ITO WD.5(4), Pune, v. Hrishikesh Laxman Joshi,

ITA 972/PUN/2007 | 2003-2004
Pronouncement Date: 13-08-2010 | Result: Dismissed

Appeal Details

RSA Number 97224514 RSA 2007
Assessee PAN ABAPJ9327L
Bench Pune
Appeal Number ITA 972/PUN/2007
Duration Of Justice 3 year(s) 2 month(s) 29 day(s)
Appellant ITO WD.5(4), Pune,
Respondent Hrishikesh Laxman Joshi,
Appeal Type Income Tax Appeal
Pronouncement Date 13-08-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 13-08-2010
Assessment Year 2003-2004
Appeal Filed On 15-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 702/PN/2007 (AY : 2003-04) MR. HRISHIKESH LAXMAN JOSHI 23 SHUKRAWAR PETH PUNE 411 002 PAN: ABAPJ9327L . APPELLANT V. INCOME TAX OFFICER WARD 5(4) PUNE . RESPONDENT ITA NO. 972/PN/2007 (AY: 2003-04) INCOME TAX OFFICER WARD 5(4) PUNE . APPELLANT V. MR. HRISHIKESH LAXMAN JOSHI 23 SHUKRAWAR PETH PUNE 411 002 PAN: ABAPJ9327L . RESPONDENT ASSESSEE BY : SHRI NITHIN PATHAK DEPARTMENT BY : MS. MANJU AJWANI ORDER PER D. KARUNAKARA RAO AM THESE ARE THE CROSS APPEALS AND BOTH THESE APPEALS ARE FILED AGAINST THE ORDER OF THE CIT(A) DATED 13.3.2007. ITA NO. 702/PN / 2007 IS FILED BY THE ASSESSEE AND THE GROUNDS IN THIS APPEAL RAISE THREE IS SUES RELATING TO (I) ADDITION OF RS 1 60 512/- IN RESPECT OF THE PURCHASES FROM M/S ANI RITA TRADE LINKS (WIFES CONCERNE); (II) DISALLOWANCE OF SUPERVISION FEES OF S 2.18 LAKHS PAID TO MR SHRIHARSH L JOSHI (BROTHER OF THE ASSESSEE) AND (III) ADDITION OF RS 2 80 476 U/S 41(1) OF THE ACT. THE GROUNDS OF THE REVENUE RAISED ITA NO. 972/PN /2007 (ASSTT. YEAR : 2003- 04) ARE ALSO RELATED TO THE ABOVE ISSUES. THEREFORE G ROUNDS OF BOTH APPEALS OF THE ASSESSEE AND THE REVENUE ARE DISPOSED OF IN A CONSOLI DATED WAY. BEFORE DECIDING THE ISSUES THE BASIC DETAILS AS NARRATED BY THE CIT(A) VIDE PARA 2.1 OF THE IMPUGNED ORDER ARE AS UNDER. ITA NO 702 & 972/PN/2007 HRISHIKESH LAXMAN JOSHI . A.Y.2003-04 PAGE OF 8 2 2. FOR THE SAKE OF CONVENIENCE THE SAID PARAGRAPHS IS REPRODUCED AS UNDER. 2.1 THE FACTS OF THE CASE FROM THE ASSESSMENT ORD ER ARE THAT THE ASSESSEE IS AN ELECTRICAL ENGINEER AND CONTRACTOR AND RUNNING BUSINESS UNDER THE NAME AND STYLE OF M/S PRATIBHA ELECTRICALS. WHILE SCRUTINIZING THE DETAILS OF CRED ITORS FILED BY THE ASSESSEE IT WAS NOTICED BY THE ASSESSING OFFICER THAT IN THE CASE OF AN IRITA TRADE LINKS THE OPENING BALANCE WAS RS. 5 78 914/- AND FURTHER PURCHASES OF RS.3 21 556/- HAD BEEN MADE. AS NO PAYMENT HAD BEEN MADE DURING THE YEAR UNDER CONSIDERATION THE EXTRACTS OF ACCOUNT OF ANIRITA TRADE LINK FOR THE LAST THREE YEARS WERE CALLED. THE ASSESSIN G OFFICER FOUND THAT THE PROPRIETOR OF M/S ANIRITA TRADE LINKS (ATL) WAS MRS. ANITA H. HOSHI WIF E OF THE ASSESSEE. THE TRANSACTION WITH MRS. ANITA JOSHI WERE NOT DISCLOSED U/S 40A(2)(B) IN THE AUDIT REPORT U/S 40AB. FURTHER THE ASSESSEE HAD BEEN SHOWING PURCHASES OF GOODS FRO M M/S ATL FROM 1.4.2000 TO 31.3.2003 WHILE THE OPENING BALANCE IN ALL THE YEARS WAS MORE OR LESS THE SAME I.E. AROUND RS.5 70 000/-. ACCORDING TO THE ASSESSING OFFICER THE PURCHASES WERE SHOWN MERELY TO INFLATE ASSESSEES EXPENDITURE AND REDUCE THE PROFITS. THE ASSESSEE WAS ASKED TO FILE THE PURCHASE BILLS AND TO EXPLAIN WHY THE PURCHASES SHOULD NO T BE TREATED AS BOGUS. IN RESPONSE IT WAS SUBMITTED THAT DUE TO SHORTAGE OF F UNDS THE LIABILITY WAS NOT PAID. NO DOCUMENTARY EVIDENCE TO SHOW THAT THE PURCHASES HAD IN FACT BEEN MADE FROM M/S. ATL WERE FILED. THE ASSESSING OFFICER FURTHER EXAMINED MRS . ANITA H. JOSHI PROPRIETOR U/S 131 OF THE INCOME TAX ACT 1961. SHE DEPOSED THAT SHE HAD FILED RETURN OF INCOME UPTO A.Y. 2001-02 BUT THE BOOKS OF ACCOUNT FOR AND FROM F.Y. 2001-02 ONWARDS WERE NOT TRACEABLE. IT WAS ADMITTED THAT THE EXTRACTS OF THE ACCOUNTS OF THE ASSESSEE WERE FILED TO THE INCOME TAX DEPARTMENT ON THE BASIS OF ROUGH RECORDS MAINTAINE D BY HER AND AFTER OBTAINING INFORMATION FROM THE ASSESSEE. THE BOOKS OF ACCOUNT BILLS OF PURCHASE OF GOODS SALE BILLS AND THE SALES MADE TO THE ASSESSEE WERE NOT PRODUCED EVEN WHEN IT WAS PROMISED TO BE PRODUCED BY 3.2.2006. THIS STATEMENT OF MRS. ANITA H . JOSHI WAS RECORDED IN THE PRESENCE OF THE ASSESSEE. THE ASSESSING OFFICER THEN PROCEEDE D TO RECORD STATEMENT OF THE ASSESSEE ON OATH U/S 131 OF THE INCOME TAX ACT 1961 THE RE LEVANT PORTION OF WHICH WAS REPRODUCED ON PAGE 3 OF THE ASSESSMENT ORDER. IN RESPONSE TO QUESTION NO.3 SUGGESTING THAT THE TRANSACTIONS WITH THE ASSESSEE WERE ONLY PAPER TRANSAC TIONS AND NO AMOUNTS WERE EITHER PAYABLE OR RECEIVABLE IT WAS STATED THAT NO COMMENTS C OULD BE MADE AS NO RECORDS/DOCUMENTS WERE AVAILABLE TO SUPPORT THE FINDINGS . THE ASSESSEE THEN AGREED TO THE ADDITIONS ON THE FINDINGS MADE. THE ASSESSING OFFICER THEREFORE PROCEEDED TO MAKE AN ADDITION OF RS.3 21 556/- ON ACCOUNT OF PUR CHASES MADE AND ALSO MADE AN ADDITION OF THE OPENING BALANCE OF RS.5 78 914/- AS PER PROVISIONS OF SECTION 41(1) OF THE INCOME TAX ACT 1961 AS THERE WAS NO L IABILITY OUTSTANDING. FURTHER THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.2 18 500/- AS PAYABLE TOWARDS SITE PROVISION CHARGES TO M/S. PRATIBHA ENTERPRISES. M/ S PRATIBHA ENTERPRISES IS THE PROPRIETORSHIP OF ASSESSEES REAL BROTHER SHRI S.L. JOS HI. SHRI S.L. JOSHI WAS NOT FILING THE RETURN OF INCOME FOR THE LAST THREE YEARS AND THEREF ORE THE REQUEST OF THE ASSESSING OFFICER TO FILE THE RETURNS OF INCOME FILED BY SHRI S.L. JOSHI COU LD NOT BE COMPLIED. IT WAS STATED THAT THE RETURNS HAD NOT BEEN FILED BY ASSESSEES BRO THER INADVERTENTLY. THE AMOUNT OF RS. 2 18 500/- WAS HELD TO BE EXPENSE NOT INCURRED FOR TH E PURPOSE OF BUSINESS BY THE ASSESSING OFFICER AND ADDED TO THE INCOME OF THE ASSES SEE. THE ASSESSING OFFICER ALSO BROUGHT OUT THE CONTRADICTION IN THE AUDIT REPORT WHERE THE AUDITORS HAD MENTIONED THE AMOUNT AS PAID ON ACCOUNT OF SITE CONSULTANCY FEE WHILE IN THE SUBMISSION MADE THE SAME IS BEING CLAIMED AS SUPERVISORY CHARGES REGARDING THE SUPERVISION CHARGES OF RS 2 18 500/- IT WAS STATED THAT THE ASSESSEES BROTHER WAS A SCIENCE GRADUATE AND PRIOR TO F.Y. 2002 -03 HE WAS WORKING ON A SHIP FOR MORE THAN 10 YEARS. AFTER LEAVING JOB HE WAS ASSISTIN G THE ASSESSEE ON FULLTIME BASIS BOTH IN OPERATIONAL AND ADMINISTRATIVE WORK. IT WAS STATED TH AT THE AMOUNT PAID WAS NOT EXCESSIVE BUT IN FACT COMMENSURATE WITH HIS EXPERIENCE A ND NATURE OF SERVICES RENDERED BY HIM. IT WAS STATED THAT THE RETURNS OF INCOME HAVE N OW BEEN FILED AND THE DUE AMOUNT HAS BEEN OFFERED TO TAX. ITA NO 702 & 972/PN/2007 HRISHIKESH LAXMAN JOSHI . A.Y.2003-04 PAGE OF 8 3 3. THE ISSUE WISE ADJUDICATION IS GIVEN IN THE FOLL OWING PARAGRAPHS. 4. ADDITION OF RS 1 60 512/- IN RESPECT OF THE PURCHAS ES FROM M/S ANIRITA TRADE LINKS (WIFES CONCERN): REGARDING THIS ISSUE AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ADDITIO N OF RS.1 61 054/- OUT OF RS.3 21 556/- IS DELETED AND CONFIRMED THE ADDITION OF RS 1 60 502/-. RELEVANT DISCUSSION AS GIVEN IN I HAVE GONE THROUGH THE FACTS OF THE CASE FROM THE ASSESSMENT ORDER AS ALSO THE WRITTEN SUBMISSIONS FILED THE REMAND REPORT OF THE ASSESSING OF FICER AND THE REJOINDER OF THE APPELLANT. IN THE STATEMENT RECORDED ON OATH U/S 131 OF THE INCOME TAX ACT 1961 THE ASSESSEE HAD AGREED TO THE ABOVE ADDITIONS ON THE BA SIS OF FINDING MADE BY THE ASSESSING OFFICER. THE ASSESSEES WIFE FROM WHOM THE PURCHASES WERE EFFECTED HAD FILED RETURN U/S 44AF AND 44AD FOR THE A.Y. 2001-02 TO 2003-04 ON 22.8.2006 WHICH ARE CLEARLY BARRED BY LIMITATION . IN HER SOLEMN STATEMENT RECORDED ON 2.2.2006 SHE DEPOSED THAT SHE HAD FILED HER RETURN OF INCOME UPTO A.Y. 2001-02 AND T HE BOOKS OF ACCOUNT FOR AND FROM A.Y. 2001-02 WERE NOT TRACEABLE AND AVAILABLE WITH HER. IT WAS ALSO ACCEPTED BY HER THAT SHE FILED THE EXTRACTS OF THE ACCOUNTS OF THE AS SESSEE WHEN CALLED FOR BY THE ASSESSING OFFICER ON THE BASIS OF INFORMATION FROM THE HUSBAND SH RI H.L. JOSHI. THE AUDITORS HAVE NOT DISCLOSED THESE TRANSACTIONS WHICH THEY WERE REQUIRED TO DISCLOSE IN THE AUDIT REPORT U/S 40A(2)(B) OF THE INCOME TAX ACT 1961. THERE IS NO DOCUMENTARY EVIDENCE THAT ANY GOODS HAD INFACT BEEN PURCHASED FROM M/S ATL . THE ASSESSEES CONTENTION THAT THE PURCHASES OF VERY SMALL AMOUNTS WAS MADE FROM M/S. AT L AS COMPARED TO THE TOTAL SALES MADE IS IRRELEVANT IN SO FAR AS THE PURCHASES MADE BY T HE ASSESSEE HAVE NOT BEEN PROVED EITHER BY RECEIPT OF THESE ITEMS THEIR FURTHER CONSUMP TION OR SALE OR EVEN BY PAYMENT OF THE AMOUNT. I THEREFORE AGREE WITH THE OBSERVATION OF THE ASS ESSING OFFICER THAT THE FILING OF THE TIME BARRED RETURNS BY THE ASSESS EES WIFE WAS AN AFTERTHOUGHT TO JUSTIFY THE PURCHASES MADE BY THE ASSESSEE. THE FILING OF THE SALES TAX RETURNS BY M/S ATL DOES NOT PROVE IN ANY WAY THAT THE PURCHASES HAD IN FACT BEEN MADE FROM M/S ATL. IN ANY CASE THE ORDER OF THE SALES TAX OFFICER FOR THE A.Y. UNDER CONSIDERATION ARE DATED 13.2.2006 FOR ALL THE THREE YEARS. FURTHER TH E CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAD INCORRECTLY ADDED THE AMOUNT OF R S.3 21 556/- WHILE THE PURCHASES OF ONLY RS. 1 60 512/- HAD BEEN MADE HAS NOT BEEN CONTR OVERTED BY THE ASSESSING OFFICER IN THE REMAND REPORT. THE ASSESSING OFFICER HAS GONE BY THE COPY OF ACCOUNT O F M/S ATL IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHERE AN AMOUNT OF RS.1 60 512/- AND AN AMOUNT OF RS.1 61 054/- HAS BEEN DEBITED WITHOUT VERIFYING AS TO WHETHER THE AMOUNT OF RS.1 61 054/- WAS DEBITED ON ACCOUNT OF PU RCHASES OR OTHERWISE. FROM THE COPY OF ACCOUNT OF M/S ATL IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IT IS SEEN THAT IN THE ACCOUNTING YEAR 2000-01 THE OPENING BALANCE WAS RS.25 289/ CERTAIN SALES AMOUNTING TO RS.32 563/- WERE MADE TO M/S ATL A ND PAYMENT OF RS.47 999/- WAS RECEIVED LEAVING CLOSING BALANCE OF RS.9 853/-. IN THE AC COUNTING YEAR 2001-02 THE AMOUNT RECEIVED WAS RS.1 34 234/- CONSISTING OF RS.50 000/- RS.8 000/- AND RS.4 234/- PAID. THE SALES WERE RS. 4 698/-. IN THE ACCOUNTING YEAR 2002- 03 SALES WERE RS. 39 299/- WHILE AMOUNT PAID WAS RS.80 672/- CONSISTING OF RS.21 000/- RS.34 000/- RS. 25 407/- LEAVING A BALANCE OF RS.1 61 054/-. THE SALES OF RS.25 289/- RS. 9 853/- AND RS. 39 299/- MADE IN ACCOUNTING YEAR 2000-01 2001-02 AND 2002-03 TO M/S ATL ARE SHOWN IN THE SALES ACCOUNT OF THE ASSESSEE AND ACCEPTED BY THE ASSESSING OFFICER . THEREFORE THE AMOUNT OF RS.1 61 054/- WAS AN AMOUNT WHICH WAS RECEIVABLE B Y THE APPELLANT FROM M/S ATL NOT ON ACCOUNT OF ANY PURCHASES MADE BUT ON ACCOUNT OF ADVANCE AMOUNT PAID. THIS CREDIT AMOUNT LYING IN THE DEBTORS LEDGER WAS CREDIT ED TO APPELLANTS CREDITOR ACCOUNT WHERE THE OPENING BALANCE WAS ALREADY RS.5 78 914/- (C R) AND FURTHER RS. 1 61 054/- WAS NOT ON ACCOUNT OF ANY BOGUS PURCHASES BUT JUST A TR ANSFER ENTRY FROM THE DEBTORS ACCOUNT TO CREDITORS ACCOUNT. IN VIEW OF THE ABOVE THE ADD ITION OF RS.1 61 054/- OUT OF RS.3 21 556/- IS DELETED. ITA NO 702 & 972/PN/2007 HRISHIKESH LAXMAN JOSHI . A.Y.2003-04 PAGE OF 8 4 5. FROM THE ABOVE UNDISPUTED FACTS IT IS EVIDENT TH AT THE ASSESSEE FAILED TO FILE ANY DOCUMENTARY EVIDENCE TO SHOW THE VERACITY OF THE CLAIM OF THE PURCHASE FROM HIS WIFES CONCERN (ATL)). THE SAID CONCERN IS A NON FILER OF RETURN FROM THE AY 2001- 02 ON WARDS. THERE ARE NO BOOKS OF ACCOUNTS OF THE SAI D CONCERN TOO FOR THE RELEVANT YEARS. THOUGH SOME IN TIME BARRED RETURNS ARE FIL ED IN THE YEAR 2006 FOR THE SAID YEARS THEY ARE NOT BACKED BY THE BOOK ENTRIE S. THE SALE TAX RETURNS FILED BY THE SAID CONCERN IS NOT A CLINCHING EVIDENCE AND IN THE ABSENCE OF VALID PURCHASE OR SALE BILLS THE SAID RETURNS ARE RIGHTLY REJECTED BY THE REVENUE. CONSIDERING THE ABOVE FACTUAL POSITION WE FIND THAT THE ASSESSEE FA ILED TO DISCHARGE THE ONUS IN RESPECT OF THE CLAIM AND THEREFORE WE FIND NO REASON T O INTERFERE WITH THE IMPUGNED ORDER OF THE CIT(A). ACCORDINGLY THIS PART OF THE GROUN D OF THE ASSESSEE IS DISMISSED . 6. REGARDING THE REVENUES APPEAL THE GROUNDS 1 TO 6 ARE MESSY AND THEY ARE NOT AS PER THE RELEVANT RULES. ASSESSEES COUNSEL FILE D A NOTE EXPLAINING THE GROUNDS VIDE PARA 5 TO 7 OF THE NOTE. CONSIDERING THE SAID NO TE AND THE GROUNDS WE FIND THAT THE REVENUE IS AGGRIEVED AGAINST THE DECISION OF THE CIT(A) IN GRANTING RELIEF IN RESPECT OF THE ADDITIONS OF (I) 1 61 054/- OUT OF RS .3 21 556/- AND (II) RS 5 74 914/-. RELEVANT GROUNDS OF THE REVENUE HAVE TO BE DISMISSED CONSIDERING THE REMAND PROCEEDING GRANTED BY THE CIT(A) AND ALSO THE DETAILE D REASONING GIVEN BY HIM IN THE IMPUGNED ORDER. IN SO FAR AS THE INVOKING THE PROVI SIONS OF SECTION 41(1) OF THE ACT ARE CONCERNED WE FIND THE DETAILED DISCUSSION AN D DECISION GIVEN IN THE CONTEXT OF THIRD ISSUE RELATING TO RS 2 80 476/- ARE RELEVANT. ACCORDINGLY RELEVANT GROUNDS OF THE REVENUE ARE DISMISSED . 7. DISALLOWANCE OF SUPERVISION FEES OF S 2.18 LAKHS PAID TO MR SHRIHARSH L JOSHI (BROTHER OF THE ASSESSEE): ASSESSEE INITIALLY CLAIMED THE ABOVE PAYMENT MADE TO HIS BROTHER (M/S. PRATIBHA ENTERPRISES) UNDER THE SITE PROVISION CHARGES. HIS BROTHER IS NOT ASSESSED TO TAX. CONSIDERIN G THE DISCREPANCIES IN THE AUDIT REPORT AO PROPOSED TO MAKE THE ADDITIONS AND I N THE SUBMISSION THE ASSESSEE MENTIONED THAT THE SAID AMOUNT WAS PAID TO WARDS THE SUPERVISORY CHARGES. AO REJECTED THE SAID EXPLANATION AND MADE AD DITION. DURING THE FIRST APPELLATE PROCEEDINGS REGARDING THE SUPERVISION CHARGE S OF RS 2 18 500/- IT WAS STATED THAT THE ASSESSEES BROTHER WAS A SCIENCE GRADU ATE AND PRIOR TO F.Y. 2002-03 ITA NO 702 & 972/PN/2007 HRISHIKESH LAXMAN JOSHI . A.Y.2003-04 PAGE OF 8 5 HE WAS WORKING ON A SHIP FOR MORE THAN 10 YEARS. AFTER LEAVING JOB HE WAS ASSISTING THE ASSESSEE ON FULLTIME BASIS BOTH IN OP ERATIONAL AND ADMINISTRATIVE WORK. IT WAS STATED THAT THE AMOUNT PAID WAS NOT EXCESSIV E BUT IN FACT COMMENSURATE WITH HIS EXPERIENCE AND NATURE OF SERVICES RENDERED BY HIM. IT WAS STATED THAT THE RETURNS OF INCOME HAVE NOW BEEN FILED AND THE DUE AMO UNT HAS BEEN OFFERED TO TAX IN THE HANDS OF THE BROTHER. HOWEVER THE CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ADDITIONS FOR NOT SUB STANTIATING THE SERVICES CLAIMED TO HAVE BEEN RENDERED. 8. AGGRIEVED WITH THE SAME THE ASSESSEE FILED THE P RESENT APPEAL WITH THE RELATABLE GROUNDS. DURING THE PROCEEDINGS LD COUNSEL F OR THE ASSESSEE BROUGHT TO OUR ATTENTION THE BILLS SIGNED BY MR S L JOSHI AND AL SO ON THE QUOTATION OF THE ASSESSEE FOR DEMONSTRATING THE SERVICES RENDERED TO THE ASSESSEE. ON THE OTHER HAND LD DR RELIED ON THE ORDERS OF THE REVENUE. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE SAMPLE BI LLS QUOTATION ETC PLACED IN THE PAPER BOOK FOR EVIDENCING THE RENDERING OF THE S ERVICES TO THE ASSESSEE BY SRI S L JOSHI WHO WAS LOOKING AFTER THE SITE SUPERVIS ION. FURTHER WE HAVE EXAMINED IF THE AO MADE OUT ANY CASE OF EXCESSIVE OR UNREASONA BLE AFTER BRINGING COMPARABLE AS PER THE PROVISIONS OF SECTION 40A(2) OF THE ACT AN D FOUND IT IS NOT THE CASE OF THE REVENUE. CONSIDERING THE VOLUMINOUS AMOUNT OF PAPER WO RK PRESENTED BEFORE THE SERVICES RENDERED BY THE BROTHER SL JOSHI NEED NOT BE DO UBTED. CONSIDERING THE ABOVE WE FIND THAT THE CLAIM OF THE ASSESSEE HAS T O BE ALLOWED AND THE ORDER OF THE CIT(A) HAS TO BE REVERSED IN THIS REGARD. ACCORDINGLY THIS PART OF THE GROUNDS ARE ALLOWED . 10. ADDITION OF RS 2 80 476 U/S 41(1) OF THE ACT: IN THIS REGARD IT WAS MENTIONED THAT IT IS PART OF THE FIGURE OF RS.4 21 03 8/- AND THE CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF RS 2 80 476/-. F URTHER IT WAS STATED THAT THE RELEVANT CREDITORS WERE REGULAR MOVING ACCOUNTS IE. PARTIES FROM WH OM PURCHASES WERE REGULARLY BEING MADE OVER THE LAST MANY YEARS. THE DIF FERENCE HAD ARISEN DUE TO DISCOUNTS GIVEN REJECTION MADE BY THE ASSESSEE WHIC H WERE ACCEPTED BY THE SUPPLIER WITHOUT ANY EXPRESS INTIMATION TO THE APPELL ANT. AS PAYMENT IS MADE SOMETIMES ON ACCOUNT AND NOT WITH RESPECT TO SPECIFI C BILLS THE DISCOUNTS REJECTIONS ETC WHICH HAD BEEN ACCEPTED BY THE SUPPLIERS DID NO T COME TO THE KNOWLEDGE OF THE ITA NO 702 & 972/PN/2007 HRISHIKESH LAXMAN JOSHI . A.Y.2003-04 PAGE OF 8 6 ASSESSEES ACCOUNTANT. AS THE ABOVE DIFFERENCE WERE NOT RECONCILED ON YEAR TO YEAR BASIS IT WAS ONLY ON ACCOUNT OF ASSESSING OFFICERS INTIMATION THAT THE ABOVE DIFFERENCES WERE NOTICED. IT WAS STATED THAT FOR THE YEAR ENDING 31.3.2006 THE ABOVE AMOUNTS HAD BEEN WRITTEN BACK AND THE ASSESSEE WAS WILLING TO OFFER THE SAID AMOUNT TO TAX IF THE ADDITION IS DELETED IN A. Y. 2003-04. IT WAS STATED THAT SINCE THE ASSESSEE HAS NOT WRITTEN BACK OR OTHERWISE OBTAINED ANY BENEFIT THE DIFFERENCE OF RS.4 21 038/- IS NOT CHARGEABLE TO TAX U/S 41(1) OF THE INCOME TAX ACT 1961 FOR THE A.Y. 2003-04. IT WAS FURTHER STATED THAT PART OF THE ABOVE DIFFERENCE PERTAINED TO EARLIER YEARS AND TO THAT EXTEN T IT WAS NOT CHARGEABLE TO TAX FOR THE A.Y. 2003-04. AS ADDITIONAL EVIDENCES HAD B EEN FILED DURING THE COURSE OF APPELLATE PROCEEDINGS THE REMAND REPORT OF THE ASSESSI NG OFFICER WAS CALLED FOR ON THE ABOVE THREE ISSUES. 11. THE OPERATIVE PORTION OF THE REMAND REPORT SUBMITTE D IS BEING REPRODUCED AS UNDER FOR READY REFERENCE : . III. CESSATION OF LIABILITY OF RS.4 21 038/-: ALL THE CREDITORS WERE ASKED TO FURNISH EXTRACT OF ACCO UNTS WITH THE ASSESSEE U/S 133(6) OF THE INCOME TAX ACT 1961. IN RESPONSE TO THIS THEY FURNISHED THE EXTRACT FOR THE YEAR UNDER CONSIDERATION. ON VERIFICATION OF IT WITH THE ASSESSEES ACCOUNT THE SAID DISCREPANCIES WERE FOUND. THE ASSESSEE WAS C ATEGORICALLY ASKED ABOUT IT WHICH HE HAS NO ANSWER. NOW THE ASSESSEE HIMSELF OFFE RING THE SAID ADDITION FOR THE A.Y.2006-07 IF IT IS DELETED IN THE A.Y. 2003-04. THUS IT WILL NOT BE OUT OF PLACE TO SAY THAT WHEN THE DISCREPANCY IS FOUND IN THE YEAR UNDER CONSIDERATION HOW IT CAN BE TAXED FRO THE A.Y. 2006-07. HIS STATEMENT CLEARLY CONNOTES THAT THERE IS DEFAULT OTHERWISE HE WOULD NOT HAVE OFFERED THIS AMOUN T FOR TAXATION. THIS PROPOSAL IS JUT TO ESCAPE FROM PENALTY U/S 271(1)(C ) AND FUTU RE PROSECUTION PROCEEDINGS. THE FURTHER COMMENTS OF THE ASSESSEE ON THE REMAND REPORT WERE CALLED FOR WHEN THE SUBMISSION ALREADY MADE BY THE APPELLANT WERE REITERATED . IT WAS ADDITIONALLY SUBMITTED WITH REFERENCE TO THE CESSATION OF LIABILITY OF RS.4 21 0 38/- THAT THE ASSESSEE HAD PAID RS.1 03 300/- TO KIRAN ELECTROTECHNIC ON 21.8.2003 VIDE ACCOUNT PAYEE CHEQUE. COPY OF THE BANK STATEMENT WAS ENCLOSED. FURTHER THE ACCOUN T OF M/S SWITCHON ELECTRICALS WAS RECONCILED IN F.Y. 2004-05 AND THE ASSESSEE HAD WRITTEN BACK AND OFFERED TO TAX RS.32 229/- IN A.Y.2005-06 AS AGAINST RS.37 273/- TAXED BY THE ASSESSING OFFICER IN ORDER U/S 143(3) WHICH WAS PASSED SUBSEQUENT TO THE FILING OF RETURN OF INCOME FOR A.Y. 2005-06. IT WAS FURTHER STATED THAT THE ASSESSEE HAD WRITTEN BACK RS . 2 80 476/- IN THE A.Y. 2006-07 AND REDUCED THE SAME WHILE COMPUTING THE TOTAL INCOME FOR A.Y. 2006-07 AS THE SAME HAD ALREADY BEEN TAXED IN ORDER U/S 143(3). THE DETAILS OF RS.2 80 476/- WAS AS UNDER: NAME OF THE PARTY RUPEES SUGANDHTARA ELECTRICALS 12 482 INDIAN CABLE CORPORATION 2 45 621 AJANTHA ELECTRICALS 11 750 POWERCRAFT ENGINEERS 10 623 TOTAL 2 80 476 ITA NO 702 & 972/PN/2007 HRISHIKESH LAXMAN JOSHI . A.Y.2003-04 PAGE OF 8 7 FINDING OF THE CIT(A) AS GIVEN IN PARA 2.4 IS AS UNDER: 2.4 I HAVE GONE THROUGH THE FACTS OF THE CASE FRO M THE ASSESSMENT ORDER REMAND REPORT OF THE ASSESSING OFFICER AND THE REJOINDER SUBMITTED B Y THE APPELLANT. REGARDING CESSATION OF LIABILITY OF RS.4 21 238/- GROUND OF APPEAL NO.(V) IT WAS SUBMITTED THAT THE ASSESSEE HAS MADE A PAYMENT OF RS.1 03 300/- BY AN ACCOUNT PAYEE CHEQUE ON 21.8.2003 TO M/S KIRAN ELECTROTECHNIC. FURTHER THE AMOUNT OF RS.32 229/- WA S RECONCILED IN F.Y. 2004-05 AND OFFERED TO TAX FOR A.Y. 2005-06 AS AGAINST RS.37 273 /- TAXED BY THE ASSESSING OFFICER IN A.Y. 2003-04. IT IS SEEN THAT THE RETURN OF INCOME WAS F ILED ON 29.11.2003 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ACCOUNT PAYEE CHEQUE TO M/S KIRAN ELECTRICALS WAS ISSUED ON 21.8.2003 I.E. BEFORE THE FILING OF RETURN. AS THE ASS ESSING OFFICER HAD CALLED FOR AND TRIED TO RECONCILE THE DIFFERENCE AS ON 31.3.2003 THE AMOUNT O F RS.1 03 300/- WAS SHOWN AS PAYABLE. THE AMOUNT IS HOWEVER DEBITED IN THE BANK A CCOUNT OF M/S. PRATIBHA ELECTRICALS ON 1.9.2003. THE ADDITION MADE ON ACCOUNT OF M/S KI RAN ELECTRICAL P. LTD. THEREFORE HAS TO BE DELETED. FURTHER BEFORE THE PASSING OF THE AS SESSMENT ORDER THE ASSESSEE HAD WRITTEN BACK AN AMOUNT OF RS.32 229/- IN THE A.Y. 200 5-06 RETURN FOR WHICH WAS FILED PRIOR TO PASSING OF THE ASSESSMENT ORDER U/S 143(3) AND TH E ASSESSING OFFICER HAD NOT WRITTEN BACK ANY OTHER AMOUNT IN THE SAME ASSESSMENT YEAR. THE BONA FIDE OF THE ASSESSEE CANNOT BE DOUBTED. THE ADDITION ON ACCOUNT OF SWITHCHON ELEC TRICAL AMOUNTING TO RS. 37 273/- IS ALSO DELETED. THE REMAINING ADDITION OF RS.2 80 476/- P ERTAINING TO FOUR PARTIES IS HOWEVER ADMITTED AS NOT ONLY THERE WAS DIFFERENCE IN THE ACCOUNTS WHEREBY THE LIABILITY WAS LESS BY SUCH AMOUNT BUT THE ASSESSEE HAS NOT BEEN ABLE TO RECONCILE THE AMOUNT EITHER BEFORE THE ASSESSING OFFICER OR EVEN IN THE APP ELLATE PROCEEDINGS ALSO. FURTHER IT IS SEEN THAT THE ASSESSEE HAS WRITTEN BACK THESE AMOUNTS IN THE A.Y. 2006-07 BUT REDUCED THE SAME WHILE COMPUTING THE TOTAL INCOME FOR A .Y. 2006-07 AS THE AMOUNT HAD ALREADY BEEN TAXED BY THE ASSESSING OFFICER IN THE A.Y. 2003-04. ON ACCOUNT OF THE ADMISSION OF THE ASSESSEE WHEREBY HE REDUCED THE WRITT EN BACK AMOUNT FROM THE COMPUTATION OF INCOME FOR THE A.Y. 2006-07 AND THE DIS CUSSION MADE ABOVE THE ADDITION OF RS.2 80 476/- IS CONFIRMED. 12. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT(A) THE ASSESSEE FILED GROUND 3 OF THE APPEAL BEFORE US. FURTHER AGGRIEVED WITH THE REL IEF GIVEN TO THE ASSESSEE THE REVENUE IS IN APPEAL VIDE THE GROUND 7 OF THE APPEAL. DURING THE PROCEEDINGS THE ASSESSEE FILED A WRITTEN NOTE STATING THAT THE AO IN VOKED THE PROVISIONS OF SECTION 41(1) OF THE ACT AND ACCORDING TO THE SAID PROVISIONS THE AO CANNOT TREAT THE SAID AMOUNTS AS INCOME OF THE ASSESSEE OR DEEM THEM AS CA SE OF REMISSION OR CESSATION OF LIABILITIES WHERE THE SAID AMOUNTS WERE NOT WRIT TEN OF BY THE ASSESSEE IN THE BOOKS OF THE ASSESSEE. DURING THE PROCEEDINGS BEFORE U S THE ASSESSEE FILED CASE LAWS TO SUPPORT VIEW INCLUDING THE PUNE BENCH DECISI ON IN THE CASE OF M/S ATIDAB CONCRETE PIPES AND PRODUCTS PUNE VIDE ITA NO 1017/PN /2002 TO SUPPORT THE ABOVE. FURTHER COUNSEL STATED THAT THE SAID AMOUNTS WERE WRIT TEN OFF AS THE INCOME OF THE ASSESSEE IN THE YEAR RELEVANT TO THE AY 2006-07 AND T HEREFORE THERE IS NO NEED FOR ANY ADDITION DURING THE YEAR UNDER CONSIDERATION. FURTHE R WE FIND THE JUDGMENTS IN THE CASES OF DSE ENGINEERS (30 SOT 31)(MUM) SUGAOL I SUGAR WORKS P LTD (236 ITR 518) HOLDS THAT THE LIABILITIES DO NOT CEASE TO EXISTS MERELY BY EFFLUX OF TIME. CONSIDERING THE ABOVE SETTLED PRINCIPLES ON THE ISSUE WE FIND THAT THE FINDING OF THE ITA NO 702 & 972/PN/2007 HRISHIKESH LAXMAN JOSHI . A.Y.2003-04 PAGE OF 8 8 CIT(A) HAS TO BE REVERSED ON THIS ISSUE. ACCORDINGLY THE RELEVANT GROUND OF THE ASSESSEE ARE ALLOWED . FURTHER THE GROUNDS OF THE REVENUE ARE DISMISSED . 13. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 13TH DAY OF AUGU ST 2010. SD/- SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER PUNE DATED THE 13 TH AUGUST 2010 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT- I NASHIK 4. THE CIT(A)-II NASHIK 4. THE D.R. B BENCH PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE