ACIT,, Chandigarh v. Ramesh Kumar (HUF), Mohali

ITA 626/CHANDI/2009 | 2005-2006
Pronouncement Date: 18-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 62621514 RSA 2009
Assessee PAN AAKHR0840P
Bench Chandigarh
Appeal Number ITA 626/CHANDI/2009
Duration Of Justice 1 year(s) 2 month(s) 15 day(s)
Appellant ACIT,, Chandigarh
Respondent Ramesh Kumar (HUF), Mohali
Appeal Type Income Tax Appeal
Pronouncement Date 18-08-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 18-08-2010
Date Of Final Hearing 29-03-2010
Next Hearing Date 29-03-2010
Assessment Year 2005-2006
Appeal Filed On 02-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI G.S.PANNU ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.615/CHD/2009 ASSESSMENT YEAR: 2005-06 SHRI RAMESH KUMAR(HUF) VS. THE ACIT CIRCLE 5(1 ) PROP. MUNISH IRON STORE CHANDIGARH MOHALI PAN NO. AAKHR0840P & ITA NO.626/CHD/2009 ASSESSMENT YEAR: 2005-06 THE ACIT CIRCLE 5(1) VS. SHRI RAMESH KUMAR (HUF ) CHANDIGARH PROP. MUNISH IRON STORE MOHALI PAN NO. AAKHR0840P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINEET KRISHAN RESPONDENT BY: SHRI S.S.KHEMWAL ORDER PER SUSHMA CHOWLA JM THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE AGAINST THE ORDER OF CIT(A) DATED 30.3.2009 RELATIN G TO ASSESSMENT YEAR 2005-06 AGAINST ORDER PASSED U/S 143(3) OF THE I.T. ACT 2. THE GROUND NO.1 RAISED BY THE ASSESSEE AND THE R EVENUE BEING GENERAL ARE DISMISSED. 2 3. THE GROUND NOS. 2 3 & 4 RAISED BY THE ASSESSEE ARE AS UNDER:- 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) PATIALA GRAVELLY ERRED IN UPHOLDING THE ADDITIONS OF RS. 22 18 419/- ON ACCOUNT OF ALLE GED CESSATION OF LIABILITY PAYABLE BY M/S N.G. ENGINEER ING WORKS. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) GRAVELLY ERRED IN UPHOLDING THE ADDITION OF RS. 3 89 435/- ON ACCOUNT OF OUT OF THE TOTAL ADDITIONS MADE BY LEARNED ASSESSING OFFICER AT RS. 38 94 349/- ON ACCOUNT OF CESSATION OF LIABILIT Y. 4. THAT WITHOUT PREJUDICE THE ADDITIONS ARE HIGHLY EXCESSIVE. 4. THE REVENUE HAS RAISED GROUND NOS. 2 & 3 AS UNDE R:- 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED TRANSACTION U/S 68 OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF DEEMED PROFIT U/S 41(1)(A) OF THE ACT BEING CESSATION OF LIABILITY. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF IRON AND OTHER HAR DWARE ITEMS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED SOME OF THE CREDITORS TO FURNISH THE COPY OF ACCOUNTS OF THE ASSESSEE AS APPEARING IN THEIR BOOKS OF ACCOUNT. ONE SUCH C REDITOR WAS M/S N.G. ENGINEERING WORKS LOHA BAZAR MANDI GOBINDGARH PU NJAB TO WHOM NOTICE U/S 133(6) OF THE ACT WAS ISSUED WHICH WAS RECEIVED BACK WITH THE REMARKS NO SUCH PERSONS. THE DCIT MANDI GOBINDGARH ALSO MADE ENQUIRIES AND EFFORTS TO SERVE THE NOTICE WHICH WE RE RETURNED WITH THE REMARKS THAT THERE WAS NO SUCH PARTY AT THE GIVEN A DDRESS. THE ASSESSEE WAS REQUISITIONED BY THE ASSESSING OFFICER TO PRODU CE THE SAID PARTY ON 3 VARIOUS DATES AND ALSO TO PRODUCE THE BOOKS OF ACCO UNT. THE ASSESSEE FAILED TO PRODUCE THE PARTY M/S N.G. ENGINEERING W ORKS HOWEVER IT WAS EXPLAINED THAT DURING THE YEAR NO TRANSACTION WAS U NDERTAKEN WITH THE CREDITOR AND THE BALANCE OF RS. 22 18 419/- APPEARI NG AGAINST THE CREDITOR WAS THE OPENING BALANCE AS ON 1.4.2004. THE ASSESS ING OFFICER NOTES THAT NO DETAILS REGARDING THE TRANSACTIONS IN THE E ARLIER YEAR WERE FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER TREATED THE CREDIT AS NON GENUINE IN VIEW OF THE REPORT OF THE DCIT MAND I GOBINDGARH THAT NO SUCH PERSON EXISTS AND NON PRODUCTION OF THE PERSON DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER INVOKING THE P ROVISIONS OF SECTION 41(1)(A) OF THE ACT TREATED THE LIABILITY OF RS. 22 18 419/- AS INCOME FOR THE YEAR AS IT HAS BEEN ESTABLISHED THAT THE CREDIT OR DOES NOT EXIST AND THEREFORE IT AMOUNTS TO CESSATION OF LIABILITY. FROM THE PERUSAL OF THE BOOKS OF ACCOUNT THE ASSESSING OFFICER NOTED THAT AGAINST M/S SAHIL SALES CORPORATION SUM OF RS. 54 43 360/- WAS OUTSTANDING . THE ASSESSING OFFICER FOUND THAT ON THE BILLS OF THE SAID PARTY O F DIFFERENT DATES NO PHONE NUMBERS WERE MENTIONED AND FURTHER THOUGH TRU CK NUMBERS WERE MENTIONED ON THE BILLS BUT NO DOCUMENTS / VOUCHERS IN SUPPORT OF THE TRANSPORTATION WERE APPENDED ALONG WITH THE BILLS. FURTHER NO OCTROI DOCUMENTS WERE ALSO APPENDED ALONG WITH THE BILLS. THE ASSESSEE DURING THE FINANCIAL YEAR 2004-05 HAD NOT MADE ANY PAYMENT TO M/S SAHIL SALES CORPORATION AND THE AMOUNT WAS OUTSTANDING. FURTHE R THERE WAS OPENING BALANCE OF RS. 15 49 011/- AS ON 1.4.2004 AND HENCE THE TRANSACTION OF THE FINANCIAL YEAR WERE TO THE EXTENT OF RS. 38 94 349/ -. THE ASSESSEE FAILED TO PRODUCE THE EVIDENCE OF TRANSPORTATION AND OCTRO I DETAILS BEFORE THE ASSESSING OFFICER. THE SUMMONS ISSUED BY THE ASSES SING OFFICER TO THE SAID PARTY WERE RECEIVED BACK UNSERVED AND EVEN THE DCIT MANDI GOBINDGARH FAILED TO SERVE THE NOTICE ON THE PARTI ES. THE COUNSEL FOR THE 4 ASSESSEE WAS ASKED TO PRODUCE THE CREDITOR FOR VERI FICATION TO ESTABLISH ITS IDENTITY CAPACITY AND GENUINENESS OF THE TRANSACTI ONS. IT WAS EXPLAINED BY THE ASSESSEE THAT IT HAD DEALINGS WITH THE SAID PARTY IN EARLIER YEARS ALSO WHEN PAYMENTS WERE MADE THROUGH CHEQUES. IT WAS ALSO STATED THAT THE GOODS WERE RECEIVED F.O.R. DESTINATION AND THE EXPENSES ON ACCOUNT OF FREIGHT / OCTROI ETC. WERE BORNE BY THE SELLER . AS NO EVIDENCE WAS FILED BY THE ASSESSEE NOR BY M/S SAHIL SALES CORPOR ATION REGARDING FREIGHT / OCTROI ETC. THE ASSESSING OFFICER HELD THE CREDI T AMOUNTING TO RS. 38 94 349/- AS NOT GENUINE AND THE SAME WAS TREATED AS CASH CREDIT UNDER THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT. THE OPENING BALANCE OF RS. 15 14 011/- PERTAINING TO THE EARLIER YEAR W AS HELD TO BE THE INCOME OF THE PREVIOUS YEAR ON CESSATION OF LIABILITY AS I T HAD BEEN ESTABLISHED THAT THE SAID CREDITORS DOES NOT EXIST AND AN ADDIT ION OF RS. 15 49 011/- WAS MADE ON ACCOUNT OF THE AFORESAID U/S 41(1)(A) O F THE ACT. 6. BEFORE THE CIT(A) THE CONTENTION OF THE ASSESS EE WAS THAT THE CREDIT IN THE ACCOUNT OF M/S N.G. ENGINEERING WORKS MANDI GOBINDGARH WAS NOT RECEIVED DURING THE YEAR UNDER APPEAL AND I T WAS NOT A CASE OF CESSATION OF LIABILITY. RELYING ON THE RATIO LAI D DOWN BY THE HON'BLE SUPREME COURT IN SUGAULI SUGAR WORKS (P) LTD IN 23 6 ITR 519 (SC) IT WAS CONTENDED THAT EVEN IF THE AMOUNT WERE WRITTEN OFF UNILATERALLY BY THE ASSESSEE IT COULD NOT BE ASSESSED AS INCOME. THE C IT(A) UPHELD THE ADDITION AS THE ASSESSEE HAD FAILED TO DISCHARGE IT S ONUS OF PROVING EXISTENCE OF THE CREDITORS IN SPITE OF VARIOUS OPPO RTUNITIES. WITH REGARD TO THE TRANSACTIONS WITH M/S SAHIL SALES CORPORATIO N IT WAS EXPLAINED THAT AMOUNT OF RS. 15 49 011/- WAS THE OPENING BALANCE I N THE ACCOUNT OF CREDITORS HAVING CLOSING BALANCE OF RS. 54 43 360/- . IN ANOTHER ACCOUNT OF THE PARTY THERE WAS DEBIT BALANCE OF RS. 55 03 829/- REPRESENTING THE 5 ADVANCES PAID AGAINST THE PURCHASERS MADE FROM THAT PARTY. IT WAS EXPLAINED BEFORE CIT(A) THAT IN THE BALANCE SHEET F ORMING PART OF THE RETURN OF INCOME THE NECESSARY INFORMATION WAS AVA ILABLE. HOWEVER SINCE THERE WAS CHANGE IN THE ACCOUNTANT AND COUNSE L REPRESENTING THE ASSESSEE THE SUNDRY CREDITS AND DEBITS OF THE SAME PARTY WERE SHOWN SEPARATELY. THE CIT(A) CONFRONTED THE ASSESSING OF FICER WITH THE COPY OF ACCOUNT SHOWING DEBIT BALANCE OF RS. 55 03 829/- WHICH WAS REJECTED VIDE REMAND REPORT AS ACCORDING TO ASSESSING OFFICE R AMPLE OPPORTUNITIES WERE PROVIDED TO THE COUNSEL OF THE A SSESSEE TO EXPLAIN AND HE FAILED TO EXPLAIN THE SAME. THE CIT(A) NOTED TH AT THE OPPORTUNITY GIVEN TO THE ASSESSEE WAS NOT SUFFICIENT AND HENCE THE EVIDENCE PRODUCED BEFORE HIM WAS ADMITTED. THE CIT(A) FURTHER NOTE D THAT THE AMOUNT WAS OUTSTANDING SINCE LAST YEAR WHERE SALES HAD BEEN BO OKED IN THE ACCOUNTS SHOWN AGAINST THE PURCHASES MADE FROM THE SAID PART Y AND SUCH PURCHASES COULD NOT BE HELD TO BE NON GENUINE. THE ASSESSEE FURNISHED ON RECORD THE BANK CERTIFICATE OF STATE BANK OF INDIA MANDI GOBI NDGARH DATED 18.3.2009 IN WHICH IT WAS CONFIRMED THAT ACCOUNT P AYEE CHEQUE WERE ISSUED IN THE LAST YEAR BY THE ASSESSEE DRAWN ON TH E SAID PARTY. THE COPY OF THE SAID CERTIFICATE WAS MADE PART OF THE APPELL ATE ORDER AS ANNEXURE A. THE ASSESSEE ALSO FURNISHED ON RECORD THE CERTIFIC ATE FROM CONCERNED SALES TAX AUTHORITIES I.E. EXCISE AND TAXATION OFFI CER MANDI GOBINDGARH DATED 25.3.2009 WHEREIN THEY HAVE CERTIFIED THAT TH E SAID PARTY WAS HOLDING R.C. NO. 0349410 DATED 7.8.1992 AND THE PAR TY WAS FILING REGULAR SALES TAX RETURNS WITH THE DEPARTMENT UPTO 30.6.200 5. THE CIT(A) FURTHER NOTED THAT THE SAME R.C. NUMBER APPEARS ON THE BILLS OF M/S SAHIL SALES CORPORATION. THE R.C. WAS CANCELLED ON 25.11 .2005 AND THE COPY OF CERTIFICATE OF EXCISE AND TAXATION OFFICER WAS ENCL OSED AS ANNEXURE B TO THE APPELLATE ORDER. THE CIT(A) ADMITTED THE STA ND OF THE ASSESSEE THAT 6 THE CONCERNED PARTIES EXISTED AT THE POINT OF TIME AND EVEN INDEPENDENT AUTHORITIES LIKE SALES TAX AUTHORITIES AND NATION ALISED BANK CERTIFIES TO THAT EFFECT AND MERELY BECAUSE PERSON WAS NOT AV AILABLE ON A LATER DATE NO ADDITION WAS JUSTIFIED IN THE HANDS OF THE ASSES SEE. FURTHER IN FACT THE AMOUNT WAS PAID IN THE ADVANCES ACCOUNT TO THE TUNE OF RS. 55 03 829/-. THE CIT(A) DELETED THE ADDITION OF RS. 38 94 349/- MADE ON ACCOUNT OF ALLEGED UNEXPLAINED CREDITS AND RS. 15 49 011/- ON ACCOUNT OF ALLEGED CESSATION OF LIABILITY. HOWEVER THE CIT(A) MADE A N ADDITION OF RS. 3 89 435/- ON ACCOUNT OF GP RATE ON SUCH PURCHASES MADE FROM THE SAID PARTY. THE ASSESSEE IS IN APPEAL AGAINST THE UPHOL DING THE ADDITION ON ACCOUNT OF THE SAID ESTIMATION OF PROFITS. THE REV ENUE HAS FILED AN APPEAL AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITIO N ON ACCOUNT OF THE UNEXPLAINED TRANSACTIONS U/S 68 AND CESSATION OF LI ABILITY U/S 41(1) OF THE ACT WITH REGARD TO TRANSACTION WITH M/S SAHIL SALES CORPORATION. THE ASSESSEE IS ALSO IN APPEAL AGAINST THE ADDITION OF AMOUNT DUE TO M/S NG. ENGINEERING WORKING TREATED AS CESSATION OF LIABILI TY. 7. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT THE TRANSACTIONS WITH M/S N.G. ENGINEERING WORKS WAS OF EARLIER YEAR S AND DURING THE YEAR NO PURCHASERS WERE MADE FROM THE SAID PARTY. THE LEARNED AR FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING:- CIT VS. SUGAULI SUGAR WORKS (P) LTD. [236 ITR 518 (SC)] CCIT VS. KESERIA TEA CO LTD [254 ITR 434 (SC)] CIT VS. G.P. INTERNATIONAL LTD [229 CTR (P&H) 86] CIT VS. SMT. SEETA DEVI JUNEJA [187 TAXMAN 96 (P&H )] 8. IN RESPECT OF THE TRANSACTION WITH M/S SAHIL SAL ES CORPORATION RELIANCE WAS PLACED ON THE ORDER OF CIT(A). 7 9. THE LEARNED DR PLACED RELIANCE ON THE ORDER OF C IT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD SH OWN A SUM OF RS. 22 18 419/- DUE TO M/S N.G. ENGINEERING WORKS. THE EXPLANATION OF THE ASSESSEE WAS THAT DURING THE YEAR UNDER APPEAL THER E WAS NO TRANSACTION UNDERTAKEN WITH THE SAID CREDITOR AND THE AFORESAID BALANCE WAS CARRIED FORWARD FROM THE PRECEDING YEARS. THE ASSESSEE WA S UNABLE TO PRODUCE THE CREDITOR BEFORE THE ASSESSING OFFICER AND HENCE THE ADDITION UNDER SECTION 41(1)(A) OF THE ACT. THE ASSESSEE WAS ACK NOWLEDGING THE LIABILITY AND THERE WAS NO BILATERAL ACT OF THE ASSESSEE AND THE CREDITORS ON RECORD WHICH PROVES THAT THE LIABILITY HAD CEASED TO EXIST S. THE LEARNED AR FOR THE ASSESSEE THOUGH ACKNOWLEDGES THAT THE SAID AMOU NT HAS BEEN WRITTEN OFF IN ASSESSMENT YEAR 2007-08 WHICH WAS CLAIMED T O BE A UNILATERAL ACT ON THE PART OF THE ASSESSEE. THE QUESTION TO BE AD DRESSED IN THE PRESENT APPEAL IS THE WHETHER THE SAID CREDIT BALANCE APPEA RING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ON NON PRODUCTION OF THE C REDITORS RESULTS IN CESSATION OF LIABILITY. 11. THE ISSUE IN HAND IS SQUARELY COVERED BY THE TH IRD MEMBER DECISION IN ITO VS. AHUJA GRAPHIC MACHINERY (P) LTD. [2007] 111 TTJ (MUMBAI)(TM) 445 WHEREIN IT WAS HELD AS UNDER:- THE VALUE OF ANY BENEFIT OR PERQUISITE ARISING FRO M BUSINESS OR THE EXERCISE OF A PROFESSION IS CHARGEABLE TO INCOM E-TAX AS PART OF THE INCOME FROM BUSINESS/PROFESSION UNDER THIS S ECTION AND IT IS DEEMED TO BE INCOME UNDER SECTION 2 (24) OF THE ACT. THIS CLAUSE DOES NOT APPLY TO THE RECEIPTS IN CASH. THE SUM CREDITED BY THE ASSESSEE TO THE P&L A/C. OF THE UNCLAIMED AD VANCES RECEIVED FROM CUSTOMERS AND UNCLAIMED EXCESS COMMIS SION RECEIVED AND UNCLAIMED COLLECTIONS FROM PRINCIPALS ARE ASSESSABLE UNDER SECTION 28 (IV) OF THE ACT SINCE THE SAID SUMS HAVE CLOSE AND DIRECT NEXUS WITH THE ASSESSEES BUS INESS AND HAVE THE RESULT OR NOT ONLY REDUCING THE ASSESSEES TRAD E LIABILITIES AND 8 ENHANCING ITS PROFITS BUT ALSO INCREASING ITS CAPIT AL. THIS WAS ALSO HELD BY THE HON'BLE BOMBAY HIGH COURT IN PROTO S ENGINEER CO. (P) LTD. VS. CIT (1995) 123 CTR (BOM.) 510 : ( 1995) 211 ITR 919 (BOM.). HOWEVER IT HAS BEEN HELD THAT THE BENEFIT SHOULD HAVE ARISEN TO THE ASSESSEE BY APPROPRIATION OF THE EXCESS COMMISSION OR ADVANCE RECEIPTS AGAINST SUPPLIES ET C. RECEIVED IN EARLIER YEARS AND NOT CREDITED TO THE P&L A/C. IN T HOSE YEARS HAD A CLOSE AND DIRECT NEXUS WITH THE BUSINESS OF THE A SSESSEE AND DEFINITELY AMOUNTED TO A BENEFIT TO THE ASSESSEE. IN OTHER WORDS TO APPLY THESE PROVISIONS THE ASSESSEE SHOULD HAVE APPROPRIATED THE SUMS IN QUESTION TO ITS P&L A/C. HERE IS A CAS E WHERE THE ASSESSEE HAS NOT APPROPRIATED ANY SUMS TO ITS P&L A /C IN THE EARLIER YEARS WHICH THE HON'BLE BOMBAY HIGH COURT W AS CONCERNED WITH. IT IS A CASE OF SALE OF SOMEBODYS ASSET AND NOT EVEN A PART OF ITS REGULAR BUSINESS RECEIPTS. THE QUESTION OF ITS APPROPRIATION IN THE MANNER AFORESAID HAS NOT ALSO TAKEN PLACE. THEREFORE IT IS DIFFICULT TO APPLY THE PROVISIONS OF SECTION 28 (IV) OF THE ACT TO THE FACTS OF THE CASE WHEN THE ASSESS EE HAS BEEN ACKNOWLEDGING THIS OUTSTANDING AMOUNT AS LIABILITIE S TO ITS PRINCIPAL FROM YEAR TO YEAR IN ITS BALANCE SHEET. 13. FURTHER IT WAS HELD AS UNDER: NOW I SHALL TAKE UP THE SECOND ISSUE WHETHER THE AMOUNTS IN QUESTION ARE LIABLE TO BE TAXED UNDER SECTION 41 (1 ) OF THE ACT. I AM AGAIN PERSUADED BY THE DECISION OF THE HON'BLE B OMBAY HIGH COURT IN MAHINDRA & MAHINDRA LTD. (SUPRA) WHEREIN T HEY HAVE CATEGORICALLY STATED THAT WHERE THE ASSESSEE HAD NO T OBTAINED ANY DEDUCTION IN RESPECT OF EXPENDITURE OR TRADING LIAB ILITY THE QUESTION OF THE SAME AMOUNT BEING BROUGHT TO TAX UN DER SECTION 41 (1) DOES NOT ARISE. NOW I HAVE EXAMINED WHETHE R THE ASSESSEE IN THIS CASE HAS OBTAINED ANY DEDUCTION BY DEBITING THE AMOUNT INTO P&L A/C. IN THE EARLIER YEARS. THE FACT OF TH E MATTER IS THAT THE ASSESSEE HAS NOT. THE TRANSACTION IN QUESTION WAS BETWEEN THE PRINCIPAL AND THE AGENT AND THE ASSET BELONGED TO THE PRINCIPAL AND THERE IS NO QUESTION OF THE ASSESSEE CLAIMING ANY DEDUCTION IN ITS P&L A/C FOR THE TRANSACTION WHICH IT HAD ENTERED IN RESPECT OF THIS. THIS TRANSACTION IS TRULY TO B E ACCOUNTED TO THE CREDIT OF THE SUPPLIER OF THE MACHINERY WHO IS THE ORIGINAL OWNER OF THE PROPERTY. IF THE ORIGINAL OWNER DOES NOT CL AIM THE AMOUNTS DUE TO HIM IT MAY BE ANYTHING BUT NOT A CESSOR OF LIABILITY OF THE TYPE WHICH COULD BE ASSESSED UNDER SECTION 41 (1) O F THE ACT AS RIGHTLY POINTED OUT BY THE LEARNED JM. IN MY VIEW THE FACTS OF THE CASE DO NOT GO WITH THE FACTS STATED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. T. V. SUNDARAM IYENGAR & SON S LTD. (SUPRA). IN THAT CASE THE ASSESSEE HAS APPROPRIATE D THE LIABILITY TO ITS P&L ACCOUNT WHE3REAS IN THIS CASE THERE IS N O SUCH APPROPRIATION. THE ASSESSEE IS STILL SHOWING THEM AS OUTSTANDING LIABILITIES IN ITS BALANCE SHEET FROM YEAR TO YEAR AND THE LIABILITY AROSE AS A DEBT WHICH IS REQUIRED TO ACCOUNT FOR TH E RECEIPT ON BEHALF OF THE PRINCIPAL. IN MY VIEW THERE IS NO QU ESTION OF CESSOR OF LIABILITY. THE HON'BLE SUPREME COURT EXAMINED T HIS CASE IN THE CASE OF CIT VS. SUGAULI SUGAR WORKS (P) LTD. (S UPRA) WHEREIN THE APEX COURT HELD AGAIN THAT THE EXPIRY FOR THE P ERIOD OF LIMITATION PRESCRIBED UNDER LIMITATION ACT COULD NO T BE EXTINGUISH THE DEBT BUT IT WOULD PREVENT THE CREDIT OR FROM ENFORCING THE DEBT HAS BEEN WELL SETTLED. IF THE PRINCIPLE IS APPLIED IT IS CLEAR THAT MERE ENTRY IN THE BOOKS O F ACCOUNT OF THE DEBTOR MADE UNILATERALLY WITHOUT ANY ACT ON THE PAR T OF THE CREDITOR WILL NOT ENABLE THE DEBTOR TO SAY THAT THE LIABILITY HAS 9 COME TO AN END. APART FROM THAT THAT WILL NOT BY ITSELF CONFER ANY BENEFIT ON THE DEBTOR AS CONTEMPLATED BY THAT S ECTION. 12. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. SMT. SITA DEVI JUNEJA (SUPRA) HAD HELD THAT WHERE THE ASSESSE E HAD ACKNOWLEDGED THE DEBT PAYABLE AND IN THE ABSENCE OF BILATERAL AC T OF THE ASSESSEE AND CREDITORS ON RECORD WHICH PROVED LIABILITY HAD CEA SED TO EXIST THERE WAS NO REMISSION OF LIABILITY AND PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE. 13. IN THE FACTS OF THE PRESENT CASE BEFORE US THE ASSESSEE CONTINUES TO RECOGNIZE THE LIABILITY AS DUE FROM YEAR TO YEAR. IN LINE WITH THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF SU GAULI SUGAR WORKS P. LTD. (SUPRA) AND HON'BLE PUNJAB & HARYANA HIGH C OURT IN CIT VS. SMT. SITA DEVI JUNEJA AND THIRD MEMBER DECISION IN ITO VS. AHUJA GRAPHIC MACHINERY (P) LTD. (CITED SUPRA) WE SET A SIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE T HE ADDITION MADE U/S 41(1) OF THE ACT. THUS GROUND NO. 2 RAISED BY T HE ASSESSEE IS ALLOWED. 14. THE REVENUE IS IN APPEAL AGAINST THE DELETION O F ADDITIONS ON ACCOUNT OF TRANSACTION WITH M/S SAHIL SALES CORPORA TION. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD SHOWN OUTST ANDING BALANCE OF RS. 54 43 360/- AGAINST M/S SAHIL SALES CORPORATION. T HE SAID OUTSTANDING WAS ON ACCOUNT OF PURCHASES MADE DURING THE FINANCI AL YEAR 2004-05 AND THE AMOUNT WAS SHOWN OUTSTANDING AT THE CLOSE OF TH E YEAR. THERE WAS AN OPENING BALANCE OF RS. 15 49 011/- AS ON 1.4.2004 ON ACCOUNT OF THE TRANSACTIONS ENTERED WITH THE SAID PARTY DURING THE PRECEDING YEAR. . THE ASSESSEE HAD ALSO MADE ADVANCE TO THE SAID SUPPLIER TO THE TUNE OF RS. 10 55 03 839/- WHICH APPEARED SEPARATELY IN THE SUNDRY ACCOUNTS. THE ASSESSEE WAS ASKED TO PRODUCE THE SAID PARTY AND TO ESTABLISH ITS IDENTITY CAPACITY AND PROVE THE GENUINENESS OF THE TRANSACTI ON. BEFORE THE CIT(A) THE ASSESSEE PRODUCED THE NECESSARY INFORMATION I.E . THE COPY OF ACCOUNT OF M/S SAHIL SALES CORPORATION SHOWING DEBIT BALANC E OF RS. 55 03 829/- WHICH WAS ADMITTED BY THE CIT(A) AFTER CONFRONTING THE SAME TO THE ASSESSING OFFICER. THE COPIES OF BILLS WERE ALSO F ILED BEFORE ASSESSING OFFICER AND CIT(A) AND THE COPY OF ACCOUNT SHOWING CREDIT BALANCE OF RS. 54 43 360/- WAS PRODUCED. THE ASSESSEE ALSO FURNI SHED ON RECORD BEFORE THE CIT(A) THE CERTIFICATES FROM SALES TAX AUTHORIT IES I.E. EXCISE AND TAXATION OFFICER GOBINDGARH DATED 25.3.2009. THE SAID PARTY M/S SAHIL SALES CORPORATION WAS REGISTERED UNDER R.C. NO. 034 9410 DATED 7.8.1995 AND IT WAS CERTIFIED BY THE EXCISE & TAXATION OFFIC ER MANDI GOBINDGARH VIDE LETTER DATED 25.3.2009 THAT THE PARTY HAD BEE N FILING REGULAR SALES TAX RETURNS UPTO 30.6.2005. THE SAID CERTIFICATE IS AN NEXED AS ANNEXURE B TO THE APPELLATE ORDER. FURTHER THE STATE BANK OF I NDIA MANDI GOBINDGARH HAD ALSO CERTIFIED THAT THE ASSESSEE HAD PAID SEVER AL CHEQEUS ON VARIOUS DATES AS DETAILED IN THE SAID CERTIFICATES TO M/S S AHIL SALES CORPORATION IN THE PRECEDING YEAR. THE COPY OF THE SAID CERTIFICA TE IS ENCLOSED AS ANNEXURE A TO THE APPELLATE ORDER. THE CIT(A) ALS O NOTED THAT DEBIT BALANCE OF RS. 55 03 829/- REPRESENTED THE ADVANCES PAID BY THE ASSESSEE AGAINST THE PURCHASES MADE FROM THAT PARTY WHICH W ERE NOT ADJUSTED AGAINST THE PURCHASES MADE DURING THE YEAR SHOWN IN ANOTHER ACCOUNT. THE AMOUNT OF RS. 15 49 011/- WAS THE OPENING BALAN CE IN THE ACCOUNT OF THE CREDITOR AGAINST TRANSACTION OF RS. 2 45 99 042 /- OUT OF WHICH A SUM OF RS. 2 30 50 031/- WAS PAID BY THE ASSESSEE IN TH E PRECEDING YEAR. THE TWO ACCOUNTS WERE SHOWN SEPARATELY IN THE BALANCE S HEET. IN VIEW OF THE ABOVE SAID EVIDENCES PRODUCED AND ACCEPTED BY THE C IT(A) THE IDENTITY 11 AND CAPACITY OF THE SAID PARTY AND GENUINENESS OF THE TRANSACTION STANDS PROVED. WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER IN MAKING THE ADDITIONS ON ACCOUNT OF THE AFORESAID AMOUNTS AND O PENING BALANCE MERELY BECAUSE THE SAID CONCERN WAS NOT FOUND WORKING AT T HE SAME PLACE AFTER ELAPSE OF TIME. WE ALSO UPHOLD THE ORDER OF CIT(A ) THAT IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE ASSESSEE HAD CLAIM ED EXPENSES ON ACCOUNT OF OCTROI AND TRANSPORTATION IN HIS ACCOUNT S WHERE THE GOODS WERE RECEIVED F.O.R. DESTINATION THE ASSESSEE CANNOT BE MADE TO LEAD EVIDENCE IN SUPPORT OF SUCH EXPENSES. THE CIT(A) IN PARA 4 .9 OF HIS ORDER ON THE PERUSAL OF THE ASSESSMENT RECORDS HAD NOTICED THAT THE ASSESSEE HAD FILED THE LIST OF SUNDRY DEBTORS IN WHICH THE DEBIT BALAN CE AGAINST M/S SAHIL SALES CORPORATION STOOD AT RS. 55 03 829/- AND THE ASSESSEE HAD ALSO FILED THE COPY OF ACCOUNT OF THE SAID PARTY SHOWING CREDI T BALANCE OF RS. 54 43 360/- DURING THE ASSESSMENT PROCEEDINGS. IN VIEW OF THE ABOVE WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS. 38 94 349/- MADE ON ACCOUNT OF ALLEGED UNEXPLAINED TRANSACTIONS U/S 68 OF THE ACT. WE ALSO UPHOLD THE DELETION OF ADDITION OF RS. 15 4 9 011/- ON ACCOUNT OF DEEMED PROFIT U/S 41(1)(A) OF THE ACT BEING CESSAT ION OF LIABILITY IN VIEW OF OUR REASONINGS IN CONNECTION WITH M/S N.G. ENGIN EERING WORKS MANDI GOBINDGARH IN THE PARAS HEREIN ABOVE. ACCORDINGL Y THE GROUND NOS. 2 & 3 RAISED BY THE REVENUE ARE DISMISSED. 15. THE ISSUE WHICH NOW NEEDS TO BE ADDRESSED IS GR OUND NO.3 RAISED BY THE ASSESSEE. THE CIT(A) WHILE DELETING THE ADD ITION IN RESPECT OF M/S SAHIL SALES CORPORATION HAD OBSERVED THAT THE ASSES SEE HAD MADE PURCHASES TO THE TUNE OF RS. 38 94 349/- FROM THE S AID PARTY DURING THE YEAR AND IN THE ABSENCE OF COMPLETE VERIFICATION OF THE SAME AN ESTIMATED ADDITION OF GP OF 10% ON SUCH PURCHASES A MOUNTING TO RS. 12 3 89 435/- WAS MADE. WE FIND NO JUSTIFICATION IN T HE SAID ADDITION ONCE THE TRANSACTION WITH THE SAID PARTY HAD BEEN ACCEPT ED TO BE GENUINE. IN THE ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD TO PR OVE THE ASSESSEE TO HAVE SOLD THE AFORESAID GOODS OUTSIDE THE BOOKS T HERE IS NO MERIT IN THE AFORESAID ADDITION ON ACCOUNT OF GROSS PROFIT EARNE D ON THE SAID PURCHASES. THE GROUND NO.3 RAISED BY THE ASSESSEE IS THUS ALLOWED. 16. THE GROUND NO.5 RAISED BY THE ASSESSEE IS AGAIN ST THE CHARGING OF INTEREST U/S 234A 234B & 234C OF THE ACT WHICH IS CONSEQUENTIAL. THUS THE GROUND NO.5 RAISED BY THE ASSESSEE IS DISMISSED . 17. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF AUGUST 2010. SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18 TH AUGUST 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR