Softouch Hygiene Products(Mkt.)Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-8(2), Ahmedabad

ITA 1856/AHD/2011

• Counselvise Citation: 185620514 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL SRDR
• Assessee Lawyers: G S PATEL
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.1856/AHD/2011 & ITA NO.952/AHD/2012 ASSESSMENT YEARS :2007-08 & 2008-09 SOFTOUCH HYGIENE PRODUCTS (MKT) LTD., 294/1, HANSOL POST OFFICE, SARDAR NAGAR, AHMEDABAD [ PAN NO.AACCS9973P ] V/S . INCOME TAX OFFICER, WARD-8(2), AHMEDABAD /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI G.S. PATEL, AR /BY REVENUE SHRI P.L. KUREEL, SR-DR /DATE OF HEARING 25-07-2012 ! /DATE OF PRONOUNCEMENT 24-09-2012 ' ' ' ' / // / O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THESE TWO APPEALS OF THE SAME ASSESSEE ARE DIRECTE D AGAINST THE DIFFERENT ORDERS OF COMMISSIONER OF INCOME-TAX (APP EALS)-XIV, AHMEDABAD (CIT(A) FOR SHORT) DATED 27-05-2011 & 02-02-2012 PERTAIN TO DIFFERENT ASSESSMENT YEARS (AY) I.E., 2007-08 AND 2008-09. FIRST WE TAKE UP ITA NO.1856/AHD/20101 (A.Y.) 07-08 . 2. THE GROUND RAISED BY ASSESSEE READS AS UNDER:- 1. THE APPELLANTS SUBMIT THAT THE LD. CIT(A) HAS E RRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES OF RS.6,40,640/- OUT OF TOTAL INTEREST EXPENSES OF RS.7,07,389/- MAINLY ON THE GROUNDS THA T (1) THE FUNDS HAVE ITA NO.1856/AHD/11 & 952/AHD/12 A.YS. 07-08 & 08- 09 SOFTOUCH HYGIENE PRODUCTS (MKT) LTD. V. ITO WD-8(2) ABD PAGE 2 NOT BEEN GIVEN TO SISTER CONCERNS FOR BUSINESS PURP OSES AND (2) THE ADVANCES TO SISTER CONCERNS WERE LISTED IN SCHEDULE 10 OF THE BALANCE SHEET WHICH WERE CLASSIFIED UNDER LOANS AND ADVANC ES, AS PER THE FINDING RECORDED IN PARA 2.3 OF HIS ORDER, WITHOUT APPRECIATING, THE SUBMISSIONS AND CITATIONS OF THE APPELLANTS AS REPR ODUCED BY HIM IN PARA 2.2 OF HIS ORDER. 1.1 THE APPELLANTS THEREFORE SUBMIT THAT THE DISALL OWANCE OF INTEREST EXPENSES OF RS.6,40,640/- CONFIRMED BY LD CIT(A) IS ILLEGAL AND HENCE BE DELETED. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT U/S 1 43(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WA S FRAMED WHILE FRAMING THE ASSESSMENT. THE ASSESSING OFFICER (AO) MADE ADDITIO N ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES OF RS.6,40,614/- AND DISALLOWANCE U/S. 40(A)(IA) OF THE ACT OF RS.63,000/-. THE ASSESSEE F ILED AN APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DISMISSED THE APPEAL. 4. ASSESSEE FEELING AGGRIEVED BY THIS ORDER OF LD. CIT(A) FILED SECOND APPEAL BEFORE US. LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS AND TRADING OF S URGICAL PRODUCTS THAT ARE PURCHASED FROM M/S.SOFTOUCH HYGIENE PRODUCTS PVT. L TD. (MFG). IT WAS MUTUALLY AGREED BETWEEN THE PARTIES THAT AGAINST RE GULAR SUPPLY OF GOODS AS PER THE REQUIREMENT, THE ASSESSEE WILL GIVE ADVANCE PAYMENT AGAINST THE GOODS TO BE SUPPLIED AND NO INTEREST WILL BE CHARGE D THAT THE DEBT BALANCE- SHEET ON 1-4-2006 WAS AT RS.50,49,477/-AND DEBITED BALANCE ON 31-03-2007 WAS AT RS.43,27,389/- IN RESPECT OF SAID PARTY. HE SUBMITTED THAT ASSESSEE- COMPANY WAS ALSO PURCHASING IN PAST HERBAL AYURVEDI C POWDER FROM M/S. SOFTOUCH OPTHALMIC P T. LTD. TILL THE YEAR 2001. TH EREAFTER, THE SAID COMPANY WAS CLOSED AND SINCE THEN THERE ARE NO TRANSACTIONS . THE OPENING DEBIT BALANCE AS ON 1-4-2006 AT RS.20,98,321/- AND CLOSIN G DEBIT BALANCE AS ON 31- 03-2007 OF RS.21,02,929/-. HE SUBMITTED THAT THERE ARE NO NEW BORROWINGS BY THE ASSESSEE-COMPANY AT THE END OF THE YEAR EXCEPT OF RS.6,063/-. HE ITA NO.1856/AHD/11 & 952/AHD/12 A.YS. 07-08 & 08- 09 SOFTOUCH HYGIENE PRODUCTS (MKT) LTD. V. ITO WD-8(2) ABD PAGE 3 SUBMITTED THAT UNSECURED LOAN AS ON 31-03-2006 WAS OF RS.24,60,479/- AND AS ON 31-03-2007 WAS RS.24,66,542/-. HE SUBMITTED T HAT CAPITAL AND RESERVE OF THE COMPANY OF RS.87,35,599/- (INTEREST FREE FUN DS) ARE ENOUGH TO COVER THE ADVANCES OF RS.64,30,318/- (RS.43,27,389/- + RS.21, 02,929/-) BEING DEBIT BALANCES AS ON 31-03-2007 OF BOTH THE FACTS. HE SUB MITTED THAT THE NO DISALLOWANCE OF INTEREST WAS MADE BY THE AO IN EARL IER YEARS. HE SUBMITTED THAT THE AO HAS NOT PLACED ANYTHING TO ESTABLISH NE XUS BETWEEN THE BORROWER FUNDS AND THE ADVANCES MADE AGAINST THE PURCHASES. HE SUBMITTED THAT FINDINGS OF AUTHORITIES BELOW ARE NOT CORRECT AS TH ERE ARE NO NEW BORROWINGS EXCEPT RS.6,063/-. HE PLACED RELIANCE ON THE JUDGME NT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT V. SRIDEV ENTERPRISES (1991) 192 ITR 165 (KAR). HE ALSO RELIED ON THE ORDER OF HONBLE C O-ORDINATE BENCH RENDERED IN THE CASE OF M/S SHREE JAGDISH V. ITO IN ITA NO.1459/AHD/2008 DATED 07- 10-2009. HE RELIED THE JUDGMENTS OF HONBLE SUPREME COURT RENDERED IN THE CASE OF S.A BUILDERS LTD. V. CIT(A) AND ANOTHER (2007) 288 ITR 1 (SC) IN SUPPORT OF THE CONTENTION THAT ONCE IT IS ESTABLISH ED THAT THERE WAS NEXUS BETWEEN EXPENDITURE AND PURPOSE OF BUSINESS (WHICH NEED NOT BE THE BUSINESS OF ASSESSEE ITSELF) THE REVENUE JUSTIFIABL E CANNOT CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN OR IN THE POSIT ION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABL E EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINES SMAN CAN BE COMPELLED TO MAXIMISE ITS PROFIT LD. COUNSEL ALSO RELIED UPON THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT V. MOTOR SALES LTD. (2008) 304 ITR 123 (ALL). HE FURTHER RELIED UPON THE JUDGM ENT OF THE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT V. RELIANCE UTILITIES AND POWER LTD. (2009) 313 ITR 340 (BOM) IN SUPPORT OF HIS CONTENTION THAT THERE WERE BOTH INTEREST BEARING AND INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE THEN A PRESUMPTION ARISE THAT INVESTMENT WOULD BE OUT OF T HE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE ASSESSEE, IF THE IN TEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT. HE SUBMITTED THA T THERE WAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE-COM PANY IN THE FORM OF CAPITAL ITA NO.1856/AHD/11 & 952/AHD/12 A.YS. 07-08 & 08- 09 SOFTOUCH HYGIENE PRODUCTS (MKT) LTD. V. ITO WD-8(2) ABD PAGE 4 RESERVE. THEREFORE, ENOUGH TO COVER ADVANCE OF RS.6 4 LAKH ADVANCES GIVEN TO THE SISTER CONCERN. ON THE CONTRARY, LD. DR STRONGL Y SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THERE WAS NO I NTEREST FREE FUNDS AVAILABLE TO GIVE INTEREST FREE ADVANCE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) AS WEL L AS ASSESSING OFFICER HAS NOT DISPUTED THAT THE ASSESSEE-COMPANY WAS MAKING P URCHASE FROM THE SISTER CONCERN. ALSO LD. CIT(A) HAS CATEGORICALLY OBSERVED THAT EVEN THOUGH THE ASSESSEE WAS MAKING PURCHASE FROM THE SISTER CONCER N. THERE WAS NO PLAUSIBLE JUSTIFICATION GIVEN BY THE ASSESSEE FOR A DVANCING SUCH HUGE LOANS. THESE FACTS COUPLED WITH THE FACTS THAT IN THE BALA NCE-SHEET ITSELF THE LOANS HAVE NOT CLASSIFIED AS BUSINESS DEBTS CLEARLY SHOW THAT THE FINDING OF THE AO WAS CORRECT. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERA TION TO THE RIVAL SUBMISSIONS, IT IS NOT DISPUTED THAT THE ASSESSEE-C OMPANY HAVE BEEN MAKING PURCHASES FROM THE SISTER CONCERN BY THE REVENUE TH E OBJECTION OF THE LD. CIT(A) AS WELL AS AO APPEARS TO BE THAT THE ASSESSE E-COMPANY HAS NOT SHOWN THE ADVANCE AS BUSINESS DEBT. ON THE CONTRARY , IT HAS BEEN REFLECTED AS LOAN AND ADVANCE IN THE BALANCE-SHEET. IT IS ALS O NOT DISPUTED THAT THESE ADVANCES WERE NOT GIVEN IN EARLIER YEARS NOT IN THE YEAR UNDER CONSIDERATION. SINCE THE ASSESSEE HAS ESTABLISHED THAT ADVANCES WE RE GIVEN FOR PURCHASING THE GOODS AND THIS FACT HAS NOT BEEN CONTROVERTED. RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF S.A. BUILDERS LTD. (SUPRA) WHEREIN HONBE SUPREME COURT TO CONSIDER W HETHER ONE SHOULD ALLOW DEDUCTION U/S. 36(1)(III) OF THE ACT OF INTER EST PAID BY THE ASSESSEE ON AMOUNTS BORROWED BY IT FOR ADVANCING TO A SISTER CO NCERN, THE AUTHORITIES AND THE COURTS SHOULD EXAMINE THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MONEY AND WHAT THE SISTER CONCERN DID WITH THE MONE Y. THAT THE BORROWED AMOUNT IS NOT UTILIZED BY THE ASSESSEE IN ITS OWN B USINESS BUT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SISTER CONCER N IS NOT RELEVANT. WHAT IS RELEVANT IS WHETHER THE AMOUNT WAS ADVANCED AS A ME ASURE OF COMMERCIAL ITA NO.1856/AHD/11 & 952/AHD/12 A.YS. 07-08 & 08- 09 SOFTOUCH HYGIENE PRODUCTS (MKT) LTD. V. ITO WD-8(2) ABD PAGE 5 EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER T HE AMOUNT WAS ADVANCED. IN THIS VIEW OF THE MATTER, THIS GROUND OF ASSESSEE IS ALLOWED. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. COMING TO ASSESSEES APPEAL IN ITA NO.952/AHD/2012 FOR A.Y. 08-09. 7. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1 THE APPELLANTS SUBMITS THAT THE LD CIT(A) HAS ER RED IN CONFIRMING THE DISALLOWANCE OF RS.11,495/- OUT TOTAL DISALLOWANCE U/S 43B OF I.T. ACT ON THE GROUND THAT IT WAS NOT THE LIABILITY OF THE APP ELLANT COMPANY BEING THE PROFESSIONAL TAX OF THE EMPLOYEES. 2 THE APPELLANTS SUBMIT THAT THE LD CIT(A) HAS ERRE D IN CONFIRMING THE ADDITION OF RS.75,000/- OUT OF TOTAL ADDITION OF RS .95,686/- MADE BY AO U/S 41(1) OF I.T ACT ON THE GROUND THAT HT NATURE O F LIABILITY IS NOT CLEAR AND THE APPELLANT HAS NOT FURNISHED ANY DETAILS REG ARDING THE LIABILITY AND THE REASONS FOR WHICH IT IS NOT BEING PAID. 3 THE APPELLANTS SUBMIT THAT THE LD CIT(A) HAS ERRE D IN CONFIRMING THE DISALLOWANCE OF RS7,61,689/- MADE BY AO ON ACCOUNT OF INTEREST FREE ADVANCES MADE TO SISTER CONCERNS ON THE GROUND THAT THE SIMILAR ISSUE HAS BEEN DECIDED BY HIM FOR A.Y. 2007-2008 WHEREIN THE CLAIM OF THE APPELLANT WAS DISMISSED AND AS SUCH FOLLOWING EARLI ER YEAR, THIS YEAR ALSO THE DISALLOWANCE MADE BY AO IS CONFIRMED. 4 THE APPELLANTS SUBMIT THAT THE LD CIT(A) HAS ERRE D IN CONFIRMING THE INTEREST OF RS.1,06,779/- CHARGED U/S. 234-B AN INT EREST OF RS.1,166/- CHARGED U/S. 234-C BY THE AO. 8. FIRST GROUND IS AGAINST THE CONFIRMATION OF DISA LLOWANCE OF RS.11,495/- OUT OF TOTAL DISALLOWANCE OF RS.37,721/- MADE BY TH E ASSESSING OFFICER ON THE GROUND OF U/S. 43B OF THE ACT. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS ALLOWED THE LIABILITY OF PROFESSIONA L TAX MADE BY THE AO OF RS.26,126/- OUT OF TOTAL PAYMENT OF RS.37,721/- AND DISALLOWED RS.11,495/- BEING THE SAME LIABILITY OF UTILIZATION ON THE GROU ND THAT IT WAS NOT THE LIABILITY OF ITA NO.1856/AHD/11 & 952/AHD/12 A.YS. 07-08 & 08- 09 SOFTOUCH HYGIENE PRODUCTS (MKT) LTD. V. ITO WD-8(2) ABD PAGE 6 THE ASSESSEE. HE SUBMITTED THAT LD. CIT(A) FAILED T O APPRECIATE THE FACTS IN BRIGHT PERSPECTIVE. ON THE CONTRARY, LD. DR SUPPORT ED THE ASSESSMENT ORDER. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) HAD GI VEN RELIEF OF RS.26,226/- ON THE BASIS THAT THE DEDUCTION WAS AVAILABLE TO THE A SSESSEE-COMPANY U/S. 43B OF THE ACT. HOWEVER, THE CLAIM OF DEDUCTION OF RS.1 1,495/- IS NOT ALLOWABLE AS THE ASSESSING OFFICER HAS RIGHTLY HELD THAT PROFESS IONAL TAX OF THE EMPLOYEE IS TO BE PAID BY THE EMPLOYER AND SHOULD BE DEDUCTED F ROM THEIR SALARY AND ACCORDINGLY IT WAS NOT LIABILITY OF THE ASSESSEE-CO MPANY. SINCE THE PROFESSIONAL TAX IS STATUTORY DEDUCTION FROM THE SA LARY OF THE EMPLOYEE THIS CANNOT BE TREATED AS THE LIABILITY OF THE ASSESSEE- COMPANY. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A). THIS GROUND OF ASSESSEE IS DISMISSED. HOWEVER, IF THE AS SESSEE HAS PAID THE AMOUNT OF RS.11,495/- WITHOUT DEDUCTING THE SAME FR OM THE EMPLOYEES SALARY AND INCURRED SUCH EXPENDITURE THEN SUCH SUM SHALL B E ALLOWED AS DEDUCTION. THE ASSESSING OFFICER IS HEREBY DIRECTED TO VERIFY THE SAME AND PASS ORDER ACCORDINGLY. THUS, THIS GROUND RAISED BY ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. 10. NEXT GROUND IS AGAINST THE CONFIRMATION OF ADDI TION OF RS.75,000/- OUT OF TOTAL ADDITION OF RS.95,686/- BY THE ASSESSING OFFI CER U/S 41(1) OF THE ACT. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.75,000/- OUT OF TOTAL ADDITION OF RS .95,686/- ON THE GROUND AND NATURE AND LIABILITY IS NOT CLEAR AND THE ASSESSEE REGARDING THE LIABILITY AND REASON FOR WHICH IT IS NOT BEING PAID. HE SUBMITTED THAT FINDING AS GIVEN BY LD. CIT(A) IN PARA-3.3 OF HIS ORDER IS NOT RELEVANT TO THE ISSUE. HE SUBMITTED THAT ONCE THE LIABILITY IS CARRIED OUT IN THE BALANCE-SH EET WHICH IS NOT DISPUTED AND HENCE THERE IS NOTHING TO SHOW CESSATION OF LIABILI TY AS PER LAW NO ADDITION CAN BE MADE. IN SUPPORT OF THIS CONTENTION, LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF HONBLE CO-ORDINATE BENCH RENDERE D IN THE CASE OF NITIN S ITA NO.1856/AHD/11 & 952/AHD/12 A.YS. 07-08 & 08- 09 SOFTOUCH HYGIENE PRODUCTS (MKT) LTD. V. ITO WD-8(2) ABD PAGE 7 GARG V. ACIT (2010) 40 SOT 253 (AHD). ON THE CONTRARY, LD. DR S UPPORTED THE ORDER OF ASSESSING OFFICER. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOT DISPUTED THAT THE LI ABILITY REMAINED REFLECTED IN THE BALANCE-SHEET THE ASSESSEE HAS NOT WRITTEN OFF THE OUTSTANDING LIABILITY IN ITS BOOKS OF ACCOUNT AND THE SAID LIABILITY WAS STILL I N EXISTENCE. THE LIABILITIES HAVE BEEN CARRIED FORWARD FOR MANY YEARS. THE FACT REMAI NS THAT THE LIABILITIES HAVE NOT BEEN WRITTEN OFF FROM THE BOOKS OF ACCOUNT OF T HE ASSESSEE. AO HAS OBSERVED THAT THE ASSESSEE HAS ALREADY REDUCED IN C OMPUTING THE INCOME OF THE EARLIER YEARS BY DEBITING EXPENDITURE OF RS.75, 000/- UNDER THE HEAD DISPUTED DAMAGES AND LOSSES THIS AMOUNT IS REFLEC TED IN THE BALANCE-SHEET AS SUNDRY CREDITORS WHICH SHOW THAT THE ASSESSEE HA S SNOT PAID THE SAID AMOUNT SO FAR. IT IS THEREFORE SAFELY CONCLUDED THA T LIABILITY IS DEFRAY EXPENDITURE SEIZED TO EXIST. HOWEVER, THE LD. CIT(A ) CONFIRMED THE ADDITION ON THE BASIS THAT NATURE OF LIABILITY IS NOT CLEAR. WE FIND THAT THE NATURE OF LIABILITY WAS NOT AT ALL DISPUTED AND AO HAS DISCUSSED THE SA ME. BUT MADE ADDITION ON THE GROUND THAT THE ASSESSEE HAD DEBITED THE EXPEND ITURE OF RS.75,000/- UNDER THE HEAD DISPUTED DAMAGES AND LOSES THIS AM OUNT IS REFLECTED IN THE BALANCE-SHEET AS SUNDRY CREDITORS THAT SHOWN THE AS SESSEE HAD BEEN PAID AMOUNT SO FAR. THEREFORE, ON THE BASIS OF NON-PAYME NT OF THE AMOUNT, THE AO CONCLUDED THAT THE LIABILITY TO DEFRAY EXPENDITURE SEIZE TO EXIST. THE REASONING GIVEN BY THE AUTHORITIES BELOW IS NOT ACCEPTABLE IN VIEW OF THE ORDER OF HONBLE CO-ORDINATE BENCH, WHERE IN THE CASE OF NITIN S GARG (SUPRA), IT IS HELD THAT MERELY BECAUSE THE LIABILITY WAS OUTSTANDING FOR LA ST MANY YEARS, IT COULD NOT BE INFERRED THAT SAID LIABILITY HAD SEIZED TO EXIST . IT WAS ALSO FACT THAT ASSESSEE HAD NOT WRITTEN OFF THE OUTSTANDING LIABILITY IN TH E BOOKS OF ACCOUNT AND THE OUTSTANDING LIABILITY WAS STILL IN EXISTENCE WHICH WOULD PROVE THAT THE ASSESSEE ACKNOWLEDGED HIS LIABILITY AS PER BOOKS OF ACCOUNT SECTION 41(1) OF THE ACT IS ATTRACTED WHEN THERE IS A CESSATION OR REMISSION OF A TRADING LIABILITY. THE AO SHALL HAVE TO PROVE THAT THE ASSESSEE HAS OBTAINED THE BENEFIT IN RESPECT OF ITA NO.1856/AHD/11 & 952/AHD/12 A.YS. 07-08 & 08- 09 SOFTOUCH HYGIENE PRODUCTS (MKT) LTD. V. ITO WD-8(2) ABD PAGE 8 SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSI ON THEREOF. MERELY BECAUSE THE ASSESSEE OBTAINED BENEFIT OF DEDUCTION IN THE E ARLIER YEARS AND BALANCES WERE CARRIED FORWARD IN SUBSEQUENT YEAR WOULD NOT P ROVE THAT TREATING LIABILITY OF THE ASSESSEE HAVE BECOME NON-EXISTENT. RESPECTFU LLY FOLLOWING THE ORDER OF HONBLE CO-ORDINATE BENCH RENDERED IN THE CASE OF NITIN S GARG (SUPRA), THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. THE AO IS D IRECTED TO DELETE THE ADDITION OF RS.75,000/- MADE U/S. 41(1) OF THE ACT. 12. NEXT GROUND IS AGAINST THE CONFIRMATION OF DISA LLOWANCE OF RS.7,61,689/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTERES T FREE ADVANCE. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LD. CIT(A) FOLLOWED HIS DECISION ON THIS ISSUE FOR A.Y. 2007-08. SINCE WE HAVE DECIDED THIS ISSUE IN RESPECT OF A.Y. 2007-08 AND THERE IS NO CHANGE ON THE FACTS AN D CIRCUMSTANCES OF THE CASE ARE POINTED OUT BY THE LD. DR. THEREFORE, TAKI NG A CONSISTENT VIEW THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOLLOWING OU R DECISION IN ITA NO.1856/AHD/2011 IN PARA-5 OF THIS ORDER. 13. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. 14. IN COMBINED RESULT, ASSESSEES APPEALS IN ITA NO.18 56/AHD/2011 IS ALLOWED AND THAT OF ITA NO.952/AHD/2012 IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.MOHAN ALANKAMONY) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, (TRUE COPY) *DKP #$%- 24/09/2012 ,-. / ' ' ' ' 001 001 001 001 21 21 21 21 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT ITA NO.1856/AHD/11 & 952/AHD/12 A.YS. 07-08 & 08- 09 SOFTOUCH HYGIENE PRODUCTS (MKT) LTD. V. ITO WD-8(2) ABD PAGE 9 2. / RESPONDENT 3. $.$05 6 / CONCERNED CIT 4. 6- / CIT (A) 5. 1 89 0005, 05!, ,-. / DR, ITAT, AHMEDABAD 6. 9<= >? / GUARD FILE. BY ORDER/ ' , /TRUE COPY/ @/, $ 05!, ,-. / STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 19/09 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 19/09, 20/09 4) DATE OF CORRECTION 21/09, 21/09 5) DATE OF FURTHER CORRECTION 6) DATE OF INITIAL SIGN BY MEMBERS 21/09 7) ORDER UPLOADED ON 24/09 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 24/09