M/s. Neptune India Ltd., New Delhi V. DCIT, New Delhi

CO 99/DEL/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6189 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 30-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 29-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: SSH ASHWANI TANEJA; TARUN KUM
• Keywords: Depreciation; Period of limitation; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T. A. NO.4286/DEL/2010 ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME-TAX, M/S. NEPTUNE INDIA LTD., CIRCLE 13(1), NEW DELHI. VS. B-1/6, MALVIYA NAGAR, NEW DELHI. PAN: AAACN0026C C.O. NO.99/DEL/2011 (IN I.T. A. NO.4286/DEL/2010) ASSESSMENT YEAR : 2006-07 M/S. NEPTUNE INDIA LTD., DY. COMMISSIONER OF INCOM E-TAX, B-1/6, MALVIYA NAGAR, VS. CIRCLE 13(1), NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY: MS. Y. KAKKAR, SR. DR. ASSESSEE BY: S/SH. ASHWANI TANEJA & TARUN KUM AR, ADVOCATES. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 2. 06.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) PE RTAINING TO THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION IN R ELATION THERETO. 2 3. WE SHALL FIRST TAKE THE APPEAL FILED BY THE REVE NUE. 4. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DIRECTED AGAINST THE CIT(A)S ORDER IN DELETING THE ADDITION OF RS.22,75 ,663/- MADE BY THE ASSESSING OFFICER UNDER SEC. 41(1) OF THE INCOME-TA X ACT, 1961 (THE ACT). THESE GROUNDS ARE AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.22,75,663/- U/S 41(1) OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED WHILE DELETING THE ADDITIO N OF RS.22,75,663/- TO NOTE THAT THE ASSESSEE HAS NOT BR OUGHT OUT EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE CLOSING B ALANCE OUTSTANDING IN THE NAME OF THREE PARTIES I.E. M/S. ELCON CLIPSAL INDIA LTD. (RS.10,52,884/-), M/S. THE POWER SERVICE S (RS.10,22,779), AND M/S.YAMUNA GAS & CHEMICALS (RS.2,00,000) WERE IN EXISTENCE ON THE LAST DAY OF THE FINANCIAL YEAR. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY IGNORING THE ADMITTED FACT THAT THE ASSESSEE HAD NEITHER REPAID THESE CREDITORS NOR SEEMS TO HAVE ANY INTENT ION TO REPAY THE SAME AS THEY WERE OUTSTANDING EVEN AS ON 31.03. 2008. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.22,75,663/- BY IGNORING THE FACT THAT THE ASSESS EE HAS NOT PROVED THAT THERE WAS AN ACTUAL LIABILITY TO PAY IT S DEBTS AND WAS UNDER OBLIGATION TO PAY ITS DEBITS IN ABSENCE O F ANY EVIDENCES. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN APPRECIATING THE FACT T HAT THE AO HAS BROUGHT OUT CLEAR CASE OF CESSATION OF LIABILIT Y U/S 41(1) OF 3 THE ACT AND WERE ESTABLISHED BY THE AO IN THE ASSES SMENT ORDER. 5. THE ASSESSEE FILED RETURN OF INCOME ON 31.10.200 6 DECLARING TOTAL INCOME AT RS.21,25,129/-. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD SHOWN S UNDRY CREDITORS REMAINING OUTSTANDING AS ON 31.3.2006, THE DETAILS OF WHICH ARE AS UNDER:- SL.NO. NAME OF THE SUNDRY CREDITOR AMOUNT PAYABLE 1. ELCON CLIPSAL INDIA LTD. 10,52,884 2. THE POWER SERVICES 10,22,779 3. YAMATA GAS & CHEMICALS 2,00,000 TOTAL AMOUNT PAYABLE = 22,75,663 5.1 IT WAS FURTHER OBSERVED BY THE AO THAT THE AFOR ESAID AMOUNTS WERE SHOWN OUTSTANDING SINCE 31.3.2003 TILL 31.03.2006. THE AO, THEREFORE, ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY SUNDRY C REDITORS REMAINING OUTSTANDING SINCE 31.3.2003 SHOULD NOT BE TREATED A S CESSATION OF LIABILITY AND CONSEQUENTLY, SHOULD NOT BE TREATED AS ASSESSEE S INCOME UNDER SEC. 41(1) OF THE ACT. THE ASSESSEE THEN SUBMITTED ITS R EPLY BY GIVING THE DETAILS OF OUTSTANDING AS UNDER:- A ELCON CLIPSAL INDIA LTD. 10,52,884 THIS IS A DISP UTED ACTUAL AMOUNT WILL BE COMPUTED SOON. B THE POWER SERVICES 10,22,779 THIS IS A DISPUTED ACTUAL AMOUNT WILL BE COMPUTED SOON. C YAMATA GAS & CHEMICALS 2,00,000 AMOUNT WILL BE REFUNDED IN CURRENT 4 YEAR. 5.2 THE ASSESSEES SUBMISSIONS WERE CONSIDERED BY T HE AO BUT NOT ACCEPTED BY HIM. THE AO, THEREFORE, MADE THE ADDIT ION OF RS.22,75,663/- BY OBSERVING AND HOLDING AS UNDER:- 3.3 THE SUBMISSIONS MADE BY THE ASSESSEE COMPANY H AVE DULY BEEN CONSIDERED. HOWEVER, THE SAME WERE NOT F OUND ACCEPTABLE. AS ALREADY POINTED OUT IN EARLIER PARA THAT THE ASSESSEE IS NOT CONSIDERING THE ABOVE CREDITORS AS ITS LIABILITY AND ONLY BECAUSE OF THIS THE AMOUNT OUTSTANDING AGA INST THEIR NAME WERE REMAIN UNPAID SINCE 31.03.2003 OR MAY BE MUCH BEFORE THIS DATE. SINCE THE ASSESSEE HAS NEITHER R EPAID THESE CREDITORS TILL DATE NOR SEEMS TO HAVE ANY INTENTION TO REPAY THE SAME AS THEY ARE STILL OUTSTANDING AS ON 31.03.2008 , THEREFORE, IT IS A CLEAR CUT CASE OF CESSATION OF LIABILITY OF THE ASSESSEE TOWARDS THE ABOVE CREDITORS WITHIN THE MEANING OF S ECTION 41(1) OF THE I. TAX ACT. HENCE THE AMOUNT OF RS.22,75,663 /- OUTSTANDING AGAINST THE NAME OF ABOVE MENTIONED CRE DITORS IS TREATED AS TAXABLE INCOME OF THE ASSESSEE FOR THE A SSESSMENT YEAR UNDER CONSIDERATION AS PER SECTION 41(1) OF TH E I. TAX ACT. 3.4 I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND CONCEALED ITS CORRECT INCOME ON THIS ISSUE, THEREFORE, PENALTY PROCEEDINGS U/S 271( 1)(C) HAVE BEEN INITIATED SEPARATELY. 6. ON AN APPEAL, THE LEARNED CIT(A) DELETED THE ADD ITION BY OBSERVING AS UNDER:- 3.9 I HAVE CONSIDERED THE SUBMISSIONS MADE BY LEAR NED AR OF THE APPELLANT COMPANY. THE REQUEST FOR ADMITTING THE A DDITIONAL EVIDENCE U/RULE 46A IS REQUIRED TO BE ACCEDED TO AS AFTER LO OKING INTO THE ASSESSMENT RECORD, IT IS NOTICED THAT THE ASSESSING OFFICER ASKED THE APPELLANT TO FILE EXPLANATION ON THE LIABILITIES OU TSTANDING VIDE ORDER SHEET NOTING DATED 12-05-2008 FIXING THE NEXT HEARI NG DATE ON 22-05- 2008. THE APPELLANT FILED THE REASONS AS TO WHY TH ESE LIABILITIES ARE 5 OUTSTANDING BUT THEREAFTER, THE ASSESSING OFFICER S EEMS TO HAVE NOT RAISED ANY QUERY ON THIS ISSUE. AS PER SECTION 41( 1), IT IS CLEAR THAT THE FOLLOWING CONDITIONS MUST BE FULFILLED BEFORE S ECTION 41(1) IS MADE APPLICABLE I.E. (I) IN THE ASSESSMENT OF AN ASSESSE E, AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN RESPECT OF ANY LOSS, EXP ENDITURE OR TRADING LIABILITY INCURRED, (II) THAT ANY BENEFIT I N RESPECT OF SUCH LOSS OR EXPENDITURE IS OBTAINED BY WAY OF REMISSION OR C ESSATION BY THE ASSESSEE DURING THE YEAR OR IN A SUBSEQUENT YEAR. HERE, IN THE INSTANT CASE, THERE SEEMS TO BE NEITHER ANY REMISSION NOR C ESSATION OF LIABILITY. THE APPELLANT HAS NOT OBTAINED ANY BENE FIT WHAT SO EVER AND HENCE THE PROVISIONS OF SECTION 41(1) ARE NOT APPLI CABLE. THE REMISSION OF LIABILITY ARISES WHEN THE CREDITOR VOL UNTARILY GIVES UP THE CLAIM. THE CESSATION OF THE SUCH LIABILITY ARISES ONLY WHEN IT CEASES TO EXIST IN THE EYES OF LAW FOR ALL INTENT AND PURPOSE S BUT IN THE INSTANT CASE, THERE IS NO EVIDENCE AT ALL TO HOLD THAT THE LIABILITY OF RS.22,75,663/- HAD CEASED TO EXIST. REFERENCE CAN BE MADE TO THE CASE LAW OF CIT VS. AUTOPINS INDIA 192 ITR 161 (DEL) WHE RE THE JURISDICTIONAL DELHI HIGH COURT AGREED WITH THE FIN DINGS OF CIT(A) AND ITAT AND HELD THAT THERE WAS NO EVIDENCE AT AL L TO HOLD THAT ANY LIABILITY HAD CEASED TO EXIST. IT FURTHER HELD THA T THERE WAS CONSOLIDATION OF VARIOUS ACCOUNTS AND NO LIABILITY HAD BEEN WRITTEN OFF. IN VIEW OF THIS FINDING, IT RIGHTLY CAME TO TH E CONCLUSION THAT THE PROVISIONS OF SECTION 41 WERE NOT ATTRACTED. THE Q UESTION WHETHER LIABILITY CONTINUED TO EXIST OR NOT IS A QUESTION O F FACT. THE FINDING OF FACT IS THAT THE LIABILITY CONTINUED TO EXIST. THI S BEING SO, THE PROVISIONS OF SECTION 41 WOULD BE CLEARLY INAPPLICA BLE. IT IS FURTHER SEEN THAT THE RATIO OF THE CASE LAWS ON WHICH THE A PPELLANT RELIED ARE APTLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. EVEN IN THE CASE OF LIQUIDATOR, MYSORE AGENCIES PVT. LTD. VS. CIT, MYSO RE (SUPRA), IT WAS HELD BY KARNATAKA HIGH COURT THAT EVEN THOUGH THE L IABILITY IS BARRED BY LIMITATION AND THERE IS NO ABANDONMENT OF CLAIM BY THE CREDITOR, BUT STILL THERE IS NO CESSATION/REMISSION OF LIABIL ITY AND THE AMOUNT CANNOT BE INCLUDED IN TAXABLE INCOME OF THE ASSESSE E U/S 41(1) OF THE ACT. IN VIEW OF ABOVE, I DIRECT THE ASSESSING OFFI CER TO DELETE THE ADDITION MADE U/S 41(1) OF THE ACT. 7. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE US. 6 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW. 9. IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE TH E LEARNED CIT(A), THE ASSESSEE SUBMITTED VARIOUS DETAILS AND NOTICES BEFO RE THE LEARNED CIT(A) WHICH WERE ADMITTED BY THE LEARNED CIT(A) AND REMAN D REPORT WAS ALSO CALLED FOR FROM THE AO. THE REMAND REPORT GIVEN BY THE AO ON THE MERIT OF THE ISSUE AS UNDER:- DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE QUESTIONNAIRE DATED 13-02-2008 WAS ASKED TO FURNISH THE DETAILS OF SUNDRY CREDITORS OUTSTANDING FROM 31-03- 2003 TO 31- 03-2006, WHICH WAS FILED ON 20-03-2008. ON EXAMINI NG THE SAME, IT WAS NOTICED THAT IN 3 CASES, AMOUNT TOTALI NG TO RS.22,75,663/- WERE SHOWN OUTSTANDING SINCE 31-03-2 003. ON BEING ASKED VIDE ORDER SHEET ENTRY DATED 12-05-2008 , TO SHOW CAUSE WHY SUNDRY CREDITORS OUTSTANDING SINCE 31-03- 2003 BE NOT TREATED AS CESSATION OF LIABILITY AND TREATED A S INCOME OF THE ASSESSEE U/S 41(1) OF I. TAX ACT, THE ASSESSEE SUBM ITTED REPLY DATED 22-05-2008 GIVING FOLLOWING REASONS FOR NON-P AYMENT:- SL.NO. NAME OF SUNDRY CREDITOR AMOUNT REASON FOR NOT MAKING PAYMENT 1. ELCON CLIPSAL INDIA LTD. 10,52,884 THIS IS A DISPUTED AMOUNT. ACTUAL AMOUNT WILL BE COMPUTED SOON. 2. THE POWER SERVICES 10,22,779 THIS IS A DISPUTED AMOUNT. ACTUAL 7 AMOUNT WILL BE COMPUTED SOON. 3. YAMUNA GAS & CHEMICALS 2,00,000 AMOUNT WILL BE REFUNDED IN CURRENT YEAR. TOTAL 22,75,663 SINCE THE ASSESSEE HAS NEITHER REPAID THESE CREDITO RS NOR SEEMS TO HAVE ANY INTENTION TO REPAY THE SAME, THEREFORE, IT WAS TREATED AS CESSATION OF LIABILITY OF THE ASSESSEE T OWARDS THE ABOVE CREDITORS WITHIN THE MEANING OF SECTION 41(1) OF I. TAX ACT AND ADDITION OF RS.22,75,663/- WAS MADE. 10. FROM THE DETAILS FILED BY THE ASSESSEE AS WELL AS THE AOS ORDER, IT IS CLEAR THAT THE OUTSTANDING AGAINST SUNDRY CREDITORS HAS BEEN DULY SHOWN BY THE ASSESSEE IN THE BALANCE SHEET AS ON 31.03.2006. IT HAS ALSO NOT IN DISPUTE THAT THESE OUTSTANDINGS WERE BEING BROUGHT FORWARD FROM 31.03.2003. IN OTHER WORDS, THESE OUTSTANDINGS WERE CREDITED IN TH E YEAR ENDED ON 31.03.2003. THE ASSESSEE HAS ACKNOWLEDGED THIS LIA BILITY BY SHOWING THE SAME IN THE BALANCE-SHEET AS ON 31.03.2006. MERE B ECAUSE THESE OUTSTANDING HAVE NOT BEEN PAID BY 31.03.2006, THAT BY ITSELF CA NNOT BE A GROUND OR BASIS TO HOLD THAT LIABILITY HAS BEEN CEASED SO AS TO ATT RACT THE PROVISIONS OF SEC. 41(1) OF THE ACT. NOTHING HAS BEEN BROUGHT ON RECO RD BY THE AO AFTER MAKING ENQUIRY FROM THE CREDITORS THAT THIS AMOUNT WAS NO MORE PAYABLE AS ON 31.03.2006. THE AO HAS ALSO NOT BROUGHT ON RECO RD ANY MATERIAL TO SHOW 8 THAT THE CREDITORS HAVE ABANDONED THEIR CLAIM IN TH E YEAR ENDED ON 31.03.2006. 10.1 IN THE CASE OF CIT VS. SITA DEVI JUNEJA, 325 I TR 593, THE HONBLE HIGH COURT OF PUNJAB & HARYANA HAS ALSO HELD THAT M ERELY BECAUSE LIABILITY TOWARDS SUNDRY CREDITORS IS OUTSTANDING FOR THE LAS T SIX YEARS, IT CANNOT BE PRESUMED THAT THE SAID LIABILITIES HAVE CEASED TO E XIST. IN THAT CASE THE LIABILITY WAS DULY SHOWN IN THE BALANCE-SHEET INDIC ATING THE ACKNOWLEDGEMENT OF THE DEBTS PAYABLE BY THE ASSESSE E. THERE WAS NO BILATERAL ACT OF THE ASSESSEE AND THE CREDITORS, WH ICH INDICATED THAT THE LIABILITIES HAD CEASED TO EXIST. IN THE ABSENCE OF ANY BILATERAL ACT, THE LIABILITIES COULD NOT HAVE BEEN TREATED TO HAVE CEA SED. IN THE PRESENT CASE BEFORE US, THE AO HAS NOT BROUGHT ANY MATERIAL TO S HOW THAT LIABILITIES HAVE CEASED TO EXIST BY WAY OF ANY BILATERAL ACT OF THE ASSESSEE AND THE CREDITORS, OR BY WAY OF WRITING OFF THE LIABILITY BY THE ASSES SEE IN HIS BOOKS OF ACCOUNT. 11. IN THE COURSE OF HEARING OF THIS APPEAL, THE LE ARNED DR HAS RELIED UPON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF GOODRICKE GROUP LTD. VS. CIT, 2011-TIOL-303-HC-KOL-IT. WE HAVE GON E THROUGH THIS DECISION AND WE FIND THAT THIS DECISION IS OF ANY A SSISTANCE TO THE REVENUE INASMUCH AS IT WAS HELD BY THE HONBLE HIGH COURT T HAT IT IS NOT POSSIBLE FOR THE AUTHORITY TO COME TO A CONCLUSION THAT THE DEBT IS BARRED AND HAS BECOME 9 UNENFORCEABLE. IT WAS FURTHER OBSERVED HEREIN THAT THERE MAY BE CIRCUMSTANCES WHICH MAY ENABLE THE CREDITOR TO COME WITH A PROCEEDING FOR ENFORCEMENT OF THE DEBT EVEN AFTER EXPIRY OF THE NO RMAL PERIOD OF LIMITATION AS PROVIDED IN THE LIMITATION ACT AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE HOLDING THAT THE AO WAS NOT JUSTIFIED IN T REATING THE AMOUNT OF DEBT AS INCOME OF THE ASSESSEE. THISE CASE RATHER SUPPO RTS THE ASSESSEES CASE. 12. IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE, WE, THEREFORE, UPHOLD THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITIO N AND REJECT THE GROUND RAISED BY THE REVENUE. 13. NOW, WE COME TO THE CROSS OBJECTION FILED BY TH E ASSESSEE. 14. GROUND NO.1 REGARDING DISALLOWANCE OF RS.3,62,9 67/- UNDER SEC.40(A)(IA) MADE BY THE AO IS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE. HENCE, THE SAME STANDS DISMISSED. 15. GROUND NO.2 IS DIRECTED AGAINST THE LEARNED CIT (A)S ORDER IN CONFIRMING THE AOS ORDER IN NOT ALLOWING DEPRECIAT ION @ 60% ON UPS AND BATTERY CONNECTED TO THE COMPUTER. 16. RESPECTFULLY FOLLOWING THE DECISION OF JURISDIC TIONAL DELHI HIGH COURT IN THE CASE OF CIT VS. BSES RAJDHANI POWERS LTD. IN ITA 1266/2010, THE ORDER BEING DATED 31 ST AUGUST, 2010, WE HOLD THAT COMPUTER ACCESSORIES AN D PERIPHERALS SUCH AS UPS, PRINTERS, SCANNERS AND SER VER ETC. FORM AN INTEGRAL 10 PART OF THE COMPUTER AND THEREFORE, THE ASSESSEE IS ENTITLED FOR DEPRECIATION @ 60% THEREUPON. WE, THEREFORE, DIRECT THE AO TO A LLOW DEPRECIATION @ 60% ON UPS, BATTERY AND TROLLY CONNECTED TO THE COM PUTER. 17. GROUND NO.3 REGARDING CHARGING OF INTEREST UNDE R SEC.234B, 234D & 244A(3) ARE CONSEQUENTIAL AND THE AO SHALL RECOMPUT E THE SAME ON TOTAL INCOME FINALLY ASCERTAIN IN THE CASE. 18. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. 19. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT IMMEDIATELY AFTER THE HEARING WAS OVER ON 30 TH JUNE, 2011. SD/- SD/- (SHAMIM YAHYA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH JUNE, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.