Planman Motion Pictures Pvt. Ltd, New Delhi V. ITO ward-20(1), New Delhi

ITA 1789/DEL/2019

AI Insights

The case involves M/s Planman Motion Pictures Pvt. Ltd., which appealed against the order of the CIT (Appeals)-7, New Delhi, pertaining to the Assessment Year 2014-15. The primary contention was regarding the addition of Rs. 84,10,139 to the assessee's income, which was initially added by the Assessing Officer under section 143(3) of the Income Tax Act, 1961, citing non-confirmation of liabilities and cessation of business activities. The CIT(A) and subsequently the Tribunal found that the assessee failed to provide necessary confirmations and explanations for the outstanding liabilities, leading to the conclusion that these liabilities had ceased to exist, thus justifying the addition under section 41(1).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121847 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 14-02-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 04-03-2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘F’: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND Ms. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.1789/DEL/2018 [Assessment Year: 2014-15] M/s Planman Motion Pictures Pvt. Ltd. 48, Community Centre, Naraina Industrial Area, Phase-I, New Delhi-110028 Vs Income Tax Officer, Ward-20(1), Delhi PAN-AADCP7705M Assessee Revenue Assessee by None Revenue by Sh. K.K. Mishra, Sr. DR Date of Hearing 15.02.2023 Date of Pronouncement 14.03.2023 ORDER PER SHAMIM YAHYA, AM, This appeal by the assessee is directed against the order of ld. CIT (Appeals)-7, New Delhi, dated 11.01.2019 and pertains to Assessment Year 2014-15. 2. The grounds of appeal reads as under:- “1. On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the order passed by the Assessing Officer (AO) is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the addition at an income of Rs.84,10,139/- as against the returned loss of Rs.2,98,367/- declared by the assessee. 3. (i) On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the disallowance of loss of 2 ITA NO.1789/DEL/2019 Rs.2,98,367/- by holding that no business activity was carried out during the year. (ii) That the said disallowance has been confirmed despite the fact that the loss is due to the expenses claimed by the assessee and the same have been incurred wholly and exclusively for the purpose of business. 4. On the facts and circumstances of the case, the learned AO has erred both on facts and in law in holding that the assessee was not carrying on any business during the year ignoring the fact that the quantum of business receipts is not relevant for deciding whether the business was being carried out or not. 5. (i) On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred both on facts and in law confirming the addition of Rs.84, 10, 139/- u/s 41(1) of the Income Tax Act on account of outstanding balances of the sundry creditors and outstanding balances of other liabilities. (ii) That the Ld. Commissioner of Income Tax (Appeals) has erred in treating the reduction in liabilities as cessation of liability without properly appreciating the facts of the case. (iii) That the addition has been confirmed despite the fact that the amount has not been written off in the books of accounts of the assessee and hence no addition can be made under section 41(1) of the Income Tax Act.” 3. Brief facts of the case are that the assessee company e-filed its return of income on 30.09.2014 for the AY 2014-15 declaring loss of Rs.2,98,367/-. The case was selected for scrutiny. Order u/s 143(3) was passed on 02.12.2016. Assessing the income at Rs.84,10,139/- after addition of Rs.2,98,367/- by disallowing the expenses incurred during the year and addition of Rs.84,10,139/- u/s 41(1) by adding outstanding balances of sundry creditors and other liabilities. 4. Upon assessee’s appeal, the Ld. CIT(A) elaborately dealt with the issue of application of section 41(1) as under:- 3 ITA NO.1789/DEL/2019 “5.2. I have carefully considered the assessment order and written submission filed by the Ld. AR. The perusal of the appellant's financials indicate that the appellant had shown creditors of Rs. 56 45,576/ Further the assessee has shown other liabilities of Rs 27,63,613/- on account of due to M/s NDTV Films Imaging Lid. Skol Breweries Lid., M/s. M. M. Narang & Associates, Shubho Shekhar Bhattarjee and on account of salary payable. The assessee was asked to furnish confirmed copies of account of some major creditors NDTV Films Imaging Ltd. and Skol Breweries Ltd on test check basis which the assessee failed to furnish. During assessment proceedings the assessee was requested to file the details and confirmation of trade payables and advance from customers but it was not filed, 5.3 The appellant filed sketchy details of trade payable and advance from customers at appellate stage, however, these were without any confirmations. Since the appellant did not file the confirmations of trade payable and advance from customers, therefore the appellant was again requested by the AO. 5.4. The appellant was requested by the AO to either file the confirmations of the static creditors or else explain as to why the static creditors may not be treated as cessation of liability under the provisions of Section 41 of the Act. The AO concluded that it is apparent that the advances from customers and Sundry creditors standing from earlier years were no longer liability with the appellant. Either the appellant has paid off these parties in cash or the parties have closed the account of the appellant as unrecoverable. Therefore the liability has ceased to exist under the provision of section 41 of the Act, 1961. 5.5. The appellant was asked to explain, as to why the aforesaid advances from customer and sundry creditors, static may not be treated as bogus. The appellant itself submitted to the AO and at appellate stage that it has nothing more to add other than whatever has been stated in submission. 5.6. The AO further observed that the assessee's contention that static balances and the advance, from customers cannot be added back to the income of the appellant unless the same are written back in the books of the appellant is not acceptable. The submission of the appellant could have been accepted, if the confirmations were filed. The primary onus to prove that the liability of creditors exists is on the appellant. The appellant can discharge this onus very well by furnishing confirmations of the creditors. Here in this case the appellant has squarely failed in its discharge of onus regarding the existence of liability. The 4 ITA NO.1789/DEL/2019 failure on the part of the appellant to file confirmations and also, a glaring fact that the balances have been outstanding and are static, There has not been any transaction of payment/receipt etc in these accounts and the same has been admitted by the appellant and is reflected from the details filed by the appellant. Therefore, it clearly establishes that the liability to pay off these trade payables and advances from customer does not exist any longer. The case of the appellant is squarely covered under the provisions of section 41(1) of the Act. The liability to pay advance from customers and sundry creditors has ceased to exist therefore this profit amount to the extent to which liability has ceased to exist is chargeable to tax under the provision of Section 41(1) of the Act. 5.7. The undisputed fact is that the appellant did not furnish confirmations of the sundry creditors in the first instance. The initial onus therefore, with reference to the impugned credits did not stand discharged, Due opportunity was provided by the AO by issue of a show cause notice. However, neither was any reconciliation furnished nor did the appellant file confirmation of any of the sundry creditors, The lad. AR was also provided opportunity to furnish reconciliation and confirmation of balances during appellate proceedings. However, except for simple assertions that the transactions were entered in regular course of business, no documentation or evidence in support of the impugned credits was furnished. Admittedly, in the body of the assessment order, the AO has invoked provisions of Section 41(1) of the Act and treated the amounts outstanding as cessation of liability. The appellant was duly show caused by the AO during scrutiny. Even in appellate proceedings, no evidence, confirmation or documentation to substantiate the impugned transaction is furnished. The Ld. AR has not explained the nature of the transaction with these creditors In view of these facts and in the absence of any confirmation or supporting evidence suggesting that the transactions are made in the regular course of business, I do not see any reason to interfere with the finding of the AO. The addition of Rs. 84,10, 139/- is therefore, sustained. This ground of appeal is ruled against the appellant.” 5. Against the above order, the assessee is in appeal before us. 6. We have heard ld. DR and perused the records. We note that despite several notices none appeared on behalf of the assessee and the notices of hearing have returned unserved. Hence, we are proceeding to adjudicate 5 ITA NO.1789/DEL/2019 the issue by hearing the ld. DR and perusing the records. We note that the issue has been dealt with by the Ld. CIT(A) elaborately as above. Unconfirmed bill, advance from customers and sundry creditors which are static creditors were there for which the assessee could not provide any confirmation or explanation. In these circumstances, in our considered opinion, the authorities below have passed a reasonable order, we do not need any interference on our part. Accordingly, we uphold the same. 7. In the result, the appeal of the assessee stands dismissed. Order pronounced in the open court on 14 th March, 2023. Sd/- sd/- /- [ASTHA CHANDRA] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated: 14.03.2023. f{x~{tÜ? f{x~{tÜ?f{x~{tÜ? f{x~{tÜ? Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi