Karnavati Safe Vaults Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-4(2), Ahmedabad

ITA 1044/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1419 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEPAK SUTURIA
• Keywords: Business income
• Section: 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.1044/AHD/2013 /BLOCK ASSTT. YEAR: 2008-2009 KARNAVATI SAFE FAULTS P.LTD. 2235, KAKUBHAI BUILDING MAHURAT POLE, MANEK CHOWK AHMEDABAD. PAN : AAACK 8431 C VS ITO, WARD-4(2) AHMEDABAD. %& / (APPELLANT) '( %& / (RESPONDENT) ASSESSEE BY : SHRI KARAN SHAH, AR REVENUE BY : SHRI DEPAK SUTURIA, SR.DR / DATE OF HEARING : 07/06/2016 / DATE OF PRONOUNCEMENT: 08/06/2016 )*/ O R D E R THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF THE LD.CIT(A)-VIII DATED 8.2.2013 PASSED FOR THE ASSTT. YEAR 2008-09. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) IS ERRED IN CONFIRMING THE ADDITION OF RS.18,75,000/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 28.9.2008 DECLARING TOTAL LOSS OF RS.4,348/-. T HE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER S ECTION 143(2) OF THE ACT WAS ISSUED ON 30.9.2009. ON SCRUTINY OF THE ACCOUNT S, IT REVEALED TO THE AO THAT A SUM OF RS.18,75,000/- WAS RECEIVED BY THE AS SESSEE IN THE ACCOUNTING ITA NO.1044/AHD/2013 2 YEAR 1995-96 RELEVANT TO THE ASSTT.YEAR 1996-97 FRO M KING SECURITIES LTD. THE ASSESSEE HAS NOT PAID ANY INTEREST ON THIS AMOU NT NOR REPAID THE AMOUNT. IN OTHER WORDS, IT WAS UNSECURED LOAN. THE LD.AO H AS OBSERVED THAT LIABILITY TO REPAY THIS AMOUNT HAS CEASED BY VIRTUE OF EFFLUX OF TIME. HE ISSUED NOTICE UNDER SECTION 133(6) OF THE INCOME TAX ACT TO KING SECURITIES AND KING INTERNATIONAL LTD, BUT NOTICES WERE RETURNED UNDELI VERED BY THE POSTAL AUTHORITIES. THE AO HAS FORMED AN OPINION THAT IT IS A NON-EXISTING LIABILITY, AND THEREFORE, IT IS TO BE INCLUDED IN THE TAXABLE INCOME OF THE ASSESSEE. 4. THE APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RE LIEF TO THE ASSESSEE. 5. BEFORE ME, THE LD. COUNSEL FOR THE ASSESSEE CONT ENDED THAT IT IS NOT A TRADING LIABILITY. IT WAS AN UNSECURED LOAN. THE ASSESSEE HAS NOT WRITTEN OFF THIS AMOUNT IN THE ACCOUNT. THE ASSESSEE IS WILLIN G TO REPAY THIS AMOUNT, AND ULTIMATELY THE AMOUNTS HAVE BEEN PAID THROUGH GOLD AQUA SHARE GIVEN TO THE DIRECTOR ON 6.6.2014. HE PLACED ON RECORD COPY OF LEDGER ACCOUNT. IT READS AS UNDER: 1-APR-2014 TO 31-MAR-2016 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2014 BY OPENING BALANCE 18,75,000.00 6-6-2014 TO NANDINI HITENDRA THAKAR C GOLD AUA SHARE GIVEN BY DIRECTOR 93750 X 10 JOURNAL 1 9,37,500.00 TO HITENDRA MANILAL THAKKAR C GOLD AQUA SHARE GIVEN BY DIRECTOR 93750 X 10 JOURNAL 1 9,37,500.00 18,75,000.00 18,75,000.00 HE HAS ALSO PLACED ON RECORD COPY OF CONFIRMATION O F ACCOUNT FROM HITENDRA MANILAL THAKKAR AND NANDINI HITENDRA THAKK AR WHO WERE THE DIRECTORS IN THE KING INTERNATIONAL LTD. THE LD.C OUNSEL FOR THE ASSESSEE FURTHER RELIED UPON THE JUDGMENT OF THE HONBLE GUJ ARAT HIGH COURT IN THE CASE OF BHOGILAL RAMJIBHAI ATARA VS. CIT, 43 TAXMAN N.COM 55 (GUJ) AND CIT VS. PURIVEDI MAHEDRAKUMAR CHAUDHAR, 41 TAXMANN.COM 329 (GUJ). HE ITA NO.1044/AHD/2013 3 SUBMITTED THAT IN THE CASE OF PURIDEVI MAHENDRAKUMA R CHAUDHAR (SUPRA), THERE IS A TRADE LIABILITY. THE AO HAS APPLIED SEC TION 41(1) AND OBSERVED THAT LIABILITY IS MORE THAN THREE YEARS, AND THEREFORE, CREDITOR WOULD NOT BE IN A POSITION TO RECOVER THE AMOUNT FROM THE ASSESSEE, H ENCE, IT IS TO BE CONSTRUED THAT LIABILITY HAS CEASED. THE CIT(A) HAS DELETED THE ADDITION. THE TRIBUNAL ON THE STRENGTH OF THE HONBLE SUPREME COURT DECISI ON IN THE CASE OF CIT VS. SUGAULI SUGAR WORKS P. LD., 236 ITR 518 UPHELD THE ORDER OF THE LD.CIT(A). THE HONBLE HIGH COURT HAS UPHELD THE ORDER OF THE TRIBUNAL. IDENTICAL POSITION IS AVAILABLE IN THE CASE OF BHOGILAL RAMJI BHAI ATARA (SUPRA). 6. THE LD.DR, ON THE OTHER HAND, CONTENDED THAT THE FACTS IN THE PRESENT CASE ARE QUITE DIFFERENT. HERE THE ASSESSEE HAS TA KEN UNSECURED LOANS WHICH IT FAILED TO REPAY IN THE LAST 15 YEARS. IT HAS NOT P AID INTEREST ALSO. THEREFORE, THE LIABILITY WAS NOT EXISTING. 7. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. SECTION 41(1) HAS BEEN INCORPORATED IN THE ACT TO COVER A PARTICULARS FACT SITUATION. THE SECTION APPLIES W HERE A TRADING LIABILITY WAS ALLOWED AS A DEDUCTION IN AN EARLIER YEAR IN COMPUT ING THE BUSINESS INCOME OF THE ASSESSEE AND THE ASSESSEE HAS OBTAINED A BENEFI T IN RESPECT OF SUCH TRADING LIABILITY IN A LATER YEAR BY WAY OF REMISSION OR CE SSATION OF THE LIABILITY. IN SUCH A CASE THE SECTION SAYS THAT WHATEVER BENEFIT HAS ARISEN TO THE ASSESSEE IN THE LATER YEAR BY WAY OF REMISSION OR CESSATION OF THE LIABILITY WILL BE BROUGHT TO TAX IN THAT YEAR. THE PRINCIPLE BEHIND THE SECTI ON IS SIMPLE. IT IS A PROVISION INTENDED TO ENSURE THAT THE ASSESSEE DOES NOT GET A WAY WITH A DOUBLE BENEFIT ONCE BY WAY OF DEDUCTION IN AN EARLIER ASSESSMENT Y EAR AND AGAIN BY NOT BEING TAXED ON THE BENEFIT RECEIVED BY HIM IN A LATER YEA R WITH REFERENCE TO THE LIABILITY EARLIER ALLOWED AS A DEDUCTION. IN THE PR ESENT CASE, NO LIABILITY WAS ALLOWED AS DEDUCTION. IT WAS A LOAN TAKEN BY THE A SSESSEE. THE ASSESSEE HAS ITA NO.1044/AHD/2013 4 NOT WRITTEN OFF THE AMOUNTS IN THE BOOKS. NO DOUBT , IT HAS ALLOTTED THE SHARES IN THE ASSESSMENT YEAR 2014 AND COPY OF THE LEDGER ACCOUNT HAS BEEN PLACED BEFORE ME. THE LD.DR HAS OBJECTED THAT IT IS A FRE SH EVIDENCE AND IT BE NOT TAKEN AS EVIDENCE, UNLESS AN OPPORTUNITY BEING GRAN TED TO THE AO TO VERIFY THE GENUINENESS OF THESE DETAILS. IN PRINCIPLE, THESE DETAILS ARE NOT FOR DECIDING THE ISSUE, BECAUSE THE LIABILITY TO PAY HAS NOT CEA SED UPTO AND UNLESS THE ASSESSEE HAS BEEN RECOGNIZING THE SAME IN THE BOOKS . IT IS ALSO NOTE WORTHY THAT THE ASSESSEE HAS NOT CLAIMED THIS AMOUNT AS A DEDUCTION IN THE PAST. THUS, STRICTLY, IT IS NOT A LIABILITY AKIN TO ONE CONTEMP LATED IN SECTION 41(1) OF THE ACT. REFERENCE TO THIS DOCUMENT IS ONLY MADE FOR G IVING EMPHASIS TO THE BONA FIDE OF THE ASSESSEE IN RESPECT OF ITS ACCOUNTING ENTRI ES IN THE BOOKS. THEREFORE, I ALLOW THE APPEAL OF THE ASSESSEE AND D ELETE THE DISALLOWANCE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 8 TH JUNE, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER