ACIT, CHENNAI V. Roopchand Betala, CHENNAI

ITA 1253/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68858 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 06-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 1253/MDS/2013 (ASSESSMENT YEAR: 2006-07) THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-XII, CHENNAI-600 006. VS. MR. ROOPCHAND BETALA, 2, VEERAPPAN STREET, SOWCARPET,CHENNAI-600 079. PAN:AABPB7796F (APPELLANT) (RESPONDENT) APPELLANT BY : MR. GURU BASHYAM, J CIT RESPONDENT BY : MR. T.BANUSEKAR, C.A. DATE OF HEARING : 28 TH OCTOBER, 2013 DATE OF PRONOUNCEMENT : 18 TH NOVEMBER, 2013 O R D E R PER CHALLA NAGENDRA PRASAD, JM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, CHENNA I DATED 11.2.2013 FOR THE ASSESSMENT YEAR 2006-07. TH E ONLY GRIEVANCE OF THE REVENUE IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE ADDITION MADE UNDER SECTION 41(1) OF THE ACT IN RES PECT OF OUTSTANDING CREDITS. ITA NO.1253/MDS//2013 2 2. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT UNDER SECTION 143(3) ON 26.12.2008 MADE ADDITION OF ` 65,00,000/- UNDER SECTION 41(1) OF THE ACT IN RESPE CT OF SUNDRY CREDITORS BALANCES, AS THE ASSESSEE COULD N OT FILE CONFIRMATIONS FROM THE CREDITORS TO THE SATISFACTIO N OF THE ASSESSING OFFICER. THE ASSESSEE PREFERRED AN APPEA L BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE DIRECTED THE ASSESSING OFFICER TO EXAMINE WHETHER LOAN CREDITORS WERE CLAIMED AS ALLO WANCES / DEDUCTIONS OR TRADE LIABILITIES IN ANY OF THE EAR LIER YEARS BY THE ASSESSEE AND IF IT IS NOT FOUND SO, DELETE THE ADDITION MADE. THE REVENUE IS IN APPEAL BEFORE US. 3. THE DEPARTMENTAL REPRESENTATIVE SUBMITS THAT TH E ASSESSEE HAS NOT FILED CONFIRMATIONS FROM THE CREDI TORS. AGAINST THESE CREDITORS, OUTSTANDING BALANCES ARE APPEARING IN THE BOOKS OF THE ASSESSEE FOR THE PAST SEVERAL Y EARS AND THERE IS A CESSATION OF LIABILITY. THEREFORE, THE A SSESSING OFFICER IS JUSTIFIED IN MAKING ADDITION UNDER SECTI ON 41(1) OF THE ACT. ITA NO.1253/MDS//2013 3 4. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE AS SESSEE HAD NEVER CLAIMED THESE CREDITORS AS TRADE LIABILIT IES. THESE CREDITORS WERE NEVER CLAIMED AS ALLOWANCES / DEDUCT ION IN ANY OF THE EARLIER ASSESSMENT YEARS. THE COUNSEL FURTHE R SUBMITS THAT THE ASSESSEE HAD BORROWED MONIES FROM THESE CR EDITORS FOR MAKING INVESTMENTS IN SHARES AND IN FACT, THE A SSESSEE HAD SOLD THOSE SHARES AND OFFERED CAPITAL GAINS FOR TAXATION. THE SAID CREDITORS WERE NEVER CLAIMED AS ALLOWANCES OR DEDUCTION. THEREFORE, THE PROVISIONS OF SECTION 41 (1) HAVE NO APPLICATION TO THE ASSESSEES CASE. 5. HEARD BOTH SIDES. PERUSED THE ORDERS OF THE LOWE R AUTHORITIES. THE ASSESSING OFFICER ADDED THESE CRED ITS ON THE GROUND THAT THE ASSESSEE HAS NOT FURNISHED PROPER CONFIRMATIONS FROM THE CREDITORS. THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THAT NONE OF THESE CREDITS WERE CLAIMED AS ALLOWANCES/DEDUCTIONS OR TRADE LIABILITIES IN ANY OF THE EARLIER YEARS DIRECTED THE ASSESSING OFFICER TO VERIFY THIS FACT AND IF IT IS FOUND THAT THE ASSESSEE HAS NOT CLAIMED THESE CR EDITS AS ALLOWANCES/DEDUCTIONS OR TRADE LIABILITIES, THE AD DITION SHOULD ITA NO.1253/MDS//2013 4 NOT BE MADE UNDER SECTION 41(1) OF THE ACT, AS THE PROVISIONS HAVE NO APPLICATION IN SUCH CIRCUMSTANCES. WHILE H OLDING SO, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED T HAT IN ORDER TO INVOKE THE PROVISIONS OF SECTION 41(1) OF THE ACT WITH RESPECT TO ANY OUTSTANDING LIABILITIES, SUCH LIABIL ITIES SO OUTSTANDING MUST HAVE BEEN DEBITED TO THE PROFIT AN D LOSS ACCOUNT OR CLAIMED AS AN EXPENDITURE/ALLOWANCE IN ANY OF THE EARLIER YEARS. THE COMMISSIONER OF INCOME TAX (APPE ALS) HELD IN ASSESSEES CASE THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCES TO SHOW THAT THESE CREDITS WERE CLAIMED AS ALLOWANCES/DEDUCTIONS OR TRADE LIAB ILITIES IN ANY OF THE EARLIER YEARS FOR THE PURPOSE OF INVOKIN G THE PROVISIONS OF SECTION 41(1) OF THE ACT. THEREFORE , IN THE ABSENCE OF ANY SUCH FINDING BY THE ASSESSING OFFICE R, IT IS NOT POSSIBLE TO TREAT THE SAID CREDITS OUTSTANDING AS CESSATION OF LIABILITY UNDER SECTION 41(1) OF THE ACT. THE DEPA RTMENT HAS NOT CONTROVERTED ANY OF THE FINDING OF THE COMMISSI ONER OF INCOME TAX (APPEALS). IN ANY EVENT, THE COMMISSION ER OF INCOME TAX (APPEALS) HAS DIRECTED THE ASSESSING OFF ICER TO VERIFY WHETHER THESE CREDITS OUTSTANDING HAVE BEEN CLAIMED ITA NO.1253/MDS//2013 5 AS EXPENDITURE/ALLOWANCES OR AS TRADE LIABILITIES I N ANY OF THE EARLIER YEARS BY THE ASSESSEE AND IF THE ASSESSEE H AS NOT CLAIMED ANY EXPENDITURE/ALLOWANCES OF THESE CREDITS , NO ADDITION IS REQUIRED TO BE MADE UNDER SECTION 41(1) OF THE ACT. WE DO NOT FIND ANY INFIRMITY IN SUCH DIRECTIONS OF THE COMMISSIONER OF INCOME TAX (APPEALS). THEREFORE, WE SUSTAIN THE IMPUGNED ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS) AND REJECT THE GROUNDS OF APPEAL RAIS ED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY, THE 18 TH DAY OF NOVEMBER, 2013 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY ) (CHALLA NAGENDRA PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI. DATED THE 18 TH NOVEMBER, 2013. SOMU COPY TO: (1) APPELLANT (4 ) CIT(A) (2) RESPONDENT (5 ) D.R. (3) CIT (6 ) G.F.