BAMBOAT & CO., MUMBAI V. ACIT 12(3), MUMBAI

ITA 1438/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48510 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 05-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 22-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: RAJESH S ATHVALE
• Keywords: Period of limitation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SI NGH(AM) ITA NO.1438/M/2010 ASSESSMENT YEAR 2006-07 M/S. BAMBOAT & CO. THE ACIT 12(3), AAYAKAR BHAV AN 194 RAVINDRA MANSION, CHURCHGATE, MUMBAI 400 020 . DINSHAW VACHA ROAD, CHURCHGATE, MUMBAI 400 020. PAN : AAAFG 2034 R APPELLANT RESPONDENT ASSESSEE BY : SHRI RAJESH S.ATHVALE REVENUE BY : MS ASHIMA GUPTA O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 9.12.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07 . THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON TWO DIFFERENT GROUNDS . 2. THE FIRST DISPUTE IS REGARDING ADDITION OF RS.26 ,20,274/- UNDER SECTION 41(1) OF THE INCOME-TAX ACT ON ACCOUNT OF CESSATION OF LIABILITY. THE AO NOTED THAT THERE WAS OUTSTANDING CREDIT BALANCE OF RS.26, 20,274/- IN THE NAME OF M/S. MATULYA MILLS LTD. SINCE FINANCIAL YEAR 2000-0 1. AO THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT SHOULD NOT BE TREATED AS INCOME OF THE ASSESSEE UNDER SECTION 41(1) OF THE INCOME-TAX ACT. THE ASSESSEE EXPLAINED THAT THE AMOUNT HAD BEEN RECEIVED FROM MA TULYA MILLS LTD. FOR CARRYING OUT PLUMPING WORK AT LOWER PAREL AND SINCE THIS WAS NOT A TRADING ACTIVITY, NO ADDITION COULD BE MADE UNDER SECTION 4 1(1). THE AO HOWEVER NOTED THAT AMOUNT HAD BEEN RECEIVED IN FINANCIAL YEAR 199 9-2000 AND MATULYA MILLS LTD. HAD CLOSED DOWN BUSINESS IN THE YEAR 20002. AO ALSO OBSERVED THAT IT WAS HARD TO BELIEVE THAT AFTER RECEIVING THE AMOUNT THE ASSESSEE HAD NOT CARRIED OUT ANY WORK AS PER THE CONTRACT. AO THEREFORE DID NOT ACCEPT THE CONTENTION THAT NO EXPENSES HAD BEEN INCURRED BY THE ASSESSEE AND THAT THE LIABILITY WAS NOT A TRADING LIABILITY. IT WAS ALSO OBSERVED BY HI M THAT AMOUNT HAD TO BE TAXED EITHER UNDER SECTION 41(1) OR UNDER SECTION 28(IV). ACCORDINGLY HE ADDED THE SUM OF RS.26,20,274/- TO THE TOTAL INCOME OF THE AS SESSEE. 2.1 IN APPEAL THE ASSESSEE SUBMITTED THAT THE AO W AS NOT JUSTIFIED IN ADDING THE AMOUNT EITHER UNDER SECTION 41(1) OR UNDER SECT ION 28(IV). THE AMOUNT HAD BEEN RECEIVED IN A.Y.2000-01 AND THEREFORE THE SAME COULD NOT BE TAXED UNDER SECTION 28(IV) IN A.Y.2006-07. IT WAS ALSO SUBMITTE D THAT WORK HAD BEEN DONE AGAINST THE AMOUNT RECEIVED THOUGH NO BILLS WERE RE ISED BECAUSE OF SOME DISPUTES. THEREFORE ADDITION IF ANY COULD HAVE BEEN MADE IN A.Y.2000-01. CIT(A) HOWEVER OBSERVED THAT THE ASSESSEE ADMITTED BEFORE HIM THAT WORK HAD BEEN DONE WHICH WAS ALSO SUPPORTED BY THE ARCHITECT S CERTIFICATE AND THEREFORE AMOUNT RECEIVED WAS CLEARLY TRADING LIABILITY. IT W AS ALSO NOTED BY HIM THAT THE AMOUNT WAS OUTSTANDING SINCE F.Y.2000-01 AND NO SUI TES HAD BEEN FILED BY THE PARTY NOR ANY EVIDENCE WAS PRODUCED THAT THE SAID C OMPANY WAS CLAIMING THE MONEY BACK. CIT(A) ALSO OBSERVED THAT THE ASSESSEE ITSELF CLAIMED THAT MORE WORK HAD BEEN DONE AND THE COMPANY WOULD OWED THE A PPELLANT A SUM OF RS.55,99,794/-. HE THEREFORE HELD THAT THE PROVISIO NS OF SECTION 41(1) WERE APPLICABLE AND THE ADDITION WAS JUSTIFIED. HE ALSO HELD THAT THE PROVISIONS OF SECTION 28(IV) WERE NOT APPLICABLE. AGGRIEVED BY TH E DECISION OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.2 BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMI TTED THAT THERE WAS NO MATERIAL WITH THE REVENUE TO SHOW THAT THE LIABILIT Y HAD CEASED TO EXIST. MERELY BECAUSE THE PARTY HAD NOT FILED SUITE, DID NOT MEAN THAT THE LIABILITY HAD CEASED. IT WAS ALSO SUBMITTED THAT THE SAME LIABILI TY HAD BEEN WRITTEN BACK BY THE ASSESSEE UNILATERALLY IN FINANCIAL YEAR 2010-11 AND OFFERED TO TAX. THEREFORE THE ADDITION MADE WAS NOT JUSTIFIED. THE LEARNED DR PLACED RELIANCE ON THE ORDER OF AO. 2.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION UNDER SECTION 41(1) O N ACCOUNT OF CESSATION OF LIABILITY. THE ASSESSEE HAD TAKEN ADVANCE FROM MATU LYA MILLS LTD. IN FINANCIAL YEAR 1999-2000 AGAINST SOME PLUMBING WORK. THE ASSE SSEE ADMITTED BEFORE CIT(A) THAT WORK ACTUALLY HAD BEEN DONE AND THEREFO RE THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED THAT THE AMOUNT OUTSTAN DING SINCE FINANCIAL YEAR 2000-01 WAS NOT A TRADING LIABILITY. THE PROVISIONS OF SECTION 41(1) ARE THUS APPLICABLE. HOWEVER THE BURDEN FOR PROVING THAT THE LIABILITY HAD CEASED TO EXIST DURING THE YEAR IS ON THE REVENUE. THIS VIEW IS SUP PORTED BY THE DECISION OF THE TRIBUNAL IN CASE OF DCIT VS BHAGWANDAS SHOBERLAL JA IN (60 ITD 118) WHICH WE FIND HAS ALSO BEEN REFERRED TO BY CIT(A) IN HIS ORD ER AND YET THE ADDITION HAS BEEN CONFIRMED WITHOUT ANY MATERIAL BEING PLACED ON RECORD BY THE REVENUE THAT THE PARTY HAD FORGOTED THE CLAIM DURING THE RE LEVANT YEAR. THE LIABILITY CANNOT BE SAID TO HAD CEASED ONLY BECAUSE NO SUIT H AD BEEN FILED AND PERIOD OF LIMITATION HAD EXPIRED. THIS VIEW IS SUPPORTED BY T HE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF SAGAULI SUGAR WORKS (236 I TR 518). THEREFORE IN OUR VIEW THE ADDITION MADE IN THE IMPUGNED CURRENT YEAR IS NOT JUSTIFIED. THE ASSESSEE HAS ALSO SUBMITTED THAT IT HAS UNILATERALL Y WRITTEN BACK THE LIABILITY IN THE YEAR 2010-11 AND THEREFORE THE SAME HAS TO BE T AXED IN THAT YEAR. WE THEREFORE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION MADE BY THE AO. 3. THE SECOND DISPUTE IS REGARDING CHARGE OF INTERE ST UNDER SECTION 234C. IT WAS ADMITTED BY THE LEARNED AR THAT CHARGE OF INTER EST WAS ONLY CONSEQUENTIAL. THE AO WILL THEREFORE RECOMPUTE THE INTEREST AT THE TIME OF GIVING EFFECT TO THIS ORDER. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. 5. ORDER WAS PRONOUNCED IN THE OPEN COURT 20.04.20 11. SD/- SD/- ( D. K. AGARWAL ) (RAJEND RA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 20 .04.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR J BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK