Income Tax Appellate Tribunal - Ahmedabad
Shashin Construction Co.,, Ahmedabad vs Department Of Income Tax on 24 May, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD '' D " BENCH - AHMEDABAD
Before Shri Kul Bharat, JM, & Shri Manish Borad, AM.
ITA No.329 /Ahd/2013
Asst. Year: 2009-10
DCIT(OSD), Circle-9, Vs. M/s Shashin Construction
Ahmedabad. Co., 57, shaymsundar
Society, Opp. Karmachari
School, Rannapark,
Ahmedabad.
Appellant Respondent
PAN AAFFS 5177F
Appellant by Shri Mukesh Sharma, Sr.DR
Respondent by Shri G. C. Pipara, AR
Date of hearing: 17.5.2016
Date of pronouncement: 24/5/2016
ORDER
PER Manish Borad, Accountant Member.
This appeal by the Revenue is directed against the order of ld. CIT(A)-XV, Ahmedabad, dated.29/11/2012 in appeal No.CIT(A)- XV/ACIT(OSD)/Cir-9/462/11-12, passed against order u/s 143(3) of the IT Act, 1961 (in short the Act), for Asst. Year 2009-10 on 29/12/2011 by ACIT(OSD) Cir-9, Ahmedabad.
2. Briefly stated the facts of the case as culled out from the assessment order are that the assessee is a partnership firm engaged in the business of civil contract. Return of income was e-
ITA No. 329/Ahd/2013 2Asst. Year 2009-10 filed on 28.09.2009 declaring total income at Rs.74,04,760/-. The case was selected for scrutiny assessment under CASS and notice u/s 143(2) of the Act was issued on 30.08.2010 followed by notice u/s 142(1) of the Act on 15.4.2011 and further due to change of incumbent notice u/s 143(2) of the Act was issued on 11.7.2011. Necessary details were submitted before ld. Assessing Officer. During assessment proceedings ld. Assessing Officer observed that in the financial statement as on 31.3.2007 there stood outstanding sundry creditors at Rs.1,46,27,060/- which were unpaid since 31.3.2007. In reply to the observations made by the ld. Assessing Officer wherein it was observed that many of the names standing in the list of impugned sundry creditors of Rs.1,46,27,060/- were repaid by cash after remaining due for 3 to 4 years and also no evidence to prove the genuineness and identity of the sundry creditors were placed on record and, therefore, ld. Assessing Officer went ahead to making disallowance u/s 41(1) of the Act and added back Rs.1,46,27,060/- to the income of assessee. Also during the course of assessment proceedings ld. Assessing Officer observed that credit amount of Rs.80,55,680/- shown as labour advances was reduced from the loans and advances standing under the head "current assets". To this observation of ld. Assessing Officer assessee submitted that the amount of labour advances of Rs.80,55,680/- are the credit balance with staff members on account of unpaid salary as well as security deposit taken from the staff and the same are repayable back year after year. However, ld. Assessing Officer was not convinced with the reply of assessee and was of the view that how can a staff, who is employed for a meagre salary, to give security ITA No. 329/Ahd/2013 3 Asst. Year 2009-10 deposit to the employer or to keep the salary outstanding to be received and, therefore, added back the credit balance of Rs.80,55,680/- to the income of assessee. Accordingly income of assessee was assessed at Rs.3,00,87,500/- after making addition u/s 41(1) of the Act for cessation of liability at Rs.1,46,27060/- and unexplained credit balance of labour advances of Rs.80,55,680/-.
3. Aggrieved, assessee went in appeal before ld. CIT(A) who deleted addition u/s 41(1) of the Act at Rs.1,46,27,060/- and also deleted addition on account on unexplained credit balance relating to labour advances of Rs.80,55,680/-.
4. Aggrieved, Revenue is now in appeal before the Tribunal. Revenue has raised the following grounds :-
1) The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.1,46,27,060/- made on account of cessation of liability u/s.41 (1) of the Act.
2) The Ld. CIT(A)-XV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.80,55,680/- made on account of labour advances.
3) On the facts and in the circumstances of the case, the Ld. CIT(A)-XV, Ahmedabad ought to have upheld the order of the Assessing Qfficer.
4) It is therefore, prayed that the order of the Ld. CIT(A)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.
5. First we take up ground No.1 which reads as under :-
1) The Ld. Commissioner of Income-Tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.1,46,27,060/- made on account of cessation of liability u/s.41 (1) of the Act.ITA No. 329/Ahd/2013 4
Asst. Year 2009-10
6. Ld. DR referred and relied on the order of ld. Assessing Officer.
7. On the other hand, ld. AR submitted that the assessee firm is a civil contractor and engaged in the construction line activities with the project(s) continued almost 2-3 years and payments are made to the concerned creditor(s) as per the work completed by them, similar to the payment received by the assessee from the various awarders of contract and, therefore, when work is completed of a particular creditor then final payment is made to it and the same gets support by the fact that as on 31.3.2008 outstanding sundry creditors amounted to Rs.2,98,46,070/- and during the financial year 2008-09 i.e. Asst. Year 2009-10 new creditors were added amounting to Rs.2,83,14,261/- and total payments made to creditors during F.Y. 2008-09 was at Rs.3,09,30,820/- and outstanding balance in creditors is of Rs.2,72,29,511/-. Ld. AR further submitted that since payments were in subsequent years and there was hardly any outstanding outstanding balance after the payments were made, it cannot be a cessation of liability and also the outstanding balance were as per normal course of business and the assessee has been continuously showing the liability as trading liability in its books of accounts and, therefore, ld. CIT(A) has rightly deleted the addition by not treating the unpaid sundry creditor as cessation of liability u/s 41(1) of the Act at Rs.1,46,27,060/-.
8. We have heard the rival contentions and perused the material on record. Through this ground Revenue has objected the action of ld. CIT(A) for deleting the addition of Rs.1,46,27,060/- made on account of cessation of liability u/s 41(1) of the Act. During the course ITA No. 329/Ahd/2013 5 Asst. Year 2009-10 of assessment proceedings ld. Assessing Officer observed that sundry creditor at Rs.1,46,27,060/- were outstanding to be paid prior to 31.3.2007 which was almost more than 3 years and was unable to get convinced that these were genuine sundry creditors and accordingly went ahead to make the addition u/s 41(1) of the Act for cessation of liability and added the same to the income of assessee. However, ld. CIT(A) deleted the addition by observing as under :-
5.1. Ground No.1 with its sub-clauses are the grounds against the addition made by A.O. of Rs.1,46,27,060 u/s.41(1) of the Act both on technical as well as on merit. The A.O.'s main contention for such addition is on account of fact that huge sum was found outstanding in the name of individual labour which is being reduced by appellant through payment in cash after three to four years and new names are added under a 'modus operandi' adopted by appellant. Further, the appellant failed to supply the evidences in the form of genuineness and identity of same labourers, the same are not genuine creditor. As against this, the appellant has given detailed explanation both on legal point as well as on merit point. The first & foremost is in respect of unambiguous provisions of section 41(1) of the Act itself, which deals with the necessary condition of drawing in actual direct or in direct advantage out of any business liability for invoking section 41(1) of the Act itself. The A.O. failed to demonstrate even by a single instance that any such advantage was accruing or accrued to appellant. On the other hand it appears that AO is in two minds, i.e. on one hand he accept that these are trading/business liabilities and thereby invoking the section 41(1) of the Act while on the other hand he doubts about the genuinity and identity of creditor.
The A.O. if have doubt about the identity and genuineness of these creditors, he should have test checked the same and rejected the books of accounts to accept gross profit or should have proceeded to re-asst. proceedings to disallow such expenditure in the year in which the same is claimed. But, the A.O. has not done any of such inquiry or taken any such action. The appellant by detailed submission explained the reasons of such huge liabilities and given details of subsequent payment to discharge such liabilities. In the absence of any inquiry from A.O. or evidences to support his contention, the conclusion that these liabilities are no longer existing since appellant had already paid them in cash can only be attributed as an assumption and the addition so made can be treated as made on conjecture or surmises. The A.O. has no evidence to support his contention that appellant adopted some modus operand! assumed by him. The appellant's books of accounts are regularly audited and therefore A.O.'s contention of a modus operand! adopted by appellant cannot be accepted without any evidences gathered contrary to the audit report. If the A.O.'s contention of settling of trade liabilities through cash are accepted, then those ITA No. 329/Ahd/2013 6 Asst. Year 2009-10 transaction will be covered by provisions of section 40A(3) of the Act and auditor has to report the same in his audit report in Form No.3CB & 3CD irrespective of the fact whether the expenditure related to same was claimed and allowed in earlier year because as per provisions of section 40A(3) of the Act, those allowed expenditure will be disallowed through rectification in the year when such trade liabilities are settled in cash. The A.O. himself has not considered these provisions indicating that his contentions are not supported by facts or evidences and merely assumptions based on conjecture and surmises. The appellant vide submission dated 04.07.2012 with details in a paper book submitted details about how those creditor as tabulated and discussed by A.O. in the asstt. order were settled in subsequent years. (Annexure A-1 of the paper book). As far as legal position on this issue is concerned, the A.O. has not put forward any such proposition to substantiate his contention, on the other hand the appellant submitted and relied on various legal proposition as discussed in earlier paras 4B & 4C of this order to substantiate contentions .
I am therefore inclined to accept the contentions of the appellant that all the sundry creditors are existing in the books of appellant and respective liability were discharged subsequently therefore there is no cessation of such liability. These liabilities were discharged mostly through payment by account payee cheques. Most of the parties ^re appellant's regular sub-contractors and there are contiguous transactions of labour bills raised by them, deduction of TDS by appellant etc. The appellant during the course of asst. proceedings submitted an explanation with copies of such ledger accounts and A.O. has not pointed out any adverse findings. Considering the nature of appellant's business and volume, such huge creditors are not unusual feature and the same are settled as per business practice in the field of appellant. I am also inclined with the legal proposition in this regard as submitted by appellant. Hon'ble Gujarat High Court in the case of Silver Cotton Mills Co. Ltd. (2002) 125 Taxman 741 emphasized that for invocation of provisions of section 41(1) of the Act, there should be either remission of the liability by the concerned creditor so that the liability with regard to making payment comes to an end, or there should be cessation of liability. Hon'ble Supreme Court in the case of Sugauli Sugar Works (P)Ltd. (supra) held that "The obtaining by the assessee of a benefit by virtue of remission or cessation is sine quo non for the application of section 41(1) of the Act.
The Hon'ble Gujarat High Court in its landmark judgement of Bharat Iron & Steel Industries (supra) held that "Section 41(1) introduces a fiction and the same is indivisible one i.e. it cannot be enlarged or applied to for another fiction. The only meaning that can be attached to the words 'obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure 'incurred in any previous year, clearly refers to the actual receiving of the cash of that amount. Hon'ble ITAT Ahmedabad 'C' bench in its order dated 16.9.2011 in the case of M/s.V.K.Patel & Co. v. ACIT Range-9, Ahmedabad (ITA ITA No. 329/Ahd/2013 7 Asst. Year 2009-10 No.3106/Ahd/2010) following its earlier order in the case of DCIT vs. G.K. Patel & Co. (ITA No.2938/Ahd/2009) and in the case of M/s.Supriya Textiles Industries v.lTO (ITA No.3228/Ahd/2011) held that -
"The facts of the assessee's case are identical. In the case of the assessee also there is no actual finding of remission or cessation of liability. The A.O. made addition on the presumption that since the liability is very old, it must have ceased. For the purpose of applicability of section 41(1), the liability being old is not sufficient to tax the assessee under section 41 (1). There has to be cessation or remission of the liability. In view of the above, we hold that the A.O. was not justified in making the addition of Rs.94,53,513u/s.41(1)."
The facts of the appellant are also same and the contention of A.O. for making such addition is similar to this case. Considering various facts as discussed above and legal proposition relied on by appellant and discussed above, the addition made "by A.O. in the case of appellant of Rs.1,46,27,060 u/s.41(1) of the Act is not justified. The A.O. is directed to delete such addition. The appellant gets relief accordingly.
9. Certainly the basis for making addition by ld. Assessing Officer was the presumption that since the liabilities were very old then they must cease but as rightly observed by learned CIT(A) referring to various judgments, we find that the liability shown by the assessee did not get extinguished or wiped off unless and until the assessee has written off the same in its books of account or the sundry creditors deny for any claim on the assessee. Now looking to this aspect let us go through the provisions of section 41(1) of the Act which reads as under :-
41. [ (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,--
(a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liabilityby way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to ITA No. 329/Ahd/2013 8 Asst. Year 2009-10 income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or
(b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year.
[Explanation 1.--For the purposes of this sub-section, the expression "loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof" shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts.] [Explanation 2].--For the purposes of this sub-section, "successor in business" means,--
(i) where there has been an amalgamation of a company with another company, the amalgamated company;
(ii) where the first-mentioned person is succeeded by any other person in that business or profession, the other person;
(iii) where a firm carrying on a business or profession is succeeded by another firm, the other firm;] [(iv) where there has been a demerger, the resulting company.] Applying the provisions of section 41(1) of the Act to the facts of the case of assessee, we observe that in most of the impugned outstanding sundry creditors assessee has demonstrated through its regular books of account that the sundry creditors have been paid off in the following year i.e. in F.Y.2009-10 as and when the revenue was generated in liquidity mode then certainly the contention of the assessee can be accepted that the impugned sundry creditors were genuine. We further observe that out of the list of impugned outstanding sundry creditors which is having 37 names showing total outstanding at Rs.1,46,27,060/-, except in the case of 5 sundry creditors having total outstanding liability of Rs.9,35,976/- in all the ITA No. 329/Ahd/2013 9 Asst. Year 2009-10 remaining 32 accounts, assessee has been able to show through copies of ledger account of the impugned sundry creditors that they have been paid off in the following years(mostly during financial year 2009-10) either by account payee cheques or by cash. But in case of 5 parties assessee has been unable to put on record any evidence as to whether they have been repaid in the following years or confirmation by the sundry creditors confirming the outstanding balance because we are of certain belief, that if a sundry creditor is genuine and legitimate amount is unpaid, then he will certainly give confirmation to the buyer which in the case is assessee about his rightful claim to the outstanding amount and both of these requirements are not fulfilled in the case of following five parties :-
1. C. G. Transport Rs.3,67,530/-
2. Kesar Kalu Khant Work Depot Rs.32,992/-
3. Mohan Vanzara Rs.1,72,862/-
4. Om Transport Rs.1,50,033/-
5. Raghunath Rabari Rs.2,12,559/-
-------------------
Rs.9,35,976/-
With this observation, we are of the view that addition u/s 41(1) of the Act in the case of assessee is to be sustained at Rs.9,35,976/- as the assessee has been unable to prove the genuineness of the unpaid sundry creditors nor any payment has been made in the normal course of business even when these are outstanding prior to 31.3.2007/ Accordingly, this ground of Revenue is partly allowed.
ITA No. 329/Ahd/2013 10Asst. Year 2009-10
10. Now we take up ground No.2 which reads as under :-
2) The Ld. CIT(A)-XV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.80,55,680/- made on account of labour advances.
11. During the course of assessment proceedings, ld. Assessing Officer observed that assessee firm being a civil contractor and certain loans and advances as workers/labourers in the balance sheet were very uncommon in this type of business that too from labour who are paid an average salary between Rs.6 to 7 thousand on monthly basis and the only reply submitted by assessee before ld. Assessing Officer reads as below :-
"4. Details of the Labour advance credit balance is of the Staff of the firm. This amount is kept as security deposit or deposit as the staff has agreed for the same. The same is not a permanent deposit, which is payable every year to them and again new deduction is made from their monthly salary towards deduction. This deduction is also accumulated for the entire year from their monthly salary."
12. Above reply was not sufficient to satisfy ld. Assessing Officer as along with this reply no prove of payment to its staff nor any agreement of taking security deposit was placed on record and ld. Assessing Officer was of the belief that the assessee has tried to create liability to generate lesser profit and accordingly added Rs.80,55,680/- to the income of assessee.
ITA No. 329/Ahd/2013 11Asst. Year 2009-10
13. Ld. CIT(A) has deleted the addition.
14. Ld. DR supported the view taken by ld. Assessing Officer.
15. On the other hand, ld. AR supported the order of ld. CIT(A) and also referred to the group summary of labour, as well as ledger account for Asst. Year 2009-10 and copy of ledge account of workers/labour for financial year 2008-09 and 2009-10 and submitted that there were regular transaction of flow and outflow in this account of labour/workers relating to salary and payments thereof.
16. We have heard the rival contentions and perused the material on record. Through this ground Revenue has objected the action of ld. CIT(A) in deleting the addition of Rs.80,55,680/- made on account of labour advances which were treated as unexplained by ld. Assessing Officer during the course of assessment proceedings because of uncommon feature of these advances being shown to be taken from workers/labourers working on a meager salary of Rs.6 to 7 thousand per month. Ld. CIT(A) while deleting the addition has observed as under :-
5.2. Ground No.2 is related to addition made by A.O. for an amount of Rs.80,55,680 being uncommon practice of huge advances as on*/ 31.3.2009 to workers/labourers in the business of appellant of civil contractor. The appellant during the course of asstt. proceedings contended before A.O. that such advances are mainly related to staff who had left them as one time deposit with appellant and through regular deduction the same are recovered. The A.O. rejected the appellant's claim since assessee has not submitted any proof of payment of salary to his staff from which it could be ascertained that any deduction such a security deposit is being made from monthly salary. The A.O. ITA No. 329/Ahd/2013 12 Asst. Year 2009-10 further contended that in the absence of any benefit generated out of such deposit, no staff member will like to such deduction out of his meager salary .The A.O. therefore made disallowances for the liability shown as advances from labourers amounting to Rs.80,55,680.
The appellant made detailed submission with ledger accounts of all these parties and a reconciliation statement to show that such outstanding liabilities were paid / settled subsequently. It was further contended by appellant that in the absence of any express provision applied by A.O. for disallowance, the same as per the language adopted by A.O. can be discerned as u/s.41(1) of the Act, i.e. A.O. doubted about the existence of those liability. The appellant contended that A.O.'s contention that such advances from staff/labour are uncommon in the trade of appellant is based on conjecture and surmises since it is not uncommon that some amount out of regular/monthly payment to staff, some amount remained unpaid or otherwise for retaining some of the labour/staff a portion of his payment kept back so that whenever he goes on leave, he should come back for that money. The appellant through details in the form of a reconciliation chart and ledgerized account demonstrated that in none of the case there is any uncommon or huge addition, rather the same is generally Rs.10,000 to Rs.25,000 per year in most of the cases. It was also contended that none of such account is sticky i.e. there are regular receipts and payment which is a normal phenomenon in the business of civil contractor where payment are made to labour contractor/staff as per availability of fund which is dependent on the stage of completion of project/contract.
I am inclined with the contention of the appellant that A.O. without properly appreciating the explanation and details and without supporting his contention with any evidences or inquiry made such addition. Even A.O. has not applied any specific section for such addition. As discussed in previous para 5.1, the A.O. though made disallowances about such liabilities which are covered under only and specific provisions of section 41(1) of the Act but in the absence of any evidences, or inquiry remained silent to quote the section. The A.O.'s such contentions can therefore be nothing but assumptions and the addition so made is held as made on the basis of conjecture and surmises. It is a settled legal proposition that assessee is the best judge and Manager of his business and assessing officer cannot direct the assessee about how he should conduct the business. The A.O. simply taken the liability outstanding as on 31.3.2009 but failed to consider the details about opening balance, transaction during previous year and thereby how this final balance arrived at. If the A.O. has doubt about the existence of such liability then the transaction made in those name during the previous year are not genuine and these has to be disallowed in totality or alternatively the books of accounts of appellant be rejected for estimation of correct profit. The A.O. without rejecting the books of accounts, accepted the gross profit and net profit but made such addition which cannot be justified on any ground. The appellant by details so filed during the appeal proceedings able ITA No. 329/Ahd/2013 13 Asst. Year 2009-10 to demonstrate that in all these accounts out of credit of salary/labour charges and periodic withdrawals etc. there remains some amount which is either added or got subtracted from opening balance represented in the form of such liabilities. It is further demonstrated by appellant that out of such outstanding liabilities of Rs.80,55,680 as on 31.3.2009, the appellant credited an amount of Rs.82,57,862 in various such account and debited Rs.1,44,55,742 thereby there left a balance of Rs.18,57,800 credit as on "31.3.2010. It is therefore even if it is taken that such disallowances and additions are made on the line of section 41(1) of the Act, the same does not survive because there is no cessation of liability and appellant has not got any advantage in cash or otherwise directly or indirectly. It is therefore the A.O. is directed to delete such addition of Rs.80,55,680. The appellant gets relief accordingly.
17. From going through the financial statement of the assessee we observe that in the balance sheet as on 31.3.2009 under the head "current assets" loans and advances in schedule VI there is a specific sub-head of loans and advances shown at Rs.6,34,46,949.67 and going through the schedule -6 to the balance sheet to get the detail of these amounts, we observe that under the head loans and advances a sum of Rs.8,11,41,643.37 is shown as a gross advance to various awarders, banks, under-going projects etc. (as shown in the list at pages 29 to 32 of the paper book) and from this amount a sum of Rs.1,76,94,964 inclusive of amount of labour advances of Rs.80,55,680/-, has been reduced in the name of advances from creditors and remaining amount i.e. Rs.96,39,284/- is duly figured out under various names at pages 32 - 33 of Paper Book. Going through these facts and figures of the balance sheet, we find that a lump sum of labour advance of Rs.80,55,680/- has been shown. Generally at the time of preparation of balance sheet, if there are outstanding sundry creditors or outstanding liabilities towards expenditure they are figured out under the head "current liabilities and provisions" but surprisingly in the case of assessee they have been shown as ITA No. 329/Ahd/2013 14 Asst. Year 2009-10 deduction from loans and advances which means that the impugned amount of Rs.80,55,680/- seems to be loans taken from workers/labours. Further observing the ledger account of labourers/workers covered under impugned list of Rs.80,55,680/- we find that in majority of cases there is no transaction of salary/labour expenses with these labourers/workers during the year under appeal and most of the payments have been paid in cash.
18. From going through the assessment order we observe that ld. Assessing Officer has made addition by observing that the assessee has tried to put in its account is nothing but creation of a liability to generate lesser profit which means that ld. Assessing Officer was of the belief that Rs.80,55,680/- is on account of labour charges which remained unpaid and were not genuine. It was just entered in the earlier years for reduction of profits. On the other hand, submissions made by assessee during the course of assessment proceedings, were focusing on the fact that this amount of Rs.80,55,680/- was kept as security deposit or deposit, as the staff have agreed for the same. While referring to the observations of ld. Assessing Officer and the submissions of assessee, we want to point out that it is not clear as to what is the nature of this impugned amount of Rs.80,55,680/- as to whether it is in the nature of loans or deposits from labours/workers or they are outstanding liabilities towards impugned expenses. If we look from the angle of accounting, assessee has displayed the amount of Rs.80,55,680/- as loans/deposits and has reduced the same from loans and deposits given during the year whereas if we look from the angle of observations of ld. Assessing Officer it seems ITA No. 329/Ahd/2013 15 Asst. Year 2009-10 that he was of the belief that these are non-genuine expenditure booked in earlier years to generate lesser profit. Therefore, there is a difference of observation and what has been submitted by assessee during the course of assessment proceedings read altogether with the audited financial statements and the observations made by ld. Assessing Officer while making addition though both are not referring to a common fact.
19. We further observe that assessee has passed through the assessment proceedings u/s 143(3) r.w.s. section 147 of the Act for Asst. Year 2008-09 as well as scrutiny assessment u/s 143(2) for Asst. Years 2010-11 and 2011-12 and has submitted by ld. AR that no addition should have been made towards the unpaid loans and advances nor any addition has been made on account of labour/workers expenses. This means that expenditure booked by assessee for Asst. Year 2008-09 has been accepted by the Department and during the year under appeal there is annual outstanding liability in the form of unpaid salary/wages has been made.
20. In view of our above discussion, we observe that there can be possibly four situations relating to this amount of Rs.80,55,680/-. Firstly, if they are in the nature of loans and deposits taken by the assessee in previous year i.e. before F.Y. 2008-09 then also addition in the hands of assessee could not be sustained because they could be added only in the year when they were received. Secondly, if the impugned amount of Rs.80,55,680/- was in the nature of loans and ITA No. 329/Ahd/2013 16 Asst. Year 2009-10 deposits in previous year then in the year under appeal there could have been a possibility for addition on account of provisions of section 269T of the Act for repayment of loans or deposits otherwise than by account payee cheques or drafts, as in majority of amounts of loans and advances has been made in cash but the same could not be sustained because i.e. not the case of Revenue and so in this situation also no addition could be sustained. Thirdly if the impugned amount of Rs.80,55,680/- is on account of unpaid salary then also we observe that in the year under appeal in most of the cases no such expenditure has been booked and the balances are brought forward from F.Y.2007-08 and the expenditure, if any, would have been booked in the previous year and no such addition has even been made in the assessment completed u/s 143(3) r.w.s. 147 of the Act in the case of assessee for Asst. Year 2008-09. Lastly i.e. in the fourth situation could have arisen for addition u/s 41(1) of the Act for remission or cessation of liability but that also could not be sustained because all the parties covered under the impugned list of advances at Rs.80,55,680/- have been paid off in the following years and mostly during the year under appeal itself and also there is a complete absence of any evidence or enquiry which could prove that the impugned liability of Rs.80,55,680/- was not genuine.
21. Therefore, we are of the view that ld. CIT(A) has rightly deleted the addition of Rs.80,55,680/- and no interference is called for in his order. This ground of Revenue is dismissed.
22. Other grounds are of general nature.
ITA No. 329/Ahd/2013 17Asst. Year 2009-10
23. In the result, appeal of Revenue is partly allowed for statistical purposes.
Order pronounced in the open Court on 24th May, 2016
Sd/- sd/-
(Kul Bharat) (Manish Borad)
Judicial Member Accountant Member
Dated 24/5/2016
Mahata/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
1. Date of dictation: 23/05/2016
2. Date on which the typed draft is placed before the
Dictating Member: 24/05/2016 other Member:
3. Date on which approved draft comes to the Sr. P. S./P.S.:
4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________
5. Date on which the fair order comes back to the Sr. P.S./P.S.:
6. Date on which the file goes to the Bench Clerk: 24/5/16
7. Date on which the file goes to the Head Clerk:
8. The date on which the file goes to the Assistant Registrar for signature on the order:
9. Date of Despatch of the Order: