TMI Blog2012 (8) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisionin the case of T.V. Sundaram Iyengar and Sons Ltd., (1996 (9) TMI 1 - SUPREME COURT), order of CIT(A) sustained - decided against the assessee. - ITA No. 1830 and 1831/PN/2005 - - - Dated:- 31-5-2012 - Shri Shailender Kumar Yadav, Shri R.K. Panda, JJ. Appellant by : Sri M.K. Kulkarni Respondent by : Ms. Ann Kapthuama ORDER Per R.K. Panda, AM The above two appeals filed by the assessee are directed against the common order dated 17-10-2005 of the CIT(A), Kolhapur relating to Assessment Year 2001-02 and 2002-03 respectively. Since identical grounds have been taken by the assessee in both these appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience. ITA No. 1830/PN/2005 (Assessment Year 2001-02) : 2. In grounds of appeal No. 1 the assessee has challenged the order of the CIT(A) in confirming the re-assessment proceedings initiated by the AO. 3. Facts of the case in brief are that the assessee, an individual, is engaged in the business of Iron and Steel in the name of M/s. P.M. Chouhan as a proprietory concern. The assessee filed his return of income on 12-09-2001 declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a return under section 143(1) does not actually amount to regular assessment. The return filed by the appellant is simply accepted without any adjustments. During the survey, it was noticed that there was a credit in the name of certain parties in the accounts, which did not appear to be genuine. The Assessing Officer, therefore, resorted to re-opening this assessment by issue of notice under section 148. At the stage of issue of notice, all that has to be seen is whether there was a reason to believe that income had escaped assessment and whether the belief was formed in a rational manner, based on certain facts. It is evident that certain information or facts had come to the notice of the Assessing Officer, in the course of survey, which led to the belief of possible escapement of income. The issue of notice under section 148 cannot, therefore be said to be invalid or illegal. The adequacy of the reason as stated earlier is not material at the stage of issue of notice . Aggrieved with such order of the CIT(A), the assessee is in appeal before us. 6. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to explain the above discrepancy. In absence of filing any information about the payment to the party and in absence of production of the above creditor before the AO for further verification, the AO came to the conclusion that it was unusual that the credit remains in the books for four years from the year 2000-01. The submission of the assessee that the credit was on account of purchase of material which was confirmed by the party and therefore the assessee has discharged the burden and therefore no addition should be made was rejected by the AO. The AO thus made addition of Rs. 1,30,433/- u/s.68 of the I.T. Act. 9. In appeal, the learned CIT(A) was also not convinced with the explanation given by the assessee and upheld the addition made by the AO by holding as under: I have considered the submissions. The appellant has not been able to give a proper explanation of the discrepancy found by the Assessing Officer. A copy of return filed by Shri K.A. Shah for assessment year 2002-03 contains the balance sheet of Kalpana Traders as well as the capital account of Shri K.A. Shah. There is no balance sheet of Himali Enterprises attached to the return. The appellant vaguely sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee discharges the initial burden cast on him by giving the details and the other party having confirmed the outstanding balance, the assessee in our opinion cannot be held responsible for lapse or omission on the part of the other assessee. In this view of the matter, we are of the considered opinion that the addition made by the AO and sustained by the CIT(A) under the facts and circumstances of the case deserves to be deleted. We accordingly set-aside the order of the CIT(A) on this issue and direct the AO to delete the addition of Rs. 1,30,433/-. 11. In Ground of appeal No. 3 the assessee has challenged the order of the CIT(A) in sustaining the addition of Rs, 2,05,712/- made by the AO u/s. 41(1) of the I.T. Act. 12. Facts of the case, in brief, are that during the course of re-assessment proceedings the AO noted that the assessee is simply carrying forward the liability in the name of 15 parties amounting to Rs. 3,40,676/-. The AO asked the assessee to explain as to why the same should not be added to the total income of the assessee by treating the creditors as cessation of liability u/s. 41(1) of the I.T. Act. It was submitted by the assessee that in the case of 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name Amount 1 M M Chouhan Steel 35,300 2 Ashirwad Enterprises 10,610 3 Nagpur Iron Trading 22,400 4 Rajaram Steel 29,497 5 Anand Industries 82,627 6 Hindustan Steel 2,672 7 Geeta Industries 1,700 8 Samrat Industries 1,651 9 Samrat Steel Fabricators 8,621 10 Shakti Enterprises 10,634 TOTAL 2,05,712 Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 15. The learned counsel for the assessee submitted that the liability of the assessee does not seize merely because the liability has become barred by limitation, if any. He submitted that during the impugned assessment year the assessee has not received any benefit representing cessation/remission of any part of the liability. He submitted that neither the AO nor the CIT(A) has any positive evidence to show that there is cessation of liability. Relying on a couple of decisions he submitted that no addition u/s. 41(1) can be made. 15.1 The learned D.R. on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, commonsense demands that the amount should be treated as income of the assessee. In the present case, the money was received by the assessee in the course of carrying on his business. Although it was treated as deposit and was of capital nature at the point of time it was received, by efflux of time the money has become the assessee s own money. What remains after adjustment of the deposits has not been claimed by the customers. The claims of the customers have become bared by limitation. The assessee itself has treated the money as its own money and taken the amount to its profit and loss account. There is no explanation from the assessee why the surplus money was taken to its profit and loss account even if it was somebody else s money. Infact, as Atkinson J. Pointed out that what the assessee did was the commonsense way of dealing with the amounts . 17. Respectfully following the decision of the Hon ble Supreme Court cited (supra) we do not find any infirmity in the order of the CIT(A) confirming the addition of Rs. 2,05,712/- out of the total addition of Rs. 3,40,676/- made by the AO. Ground of appeal No. 3 by the assessee is accordingly dismissed. ITA No. 1831/PN/2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summons proceedings it is our duty to co-operate the department and to buy peace of mind in this matter. We have no objection to decide the matter on the merits, accounts and facts of the case as necessary departmental view. . . . This amount paid by Ch.No. 100398 on 26-03-2002 amounting to Rs. 1 lakh to M/s. P.M. Chouhan and Ch.No. 10040 on 26-03-2002 amounting to Rs. 1 lakh to R.K. Steel Traders is not regular payment against material supply but it is over and above the trade transactions but the cheque was given as requested by the said party . 22. From the above, the AO noted that Sri R.D. Patil in clear terms has admitted that it is not possible for him to prove the source and he has no objection to decide the matter on merit. Rejecting the various explanation given by the assessee the AO came to the conclusion that the credit amount of Rs. 1 lakh (shown in the note of para 8) is unexplained on the part of the assessee. Invoking the provisions of section 68 the AO made addition of Rs. 1 lakh to the total income of the assessee. 23. The assessee could not succeed before the CIT(A). Relying on his own decision in the case of the brother of the assessee where a similar tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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