V KUMAR & SONS, MUMBAI V. ITO 25(2)(4), MUMBAI

CO 154/MUM/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8953 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 19-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 15-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV SHAH
• Section: 133(6)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI .. , ! ' # $$, % ', & BEFORE SHRI R.S.SYAL, AM AND SHRI SANJAY GARG, JM ITA NO.4649/MUM/2012 : ASST.YEAR 2009-2010 THE INCOME TAX OFFICER WARD 25(2)(4) MUMBAI. M/S.V.KUMAR & SONS 13-C-3, ESTEE APARTMENT BABA NAGAR, BORIVALI (WEST) MUMBAI 400 092. PAN : AAEFV7954L. ( '( / // / APPELLANT) * * * * / VS. ( +,'(/ RESPONDENT) CO NO.154/MUM/2013 : ASST.YEAR 2009-2010 M/S.V.KUMAR & SONS 13-C-3, ESTEE APARTMENT BABA NAGAR, BORIVALI (WEST) MUMBAI 400 092. THE INCOME TAX OFFICER WARD 25(2)(4) MUMBAI. ( +,& / // / CROSS OBJECTOR) * * * * / VS. ( +,'(/ RESPONDENT) # # # # - -- - . . . . / REVENUE BY : SHRI C.P.PATHAK %* /0 %* /0 %* /0 %* /0 - . - . - . - . / ASSESSEE BY : SHRI SANJIV SHAH * - 0! / / / / DATE OF HEARING : 19.08.2013 123 - 0! / DATE OF PRONOUNCEMENT : 21.08.2013 ' 4 ' 4 ' 4 ' 4 / / / / O R D E R PER R.S.SYAL ( AM) : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE COMMISSIONER O F INCOME-TAX (APPEALS) ON 30.04.2012 IN RELATION TO THE ASSESSME NT YEAR 2009- 2010. ITA NO.4649/M/2012 & CO 154/M/2013. M/S.V.KUMAR & SONS. 2 2. THE ONLY ISSUE RAISED THROUGH VARIOUS GROUNDS IS AGAINST THE DELETION MADE BY THE LEARNED CIT(A) OF THE ADDITION MADE BY THE AO ON ACCOUNT OF CESSATION OF LIABILITY U/S 41(1) IN R ESPECT OF M/S.JAGRUTI CORPORATION, M/S.ARGASS CHEMICALS, M/S.UNIVERSAL EN TERPRISES AND M/S.SAMIDHA ENGINEERING. BRIEFLY STATED THE FACTS O F THE CASE ARE THAT THERE WERE CERTAIN CREDIT BALANCES APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER ISSUED NOTIC ES U/S 133(6) RANDOMLY IN RESPECT OF THESE CREDITORS TO CHECK UP THEIR BALANCES. THE NOTICES SENT TO SIX PARTIES, IN RESPECT OF WHICH CR EDIT BALANCES TOTALLED ` 50.76 LAKH, WERE RETURNED UNSERVED. IN RESPECT OF O THER THREE PARTIES, CONFIRMATIONS WERE RECEIVED BUT THERE WAS A DIFFERE NCE OF ` 2.05 LAKH IN THE BALANCE SHOWN BY THESE PARTIES VIS--VIS THA T BY THE ASSESSEE. THE A.O. ACCEPTED THE ASSESSEES CONTENTION IN RESP ECT OF ONE OF SUCH THREE PARTIES, NAMELY, M/S.EMKAY ENTERPRISES IN WHO SE CASE THE DIFFERENCE WAS ` 42,596. THE REMAINING TWO AMOUNTS OUT OF THESE THREE PARTIES AND OTHER SIX PARTIES TOTALING ` 50.76 LAKH, IN RESPECT OF NOTICES RETURNED BACK UNSERVED, WERE ADDED BY THE A SSESSING OFFICER U/S 41(1), THEREBY MAKING TOTAL ADDITION OF ` 52.39 LAKH. THE LEARNED CIT(A) ALLOWED PART RELIEF. THE REVENUE IS AGGRIEVE D AGAINST THE DELETION OF ADDITION IN RESPECT OF FOUR PARTIES AS UNDER:- SR. NO. NAME OF THE CONCERN OPENING BALANCE TRANSACTIONS DURING THE YEAR CLOSING BALANCE 1. JAGRUTI CORPORATION 8,52,800 NIL 7,07,800 2. SAMIDHA ENGINEERING 1,77,162 NIL 1,67,162 3. UNIVERSAL ENTERPRISES 8,52,800 NIL 8,52,800 4. ARGASS CHEMICALS 25,67,269 2,58,544 26,54,990 ITA NO.4649/M/2012 & CO 154/M/2013. M/S.V.KUMAR & SONS. 3 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. SECTION 41(1) PROVIDES THAT WHE RE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY Y EAR IN RESPECT OF LOSS OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE OBTAINS WHETH ER IN CASH OR IN ANY OTHER MANNER REMISSION OR CESSATIONS THEREOF, S UCH AMOUNT SHALL BE CONSIDERED AS PROFIT CHARGEABLE TO TAX. THE ESSE NCE OF SECTION 41(1) IS THAT THE LIABILITY SHOULD CEASE TO EXIST S O AS TO QUALIFY FOR INCOME UNDER THIS SECTION. IN OTHER WORDS, IF THE L IABILITY IS EXISTING, THEN THE SAME CANNOT BE TREATED AS EXTINGUISHED CAL LING FOR ADDITION. WITH THIS BACKGROUND, WE ADVERT TO THE FACTS OF THE PRESENT CASE. FIRST PARTY IS JAGRUTI CORPORATION WITH AN OPENING BALANC E OF ` 8.52 LAKH. PAGE 35 OF THE PAPER BOOK SHOWS THE PAYMENT OF ` 1.45 LAKH MADE BY THE ASSESSEE TO THIS PARTY THEREBY BRINGING CLOSING BALANCE DOWN TO ` 7.07 LAKH. WE FAIL TO APPRECIATE AS TO HOW THIS CLOS ING BALANCE CAN BE CONSIDERED AS REMISSION OR CESSATION BY THE PART Y, EVEN AFTER THREE YEARS OF OUTSTANDING BALANCE, SO AS TO QUALIFY AS INCOME U/S 41(1) WHEN THE ASSESSEE IS PAYING THE LIABILITY AND THERE IS NOTHING TO INDICATE, EVEN REMOTELY, THAT THE CREDITOR HAS GI VEN UP HIS CLAIM. THE ASSESSEE WAS SUPPOSED TO PAY ` 8.52 LAKH TO THE PARTY, OUT OF WHICH A SUM OF ` 1.45 LAKH HAS PAID EITHER BY CHEQUE OR BY CASH. WHEN THE POSITION IS SO AND THE ASSESSEE IS REGULARLY MAKING PAYMENT TO SUCH PARTY, THERE CAN BE NO QUESTION OF TREATING THE CLO SING BALANCE AS INCOME U/S 41(1) OF THE ACT. ITA NO.4649/M/2012 & CO 154/M/2013. M/S.V.KUMAR & SONS. 4 4.1 THE SECOND PARTY IS M/S SAMIDHA ENGINEERING. IT HAD OPENING BALANCE OF ` 1.77 LAKH. A SUM OF ` 10,000 WAS PAID BY CHEQUE DURING THE YEAR UNDER QUESTION BRINGING DOWN THE BALANCE P AYABLE AT ` 1.67 LAKH AT THE END OF THE YEAR. IT IS FURTHER RELEVANT TO NOTE THAT THE ASSESSEE MADE PAYMENTS TO THIS PARTY IN THE IMMEDIA TELY SUCCEEDING YEAR FOR THE FULL AMOUNT. COPY OF THIS ACCOUNT FOR THE FINANCIAL YEAR 2009-2010 IS AVAILABLE ON PAGE 38 OF THE PAPER BOOK SHOWING NIL BALANCE AS AT THE END OF THE SUBSEQUENT YEAR. BY NO STRETCH OF IMAGINATION, THIS AMOUNT CAN BE CONSIDERED AS INCOM E U/S 41(1) OF THE ACT FOR THE YEAR RELEVANT TO THE ASSESSMENT YEA R UNDER CONSIDERATION. 4.2 SIMILAR IS THE POSITION REGARDING UNIVERSAL ENT ERPRISES. IT HAD OPENING BALANCE OF ` 8.52 LAKH. THOUGH NO AMOUNT WAS PAID DURING THE YEAR BUT IN SUBSEQUENT YEAR THE ENTIRE AMOUNT H AS BEEN PAID. COPY OF ACCOUNT OF THIS PARTY FOR THE FINANCIAL YEAR 200 9-2010 IS AVAILABLE ON PAGES 40 AND 41 OF THE PAPER BOOK SHOWING NIL BA LANCE. WE CANNOT CONSIDER THE OUTSTANDING AMOUNT AT THE END OF THE YEAR AS INCOME CHARGEABLE TO TAX U/S 41(1). 4.3 THE LAST IS M/S ARGASS CHEMICALS. IT HAD OPENIN G BALANCE OF ` 25.67 LAKH. PAGE 32 OF THE PAPER BOOK IS THE COPY O F ACCOUNT OF THIS PARTY WHICH SHOWS VARIOUS DEBITS AND CREDITS IN THI S ACCOUNT LEAVING CLOSING BALANCE AT ` 26.54 LAKH. PAGE 33 OF THE PAPER BOOK IS COPY OF ACCOUNT OF THIS PARTY FOR THE SUBSEQUENT YEAR AGAIN HAVING SEVERAL DEBITS AND CREDITS WITH CLOSING BALANCE OF ` 14.02 LAKH. THE ASSESSEE ITA NO.4649/M/2012 & CO 154/M/2013. M/S.V.KUMAR & SONS. 5 IS HAVING REGULAR TRANSACTIONS WITH THIS PARTY AND THE AMOUNT IS PAYABLE BECAUSE OF REGULAR PURCHASE TRANSACTIONS. 5. IN OUR CONSIDERED OPINION THE AMOUNT IN RES PECT OF THESE FOUR PARTIES CANNOT BE CONSIDERED AS INCOME U/S 41(1) OF THE ACT. WE, THEREFORE, UPHELD THE IMPUGNED ORDER ON THIS ISSUE. 6. THE CROSS OBJECTION FILED BY THE ASSESSEE WAS NO T PRESSED. THE SAME STANDS DISMISSED. 7. / 05 # - 6 %* /0 - +,& !/# - #0 78 IN THE RESULT, THE REVENUES APPEAL AS WELL AS THE ASS ESSEES CROSS OBJECTION ARE DISMISSED. ORDER PRONOUNCED ON THIS 21 ST DAY OF AUGUST, 2013. ' 4 - 123 9'*5 2 - $ SD/- SD/- (SANJAY GARG) (R.S.SYAL) % ' % ' % ' % ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; 9'* DATED : 21 ST AUGUST, 2013. DEVDAS* ' 4 - +%0:; < ;30 ' 4 - +%0:; < ;30 ' 4 - +%0:; < ;30 ' 4 - +%0:; < ;30/ COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. +,'( / THE RESPONDENT. 3. = () / THE CIT, MUMBAI. 4. = / CIT(A)-35, MUMBAI 5. ;@$ +%0%* , , / DR, ITAT, MUMBAI 6. $A / GUARD FILE. ' 4* ' 4* ' 4* ' 4* / BY ORDER, ,;0 +%0 //TRUE COPY// B B B B/ // /7 # 7 # 7 # 7 # ( DY./ASSTT. REGISTRAR)