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TMI Blog2016 (11) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the creditors shown in the books of account have cease to exist - Held that:- In the instant case, it is therefore imperative on the part of the AO to carry out necessary enquiries with the trade creditors independently in order to determine whether there is remission of liability or not. We, accordingly, set-aside the matter to the file of the AO to carry out the necessary examination/enquiry from the trade creditors and examine the matter a fresh as per law and after providing reasonable opportunity to the assessee. Needless to say, the assessee shall cooperate and provide all relevant information and latest contact details of the creditors so that the matter may be decided expeditiously. The ground is therefore allowed for statistical purposes. TDS u/s 194J - non deduction of tds on professional fee - Held that:- The recipient of income M/s Kalani & Co has included the income of ₹ 50,000/- in its return of income and a copy of CA certificate was filed before the AO, we delete the disallowance in question. - Decided in favour of assessee. - ITA No.430/JP/16 - - - Dated:- 17-11-2016 - SHRI A.D.JAIN, JM SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee deals in sale and purchases of precious stones and semi precious stones. The AO recorded that inspite of several opportunities, the assessee did not comply and filed written submission and part details on 27.02.2015. However, on subsequent dates there was again no compliance and the details called for like purchase bills, sale bills and stock register were not produced for verification. It is further noted that in the absence of production of complete books of accounts and details, the AO concluded that the books of account are not reliable and rejected the same under section 145(3) of the Act. Subsequent to the same, the AO observed that from 2008-09 onwards the gross profit percentage has been over 5% except in A.Y. 2011-12 when it was 2.48%. Further it was also found that on these results, additions had been made due to irregularities in the accounts and gross profit rate after including the same was more than 9%. The chart in the AO s order at page No.3 shows that gross profit rates for Assessment year 2007-08 to 2012-13. The AO then applied the gross profit rate at 5% for the year instead of the returned gross profit of 2.27%. In the proceedings before me, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achieve the turnover. The entire sale of the assessee is export sale. The assessee furnished the details of purchase and sales as accepted by the AO in the assessment order. The opening and closing stock is also accepted. Thus, when all the components of trading account i.e. opening stock, purchases, sales and closing stock is accepted and the same is also backed by the quantitative details, the application of section 145(3) and the consequent trading addition is uncalled for. Reliance in this connection is placed on the following cases:- Malani Ramjivan Jagannath Vs. ACIT 316 ITR 120 (Raj.) Pr. CIT Vs. Hues India Ltd. 2015-TIOL-2275 (Raj.) CIT V. Gotan Lime Khaniz Udyog 256 ITR 243 (Raj) 2.3 We have heard the rival contentions and pursued the material available on record. The ld AR has contended that the assessee is maintaining complete books of accounts on day to day basis. These books are duly supported by bills and vouchers. All transaction of purchase and sales are fully verifiable and duly submitted to the AO. As per the AO, the assessee has not produced purchase bill, sale bill, stock register, ledger, cash book and books of accounts. The assessee submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering that the G.P percentage in the previous year was only 2.48%, she has held 4% G.P rate to be reasonable. We have gone through the past assessment history of the assessee right from AY 2007-08 till 2011-12. It is noted that from AY 2007-08 till AY 2010-11, the assessee had a turnover ranging from 17.40 Cr to 19.71 Cr and G.P which has been upheld ranges from 8.32% to 9.98%. AY 2009-10 seems to be an exceptional year where G.P was 5.8% on the turnover of ₹ 18.78 Cr and similarly, AY 2011-12, where on turnover of ₹ 18.72 Cr, the assessee has reported a G.P of 2.48%. In the instant year, the assessee has reported a turnover of ₹ 7.5 Cr which is almost 38% of peak turnover achieved in the past years and we were to work out the comparative G.P, keeping all other things constant, it will result in G.P of 3.64%. In absence of any other creditable data on record in terms of fall in G.P rate submitted by the assessee and based on the past assessment history of the assessee, we accordingly confirm the G.P rate of 3.64% to be applied on the turnover of ₹ 7.51 Cr. The ground of appeal is thus partly allowed. 3. In respect of ground No.2, briefly the facts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant had not written back these creditors which indicated that the business was going on with these concerns and AO did not bring on record any material to prove the liability has ceased to exist. He also placed reliance on a few decisions. It is noted that the amounts have been outstanding since 31.03.2010 no payments whatsoever have been made since then, the plea of financial crises cannot be agreed to as regular payments are being made for local purchases. The assessee has not filed any convincing evidence to demonstrate the amounts were still outstanding. Further it is important to note that inspite of several opportunities and specific queries the assessee has not produced any details of payments, any new address or any further evidence to substantiate if any payment had been made to these parties in any previous years or even till the date of assessment proceedings. The two main issues in my opinion, which need to be seen, are whether (i) the amounts could be treated as cessation of liability (ii) and since the same were outstanding in past several years, cessation or recessions could be deemed to occur in the relevant years. The discussion as above has cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof' 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. From the plain reading of the section, it can be noted that section 41(1) would be attracted only when there is a remission or cessation of a trading liability. By explanation 1 to this section a unilateral write off of such liability in the accounts is also considered as remission or cessation of the liability. It was further submitted that assessee firm is engaged in the business of gem jewellery. In course of such business it made purchases from various parties. Out of total creditor of ₹ 2,54,03,182/-, AO has picked up 8 creditors amounting to ₹ 63,20,246/- who are outstanding for more than three years to invoke section 41(1). This is not as per law as the assessee has not written back any of these creditors nor AO has brought on record any material to prove that the liability has ceased to exist. Therefore the addition made u/s 41(1) is not as per law. It was further submitted that in the trade of gems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t liability has ceased to exists. In this connection, reliance is placed on the following cases:- CIT vs. Hotline Electronics Ltd. (2012) 80 CCH 156 (Del) (HC): CIT vs. Smt. Sita Devi Juneja (2010) 325 ITR 593 (P H) (HC) CIT Vs. G.K. Patel Co. (2013) 212 Taxman 0384 (Guj) (HC) CIT Vs. Shri Vardhaman Overseas Ltd. (2012) 343 ITR 408(Del.)(HC) CIT Vs. Alvares Thomas (2016) 239 Taxman 0456 (Kar.) (HC) It was further submitted that the Ld. CIT(A) has also held that cessation has to be taken to be in the year when enquiries are made and the circumstances point that liability no longer exists. However, Hon ble Delhi High Court in case of CIT Vs. Jain Exports Pvt. Ltd. 89 DTR 265 has observed that where outstanding balance is payable to a creditor and such opening balance are being carried forward for several years, the issue as to the genuineness of a credit entry could be examined in the year in which the liability was recorded as arisen and such issue does not arise in any other year and that AO having accepted balances outstanding for years, it was not open for the Ld. CIT(A) to confirm the addition. Following this decision, Hon ble ITAT Amritsar Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable by the assessee. Similarly, there has to be a positive act on the part of the assessee where he write off such liabilities in its books of accounts. Further, there could be situations where there are mutual understanding between the parties where the liability no longer remain payable. Given that the liabilities had arisen in the earlier years relating to the purchases which has been claimed by the assessee as an expenditure, the recourse to tax such expenditure is provided under section 41(1) provided there is remission or cessation of such liability. In the instant case, it is thus clear that there is no cessation of liability. The question therefore remains regarding whether there is remission of such liability by the trade creditors and in that regard, we refer to the decision of the Hon ble Delhi High Court in case of CIT vs. Hotline Electronics Ltd. (2012) 80 CCH 156 (Del) (HC) where it was held that: In the present case, the AO has not issued any notice to the creditors to confirm from them whether they have given up their dues from the assessee. It must be remembered that the debts were not written back in the assessee's accounts as found by the Tribunal. Exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased(pleaded) that M/s Kalani Company is an income tax assessee and has included the income of ₹ 50,000/- in its return of income and copy of CA certificate was filed before the AO. The assessee has taken a plea that since the amounts of which TDS had to be deducted have been shown as income by the recipients, provisions of section 40(a)(ia) will not be applicable. I have duly considered the judicial pronouncements relied upon by the appellant. The AR relied on the decision of Hon ble ITAT, Jaipur in the case of Girdharilal Bhargoti dated 10.04.2015. It was observed that the Hon ble ITAT has not decided the issue on merits and observed that different courts have taken different views on the issue, therefore, in view of the decision of Hon ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. the case was decided in favour of the appellant. The ld CIT(A) has further relied upon the decision of the Hon ble P H High Court in the case of P.M.S. Diesels vs. CIT (2015) 277 CTR 491, Hon ble Calcutta High Court in the case of CIT vs. Crescent Export Syndicate (2013) 216 Taxman 258 (Cal.), Hon ble High Court of Himachal Pradesh in the case of Palam Gas Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) introduced by the Finance Act 2012, recently the Coordinate Bench in case of Kanhaiyalal Kalyanmal, Jaipur vs. DCIT, Circle-6, Jaipur ITA No. 172/JP/16 dated 03.08.2016 has held the second proviso to sec. 40(a)(ia) to be retrospective in nature. The relevant findings are as under: 2.5 We have heard the rival contentions and perused the material available on record. The Hon ble Supreme Court in Hindustan Coca Cola Beverage Pvt. Ltd (supra) has held that where deductee, recipient of income, has already paid taxes on amount received from deductor, department once again cannot recover tax from deductor on same income by treating deductor to be assesseein- default for shortfall in its amount of tax deducted at source. 2.6 The decision of Hon ble Punjab and Haryana High Court in case of PMS diesel (supra) is in the context of applicability of provisions of section 40a(ia) to amount paid/payable during the financial year and thus doesn t support the case of the Revenue. 2.7 Regarding decision of Hon ble Kerala High Court s decision in the case of Thomas George Muthoot(supra) and Hon ble Delhi High Court in case of Ansal Land Township Pvt. Ltd. (supra), there are confli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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