Pr. Commissioner Of Income Tax, Jaipur-3, Statute Circle,C-Scheme, Jaipur v. M/S Rakesh Construction Company

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR. DB INCOME TAX APPEAL NO.233/2016 Pr. Commissioner of Income Tax, Jaipur-3, Statute Circle,C-scheme, Jaipur. Versus M/s Rakesh Construction Company, 61/35, Pratap Nagar,Housing Board, Sanganer, Jaipur, AY:2009-10. DATE OF ORDER ::: 16.11.2016. HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE MAHENDRA MAHESHWARI Mr. Sameer Jain, for the appellant. 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal preferred by the department. 2.The following substantial questions of law have beenframed by the counsel for the appellant for consideration: “1.Whether the order of the Tribunal is notperverse on facts in as much as it hasignored the specific defects pointed out inthe expenses debited to profit and lossaccount through it has been upheld therejection of books of accounts u/s 145(3)?” “2.Whether the order of the Tribunal is notperverse on facts as it has ignored the factthat the assessee did not produce before theAO the creditors to discharge its onus ofgenuineness of the claim of sundrycreditors?” 3.Heard learned counsel for the appellant. 4.The observations made by CIT (Appeal) in para 3.3.2 reads as under: “In the light of the above legal and factualaspect, my relevant findings cum conclusionare being summarized, in following manner:-(a)As far as nature of trading liability ofRs.58,87,032, is concerned, from the relevantrecords, it is found that the same are relatedto the current period only and not representsold trading liability, which can be consideredas non-exist in nature, in any manner. TheAO has simply ignored this crucial aspectbefore arriving at the adverse conclusion, inthis regard. (b)It is also an undisputed fact that thesetrading liabilities were not written off in thebooks of account of the assessee, as such.On the other hand, the same have beenshown as payable to the creditors, the factwhich was duly confirmed by the appellant,during the assessment proceeding, itself.Thus, in my considered view, even there wasno prime-fascia basis to assume that suchliabilities have become infructuous, in anymanner, as envisaged by the AO. (c)It is also an admitted fact that the AOhas failed to bring any material on the recordto establish that the assumed remission ofthe liability was a result of anyagreement/understanding, on the part of theassessee and creditors, which is an essentialcondition, as purported in the relevantdecision given by the Hon'ble Apex Court(supra). In absence of any such bilateral acton the part of the interested parties, the AO isfound not justified in suo-motto, assuming theremission of such liabilities u/s 41(1) of theAct. (d)As discussed above, the courts havealso held that the prime obligation, in thisregard, lies on the AO, it he intends toconsider the trading liability, as deemedincome u/s 41(1) of the Act. From therecords, it is evident that the AO has failed todischarge the above onus as he could notsubstantiate her action with necessarysupporting material as such. In the case, shehas simply arrived at the adverse conclusionas there was no compliance to summonsissued to the creditors and the requisiteconfirmations were not submitted by theassessee. However, since, the prime onuswas lies on the AO, therefore, it is felt that it (d)As discussed above, the courts havealso held that the prime obligation, in thisregard, lies on the AO, it he intends toconsider the trading liability, as deemedincome u/s 41(1) of the Act. From therecords, it is evident that the AO has failed todischarge the above onus as he could notsubstantiate her action with necessarysupporting material as such. In the case, shehas simply arrived at the adverse conclusionas there was no compliance to summonsissued to the creditors and the requisiteconfirmations were not submitted by theassessee. However, since, the prime onuswas lies on the AO, therefore, it is felt that it was she who had to bring the positive andcogent evidence, in support of her stand.Moreover, as claimed by the appellant andalso from the perusal of relevant assessmentrecord, it is also found that the assessee didsubmit the confirmations of account of suchcreditors on 07.12.2012, the purported dateof assessment order. However, it is difficultto understand that why the same were notconsidered at all and a contrary finding wasgiven in the impugned order, in this regard.Conclusion: From the above detaileddeliberation, it is evident that the AO hasinvoked the provision of Section 41(1), i.r.o.,trading liability under consideration, rather inhaste and cryptic manner, without followingthe requisite procedure/preconditions, asstipulated by the various courts, as discussedabove. From the record, it is also evidentthat such liabilities were not old in nature andmostly related to the current year itself orimmediate preceding year only. Moreover,the relevant accounts are also found active innature, showing several transactions enteredinto the current year and subsequent yearalso. In other words, in my considered word,the AO has invoked the provision of Section41(1), merely on suspicion and conjecture,without bringing any supporting material inthis regard. According, it is held that additionof Rs.58,87,032, made in this regard, is founduntenable and unjustified, under the givencircumstances, thus, deleted. Consequently,this ground of appeal is upheld.” 5.The order of the CIT (Appeal) was confirmed by the Tribunal in para 3.5 which reads as under: “We have heard the rival contentions andperused the materials available on record.The main contention of the Revenue wasthat the assessee has neither filedconfirmations nor these parties wereproduced for examination. On the otherhand, the ld. AR submitted that these werethe trading liabilities and were not old innature. Most of the liabilities were of thecurrent year or immediately preceding yearand the accounts were active in nature andthe transactions were being carried out forthe current year as well as in the subsequent year. Considering these facts andcircumstances of the case, we are of the viewthat the ld. CIT(A) has rightly deleted theaddition and find no infirmity in his orderwhich is sustained. Thus g round No.3 of theRevenue is dismissed.” 6.In that view of the matter, we are in complete agreement with the view taken by the Tribunal and no substantial questionof law arises for consideration. 7.The appeal stands dismissed. MAHENDRA MAHESHWARI), J. (K.S. JHAVERI), J. Asheesh Kr. Yadav 09