Income Tax Appellate Tribunal - Ahmedabad
Ravinder Singh D.Kahlon, Baroda vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH AHMEDABAD
Before Shri Mukul Kr. Shrawat, Judicial Member and
Shri T.R. Meena, Accountant Member
ITA Nos. 1436 & 1469/Ahd/2012
Assessm ent Years :2006-07
Sri Ravinder Singh D. Kahlon V/s. ITO,
Prop. Kahlon Brothers, W ard-2 (2),
SF - 36, Sitaram Super Market, Baroda
Opp. Baroda Packaging,
Chhani, Baroda - 390001
ITO, V/s.
Sri Ravinder Singh D.
W ard-2 (2), Kahlon
Baroda Prop. Kahlon Brothers,
SF - 36, Sitaram Super
Market, Opp. Baroda
Packaging, Chhani,
Baroda - 390001
PAN No. ADYPJ4171G
(Appellant) .. (Respondent)
राजःव कȧ ओर से Shri Dinesh Singh, Sr. D.R.
By Revenue
आवेदक कȧ ओर से/By Assessee Ms. Urvashi Shodhan, A.R.
सुनवाई कȧ तारȣख/Date of Hearing
05.09.2012
घोषणा कȧ तारȣख/Date of Pronouncement 19.10.2012
ORDER
PER : T.R.Meena, Accountant Member
These are cross appeals filed by the Assessee and Revenue in ITA Nos. 1436/Ahd/12 & 1469/Ahd/12 respectively, which have emanated from the I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 2 order of CIT(A)-IV, Baroda, order dated 25.04.2012 for A.Y. 2006-07. These cross appeals were heard together and are being disposed of by way of this common order for the sake of convenience. The effective grounds of both cross appeals are as under:
Grounds of Assessed's Appeal in ITA No.1436/Ahd/2012 "1. Ld. CIT (A) erred in law and on facts in directing AO to grant expenses disallowed u/s 40(a)(ia) of the Act after verifying whether TDS deducted was paid on or before the due date of filing of return.
Ld. CIT (A) failed to appreciate the fact that in assessment order (page 2 Para 3) after due verification of TDS return AO himself noted TDS deducted being deposited on 04/04/2006 & 02/05/2006. Ld. CIT (A) ought to have deleted disallowance instead of directing AO for verification.
2. Ld. CIT (A) erred in law and on facts in confirming action of AO in disallowing commission expenses of Rs. 1, 43, 208/- invoking provisions of section 40(a)(ia) of the Act. Ld. CIT (A) erred in not appreciating the fact that in absence of principal - agent relationship with the transport service provider, provision of section 194H not being applicable, no disallowance is warranted u/s 40(a)(ia) of the Act. Ld. CIT (A) ought to have deleted erroneous disallowance made by AO.
3. Ld. CIT (A) erred in law and on facts in confirming addition made by AO of Rs. 25, 000/- as unexplained cash credit u/s 68 of the Act. Both the lower authorities failed to appreciate the fact that the amount was received by cheque from father of the appellant for business urgency. Ld. CIT (A) ought to have deleted such disallowance when identity of depositor is proven and amount is received by way of cheque.
I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 3
4. Ld. CIT (A) erred in law and on facts in confirming disallowance by AO of Rs. 35, 441/- of interest expenses u/s 36 (1)(iii) of the Act. Ld. CIT (A) erred in not appreciating the fact that interest free advances for business purposes were given due to commercial expediency. Ld. CIT (A) ought to have deleted disallowance of interest expenses. .
5. Ld. CIT (A) erred in law and on facts in confirming action of AO in making addition of Rs. 4, 79, 059/- on account of excess liability claimed by the appellant. Ld. CIT (A) erred in not appreciating the fact that in absence of cessation of liabilities arisen due to purchases of goods no addition u/s 41 (1) of the Act is warranted for want of confirmation. Ld. CIT (A) ought to have deleted addition made on surmises & conjectures."
Grounds of Revenue's Appeal in ITA No.1469/Ahd/2012 "1(a). On the facts and int eh circumstances of the case and in law, the ld CIT(Appeals) erred in deleting the addition of Rs.11,64,220/- u/s.40(a)(ia) of the Income Tax Act, 1961, holding that the provisions of section 40(a)(ia) as amended by the Finance Act, 2010 w.e.f. 01.04.2010, are of clarificatory nature and, therefore, retrospective.
1(a). The ld.CIT(Appeals) erred in not considering the fact that the relevant portion of the Memorandum Explaining the Provisions in Finance Bill, 2010 clearly states that this amendment is proposed to take effect from 01.04.2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years."
2. The first ground of assessee and revenue is directed against the order of the CIT(A)directed to the A.O. to allow the appeal in favour of the assessee, I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 4 if the TDS has been paid on or before due date of filing of return u/s.139(1) of the IT Act.
3. The factual matrix of the case is that the assessee had claimed transportation charges of Rs. 12,82,720/- in trading account which are covered under the provisions of Section 194C of the IT Act. The assessee was given reasonable opportunity of being heard during the course of assessment proceeding. It was claimed before the A.O. that the payments were made on 04th April, 2006 and 02nd May, 2006. As per A.O., the assessee had to deduct TDS and pay on or before 31st March, 2006. But the assessee had paid TDS beyond the financial year relevant to assessment year under consideration. Thus, he attracted the provisions of Section 40(a)(ia) of the IT Act. After considering the assessee's reply and reducing amount of Rs.1,18,500/- from 12,82,720/-, the remaining amount of Rs.11,64,220/- was disallowed u/s. 40(a)(ia) of the IT Act as the assessee did not furnish any explanation on opportunity granted by the A.O.
3. Being aggrieved by the order of A.O., the assessee carried the matter before the CIT(A) who had confirmed the addition after lengthy discussion in its order on page nos. 2 to 14 and after considering the Hon'ble Calcutta High Court decision in case of CIT Vs. Virgin Creation in G.A. No.3200/2011 and Hon'ble Ahmadabad Tribunal decision in case of Alpha Projects Society P. Ltd. Vs. DCIT, Circle-1(1) in ITA No. 2869/Ahd2011 and observed that payment of amount of tax deducted at source had been made by the appellant on or before due date of filing of return of income u/s.139(1) of the IT act.
I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 5 Then, the above amount of Rs.11,64,220/- cannot be disallowed u/s. 40(a)(ia) of the IT Act. In view of the above, the A.O. was directed to verify whether the TDS had been paid on or before due date of filing of return u/s. 139(1) of the IT Act and in case of such amount of TDS have been paid to the Government account on or before such due date, then allow the expenditure of Rs.11,64,220/-.
4. Now both the parties are before us. Ld. Counsel for the assessee, Ms. Urvashi Sodhan relied upon in case of Virgin Creation (supra) and challenged the direction given by the ld. CIT(A) to the A.O. that facts were verified by the A.O. and are already on record. Therefore, CIT(A) might have allowed the appeal in favour of the assessee on the basis of Hon'ble Calcutta High court decision in case of Virgin Creation (supra). Ld. A.R. further relied in case of Shri Raj Corporation vs. ITO in ITA No.44/ahd/2010. The Co-ordinate Ahmedabad 'C' Bench decision where identical issue was held in favour of the assessee. The operative portion of the order is as under:
"4. We have considered rival submissions carefully. We find that the issue of disallowance of labour and carting expenses under Section 40(a)(ia) of the Act is covered in favour of the assessee with the decision of Hon'ble Calcutta High Court in the case of Virgin Creators dated 23.11.2011 (supra) and also with the decision of the ITAT, Ahmedabad Benches in M/s.A!pha Projects Pvt. Ltd. dated 23-3-2012 (supra). We find that the issue before the Hon'ble Calcutta High Court in M/s,Virgin Creators I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 6 was whether the provision of section 40(a)(ia) has retrospective operation or not and the issue was decided in favour of the assessee. The ITAT, Ahmedabad Benches in the case of M/s.Alpha Projects Pvt. Ltd. (supra) has considered the decision cited by the learned DR of the Special Bench in the case of Bharati Shipyard Ltd. (supra) and has followed the decision of the Hon'ble Calcutta High Court in the case of Virgin Creators (supra) and has deleted the disallowance under Section 40(a)(ia) of the Act. We being in agreement with the decision of the Co-ordinate Bench of Ahmedabad Tribunal in the case of M/s. Alpha Projects Pvt. Ltd. (supra) and there being no contrary decision brought to our notice of any other Hon'ble High Courts, respectfully following the decision of the Hon'ble Calcutta High Court in CIT Vs. Virgin Creators (supra) we decide the issue in favour of the assessee and delete the disallowance of labour and carting expenses under Section 40(a)(ia) of the Act and accordingly allow this ground of the assessee."
From the side of the Revenue, ld. D.R. fairly conceded that matter has been set aside in view of the amendment made in Section 40(a)(ia) by Finance act is 2010. Therefore, the A.O. was right to disallow the Transport expenses debited in p&l account without deducting TDS u/s.194(c)(1) of the IT Act.
5. We have perused the facts of the case and gone through the order of the authorities below and heard the arguments. The Co-ordinate 'C' Bench, I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 7 Ahmadabad, has allowed the identical appeal in case of Raj Corporation (supra) and by considering Hon'ble Calcutta High Court's decision in case of Virgin Creation dated 23.11.2011and also Ahmadabad Bench decision in case of M/s.Alpha Projects Pvt. Ltd., dated 23-3-2012 (supra) holding that amendment in Section 40(a)(ia) is retrospective. Page nos. 2 & 3 of assessment order show that the appellant had deducted TDS and paid on 04th April, 2006 and 02nd May, 2006 which is before the due date of return filed u/s. 139(1) of IT Act. Therefore, we allow the Assessee's appeal and dismiss the Revenue's appeal.
6. The second ground of appeal is directed against the disallowance of commission expenses of Rs.1,43,208/- invoking provisions of section 40(a)(ia). The ld. A.O. observed that the assessee has debited in trading account an amount of Rs.1,43,208/- as commission expenses to M/s. Hariom Transport. The A.O. had given reasonable opportunity of being heard to the assessee. As assessee had not deducted TDS, therefore, it is disallowable u/s. 40(a)(ia). But the assessee did not furnish any explanation before the A.O. Therefore, he made addition of Rs.1,43,208/-.
7. Being aggrieved by the order of A.O., the matter came before ld. CIT(A) who had also confirmed the addition. The finding is reproduced as under:
"13. The reason for making the addition of Rs.1,43,208/- as mentioned by the AO in the assessment order as well as above submission of the appellant have been considered. I do not agree with the above submission of the appellant and in my opinion tax at source on payments of Rs.1,43,208/- was required to be made by the appellant. I agree with the findings of ITO Wd-
I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 8 2(2), Baroda as given above in his remand report. In the case of appellant, the payment of Rs.1,43,208/- was claimed as commission expenses in the books of accounts. Now, how the commission was paid by the appellant is immaterial as far as TDS liability is concerned. Even if commission was deducted by Hariom Transport, the sum deemed to have been paid by the appellant and the same has been claimed as commission expenses by him. In the case of appellant the rate of commission was pre decided between him and Hariom Transport for the services rendered by Hariom transport which Hariom transport deducted upfront from the amount paid by it to the appellant. Even otherwise, Hariom Transport had just facilitated the transport services for the appellant and paid all the receipts to him Albeit Commission, shortage etc. In other words all the expenses in fact were borne by the appellant only. In view of this the decision cited by the A.R. are not applicable to the case of the appellant.
14. Considering above facts I hold that the A.O. has correctly disallowed the expenses of Rs.1,43,208/- u/s 40(a)(ia) of the I.T. Act and therefore, the same is confirmed. Thus the ground of appeal no.2 of the appellant is dismissed."
8. Now the matter is before us. The ld. Counsel for the assessee contended that the provisions of Section 194 are not applicable in case of assessee. The assessee engaged in the business of transportation and had received relevant payments from the service receiver net of their entitlement of transportation/commission charges. Therefore, there being relationship of principal and agent, amount deducted by the Transport Agency would not be treated as payment on commission by the assessee and therefore, the assessee was not liable to deduct TDS at source and section194 is not I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 9 applicable in this case. The addition made u/s. 40(a)(ia) is not warranted. He also relied on following judgments:
(a) (2006) 200 (Ker), in case of Kerala State Stamp Vendors Association & Ors. Vs. Officer of the Accountant General & Ors. (B) (2006) 8 SOT 513 (Del) in case of All India Radio Commercial Broadcasting Service/Prasar Bharti Broadcasting Corporation of India vs. Income Tax Officer.
She further claimed that the facts of the appellant are identical with the case of All India Radio Commercial Broadcasting Service/Prasar Bharti Broadcasting Corporation of India (Supra). From the side of the Revenue, it is argued that the case laws cited by the appellant are not squarely applicable in case of appellant. The appellant had paid commission to M/s. Hairom Transport, on which no TDS has been deducted u/s. 194 of the IT Act. The ld. A.O. had rightly disallowed the commission expenses.
9. We have perused the orders of the authorities below and gone through the case laws cited by the appellant. The paper book submitted by the appellant shows that at page nos.18 to 21, there was an opening balance in the name of M/s. Hariom Transport at Rs.3,83,484/- in the account, shows credit entry of the transportation charges received and debited various expenses incurred on behalf of the M/s. Hariom Transport. It is also revealed from the account that TDS had been deducted on various amounts but it is not clear on what expenses/payments, these TDS were deducted and whether deposited in Government exchequer or not. The final closing balance has been shown at Rs.90,962/- as creditor. Therefore, the nature of payment as I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 10 shown in this account appears to be transportation charge paid to M/s. Hariom Transport. Neither ld. A.R. of the appellant nor Revenue had pointed out on what basis these commission expenses were claimed in p&l account. Therefore, we have considered view that A.O. should verify this account and TDS. If the payments of TDS had been made to the Government exchequer on or before due date of return, the same may be allowed after verifying. Accordingly, the matter is restored back to the A.O. for de novo. The A.O. is also directed to give reasonable opportunity to the appellant.
10. Ground no.3 of appellant is against confirming the addition of Rs.25,000/- as unexplained cash credit u/s. 68 of the IT Act. The A.O. found that the assessee had introduced cash in capital account of Rs.25,000/- during the course of assessment proceeding. The assessee had given reasonable opportunity of being heard. It was explained before the A.O. that Rs.25,000/- were received from his father but for Rs.25,000/- no confirmation was filed by the appellant before the A.O. Therefore, he made addition of Rs.25,000/- u/s. 68 of the IT Act.
11. The matter carried before the ld. CIT(A) who had also confirmed the addition in paragraph nos.18 & 19, which are reproduced as under:
"18. The reasons for making addition of Rs.75,000/- as made by the AO u/s 68 as well as above submission of the appellant have been considered. As regards addition of Rs.50,000/- the appellant's AR has submitted that this amount was directly paid to East Africa Mobile Pvt. Ltd. by a friend of appellant Mr. Avatarsingh Bal and in the regard a written submission was made before AO vide letter dated 03.10.2008. In my opinion I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 11 identification of the person i.e. Shri Avatarsingh Bal was there before the AO. Again this amount of Rs.50,000/- was paid by cheque through Bank of Baroda to the above Mobile Company and therefore, genuineness of transaction cannot be doubted unless and until it is proved to be false by the AO. Again Shri Avatarsingh Bal is having PAN and is assessed to tax and therefore his credit worthiness can also not be disregarded unless and until the AO establishes as a result of examination that Shri Avatarsingh Bal was not capable of making such payment. The AO cannot make addition merely on the ground that such amounts was capitalized in the capital account of the appellant. The appellant has discharged his onus by filing the details regarding identification of the creditors, mode of transaction and credit worthiness of the creditors showing that he is assessed to tax and therefore AO is not justified to make addition of Rs. 50,000/- u/s 68 of the IT Act and hence the same is deleted.
19. With regard to addition of Rs.25,000/- as made u/s 68 of the IT Act the above submission of the appellant's AR is not found to be tenable. It is not known whether the creditors i.e. father of the appellant is assessed to income tax and whether he is capable of advancing such amount of Rs.25,000/-. In view of this I hold that the AO has correctly made the addition of Rs.25,000/- u/s 68 of the IT Act and therefore the same is confirmed. Thus the ground of appeal no.4 of the appellant is partly allowed."
12. Now the matter is before us. Ld. Counsel for the assessee filed paper book and contended that this amount was received from his father who had paid the said sum by cheque and hence identity of depositer was well I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 12 established. Further, she relied on in case of CIT vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC). She also has drawn our attention on page no.22 that the assessee credited Rs.25,000/- on 22nd July 2005 in bank account maintained with ABN-AMRO Bank through cheque. Besides this, the assessee did not file any confirmation at any stage. Therefore, in absence of confirmation with evidence, the assessee's explanation is not found acceptable. We are in the agreement with the CIT(A) and confirm the order. Thus, assessee's appeal on this ground is dismissed.
13. Ground no.4 is directed against confirming the disallowance of Rs.35,441/- of interest expenses u/s.36(1)(iii) of the IT Act. The A.O. noticed that the appellant had given loans and advances of Rs.4,55,000/- without interest to his brothers. The details are as under:
(i) Shri Devindersingh Khalol Rs.3,05,000/-
(ii) Shri Rajindersingh Kahlon Rs.1,50,000/-
Rs.4,55,000/-
The A.O. had given reasonable opportunity of being heard for diverting his interest bearing fund for non-business purposes. The assessee did not furnish any reply even repeated querries were made by the A.O. Therefore, he disallowed Rs.35,441/- as proportionately interest expenses u/s.36(1)(iii) of the IT Act.
14. Being aggrieved by the order of the A.O., the assessee carried the matter before CIT(A), who has also confirmed the addition by observing as under:
"21 The above submission of the appellant as well as submission of the AO as made in above remand report have I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 13 been considered. I fully agreed with the above remand report of the AO and in my opinion even if the appellant had business transactions with his brothers, the corresponding expenses for the same had been claim by the appellant. Further it is not the case of the appellant that his brothers had charged less transport charges from him. Merely on the pretext that it was paying transportation charges to his brothers, the appellant cannot justify that the above advances of Rs.4,55,000/- were given out of commercial expediency. The appellant had not been able to prove by filing documentary evidences that above advances were made out of commercial expediency. Considering all these facts, I hold that the AO has correctly disallowed interest of Rs.35,441/- and therefore the same is confirmed. Thus the ground of appeal no.5 of the appellant is dismissed."
15. Now the assessee is before us. Ld. Counsel for the assessee contended that the said advances were made for the purpose of the business. It was established from the very fact that in the assessment order. The ld. A.O. confirmed that the assessee had paid transportation charges to his brothers and had claimed business expenditures. It was a business need and was recovered from brothers time-to-time out of transportation charges paid to them. Hence, the nexus of the payment with the business requirement is clearly established. The copies of account of both brothers have been enclosed. She has also drawn our attention on page nos. 34 to 37 which are copies of account showing the business transactions between assessee and Rajindersingh Kahlon's. Further,the loan of Rs.1,50,000/- was not given during the year, but it was opening balance. Page nos. 27 & 31 is a copy of account of Shri Devindersinh Kahlon and claimed that these are business transactions.
I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 14 Therefore, no interest should be charged on it. From the side of the Revenue, it is submitted that the appellant had taken various secured loan from various sources and paid the interest on it. The assessee has not advanced these loans for business purposes. Therefore, CIT(A) was right to confirm the addition.
16. We have perused the orders of the authorities below and gone through the paper book submitted by the assessee. On verification of the balance sheet, it is found that the assessee has capital at Rs.5,47,789/- as on 31st March, 2006 and also taken secured loan of Rs.12,53,504/- from various sources on which the appellant had paid interest. There were business transactions between the appellant and his brother, namely, Rajindersingh Kahlon who had advanced loan of Rs.1,50,000/- by the appellant. But, in case of Devindersingh Kahlon, the appellant had not demonstrated any business dealings between them. The paper shows only loan outstanding Rs.3,05,000/-. After considering the fact, we conclude that the advance given to the Rajindersingh Kahlon is for business purposes whereas advances to Shri Devindersingh Kahlon was not for business purposes. Thus, order of the CIT(A) is confirmed to the extent of interest disallowance on Rs.3,05,000/-. The assessee's appeal is partly allowed on this ground.
17. Ground no.5 is against confirming the addition of Rs. 4,79,059/- on account of excess liability claimed by the appellant. The A.O. found that the appellant had shown sundry creditors of Rs.6,57,075/- as on 31.02.2006. The ld. A.O. asked the appellant to file the confirmation during the course of I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 15 assessment proceeding in case of Dhanalaxmi Automobiles for Rs.4,03,390.20/-, Jay Petroleum Product for Rs.1,25,429/-, Ravinder Road Carriers for Rs.36,204/- & Rajindersingh GJ 6U 5636 for Rs.34,662/-. The assessee furnished the confirmation except in case of Dhanlaxmi Automobiles and also the confirmation filed in case of Jay Petroleum Product was to the extent of Rs.49,760/- as against liability of Rs.1,25,429/-. After giving reasonable opportunity of being heard, the A.O. proposed addition under this head on the ground that there is no confirmation in case of Dhanlaxmi Automobiles and discrepancy in the confirmation of Jay petroleum Product to the extent of Rs.75,669/-. Thus, he made addition of Rs.4,79,059/- on account of excess liability claimed by the appellant.
18. The assessee carried the matter before ld. CIT(A), who has confirmed the addition in paragraph no.28 at page no.33 of his order, the operative part is as under:
"28. With regard to liability of Rs.4,03,390/- no any explanation and evidences where filed by the appellant during the course of assessment proceedings. The AR of the appellant in his submission dated 25-10-2010 has stated that on perusal of ledger account of Dhanlaxmi Automobile, it will be noticed that all the credit and debit transactions are supported either by purchase bills or by payment vouchers and no excess credit on account of any purchase have been booked by the appellant. The AR has pleaded that due to non cooperation of the party, the appellant should not be penalized. On the other hand the concerned AO in his remand report has submitted that the appellant neither during the course of assessment proceedings I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 16 nor at the time of appellate proceedings has submitted any reason for not filing the confirmation of Dhanlaxmi Automobile. As per the AO the appellant has not submitted any evidences regarding payment for the outstanding liability as shown as on 31-03-2006. As per the AO it is not explained by the appellant whether such liability has been paid in subsequent yers. As per the AO the appellant has not taken any plea that there was dispute between it and Dhanlaxmi Mobniles in respect of above liability of Rs.4,03,390/- and therefore there is no reason as to why this party would not claim the amount and would not confirm the balance outstanding liability of Rs.4,03,390/- . I agree with the submission of the AO. The appellant's AR has not submitted any evidences even at the time of appellate proceedings also which could show that subsequent to the year under consideration any payment on account of above liability of Rs.4,03,390/- was made to the Dhanlaxmi Mobiles. In my opinion this is a very vital aspect of the case. In case if this liability of Rs.4,03,390/- was arisen on account of purchases of items from Dhanlaxmi Mobile then payment on account of such liability would have been made by the appellant to such party as a prudent businessman like Dhanlaxmi Mobiles would not wait for payment from the appellant for such a long period. The appellant has not claimed also that there was dispute with regard to payment of above liability of Rs.4,03,390/-. Even it is considered that this party i.e. Dhanlaxmi Mobile was not cooperating with the appellant, then also the payment of Rs.4,03,390/- shown as outstanding liability as on 31-03-2006 should have been made by the appellant to this party on account of jpurchases specially when such payment is neither disputed by the appellant nor by this party. However, no evidences with regard to payment of above amount of Rs.4,03,390/- has been filed despite the fact I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 17 that a very long period has elapsed after the transactions were made and outstanding liability was created. Considering these facts, I hold that the AO is correct in making addition of Rs.4,03,390/- and therefore the same is confirmed."
19. Now the assessee is before us. Ld. Counsel for the assessee argued as under:
"(a) That on perusal of the ledger accounts of the above parties submitted herewith, it will be noticed that ll the credit and debit transactions are supported by the either purchase bills or payment vouchers and no excess credit on account of any purchase have been booked by the assessee. The difference appearing in the account of Jay Petroleum Products is pertaining to earlier year relevant to A.Y.2006-07 which is not under dispute.
The confirmation of ledger account arranged from Jay Petroleum Products is enclosed for your kind perusal.
(b) In the case of account pertaining to Dhanlaxmi Automobiles, non cooperation of the party can not be the reason which penalized to the assessee without any default on his part. How could be the entire liability of the party can be considered as wrong. It is submitted that all the entries affected in the party's account are supported by the evidence which could be produced if required.
We have enclosed herewith the copy of ledger account of the above named party highlighting all the payments made during the year from the ledger account with the corresponding amount cleared by bank as evidenced from the copy of Bank statement enclosed for your kind perusal. We have also provided herewith the copy of Bills raised on assessee by the above part and credited as liability in the books of the Appellant. The said liability is on account of supply of goods during the year under I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 18 consideration. This clearly establishes that all the transactions affected with the said party are genuine and no extra liability have been claimed by the Appellant and as such the same is an allowable liability under the purview of the Income Tax Act. c. That under the circumstances, it is requested to kindly grant us the suitable relief in the interest of justice." Ld. Counsel for the assessee relied upon the Co-ordinate 'A' Bench, Ahmadabad decision in case of Deepak Petrochem Ltd. vs. The A.C.I.T. in ITA No. 1465/Ahd/2007 for A.Y. 03-04. In ground no.2 issue of cessation of liabilities u/s.41(1) was considered by the Co-ordinate Bench and it has been held by the Co-ordinate Bench in paragraph no.14, as under:
"14. Considering the above facts and the decisions referred to above, it is clear that the amounts have been shown as liability in the balance sheet and no evidence of cessation of liability has been brought on record. Therefore, the amount in question is not assessable u/s.41(1) of the IT Act. We accordingly set aside the orders of the authorities below and delete the entire addition on this issue."
The Hon'ble Co-ordinate Bench also has considered ITAT, Ahmadabad Bench, decision in case of Shri Rajesh Mukundlal Shah vs. ITO in ITA Nos. 424 and 609/Ahd/2006, CIT vs. Silver Cotton Mills Co. Ltd., 254 ITR 728(Guj), Sugauli Sugar Works (P.) Ltd. [1999] 236 ITR 518 (SC), CIT vs. Chase Bright Steel Ltd., 177 ITR 128(Bombay), J.K. Chemicals Ltd. Vs. CIT, [1966] 62 ITR 34, Bombay Dyeing & Manufacturing Co. Ltd. v. State of Bombay, AIR 1958 SC, CIT vs. Chetan Chemicals Pvt. Ltd. 267 ITR 770 (Guj), in which the ratio laid down by the Court that when there is no cessation of liability or remission I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 19 of liability of creditor, the liability subsist. From the side of the Revenue, ld. D.R. vehemently relied upon the order of the CIT(A).
20. We have perused the orders of the authorities below and gone through the paper book. On page nos. 44 to 46, there is ledger copy in case of M/s. Jay Petroleum Products for A.Y. 07-08 not for A.Y. 06-07 wherein opening balance of A.Y.07-08 which is closing balance of A.Y. 06-07 has shown at Rs.49,760/-. The same has been confirmed by the partner of M/s. Jay Petroleum Products with PAN No. At page nos. 47 to 48, there is a copy of account in the assessee's book of Dhanlaxmi Automobiles but it has not been confirmed by the side of Dhanlaxmi Automobiles in which outstanding creditor at Rs.4,03,390/- has been shown. The facts of the assessee are identical with case law cited by the appellant. The ld. A.O. has not brought on record any evidence whether creditor ceased or remitted the liability. The case law cited by the appellant is squarely applicable. The appellant has shown creditor in case of Jay Petroleum Products on page 44 at Rs.49,760/- whereas in copy of balance sheet enclosed at page nos. 42 to 43 it is Rs.1,25,429/-. Thus, there is a difference in account by Rs.75,669/-. Therefore, we delete the addition made by the A.O., and confirm the order of CIT(A) on addition of Rs.75,669/-. Thus, the assessee's partly allowed
21. In the combined result, the Revenue's appeal is dismissed and Assessee's appeal is partly allowed.
This Order pronounced in open Court on 19.10.2012 I T A No s . 1 43 6 & 14 6 9/ A hd /1 2 A . Y. 06- 0 7 Page 20 Sd/- Sd/-
(Mukul Kr. Shrawat) (T.R. Meena)
Judicial Member Accountant Member
True Copy
S.K.Sinha
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।
Strengthen preparation & delivery of orders in the ITAT
1) Date of taking dictation 15 & 16.10.2012
2) Direct dictation by Member straight on XXX computer/laptop/dragon dictate
3) Date of typing & draft order place before Member 17.10.2012
4) Date of correction ,, ,,
5) Date of further correction XXX
6) Date of initial sign by Members 19.10.2012
7) Order uploaded on ,, ,,
8) Original dictation pad has been enclosed in this file Yes
9) Final order and 2nd copy send to Bench Clerk on 19.10.2012