M/s. Cama Hotel Pvt. Ltd., Ahmedabad V. The Dy. CIT, Circle-1(1)(2), Ahmedabad

CO 40/AHD/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8607 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 07-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india; Deemed dividend
• Section: 143(3); 2(22)(e); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 1(1)(2), AHMEDABAD (APPELLANT /RESPONDENT ) VS CAMA HOTEL PVT. LTD. KHANPUR, AHMEDABAD - 380001 PAN: AABCC5432G (RESPONDENT /CROSS OBJECTOR ) REVENUE BY : S H RI KAMLESH MAKWANA , SR. D . R. ASSESSEE BY: SHRI RAJESH C. SHAH, A.R. DATE OF HEARING : 03 - 12 - 2 018 DATE OF PRONOUNCEMENT : 10 - 12 - 2 018 / ORDER P ER BENCH : - THIS REVENUE S APPEAL AND ASSESS EE S CROSS OBJECTION FOR A. Y. 2013 - 14 , ARI SE FROM ORDER OF THE CIT(A) - 1, AHMEDABAD DATED 27 - 10 - 2 016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - (1) THAT TH E LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.75,00,000/ - MADE U/S 2(22) (E) OF THE I T. ACT ON ACCOUNT OF DEEMED DIVIDEND. (2) THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.38,21,232/ - MADE U/S 41(1) O F THE I.T. ACT BEING CESSATION OF LIABILITY. I T A NO . 42 & CO NO. 40 / A HD/ 20 17 A SS ESSMENT YEAR 2013 - 14 I.T.A NO. 42 & CO NO. 40 /AHD/20 17 A.Y. 2013 - 14 PAGE NO D CIT VS. CAMA HOTEL PVT. LTD. 2 3. THE BRIEF FACT OF THE CASE IS THAT RETURN OF INCOME DECLARING LOSS OF R S. - 35 , 98 , 920/ - WAS FILED ON 27 TH SEP, 2013. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTIC E U/S. 143(2) OF THE ACT ON 11 SEP, 2014. THE REVENUE IN ITS APPEAL HAS FILED TWO GROUNDS OF APPEAL. TH E SAME ARE ADJUDICATED AS UNDER. FIRST GROUND OF APPEAL DELETING THE ADDITION OF RS. 75 LACS MADE U/S. 2(22)(E) OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT , THE AS SESSING OFFICER HAS NOTICED THAT ASSESSE HAS RECEIVED AN AMOUNT OF RS. 75 LACS FROM CA MA MOTOR S COMPANY LTD. BEING UNSECURED LOAN DURING THE YEAR CONSIDERATION . THE ASSESSE WAS SHOW CAUSED TO EXPLAIN WHY THE SAME SHOULD NOT BE DISALLOWED AS DEEMED DIVIDEN D U/S. 2(22)(E) OF THE ACT. THE ASSESSEE EXPLAINED THAT IT WAS NOT H OLDING MORE THAN 10% SHARE IN CAMA MOTOR P VT. LTD. AND NOR THE ASSESSEE COMPANY WAS SHAREHOLDER OF THE CAM A MOTOR P VT. LTD. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF T HE ASSSESSEE ON THE GROUND THAT COMMON DIRECTOR S OF THE ASSESSEE COMPANY BEING SHRI JEHANGIR R. CA MA, MRS. MEHROO J. CAMA A ND RUSTOM J. CAMA WERE HOLDING MORE THAN 20% SHARE CAPITAL. THEREFORE, HE WAS OF THE VIEW THAT ASSESEE S CA S E WAS SQUARELY FELL WITHI N THE AMBIT OF SECTION 2(22(E) OF THE ACT. THEREFORE , HE HAS TREATED AN AMOUNT OF RS . 75 LACS RECEIVED BY THE ASSESSEE FROM CAMA MOTORS PVT. LTD. AS D EEMED DIVIDEND UNDER SECTION 2(22) (E) OF THE ACT A ND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. A GGRIEVED ASSESSEE HAS FILED APPEAL BEFORE T H E LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE AFTER FOLLOWING THE ORDER OF CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2009 - 10 AND ALSO THE DECISION OF CIT (A) IN THE ASSESSEE S CASE FOR ASSESSMENT YEAR 2012 - 13. THE RELEVANT PART OF DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 2.3. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSION FILED BY THE APPELLANT. THE ASSESSING OFFICER HAS M ADE DISALLOWANCE UNDER SECTION 2(22)(E) OF THE I.T.A NO. 42 & CO NO. 40 /AHD/20 17 A.Y. 2013 - 14 PAGE NO D CIT VS. CAMA HOTEL PVT. LTD. 3 I.T. ACT AS DEEMED DIVIDEND AND SIMILAR DISALLOWANCE WAS MADE IN A.Y.2012 - 13 WHEREIN UNDERSIGNED VIDE ORDER DATED 16 TH DECEMBER, 2015 HAS HELD AS UNDER: - 2.3. I HAVE GONE THROUGH THE FACTS AND THE SUBMISS ION OF THE APPELLANT CAREFULLY. IN ASSESSMENT ORD ER A. O HAS OBSERVED THAT THE APP ELLANT HAS RECEIVED AN AMOUNT FROM CAMA MOTORS PVT. LTD. BE ING UNSECURED LOAN. THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY THE UNSECURED LOAN RECEIVED FROM CAMA MOTORS PVT. LTD. SHOULD NOT BE TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE I.T. ACT. THE A.O. HAS NOT ACCEPTED THE SUBMISSION OF THE ASSESSEE THAT IT HAS NO INVESTMENT IN SHARES WITH CMPL FOR REASON THAT THE COMMON DIRECTORS OF THE ASSESSEE COMPANY BEING SHRI JEHANGIR R. CAMA, MRS. MEHROO J. CAMA AND SHRI RUSTOM J. CAMA HOLD MORE THAN 10% OF THE SHARE CAPITAL I.E. SHRI JEHANGIR R. CAMA IS HOLDING 21.20% AND RUSTOM J. CAMA IS HOLDING 32.60% SHARES. IN VIEW OF THE ABOVE, THE ASSESSEE 'S CASE SQUARELY FELL WITHIN THE AMBIT OF SECTION 2(2)(E) OF THE ACT AND RS. 75,00,000/ - IS TREATED AS DEEMED DIVIDEND U/S.2(22)(E) OF THE I. T. ACT IN THE HANDS OF THE ASSESSEE BY THE A.O. THE APPELLANT HAS SUBMITTED THAT THAT APPELLANT COMPANY HAS NOT RECEIVED NEW LOAN OF RS. 75,00 ,000/ - FROM CAMA MOTORS PVT. LT D. & HAS REPAID RS. 2,11,90,000/ - THUS THERE IS NET REPAYMENT OF RS.40,00,000/ - .THE APPELLANT HAS SUBMITTED THAT THE SHAREHOLDERS HOLDING MORE THAN 10% SHARES IN THE LENDING COMPANY ARE NOT HOLDING MORE THAN 20% SHARE IN THE RECIPIENT APPELLANT COMPANY WHICH MEANS THAT THEY ARE NOT HAVING SUBSTANTIAL INTEREST IN THE RECIPIENT COMPANY. THE APPELLANT HAS ALSO CITED THAT THE HON'BLE MUMBAI TRIBUNAL IN THE DIRECT DECISION OF ACIT VS. BHAUMIK COLOUR - 118 ITD 1 (MUMBAI SPL. BENCH) H ELD THAT 'AS REGARDS THE APPLICABILITY OF THE PROVISION OF SEC. 2(22)(E), THE SAME ARE NOT 'AT ALL' APPLICABLE AS THE APPELLANT DOES NOT HOLD ANY SHARE IN THE LENDING COMPANY.' THE APPELLANT HAS FURTHER SUBMITTED THAT THE AMOUNT OF CALCULATION OF DEEMED DI VIDEND TO BE CALCULATED AND LOOKED FROM THE POSITION ON ACCUMULATED PROFITS OF THE LENDING COMPANY AND IT SHOULD NOT BE ON THE BASIS OF ACTUAL AMOUNT OF LOAN GRANTED AND RECEIVED BY THE RECIPIENT COMPANY. THE APPELLANT HAS ALSO BROUGHT TO THE NOTICE THAT C IT(A) - 6 VIDE ORDER DID. 04/07/2014 FOR A.Y.2010 - 11 HAS ALSO DELETED THE ADDITION MADE U/S. 2(22) (E) AND THE SAME SQUARELY APPLIES IN CURRENT YEAR ALSO. THAT ADDITION MADE OF DEEMED DIVIDEND U/S. 2(22)(E) BE DELETED IN FULL. 2.4. IDENTICAL ISSUE HAS ALSO COME UP IN APPELLANT'S OWN CASE FOR A.Y. 2009 - 10. VIDE ORDER DTD. 25 - 06 - 2012 IN APPEAL NO. CIT(A) - VI/ACIT(OSD)/R - 1/184/11 - 12, MY PREDECESSOR HELD AS UNDER: '4.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESSMENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. A PPELLANT TOOK LOAN FROM TWO OF ITS ASSOCIATED GROUP COMPANIES ASSESSING OFFICER TREATED AS DEEMED DIVIDEND UN DER SECTION 2(22) (E) OF IT ACT SUBMITTED THAT IT WAS NOT HOLDING ANY SHARES IN THESE TWO COMPANIES AND THEREFORE THERE IS NO QUESTION OF TAXING D EEMED DIVIDEND IN ITS HANDS IN VIEW OF THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF ACIT V. BHAUMIK COLOUR PVT. LTD. REPORTED IN 118 ITD 1. IT IS NOT IN DISPUTE THAT APPELLANT IS NOT A SHAREHOLDER IN EITHER OF THESE COMPANIES WHICH ADVANCED LOANS T O THE APPELLANT AND THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF ITAT SPECIAL BENCH MUMBAI RELIED UPON BY THE APPELLANT, ADDITION OF DEEMED DIVIDEND CANNOT BE MADE IN THE HANDS OF APPELLANT. ACCORDINGLY THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELETED. HOWEVER IN THE SAID DECISION OF SPECIAL BENCH IT IS HELD THAT THE PROVISION OF SECTION 2(22) (E) CAN BE ATTRACTED IN THE HANDS OF SHAREHOLDERS. THEREFORE ASSESSING OFFICER IS FREE TO TAKE APPROPRIATE MEASURES IN THE CASES OF SHAREHOLDERS IN RESPE CT OF LOANS TAKEN BY THE APPELLANT UNDER SECTION 2(22) (E) OF IT ACT. ALL OTHER ARGUMENTS OF THE APPELLANT ARE NOT DISCUSSED HERE SINCE THE SAME ARE NOT RELEVANT AFTER DELETING ADDITION IN THE HANDS OF APPELLANT IN PREVIOUS PARA.' 2.5. THE VIEW TAKEN BY TH E I.T.A.T. MUMBAI SPECIAL BENCH IN THE CASE OF ACIT MUMBAI VS. BHAUMIK COLOUR (P) LTD HAS BEEN APPROVED BY THE HON'BLE BOMBAY I.T.A NO. 42 & CO NO. 40 /AHD/20 17 A.Y. 2013 - 14 PAGE NO D CIT VS. CAMA HOTEL PVT. LTD. 4 HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PRIVATE LIMITED (2010) 324 ITR 263 (BOM.) THE GUJARAT HIGH COURT IN THE CASE OF CIT V/S DAISY PACKERS (P) LTD HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, RELYING ON THE DECISION OF THE DIVISION BENCH OF THE HIGH COURT IN CIT V. ANKITECH (P.) LTD. (2012) 340 ITR 14 (DEL) WHEREIN IT WAS HELD THAT IF THE ASSESSEE - COMPANY DOES NOT HOLD A SHARE IN OTHER COMPANY FROM WHICH IT HAD RECEIVED DEPOSIT THEN IT CANNOT BE TREATED TO BE A DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. FROM THE READING OF THE PROVISIONS OF SECTION 2(22) (E), IT IS SEEN THAT THE PROVISION IS INTENDED TO TA X THE DIVIDEND IN THE HANDS OF A SHAREHOLDER AND THE DEEMING PROVISION AS IT APPLIES TO THE CASE OF LOAN OR ADVANCE BY A COMPANY TO A CONCERN IN WHICH IS SHAREHOLDER AND HAS SUBSTANTIAL INTEREST, I S BASED ON THE PRESUMPTION THAT THE LOAN OR ADVANCE WOULD U LTIMATELY BE MADE AVAILABLE TO THE SHAREHOLDER OF THE COMPANY GIVING LOAN OR ADVANCE. VARIOUS COURT DECISIONS E.G. ASSTT. CIT V/S. BHAUMIK COLOUR (P.) LTD.[2009] 118 ITD 1 (MUM.) (SB) & JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT V/S DAISY PACKER S (P.) LTD [2013] 40 TAXMANN.COM 480 (GUJARAT), SUPPORT THIS VIEW THAT THE DEEMED DIVIDEND U/S 2(22) (E) CAN ONLY BE ASSESSED IN THE HANDS OF THE PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN THE SHAREHOLDER. FACTS REMAINING THE SAME IN THE YEAR UNDER CONSIDERATION AND FOLLOWING THE RATIOS OF ABOVE DECISIONS AND ABOVE - MENTIONED ORDER OF MY PREDECESSOR, IMPUGNED DIS ALLOWANCE OF RS. 75,00,000 / - IS DELETED IN THE HANDS OF THE APPELLANT COMPANY. A.O. MAY TAKE APPR OPRIATE ACTION IN THE CASES OF THE SHAREHOLDERS, IF REQUIRED. THIS GROUND OF APPEAL IS ALLOWED'. 2.4. FURTHER, HON'BLE IT AT, AHMEDABAD 'B' BENCH IN THE APPELLANT'S OWN CASE FOR A.Y.2009 - 10, ITA NO.1834/AHD/2012 DATED 29/05/2015 ON SIMILAR FACTS, DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE AS UNDER - '11. THE BRIEF FACTS OF THE CASE ARE THAT ON PERUSAL OF THE ACCOUNTS, IT REVEALS TO THE ASSESSING OFFICER THAT ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 62,06,638/ - FROM CAMA MOTORS PVT LTD. AND RECEIVED RS.1,69,38 ,020/ - FROM R. J. CAMA & CO. PVT. LTD.. THE ID. ASSESSING OFFICER HAS CONSIDERED THESE LOANS AS DEEMED DIVIDEND IN THE HANDS OF ASSESSEE. HE ACCORDINGLY MADE ADDITION OF RS.2,63,12,188/ - U/S. 2(22)(E) OF THE INCOME TAX ACT. ON APPEAL, ID. CIT(A) HAS DELETE D THE ADDITION. 12. THE ID. COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, SUBMITTED THAT ISSUE IN DISPUTE IS CLEARLY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HON'BLE GUJARAT HIGH COURT RENDERED IN CASE OF CIT VS. DAISY PACKERS (P.) LTD. [2013] 40 T AXMANN.COM 480 (GUJARAT). HE PLACED ON RECORD A COPY OF THE ORDER OF HON'BLE GUJARAT HIGH COURT. LD. COUNSEL FOR THE ASSESSEE TOOK US THROUGH PAGE NOS. 9 &10 OF THE CIT(A)'S ORDER. HE POINTED OUT THAT ASSESSEE IS NOT A SHARE HOLDER OF EITHER CAMA MOTORS PV T. LTD. OR R.J. CAMA & CO. PVT. LTD. SECTION 2(22)(E) CAN BE APPLIED IF THE ASSESSEE IS REGISTERED SHARE HOLDER OF THE LENDER COMPANY AND AVAILED SOME AMOUNTS WHICH CAN BE TREATED AS DEEMED DIVIDEND. THE ID. ASSESSING OFFICER HAS TREATED THE ALLEGED LOAN A S DEEMED DIVIDEND ON THE GROUND THAT THE DIRECTORS ARE HOLDING MORE THAN 10% OF THE SHARE CAPITAL OF CAMA MOTORS PVT. LTD. AND R. J. CAMA & CO. PVT. LTD. LD. SR. D.R. RELIED UPON THE ORDER OF ASSESSING OFFICER. 13. ON DUE CONSIDERATION OF THE RECORD, WE FI ND THAT ID. FIRST APPELLATE AUTHORITY HAS RECORDED A FINDING OF FACT THAT ASSESSEE IS NOT THE SHARE HOLDER OF BOTH THE COMPANIES. THE ID. CIT(A) HAS FOLLOWED THE DECISION OF SPECIAL BENCH OF ITAT IN CASE OF ACIT VS. BHAUMIK COLOUR PVT. LTD. REPORTED IN 118 ITD 1. THIS DECISION OF ITAT HAS BEEN UPHELD BY THE HON'BLE BOMBAY HIGH COURT. HON'BLE DELHI HIGH COURT HAS ALSO HELD IN CASE OF CIT VS. ANKITECH (P.) LTD. IN [2012] 340 ITR 14 THAT THE ASSESSEE SHOULD BE A SHARE HOLDER IN THE LENDER COMPANY AND SUCH HOLDI NG SHOULD BE MORE THAN 10% OF THE VOTING 'RIGHTS, ONLY THEN SECTION 2(22)(E) WOULD I.T.A NO. 42 & CO NO. 40 /AHD/20 17 A.Y. 2013 - 14 PAGE NO D CIT VS. CAMA HOTEL PVT. LTD. 5 BE ATTRACTED. HON'BLE JURISDICTIONAL HIGH COURT CONCURRED WITH HON'BLE DELHI HIGH COURT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT VS. DAISY PACKERS (P.) LTD. (SUPRA), WE DO NOT FIND ANY ERROR IN THE ORDER OF ID. CIT(A) ON THIS ISSUE. THIS GROUND OF APPEAL IS REJECTED'. AFTER GOING THROUGH THE FACTS OF THE CASE, IT IS SEEN THAT THERE IS NO CHANGE WITH RESPECT TO THE FACTS AND POSITION IN LAW DURING THE YEAR UNDER CONSIDERATION FROM THOSE EXISTED IN THE PRECEDING ASSESSMENT YEARS. FACTS AS WELL AS POSITION IN LAW REMAINING THE SAME DURING THE YEAR UNDER CONSIDERATION AND RESPECTFULLY FOLLOWING THE ORDER OF THE HON'BLE ITAT, AHME DABAD BENCH IN THE APPELLANT'S OWN CASE FOR A.Y. 2009 - 10 AND ALSO THE APPELLATE ORDERS OF THE CIT (APPEALS) IN THE APPELLANT'S OWN CASE FOR ASSESSMENT YEARS 2009 - 10 TO 2012 - 13, I HOLD THAT THE IMPUGNED ADDITION MADE BY THE AO OF RS. 75,00, 000 / - IS DELETED . THIS GROUND OF APPEAL IS ALLOWED. 6. WE HAVE HEAR D THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. RESPECTIVELY FOLLOWING THE DECISION OF CO - ORDINATE BENCH AS ELABORATED SUPRA IN THE FINDING OF LD. CIT(A), WE ARE INCLINED WITH THE DECISION LD. CIT(A) , T HEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED ON THIS ISSUE . SECOND GROUND OF APPEAL PERTAINING DELETING THE ADDITION OF RS . 38 , 21 , 232/ - U/S. 41(1) OF THE ACT 7. DURING THE ASSESSMENT , ON VERIFICATION OF THE BALANCE SHEET, THE ASSESSING OFFICER NOTICED THAT ASSESS EE HAS SHOWN SUNDRY CREDIT ORS OF RS . 38 , 21 , 232/ - FROM YEAR AFTER YEAR WITHOUT ANY TRANSACTION SINCE ASSESSMENT YEAR 2007 - 08. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN WHY N OT THE SAID SUNDRY CREDIT SHOULD BE TREATED AS INCOME U/S 41(1) OF THE ACT. IT IS STATED THAT ASSESSEE HAS NOT MADE ANY COMPLIANCE BEFORE THE ASSESSING OFFICER , THEREFORE, THE ASSESSING OFFICER HAS TREATED THE SAID LIABILITY AS CEASED TO EXIST WITHIN THE MEANING OF SECTION 41(1) OF THE ACT AND AD DED T O THE TOTAL INCOME OF T HE SSSESSEE. THE LD . CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE . THE RELEVANT PART OF THE DECISION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: - 4.3. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND SUB MISSION FILED BY APPELLANT. THE ASSESSING OFFICER HAS OBSERVED THAT THE APPELLANT HAS SHOWN SUNDRY CREDIT OF RS.38,21,2327 - IN THE NAME OF SAROVAR PARK PLAZA, MUMBAI IS CARRIED FORWARD FROM AFTER YEAR WITHOUT ANY TRANSACTION FROM A.Y.2007 - 08. THE APPELLANT HAS FAILED TO PRODUCE THE IDENTITY OF THE CREDITOR AND THE NATURE OF TRANSACTION IT CARRIED OUT THROUGH SAROVAR PARK PLAZA, MUMBAI AGAINST WHOM THE CREDITS APPEAR. THE ASSESSING OFFICER HAS REFERRED TO PROVISIONS OF SECTION 41(1) OF THE ACT AND CONTENDED THAT WHERE SOME BENEFIT IN RESPECT OF TRADING LIABILITY HAS BEEN OBTAINED BY ASSESSEE, IT SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS & PROFESSION. I.T.A NO. 42 & CO NO. 40 /AHD/20 17 A.Y. 2013 - 14 PAGE NO D CIT VS. CAMA HOTEL PVT. LTD. 6 ON THE OTHER HAND APPELLANT HAS RELIED UPON THE DECISIONS OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NITIN S. GARG 71 DTR 73(GUJ), CIT V/S. BHOGILAL RAMANLAL ATARA REPORTED IN 222 TAXMAN 313(GUJ) IN SUPPORT OF ITS CLAIM. SECONDLY, THE APPELLANT HAS ALSO SUBMITTED THAT IT HAS WRITTEN OFF THIS AMOUNT OF RS. 38,21,232/ - FINALLY IN THE F.Y. 2015 - 1 6 WHEN THE APPELLANT FELT THAT NO SETTLEMENT WAS FORTHCOMING AND, ACCORDINGLY, THE SAME HAS BEEN TRANSFERRED TO SUNDRY BALANCES WRITTEN OFF/BACK ACCOUNT AND THE SAME HAS BEEN TRANSFERRED TO P & L ACCOUNT AND THUS OFFERED FOR TAXATION IN THE A.Y. 2016 - 17 WH EN THE AMOUNT IS WRITTEN OFF AS PAYABLE AND THUS ENJOYED THE BENEFIT OF CESSATION OF A TRADE LIABILITY. IN VIEW OF THIS ALSO, NO FURTHER ACTION IS REQUIRED TO BE TAKEN BY THE A.O. IN THE A.Y. 2013 - 14 AND, THEREFORE, THE ADDITION OF RS. 38,21,232/ - BE DELET ED. 4.4. ON CAREFUL CONSIDERATION OF OBSERVATION OF ASSESSING OFFICER AND CONTENTION OF APPELLANT, I OBSERVE THAT OUTSTANDING BALANCE IS CREDITORS ACCOUNT ARE SHOWN AS LIABILITY IN ITS BOOKS OF ACCOUNT AND SUCH AMOUNT IS NOT WRITTEN BACK IN PROFIT & LOSS A CCOUNT HENCE APPLYING PROVISIONS OF SECTION 41(1), NO SUCH ADDITION CAN BE EVEN THOUGH DEBT IS TIME BARRED OR OUTSTANDING FOR MORE THAN THREE YEARS. ON IDENTICAL FACTS, HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S. BHOGILAL RAMJIBHAI ATARA (2014) 43 T AXMANN.COM 55 HAS HELD AS UNDER - 'SECTION 41(1) OF THE INCOME - TAX ACT, 1961 - REMISSION OR CESSATION OF TRADING LIABILITY (CESSATION OF LIABILITY) - ASSESSMENT YEAR 2007 - 08 - IN RETURN OF INCOME FOR ASSESSMENT YEAR 2007 - 08, ASSESSEE HAD SHOWN A CERTAIN AMOU NT BY WAY OF HIS DEBTS. HE SUPPLIED DETAILS OF 27 DIFFERENT CREDITORS. ASSESSING OFFICER UNDERTOOK EXERCISE TO VERIFY RECORDS OF SO CALLED CREDITORS AND FOUND THAT CREDITORS HAD NO DEALING WITH ASSESSEE. ASSESSING OFFICER FURTHER HAVING FOUND THAT DEBTS WE RE OUTSTANDING SINCE SEVERAL YEARS APPLIED SECTION 41(1) AND ADDED ABOVE AMOUNT IN INCOME OF ASSESSEE AS DEEMED INCOME. THERE WAS NOTHING ON RECORD TO SUGGEST THAT THERE WAS REMISSION OR CESSATION OF LIABILITY THAT TOO DURING PREVIOUS YEAR RELEVANT TO ASSE SSMENT YEAR 2007 - 08. WHETHER IN PECULIAR OF CASE AMOUNT IN QUESTION COULD NOT BE ADDED BACK IN INCOME OF ASSESSEE AS INCOME UNDER SECTION 41(1). HELD, YES (PARA 8) (IN FAVOUR OF ASSESSEE)'. FURTHER, HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S. NITIN S. GARG 208 TAXMAN 16 HAS ALSO HELD AS UNDER: - 'SECTION 41(1) OF THE INCOME - TAX ACT, 1961 - REMISSION OR CESSATION OF TRADING LIABILITY (CESSATION OF LIABILITY) - ASSESSMENT YEAR 2001 - 02 TO 2003 - 04 AND 2006 - 07 - IN COURSE OF ASSESSMENT, ASSESSING OFFICER NOTICED FROM BALANCE SHEET THAT VARIOUS CREDITORS WERE VERY OLD AND NO INTEREST HAD BEEN PAID ON THOSE VARIOUS LOANS - ASSESSING OFFICER GAVE VARIOUS OPPORTUNITIES TO ASSESSES TO FURNISH DETAILS OF SUCH CREDITORS VIZ., CONFIRMATION AS WELL AS CREDITWORTHI NESS BUT ASSESSEE FAILED TO PRODUCE NECESSARY INFORMATION AND DETAILS IN THAT REGARD OF AFORESAID LIABILITIES. ON FURTHER APPEAL, TRIBUNAL DELETED ADDITION ON GROUND THAT ASSESSEE HAD CONTINUED TO SHOW ADMITTED AMOUNTS AS LIABILITIES IN ITS BALANCE SHEET A ND THUS IT COULD NOT BE TREATED AS A CASE OF CESSATION OF LIABILITIES. WHETHER MERELY BECAUSE LIABILITIES WERE OUTSTANDING FOR LAST MANY YEARS, IT COULD NOT BE INFERRED THAT SAID LIABILITIES HAD CEASED TO EXIST. HELD, YES, WHETHER EVEN OTHERWISE, SINCE ASS ESSEE HAD CONTINUED TO SHOW ADMITTED AMOUNTS AS LIABILITIES IN ITS BALANCE SHEET, TRIBUNAL WAS JUSTIFIED IN DELETING IMPUGNED ADDITION MADE BY ASSESSING OFFICER - HELD YES (IN FAVOUR OF ASSESSEE)'. IN VIEW OF THE ABOVE FACTS AND FOLLOWING THE DECISIONS OF HON'BLE GUJARAT HIGH COURT REFERRED SUPRA, DISALLOWANCE MADE ASSESSING OFFICER U/S.41(1) FOR RS. 38,21,232/ - IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. I.T.A NO. 42 & CO NO. 40 /AHD/20 17 A.Y. 2013 - 14 PAGE NO D CIT VS. CAMA HOTEL PVT. LTD. 7 8. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE AND PERUSED THE MATERIAL ON RECORD. THE A SSE SSEE HAS SHOWN SUNDRY CREDIT OF RS.38,21,2327 - IN THE NAME OF SAROVAR PARK PLAZA, MUMBAI WHICH WAS CARRIED FORWARD FROM AFTER YEAR WITHOUT ANY TRANSACTION FROM A.Y.2007 - 08. THE ASSESSEE HAS SHOWN OUTSTANDING BALANCE OF CREDITORS ACCOUNT AS LIABILITY I N ITS BOOKS OF ACCOUNT AND SUCH AMOUNT WAS NOT WRITTEN BACK IN PROFIT & LOSS ACCOUNT AFTER TAKING IN TO CONSIDERATION THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S. BHOGILAL RAMJIBHAI ATARA (2014) 43 TAXMANN.COM AND THE DECSION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S. NITIN S. GARG 208 TAXMAN 16 AS ELABORTAED IN THE FINDINGS OF THE LD. CIT(A) WE ARE OF THE VIEW THAT T HERE WAS NOTHING ON RECORD TO DEMONSTRA T E THAT THERE WAS REMISSION OR CESSATION OF LIABILITY RELEVANT TO ASSESSMENT YEAR 2007 - 08. THEREFORE WE DO NOT FIND ANY ERROR IN THE DECISION OF THE LD. CIT(A). ACCORDINGLY THE APPEAL OF THE REVENUE IS DISMISSED. CROSS OBJECTION NO . 40/AHD/2017 9. CROSS OBJECTION OF THE ASSESSEE IS PERTAINED TO SOLITARY DISALLOWAN CE OF RS. 4 , 28 , 367/ - MADE BY THE ASSESSING OFFICER IN RESPECT OF BELATED CONTRIBUTION TO PROVIDENT FUND AND ESIC U/S. 36(1)(VA) OF THE ACT. 10. WE HAVE HE A RD THE RIVAL CONTENTION ON THIS ISSUE. IT IS NOTICED THAT THE ASSESSEE HAS FAILED TO MAKE PAYMEN T OF THE PF/ESIC RECEIVED FROM THE EMPLOYEES WITHIN THE TIME ALLOWED AS PER THE PF/ESIC ACT. WE HAVE FURTHER NOTICED THAT HON BLE HIGH COURT IN THE CASE OF CIT VS. GSRTC IT APPEAL NO. 637 OF 2013 HELD THAT WITH RESPECT TO THE SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH PROVISIONS OF SUB - CLAUSE ( 10 ) OF CLAUSE ( 24 ) OF SECTION 2 APPLY , THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION OF SUCH AMOUNT IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 , IF SUCH SUM IS CREDITED BY THE ASSESSEE TO I.T.A NO. 42 & CO NO. 40 /AHD/20 17 A.Y. 2013 - 14 PAGE NO D CIT VS. CAMA HOTEL PVT. LTD. 8 TH E EMPLOYEES ACCOUNT IN THE RELEV ANT FUND OR FUNDS ON OR BEFORE T H E DUE DATE. IN THE LIGHT OF THE ABOVE FACTS AND JUDICIAL FINDINGS, WE DO NOT FI N D ANY ERROR IN THE DECISION OF LD. CIT(A) IN SUSTAINING THE DISALLOWANCE, THEREFORE, THIS GROUND OF THE APPEA L OF THE ASSESSEE IS DISMISSED. 11. IN THE RESULT, BOTH THE GROUNDS OF APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 10 - 12 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 10 /12 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,