The ITO, Ward-1(1),, RAJKOT-GUJARAT v. Shri Bhupendra Jamnadas Doshi (HUF),, RAJKOT-GUJARAT

ITA 1215/RJT/2010 | 2007-2008
Pronouncement Date: 25-11-2011 | Result: Dismissed

Appeal Details

RSA Number 121524914 RSA 2010
Assessee PAN AABHD1534K
Bench Rajkot
Appeal Number ITA 1215/RJT/2010
Duration Of Justice 1 year(s) 1 month(s) 13 day(s)
Appellant The ITO, Ward-1(1),, RAJKOT-GUJARAT
Respondent Shri Bhupendra Jamnadas Doshi (HUF),, RAJKOT-GUJARAT
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 25-11-2011
Date Of Final Hearing 16-05-2011
Next Hearing Date 16-05-2011
Assessment Year 2007-2008
Appeal Filed On 12-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI T.K. SHARMA (JM) AND SHRI A.L. GEHLOT ( AM) I.T.A. NO.1215/RJT/2010 (ASSESSMENT YEAR 2007-08) ITO WD.1(1) VS SHRI BHUPENDRA JAMNADAS RAJKOT DOSHI (HUF) PROP OF M/S JAY ENTERPRISE 14-D PUSHPAM OM PARK KALAWAD ROAD RAJKOT PAN : AABHD1534K (APPELLANT) (RESPONDENT) C.O. NO.52/RJT/2010 (ARISING OUT OF I.T.A. NO.1215/RJT/2010) (ASSESSMENT YEAR 2007-08) SHRI BHUPENDRA JAMNADAS DOSHI (HUF) VS ITO WD.1(1) RAJKOT RAJKOT (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING : 22-11-2011 DATE OF PRONOUNCEMENT : 25-11-2011 REVENUE BY : SHRI CJ MANIAR ASSESSEE BY : NONE O R D E R PER T.K. SHARMA (JM) THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE AGAINST THE ORDER DATED 19-07-2010 PASSED BY THE CI T(A)-I RAJKOT FOR THE ASSESSMENT YEAR 2007-08. 2. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APP EAL IS AS UNDER: (1) THE LEARNED CIT(A)-I HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1`7 46 250/- (M/S AJAY TRADERS ITA NO.1215/RJT/2010 CO 52/RJT/2010 2 RS.12 52 375/- AND M/S NARESH ENTERPRISE RS.4 93 875/-) MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUNDRY CREDI TORS AS CEASED LIABILITIES U/S 41(1) OF THE I T ACT 1961. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE OF HEARING SERVED. THEREFORE THE APPEAL IS DISPOSED OF AFTER HEARING THE LD.DR AND ON PERUSAL OF MATERIAL AVAILABLE ON RECORD. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A DE ALER OF DYE AND CHEMICAL AND MAINTAINS REGULAR BOOKS OF ACCOUNT WHICH ARE AU DITED U/S 44AB OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER ASKED THE ASSESSEE TO FURNISH DETAILS AND CONFIRMATION FROM S UNDRY CREDITORS IN RESPECT OF CREDITORS OUTSTANDING IN THE BALANCE-SHEET AS ON 31 -03-1997. THE ASSESSEE FURNISHED THE SAME. THE ASSESSING OFFICER DID NOT A CCEPT THE EXPLANATION AND TREATED THE AMOUNT PERTAINING TO FOLLOWING THREE CR EDITORS AS CEASED LIABILITY IN TERMS OF SECTION 41(1) OF THE ACT: (I) AJAY TRADERS RS. 12 52 375 (II) NARESH ENTERPRISE RS. 4 93 875 (III) PADMAVATI ENTERPRISE RS. 3 97 519 RS.21 43 750 5. THE REASONING GIVEN BY THE ASSESSING OFFICER FOR TREATING THE AFORESAID THREE CREDITORS AS CEASED LIABILITY ARE AS UNDER: (A) NO CONTRA ACCOUNT AND PAN NO. WAS FURNISHED IN THE CASE OF M/S PADMAVATI ENTERPRISE FOR EARLIER YEAR TRANSACTI ONS OF PURCHASES. ITA NO.1215/RJT/2010 CO 52/RJT/2010 3 (B) IN TWO CASES VIZ. (I) AJAY TRADERS & (II) NARES H ENTERPRISE CONTRA ACCOUNTS WERE FURNISHED FOR EARLIER YEAR TRA NSACTIONS OF PURCHASES ARE BOGUS NON GENUINE FABRICATED AND NOTHING BUT A PIECE OF PAPER. NO PAN NO. OF THE SAID TWO S UNDRY CREDITORS ARE FURNISHED. (C) NO REASON SUBMITTED BY THE ASSESSEE FOR KEEPING THE AMOUNT OUTSTANDING FOR SUCH A LONG TIME. (D) THERE IS NO DISPUTE FOR THE TRANSACTION OF PURC HASES. THEREFORE THERE IS NO LOGIC AS TO WHY THE AMOUNT SH OULD BE KEPT OUTSTANDING FOR SUCH A LONG TIME. (E) THE FINANCIAL POSITION WAS QUITE HEALTHY. THUS THERE CAN NOT BE REASON FOR NON PAYMENTS OF THE OUTSTANDING LIABI LITY OF THE ASSESSEE. (F) ON THE PART OF THREE SUNDRY CREDITORS IF AT ALL WERE GENUINE THEN THEY WOULD HAVE NOT ALLOWED TO KEEPING THE OUT STANDING ARREARS FOR SUCH A LONG TIME WITHOUT MAKING EFFORTS OF RECOVERY OR CORRESPONDENCE. (G) THE ASSESSEE HAS NOT SPECIFIED AS TO WHY PAYMEN TS WERE OUTSTANDING. (H) AS THERE WAS NO DISPUTE ABOUT THE GOODS AND ONC E IT WAS SOLD OUT. IT CANNOT BELIEVED THAT THE PAYMENT REMA INS OUTSTANDING. (I) THE INFORMATION U/S 133(6) OF THE I.T. ACT WERE CALLED FROM ALL THREE SUNDRY CREDITORS THROUGH RPAD LETTERS. THE P OSTAL AUTHORITY RETURNS THESE LETTERS WITH THE REMARKS N OT KNOWN. 6. ON APPEAL IN THE IMPUGNED ORDER THE LD CIT(A) D ELETED THE ADDITION OF RS. 21 43 750 MADE FOR THE DETAILED REASON GIVEN AT PAR AGRAPHS 3.3 TO 3.4 WHICH ARE REPRODUCED AS UNDER: 3.4 IN RESPECT OF OTHER TWO CREDITORS IT IS NOTIC ED THAT THE ASSESSEE HAD FILED COMPLETE BILLS FOR PURCHASES MAD E FROM M/S AJAY TRADERS AND M/S NARESH ENTERPRISE AHMEDABAD AND THESE PURCHASES WERE MADE DURING FY 2005-06 RELEVANT TO A Y 2006- ITA NO.1215/RJT/2010 CO 52/RJT/2010 4 07 AND THESE PURCHASES HAVE BEEN TREATED AS GENUINE . MERELY BECAUSE PAYMENT HAS NOT BEEN MADE AUTOMATICALLY THE AMOUNT CANNOT BE TREATED TO HAVE CEASED IN TERMS OF S.41(1 ) OF THE ACT. SUCH UNILATERAL ACTION OF THE A.O. IS NOT PERMISSIB LE IN LAW. IT IS ALSO SEEN THAT IN THE ASSESSMENT ORDER THE A.O. HAS MEN TIONED THAT THE NOTICES U/S 133(6) WERE RETURNED UNSERVED. HOWEVER NO OPPORTUNITY IN THIS REGARD WAS PROVIDED TO THE ASSE SSEE AND THEREFORE THE INFORMATION CALLED BEHIND THE BACK O F THE ASSESSEE COULD NOT HAVE BEEN UTILIZED IN THE ASSESSMENT PROC EEDINGS. IN ANY CASE THE FACT REMAINS THAT THE ASSESSEE HAD SU BMITTED COMPLETE DETAILS OF PURCHASES MADE FROM THESE PARTI ES AND IF THE PURCHASES WERE HELD AS GENUINE THERE CAN BE NO ACT ION TO TREAT THAT THESE CREDITORS WERE BOGUS. ALL THESE PARTIES HAVE REGULAR GUJARAT SALES TAX NUMBERS AND FROM THE CASE OF M/S AJHAY TRADERS FURTHER PAYMENT HAS BEEN MADE DURING THE F Y 2007-08. THEREFORE TREATING THESE AMOUNTS AS CESSATION OF L IABILITY IS EVEN OTHERWISE NOT PROPER. THE HONBLE ITAT AHMEDABAD C BENCH IN THE CASE OF NEW COMMERCIAL MILLS CO. LTD VS DCIT (7 3 TTJ 893) HAS HELD THAT EVEN WHEN LIABILITIES WERE CARRIED FO RWARD FOR THE LAST 10 TO 15 YEARS UNLESS THERE IS COGENT REASON AND M ATERIAL EVIDENCE TO SUPPORT THAT THESE LIABILITIES HAVE CEA SED IN THE YEAR UNDER CONSIDERATION NO ADDITION CAN BE MADE. EVEN THE HONBLE ITAT HAS HELD THAT THE REMISSION HAS TO BE GRANTED BY THE CREDITORS AND THE CESSATION OF THE LIABILITY MAY OCCUR EITHER BY REASON OF THE OCCUPATION OF THE LAW THAT IS ON THE LIABILITY BE COMING UNENFORCEABLE AT LAW BY THE CREDITORS. IN THIS CAS E EVEN SUCH TIME HAS NOT PASSED THAT IT COULD BE SAID THAT THE LIABI LITIES HAVE BECOME UNENFORCEABLE. THEREFORE FOLLOWING THE ABOVE DECI SION OF THE HONBLE AHMEDABAD ITAT I FIND NO REASON TO SUSTAIN THE ADDITION U/S 41(1) OF THE ACT AND THE ADDITION OF RS.21 43 7 50/- IS DELETED. AGGRIEVED WITH THE ORDER OF LD CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING BEFORE US ON BEHALF OF TH E REVENUE SHRI CJ MANIAR APPEARED AND RELYING ON THE REASONING GIVEN BY THE ASSESSING OFFICER CONTENDED THAT THE LD CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION IN RESPECT OF THREE CEASED CREDITORS IN TERMS OF SECTION 41(1) OF THE I .T. ACT 1961. ITA NO.1215/RJT/2010 CO 52/RJT/2010 5 8. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF AUTH ORITIES BELOW. IT IS PERTINENT TO NOTE THAT BEFORE THE LD. CIT(A) THE AS SESSEE HAS FILED CONFIRMATION OF M/S PADMAVATI ENTERPRISES WHICH WERE SENT TO THE A SSESSING OFFICER FOR ENQUJIRY AND COMMENTS. THE ASSESSING OFFICER VIDE LETTER D ATED 09-06-2010 MENTIONED THAT DETAILS FILED BY THE ASSESSEE HAVE BEEN VERIFI ED. THE MERE FACT THAT LETTER SENT BY THE ASSESSING OFFICER REMAINED UNSERVED IN OUR OPINION IS NO GROUND TO TREAT THIS LIABILITY AS CEASED U/S 41(1) OF THE ACT . 9. IN RESPECT OF OTHER TWO CREDITORS ALSO THE ASSE SSEE HAS FILED COMPLETE BILLS FOR PURCHASES MADE FROM THESE TWO PARTIES. THE MER E FACT THAT NOTICES U/S 133(6) SENT BY ASSESSING OFFICER WERE RETURNED UNSE RVED IN OUR OPINION IS NO GROUND TO PRESUME THAT THE LIABILITY IN RESPECT OF BOTH THESE CREDITORS HAVE CEASED. BOTH THESE PARTIES HAVE REGULAR SALES-TAX NUMBERS AND FROM THE BILLS IT WAS CLEAR THAT GOODS WERE SOLD BY THEM TO THE ASSES SEE. IN THE FINANCIAL YEAR 2007-08 PAYMENT HAS BEEN MADE TO M/S AJAY TRADERS. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WE ARE OF T HE VIEW THAT THE VIEW TAKEN BY THE LD.CIT(A) FOR HOLDING THAT ADDITION U/S 41(1) C ANNOT BE MADE IN RESPECT OF THESE TWO CREDITORS. WE ARE THEREFORE INCLINED T O UPHOLD THE ORDER OF LD.CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 10. THE CROSS OBJECTION IS IN SUPPORT OF THE ORDER OF THE LD.CIT(A). IN VIEW OF OUR DECISION ON THE APPEAL FILED BY THE REVENUE THE CROSS OBJECTION BECOMES INFRUCTUOUS; HENCE DISMISSED. ITA NO.1215/RJT/2010 CO 52/RJT/2010 6 11. IN THE RESULT THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. THIS ORDER HAS BEEN PRONOUNCED ON THE DATE AS MENTI ONED ABOVE. SD/- SD/- (A.L. GEHLOT) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT DT : 25 TH NOVEMBER 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-I RAJKOT 4. THE CIT-I RAJKOT 5. THE DR I.T.A.T. RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT