JAI BHAGWATI IMPEX P LTD., MUM V. DCIT, CC-1(4), MUM

ITA 16/MUM/2023

AI Insights

The case involves Jai Bhagwati Impex Pvt Ltd, which appealed against the order of the Commissioner of Income Tax (Appeals)-47, Mumbai, confirming the addition made by the Assessing Officer under section 41(1) of the Income Tax Act, 1961. The addition pertained to a disputed and live outstanding liability of Rs. 66,16,097 payable to Heerasons Al Hashmi Com Ent LLC, which the AO treated as cessation of trading liability. The assessee argued that the liability was disputed and pending litigation, and thus should not be considered as ceased. The Tribunal admitted additional evidence and set aside the CIT(A)'s order, restoring the issue for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299217 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 03-01-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence
• Section: 143(3); 142(1); 143(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHIR PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 16/Mum/2023 (A.Y: 2017-18) Jai Bhagwati Impex Pvt LtdC/o, DC Bothra & Co. 297, Tardeo Road, wille Mansion, 1 st Floor, Opp Bank of India, Nana Chowk, Mumbai 400007 Vs. DCIT, C.circle – 1(4), Room No. 902, 9 th Floor, Old CGO Annexe, MK Road, Mumbai – 400020 PAN/GIR No. : AAACJ2500K Appellant .. Respondent Appellant by : Shri Rajkumar Singh.AR Respondent by : Smt.Vranda U.matkari.DR Date of Hearing 10.03.2023 Date of Pronouncement 13.03.2023 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals)-47, Mumbai, passed u/s 143(3) and 250 of the Act. The assessee has raised the following grounds of appeal: 1. That on facts & circumstances of the case and in law the ld. CIT(Appeal) has erred in confirming the addition made by ld. A.O. u/s.41(1) of the Income Tax Act, 1961 in respect of disputed and live outstanding liability payable to Heerasons Al Hashmi Com Ent LLC of Rs. 66,16,097/- ITA No. 16/Mum/2023 Jai Bhagwati Impex P Ltd, Mumbai. - 2 - as cessation of trading liability without properly appreciating that the said liability was disputed one and litigation was pending before the Honble Tribunal of Foreign Exchange and that too without bringing any evidence on record of actual cessation or remission of the said live liability or receipt of any benefit from the said liability in any manner by the assessee appellant. 2. That the appellant craves the leave to amend, alter, substitute and or to raise new or additional grounds of appeal at the time of hearing. 2. The brief facts of the case are that the assessee company is engaged in the business of trade of importing, exporting, preparing mining cutting and processing all types of marble grainate, and other stone tiles and building materials. The assessee has filed the return of income for the A.Y 2017-18 on 07.11.2017 disclosing a total income of Rs. 29,03,760/- and the return of income was processed u/s 143(1) of the Act. Subsequently the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act was issued calling for various details. Incompliance to the notice, the assessee has furnished the details and the case was discussed. The Assessing Officer (AO) on perusal fo the financial statements found that the assessee has disclosed total trade payables of Rs.1,42,61,347/- in the ITA No. 16/Mum/2023 Jai Bhagwati Impex P Ltd, Mumbai. - 3 - Balance sheet and was carry forward from earlier years and therefore notice was issued to explain how long the amounts have been outstanding and the nature of payables. The assessee has submitted the ledger account confirmations of creditors, but the A.O. has issued the show cause notice to treat the trade payables as the income u/s 41(1) of the Act. The assessee has furnished the letter referred at Para 3 of the order and on perusal of the facts, the AO found that in respect of one trade creditor M/s Heerasons AL Hashmi Com Ent LLC an amount of Rs. 66,16,096/- is outstanding due to dispute and the assessee has filed the explanation in support of the claim. But the AO was not satisfied with the information and made addition observing as under: "In this regard, we would like to provide the list of creditors outstanding in the Audited Financial Statement as on 31.03.2017 along with the date of subsequent payment Name of the creditor Amunt o/s as on 31.03.2017 Date of subsequent payment Comfort Securities Ltd 398 30.011.2017 Ghangor Agencies 76,45,250 13.11.2017 to 21.11.2017 Heerasons AI 66,16,096 Disputed matter ITA No. 16/Mum/2023 Jai Bhagwati Impex P Ltd, Mumbai. - 4 - Hashmi Com Ent LLC Mahendra Jain 30,000 006.04.2017 In support of the above, we are enclosing ledger accounts of the above named parties of the year in which payment has been made along with a copy of bank statements highlighting such payments at EXHIBIT 'A'. As regards to Heerasons Al Hashmi Com Ent LLC outstanding in the books of the assessee company, the sane is outstanding on account of business dispute pertaining to quality and specification of the trading material imported from the said party and matter is subjudiced in the court of law. Further, material imported (marble blocks) from the said party confiscated by the custom authorities and the matter is pending in Tribunal of Foreign Exchange which was last taken place on 17/02/2010 and thereafter no further progress has been made. In view of the same and pending the verdict of the Tribunal of Foreign Exchange, assessee company has not released the payment to said party. However, assessee company by showing the said creditor in its books of account as payable has acknowledge he debt due to the said party and there is no remission or cessation of the said liability nor same has been written back in the books of assessee. For the aforesaid reasons your goodself will appreciate that section 41(1) is not getting attracted in any circumstances to the case of the assessee with reference to above stated disputed and subjudiced liability." The submission of the assessee has been duly considered however the same is found to be not acceptable. In regard to the creditor namely Heerasons Al Hashmi Com Ent LLC,the liability of Rs.66, 16,097/- is outstanding since 2010 from the said party. On facts, the assessee has failed to give any evidence as to how the said liability ITA No. 16/Mum/2023 Jai Bhagwati Impex P Ltd, Mumbai. - 5 - continues to exist. Neither the corresponding ledger nor confirmation of Heerasons Al Hashmi Com Ent LLC has been furnished by the assessee. Further, the assessee has not furnished any supporting documents in respect of how this liability is disputed. Accordingly, in absence of any evidence, existence of the said liability is not ascertainable. Further, the said liability is outstanding for more than 9 years. Accordingly, it is concluded that the said liability ceases to exist. In view of the same, the outstanding liability of Rs.66,16,097/- is added back to the total income of the assessee within the provision of section 41(1) of the Act. In this regard, penalty proceedings u/s 270A(2) of the Act is initiated separately for underreporting of income. 3. Finally the AO has assessed the total income of Rs.95,19,854/- and passed the order u/s 143(3) of the Act dated 26.12.2019. 4.Aggrieved by the order, the assessee has filed an appeal before the CIT(A), Whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the AO,and in respect of disputed issue of claim of trade payables, since the assessee has not supported with the documentary evidences on the dispute and the CIT(A) has confirmed the action of the A.O and dismissed the assessee appeal. Aggrieved by the CIT(A) order, the ITA No. 16/Mum/2023 Jai Bhagwati Impex P Ltd, Mumbai. - 6 - asseesse has filed the appeal with the Honble Tribunal. 5. At the time of hearing the Ld. AR submitted that the CIT(A) has erred in confirming the addition by the AO overlooking the factual information and legal dispute. Further the Ld.AR submitted that the assessee has a good case on merits and has filed an application for admission of the additional evidence under Rule 29 of ITAT rules and prayed for admission of additional evidence and substantiated the submissions with the factual paper book and judicial decisions.. Per Contra, the Ld. DR submitted that the transactions are not established with evidences before the lower authorities and the Ld.DR supported the order of the CIT(A). 6. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue that the CIT(A) has erred in confirming the addition by the A.O. as the transactions are not supported with the documentary evidences. The Ld.AR emphasized that the assessee has submitted the details placed at page 33 to 38 of the paper book which are overlooked. ITA No. 16/Mum/2023 Jai Bhagwati Impex P Ltd, Mumbai. - 7 - Further the Ld.AR has demonstrated the notices, submissions on the disputed issues filed in the scrutiny assesseement for the A.Y.2015-16 on the same issue placed at 69 to 77 of the paper book and the assesseement order U/sec143(3) of the Act at page 64 to 68 and these facts were not disputed. The asseesee is filling the application for admission of additional evidences under Rule 29 of ITAT rules with the documents/orders of government authorities which were not available earlier and could not produce before the lower authorities, which play a important role in decision making in the adjudicating proceedings. Therefore considering the facts, circumstances, additional evidence and the factual paper book, we are of the opinion that the assessee should not suffer for non filing of material information, as the evidences played vital role in decision making and we admit the additional evidence. Accordingly, to meet the ends of justice, we set aside the order of the CIT(A) on this disputed issue and restore the entire disputed issue along with the additional evidence to the file of the CIT(A) to decide afresh on merits and the assessee should be provided adequate opportunity of hearing ITA No. 16/Mum/2023 Jai Bhagwati Impex P Ltd, Mumbai. - 8 - and shall cooperate in submitting the information for early disposal of the appeal and we allow the grounds of appeal of the assessee for statistical purposes. 7. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 13.03.2023. Sd/- Sd/- (GAGAN GOYAL) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 13.03.2023 KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ आ / The CIT(A) 4. आ आ ( ) / Concerned CIT 5. ! !" , आ $ %, हमद द / DR, ITAT, Mumbai 6. () * + / Guard file. ान ु सार/ BY ORDER, ! //True Copy//() 1. ( Asst. Registrar) ITAT, Mumbai