The ACIT, Circle -9, Ahmedabad v. M/s Patel Chandulal Chhotalal,, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE SHRI MAHAVIR SINGH JM & SHRI A N PAHUJA AM] ITA NO.3443/AHD/2004 (ASSESSMENT YEAR:-2001-02) ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-9 AHMEDABAD V/S M/S PATEL CHANDULAL CHHOTALAL F.T.D. A-4 SWAMI GUNATIT SOCIETY MEMNAGAR AHMEDABAD [PAN : AABFP 1577 E] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI B D BAROT DR ASSESSEE BY:- NONE O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 22- 09-2004 OF THE LD. CIT(APPEALS)-XV AHMEDABAD RAIS ES THE FOLLOWING GROUNDS:- 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.8 27 776/- MADE ON ACCOUNT OF CESSATION OF LIABI LITY U/S 41(1) OF THE ACT IN THE CASE OF 15 CREDITORS WHOSE IDENTITY COUL D NOT BE ESTABLISHED. 2 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION OF RS.1 59 990/- MADE U/S 41(1) OF THE ACT IN THE CASE OF EX-PARTNER MR. C.C. PATEL AS THE LIABILITY HAD CEASED ON THE DEATH OF THE PERSON CONCERNED. 3 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION OF RS.4 85 036/- MADE ON ACCOUNT OF DIFFERENCE IN FREI GHT RECEIPT. 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 5 IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE SET ASIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE R ESTORED TO THE ABOVE EXTENT. 2 AT THE OUTSET THE BENCH REJECTED THE REQUEST FOR ADJOURNMENT ON BEHALF OF THE ASSESSEE AND PROCEEDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. DR. ITA NO.3443/AHD/2004 M/SPATEL CHANDULAL CHHOTALAL 2 3. ADVERTING FIRST TO GROUND NOS. 1 & 2 OF THE APPEAL FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING I NCOME OF RS. 3 14 480/- FILED ON 30.10.2001 BY THE ASSESSEE WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE INCOME-TAX ACT 1961[HEREINAFTER REFERRED TO AS THE ACT;] ON 1 6.10.2002. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER [AO IN SHORT] NOTICED THAT THE ASSESSEE HAD SHOWN LIABILIT IES OF RS.19.79.494/- IN SCHEDULE-K OF THE BALANCE SHEET A S PAYABLE TO CREDITORS FOR SUPPLIES. SINCE THE ASSESSEE WAS NOT ABLE TO GIVE THE ADDRESSES AND ESTABLISH THE IDENTITY OF THE 15 PAR TIES MENTIONED ON PAGE 2 OF THE ASSESSMENT ORDER NOR COULD ADDUCE REA SONS FOR NON- PAYMENT OF THESE AMOUNTS FOR MORE THAN EIGHT YEARS THE AO BROUGHT TO TAX THE AMOUNT OF RS.8 27 776/- HAVING RECOURSE TO PROVISIONS OF SEC. 41(L) OF THE ACT EVEN WHEN THE AMOUNTS HAD NOT BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS NOR WAS T HERE CESSATION OR REMISSION OF THESE LIABILITIES. THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE THAT THEY STILL OWED THESE AMOUNTS TO TH E CONCERNED CREDITORS WITH THE OBSERVATIONS THAT THE ASSESSEE DID NOT ESTABLISH THE GENUINENESS OF THESE DORMANT CREDITORS NOR WAS REQUIRED TO DISCHARGE THE LIABILITY SHOWN IN THE BOOKS THE RE COVERY OF THE AMOUNT HAVING BEEN BARRED BY LIMITATION AFTER EXPI RY OF 3 YEARS FROM THE DATE OF THEIR OCCURRENCE. THE AO ALSO OBSERVED THAT WRITING OFF OF THE LIABILITY WAS A MERE FORMALITY AND ACCORDING LY BROUGHT TO TAX THE AMOUNT OF RS.8 27 776/- + RS. 1 59 990/-ON THE GROUND OF CESSATION OF LIABILITY. 4. ON APPEAL THE ASSESSEE WHILE REITERATING THEI R SUBMISSIONS BEFORE THE AO CONTENDED THAT THE PROVISIONS OF SECTION 41 (1) OF THE ACT WERE NOT APPLICABLE IN THEIR CASE. WHILE RELYING UPON THE DE CISIONS IN THE CASE OF TIRUNELVELI MOTOR BUS SERVICE CO. (P.) LTD. VS. CIT (1970) 78 I TR 55 (SC) CIT VS. RASHMI TRADING (1996) 103 ITR 312 (GUJ.) C1T VS. SUGAULI S UGAR WORKS PVT. LTD. (1999) 236 ITR 518 (SC) CIT VS. BHARAT IRON AND STEEL INDU STRIES (1993) 199 ITR 67 ITA NO.3443/AHD/2004 M/SPATEL CHANDULAL CHHOTALAL 3 (GUJ) (FB) DY. CIT VS. TRIBENI TISSUES LTD. (2001) 77 ITD 67 (CAL.) CIT VS. SILVER COTTON MILLS CO. LTD. (2001) 170 CTR 377 (GU J.) AND DY.CIT VS. ASSAM TRIBUNE (2001) 71 TTJ 52 (GAUHATI) (MAG.) THE ASSES SEE PLEADED THAT THERE WAS NO ACTUAL REMISSION OR CESSATION OF THE LIABILITY AND THEREFORE PROVISIONS OF SEC. 41(1) CAN NOT BE INVOKED. IN THE LIGHT OF THESE SUB MISSIONS THE LD. CIT(A) DELETED THE ADDITION HOLDING AS UNDER:- 2.2 I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS A ND OF THE ASSESSING OFFICER AS WELL AS THE ARGUMENTS AND SUBMISSIONS OF THE APPELLANT I HAVE GONE THROUGH THE DECISIONS RELIED UPON BY THE ASSES SING OFFICER AND THE APPELLANT. ON VERIFICATION OF THE 'BALANCE SHEET OF THE APPELLANT I FIND THAT THE LIABILITY OF RS.8 27 776/- HAS BEEN SHOWN AS BY THE APPELLANT AND HAS NOT BEEN WRITTEN OFF IN ITS BOOKS OF ACCOUNTS. HENC E THERE IS NEITHER A CASE OF ACTUAL REMISSION OR CESSATION OF NOR IT CAN BE S AID THAT THE 'APPELLANT HAS OBTAINED ANY BENEFIT WHETHER IN CASH OR ANY MANNER WHATSOEVER OF ANY AMOUNT IN RESPECT OF SUCH .TRADING LIABILITY BY WA Y OF REMISSION OR CESSATION THEREOF. I AGREE WITH THE ARGUMENTS OF AP PELLANT THAT SECTION 41(1) OF THE ACT CONTEMPLATES ACTUAL REMISSION OR C ESSATION OF LIABILITY AS WELL AS OBTAINING OF AN AMOUNT EITHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER OR BENEFIT BY WAY OF REMISSION OR CESSAT ION AND IT SHOULD BE OF A PARTICULAR AMOUNT. THE ABOVE ARGUMENT OF THE AUTH ORIZED REPRESENTATIVE FINDS SUPPORT FROM VARIOUS DECISION S CITED BY THE APPELLANT INCLUDING OF HON'BLE APEX COURT WHEREIN IT HAS BE EN HELD THAT OBTAINING BY THE ASSESSEE OF A BENEFIT BY VIRTUE OF REMISSION OR CESSATION IS SINE QUA NON FOR THE APPLICATION OF THIS SECTION. IN THE APP ELLANTS CASE IT IS NOT THE APPELLANT WHO HAS WRITTEN OFF THE LIABILITY IN ITS BOOKS OF ACCOUNT BUT IT IS THE AO WHO IS OF THE OPINION THAT THE APPELLANT IS NOT REQUIRED TO DISCHARGE THE LIABILITY ON THE GROUND THAT THE CREDITORS ARE NOT IDENTIFIABLE AND THAT THE DEBTS HAVE GOT BARRED BY TIME AS PER LAW OF LIMITAT ION. FURTHER IT HAS ALSO NOT BEEN CONCLUSIVELY ESTABLISHED BY THE ASSESSING OFFICER THAT AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSM ENT IN ANY PREVIOUS YEAR IN RESPECT OF THE LIABILITY IN QUESTION FOR WH ICH ONUS IS ON THE REVENUE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF TIRUNELVELI MOTOR BUS SERVICE CO. LTD VS. CIT (78 ITR 55). COMING TO THE ISSUE OF THE DEBTS BEING BARRED BY LAW OF LIMITATION THE JURISDICTIONA L COURT OF LAW I.E. HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SILVER CO TTON MILLS (170 CTR 377) AS WELL AS THE HON'BLE APEX COURT IN THE CASE OF CIT VS. SUGAULI SUGAR WORKS PVT. LTD (236 ITR 518) HAS CATEGORICALL Y HELD THAT SIMPLY BECAUSE THE PERIOD OF LIMITATION HAS COME TO AN END FOR THE PURPOSE OF FILING A SUIT FOR RECOVERY OF THE SAID AMOUNT OR FO R TAKING APPROPRIATE ACTION AGAINST THE ASSESSES IT CANNOT BE SAID THAT THERE WAS A CESSATION OF LIABILITY. THE LIABILITY STILL REMAINS THOUGH IT M AY NOT BE ENFORCEABLE AT LAW ON ACCOUNT OF THE PROVISIONS OF LAW ON ACCOUNT OF T HE PROVISIONS OF LAW LIMITATION. AS REGARDS THE IDENTITY AND GENUINENESS OF THE CREDITORS IN QUESTION I AGREE WITH THE ARGUMENT OF AUTHORIZED R EPRESENTATIVE THAT ITA NO.3443/AHD/2004 M/SPATEL CHANDULAL CHHOTALAL 4 SINCE THE LIABILITY IS VERY OLD RATHER HAVING BEEN CREATED MORE THAN 8 YEARS BACK AS ALSO OBSERVED BY THE ASSESSING OFFICER AND SINCE THE SAME HAVING BEEN ACCEPTED AS GENUINE IN THE YEAR OF CREA TION AS WELL AS SUBSEQUENT YEARS BY THE DEPARTMENT THE QUESTION OF GENUINENESS OF THE CREDITORS AT THIS STAGE IN MY OPINION IS NEITHER JU STIFIED NORT OPEN TO THE REVENUE AS PER THE PROVISIONS OF LAW. THE ONLY ISSU E WHICH IS TO BE DECIDED IS IN RESPECT OF APPLICABILITY OF THE PROV ISIONS OF SECTION 41(1) OF THE ACT. I AM OF THE CONSIDERED OPINION THAT ONCE T HE APPELLANT HAS SHOWN THE LIABILITY AS OUTSTANDING IN ITS BOOKS OF ACCOUN T AND SUCH CREDITORS HAVING BEEN ACCEPTED AS GENUINE M THE EARLIER YEARS IT IS NOT OPEN FOR THE REVENUE TO SUO MOTTO TREAT THE SAID LIABILITIES AS NOT REQUIRED TO BE DISCHARGED MERELY ON THE GROUND THAT THE APPELLANT FIRM COULD NOT IDENTIFY THE WHEREABOUTS OF THE SAID CREDITORS FOR THE REASO N THAT THE SAME WAS IN THE KNOWLEDGE OF THE PARTNER OF THE FIRM WHO EXPIRE D WAY IN 1995 AND THE PRESENT PARTNERS WERE NOT FULLY AWARE OF THE WHEREA BOUTS OF THE CREDITORS. NONETHELESS THE SAID FACT ALONE IS NOT SUFFICIENT TO CONCLUDE THAT THE LIABILITIES CEASED TO EXIST AND THE APPELLANT IS NO LONGER REQUIRED TO DISCHARGE THE SAME IN FUTURE. KEEPING IN VIEW THE A BOVE FACTS IN TOTALITY AND FOLLOWING THE RATIO LAID DOWN BY VARIOUS COURTS OF LAW INCLUDING THE HON'BLE SUPREME COURT AND THE HON'BLE GUJARAT HIGH COURT THE ADDITION OF RS.8 27 776/- ON ACCOUNT OF CESSATION OF LIABILITY IS HEREBY DELETED. 4.1 LIKEWISE THE LD. CIT(A) DELETED THE ADDITIO N OF RS. 1 59 990/- ON ACCOUNT OF LIABILITY IN THE NAME OF SHRI CHANDUL AL PATEL.. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO. 6 WE HAVE HEARD THE LD. DR AND GONE THROUGH THE FAC TS OF THE CASE. THE PROVISIONS OF SEC. 41(1)(A) STIPULATE THA T WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY Y EAR IN RESPECT OF LOSS EXPENDITURE OR TRADING LIABILITY INCURRED BY THE AS SESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE OBTAINS WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR E XPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSI ON OR CESSATION THEREOF THE AMOUNT OBTAINED OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACC ORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR WHE THER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DED UCTION HAS BEEN MADE IS IN ITA NO.3443/AHD/2004 M/SPATEL CHANDULAL CHHOTALAL 5 EXISTENCE IN THAT YEAR OR NOT. UNDISPUTEDLY THE AS SESSEE DID NOT RECEIVE ANY BENEFIT NOR THE AMOUNT HAS BEEN TRANSFERRED TO PRO FIT AND LOSS ACCOUNT NOR EVEN WRITTEN OFF AND THUS THE AMOUNT DID NOT BECOME THE ASSESSEE'S OWN MONEY. IN THESE CIRCUMSTANCES AS CONCLUDED BY THE HONBLE JU RISDICTIONAL HIGH COURT IN BHARAT IRON AND STEEL INDUSTRIES(SUPRA) THE PROVIS IONS OF SEC. 41(1)(A) ARE NOT ATTRACTED. 6.1 HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. SILVER COTTON MILLS CO. LTD. 254 ITR 728(GUJ) HELD THAT SIMPLY BECA USE THE PERIOD OF LIMITATION HAD COME TO AN END FOR THE PURPOSE OF FILING A SUIT FOR RECOVERY OF THE SAID AMOUNT OR FOR TAKING APPROPRIATE ACTION AGAINST THE ASSESSEE IT CANNOT BE SAID THAT THERE WAS A CESSATION OF LIABILITY. THE LIABILITY STILL R EMAINS THOUGH IT MAY NOT BE ENFORCEABLE AT LAW ON ACCOUNT OF THE PROVISIONS OF THE LAW OF LIMITATION. RELYING UPON THE DECISION IN THE CASE OF SUGAULI SUGAR WOR KS (P.) LTD. [1999] 236 ITR 518 .SC) HONBLE JURISDICTIONAL HIGH COURT FURTHER HEL D THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE IS A REMISSION OF L IABILITY BY THE CREDITOR THE LIABILITY SUBSISTS AND THEREFORE EVEN IF THE ENTRIES ARE MA DE TO WRITE BACK THE EXPENDITURE THE AMOUNT SO WRITTEN BACK CANNOT BE A DDED IN THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT. 6.2 HONBLE BOMBAY HIGH COURT IN ANOTHER CASE OF CIT VS. CHASE BRIGHT STEEL LTD. 177 ITR 128(BOMBAY) WHILE RELYING UPON THEIR JUDGMENT IN J. K. CHEMICALS LTD. VS. CIT [1966] 62 ITR 34 HELD THAT T HE LIABILITY OF AN ASSESSEE DOES NOT CEASE MERELY BECAUSE THE LIABILITY HAS BECOME BARRE D BY LIMITATION. THE LIABILITY CEASES WHEN IT HAS BECOME BARRED BY LIMITATION AND THE ASSESSEE HAS UNEQUIVOCALLY EXPRESSED ITS INTENTION NOT TO HONOUR THE LIABILITY EVEN WHEN DEMANDED. 6.3 HONBLE SUPREME COURT IN THE CASE OF BOMBAY DYEING & MANUFACTURING CO. LTD. V. STATE OF BOMBAY AIR 1958 SC 328 IN PA RA 23 OF THEIR DECISION OBSERVED AS FOLLOWS : ' 23. IT HAS BEEN ALREADY MENTIONED THAT WHEN A DEB T BECOMES TIME BARRED IT DOES NOT BECOME EXTINGUISHED BUT ONLY UNENFORCEABLE IN A COURT OF LAW. ' ITA NO.3443/AHD/2004 M/SPATEL CHANDULAL CHHOTALAL 6 6.4 HONBLE SUPREME COURT IN THE CASE OF SUGAU LI SUGAR WORKS (P.) LTD. [1999] 236 ITR 518 HELD THAT UNLESS THERE IS A CESS ATION OF LIABILITY INCOME CANNOT BE ADDED AS PER THE PROVISIONS OF SECTION 41 (1) OF THE ACT. SIMILARLY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. C HETAN CHEMICALS PVT. LTD. 267 ITR 770 (GUJ) HELD THAT : ON A READING OF THE PROVISIONS IT IS APPARENT THA T BEFORE THE SECTION CAN BE INVOKED IT IS NECESSARY THAT AN ALLOWANCE OR A DEDUCTION HAS BEEN GRANTED DURING THE COURSE OF ASSESSMENT FOR ANY YEA R IN RESPECT OF LOSS EXPENDITURE OR TRADING WHICH IS INCURRED BY THE ASS ESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE OBTAINS WHETHER IN CASH OR IN ANY OTHER MANNER ANY AMOUNT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION OF SUCH LIABILITY. IN THAT CASE EITHER THE AMOUNT OBTAINED BY THE ASSESSEE OR THE VALUE OF THE BENEFIT OCCURRING TO THE ASSESSEE CAN BE DEEMED TO THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND CAN BE BROUGHT TO TAX AS INCOME OF T HE PREVIOUS YEAR IN WHICH SUCH AMOUNT OR BENEFIT IS OBTAINED. IN THE FA CTS OF THE CASE ON HAND WITHOUT ENTERING INTO THE ASPECT AS TO WHETHER THE LIABILITY TO REPAY THE LOANS WOULD BE A TRADING LIABILITY OR NOT IT IS AN ADMITTED POSITION THAT THERE HAD BEEN NO ALLOWANCE OR DEDUCTION IN ANY OF THE PR ECEDING YEARS AND HENCE THERE IS NO QUESTION OF APPLYING THE PROVISI ON AS SUCH. SECTION 28 OF THE ACT DEALS WITH PROFITS AND GAINS OF BUSINESS OR PROFESSION AND CLAUSE (IV) THEREOF SAYS THAT THE VA LUE OF ANY BENEFIT OR PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR NOT ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION SHALL BE CHARGEABLE AS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN T HE FACTS OF THE PRESENT CASE IT CANNOT BE SAID THAT THE ASSESSEE-COMPANY W AS CARRYING ON BUSINESS OF OBTAINING LOANS AND THAT THE REMISSION OF SUCH LOANS BY THE CREDITORS OF THE COMPANY WAS A BENEFIT ARISING FROM SUCH BUSINESS. 6.5 IN THE LIGHT OF VIEW TAKEN BY THE HONBLE SUPREM E COURT AND JURISDICTIONAL HIGH COURT IN THE AFORESAID DECISIONS IT IS APPA RENT THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE IS A REMISSION OF LIABILITY BY THE CREDITOR THE LIABILITY SUBSISTS AND THEREFORE EVEN IF THE ENTRIES ARE M ADE TO WRITE BACK THE EXPENDITURE THE AMOUNT SO WRITTEN BACK CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT . IN THE INSTANT CASE THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE HAS O BTAINED ANY BENEFIT EITHER BY WAY OF REMISSION OR CESSATION OF ANY LIABILITY WHIL E THE AFORESAID LIABILITIES ARE CONTINUALLY ADMITTED BY THE ASSESSEE IN THEIR BALAL NCESHEET . IN THESE ITA NO.3443/AHD/2004 M/SPATEL CHANDULAL CHHOTALAL 7 CIRCUMSTANCES WE HAVE NO ALTERNATIVE BUT TO UPHO LD THE FINDINGS OF THE LD. CIT(A) . THEREFORE GROUND NOS. GROUND NOS. 1 & 2 IN THE APPEAL OF THE REVENUE ARE DISMISSED. 7. AS REGARDS GROUND NO.3 RELATING TO THE ADDITION OF RS.4 85 036/- THE AO NOTICED THAT THE ASSESSEE HAD SHOWN FREIGHT INCOME OF RS.71 13 171/- IN THE RETURN OF INCOME WH EREAS AS PER THE TDS CERTIFICATES FILED BY THE ASSESSEE THE RECEIPT S WORKED OUT TO RS.73 76 321/-.THUS THERE WAS A DIFFERENCE OF RS.2 63 150/-. ON RECONCILIATION AND CONSIDERING THE PROVISIONS MADE IN THE ACCOUNTS IN THE YEAR UNDER CONSIDERATION AND IN EARLIER YEAR S THE DIFFERENCE WORKED OUT TO RS.4 85 036/-. ACCORDINGLY THE AO AD DED THE AMOUNT TO THE INCOME OF THE ASSESSEE. 8. ON APPEAL THE LEARNED CIT(A) DELETED THE ADDITI ON OF RS.4 85 036/- HOLDING AS UNDER:- 5.1 DISPUTING THE SAID ADDITION THE AUTHORIZED RE PRESENTATIVE OF THE APPELLANT SUBMITTED THAT ADDITION WAS BASED SOLELY ON GROSS MISUNDERSTANDING OF THE FACTS OF THE CASE BY THE AS SESSING OFFICER. IT WAS SUBMITTED THAT THE ASSESSING OFFICER INITIALLY RAIS ED THE QUERY ON ACCOUNT OF DIFFERENCE OF RS.2 63 150/- IN FREIGHT INCOME SHOWN IN THE P&L ACCOUNT AND AS WORKED OUT ON THE BASIS OF TDS CERTIFICATES FILED WITH THE RETURN OF INCOME. THE APPELLANT VIDE LETTER DATED 20/02/2004 FURNISHED A RECONCILIATION EXPLAINING THE REASONS FOR THE DIFFE RENCE IN THE FREIGHT INCOME OFFERED IN THE ACCOUNTS AND AS WORKED OUT ON THE BASIS OF FEE TDS CERTIFICATES AND SUBMITTED DURING THE YEAR UNDER CO NSIDERATION THE APPELLANT HAD WORKED FOR GNFC AND IOC ON CONTRACT B ASIS. THE INCOME WAS BOOKED ON THE BASIS OF BILLS PASSED BY GNFC AND IOC EVERY MONTH. IT WAS FURTHER SUBMITTED THAT IN CASE OF GNFC THE APP ELLANT HAS BOOKED THE INCOME IN THE MONTH IN WHICH THE BILL WAS RAISED. H OWEVER AS PER THE PRACTICE FOLLOWED BY GNFC THEY ARE GIVING CREDIT OF THE SAME IN THE FOLLOWING MONTH IN THEIR BOOKS OF ACCOUNTS AND THEY ALSO DEDUCT THE TDS IN THE NEXT MONTH. HOWEVER AS STATED HEREINABOVE SIN CE THE APPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THE BILL S OF MARCH I.E. THE LAST MONTH OF THE FINANCIAL YEAR ARE BEING PROVIDED FOR AND IS SHOWN AS RECEIVABLE FROM; GNFC THOUGH THE TDS ON SUCH INCOME HAS BEEN DEDUCTED BY GNFC IN THE' FOLLOWING MONTH I.E. APRIL . THE AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICE R HAVING REPRODUCED ITA NO.3443/AHD/2004 M/SPATEL CHANDULAL CHHOTALAL 8 THE RECONCILIATION STATEMENT IN RESPECT OF THE INCO ME AS PER BOOKS OF ACCOUNTS AND AS PER TDS CERTIFICATES AND HAVING CON SIDERED THE SAME HAS FAILED TO APPRECIATE AND UNDERSTAND THE SAME. AS CA N BE SEEN FROM THE RECONCILIATION REPRODUCED BY THE ASSESSING OFFICER AT PAGE NO. 7 AND 8 OF THE ASSESSMENT ORDER THE INCOME OFFERED IN THE BOO KS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION AS WELL AS EARLIER YEAR IS MORE THAT THE INCOME AS PER THE TDS CERTIFICATES. THE ASSESSING OFFICER WHI LE CONSIDERING THE INCOME AS PER BOOKS OF ACCOUNTS AS PER THE SAID REC ONCILIATION STATEMENTS IN CASE OF GNFC AND IOC AT RS.49 67 475/- AND RS.26 30 732/- RESPECTIVELY AGGREGATING TO RS.75 98 207/- AND COMP ARING THE SAME WITH THE INCOME OF RS.71 13 171/-OFFERED IN THE PROFIT & LOSS A/C. FOR THE YEAR UNDER CONSIDERATION HAS IGNORED THE FACT THAT THE F IGURE OF RS.75 98 207/- IS INCLUSIVE OF RS.5 88 693/- ALREADY OFFERED IN TH E EARLIER YEAR I.E. AY. 2000-01 AND ONLY THE TDS OF WHICH HAS BEEN DEDUCTED DURING THE YEAR UNDER CONSIDERATION BY GNFC. THUS IF RS.5 88 693/- IS EXCLUDED FROM THE FIGURE OF RS.75 98 207/- THE NET FIGURE WOULD COME TO RS.70 09 514/- WHICH IS LESS THAN THE INCOME OF RS.71 13 171/- OFF ERED IN THE P & L A/C. THE ASSESSING OFFICER HOWEVER WITHOUT CONSIDERING AND UNDERSTANDING THE FACTS IN RESPECT OF THE PROVISIONS MADE AND INC OME OFFERED IN EACH YEAR MECHANICALLY TOOK THE FIGURE OF RS.49 67 475/ - AS PER THE RECONCILIATION STATEMENT AS INCOME FROM GNFC DURING THE UNDER CONSIDERATION WHILE IGNORING THE FEET THAT THE SAME IS INCLUSIVE OF RS 5 88 693/- WHICH HAS ALREADY BEEN OFFERED AS INC OME IN THE EARLIER YEAR AS EVIDENT FROM THE SHEET OF EARLIER YEAR BUT ONLY TDS IN RESPECT OF WHICH HAS BEEN DEDUCTED DURING THE YEAR AS STATED HEREINA BOVE. THUS THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THE FACT THAT THE SAID RECONCILIATION WAS SOLELY FOR THE PURPOSE OF RECON CILING THE FIGURE AS PER TDS CERTIFICATES IT WAS SUBMITTED THAT CONSIDERING THE EFFECT OF PROVISION OF INCOME BY THE APPELLANT IN EACH YEAR THERE WAS NO DIFFERENCE AS ALLEGED BY THE ASSESSING OFFICER. THE AUTHORIZED REPRESENTA TIVE ARGUED THAT BOTH GNFC AND IOC ARE GOVERNMENT CONCERNS AND HENCE EVEN OTHERWISE THE QUESTION OF ANY DIFFERENCE AS ALLEGED BY THE ASSESS ING OFFICER DOES NOT ARISE AND THAT THE DIFFERENCE IF ANY IN THE INCOME AS PER TDS CERTIFICATES AND AS SHOWN IN THE BOOKS OF ACCOUNTS IN EACH YEAR IS ON ACCOUNT OF THE DIFFERENCE IN ACCOUNTING METHOD ADOPTED BY THE APPE LLANT AND THE SAID CONCERNS. ACCORDINGLY IT WAS SUBMITTED THAT THE AD DITION OF RS.4 85 036/- ON ACCOUNT OF ALLEGED DIFFERENCE IN FREIGHT RECEIPT REQUIRES TO BE DELETED THE SAME BEING BASED ON GROSS MISUNDERSTANDING OF T HE FACT OF THE CASE. 5.2 I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS AN D FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE ARGUMENTS AND SUBM ISSIONS PUT FORTH BY THE APPELLANT. ON PERUSAL OF THE ACCOUNTS AND THE T DS CERTIFICATES COPY OF WHICH HAS BEEN FILED WITH THE WRITTEN SUBMISSIONS IT IS SEEN THAT THE APPELLANT HAS OFFERED FREIGHT INCOME OF RS.71 13 17 1/- IN THE P&L ACCOUNT WHILE THE INCOME AS PER TDS CERTIFICATES WORKS OUT TO RS.73 76 321/- RESULTING IN A DIFFERENCE OF RS.2 63 150/-. THE APP ELLANT IN ORDER TO EXPLAIN THE SAID DIFFERENCE BETWEEN THE INCOME OFFERED IN T HE BOOKS OF ACCOUNT SAD AS WORKED OUT ON THE BASIS OF TDS CERTIFICATES HAS FILED DETAILED ITA NO.3443/AHD/2004 M/SPATEL CHANDULAL CHHOTALAL 9 RECONCILIATION WHICH HAVE BEEN REPRODUCED BY THE AO IN THE ASSESSMENT ORDER. ON PERUSAL OF THE SAID RECONCILIATION STATEM ENT IN RESPECT OF GNFC IT IS SEEN THAT THE SAME IS INCLUSIVE OF AN AMOUNT OF RS.5 88 693/- WHICH PERTAINS TO PROVISION MADE BY THE APPELLANT IN THE EARLIER YEAR RELEVANT TO AY. 2000-01 AND THE SAID INCOME WAS ALREADY OFFERED IN THE EARLIER YEAR WHILE DEBITING THE PARTY ACCOUNT AND SHOWING THE SA ME AS RECEIVABLE FROM THE SAID PARTY. THE SAID FACT IS EVIDENT FROM BALAN CE SHEET OF EARLIER YEARS COPY OF WHICH HAS BEEN FILED WITH THE WRITTEN SUBMI SSIONS WHICH SHOWS A FIGURE OF RS.5 88 640/- APPEARING AS OUTSTANDING IN THE NAME OF GNFC UNDER THE HEAD 'SUNDRY DEBTORS. THIS BEING THE CAS E I AGREE WITH THE ARGUMENT OF THE AUTHORIZED REPRESENTATIVE THAT THE ASSESSING OFFICER HAS IGNORED THE SAID FEET WHILE TAKING THE FIGURE OF IN COME FROM GNFC AND IOC AT RS.49 67 475/- AND RS.26 30 732/- RESPECTIVELY T O RS.75 98 207/- ON THE BASIS OF THE .RECONCILIATION STATEMENTS AND COMPARI NG THE SAME WITH THE INCOME OF RS.71 13 171/- OFFERED IN THE P&L ACCOUNT FOR ARRIVING AT THE DIFFERENCE OF RS.4 85 036/-. I ALSO AGREE WITH THE CONTENTION OF THE APPELLANT THAT IF THE FIGURE OF RS.5 88 693/- BEING THE INCOME ALREADY OFFERED IN THE EARLIER YEAR IS EXCLUDED FROM THE FI GURE OF RS.75 98 207/- THE NET FIGURE OF RS.70 09 514/- SO ARRIVED WILL BE LESS THAN THE INCOME OF RS.71 13 171/- OFFERED IN THE P&L ACCOUNT AND ACCOR DINGLY NO ADVERSE INFERENCE IS WARRANTED. THUS IN MY OPINION THE ASS ESSING OFFICER HAS MADE THE ADDITION WITHOUT PROPER VERIFICATION OF TH E FACTS AND FIGURES AVAILABLE ON RECORD AID ACCORDINGLY THE ADDITION O F RS.4 85 036/- IS HEREBY DELETED. 9. THE REVENUE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO. 10. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE F ACTS OF THE CASE. THE LD. DR APPEARING BEFORE US COULD NOT DISP UTE THE FINDINGS OF THE LD. CIT(A) RECORDED AFTER PERUSAL OF THE AC COUNTS THE RELEVANT BALANCESHEETS THE TDS CERTIFICATES AND THE RECON CILIATION STATEMENT IN RESPECT OF GNFC THAT THE AN AMOUNT OF RS.5 88 693/- PERTAI NED TO PROVISION MADE BY THE ASSESSEE IN THE EARLIER YEAR RELEVANT TO AY. 2000-0 1 AND THE SAID INCOME WAS ALREADY OFFERED TO TAX IN THE EARLIER YEAR AND THA T IF THE FIGURE OF RS.5 88 693/- IS EXCLUDED FROM THE FIGURE OF RS.75 98 207/- THE NE T FIGURE OF RS.70 09 514/- SO ARRIVED WOULD BE LESS THAN THE INCOME OF RS.71 13 1 71/- OFFERED IN THE P&L ACCOUNT.. IN THE LIGHT OF THESE UNDISPUTED FINDINGS OF FACTS RECORDED BY THE LD. CIT(A) THERE IS NO BASIS FOR TAKING A DIFFERENT V IEW IN THE MATTER. THEREBEING NO ITA NO.3443/AHD/2004 M/SPATEL CHANDULAL CHHOTALAL 10 ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) WE UPHOLD THE ORDER OF THE CIT(A).THEREFORE GROUND NO. 3 IN THE APPEAL IS ALSO DISMISSED. 11. GROUND NOS. 4 & 5 BEING GENERAL IN NATURE DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE THEREFORE DISMISSED. 12 IN THE RESULT APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 17-05- 2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 17-05-2010 COPY OF THE ORDER FORWARDED TO : 1. M/S PATEL CHANDULAL CHHOTALAL F.T.D. A-4 SWAM I GUNATIT SOCIETY MEMNAGAR AHMEDABAD 2. THE ACIT CIRCLE-9 AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XV AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD