The ACIT, Circle-5, Ahmedabad V. Smt. Madhuri Pradipkumar Kawadiya, Ahmedabad

ITA 1803/AHD/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8682 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 18-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Keywords: Business income; Deemed to accrue or arise in india

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI RIFAUR RAHMAN, ACCOUNTANT MEMBER ./ ITA NO.1803/AHD/2015 / ASSTT. YEAR: 2011-12 DCIT, CIR.3(1)(2) AHMEDABAD. VS. SMT.MADHURI PRADIPKUMAR KAWADIYA C-302, PRESTIGE TOWER B/H. JUDGES BUNGALOW BODEKDEV AHMEDABAD. PAN : AEDPK 8810 M / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI L.P. JAIN, SR.DR ASSESSEE BY : SHRI TUSHAR HEMANI, AR ! / DATE OF HEARING : 28/06/2019 '#$ ! / DATE OF PRONOUNCEMENT: 15/07/2019 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-9, AHMEDABAD DATED 9.3.2015 PASSED FOR TH E ASSTT.YEAR 2011-12. 2. REVENUE HAS TAKEN THREE GROUNDS. HOWEVER, ITS G RIEVANCE REVOLVES AROUND A SINGLE ISSUE VIZ. THE LD.CIT(A) H AS ERRED IN DELETING ADDITION OF RS.65,27,843/- WHICH WAS ADDED BY THE AO WITH AID OF SECTION 41(1) OF THE INCOME TAX ACT, 19 61. ITA NO.1803/AHD/2015 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN TRADING OF CONSTRUCTION MATERIA LS VIZ. CEMENT, STEEL ETC. SHE HAS FILED RETURN OF INCOME ON 28.9. 2011 DECLARING TOTAL INCOME AT RS.66,65,590/-. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT A LIABILITY OF RS.65,27,843 /- IS BEING OUTSTANDING AGAINST THE NAMES OF NINE CONCERNS. HE REPRODUCED THE DETAILS OF THESE NINE CONCERNS AND AMOUNTS OUTS TANDING AGAINST THEIR NAMES. HE FURTHER OBSERVED THAT THIS LIABILITY IS BEING OUTSTANDING FROM LAST FOUR-FIVE YEARS. HE AS SUMED THAT IT MUST HAVE CEASED, AND THEREFORE HE MADE ADDITION OF RS.65,27,843/-. ON APPEAL THE LD.CIT(A) DID NOT CON CUR WITH THE AO AND OBSERVED THAT UPTO AND UNTIL LIABILITY IS BE ING RECOGNIZED IN THE ACCOUNTS OF THE ASSESSEE, IT COULD NOT BE ASSUM ED THAT THE LIABILITY IS CEASED. THEREFORE, NO ADDITION ON ACC OUNT OF CESSATION OF LIABILITY UNDER SECTION 41 IS TO BE MADE. 4. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE SUBMIT TED THAT ISSUE IN DISPUTE IS SQUARELY COVERED BY THE LATEST DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF DATTATRAY POULTRY BREEDING FARM P.LTD. VS. ACIT, 104 TAXMANN.C OM 366 (GUJ). HE SUBMITTED THAT HONBLE GUJARAT HIGH COUR T AGAIN REITERATED POSITION OF LAW AS WAS PROPOUNDED IN THE CASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA REPORTED IN 43 TAXMANN 313. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDER OF THE AO. 5. WE HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 41(1) OF THE INCOME TAX ACT HAS BEEN INCORPORATED TO COVER A PARTICULAR FACT SITUATION. THE SECTION APPLIES WHERE A TRADING LIABILITY WAS ALLOWED AS A DEDUCTIO N IN AN EARLIER YEAR IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE AND T HE ASSESSEE HAS ITA NO.1803/AHD/2015 3 OBTAINED A BENEFIT IN RESPECT OF SUCH TRADING LIABI LITY IN A LATER YEAR BY WAY OF REMISSION OR CESSATION OF THE LIABILITY. IN SUCH A CASE THE SECTION SAYS THAT WHATEVER BENEFIT HAS ARISEN TO THE ASSESS EE IN THE LATER YEAR BY WAY OF REMISSION OR CESSATION OF THE LIABILITY W ILL BE BROUGHT TO TAX IN THAT YEAR. THE PRINCIPLE BEHIND THE SECTION IS THAT THE PROVISION IS INTENDED TO ENSURE THAT THE ASSESSEE DOES NOT GET A WAY WITH A DOUBLE BENEFIT - ONCE BY WAY OF DEDUCTION IN AN EARLIER AS SESSMENT YEAR AND AGAIN BY NOT BEING TAXED ON THE BENEFIT RECEIVED BY HIM IN A LATER YEAR WITH REFERENCE TO THE LIABILITY EARLIER ALLOWED AS A DEDUCTION. 6. AT THIS STAGE, WE WOULD LIKE TO TAKE NOTE OF THE FOLLOWING FINDING OF THE HONBLE GUJARAT HIGH COURT IN THE CA SE OF BHOGILAL RAMJIBHAI ATARA (SUPRA). IT READS AS UNDER: 8. WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUN AL. SECTION 41(1) OF THE ACT AS DISCUSSED IN THE ABOVE THREE DECISIONS WOULD APPLY IN A CASE WHERE THERE HAS BEE N REMISSION OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION SUBJECT TO THE CONDITIONS CONTAINED I N THE STATUTE BEING FULFILLED. ADDITIONALLY, SUCH CESSATI ON OR REMISSION HAS TO BE DURING THE PREVIOUS YEAR RELEVA NT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE PRESENT CASE, BOTH ELEMENTS ARE MISSING. THERE WAS NOTHING ON REC ORD TO SUGGEST THERE WAS REMISSION OR CESSATION OF LIABILI TY THAT TOO DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08 WHICH WAS THE YEAR UNDER CONSIDERATION. IT IS UNDOUBTEDLY A CURIOUS CASE. EVEN THE LIABILITY ITSE LF SEEMS UNDER SERIOUS DOUBT. THE ASSESSING OFFICER UNDERTOO K THE EXERCISE TO VERIFY THE RECORDS OF THE SO CALLED CRE DITORS. MANY OF THEM WERE NOT FOUND AT ALL IN THE GIVEN ADDRESS. SOME OF THEM STATED THAT THEY HAD NO DEALING WITH THE ASSES SEE. IN ONE OR TWO CASES, THE RESPONSE WAS THAT THEY HAD NO DEALING WITH THE ASSESSEE NOR DID THEY KNOW HIM. OF COURSE, THESE INQUIRIES WERE MADE EX PARTE AND IN THAT VIEW OF TH E MATTER, THE ASSESSEE WOULD BE ALLOWED TO CONTEST SUCH FINDI NGS. NEVERTHELESS, EVEN IF SUCH FACTS WERE ESTABLISHED T HROUGH BI- PARTE INQUIRIES, THE LIABILITY AS IT STANDS PERHAPS HOLDS THAT THERE WAS NO CESSATION OR REMISSION OF LIABILITY AN D THAT THEREFORE, THE AMOUNT IN QUESTION CANNOT BE ADDED B ACK AS A DEEMED INCOME UNDER SECTION 41(C) F THE ACT. THIS I S ONE OF ITA NO.1803/AHD/2015 4 THE STRANGE CASES WHERE EVEN IF THE DEBT ITSELF IS FOUND TO BE NON-GENUINE FROM THE VERY INCEPTION, AT LEAST IN TE RMS OF SECTION 41(1) OF THE ACT THERE IS NO CURE FOR IT. BE THAT AS IT MAY, INSOFAR AS THE ORDERS OF THE REVENUE AUTHORITI ES ARE CONCERNED, THE TRIBUNAL NOT HAVING MADE ANY ERROR, THIS TAX APPEAL IS DISMISSED. 7. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FAC TS OF THE PRESENT CASE, THEN IT WOULD REVEAL THAT LIABILITY H AS NOT CEASED, AND THE LD.CIT(A) HAS RIGHTLY DELETED THE SAME. WE DO NOT FIND ERROR IN THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. THIS GROUND OF APPEAL IS REJECTED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 15 TH JULY, 2019. SD/- SD/- (RIFAUR RAHMAN) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER