Gujtron Electronics Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-2(1)(1), Ahmedabad

ITA 1145/AHD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9587 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 10-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 03-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Search and seizure; Additional evidence; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 133(6); 153; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO.1145/AHD/2016 (ASSESSMENT YEAR:2012-13) GUJTRON ELECTRONICS PVT. LTD. VARTALI COMPLEX, NR. SWASTIK CROSS ROAD, NAVRANGPURA, AHMEDABAD 380009 APPELLANT VS. INCOME TAX OFFICER, WARD-2(1)(1), AHMEDABAD RESPONDENT PAN: AAACG5610K /BY ASSESSEE : SHRI M. J. SHAH, A.R. /BY REVENUE : SHRI JAGADISH, SR. D.R. /DATE OF HEARING : 10.01.2017 /DATE OF PRONOUNCEMENT : 10.01.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE CIT (A)-7, AHMEDABADS ORDER DATED 29.02.2016, IN A PPEAL NO. CIT(A)- 7/443/15-16, UPHOLDING ASSESSING OFFICERS ACTION M AKING SECTION 41(1) ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 2 - ADDITION OF CESSATION OF LIABILITY AMOUNTING TO RS. 7,87,19,819/- IN ASSESSMENT ORDER DATED 06.02.2015, IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THIS ASSESSEE IS A COMPANY TRADING IN ELECTRONIC ITEMS. IT FILED ITS RETURN ON 30.09.2012 DECLARING NIL INCOME ALONG WIT H BOOK PROFITS OF RS.8,01,080/-. THE ASSESSING OFFICER TOOK UP SCRUT INY. HE NOTICED THE ASSESSEE TO HAVE SHOWN OUTSTANDING CUSTOMERS ADVAN CES IN QUESTION OF RS.7,87,09,819/- IN QUESTION. THERE DOES NOT APPEA R TO BE ANY QUARREL THAT THE ASSESSEE HAD COLLECTED THESE ADVANCES FROM A WELL T ARGETED SECTION OF LOWER INCOME STRATA OF THE SOCIETY WAYBACK IN THE FINANCI AL YEAR 1986-87 WHEREIN IT HAD PROMOTED SALE OF TV SETS THROUGH A MULTI LEVEL MARKETING SCHEME. LEARNED COUNSEL AT THE OUTSET TAKES US TO ASSESSEE S BUSINESS MODEL OF INTRODUCING THE ABOVESTATED SCHEME NARRATED IN ITS STATEMENT OF FACTS BEFORE THE LOWER APPELLATE AUTHORITY AS UNDER: THE COMPANY HAS STARTED TO PROMOTE THE SALES OF IT S BLACK & WHITE T.V. FOR THE MIDDLE CLASS PEOPLE WHO CAN AFFORD TO BUY IT AND TH E PRICE OF THE SAID T.V. SET WAS FIXED AT RS.2,125/-. IN ORDER TO PUSH UP THE SALES OF THE SAME, PERSONS ARE APPOINTED AND ANY PERSON WHO IS ABLE TO ENROLL FOUR MEMBERS, WHO WILLING TO PURCHASE COUPONS WORTH RS.500/- ARE ENTITLED TO APP LY FOR THE T.V. SET. THEREAFTER, THE COUPONS WORTH RS.500/- ARE SENT TO EACH OF THE FOUR PERSONS AND IF THEY ACCEPT THE V.P.P. BY GIVING RS.500/- EACH THE PERSON WHO H AS ENROLLED FOUR MEMBERS WOULD BE GIVEN THE T.V. SET. THUS, BY THIS WAY, TH E ASSESSEE COMPANY, AFTER RECEIVING RS.2,000/- GIVES A T.V. SET TO A PERSON W HO HAD ENROLLED FOUR MEMBERS. THE MEMBERS ENROLLED ALSO BECOME ENTITLED TO GET T. V. SET IF THEY IN TURN ENROLL FOUR PERSONS WHO MAY BE WILLING TO PAY RS.500/- AND THEREAFTER ENROLLS FOUR PERSONS WHO ARE WILLING TO PAY RS.500/- AND IN FACT PAYS RS.500/- BECOMES ENTITLED TO RECEIVE T.V. SET. IN CASE, A PERSON WHO HAS ALR EADY PAID RS.500/- IS UNABLE TO ENROLL FOUR PERSONS, THE PERSON WHO HAS PAID RS.500 /- WILL NOT LOSE RS. 500/- ABUT HE WILL ALSO BE ENTITLED TO T.V. SET IF HE PAYS RS. 2,125/- LESS RS.500/- ALREADY PAID I.E. HE WILL HAVE TO PAY RS.1,625/- ONLY. THEREFOR E, UNDER THIS SCHEME, NO ONE HAS TO LOSE ANY AMOUNT, PROVIDED HE HAD DECIDED TO PURC HASE A T.V. SET. IF HE PURCHASES COUPONS OF RS.500/-, RS.1,000/- OR RS.1,5 00/- HE WILL HAVE TO PAY RS.2,125/- LESS THE VALUE OF THE COUPONS ALREADY PU RCHASED BY HIM. THUS, IT CLEARLY APPEARS THAT THIS IS A SCHEME FOR MARKETING THE T.V . SETS AND THE PERSONS WHO HELP IN MARKETING THE T.V. SET ARE BEING REMUNERATED IN THE SENSE THAT THEY GET T.V. SET AT A PRICE WHICH COULD BE LESS THAN RS.2,125/-. ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 3 - 3. THE ASSESSING OFFICER FRAMED A REGULAR ASSESSMEN T ON 06.02.2015 TREATING THE ABOVESAID OUTSTANDING CUSTOMERS ADVAN CES TO BE LIABLE TO BE ASSESSED AS ITS INCOME U/S.41(1) OF THE ACT AFTER C ONCLUDING THAT THE SAME HAD CEASED TO EXIST INTER ALIA ON THE GROUND THAT IT HA D NOT SOLD A SINGLE ITEM NOR RECEIVED ANY AMOUNT AT LEAST SINCE 2008-09 AS TABUL ATED IN PAGE 7 OF THE ASSESSMENT ORDER. ALL THIS RESULTED IN THE IMPUGNE D ADDITION BEING MADE. WE FURTHER EMPHASIZE THAT THE ASSESSING OFFICER ISS UED 40 SECTION 133(6) NOTICES ON TEST CHECK BASIS FAILING TO GET ANY SATI SFACTORY VERIFICATION. 4. THE CIT(A) UPHOLDS THE IMPUGNED ADDITION IN THE LOWER APPELLATE ORDER UNDER CHALLENGE FOR THE FOLLOWING REASONS: 3.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. THE AO MADE THE IMPUGNED ADDITION AFTER A DETAILED DISCUSSION IN THE ASSESSMENT ORDER BECAUSE HE HELD THAT THE AMOUNT OF RS.7,87,09,819/- REFLECTED AS OUTSTANDING LIABILITY IN THE BALANCE SHEET AND RECE IVED BY THE APPELLANT AS 'CUSTOMER ADVANCES' WAS BROUGHT FORWARD FROM EARLIE R YEARS AND HAD ACTUALLY SEIZED TO EXIST. THE APPELLANT ON THE OTHER HAND ST ATED THAT THE CONDITIONS REQUIRED FOR APPLICATION OF SECTION 41(1) OF THE ACT WERE NO T SATISFIED IN ITS CASE AND THAT EVEN THE LIABILITY HAD NOT CEASED TO EXIST. 3.2.1 IN THIS CASE, AS SEEN FROM THE SUBMISSIONS MA DE BY THE APPELLANT, THE COMPANY HAD LAUNCHED A SALES PROMOTION SCHEME IN 19 86-87 TO PROMOTE SALES OF ITS BLACK & WHITE TVS. THE BASIC PREMISE OF THE SCH EME WAS THAT THE COMPANY APPOINTED PEOPLE TO ENROLL MEMBERS TO THE SCHEME. T HE PERSON HAD TO ENROLL FOUR MEMBERS WHO WOULD AGREE TO PURCHASE COUPONS WORTH R S.500/-EACH. SUBSEQUENTLY, THESE COUPONS WERE SENT TO THE FOUR P ERSONS AND IF THEY ACCEPTED THE SAME BY PAYMENT OF RS.500/-, THE PERSON WHO HAD ENR OLLED THESE FOUR PERSONS WOULD BE ENTITLED TO A FREE TV SET AND THE COMPANY WOULD RECEIVE RS.2,000/- (RS.500/- X 4 PERSONS). THE PERSONS WHO HAD PAID RS .500/- EACH WOULD FURTHER BECOME ELIGIBLE FOR A FREE TV SET IF THEY THEMSELVE S ENROLLED FOUR MEMBERS AND SO ON. THE AMOUNT OF RS.7,87,09,819/- LYING AS OUTSTAN DING LIABILITY IN THE BALANCE- SHEET OF THE APPELLANT REFLECTS THIS AMOUNT RECEIVE D FROM CUSTOMERS SINCE 1986-87, THE SUBMISSIONS AND EVIDENCES GIVEN BY THE APPELLAN T FROM TIME TO TIME DURING THE APPELLATE PROCEEDINGS HAVE BEEN PERUSED AND THE; FO LLOWING OBSERVATIONS ARE MADE: (I) THE ADVERTISEMENT WHICH LAUNCHED THE SAID SCHEM E TO THE PUBLIC STATES THE FOLLOWING - ' YOUR ENLISTMENT PAYMENT IS NOT REFUNDABLE TO YOU BY CASH OR BANK DRAFT'. IT IS ALSO STATED IN THIS ADVERTISEMENT THAT TO BECO ME A PROUD RECIPIENT OF A ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 4 - TV UNDER THIS SYSTEM THE ENLISTED CUSTOMER WILL HAV E MAXIMUM TIME LIMIT OF 12 MONTHS PERIOD FROM THE DATE OF HIS ENROLLMENT AS A CUSTOMER. THE VALIDITY OF THE PROPOSAL/DISCOUNT FORM WILL AUTOMAT ICALLY EXPIRE AFTER THE DATE, THEREFORE, YOU MUST TAKE FULL ADVANTAGE OF TH E VALUE OF THE DISCOUNT FORM BEFORE THE EXPIRY DATE.' IT IS ALSO STATED TH AT 'ON REQUEST, THE VALIDITY DATE CAN EXTEND'. (II) THE OUTSTANDING AMOUNT AS ON 31.3.2012 DATES BACK NEARLY 12 TO 15 YEARS WHEN THE COMPANY WAS MANUFACTURING BLACK & WHITE TV SETS. SINCE 1988-89, THE COMPANY IS NO LONGER ENGAGED IN MANUFA CTURING AND IS NOW INTO TRADING OF GOODS. A PERUSAL OF THE SAMPLE FORM S SUBMITTED DURING APPELLANT PROCEEDINGS SHOWS THAT THESE ARE MORE THA N 10 YEARS OLD AND ARE NOT VERIFIABLE EITHER, SINCE THE ADDRESSES OF THE S O-CALLED CUSTOMERS ONLY REFER TO THEIR TEHSILS AND DISTRICTS. THERE ARE NO SIGNATURES ON THESE INVOICES. (IN) THE COURIER OR LETTERS SENT BY POST TO THE CUS TOMERS TO ESTABLISH THAT THE APPELLANT IS STILL IN CORRESPONDENCE WITH THEM AND TO ESTABLISH THAT THE LIABILITY STILL EXISTS, HAVE ALL BEEN ISSUED BY THE APPELLANT AFTER THE COMMENCEMENT OF ASSESSMENT PROCEEDINGS AND AFTER TH E AO RAISED A QUERY IN RESPECT OF THE IMPUGNED ADDITION. IT HAS BEEN SU BMITTED BY THE APPELLANT ITSELF IN |ITS SUBMISSION DATED 29.05.2015 THAT DOC UMENTARY AND PAPER EVIDENCES ARE NOT AVAILABLE WITH IT. (IV) DURING THE APPELLATE PROCEEDINGS, THE APPELLA NT WAS CONFRONTED WITH THE FACT THAT AS PER ITS OWN ADVERTISEMENT, THE VALIDIT Y OF THE SCHEME WAS 12 MONTHS, UNLESS EXTENDED ON REQUEST. IN SPITE OF SEV ERAL OPPORTUNITIES, THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY DOCUMENT TO SHOW THAT IT RECEIVED REQUESTS FROM CUSTOMERS FOR EXTENSION OF TIME PERIOD. THE APPELLANT HAS ALSO NOT BEEN ABLE TO GIVE ANY COMMUN ICATION IN RESPECT OF EXTENSION OF THIS SCHEME BY THE MANAGEMENT. IN ANY CASE, THIS SCHEME IS 12 TO 15 YEARS OLD AND THERE IS NO MENTION IN THE SUBM ISSIONS MADE THAT THERE WAS A PROVISION FOR INDEFINITE EXTENSION OF THE SCH EME. (V) THE MONEY COLLECTED UNDER THE SCHEME HAD ALREAD Y TOTALED RS.7,87,35,157/- BY F.Y.2006-07. SUBSEQUENTLY THER E HAS BEEN NO ACTIVITY FOR ACTIVATION OF THE SCHEME. THERE HAS BEEN NO CON TACT WITH THESE CUSTOMERS SINCE THEN. IT HAS BEEN STATED BY THE APP ELLANT THAT CUSTOMERS ARE STILL MAKING ENQUIRIES ABOUT THE SCHEME THROUGH TEL EPHONE CALLS AND WHATSAPP, ETC. BUT ONCE AGAIN, NONE OF THESE CLAIMS MADE BY THE APPELLANT ARE VERIFIABLE, AND CAN NOT AND HAVE NOT BEEN SUBST ANTIATED BY THE APPELLANT. (V) THE APPELLANT HAS NOT BEEN ABLE TO SHOW EVEN ON E INSTANCE WHERE LIABILITY ON ACCOUNT OF THESE ADVANCES FROM CUSTOMERS LYING W ITH THE APPELLANT OVER THE PAST SO MANY YEARS HAS BEEN DISCHARGED. ON THE CONTRARY, IT IS SEEN THAT THE APPELLANT COMPANY HAS USED THIS AMOUNT AS ITS O WN MONEY OVER THE YEARS BY GIVING ADVANCES OUT OF THE SAME TO FRIENDS AND RELATIVES AND HAS EARNED INTEREST ON SUCH ADVANCES MADE BY IT. THE AP PELLANT HAS ALSO USED THIS MONEY TO ENTER INTO TRANSACTIONS IN PROPERTIES AND SHARES. THIS MONEY HAS ALSO BEEN PARKED IN THE FORM OF FIXED DEPOSITS WITH BANKS AND IN OTHER FUNDS. IT IS SEEN FROM THE SUBMISSION MADE BY THE APPELLANT THAT ALMOST THE ENTIRE MONEY RECEIVED BY THE APPELLANT FROM THE CUS TOMERS HAS BEEN USED BY THE APPELLANT AND HAS BEEN 'PARKED'( APPELLANT'S OWN WORDS) AS FOLLOWS: ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 5 - FIXED DEPOSIT WITH BANK OF INDIA - RS.2,90,98,193/- ; FIXED DEPOSIT WITH STATE BANK OF INDIA - RS.1,00,82 ,655/-; FIXED DEPOSIT WITH SINDH MRC. CO. OP.BANK - RS.L,00 ,000/-; IIFCL TAX FREE BONDS - RS.1,00,54,814/-; NATIONAL HOUSING BANK BONDS - RS.1,00,25,371/-; ADVANCE TO PRIVATE PARTIES - RS.1,09,25,172/-, OTHER DEPOSITS AND ADVANCES - RS.25,22,468/-, ETC. (VII) THE APPELLANT HAS CLAIMED THAT ITS CUSTOME RS HAVE PLEDGED THEIR SUPPORT TO THE APPELLANT, TILL LAUNCH OF THE APPELLANT'S PORTA L. ONCE AGAIN, THESE ARE LOFTY CLAIMS AND REMAIN AS SUCH, WITHOUT ANYTHING T O SUBSTANTIATE THE SAME. NO COMMUNICATION FROM THE APPELLANT TO THE CUSTOMER S OR FROM ITS CUSTOMERS TO THE APPELLANT HAVE BEEN SUBMITTED. FUR THER, ANOTHER PERTINENT POINT IS THAT THE APPELLANT'S CUSTOMER BASE MUST BE MUCH LARGER THAN THE 'CUSTOMERS' WHOSE MONEY IS LYING WITH THE APPELLANT . IT IS ONLY THESE 'CUSTOMERS' THAT ARE RELEVANT TO THE CURRENT PROCEE DINGS AND NOT THE ENTIRE CUSTOMER BASE OF GUJTRON ELECTRONICS WHICH IS BEING REFERRED TO TIME AND AGAIN BY THE APPELLANT. (VII) THE APPELLANT HAS ALSO CLAIMED THAT IT WAS IN THE PROCESS OF LAUNCHING ITS NEW PORTAL AND THEREFORE COULD NOT FOLLOW UP ON THE SCHEME WITH ITS CUSTOMERS. IT IS DIFFICULT TO UNDERSTAND AND ACCEPT THAT IN THIS AGE OF TECHNOLOGY, THE APPELLANT'S PORTAL HAS BEEN IN THE MAKING FOR MORE THAN 5 YEARS. 3.2.2 IT IS THUS SEEN FROM THE FACTS OF THE CASE AN D FROM THE SUBMISSIONS MADE BY THE APPELLANT THAT THE LIABILITY SHOWN TO BE EXISTI NG BY THE APPELLANT DOES NOT REALLY EXIST SINCE NOT ONLY WAS THE SCHEME OF THE APPELLAN T VALID ONLY FOR THE PERIOD OF 12 MONTHS AND HAS HENCE LAPSED MANY YEARS BACK , BUT THIS AMOUNT IS BEING TREATED BY THE APPELLANT AS ITS OWN MONEY AND IT HAS BEEN USED AS SUCH BY THE APPELLANT TO MAKE ADVANCES TO FRIENDS AND RELATIVES, INVEST IN F D'S AND BONDS, DEAL IN SHARES AND PROPERTIES, ETC. FURTHER, OTHER THAN MAKING SEL F SERVING AND RIGHTEOUS CLAIMS IN THE FORM OF CUSTOMER IS KING' AND THAT THEY HAV E 'PLEDGED TO BE WITH THE COMPANY THROUGH ITS HIGHS AND LOWS', NO CONCRETE EV IDENCE HAS BEEN GIVEN TO ESTABLISH THAT THE LIABILITY STILL EXISTS. 3.2.3 THE HON SUPREME COURT IN THE CASE OF CIT V. S UGAULI SUGAR WORKS (P) LTD. [APPEAL (CIVIL) 2344 OF 1992) HAD DISCUSSED THE ISS UE OF CESSATION OF LIABILITIES U/S 41(1) IN DETAIL, AND HAD DECIDED THE MATTER IN FAVO UR OF THE ASSESSEE. THE HON DELHI HIGH COURT ALSO IN A RECENT JUDGEMENT IN THE CASE OF CIT VS SHRI VARDHJNAN OVERSEAS LTD. (ITA NO.774/2009), WHILE DECIDING THE MATTER IN FAV OUR OF THE ASSESSEE, DISCUSSED THE FINDING OF THE SUPREME COUR T IN IN THE CASE OF CIT V. SUGAULI SUGAR WORKS (P) LTD AS UNDER 'IN OUR OPINION, THE JUDGMENT OF THE SUPREME COURT IN CIT V. SUGAULI SUGAR WORKS (P) LTD. (SUPRA) IS A COMPLETE ANSWER T O THE CONTENTION OF THE LEARNED STANDING COUNSEL. IN THE CASE BEFORE THE SU PREME COURT FOR A PERIOD OF ALMOST 20 YEARS THE LIABILITY REMAINED UN PAID AND THIS FACT FORMED THE BASIS OF THE CONTENTION OF THE REVENUE B EFORE THE SUPREME COURT TO THE EFFECT THAT HAVING REGARD TO THE LONG LAPSE OF TIME AND IN THE ABSENCE ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 6 - OF ANY STEPS TAKEN BY THE CREDITORS TO RECOVER THE AMOUNT, IT MUST BE HELD THAT THERE WAS A CESSATION OF THE DEBTS BRINGING TH E CASE WITHIN THE SCOPE OF SECTION 41(1). IN THE CASE BEFORE US, THE IDENTICAL CONTENTION HAS BEEN TAKEN ON BEHALF \OF THE REVENUE, THOUGH THE PERIOD FOR WH ICH THE AMOUNT REMAINED UNPAID TO THE CREDITORS IS MUCH LESS. IT WAS HELD B Y THE SUPREME COURT THAT A UNILATERAL ACTION CANNOT BRING ABOUT A CESSATION OR REMISSION OF THE LIABILITY BECAUSE A REMISSION CAN BE GRANTED ONLY B Y THE CREDITOR AND A CESSATION OF THE LIABILITY CAN ONLY OCCUR EITHER BY REASON OF OPERATION OF LAW OR THE DEBTOR UNEQUIVOCALLY DECLARING HIS INTEN TION NOT TO HONOUR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY THE CREDITOR, OR BY A CONTRACT BETWEEN THE PARTIES, OR FAY DISCHARGE OF THE DEBT.' THE ABOVE CASES , HOWEVER, CANNOT APPLY TO THE PRES ENT CASE. THE FACTS OF THE INSTANT CASE ARE SIMILAR TO THOSE IN THE CASE B EFORE THE HON SUPREME COURT REFERRED TO SUPRA, IN THAT THE LIABILITY HAS REMAIN ED UNPAID FOR 10-15 YEARS AND HAVING REGARD TO THE LONG LAPSE OF TIME AND IN THE ABSENCE OF ANY STEPS TAKEN BY THE CREDITORS TO RECOVER THE AMOUNT, IT WAS SOUGHT TO B E HELD THAT THERE WAS A CESSATION OF THE DEBTS BRINGING THE CASE WITHIN THE SCOPE OF SECTION 41(L). AS CAN BE SEEN FROM THE PARA REPRODUCED ABOVE, THE HON SUPREME COU RT HAD HELD THAT A REMISSION CAN BE GRANTED ONLY BY THE CREDITOR AND A CESSATION OF THE LIABILITY CAN ONLY OCCUR EITHER BY REASON OF OPERATION OF LAW OR THE DEBTOR UNEQUIVOCALLY DECLARING HIS INTENTION NOT TO HONOUR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY THE CREDITOR, OR BY A CONTRACT BETWEEN THE PARTIES, OR BY DISCHARGE OF THE DEBT. IN THIS CASE, THE ABOVE CONDITIONS CAN NEVER BE SATISFIED, SINCE AS FAR AS THE CREDITORS ARE CONCERNED, THE SCHEME UNDER WHICH THEY HAD PAID RS.500/- EACH HAS ENDED LONG BACK; THE DEBTOR WILL NOT DECLARE ITS INTENTIO N NOT TO HONOUR ITS LIABILITY SINCE THE HUGE AMOUNT LYING WITH IT HAS BEEN USED BY IT T O MAKE INVESTMENTS AND FD'S AND IS VERY CONVENIENTLY BEING USED AS ITS OWN MONE Y, WHILE KEEPING ITS CLAIM OF 'LIABILITY ALIVE ; AND THERE IS NO CONTRACT BETWEEN THE PARTIE S BECAUSE THE ENTIRE AMOUNT HAS BEEN RECEIVED UNDER A SALES PROMOTION SC HEME. THUS IN THIS CASE, THE CIRCUMSTANCES BY WHICH THE H UGE AMOUNT OF RS. 7,87,19,819/- HAS COME TO BE WITH THE APPELLANT IS TOTALLY DIFFERENT AND HENCE THE FACTS IN ITS CASE ARE CLEARLY DISTINGUISHABLE FROM THE FACTS IN THE CASES WHICH HAVE BEEN RELIED ON BY THE APPELLANT AND WHICH HAVE BEEN REFERRED TO ABOVE. THE HOB'BLE SUPREME COURT IN THE CASE OF CIT VS. SUNDAR AM LYENGAR & SONS LTD. 322 ITR 344 HELD THAT WHEN THE ASSESSES ITSELF HAS TREATED MONEY AS ITS O WN MONEY AND THERE IS NO EXPLANATION AS TO WHY IT DID SO, COMMON SENSE DEMANDS THAT THE AMOUNT SHOULD BE TREATED AS INCOME OF THE ASSESSEE. THUS, IT IS POSSIBLE THAT AN AMOUNT MAY HAVE BEEN RECEIVED IN THE COURSE OF BUSINESS OR AS A TRADING TRANSACTION BUT THE AMOUNT WOULD CHANGE ITS CHARACT ER WHEN TREATED AS THE APPELLANT'S OWN MONEY. 3.2.4 WITH ALL DUE RESPECT TO THE JUDGEMENTS BY THE HON'BLE APEX COURT, HIGH COURTS AND TRIBUNALS ON SECTION 41(1] AND SECTION 2 8(IV), I AM OF THE VIEW THAT THERE ARE SITUATIONS WHERE THE FACTS AND CIRCUMSTAN CES OF AN APPELLANT'S CASE CANNOT BE COMPARED TO THOSE WHICH PREVAILED IN THE CASES BEFORE THE HON'BLE COURTS AND HENCE CASE-LAWS CANNOT BE APPLIED GENERA LLY TO EVERY APPELLANT. AS HAS BEEN DISCUSSED ABOVE, THE SITUATION IN THIS CAS E IS PECULIAR SINCE THE CUSTOMERS HAVE PAID ONLY RS.500/- EACH TO THE APPELLANT IN PU RSUANCE OF A SCHEME WHICH HAS ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 7 - LONG LAPSED. THIS AMOUNT OF RS.500/-COLLECTED FROM THE CUSTOMERS ALL OVER THE COUNTRY HAS RESULTED IN A CORPUS OF OVER RS.7 CRORE S WITH THE APPELLANT WHICH IT HAS BEEN USING AS ITS OWN MONEY OVER THE YEARS TO MAKE VARIOUS INVESTMENTS (DISCUSSED EARLIER IN THE ORDER). THE APPELLANT HAS ITSELF ADM ITTED THAT THESE CUSTOMERS ARE FROM VERY REMOTE AREAS AND A PERUSAL OF THE SAMPLE VOUCHERS AND INVOICES PRESENTED BY THE APPELLANT ALSO SHOWS THAT ONLY VAG UE ADDRESSES HAVE BEEN NOTED DOWN. THUS, IT IS HIGHLY UNLIKELY THAT AFTER A PERI OD OF 10-15 YEARS, THESE CUSTOMERS WOULD CLAIM AN AMOUNT OF RS.500/- FROM THE APPELLAN T. THE APPELLANT HOWEVER VERY CONVENIENTLY IS STILL SHOWING THESE AMOUNTS AS ITS LIABILITY THOUGH IT ITSELF IS NOT CLEAR AS TO WHOM IT HAS TO REPAY THIS MONEY. MOREOV ER, AS QUOTED FROM THE ADVERTISEMENT TAKEN OUT BY THE APPELLANT ITSELF WHI LE LAUNCHING THIS CLAIM, IT HAS BEEN CLEARLY STATED IN THE SAME THAT THE SCHEME WOU LD LAPSE IN 12 MONTHS AND THAT NO REFUNDS GIVEN. THUS, IT IS VERY CLEAR FROM THIS ADVERTISEMENT ITSELF THAT THE CUSTOMER WOULD FORGO THE RS.500/- COUPON, IF HE OR SHE DID NOT CLAIM THE SAME WITHIN A YEAR. 3.2.5 NOT ONLY THIS, THE APPELLANT HAS USED THE ENT IRE MONEY AS ITS OWN MONEY OVER THE YEARS AND AS MENTIONED IN PARA 3.2.1 (VI) ABOVE , HAS MADE SUBSTANTIAL INVESTMENTS OUT OF THIS MONEY. IT HAS RECEIVED INTE REST ON THE SAME AND HAS ALSO PAID TAXES ON THE SAME. THUS, IT IS VERY CLEAR THAT THIS AMOUNT IS BEING TREATED AS ITS OWN INCOME BY THE APPELLANT. THESE CIRCUMSTANCES AN D FACTS ARE VERY DIFFERENT FROM THE FACTS IN ALL THE CASE-LAWS RELIED ON BY TH E APPELLANT AND THEREFORE CANNOT BE APPLIED TO THE APPELLANT'S CASE. THUS LOOKING AT THE TOTALITY OF FACTS AND THE DETAILED DISCUSSION ABOVE, AND CONSIDERING: THE VIE W TAKEN BY THE HON SUPREME COURT IN CIT VS. SUNDARAM IYENGAR & SONS LTD., I AM OF THE VIEW THAT THE ADDITION WAS CORRECTLY MADE BY THE A.O. THE ADDITION OF RS.7 ,87,19,819/- MADE BY THE ASSESSING OFFICER IS CONFIRMED AND THE GROUND OF APPEAL IS DISMISSED. 5. SHRI MANISH SHAH OPENS UP ASSESSEES ARGUMENT AS SAILING CORRECTNESS OF THE ABOVESTATED ADDITION. HE FIRST OF ALL SEEKS TO INVITE OUR ATTENTION TO ASSESSEES ADDITIONAL EVIDENCE PETITION COMPRISING OF A PAPER BOOK RUNNING INTO 116 PAGES TO REBUT BOTH THE LOWER AUTHORITIES CONCLUSION THAT IT HAD NOT PERFORMED ITS CONTRACTUAL OBLIGATIONS. SHRI SHAH S TATES THAT THIS PAPER BOOK CONTAINS SUFFICIENT MATERIAL TO INDICATE THAT THE A SSESSEE HAS BEEN HONESTLY PERFORMING ITS OBLIGATIONS TO GIVE THE SPECIFIED EL ECTRONIC ITEMS TO VARIOUS COUPON HOLDERS. WE FIND THE SAME TO BE NOWHERE REL EVANT SO FAR AS THE INSTANT ISSUE BEFORE US IS CONCERNED. THE SO-CALLE D VOLUMINOUS EVIDENCE SEEKS TO PROVE THAT THE ASSESSEE HAS PERFORMED ITS CONTRACTUAL LIABILITY IN QUESTION EVEN IN SUCCEEDING ASSESSMENT YEARS UPTO 2 016. SHRI SHAH HOWEVER FAILS TO REBUT THE ABOVE EXTRACTED FINDINGS THAT TH E ASSESSEE HAS NOT PERFORMED ITS LIABILITY UPTO THE IMPUGNED ASSESSMENT YEAR. W E ARE THEREFORE OF THE ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 8 - OPINION THAT THESE SUBSEQUENT DOCUMENTS FORMING PAR T OF ASSESSEES ADDITIONAL EVIDENCE ARE NOT GERMANE TO THE SOLE SUB STANTIVE ISSUE BEFORE US PENDING FOR ADJUDICATION. THIS ASSESSEES ADDITION AL EVIDENCE PETITION IS DECLINED. 6. WE NOW COME TO MERITS OF THE ISSUE. THERE CAN H ARDLY BE ANY DISPUTE THAT THE ASSESSEES SO-CALLED MARKETING SCHEME IS V ERY MUCH IN THE NATURE OF A PONZY ONE WHEREIN IT COLLECTED MONEYS BY EXPLOITING ASPIRATIONS OF THE LOWER INCOME STRATA OF THE SOCIETY BY ISSUING THE INVESTO RS IN QUESTION SOME MARKETING COUPONS VALID FOR A YEAR. SHRI SHAH FAIL S IN PROVING ASSESSEES BONAFIDES SINCE WE FIND IT VERY MUCH AND UNJUSTIFIA BLE EXPLANATION THAT THERE WAS NO COUPON HOLDER COMING FORWARD TO ENCASH THE S AME IN LIEU OF THE SPECIFIED ELECTRONIC ITEMS BETWEEN ASSESSMENT YEARS 2008-09 TO 2013-14 INCLUDING THE IMPUGNED ASSESSMENT YEAR 2012-13. TH ESE FACTS CONSTRAIN US TO SPEAK ABOUT THE ASSESSEES MARKETING SCHEME ALIKE THE PIED PIPER OF HAMLIN TYPE FLEECING POOR INVESTORS. WE FURTHER W ISH TO HIGHLIGHT THE FACT THAT THERE IS NO PRIVITY OF CONTRACT/AGREEMENT BETW EEN THE ASSESSEE AND THE ABOVE INVESTORS SINCE THE COUPON IN QUESTION IS VAL ID FOR A CLEAR-CUT EXPRESSLY STATED TIME PERIOD OF ONE YEAR WHEREIN THE COUPON H OLDER IS OTHERWISE NOWHERE IN PICTURE. WE DEEM IT APPROPRIATE TO REJE CT ASSESSEES ARGUMENT THAT IT HAS BEEN ENTERTAINING ITS COUPON HOLDERS C LAIMS BY QUOTING THE CLASSIC CASE OF CARLILL VS. CARBOLIC SMOKE BALL CO. COURT O F APPEAL [1893] 1 QB 256; [1892] EWCA CIV 1 AND CONCLUDE THAT THE EXPRES S TERMS INDICATED IN THE COUPONS IN QUESTION COULD NOT BE FURTHER GIVEN A WIDER MEANING THAN THE SPECIFIED ONE. 7. SHRI SHAH AT LAST QUOTES HONBLE JURISDICTIONAL HIGH COURTS DECISION IN [2012] 22 TAXMANN.COM 59 (GUJ.) CIT VS. NITIN S. GA RG THAT THE MERE FACT OF THESE CREDITS BEING VERY OLD NOT INDICATING ANY INT EREST THERE UPON ARE NOT TO ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 9 - BE ADDED U/S.41(1) OF THE ACT. WE FIND THE SAME TO BE NOT APPLICABLE IN FACTS OF THE INSTANT CASE WHEREIN WE HAVE ALREADY CONCLUD ED THAT ASSESSEES LIABILITY IN QUESTION IN THE NATURE OF CUSTOMERS ADVANCES WE RE VALID FOR A PERIOD OF ONE YEAR ONLY AS PER THE TERMS INDICATED IN THE REL EVANT COUPONS. 8. OUR DETAILED DISCUSSION HEREINABOVE MAKES SHRI M ANISH SHAH TO ONCE AGAIN VEHEMENTLY ARGUE THAT THE IMPUGNED LIABILITY; IF AT ALL IS TO BE ADDED U/S.41(1) OF THE ACT, HAS NOT CEASED TO EXIST IN TH E IMPUGNED ASSESSMENT YEAR AS THE PERIOD OF ONE YEAR AFTER ISSUANCE OF THE REL EVANT COUPONS HAS EXPIRED MUCH EARLIER. WE ARE AFRAID THAT THIS CONTENTION I S ALSO NOT LIABLE TO BE ACCEPTED AS SECTION 153 OF THE ACT PRESCRIBING TIME LIMIT OF COMPLETION OF ASSESSMENT VERY WELL DEALS WITH SUCH AN INSTANCE WH ERE THE ASSESSING OFFICER CONCERNED CAN REOPEN ASSESSMENT IN AN ASSESSEES CA SE IN CONSEQUENCE TO THIS TRIBUNALS FINDINGS. WE NOTICE THAT A CO-ORDINATE BENCH IN MOSBACHER INDIA CHENNAI VS. ADDL.DIT ITA NO.1085/CHNY/2015 DECIDED ON 29.11.2016 EXPLAINS AMBIT OF THE ABOVE STATUTORY PROVISION IN SUCH A CASE WHEREIN IT CAN BE CLEARLY HELD THAT THE AMOUNT IN QUESTION IN ASSE SSEBLE AS INCOME IN EARLIER ASSESSMENT YEAR BY CONCLUDING AS FOLLOWS: [33] WE MAY AT THIS STAGE TAKE NOTE OF THE PROVISI ONS OF SECTION 153 WHICH DEALS WITH TIME LIMIT FOR COMPLETION OF ASSESSMENT, REASS ESSMENT AND RECOMPUTATION. UNDER SECTION 153(6), AS IT STANDS NOW IN ITS PRESE NT FORM, THE TIME LIMITS SET OUT FOR COMPLETION OF ASSESSMENTS, REASSESSMENTS AND RE COMPUTATIONS SHALL NOT APPLY IN THE CASES '(I)WHERE THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION IS MADE ON THE ASSESSEE OR ANY PERSON IN CONSEQUENCE TO, OR TO GIVE EFFECT TO, ANY FINDINGS OR DIRECTION CONTAINED IN AN ORDER UNDER SECTION 250, SECTION 254.........ON OR BEFORE TWELVE MONTHS FROM THE END OF THE MONTH IN SUCH ORD ER IS RECEIVED OR PASSED BY THE PRINCIPAL COMMISSIONER OR THE COMMISSIONER, AS THE CASE MAY BE'. EXPLANATION 2 TO SECTION 153 FURTHER PROVIDES THAT 'WHERE, BY AN ORDER REFERRED TO IN CLAUSE (I) OF SUB SECTION (6), ANY INCOME IS EXCLUDED FROM THE TO TAL INCOME OF THE ASSESSEE FOR AN ASSESSMENT YEAR, THEN, AN ASSESSMENT OF SUCH INCOME FOR ANOTHER ASSESSMENT YEAR, FOR THE PURPOSE OF SECTION 150 AND THIS SECTION, BE DEEMED TO BE ONE MADE IN CONSEQUENCE TO OR GIVING EFFECT TO ANY FINDING OR D IRECTION CONTAINED IN THE SAID ORDER'. AS TO THE NATURE OF FINDINGS OR DIRECTIONS WHICH CAN BE GIVEN IN AN APPELLATE ORDER, HON'BLE SUPREME COURT, IN THE CASE OF RAJINDER NATH VS CIT [(1979) 120 ITR 14 (SC)], HAS, INTER ALIA, OBSERVED AS FOLLOWS: ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 10 - 7. THE EXPRESSIONS 'FINDING' AND 'DIRECTION' ARE LI MITED IN MEANING. A FINDING GIVEN IN AN APPEAL, REVISION OR REFERENCE A RISING OUT OF AN ASSESSMENT MUST BE A FINDING NECESSARY FOR THE DISP OSAL OF THE PARTICULAR CASE, THAT IS TO SAY, IN RESPECT OF THE PARTICULAR ASSESSEE AND IN RELATION TO THE PARTICULAR ASSESSMENT YEAR. TO BE A NECESSARY F INDING, IT MUST BE DIRECTLY INVOLVED IN THE DISPOSAL OF THE CASE. IT I S POSSIBLE IN CERTAIN CASES THAT IN ORDER TO RENDER A FINDING IN RESPECT OF A, A FINDING IN RESPECT OF B MAY BE CALLED FOR. FOR INSTANCE, WHERE THE FACTS SH OW THAT THE INCOME CAN BELONG EITHER TO A OR B AND NO ONE ELSE, A FINDING THAT IT BELONGS TO B OR DOES NOT BELONG TO B WOULD BE DETERMINATIVE OF THE ISSUE WHETHER IT CAN BE TAXED AS A'S INCOME. A FINDING RESPECTING B IS INTI MATELY INVOLVED AS A STEP IN THE PROCESS OF REACHING THE ULTIMATE FINDING RES PECTING A. IF, HOWEVER, THE FINDING AS TO A'S LIABILITY CAN BE DIRECTLY ARR IVED AT WITHOUT NECESSITATING A FINDING IN RESPECT OF B. THEN A FIN DING MADE IN RESPECT OF B IS AN INCIDENTAL FINDING ONLY. IT IS NOT A FINDING NECESSARY FOR THE DISPOSAL OF THE CASE PERTAINING TO A. THE SAME PRINCIPLES SEEM TO APPLY WHEN THE QUESTION IS WHETHER THE INCOME UNDER ENQUIRY IS TAX ABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION OR ANY OTHER ASSESSMENT YE AR. [EMPHASIS, BY UNDERLINING, SUPPLIED BY US] COMING B ACK TO THE FACTS OF THE CASE BEFORE US ONCE AGAIN, WE FIND THAT WE HAVE REACHED A CATEGORICAL FINDING TO THE EFFECT THAT THE CAPITAL GAIN IN QUESTION COULD ONLY BE TAXED IN THE ASSESSMENT YEAR 2006-07 AND IT IS FOR THIS REASON THAT THE SAID CAP ITAL GAIN CANNOT BE TAXED IN ANY OTHER ASSESSMENT YEAR. THIS FINDING, IN THE LIGHT O F THE LEGAL POSITION SET OUT ABOVE, PRIMA FACIE CONSTITUTES LEGALLY SUSTAINABLE BASIS F OR BRINGING THE AMOUNT OF RS 14,52,08,040 AS ADDITIONAL AMOUNT OF CAPITAL GAINS IN THE ASSESSMENT YEAR 2006- 07. WE, THEREFORE, SEE NO REASONS TO GIVE OUR APPRO VAL TO LEARNED COUNSEL'S GENEROSITY OF OFFERING THIS INCOME TO TAX, AS CAPIT AL GAIN, IN THE PRESENT ASSESSMENT YEAR. OUR GIVING IN, IF WE MAY SAY SO, TO THIS BAIT COULD INFACT JEOPARDISE LEGITIMATE INTERESTS OF THE REVENUE INASMUCH AS ONCE THIS INCO ME IS HELD TO BE TAXABLE IN ASSESSMENT YEAR 2010-11, THIS TREATMENT OF INCOME C OULD STRAIGHTAWAY CLOSE THE DOORS OF TAXABILITY OF THIS INCOME IN THE ASSESSMEN T YEAR 2006- 07 AND RESULTANT ADDITIONAL LEVIES OF INTEREST, AND, IF APPLICABLE, PENALTIES AS WELL. IN OUR CONSIDERED VIEW, THIS AMOUNT IS REQUIRED TO BE TAXED IN THE AS SESSMENT YEAR 2006-07 AND THE ASSESSING OFFICER, IN THE LIGHT OF THE DISCUSSIONS ABOVE, IS LEGALLY COMPETENT TO DO SO EVEN AT THIS STAGE. IT IS ONLY ELEMENTARY THAT W HEN A STATUTORY AUTHORITY HAS THE POWER TO DO SOMETHING UNDER THE STATUTE, HE HAS A C ORRESPONDING DUTY TO EXERCISE THESE POWERS WHEN CIRCUMSTANCES SO JUSTIFY OR WARRA NT. THE CALL, NEVERTHELESS, IS TO BE TAKEN BY THE ASSESSING OFFICER AND IT IS FOR HIM TO DECIDE THE CORRECT LEGAL POSITION TAKING INTO ACCOUNT ALL THE NECESSARY INPU TS, INCLUDING OUR OBSERVATIONS ABOVE. 9. WE ACCORDINGLY OBSERVE THAT THE ASSESSEES ABOVE STATED LAST ARGUMENT WOULD INCREASE ITS TAX LIABILITY ONLY. WE HOWEVER DO NOT DEEM IT APPROPRIATE IN LARGER INTEREST OF JUSTICE TO ONCE A GAIN DIRECT THE ASSESSING OFFICER TO ASSESS THE ABOVE OUTSTANDING LIABILITY I N THE RESPECTIVE YEAR OF ITA NO. 1145/AHD/2016 (GUJTRON ELECTRONICS PVT. LTD . VS. ITO) A.Y. 2012-13 - 11 - CESSATION FALLING AFTER ONE YEAR OF THE ASSESSEES COUPON TERMS IN QUESTION. THE ASSESSEES SOLE SUBSTANTIVE GROUND IS THEREFORE REJECTED. 10. THIS ASSESSEES APPEAL IS DISMISSED. [ORDER ALREADY PRONOUNCED IN OPEN COURT AFTER CONC LUSION OF HEARING ON THE 10 TH DAY OF JANUARY, 2017.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 14/03/2017 S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0