROCEEDINGS EARLIER ASSESSMENT Y EARS WHICH PROVE THAT THE OUTSTANDING LIABILITIES FROM E ARLIER YEARS WERE CARRIED FORWARDED TO THE ASSESSMENT YEARS UNDE R APPEAL STARTING FROM ASSESSMENT YEAR 2001-02. THE LIABILIT IES IN ASSESSMENT YEAR 2000-01 WERE IN A SUM OF RS.1 29 83 564/-. THE PARTICULARS OF THOSE PARTIES AGAINST WHOM THE L IABILITIES WERE SHOWN IS MENTIONED AT PB-3 4 AND 5. THE SAME PARTIES CONTINUED IN THE ASSESSMENT YEAR 2001-02 UNDER APPE AL BUT THE BALANCES OF SOME OF THE PARTIES HAVE REDUCED WH ICH WOULD SHOW THAT PART PAYMENTS HAVE BEEN MADE TO THEM. THE ABOVE FACTS WOULD SHOW THAT THE LIABILITIES SHOWN IN THE BALANCE SHEET IN THE ASSESSMENT YEAR UNDER APPEAL I.E. 2001 -02 WHICH ARE OPENING BALANCES WHICH ARE CARRIED FORWARD FRO THE PRECEDING ASSESSMENT YEAR. THE LIABILITIES HAVE BEE N SHOWN IN THE BALANCE SHEET OF THE ASSESSEE WHICH WOULD SH OW THAT THE ASSESSEE ACKNOWLEDGED THE LIABILITIES OF THE OU TSTANDING ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 13 AMOUNTS. THE BALANCES WERE THUS CARRIED FORWARD FRO M EARLIER YEARS. IN ASSESSMENT YEAR 2002-03 THE AO MADE ADDI TION OF RS.1 60 590/- IN RESPECT OF ROYAL ENGINEERING WORK WHOSE BALANCE WAS ALSO OUTSTANDING IN THE ASSESSMENT YEAR 2000- 01 AND 2001-02. IT WOULD THEREFORE SHOW THAT SI MILAR ADDITION IS MADE IN THE ASSESSMENT YEAR 2002-03 WHI CH WOULD AMOUNT TO DOUBLE ADDITION IN RESPECT OF THE S AME PARTY. IN ASSESSMENT YEAR 2003-04 THE AO MADE ADDITION OF RS.40 032/- IN RESPECT OF SANJAY SPAL RS.32/- AN KIT ENGINEERING RS.20 000/- AND MOTILALJI RS.20 000 /-. THESE AMOUNTS WERE NOT CARRIED FORWARD FROM EARLIER YEARS AS PER THE DETAILS FILED IN THE PAPER BOOK. IT WOULD SHOW THAT THESE ARE THE CURRENT LIABILITIES OF THE ASSESSEE IN THE ASSESSMENT YEAR 2003-04. SIMILARLY IN ASSESSMENT YEAR 2006-07 THE AO MADE ADDITION OF RS.1 32 118/- IN RESPECT OF AMOUNT OF RS.45 409/- AND RS.86 709/- IN RESPECT OF MAHALAXMI ROADWAYS AND NIHAL ROADWAYS. THESE WERE THE CREDIT BALANCES IN THE ASSESSMENT YEAR UNDER APPEAL WHICH WERE CARRIED FORWARD IN THE PRECEDING ASSESSMENT YEAR 20 05-06 AND IN THAT YEAR THERE WERE DEBIT BALANCES AGAINST THESE PARTIES AS PER THE DETAILS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THESE FACTS WOULD SHOW THAT THE A UTHORITIES BELOW HAVE NOT APPLIED THEIR MIND TO THE FACTS OF T HE CASE THAT THESE ARE NOT THE FIT CASES FOR INVOKING THE PROVIS IONS OF SECTION 41(1) OF THE IT ACT IN THE MATTER AS DONE B Y THE AO. 9.1 CONSIDERING THE FACTS OF THE CASE AS NOTED ABOV E IT IS CLEAR THAT THE ASSESSEE HAD CONTINUED TO SHOW THE A DMITTED AMOUNTS AS LIABILITIES IN ITS BALANCE SHEET. THE LI ABILITIES REFLECTED IN THE BALANCE SHEET CANNOT BE TREATED AS CESSATION OF LIABILITIES. MERELY BECAUSE THE LIABILITIES ARE OUTSTANDING FOR LAST MANY YEARS IT CANNOT BE INFERRED THAT THE SAI D LIABILITIES HAVE CEASED TO EXIST. IT IS ALSO A FACT THAT THE AS SESSEE HAS NOT WRITTEN OFF THE OUTSTANDING LIABILITIES IN THE BOOK S OF ACCOUNT AND THE OUTSTANDING LIABILITIES ARE STILL IN EXISTE NCE WOULD PROVE THAT THE ASSESSEE ACKNOWLEDGED HIS LIABILITIE S AS PER THE BOOKS OF ACCOUNT. SECTION 41(1) OF THE IT ACT I S ATTRACTED WHEN THERE IS CESSATION OR REMISSION OF A TRADING L IABILITY. THE AO SHALL HAVE TO PROVE THAT THE ASSESSEE HAS OBTAIN ED THE BENEFITS IN RESPECT OF SUCH TRADING LIABILITIES BY WAY OF REMISSION OR CESSATION THEREOF. MERELY BECAUSE THE ASSESSEE OBTAINED BENEFIT OF DEDUCTION IN THE EARLIER YEARS AND BALANCES ARE CARRIED FORWARD IN THE SUBSEQUENT YEAR WOULD NOT PROVE THAT THE TRADING LIABILITIES OF THE ASSES SEE HAVE BECOME NON-EXISTENT. IT MAY ALSO BE NOTED HERE THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF THE EXPEN DITURE IN ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 14 ALL THE ASSESSMENT YEARS UNDER APPEAL. THE DECISION S CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE SQUARELY APPLY TO THE FACTS OF THE CASE. THEREFORE WE ARE OF THE VIEW TH AT PROVISIONS OF SECTION 41 (1) (A) OF THE IT ACT HAVE BEEN WRONG LY APPLIED IN THE MATTER. WE MAY ALSO NOTE HERE THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED DETAILS OF PARTICULARS O F PAYMENTS OF LIABILITIES IN SUBSEQUENT YEARS WHICH ARE IN THE NA TURE OF ADJUSTMENT THROUGH JOURNAL ENTRY CASH PAYMENT AND SOME PAYMENTS BY BANKING CHANNEL. THE LEARNED DR OBJECTE D TO THE FILING OF SUCH DETAILS AT THIS STAGE AND FURTHER SU BMITTED THAT THE PAYMENT BY CASH AND JOURNAL ENTRY WOULD NOT PRO VE GENUINENESS OF THE PAYMENTS. WE DO NOT AGREE WITH T HE SUBMISSION OF THE LEARNED DR BECAUSE THOSE DETAILS WERE CALLED FOR BY THE BENCH DURING THE COURSE OF HEARIN G AND EVEN PAYMENT BY CHEQUES AND/OR JOURNAL ENTRY WOULD NOT A BSOLVE THE AO FOR MAKING OUT A CASE U/S 41 (1) (A) OF THE IT ACT. THE LAST CONTENTION OF THE LEARNED COUNSEL FOR THE ASSE SSEE WAS THAT SINCE INCOME OF THE ASSESSEE IS COMPUTED U/S 4 4AE OF THE IT ACT THEREFORE PROVISIONS OF SECTION 41(1) OF THE IT ACT WOULD NOT APPLY. HOWEVER CONSIDERING THE FINDING G IVEN ABOVE THAT PROVISIONS OF SECTION 41 (1) WOULD NOT A PPLY TO THE FACTS AND CIRCUMSTANCES OF THE CASE; THERE IS NO NE ED TO GIVE FURTHER FINDINGS ON THIS ISSUE. 10. ON CONSIDERATION OF THE ABOVE DISCUSSION WE FI ND THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE ADDITIONS AGAINST THE ASSESSEE IN ALL THE ASSESSMEN T YEARS UNDER APPEAL OF THE ABOVE AMOUNTS WITH THE AID OF SECTION 41(1)(A) OF THE IT ACT. AS A RESULT WE SET ASIDE T HE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITIO NS. 11. IN VIEW OF THE ABOVE FINDINGS THE DECISIONS CI TED BY THE LEARNED DR WOULD NOT SUPPORT THE CASE OF THE REVENU E. 12. AS A RESULT THESE GROUNDS OF APPEAL OF THE ASS ESSEE IN ALL THE APPEALS ARE ALLOWED. 13. CONSIDERING THE ABOVE DISCUSSIONS WE SET ASID E THE ORDERS OF THE AUTHORITIES BELOW AND DELETE BOTH THE ADDITIONS. IN THE RESULT GROUNDS NO.2 AND 3 ARE ALLOWED. 14. GROUNDS NO.4 5 AND 6 OF THE APPEAL READ AS UND ER: ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 15 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING DISALLOWANCE MADE BY AO OF RS.12 924/- O UT OF REPAIRS AND MAINTENANCE AMOUNT ON ADHOC BASIS. LTD. CIT (A) OUGHT TO HAVE DELETED SUCH DISALLOWANCE WHEN AO HAS ACCEPTED 80% OF THE EXPENSES AS GENUINE. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF 20% OF THE TELEPHONE EXP ENSES BY AO TREATING THEM TO BE OF PERSONAL NATURE. LD. CIT( A) OUGHT TO HAVE DELETED SUCH DISALLOWANCE. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING 20% AD HOC DISALLOWANCE OF RS.45 969/- A ND RS.44 257/- OUT OF VEHICLE EXPENSES AND DEPRECIATIO N RESPECTIVELY MADE BY AO OUT OF TOTAL EXPENDITURE CL AIMED. LD. CIT (A) OUGHT TO HAVE DELETED SUCH DISALLOWANCE. 15. THE LEARNED CIT(A) ON THE ABOVE GROUNDS OF APPE AL NOTED THAT THE REPAIRS AND MAINTENANCE EXPENDITURE HAVE NOT BEEN S UPPORTED BY MATERIAL PROOF. THE LEARNED CIT(A) ALSO NOTED THAT TELEPHONE EXPENSES WERE INCURRED FOR PERSONAL PURPOSES AND SIMILARLY P ERSONAL USER OF MOTOR VEHICLE WAS FOUND TO BE CORRECT AND ACCORDINGLY ALL THESE GROUNDS WERE DISMISSED. 16. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ON THE OTHER HAN D THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A SSESSEE IS AN INDIVIDUAL. THE AO WITH REGARD TO REPAIR AND MAINTE NANCE EXPENSES NOTED THAT THE EXPENDITURE AMOUNTING TO RS.64 621/- ARE NOT SUPPORTED BY ANY BILLS/VOUCHERS AND THE SAID ARE PAID IN CASH . 20% OF THE SAID EXPENSES WERE ACCORDINGLY DISALLOWED. AS REGARDS TE LEPHONE EXPENSES VEHICLE EXPENSES AND DEPRECIATION THE ASSESSEE HAS ADMITTED IN HIS REPLY BEFORE THE AO THAT HE HAS NOT MAINTAINED ANY LOG BO OK FOR CAR TELEPHONE AND MOBILE PHONE. THE ABOVE FACTS WOULD SHOW THAT T HE ASSESSEE HAS NOT MAINTAINED PROPER RECORD TO SHOW THAT THE SAME HAS BEEN USED FOR THE ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 16 PURPOSE OF BUSINESS. THEREFORE THE AUTHORITIES BEL OW WERE RIGHT IN DISALLOWING PART EXPENSES. THE SAME IS THE POSITION BEFORE US AS THE ASSESSEE HAS NOT ADDUCED ANY SUFFICIENT EVIDENCE TO CONTRADICT THE FINDINGS OF THE AUTHORITIES BELOW. IN THE RESULT W E DO NOT FIND ANY ERROR IN THE FINDINGS OF THE AUTHORITIES BELOW ON THESE G ROUNDS OF APPEAL. GROUNDS NO.4 5 AND 6 OF THE APPEAL OF THE ASSESSEE ARE DISMISSED. 17. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NO.3266/AHD/2009 18. THE AO MADE THE ADDITION AS DISCUSSED ABOVE ON QUANTUM APPEAL. THE LEARNED CIT(A) DELETED PART OF THE ADDITION. TH E AO THEREFORE LEVIED PENALTY U/S 271 (1) ( C ) OF THE IT ACT ON THE FOLL OWING ADDITIONS: (1) AGRICULTURAL INCOME DISALLOWED RS. 3 81 403/- (2) ON ACCOUNT OF CESSATION OF LIABILITY RS. 8 8 623/- (3) ON ACCOUNT OF CESSATION OF LIABILITY RS. 1 29 747/- (4) OUT OF REPAIR AND MAINTENANCE EXPENSES RS. 12 924/- (5) OUT OF TELEPHONE/MOBILE EXPENSES RS. 5 7 82/- (6) OUT OF VEHICLE EXPENSES RS. 45 969/- (7) OUT OF DEPRECIATION ON CAR RS. 44 267/- THE AO VIDE SEPARATE ORDER LEVIED PENALTY WHICH WAS CONFIRMED BY THE LEARNED CIT(A). 19. ON CONSIDERATION OF THE RIVAL SUBMISSIONS AND F INDINGS GIVEN ON QUANTUM APPEAL IN ITA NO.1215/AHD/2007 WE ARE OF T HE VIEW THAT PENALTY IS NOT LEVIABLE U/S 271 (1) ( C ) OF THE IT ACT IN THE AFORESAID CASE. THE ADDITION ON ACCOUNT OF AGRICULTURAL INCOME WAS MADE BY THE AUTHORITIES BELOW ON ESTIMATION BASIS ON WHICH SUBS TANTIAL ADDITION HAS BEEN REDUCED BY THE TRIBUNAL. THE ADDITION U/S 41 ( 1) OF THE IT ACT HAS BEEN DELETED. HOWEVER THE ADDITION ON ACCOUNT OF D ISALLOWANCE OF THE EXPENDITURE HAS BEEN MAINTAINED. THE ABOVE FACTS WO ULD SHOW THAT THE ASSESSEE HAS MADE A CLAIM OF AGRICULTURAL INCOME WH ICH IS BASED UPON THE HISTORY OF THE ASSESSEE. HOWEVER DUE TO FALL I N THE GROSS PROFIT RATE ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 17 PART ADDITION IS MAINTAINED. THEREFORE THERE IS NO REASON TO BELIEVE THAT THE ASSESSEE HAS DELIBERATELY CONCEALED THE PARTICU LARS OR FILED INACCURATE PARTICULARS OF INCOME. SINCE THE ADDITIO N U/S 41 (1) OF THE IT ACT HAVE BEEN DELETED THEREFORE NO PENALTY WOULD BE LEVIABLE ON SUCH DELETION OF ADDITION. THE ASSESSEE FURTHER MADE CLA IM OF DEDUCTION OF EXPENDITURE BUT PART ADDITIONS HAVE BEEN MADE BY T HE AUTHORITIES BELOW BECAUSE THE ASSESSEE COULD NOT PROVE TO THE SATISFA CTION OF THE AUTHORITIES BELOW THAT WHOLE OF THE EXPENDITURE HAV E BEEN INCURRED FOR BUSINESS PURPOSE. IT IS THEREFORE A CASE OF ESTIM ATE OF AGRICULTURAL INCOME AND DISALLOWANCE OF THE EXPENDITURES. ON EST IMATE OF AGRICULTURAL INCOME AND DISALLOWANCE OF THE EXPENDITURE PER-SE W OULD NOT PROVE THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FILED INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS MADE A CLAI M OF AGRICULTURAL INCOME AND DEDUCTION OF THE EXPENDITURE AND EXPLANA TION OF THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE. THEREFORE WE DO NO T FIND IT TO BE A FIT CASE FOR CONFIRMING THE ORDERS OF THE PENALTY U/S 271 (1 ) ( C ) OF THE IT ACT. HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANC E PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) HELD THAT A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C ) OF THE INCOME-TAX ACT 1961 SUGGEST TH AT IN ORDER TO BE COVERED BY IT THERE HAS TO BE CONCEALMENT OF PARTI CULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING O F THE WORD PARTICULARS USED IN SECTION 271(1) ( C ) WOULD EM BRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN TH E RETURN IS FOUND TO BE INCORRECT OR INACCURATE THE ASSESSEE C ANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORD ER TO EXPOSE THE ASSESSEE TO PENALTY UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUN T TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 18 BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULAR S ARE FOUND TO BE INACCURATE THE LIABILITY WOULD ARISE. TO ATTRAC T PENALTY THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE NOT EXACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS. W HERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE I N ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE I S NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1) ( C ). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF W ILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AM OUNT TO FURNISHING INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. HONBLE SUPREME COURT IN THE CASE OF M/S. RAJASTHA N SPINNING & WEAVING MILLS 2009 PIOL 63 SC HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. 20. CONSIDERING THE FACTS OF THE CASE AS NOTED ABOV E IN THE LIGHT OF THE ABOVE DECISIONS WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY. THE ORDERS OF THE AUTHORITIES BELOW ARE ACCORDINGLY SET ASIDE AND PENALTY U/S 271 (1) ( C ) OF THE IT ACT IS CANC ELLED. 21. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. ITA NOS. 1215/AHD/2007 AND 3266/AHD/2009 SHRI KESHAVBHAI B. TANDEL VS ITO W-2 VAPI 19 22. IN THE RESULT THE APPEAL OF THE ASSESSEE IN IT A NO.1215/AHD/2007 IS PARTLY ALLOWED. HOWEVER THE APPEAL OF THE ASSES SEE IN ITA NO.3266/AHD/2009 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09-09-2010 SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 09-09-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD 1. DATE OF DICTATION: 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DISPATCH OF THE ORDER: