ITO, Ward - 35(4), Kolkata, Kolkata V. M/s. M.L. Sarkar & Bros., Kolkata

ITA 1550/KOL/2010

• Counselvise Citation: [2013] 119 COUNSELVISE.COM (IT) 3021 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJOY KUMAR SINGH
• Assessee Lawyers: N M BHANSALI P
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI P.K.BANSAL, A.M. & SHRI GEORGE MATHAN, J.M. ] I.T.A. NO.1550/KOL/2010 ASSESSMENT YEAR : 2007-2008 I.T.O., WARD-35(4), KOLKATA -VS- M/S. M. L. SARKAR & BROS. 9, INDIA EXCHANGE PLACE, KOLKATA 700 001 (PAN:AAFFM 0720L) ( APPELLANT ) ( RESPONDENT ) DATE OF CONCLUDING THE HEARING : 06.02.2013 DATE OF PRONOUNCING THE ORDER : 06.02.2013 APPEARANCES : FOR THE APPELLANT : SHRI AJOY KUMAR SINGH, CIT : FOR THE RESPONDENT : SHRI N.M.BHANSALI, ADVOCATE O R D E R PER BENCH : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)- XX, KOLKATA DATED 11 TH MAY, 2010 FOR THE ASSESSMENT YEAR 2007-2008. 2. THE ONLY GROUND INVOLVED IN THIS APPEAL RELATES TO THE DELETION OF ADDITION OF RS.1,04,06,599/- ADDED BY THE AO AS THE CESSATION O F THE LIABILITY UNDER SECTION 41(1) OF THE INCOME TAX ACT. 3. BRIEF FACTS OF THE CASE ARE THAT WHILE MAKING TH E ASSESSMENT, THE AO NOTICED FROM THE BALANCE-SHEET OF THE ASSESSEE THAT THE BAL ANCE-SHEET SHOWS OUTSTANDING LIABILITY TOWARDS THE CREDITORS AMOUNTING TO RS.1,6 6,53,143/- IN RESPECT OF 28 CREDITORS. THE AO FURTHER NOTICED THAT THESE LIABIL ITIES WERE OUTSTANDING FROM THE ASSESSMENT YEAR 2001-02. NOTICES UNDER SECTION 133( 6) WERE ISSUED TO ALL THE CREDITORS. BUT THE NOTICES RETURNED UNSERVED IN CAS E OF 20 CREDITORS HAVING OUTSTANDING LIABILITY OF RS.1,04,06,600/-. THE ASSE SSEE FILED CONFIRMATION IN RESPECT 2 I.T.A. NO.1550/KOL/2010 M/S. M.L.SARKAR & BROS. ASSES SMENT YEAR : 2007-08 OF SOME OF THE CREDITORS BUT THE AO TREATED ALL THE SE CREDITORS TO BE BOGUS AND NON- EXISTENT AND CEASED TO EXIST AND ACCORDINGLY MADE T HE ADDITION UNDER SECTION 41(1). WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: 11. I HAVE PERUSED THE ASSESSMENT ORDER. I HAVE AL SO CONSIDERED THE SUBMISSION OF THE APPELLANT. THE DECISION OF THE A O IS NOT BASED ON CATEGORICAL FINDING. THE LEGAL PROVISION UNDER WHI CH THE ADDITION WAS MADE IS ALSO NOT MENTIONED IN THE ASSESSMENT ORDER. THE AO HAS NOTED THAT THE OUTSTANDING LIABILITY WAS BROUGHT FORWARD FROM THE EARLIER YEARS. IF THE AO FELT THAT THE CLAIM RELATED TO THE OUTSTANDING LIA BILITY WAS BOGUS, NO ADDITION CAN BE MADE IN THE YEAR UNDER CONSIDERATION, AS TH E CLAIM ADMITTEDLY RELATES TO THE EARLIER YEARS. ON THE OTHER HAND, IF THE AO WAS OF THE OPINION THAT THE CLAIM WAS GENUINE, BUT, THE OUTSTANDING LIABILITY NO LONGER EXISTS, THEN BEFORE APPLYING THE PROVISIONS OF SECTION 41(1), T HE ONUS WAS ON THE AO TO ESTABLISH THAT THE LIABILITY HAD ACTUALLY CEASED T O EXIST. IT IS AN ADMITTED FACT THAT THE APPELLANT HAS CONTINUED TO SHOW THE AMOUN TS AS LIABILITY IN THE BALANCE SHEET. IN THE CASE OF CIT VS TAMILNADU WAR EHOUSING CORPORATION [2007] 292 ITR 310 (MADRAS), THE HONBLE MADRAS HI GH COURT HAS HELD THAT ONCE THE ASSESSEE HAS CONTINUED TO SHOW THE A DMITTED AMOUNT AS LIABILITY IN THE BALANCE SHEET, IT IS NOT ASSESSAB LE U/S 41(1). UNLESS AND UNTIL THERE IS A CESSATION OF LIABILITY, SECTION 41 WILL NOT BE PRESSED INTO SERVICE. IN. THE CASE OF VISNAGAR TALUKA AUDYOGIK SAHAKARI MANDLI LTD VS CIT 242 ITR 627 (GUJRAT), THE HONBLE GUJRAT HIGH COURT HA S HELD THAT ONE HAS TO GO BY THE LANGUAGE USED IN SECTION 41(1) TO FIND O UT WHETHER OR NOT THE AMOUNT WAS OBTAINED BY THE ASSESSEE OR WHETHER OR NOT SOME BENEFIT IN RESPECT OF TRADING LIABILITY BY WAY OF REMISSION O R CESSATION THEREOF WAS OBTAINED BY THE ASSESSEE AND IT IS IN THE PREVIOUS YEAR IN WHICH THE AMOUNT OR BENEFIT, AS THE CASE MAY BE, HAS BEEN OBTAINED THAT THE AMOUNT OR THE VALUE OF THE BENEFIT WOULD BECOME CHARGEABLE TO IN COME TAX AS INCOME OF THAT PREVIOUS YEAR A CESSATION OF LIABILITY FOR TH E PURPOSES OF SECTION 41(1) OF THE ACT WOULD MEAN IRREVOCABLE CESSATION SO THA T THERE IS NO POSSIBILITY OF THE LIABILITY BEING REVIVED IN FUTURE. 12. THE APPELLANT HAS CONTINUED TO SHOW THE AMOUNT S AS ADMITTED LIABILITY IN THE BALANCE SHEET. THE AO HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT THERE IS ANY CESSATION OF LIABILITY. ALSO, THERE I S NO MATERIAL ON RECORD TO SHOW THAT THE APPELLANT HAS PAID OFF THE LIABILITY FROM HIS UNACCOUNTED SOURCES AND THAT THEY NO LONGER EXIST. THE LIABILI TY HAS BEEN APPEARING IN THE BALANCE SHEET FOR THE PAST SEVERAL YEARS BECAU SE NO PAYMENTS WERE RECEIVED FROM THE NJMC LTD, WHICH ALSO APPEARS AS DEBTOR IN THE BALANCE SHEETS. SIMPLY BECAUSE NOTICES U/S 133(6) COULD NO T BE SERVED ON THE 3 I.T.A. NO.1550/KOL/2010 M/S. M.L.SARKAR & BROS. ASSES SMENT YEAR : 2007-08 CREDITORS, IT CANNOT BE PRESUMED THAT THE LIABILIT Y HAS CEASED TO EXIST. THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE AO; MORE OVER, CONFIRMATIONS FROM 6 CREDITORS WERE ALSO FILED. IN THIS FACTUAL BACKGROUND, THE AO WAS NOT JUSTIFIED IN ADDING THE OUTSTANDING LIABILITY ON A CCOUNT OF ITS CESSATION, WITHOUT ANY BASIS, AND, WITHOUT BRINGING ANY SUPPO RTING MATERIAL ON RECORD. IF THE AO FELT THAT THE ADMITTED LIABILITY, SHOWN IN THE AUDITED BALANCE SHEET OF THE APPELLANT, HAS CEASED TO EXIST, THE ONUS WA S ON HIM TO BRING POSITIVE MATERIAL ON RECORD TO ESTABLISH THAT THE LIABILITY HAD ACTUALLY CEASED TO EXIST, I FIND NO JUSTIFICATION FOR THE AO TO PRESUME THAT THE LIABILITY HAS CEASED TO EXIST. EVEN IF THE NOTICE U/S 133(6) COULD NOT BE SERVED ON THE CREDITORS, THE AO CANNOT SIMPLY PRESUME THAT THE LIABILITY APPEAR ING IN THE BALANCE SHEET HAS CEASED TO EXIST. I FIND SUBSTANCE IN THE ARGUM ENT THAT THAT THE PROVISIONS OF SECTION 41(1) HAVE NO APPLICATION IN THE CASE O F THE APPELLANT. THE LEGAL PRONOUNCEMENTS IN THIS REGARD ALSO SUPPORT THE CAS E OF THE APPELLANT. I ALSO FIND FORCE IN THE ARGUMENT THAT THE APPELLANT HAS SIMPLY ADDED AS A BROKER BETWEEN THE FARIYAS AND THE JUTE MILLS; AND, THAT NO EXPENDITURE HAD BEEN CLAIMED BY THE APPELLANT IN RESPECT OF THE SAID LI ABILITY; AND THEREFORE, THE PROVISIONS OF SECTION 41(1) ARE NOT ATTRACTED. IN VIEW OF THE ABOVE, I AM OF THE OPINION THAT THE AO WAS NOT JUSTIFIED IN ADDIN G THE OUTSTANDING LIABILITY APPEARING IN THE BALANCE SHEET. THE ADDITION OF RS .1,04,06,600/- IS DIRECTED TO BE DELETED. GROUND NO. 2 IS ALLOWED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. IN OUR OPINION, NO INTERVENTION IS CALLED FOR IN THE O RDER OF THE CIT(A). THE CIT(A) HAS RIGHTLY, AFTER APPRECIATING THE FACTS OF THE CA SE, DELETED THE ADDITION. THIS IS NOT A FIT CASE WHICH WARRANTS OUR INTERFERENCE. WE ACCO RDINGLY CONFIRM THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.1,04,06,000/-. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE D AY OF HEARING ITSELF I.E. ON 6 TH FEBRUARY, 2013. SD/- SD/- (GEORGE MATHAN) (P. K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6 TH FEBRUARY, 2013 4 I.T.A. NO.1550/KOL/2010 M/S. M.L.SARKAR & BROS. ASSES SMENT YEAR : 2007-08 COPY OF THE ORDER FORWARDED TO: 1. M/S. M. L. SARKAR & BROS., 9, INDIA EXCHANGE PLACE , KOLKATA 700 001 2 I.T.O., WARD-35(4), KOLKATA 3. THE CIT(A), KOLKATA 4. CIT, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA TALUKDAR(SR.P.S.)