2017 (3) TMI 387 - HC - Income Tax

Addition u/s 41 - proof of ceasation of liability - Held that - Tribunal has clearly recorded the evidence and findings of facts in favour of the respondent-assessee that the assessee has produced the documentary evidence in the form of ledger accounts and proof of payments made through Bank channel and PAN numbers also. In our opinion that prima facie, ought to have satisfied the learned Assessing Authority, about the existences of the transporters and genuineness of the transact ion undertaken by the respondent-assessee in the relevant period. The learned Tribunal has found that the summons issued by the Assessing Authority under Sections 131 and 133(6) of the Act could not be even served upon these transporter s, for which the explanation given by the assessee was that the mining activity having reduced after the particular period, such transporters had left the place in question and therefore they were not traceable. In our opinion, burden of the Revenue to summon such creditors or transporters for establishing that the liability has ceased could not be shifted upon the respondent - assessee. We do not find any material brought on record by the Assessing Authority to establish that such transporters could be actually brought before the Assessing Authority and upon their cross examination, their transactions were found to be fake or incorrect. On the contrary, the documentary evidence which was brought on record by the assessee perused the learned Tribunal, who had returned the a foresaid findings of facts in favour of the respondent-assessee. These findings of the facts appear to be just and proper and correct. - Decided against revenue

Summary

Issues Involved:
Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal regarding deletion of addition under Section 41(1) of the Act made in the hands of the assessee.

Analysis:

1. Addition under Section 41(1) of the Act:
The Revenue contended that the Tribunal wrongly deleted the addition made under Section 41(1) of the Act due to the remission/cessation of liability of transporters who transported minerals for the assessee. The Revenue argued that since the transporters were not produced before the Assessing Authority, the addition was justified. However, the Tribunal found in favor of the assessee, stating that payments were made through banking channels, confirmations were obtained, and the transport contractors existed as per income tax returns. The Tribunal emphasized that the burden of proof lies with the Revenue to show that the liability ceased, and in this case, the evidence provided by the assessee was deemed satisfactory.

2. Legal Precedents and Burden of Proof:
The respondent-assessee relied on legal precedents and argued that the conditions for invoking Section 41(1) were not met as there was no benefit taken by the assessee in respect of the trading liability. The Division Bench considered the requirement of remission or cessation of liability and emphasized that non-traceability of a creditor does not automatically imply cessation of liability. The court highlighted that the burden lies on the Revenue to establish the cessation of liability before applying Section 41(1) of the Act.

3. Documentary Evidence and Tribunal's Findings:
The Tribunal found that the assessee provided ample documentary evidence, including ledger accounts and proof of payments through bank channels, to support the existence of transporters and the genuineness of transactions. The Tribunal noted that the Assessing Authority failed to serve summonses to the transporters and could not shift the burden of proof onto the assessee. The court upheld the Tribunal's findings, stating that there was no perversity in the decision and no substantial question of law arose for consideration.

4. Conclusion:
The court dismissed the Revenue's appeal, citing the lack of evidence to establish the cessation of liability and affirming the Tribunal's decision based on the documentary evidence provided by the assessee. The judgment emphasized the importance of the Revenue meeting the burden of proof before invoking Section 41(1) of the Act and upheld the Tribunal's findings in favor of the respondent-assessee.

This comprehensive analysis covers the key issues raised in the judgment, the arguments presented by both parties, the legal precedents considered, and the court's reasoning leading to the final decision.