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Income-tax Officer, Wd-9 (1) , Kolkata Versus M/s. Shree Laminators Limited

2016 (6) TMI 928 - ITAT KOLKATA

Additions u/s 41(1) - cessation of Trading liability - Held that:- We find that the provisions of section 41(1) of the Act could be invoked towards cessation of liability only in the event of revenue proving the fact of assessee deriving some benefit out of this transaction. In the instant case , the assessee claims that the liability has been settled in the subsequent financial year which fact has not been verified by the Learned AO. Hence in the facts and circumstances, we deem it fit and appr .....

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roduced to them through a broker. The broker in the instant case needs to be understood only as M/s Timespac India Ltd. The revenue was not able to produce any contrary evidence in this regard. However, we agree with the contention of the Learned DR that these confirmations were dated in the fag end of December 2011 from different locations in India, it would not have reached the Learned AO before the completion of assessment proceedings. Hence, in these facts and circumstances, we deem it fit a .....

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e ORDER Per Shri M. Balaganesh, AM: This appeal by revenue is arising out of order of CIT(A)-VIII, Kolkata vide Appeal No. 267/CIT(A)-VIII/Kol/11-12 dated 19.12.2012. Assessment was framed by ITO, Wd-9(1), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2009-10 vide his order dated 28.12.2011. 2. The first issue to be decided in this appeal is as to whether the trading liability standing in the name of M/s Peekay Associates amounting to & .....

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from the assessee. The assessee submitted that this was the balance amount being carried forward from FY 2008-09. The AO without making further reference in this respect to the assessee treated the amount as unexplained and thus added in computing the total income of the assessee. The assessee claimed that there was transaction in the nature of purchase from the said party M/s Peekay Associates which remained unpaid as on 31.3.2009 and hence reflected as sundry creditors in the balance sheet as .....

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not be applied on this credit balance and accordingly deleted the addition. Aggrieved, the revenue is in appeal before us on the following ground:- 1. Ld. CIT(A) is not justified in deleting the addition of ₹ 77,258/- on account of trading liability to M/s. Peekay Associates ceased during the previous year. 2.2. The Learned DR argued that when the party in response to notice u/s 133(6) of the Act had stated that there is no balance outstanding as on 31.3.2009 towards the account of the as .....

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able on record. We find that the provisions of section 41(1) of the Act could be invoked towards cessation of liability only in the event of revenue proving the fact of assessee deriving some benefit out of this transaction. In the instant case , the assessee claims that the liability has been settled in the subsequent financial year which fact has not been verified by the Learned AO. Hence in the facts and circumstances, we deem it fit and appropriate, in the interest of justice and fair play, .....

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facts and circumstances of the case. 3.1. The brief facts of this issue are that while making the assessment the Ld. AO found that an amount of ₹ 50,20,020/· was debited to the assessee's Profit & Loss A/c. as brokerage/commission paid to M/s. Timespac India Ltd. The payment of such brokerage was verified by issuing summons u/s. 131 to M/s. Timespac India Ltd. Then notices u/s. 133(6) of the Act were issued to all the sellers from whom the assessee purchased through broker. .....

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made through account payee cheques and the necessary tax was deducted at source. The parties being not aware of the existence of such brokers informed that the sales were made directly to the assessee. The Ld. AO was not satisfied with this explanation and treated the payment of brokerage of ₹ 43,20,020/- except one paid to M/s. Modern Laminators Ltd. as bogus and fabricated with an intention to conceal the actual income. 3.2. Before the Learned CIT(A), the assessee stated as follows:- i) .....

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ods directly to the appellant which fact is apparent from the details of the purchases duly accounted for. iv) There was no dispute as to purchases made with the parties and these were proved genuine. For facilitating such purchases services in the nature of introduction with the parties were obtained from the above mentioned broker M/s. Timespac India Ltd. who was paid brokerage to the tune of ₹ 43,20,020/- for rendering the services in the nature of introduction which fact was disputed. .....

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by them was paid. The appellant was liable and as such paid the necessary commission to M/s. Timespac India Ltd. and it was in the course of its business activities. The details of such payment along with documentary evidences were submitted before the Ao during the course of assessment proceedings. 3.3. The Learned CITA observed that the assessee had paid brokerage of ₹ 43,20,020/- to M/s Timespac India Ltd who had confirmed the receipt of commission from the assessee. He held that the c .....

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o appreciate the reason for considering the claim of brokerage payment amounting to ₹ 43,20,020/- as not genuine and has erroneously considered the report of the seller of making direct sale without involvement of any broker as the only reason for making such disallowance by the Assessing Officer and as such has erred in deleting the disallowance of claim of payment of brokerage to the tune of ₹ 43,20,020/- to M/s. Timespac India Ltd. 3.4. The Learned DR vehemently relied on the orde .....

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ere dated in the fag end of December 2011 and obviously it would not have reached the Learned AO before the completion of assessment proceedings. 3.5. We have heard the rival submissions and perused the materials available on record. We find that the assessee had made purchase of raw materials from six suppliers. The assessee claims that these suppliers were introduced to him by M/s Timespac India Ltd to whom the assessee had paid commission at an agreed rate which fact has also been confirmed b .....

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