Ita/78/2023 Of Pr. Commissioner Of Income Tax I v. Shri Sunil Kumar Jain

1 IN THE HIGH COURT OF MADHYA PRADESHAT INDOREBEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI& HON'BLE SHRI JUSTICE PRANAY VERMA ON THE 3[rd] OF OCTOBER, 2023 INCOME TAX APPEAL No. 78 of 2023 BETWEEN:- PR. COMMISSIONER OF INCOME TAX I ROOM NO.101,AAYKAR BHAWAN, OPP. WHITE CHURCH, INDORE(MADHYA PRADESH) .....PETITIONER (MS VEENA MANDLIK, LEARNED COUNSEL FOR THE PETITIONER) AND SHRI SUNIL KUMAR JAIN PROP. M/S SUNIL TRADERSKANWAN TEHSIL BADNAWAR DISTT. DHAR PANASSPJ4881P (MADHYA PRADESH) (NONE PRESENT FOR THE RESPONDENT) .....RESPONDENT This appeal coming on for admission this day, Justice Sushrut Arvind Dharmadhikari passed the following: ORDER Heard on the question of admission. This appeal has been preferred by the appellant u/S 260-A of the IncomeTax Act, 1961(for brevity 'the Act' hereinafter) being aggrieved by the orderdated 21.11.2022 passed by the Income Tax Appellate Authority(ITAT), BenchIndore in ITA No. 793/Ind/2018 whereby the ITAT has dismissed the revenue'sappeal finding no ambiguity in the order passed by the first appellate authority in 2 the matter of deleting the addition of Rs. 6,41,59,626/- made by the AssessingOfficer u/S 41(1) of the Act and ignoring the findings of the remand report. 2. Brief facts of the case are that during the course of scrutinyproceedings, the assessee was asked to provide full details of sundry creditorsmainly PAN number, name & address, mode of transaction and their credibility.The assessee was further directed to show cause as to why addition u/S 41(1)of the Act to the tune of Rs. 6,41,59,626 should not be made after disallowingthe creditors shown on the ground that liability has ceased to exist. Theassessee submitted the trading transaction in this case and the same is notcovered u/S 41(1) of the Act. On 16.12.2016, notice u/S 142(1) of the Act wasfurther issued to the assessee asking him to furnish the details already asked formentioned herein above. As no reply was forthcoming , the learned AssessingOfficer proceeded to deal with the matter ex-parte. Upon examining thedocuments, the sundry creditors amounting to Rs. 6,41,59,626 have been foundto have entered in the balance sheet, therefore, the entire aforesaid amount hasbeen added to the total income tax of the assesee u/S 41(1) of the Act. 3. Being aggrieved by the order of assessment, the assessee preferred anappeal before the Commissioner of Income Tax(Appeals), Indore. The CIT(A)vide its order dated 02.07.2018 deleted the addition of Rs. 6,96,00,947/- byholding that the assessee had already made payments to the creditors insucceeding years, therefore, neither there was any recession or remission ofliability by the creditors nor had the appellant taken any benefit by writing offany liability in his books of accounts. Hence, the addition needs to be deletedand the appeal was allowed. 4. Being aggrieved by the order of CIT(A), the appellant preferred anappeal before the ITAT, Indore Bench. The ITAT vide its order dated 21.11.2022 dismissed the appeal by holding that merely because the outstandingwas more than three years, the amount cannot be added u/S 41(1) of the Act,particularly when the same has been disclosed in the balance sheet and paymentwas made in succeeding years. Thus, there was no assessment of liability by thecreditors and found that neither the assessee has taken any benefit by writing offliability in his books of accounts. The learned ITAT dismissed the appealupholding the order passed by the first appellate authority, hence this appeal hasbeen preferred before this Court. 5. The learned ITAT in the order impugned has dealt with the aforesaidissue exhaustively in para 7 and 8 which are reproduced below: 21.11.2022 dismissed the appeal by holding that merely because the outstandingwas more than three years, the amount cannot be added u/S 41(1) of the Act,particularly when the same has been disclosed in the balance sheet and paymentwas made in succeeding years. Thus, there was no assessment of liability by thecreditors and found that neither the assessee has taken any benefit by writing offliability in his books of accounts. The learned ITAT dismissed the appealupholding the order passed by the first appellate authority, hence this appeal hasbeen preferred before this Court. 5. The learned ITAT in the order impugned has dealt with the aforesaidissue exhaustively in para 7 and 8 which are reproduced below: "7. It is evident from the remand report that the Ld. AO haschecked identity of the creditors and also verified the paymentsmade to them by the appellant. That has been done uponverification of the copies of Form 31A of VAT Rules, MadhyaPradesh which further establishes the business transactionsbetween these parties and the appellant. There was no recording ofadverse comment on the evidences adduced by the assessee isforthcoming from the remand report. Thus, it establishes that theassessee has proved the identity of the creditors and paymentsmade to them. Thus, under the circumstances, merely because theoutstanding was more than three years, the amount cannot beadded under Section 41(1) of the Act, particularly, when the samehas been disclosed in the balance sheet and the payment was madein succeeding years. On this issue relying upon the judgment 4 passed by the Hon'ble Delhi High Court in the matter of CIT Vs.Shri Vardhman Overseas Ltd. reported in [2011] 16 taxmann.com351(Delhi), the Ld. CIT(A), therefore, granted relief by deleting theaddition made by the Ld. AO as there was no cessation of liabilityby the creditors has been found and neither the assessee has takenany benefit by writing off liability in his books of accounts. We donot find any ambiguity in such order passed by the First AppellateAuthority so as to warrant interference. The same is thereforeupheld. Revenue's Appeal, thus, found to be devoid of any meritand dismissed." 6. The ITAT has recorded detailed reasons for coming to theconclusion. 7. It is a case of the appellant that ITAT has failed to consider thediscrepancies noted by the Assessing Officer. The ITAT erred in overlooking the facts of remand report that Form - 31 A of the VAT Act produced by theassessee in order to establish genuineness of the transaction does not pertain tothe assessment year under consideration. The ITAT also erred in notconsidering the bills, transport, delivery receipts etc. In absence of evidence,genuineness of transactions could not be established. Even, the additionalevidence presented by the assessee before the CIT(A) does not satisfy any ofthe conditions stipulated under Rule 46(A) of the Income Tax Rules. In fact, theassessee was provided ample opportunities to furnish the genuineness oftransaction, therefore, the additional evidence was not admissible. 8. In view of the aforesaid the following substantial question of lawarises for consideration: "Whether in the facts and circumstances of the case, theCIT(A) was justified in deleting the addition of Rs. 64,15,926made by the Assessing Officer u/S 41(1) of the Act and ignoring thefindings of remand report." 8. In view of the aforesaid the following substantial question of lawarises for consideration: "Whether in the facts and circumstances of the case, theCIT(A) was justified in deleting the addition of Rs. 64,15,926made by the Assessing Officer u/S 41(1) of the Act and ignoring thefindings of remand report." 9. Having heard, learned counsel for the appellant on the question ofadmission and on perusal of the order dated 26.12.2016 and the order dated02.07.2018 passed by the Commissioner of Income Tax (Appeal) Indore, it isseen that the ITAT has dismissed the appeal while maintaining the orderpassed by the CIT(A) whereby the order passed by the Assessing Officer hasbeen reversed by the CIT(A) which is based on material available on record andhas also assigned specific reasons for doing so in the impugned order. Thefindings of ITAT as well as CIT(A) is based on due appreciation of documentsand material available on record which cannot be found fault with. The learnedcounsel for the appellant is not able to point out any substantial question of lawin the instant appeal. 10. Accordingly, we not not find any substantial question of law in thisappeal warranting interference by this Court and, therefore, this appeal beingdevoid of merits is hereby dismissed. 11. No order as to cost. sh (S. A. DHARMADHIKARI) JUDGE (PRANAY VERMA)JUDGE