TaxTMI 
TaxTMI 
2023 (2) TMI 1222
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....s under: "Date : 06.12.2017 To The Deputy/Asstt.registrar Income tax Appellate Tribunal, Ahmedabad. Sir, Sub: Request for condonation of delay for filing appeal in the case of M/s. Shanti Super Buildcon against the order of CIT(A) Gandhinagar, Ahmedabad, in order No. CIT(A)/GNR/209/2016-17 dated 31,08.2017 for A.Y. 2014-15 - Reg. Kindly refer to above, 2. The AO namely DCIT, Gandhinagar Circle, Gandhinagar, the applicant has preferred the above Appeal under section 253 of the Income Tax Act, 1961. The applicant craves leaves to refer to and rely upon the grounds stated in the appeal memo. 3. It is humbly submitted that the said appeal was required to be filed on or before 07.11.2017. However, this appeal could not be filed in time due to the fact that the Pr. CIT-3, Ahmedabad is holding the additional charge of PCIT Gandhinagar and that there was tremendous time barring workload in each of these charges compelled with the fact that many of these appeals were of very high tax impact, which required very thorough and diligent study of the decisions of the facts on records. Further, the move....
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....anding credit balance pertaining to one Shri Jatin Priyankant Shah, proprietor of Paper Star Marketing, A-28, Navkar Apartment, Vejalpur, Ahmedabad amounting to Rs. 8,21,50,309/-. He noted that the said party had vide letter submitted during the assessment proceedings categorically denied to entering into any transaction with the assessee. He further noted that even the bank statement of the said party revealed no transaction undertaken with the assessee. Accordingly, the assessee was show caused as to why the impugned sum relating to the said party outstanding as on 31.3.2013 i.e. at the end of the impugned year be not added to the income of the assessee asper the provisions of section 41(1) of the Act. The assessee filed a reply stating that the outstanding balance of the said party pertained to the transaction undertaken by the assessee with the said party in the preceding year i.e. Asst.Year 2012-13 which had been completely scrutinized in the assessment proceedings, and not found to be bogus by the AO. He further contended that genuineness of the outstanding balance is further proved by the fact that the assessee had made payment of Rs. 45 lakhs to the said party in ....
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....id party during the year, there can be no case of cessation of any liability relating to the said party so as to invoke section 41(1) of the Act. He therefore deleted the disallowance made by the AO. The relevant finding of the ld.CIT(A) at para 4.3 to 4.5 of the order are as under: 9. Before us, the contentions of the ld.DR was that section 41(1) of the Act had been rightly invoked by the AO because the assessee was found to have incorrectly claimed expenses in relation to the purchases made from the party in the preceding assessment year i.e. Asst.Year 2012-13 through scrutiny proceedings in the impugned year, since the party had denied any liability outstanding with the assessee, there was clear cessation of liability ; that two limbs for invoking section 41(1) of the Act on expenses having been claimed earlier by the assessee, and liability arisen on accounts of the same expenditure having ceased to exist have arisen in the impugned case, the provisions of section 41(1) had been rightly invoked. He heavily relied on the order of the AO in this regard. The ld.DR relied on the decision of the ITAT, Bangalore Bench in the case of Suresh Kumar T. Jain Vs. ITO, (2011) 128 ITD 74 ....
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....this, the ld.DR countered by saying that the ld.CIT(A) had appreciated the additional evidence filed by the assessee in the form of copy of bank statement of the said party reflecting the transaction of Rs. 45 lakhs payment made by the assessee to the party during the impugned year in total disregard to the provisions of section and requirement of Rule 46A of the Income Tax Rules, 1962 without confronting the same to the AO, and therefore, the same could not be considered for the purpose of adjudicating the issue. The ld.counsel summed up by relying on the order of the ld.CIT(A) and decision of Hon'ble jurisdictional High Court in the case of Bhogilal Ramjibhai Atara(supra) and, Dattatray Poultry Breeding Farm P. Ltd. Vs. CIT, 104 taxmann.com 366 (Guj) and CIT Vs. Nitin S. Garg (supra). Copies of the case laws are filed before us. 11. We have carefully considered submissions of both the parties have also gone through orders of the authorities below, as also decisions cited before us. 12. The issue to be adjudicated is with respect to the addition made by invoking provisions of section 41(1) of the Act as per which any expenses claimed by the assessee in earlier years, th....
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....y deduction of TDS and deposited the same to the government as required under the Income Tax Act and has submitted the TDS certificate. Further, assessee submitted that assessee has maintained the paper stock records and TDS have been deducted as per the provisions of the Act. There is no foul play on the part of the assessee. Assessee has made proper purchase from M/s. Paper Star Marketing cannot be held bogus. Assessee also submitted numerical calculation stating that there is no sense taking bogus bills as the assessee is incurring more tax burden in accepting bogus bills." 14. In the impugned order before us this sundry credit balance has again not been found to be genuine for the very same reason that the said party has not entered any transaction with the assessee, and there was no transaction reflected in the bank account of the said party with the assessee. 15. When this adverse material relating to the PSM was found to be of no relevance to its transaction undertaken with the assessee in Asst.Year 2012-13 which was examined by the AO and found to be genuine, we fail to understand how on the basis of this very same adverse material, the outstanding balance pertaining ....
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.... is no declaration by the appellant that it does not intend to honor its liability nor is there any discharge of the debt and no event had taken place in the year under consideration to indicate remission or cessation of the liability in question. Further the trading result of the appellant has been accepted in the assessment of current assessment year as well as previous assessment years 2012-13 and 2013-14. In the cases relied upon by the appellant in the judgment of Hon'ble Gujarat High Court in the case of CIT-III Vs. Bhogilal Ramjibhai Atara [2014] tax appeal no 588 of 2013 has decided the issue against the revenue holding that it does not amounts to remission or cessation of liability merely because where many of the creditors were not found at the given address and some of them stated that they had no dealing with the appellant and merely on these grounds the outstanding liability amount cannot be added as deemed income u/s 41(1). The appellant has not written off the impugned liability shown in the accounts. The AO has not brought sufficient material on record to establish as to how the ingredients of section 41(1) are satisfied. The judgment of the Hon'ble jurisdic....
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....saction from same party i.e. Paper Star Marketing as genuine transaction and proceeded to make Gross Profit addition. When purchases are not doubted as non genuine in. year in which it is claimed as expenses, outstanding balance remaining in creditor account cannot be taxed U/s .41(1) of the Act merely on the ground that other person has denied transaction and even appellant has not shown such liability as ceased to exist. Hon'ble Gujarat High court in the case of CIT VS Bhogilal Ramjibhai Patel referred supra and relied upon by appellant on identical facts held that provisions of section 41(1) cannot be applied. Even court has stated that "this is one of the strange cases where even if the debit itself is found to be non genuine from the very inception, at least in terms of section 41(1) of the Act there is no cure for it....." Even if any action is required to be taken considering the fact that said person has denied transaction, it has to be made in A.Y. 2012-13 and even in said year, the AO has concluded that purchases cannot be held to be bogus even if counter party has denied such transactions and only Gross Profit is required to be added. 4.6 Considering the fac....
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....r the AY 2013-14 and A.Y.2014-15 giving effect of the assessment order of AY 2012-13 against which the assessee has not filed an appeal before any of the authority." 21. When the case of the Revenue clearly is that no cheque payment of Rs. 45 lacs was made by the assessee, how does the same call for any addition at all to be made in the hands of the assessee, we are unable to fathom, leave alone addition made on account of cessation of liability u/s 41(1) of the Act. 22. Further the basis of making the impugned addition, we have noted, is identical to the basis for addition made of outstanding balance of the said party, PSM, in the preceding year, A.Y 2013-14, of Rs. 8.2 Crs finding it to be bogus. This basis has been found by us in A.Y 2013-14, to be contrary to the finding of the AO in respect of the very same transaction when undertaken in A.Y 2012-13 when it was found genuine and addition therefore made of the outstanding balance of Rs. 8.2 Crs has been held by us to be rightly deleted by the Ld.CIT(A) in our order above for the preceding year, A.Y 2013-14. Since the basis for making addition of Rs. 45 lacs has been found to be incorrect, the additi....
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.... to parties at S.No.2-5 of the list of Sundry Creditors amounting in all to Rs. 4,18,16791/-. With respect to the balance of Rs. 20,430/- pertaining to Bharatbhai Rajgor, the Ld.CIT(A) noted that the balance pertained to a small portion of purchases made from the said party which purchases had been accepted in full by the AO. He therefore deleted the said addition also. Similarly he found no anomaly in the outstanding balance of Rs. 16,780/- pertaining to Radhe Developers noting the same to be the opening balance carried forward. With respect to the balances outstanding pertaining to Unsecured loans of Rs. 8 lacs and Rs. 10 lacs pertaining to balance of one Sh. Kalpesh Vithani, he found that the assessee was unable to discharge its onus of proving the genuineness of the same and accordingly upheld addition to the extent of Rs. 18 lacs. His findings at para 5.3 to 5.7 of the order is as under: "5.3 I have considered the facts or the case, assessment order, submission made by the appellant and the case laws relied upon. During the course of the scrutiny, appellant has submitted the copies of ledger account and duly stamped and signed confirmatio....
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....the investments may be deemed to be the income of the assessee of such financial year." Here, AO has not revealed any investment which has not been recorded by appellant in its books of accounts. Therefore the provision of section 69 of the Act is not applicable in this case. AO in his order stated that appellant has failed to prove the identity, credit worthiness and genuineness of transactions, means the AO intended to make the addition u/s 68 of the Act and not section 69 but wrongly applied the provision of section 69 of the Act. 5.4 On perusal of the assessment order and submission made by appellant, it is found that the ledger A/c of Arihant Enterprise, Jolly enterprise, Simmons Enterprise and Angana Corporation contains no fresh credit entries are shown during the year. Further, it is seen that in the above cases, payment against outstanding liability was made by the appellant. Further the appellant has furnished the assessment order of AYs 2012-13 and 2013-14 where in it is clearly stated that all the parties appearing in the balance sheet of appellant has confirmed the balances except one M/s. Paper Star Marketing. Even though provisions of section 69 are....
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....e in ledger A/c of both the parties. 5.6 So far as addition of Rs. 20,430/- pertaining to Bharatbhai V. Rajgor is concerned, Appellant has made purchases of Rs. 36,57,000/- as against which payment along with TDS for Rs. 36,36,570/- is made and remaining amount of Rs. 20,430 is shown as outstanding balance as on 31st March, 2014 and same las been claimed as bad debt in subsequent Assessment Year. The AO has not doubted the nature of sub-contract expenses of Rs. 36,57,000 and same has been allowed as genuine expenditure hence there is no reason for adding closing balance of Rs. 20,430 as unexplained investment under Section 69 of the Act. Thus, addition of Rs. 20,430 is deleted. 5.7 So far as loans of Rs. 7,00,000 received from Amee Construction Rs. 10,00,000 from Kalpesh K. Vithlaniand Rs. 1,00,000 from Girijan Agro are concerned, the Appellant vide its letter dated 1st August, 2016 has submitted confirmation of the parties along with PAN and argued that all the receipts are through RTGS/account payee cheques. During the course of Assessment Proceedings Appellant has not submitted copies of Return of Income filed b....
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....unsel for the assessee, on the other hand, supported the order of the ld.CIT(A). We have gone orders of the authorities below. 27. We see no reason to interfere in the order of the ld.CIT(A). The Revenue was unable to controvert the factual findings of the ld.CIT(A) that the majority addition deleted of Rs. 4,18,16,791/- pertained to outstanding credit balance of parties relating to preceding years. The proposition of law that no addition could be made u/s 68 of the Act on account of opening credit balances of parties, also remained uncontroverted before us. In view of the same, we see no reason to interfere in the order of the ld.CIT(A) deleting the addition made of Rs. 4,18,16,791/- of opening credit balance of parties. As for the deletion of the balance outstanding of Rs. 20,430/-, the factual finding of the Ld.CIT(A) that the same pertains to purchases made during the year from the said party, Bharat Bhai Rajgor, which purchases genuineness has not been doubted by the AO, has also remained uncontroverted before us. So also his findings with respect to outstanding balance of Rs. 16,780/- which was found to pertain to opening balance. We see no infirmity in....
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.... against the debit amount of Rs.45,00,000/- on date 02.04.2013. Appellant in its submission to the AO requested to call for bank statements of all banks of the party u/s 133(6) of the Act but the AO has relied upon the bank statement of Central Bank of India only which had been submitted by party and not made any further inquiry to know where the payment made by appellant has been deposited and insisted on the appellant to submit the bank statement of payee as payer. Appellant himself made an effort and submitted before me the copy of bank account of M/s. Paper Star Marketing maintained with Development Credit Bank, Vejalpur Branch A/c No: 08020100002318. The Bank statement of Development Credit Bank submitted by appellant display the deposit of Rs.45,00,000/- on 02.04.2013 with same cheque no 22901 as issued by the appellant. The bank statement also displays the name of A/c holder as Paper Star Marketing, Address A-28, Navkar Apts, . Shreyas X to Vastrapur Rly Crossing, Ahmedabad, PIN-380051. From the assessment order of AY 2012-13, it becomes clear that appellant has rightly sub- contracted the work to M/s Paper Star Marketing and from....
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.... decision holds that a unilateral act on the part of the debtor cannot bring about a cessation of his liability, the same would not be applicable to the facts of the present case, in view of the insertion of Explanation 1. However, at the cost C of repetition it may be stated that in this case there is no unilateral act on the part of the debtor so as to bring about a cessation of its liability. Therefore, the other part of the decision would still apply to the facts of the present case, namely that the cessation of liability has to be either by reason of operation of law, i.e., on the liability becoming unenforceable at law by the creditor and the debtor declaring unequivocally his intention not to honour his liability when payment is demanded by the creditor, or a contract between the parties, or by discharge of the debt the debtor making payment thereof to his creditor. In the present case, admittedly there in no declaration by the assessee that it does not intend to honour its liabilities nor is there any discharge of the debt. In the aforesaid premises, as no event had taken place in the year under consideration to indicate remission o....