ACIT,Circle-36, Kolkata, Kolkata V. M/s Soorajmull Nagarmull, Kolkata

ITA 1907/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5851 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 29-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: AKKAL DUDHWEWAL
• Keywords: Period of limitation; Tangible material; Bad and doubtful debts; Onus to prove
• Section: 143(3); 133(6); 131; 68; 148

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI, M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 1907 / KOL / 20 16 ASSESSMENT YEAR :2001-02 ACIT, CICLE-36, AAYAKAR BHAWAN, POORVA, 8 TH FLOOR, 110, SHANTIPALLY, KOLKATA-107 V/S . M/S SOORAJMULL NAGARMULL, 8 B.B.D. BAG (EAST), KOLKATA-700001 [ PAN NO.AAAAB 0601 N ] /APPELLANT .. / RESPONDENT /BY APPELLANT MD. USMAN CIT-DR /BY RESPONDENT SHRI AKKAL DUDHWEWAL, FCA /DATE OF HEARING 26-06-2018 /DATE OF PRONOUNCEMENT 20-07-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2001-02 C ALLS INTO QUESTION CORRECTNESS OF THE COMMISSIONER OF INCOME TAX (APPE ALS)-10, KOLKATAS ORDER DATED 08.07.2016, PASSED IN CASE NO.142/CIT(A)/10/C IR-36/15-16/KOL, REVERSING ASSESSING OFFICERS ACTION INVOKING SECTI ON 41(1) AFTER TREATING THE ASSESSEES LIABILITY AMOUNT OF 12,97,47,322/- TO BE A CASE OF CESSATION OF LIABILITY ASSESSMENT ORDER DATED 30.03.2015, INVOLV ING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. WE NOTICE AT THE OUTSET THAT CIT(A)S DETAILED DISCUSSION ON THE ABOVE SOLE ISSUE OF CESSATION OF LIABILITY U/S 41(1)(A) O F THE ACT READS AS FOLLOWS:- 06. DECISION: 1. I HAVE CAREFULLY CONSIDERED THE ACTION OF THE LD .AO IN ADDING AN AMOUNT OF RS.12,97,47,322/- U/S. 441(1) OF THE INCOME TAX ACT , 1961, ON GROUNDS THAT THERE WAS A CESSATION OF LIABILITY ON THE PART OF THE ASS ESSEE FOR THE IMPUGNED AMOUNT, AND THAT THEREFORE IT WOULD CONSTITUTE PART OF THE INCO ME OF THE ASSESSEE-FIRM. IT IS TO BE OBSERVED THAT THIS IS THE 2 ND ROUND OF THE ASSESSMENT ORDER FOR THE A.Y 2001-02, AND ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 2 IN THE FIRST ROUND THE MATTER HAD TRAVELLED TO THE HON'BLE ITAT. BRIEFLY, THE FACTS ARE THAT THE APPELLANT IS A VERY OLD PARTNERSHIP FIRM A ND HAS BEEN CARRYING SUNDRY CREDITORS OVER AN EXTENDED PASSAGE OF TIME. 2. FOR THE SUBJECT ASSESSMENT YEAR, 2001-02 THE APP ELLANT-FIRM HAD FILED RETURN OF INCOME U/S 139(2) ON 30 TH JULY, 2001, DECLARING LOSS OF RS.18,740/-. THE APP ELLANT- FIRM THEREAFTER RECEIVED NOTICE U/S 148 OF THE INCO ME TAX ACT, 1961, DATED 21.11.2006 REOPENING THE ASSESSMENT FOR AY 2001-02. IN RESPONSE THE APPELLANT FILED A RETURN OF INCOME DECLARING LOSS OF RS.83,92 3/-. THEREAFTER, THE LD.AO FRAMED THE ASSESSMENT U/S 148 ON 31.12.2007, AT AN INCOME OF RS.13,02,16,901/-. IN THE AFORESAID ORDER THE LD.AO HAD MADE ADDITION ON ACCO UNT OF SECTION 41(L) AMOUNTING TO RS.12,97,47,322/- AND DISALLOWED BAD DEBTS OF RS .5,63,402/-. AGAINST THE SAID ORDER, THE APPELLANT PREFERRED AN APPEAL BEFORE THE LD. CIT(A)-XX. KOLKATA. IN THE APPELLATE ORDER PASSED U/S 250 DATED 31.03.2008, TH E LD. C!T(A: DELETED BOTH THE ADDITIONS MADE BY THE AO. AGAINST THIS APPELLATE OR DER, THE DEPARTMENT PREFERRED AN APPEAL BEFORE THE HON'BLE ITAT, KOLKATA. THE SAID A PPEAL WAS ADJUDICATED BY THE 'C' BENCH OF HON'BLE ITAT, KOLKATA ON 04.03.2014 IN ITA NO. 1326/KOL/2008 . AFTER GIVING CONSIDERATION TO THE ARGUMENTS PUT FORTH BY THE REVENUE AS WELL AS THE APPELLANT, THE HON'BLE ITAT SET ASIDE THE MATTER BA CK TO THE FILE OF THE ASSESSING OFFICER. I HAVE THEREFORE CAREFULLY EXAMINED THE AP PLICABLE LEGAL PROVISIONS AND THE JUDICIAL DECISIONS AVAILABLE ON THE SUBJECT AND REL IED UPON BY BOTH, THE LD.AO AND THE LD.A.RS FOR THE APPELLANT-FIRM. AS SUCH IT IS THE S ECOND ROUND OF LITIGATION AND THE SCOPE OF THE PRESENT PROCEEDINGS ARE RESTRICTED TO DIRECTIONS CONTAINED IN THE APPELLATE ORDER OF THE HON'BLE TRIBUNAL. THE RELEVA NT OBSERVATIONS OF THE HON'BLE ITAT, KOLKATA ARE AS UNDER: [QUOTE] 'THE QUESTION ARISES UNDER SEC. 41(1)(A), ON WHOM T HE ONUS LIES TO PROVE WHETHER THE LIABILITY HAS BEEN REMITTED OR CEASED. THE AO, IN THIS CASE, HAS MADE INQUIRY AND GIVEN OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE EVIDENCE TO PROVE THAT THE LIABILITY STILL EXISTS BUT NO SUC H CONFIRMATION OR EVIDENCE WERE PRODUCED BY THE ASSESSEE. IN CASE THE ONUS LIES ON THE REVENUE, THEN THE' REVENUE HAS TO PROVE AND BRING EVIDENCE THAT THE IN TEREST PAYABLE OUTSTANDING IN THE BOOKS GOT REMITTED OR CEASED DUR ING THE YEAR. IN CASE, THE ONUS LIES ON THE ASSESSEE, THEN THE ASSESSEE HAS TO PROVE THAT THERE IS NO REMISSION OR CESSATION OF THE INTEREST PAYABLE LIAB ILITY DURING THE IMPUGNED ASSESSMENT YEAR. IT IS NOT DENIED THAT THE LIABILIT Y RESPECTING THE INTEREST PAYABLE IS IN EXISTENCE FOR OVER 3 DECADES AND UNDE R THESE FACTS, THE IMMEDIATE QUESTION THAT WILL ARISE IN THE MIND OF A N ORDINARY PERSON IS HOW THE LIABILITY FOR THE INTEREST WAS NOT PAID FOR OVER 30 YEARS, WHETHER THE LIABILITY COULD BE REGARDED TO REMAIN IN EXISTENCE OR NOT AND WHETHER THE PARTIES TO WHOM THE INTEREST IS PAYABLE BY THE ASSESSEE ARE ST ILL SURVIVING OR NOT. IN OUR OPINION, ALL THESE QUESTIONS ARE MUCH MORE RELEVANT TO COME TO A CONCRETE FINDING WHETHER IT CAN BE SAID THAT THERE IS REMISS ION OR CESSATION OF INTEREST PAYABLE LIABILITY. WE NOTED THAT THE CIIT (A) HAS D ELETED THE ADDITION MAINLY ON THE BASIS THAT THE AO HAS NOT BROUGHT ANY MATERIAL OR RECORD TO SHOW THAT THERE HAD BEEN A REMISSION OR CESSATION OF THE LIAB ILITY AND BENEFIT HAS BEEN GRANTED TO THE ASSESSEE BY THE LOAN CREDITOR IN ANY MODES OF REMISSION WITHOUT DECIDING THE ISSUE FIRST WHETHER THE ONUS L IES ON THE AO TO PROVE THE REMISSION OR CESSATION OF THE LIABILITY DURING THE YEAR OR THE ONUS LIES ON THE ASSESSEE TO PROVE THAT THE LIABILITY IS IN EXISTENC E DURING THE YEAR. IF THE ONUS LIES ON THE AO, THEN THE AO WAS DUTY BOUND TO PROVE THAT THERE IS REMISSION OR CESSATION OF THE LIABILITY DURING THE YEAR. IN O UR OPINION, WHETHER THE LIABILITY IS IN EXISTENCE OR NOT, THE BURDEN OF PROVING IS ON THE ASSESSEE AND ASSESSEE HAS TO BRING EVIDENCE ON RECORD WHICH MAY PROVE THA T THE LIABILITY IS IN ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 3 EXISTENCE DURING THE ASSESSMENT YEAR EVEN IF IT IS BARRED BY LIMITATION. IT CANNOT BE WITHIN THE DOMAIN OF THE AO TO PROVE THAT THE LIABILITY HAS CEASED OR REMITTED DURING THE YEAR EVEN IF THE ASSESSEE HAS N OT FILED ANY CONFIRMATION OR EVIDENCE TO PROVE THE EXISTENCE OF THE LIABILITY . WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES, SET A SIDE THE ORDER OF CIT (A) AND RESTORE THIS ISSUE TO THE FILE OF AO WITH THE DIREC TION THAT THE AO SHALL RE- EXAMINE THIS ISSUE AFRESH AND GIVE PROPER AND SUFFI CIENT OPPORTUNITY TO THE ASSESSEE TO PROVE THAT THE INTEREST PAYABLE WHICH A RE MORE THAN 3 DECADES OLD ARE STILL LIABILITY IN PRAESENTI. THE AO IS ALS O DIRECTED THAT WHILE DECIDING THE ISSUE AFRESH, TO LOOK INTO THE RELEVANT PROVISI ONS OF THE INCOME TAX ACT AS WELL AS THE RELEVANT CASE LAWS ON THE ISSUE FOR ASC ERTAINING ON WHOM THE BURDEN TO PROVE LIES U/S 41.(1.)(A). IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ' [UNQUOTE] 3. IN THE IMPUGNED ORDER, IT IS TO BE SEEN WHETHER BOTH PARTIES, AS REQUIRED BY THE HON'BLE TRIBUNAL CARRIED OUT THESE DIRECTIONS APPRO PRIATELY AND ONLY THEREAFTER THE LD.AO COULD HAVE SUSTAINED THE ADDITION U/S 41(1) A S MADE IN THE ORIGINAL ASSESSMENT U/S 147/143(3). IN THE PRESENT CASE THE FACTS ON RECORD BRING FORTH THAT IN THE ASSESSEE'S BALANCE SHEET, IT HAD DISCLOSED OUTS TANDING CURRENT LIABILITIES OF RS.12,97,47,322/- WHICH WERE ADDED BY THE AO U/S 41 (1) OF THE ACT ON THE GROUND THAT THERE WAS CESSATION OR REMISSION OF LIABILITY. THE ADDITION SO MADE IN THE ORIGINAL ORDER WAS DELETED BY FIRST APPELLATE AUTHORITY ON T HE GROUND THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE LD.AO TO DEMONSTRATE THAT THE ASSESSEE-APPELLANT WAS ACTUALLY GRANTED REMISSION OF THE IMPUGNED LIABILIT IES. HOWEVER WHEN THE MATTER TRAVELLED BEFORE THE HON'BLE TRIBUNAL, IT ISSUED TH E DIRECTIONS AS HAVE BEEN INCORPORATED IN THE ORDER, AND THESE WERE REQUIRED TO BE CARRIED OUT BOTH BY THE ASSESSEE-APPELLANT, AS WELL AS THE LD.AO. I FIND TH AT IN THE FIRST INSTANCE THE ASSESSEE WAS DIRECTED TO DEMONSTRATE WITH EVIDENCE THAT THERE EXISTED VALID LIABILITY AND THESE WERE PROPERLY ACCOUNTED IN ITS BOOKS OF A CCOUNTS. FROM THE SUBMISSIONS MADE BY THE LD. A.R BEFORE THE AO AS ALSO IN THIS F ORUM, IT IS TO BE OBSERVED THAT THE APPELLANT HAD FURNISHED THE COMPLETE DETAILS OF OUT STANDING LIABILITIES AS ON 31.03.2001 AMOUNTING TO RS.12,97,47,322/-. THE DETA ILS FURNISHED INTER-ALIA INCLUDED THE NAMES AND COMPLETE ADDRESSES OF THE CREDITORS A ND THE AMOUNTS DUE TO EACH OF THEM. THE ASSESSEE ALSO FURNISHED COPIES OF THE BAL ANCE SHEET OF THE ASSESSEE-FIRM AND THE DETAILED LIST OF SUNDRY CREDITORS FOR THE A Y.S 2000-01, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-1 2, 2012-13 & 2013-14. WITH REFERENCE TO THESE DETAILS, THE LD. A.R OF THE ASSE SSEE DEMONSTRATED THAT THE LIABILITY OF RS.12,97,47,322/- WHICH IS THE SUBJECT MATTER OF DISPUTE IN THE IMPUGNED PROCEEDINGS WAS CONSISTENTLY DISCLOSED BY THE ASSES SEE ON ITS LIABILITY SIDE AND BY INCLUDING THE AMOUNTS DUE TO THE SAID PARTIES IN IT S FINANCIAL STATEMENTS FILED WITH THE TAX AUTHORITIES THE ASSESSEE HAD ACKNOWLEDGED THAT THE LIABILITIES WERE SUBSISTING AND OUTSTANDING. IN MAKING THE COMPLETE DECLARATION IN THE FORM OF LIABILITIES SHOWN IN THE BALANCE SHEET, THE ASSESSEE WAS ACKNOWLEDGING T HAT IT HAD OBLIGATION TO PAY THESE AMOUNTS TO THE SUNDRY CREDITORS NAMED IN THE FINANCIAL STATEMENTS AND THE LIABILITIES HAD NOT CEASED TO EXIST. FROM THE PERUS AL OF THE ASSESSMENT ORDER AS ALSO FROM THE DETAILS AVAILABLE IN RECORD, I FIND THAT T HE ASSESSEE HAD NOT ONLY FURNISHED THE DETAILED LIST OF SUNDRY CREDITORS OUTSTANDING A S ON 31.03.2001, BUT THE ASSESSEE HAD ALSO FILED LETTERS OF CONFIRMATIONS ISSUED BY T HE PARTIES WHEREIN THEY HAD CONFIRMED THE BALANCES SHOWN OUTSTANDING AS PER ASS ESSEE'S BOOKS OF ACCOUNTS. I THUS FIND THAT AS PER THE BALANCE SHEETS OF THE ASS ESSEE FOR THE IMMEDIATE PRECEDING YEAR AS ALSO FOR THE RELEVANT ASSESSMENT YEAR, AND FOR THE SUBSEQUENT YEARS TILL AY 2013-14, THE ASSESSEE HAD DECLARED THE DETAILS OF O UTSTANDING LIABILITIES DUE TO SUNDRY CREDITORS. BESIDES DISCLOSING THE LIABILITIE S IN ANNUAL FINANCIAL STATEMENTS, THE ASSESSEE-FIRM HAD SUPPORTED EXISTENCE OF LIABILITIE S BY PRODUCING BALANCE ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 4 CONFIRMATIONS OF THE PARTIES FOR THE YEAR ENDED 31. 03.2001. THE LD. A.R FOR THE ASSESSEE WAS DIRECTED TO FILE COPIES OF THE ASSESSM ENT ORDERS FOR THE YEARS PRIOR TO AY 2000-01 TO SUBSTANTIATE THAT IN THE EARLIER YEAR S WHEN THE LIABILITIES ACCRUED, NO ADVERSE INFERENCE WAS DRAWN BY ANY OF THE AOS UNDER SECTION 41(1). IN RESPONSE THE LD. A.R OF THE ASSESSEE PRODUCED COPIES OF THE ASSE SSMENT ORDERS FOR AYS 1998-99, 2000-01, 2002-03 AND 2003-04. FROM THESE ASSESSMENT ORDERS IT IS APPARENT THAT EVEN THOUGH THE SAME SET OF CREDITORS HAD APPEARED IN THE APPELLANT'S BOOKS OF ACCOUNTS UPTO 31.03.2000, THE LD. AO HAD NOT DISBEL IEVED OR DOUBTED THE GENUINENESS OF THE LIABILITI.ES AND ACCORDINGLY NO INFERENCE WITH REGARD TO REMISSION OR CESSATION OF LIABILITY WAS DRAWN. ALL THESE YEAR S, HAD BEEN SUBJECTED TO SCRUTINY AND ORDERS WERE PASSED U/S 143(3) OF THE INCOME TAX ACT. ON THE OTHER HAND, THESE ASSESSMENT ORDERS DEMONSTRATED THAT EVEN THOUGH THE SAME SET OF CREDITORS APPEARED IN THE ASSESSEE'S BOOKS, THE LD. AO HAD AC CEPTED THESE LIABILITIES TO BE GENUINELY OUTSTANDING AND DUE TO THE CREDITORS, AS LISTED. SIMILARLY IN THE SUBSEQUENT ASSESSMENTS ALSO THE AO NEVER DISPUTED NOR DISBELIE VED THE ASSESSEE'S TRANSACTIONS WITH THESE SUNDRY CREDITORS WHEN THE ASSESSEE HAD M ADE PAYMENTS AGAINST OUTSTANDING BALANCES DUE AS ON 31.03.2001. I ALSO F IND THAT EVEN THOUGH THE SAME SET OF SUNDRY CREDITORS WERE SHOWN OUTSTANDING AS O N 31.03.2004, IN THE ASSESSMENT FRAMED U/S 143(3) FOR AY 2004-05, THE LD.AO HAD NOT MADE ANY ADVERSE COMMENT ABOUT THE GENUINENESS OF THE OUTSTANDING LIABILITIE S. AN ASSESSEE IN THE ORDINARY COURSE OF ITS DEALING WITH THE CREDITORS IS EXPECTE D TO MAINTAIN THE BASIC RECORDS IN SUPPORT OF THE TRANSACTIONS WITH THE PARTIES. WHEN CALLED UPON TO SUBSTANTIATE THE TRANSACTION, THE ASSESSEE IS REQUIRED TO FURNISH NA MES AND ADDRESSES AND THE DETAILS OF FINANCIAL TRANSACTIONS CONDUCTED. FURTHER THE AS SESSEE MAY ALSO SUPPORT THE TRANSACTIONS BY PRODUCING THE PARTY CONFIRMATIONS. THEREFORE WITH REFERENCE TO THE SET OF FACTS AND DOCUMENTARY EVIDENCES AS DISCUSSED, I AM INCLINED TO OBSERVE AND HOLD THAT THE ASSESSEE HAD DISCHARGED ITS ONUS OF PROVIN G THAT AS OF 31.03.2001, THAT THE ASSESSEE HAD SUBSISTING LIABILITY TO PAY RS.12,97,4 7,322/- TO SUNDRY CREDITORS; DETAILS WHEREOF WERE NOT ONLY FURNISHED BEFORE THE LD.AO BU T THE ASSESSEE HAD ALSO FURNISHED CONFIRMATIONS FROM THESE CREDITORS. IN TH E LIGHT OF THE AFORESAID FACTS, I THEREFORE HOLD THAT THE ASSESSEE HAD DULY DISCHARGE D THE ONUS CAST UPON IT OF PROVING THE FACT THAT THE ASSESSEE HAD SUBSISTING AND GENUI NE OBLIGATION TO PAY RS.12,97,47,322/- TO THE SUNDRY CREDITORS. THE DIRE CTIONS CONTAINED IN THE ORDER HON'BLE ITAT, KOLKATA WHICH THE ASSESSEE WAS REQUIR ED TO COMPLY WERE THUS SATISFACTORILY CARRIED OUT BY THE ASSESSEE AND THER EFORE THE ONUS OF CARRYING OUT THE OTHER DIRECTIONS OF THE HON'BLE ITAT, KOLKATA SHIFT ED ON THE REVENUE, MORE SPECIFICALLY THE LD A.O. 4.FROM PERUSAL OF THE ASSESSMENT ORDER, IT IS OBSER VED THAT THE LD. AO HAD ALSO CARRIED OUT ENQUIRIES AND INVESTIGATION INTO THE DE TAILS OF CREDITORS AS FURNISHED BY THE APPELLANT. IT IS NOTED THAT THE LD. AO HAD IDENTIFI ED THE PARTIES WHO HAD LARGE OUTSTANDING SUMS WHICH TOGETHER ACCOUNTED FOR MORE THAN 850/0 OF THE OUTSTANDING LIABILITY CONSIDERED AS INCOME U/S 41(1) AND HAD IS SUED SUMMONS U/S 131 ON SAMPLE BASIS TO SIX CREDITORS. FROM THE IMPUGNED ORDER IT IS OBSERVED THAT ALL THE SUMMONS WERE SERVED UPON ALL THE SIX CREDITORS. THE SUMMONS WAS ALSO COMPLIED WITH BY FOUR CREDITORS. THE REMAINING TWO CREDITORS DID NOT PERS ONALLY APPEAR BUT FURNISHED THE DETAILS AS SOUGHT BY THE LD.AO BY WAY OF A LETTER W HICH WAS SUBMITTED IN RECEIPT / BY POST. THE STATEMENTS WHICH WERE RECORDED ON OATH BY THE LD.AO FROM THE FOUR CREDITORS HAVE BEEN EXTENSIVELY REPRODUCED IN THE A SSESSMENT ORDER AT PAGES 17 TO 24. AFTER CAREFULLY PERUSING THE STATEMENTS U/S 131 OF THE INCOME TAX ACT, 1961, IT IS TO BE NOTED THAT THAT NONE OF THE CREDITORS DENIED THE, FACTS THAT THE DEBTS WERE DUE BY THE APPELLANT. NONE OF THE PERSONS ADMITTED OR S TATED THAT THE LIABILITIES DUE TO THEM HAD CEASED TO EXIST OR STOOD REMITTED. IN THE SAID CONTEXT, IT IS TO BE NOTED THAT THE DIRECTORS OF THE CREDITOR COMPANIES WHO HAD APP EARED BEFORE THE LD.AO WERE APPOINTED ON THE BOARD OF THE COMPANIES MUCH AFTER F.Y. 2000-01, AND THEREFORE ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 5 THEY HAD EXPRESSED THEIR INABILITY TO EXPLAIN THE F INANCIAL TRANSACTIONS OF THEIR RESPECTIVE COMPANIES CONDUCTED A FEW YEARS BACK IN THE F.Y 2000-01. BASED ON SUCH STATEMENTS THEREFORE THE LD. AO HAD INFERRED T HAT THE INABILITY OF THE DIRECTORS OF THE CREDITOR COMPANIES TO EXPLAIN THE TRANSACTIONS WITH THE APPELLANT IN F.Y. 2000-01 ESTABLISHED THAT THE LIABILITIES HAD CEASED TO EXIS T IN TERMS OF SECTION 41(1) OF THE ACT. IN THIS FACTUAL MATRIX, IT IS OBSERVED THAT, FIRSTL Y, THE LD. AO HAD ATTEMPTED TO COMPLY WITH THE DIRECTIONS OF THE ITAT, KOLKATA AS WHEN TH E APPELLANT HAD DISCHARGED ITS ONUS OF ESTABLISHING THAT THE LIABILITIES OF RS.12, 97,47,322/- WERE GENUINE AND SUBSISTING AS ON 31.03.2001, THE LD.AO CONDUCTED EN QUIRIES FROM SUCH CREDITORS TO ASCERTAIN WHETHER THE LIABILITIES ACTUALLY EXISTED OR NOT. HOWEVER ON CAREFUL PERUSAL OF STATEMENTS U/S 131 AND THE FACTS AS AVAILABLE ON RE CORD, I NOTE THAT THE CONCLUSIONS DRAWN BY THE LD.AO BASED ON THE STATEMENTS RECORDED U/S 131 WAS WITHOUT PROPER AND COMPLETE CONSIDERATION OF THE CIRCUMSTANCES EMI NENT. FROM THE STATEMENTS U/S 131, IT IS OBSERVED THAT NONE OF THE CREDITORS HAD DENIED THE FACT THAT THE DEBTS WERE NOT OUTSTANDING NOR HAD THEY STATED THAT THE LIABIL ITIES DUE BY THE APPELLANT HAD CEASED TO EXIST. IT IS FURTHER MATERIAL TO NOTE THA T THE LETTERS OF CONFIRMATIONS ISSUED BY THESE PARTIES WERE FILED BEFORE THE LD.AO, GENUINEN ESS OF WHICH WAS NEVER DENIED OR DISPUTED BY THE DIRECTORS WHEN THEY WERE EXAMINED O N OATH BY THE LD.AO. THE DIRECTORS WHO HAD APPEARED ON BEHALF OF THE CREDITO R COMPANIES HAD ONLY EXPRESSED THEIR INABILITY TO EXPLAIN THE TRANSACTIO NS WHICH WERE CONDUCTED WITH THE APPELLANT DURING FY 2000-01 SINCE THEY WERE NOT ON THE BOARD OF DIRECTORS BACK THEN AND THAT SUCH OLD BOOKS OF ACCOUNTS WERE NOT AVAILA BLE WITH THEM. TAKING INTO ACCOUNT THE FACT THAT THESE DIRECTORS WERE NOT THE DIRECTORS DURING THE RELEVANT PREVIOUS YEAR AND ALSO THAT MORE THAN 15 YEARS HAD ELAPSED SINCE THEN, I FIND MYSELF IN AGREEMENT WITH THE CONTENTIONS OF THE LD. A.RS F OR THE APPELLANT THAT THE INABILITY OF THE DIRECTORS TO EXPLAIN THE TRANSACTIONS CONDUCTED BY THEIR COMPANIES WITH THE APPELLANT IN F.Y 2000-01 COULD NOT BE VIEWED ADVERS ELY. I ALSO NOTE THAT EVEN UNDER THE COMPANIES ACT, 1956; THE CORPORATE CREDITORS WE RE REQUIRED TO MAINTAIN AND PRESERVE THE BOOKS OF ACCOUNTS AND OTHER RECORDS OF THEIR BUSINESS TRANSACTIONS FOR PERIOD NOT EXCEEDING 8 YEARS AND THEREFORE IN VIEW THESE LEGAL PROVISIONS IF THE DIRECTORS OF THE CREDITOR COMPANIES EXPRESSED THEIR INABILITY TO PRODUCE THE BOOKS OF THE RELEVANT YEAR OR PROVIDE EXPLANATIONS WITH REGA RD TRANSACTION OF FY 2000-01 THEN NO ADVERSE VIEW APPEARS TO BE PERMISSIBLE IN LAW. T HE MERE FACT THAT THE PERSONS WHO HAD APPEARED WERE NOT AWARE OF THE TRANSACTIONS WHICH HAD OCCURRED MORE THAN 15 YEARS BACK CANNOT BE TAKEN AS AN ADMISSION BY TH EM THAT THE LIABILITIES DUE BY THE APPELLANT HAD CEASED OR THEY WERE REMITTED BY THE C REDITORS. I THEREFORE, HOLD THAT THE CONCLUSIONS DRAWN BY THE LD.AO FROM THE STATEMENTS U/S 131 WAS WHOLLY UNJUSTIFIED. ON THE CONTRARY, I FIND THAT THE ENQUIRIES CONDUCTE D BY THE LD.AO ACTUALLY ADVANCE THE CASE FOR THE APPELLANT-ASSESSEE. ADMITTEDLY THE SUMMONS U/S 131 WERE SERVED UPON THE CREDITORS AND WERE ALSO COMPLIED WITH. THE DIRECTORS OF THE CREDITOR COMPANIES HAD PERSONALLY APPEARED AND THEIR STATEME NTS ON OATH WAS RECORDED. NONE OF THE CREDITORS HAD DENIED THE LIABILITIES DU E BY THE APPELLANT NOR HAD THEY ADMITTED THAT THEY HAD GRANTED REMISSION OF THE AMO UNTS DUE FROM THE APPELLANT EITHER IN FY 2000-01 OR AT ANY TIME. THESE FACTS TH EREFORE GO ON TO POINT THAT NO INFERENCE COULD HAVE BEEN DRAWN BY THE LD. AO TO TH E EFFECT THAT THE CREDITORS OF THE APPELLANT WHICH WERE BROUGHT FORWARD FROM THE EARLI ER YEAR HAD GRANTED ANY REMISSION OR CESSATION OF LIABILITY DURING FY 2000- 01, SO AS TO CONSTITUTE AS BENEFIT CONTEMPLATED IN SECTION 41(1) OF THE ACT. THEREFORE FROM THE FACTS AS WERE GATHERED IN THE COURSE OF ASSESSMENT PROCEEDINGS, I FIND THA T THE MATERIAL COLLECTED BY THE LD.AO SUFFICIENTLY INDICATE THAT THE IMPUGNED LIABI LITIES OF RS.12,97,47,322/- AS REFLECTED IN THE BALANCE SHEET FOR FY 2000-01 HAD N OT CEASED TO EXIST. FOR THE REASONS SET OUT IN THE FOREGOING, AND IN LIGHT OF T HE AFORESAID FACTS AS DISCUSSED, I HOLD THAT ALTHOUGH THE LD. AO HAD ENQUIRED INTO THE LIABILITIES AS REFLECTED BY THE APPELLANT AS OUTSTANDING AS ON 31.03.2001, BUT THE ENQUIRIES DID NOT IN ANY MANNER SUGGEST OR PROVE THAT THE LIABILITIES HAD CEASES TO EXIST OR THAT THE SUNDRY CREDITORS ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 6 HAD GRANTED REMISSION OF THE LIABILITIES TO THE APP ELLANT DURING THE RELEVANT PREVIOUS YEAR SO AS TO ASSESS THE INCOME UNDER THE DEEMING P ROVISIONS OF SECTION 41(1) OF THE INCOME TAX ACT. 5. FOR THE REASONS DISCUSSED IN THE FOREGOING THER EFORE, THE SECOND DIRECTION OF THE HON'BLE ITAT, KOLKATA TO THE LD.AO WAS NOT FULLY CO MPLIED WITH AS NO CONVINCING MATERIAL OR IRREFUTABLE EVIDENCE WAS BROUGHT ON REC ORD TO PROVE THAT THE SUNDRY CREDITORS HAD GRANTED REMISSION OF THE AMOUNTS DUE OR OTHERWISE THE ASSESSEE'S LIABILITY DUE TO THE SUNDRY CREDITORS HAD CEASED BY 31.03.2001. 6. FURTHER, IT IS TO BE OBSERVED THAT IN THE APPEL LATE ORDER DATED 04.03.2014, THE HON'BLE ITAT HAD FURTHER DIRECTED THE LD.AO TO BRIN G ON RECORD CLINCHING EVIDENCE TO SHOW THAT THE LIABILITIES IF EXISTED, THE SAME WERE REMITTED DURING THE RELEVANT YEAR OR THERE WAS A CESSATION OF THE LIABILITY DURING THE F Y 2000-01 SO AS TO CONSTITUTE AS APPELLANT'S INCOME CHARGEABLE FOR AY 2001-02. IN TH IS REGARD I FIND THAT THE RELEVANT PROVISION OF THE ACT READS AS FOLLOWS: '(1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENT IONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR,- (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF S UCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAI NED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DE EMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHE THER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF W HICH LOSS OR EXPENDITURE WAS INCURRED BY THE FIRST-MENTIONED PER SON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRE D TO IN CLAUSE (E) BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAI NED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRU ING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR. EXPLANATION 1. -FOR THE PURPOSES OF THIS SUB-SECTIO N, THE EXPRESSION 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUDE THE R EMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENTIONE D PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OF THAT SUB-SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. ' A PLAIN READING OF SECTION 41(1) SHOWS THAT THE BEF ORE THE DEEMING PROVISIONS THEREOF ARE INVOKED, IT IS NECESSARY FOR THE LD. AO TO DEMONSTRATE WITH TANGIBLE MATERIAL AND ADMISSIBLE EVIDENCE THAT IN REALITY TH E CREDITORS HAD GRANTED REMISSION OF THE LIABILITIES AND SUCH REMISSION WAS GRANTED D URING THE RELEVANT PREVIOUS YEAR. SINCE SECTION 41(1) IS A DEEMING PROVISION OF THE A CT, IN TERMS OF WHICH CESSATION OR REMISSION OF A TRADING LIABILITY IS DEEMED TO BE AS SESSEE'S INCOME; THE ONUS IS ON THE REVENUE TO PROVE THAT IN FACT THERE WAS A REMISSION OR CESSATION OF THE LIABILITY AND SECONDLY SUCH REMISSION OR CESSATION OCCURRED DURIN G THE RELEVANT PREVIOUS YEAR CONSEQUENT TO WHICH THE INCOME ACCRUED TO THE ASSES SEE. FOR THIS REASON THE ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 7 HON'BLE ITAT IN ITS ORDER DATED 04.03.2014 HAD REQU IRED THE LD. AO TO BRING ON RECORD NOT ONLY THE FACT THE LIABILITY WAS REMITTED OR THERE WAS A CESSATION OF LIABILITY, BUT FURTHER THE AO WAS REQUIRED TO BRING ON RECORD SUFFICIENT MATERIAL TO PROVE THAT SUCH REMISSION OR CESSATION OF THE LIABILITY WAS GR ANTED OR OCCURRED DURING THE FY 2000-01 BEING THE RELEVANT PREVIOUS YEAR FOR AY 200 1-02. FROM A CAREFUL PERUSAL OF THE IMPUGNED ASSESSMENT ORDER, HOWEVER I FIND THAT THE LD. AO DID NOT BRING ON RECORD ANY EVIDENCE OR DOCUMENT WHICH PROVED THAT T HE ASSESSEE DERIVED THE BENEFIT IN THE FORM OF REMISSION GRANTED BY THE CREDITOR DU RING FY 2000-01 SO AS TO CONSTITUTE AS INCOME UNDER SECTION 41(1) OF THE ACT. 7. THE LAST DIRECTION OF THE HON'BLE ITAT, KOLKATA REQUIRED THE LD. AO TO CONSIDER THE SCOPE OF SECTION 41(1) OF THE INCOME TAX ACT, 1961 IN LIGHT OF THE PREVAILING JUDICIAL VIEWS ON THE SUBJECT. IT IS OBSERVED THAT IN THE IM PUGNED ORDER THE LD.AO REFERRED TO A SOLITARY JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS CHIPSOFT TECHNOLOGY (P) LTD (26 TAXMANN.COM 109) FOR JUSTIFYING INVOCAT ION OF S. 41(1) OF THE ACT. ON ANALYSIS OF THIS DECISION IT WAS NOTED THAT IN THE DECIDED CASE, UNPAID DUES OF THE EMPLOYEES HAD REMAINED OUTSTANDING IN ASSESSEE'S BO OKS FOR MORE THAN 7-8 YEARS. IT WAS THEREFORE THE REVENUE'S CASE THAT UNDER THE IND USTRIAL DISPUTES ACT, THE WORKMEN'S DUES HAD BECOME TIME-BARRED AND THEREFORE THERE WAS A CESSATION OF LIABILITY WITHIN THE MEANING OF SECTION 41(1) OF TH E ACT. ON THESE FACTS THEREFORE THE HON'BLE HIGH COURT HELD THAT THE UNPAID DUES OF EMP LOYEES, WHOSE RECOVERY HAD GOT TIME BARRED, LEGALLY CEASED TO BE THE EMPLOYER'S LI ABILITY AND THEREFORE IT WAS RIGHTLY ASSESSED AS INCOME BY THE AO U/S 41(1) OF THE ACT. APPLYING THE DECISION RENDERED BY THE DELHI HIGH COURT IN THE ABOVE SAID FACTUAL C ONTENT THE LD. AO JUSTIFIED THE ADDITION OF RS.12,97,47,322/- THE OUTSTANDING LIABI LITIES OF THE APPELLANT WHICH REMAINED OUTSTANDING FOR SEVERAL YEARS. THE LD. A.R S FOR THE APPELLANT, IN THE SUBMISSION IN APPEAL, HOWEVER, IN MY CONSIDERED VIE W HAVE CORRECTLY APTLY POINTED OUT THAT THIS DECISION WAS DISTINGUISHABLE SINCE TH E FACTS INVOLVED IN APPELLANT'S CASE WERE DIFFERENT. THE LD.A.RS SUBMITTED THAT IN THE C ASE BEFORE THE HON'BLE DELHI HIGH COURT, THE OUTSTANDING LIABILITIES WERE WORKMEN DUE S WHICH HAD BECOME TIME-BARRED UNDER THE RELEVANT LABOUR LAW. THESE FACTS ARE HOWE VER NOT INVOLVED IN THE APPELLANT' CASE. IT WAS EXPLAINED THAT THE OUTSTANDING LIABILI TIES DID NOT INVOLVE A SINGLE RUPEE OF LABOUR DUES. INSTEAD ALL THE LIABILITIES WERE ' TRADING LIABILITIES ' IT WAS EXPLAINED BY THE LD. A.RS THAT UNDER THE LIMITATION ACT, 1903 WH ICH GOVERNED SUCH LIABILITIES, SINCE THE APPELLANT HAD ACKNOWLEDGED THE LIABILITIES IN I TS BOOKS OF ACCOUNTS, THEY HAD NOT BECOME TIME-BARRED BUT REMAINED SUBSISTING AND OUTS TANDING. AFTER PERUSING THE JUDGMENT OF HON'BLE DELHI HIGH COURT AND THE FACTS INVOLVED THEREIN VIS-A-VIS THE FACTS OF THE APPELLANT'S CASE, I THEREFORE FIND MERIT IN THE CONTENTIONS OF THE LD.A.RS. I FIND THAT, IN THE PRESENT CASE, UNDENIABLY THE OUTSTANDI NG LIABILITIES ARE NOT WORKMEN'S DUES AND THEREFORE NOT GOVERNED BY INDUSTRIAL DISPU TE ACT. I FIND THAT UNLIKE THE FACTS INVOLVED IN THE JUDGMENT OF HON'BLE DELHI HIGH COUR T, THERE IS NO MATERIAL ON RECORD THAT THE LIABILITIES OF RS.12,97,47,322/- HAD BECOM E TIME-BARRED OR THERE WAS A CESSATION THEREOF IN THE RELEVANT YEAR. IN THE COUR SE OF APPELLATE HEARING, THE LD.A.RS FOR THE APPELLANT FILED COPY OF A DECISION OF HON'B LE ITAT, BANGALORE IN THE CASE OF ASST. CIT VS ALVARES & THOMAS (62 TAXMAN.COM 286) W HEREIN THIS PARTICULAR ASPECT WAS CONSIDERED BY THE HON'BLE TRIBUNAL. IN THE DECI DED CASE ALSO THE LIABILITIES OF THE ASSESSEE HAD REMAINED OUTSTANDING FOR SEVERAL YEARS . BEFORE THE HON'BLE TRIBUNAL THE REVENUE RELIED ON THE JUDGMENT OF THE DELHI HIG H COURT IN THE CASE OF CIT VS CHIPSOFT TECHNOLOGY (P) LTD (SUPRA) TO CLAIM THAT T HE LIABILITIES HAD BECOME TIME BARRED AND THEREFORE THERE WAS A CESSATION OF LIABI LITY. THE TRIBUNAL HOWEVER DISTINGUISHED THE SAID JUDGMENT AS IT FOUND THAT TH E LIABILITIES INVOLVED WERE NOT WORKMEN DUES BUT THEY WERE TRADING LIABILITIES AND THEREFORE THE JUDGMENT OF HON'BLE DELHI HIGH COURT HAD NO APPLICATION TO THE FACTS OF THE ASSESSEE'S CASE. THE RELEVANT FINDINGS OF THE ITAT, BANGALORE IN THIS REGARD WERE AS FOLLOWS: ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 8 'THE LEARNED DR PLACED RELIANCE ON A DECISION OF TH E ITAT MUMBAI IN THE CASE OF ITO V. SHAILESH D. SHAH [IT APPEAL NO. 7012 (MUM) OF 2010, DATED 11-12-2013}. WE HAVE PERUSED THE SAID DECISION AND WE FIND THAT WAS A CASE WHERE THE LIABILITY IN QUESTION WAS OUTSTANDING LAB OUR CHARGES IN THE CASE OF AN ASSESSEE ENGAGED IN THE BUSINESS OF CIVIL CONSTR UCTION. THE TRIBUNAL FOLLOWED THE DECISION OF THE HON'BLE DELHI HIGH COU RT IN THE CASE OF CIT V. CHIPSOFT TECHNOLOGY (P.) LTD. [2012J 26 TAXMANN.COM 109/210 TAXMAN 173 (DELHI) WHEREIN THE HON'BLE DELHI HIGH COURT ON THE FACTS OF THAT CASE WHERE THE OUTSTANDING LIABILITY WAS WAGES OF WORKMAN, EXP RESSED THE VIEW THAT IT WAS ILLOGICAL THAT WAGES OF WORKMAN WOULD REMAIN UN PAID FOR A LONG DURATION OF TIME AND THEREFORE HELD THAT THE LIABILITY SHOUL D BE CONSIDERED AS HAVING CEASED. THE PRESENT CASE IS A CASE OF TRADING LIABI LITY, WHICH CANNOT STAND ON THE SAME FOOTING AS DUE TO WORKMAN. WE ARE THEREFOR E OF THE VIEW THAT THE DECISION RELIED UPON BY THE LEARNED COUNSEL FOR THE REVENUE WOULD NOT BE OF ANY ASSISTANCE TO THE PLEA OF THE REVENUE. ' (EMPHASIS SUPPLIED) 8. I FURTHER NOTE THAT THIS JUDGMENT OF THE ITAT, B ANGALORE WAS THEREAFTER UPHELD BY THE KARNATAKA HIGH COURT & THE RELEVANT DECISION IS REPORTED AS CIT VS ALVARES BR. THOMAS (239 TAXMAN 456). THE RELEVANT FINDINGS OF H IGH COURT WERE AS FOLLOWS: '7. AS IN THE ABOVE REFERRED ORDER OF THE TRIBUNAL, THE RELEVANT PORTION OF SECTION 41 IS REPRODUCED, WE MAY NOT REPRODUCE THE SAME. BUT, THE RELEVANT ASPECT IS THAT, THERE ARE TWO REQUIREMENTS FOR INVO KING THE PROVISION OF SECTION 41. THE SINE QUA NON IS, THE REMISSION OR CESSATION OF THE TRADING LIABILITY AND THE ADDITIONAL REQUIREMENT IS, SOME BENEFIT IN RESP ECT OF SUCH TRADE LIABILITY IS TAKEN BY THE ASSESSEE. IF THE AFORESAID CONDITIONS ARE SATISFIED, THEN ONLY SECTION 41(1) COULD BE INVOKED BY THE ASSESSING OFF ICER. 8. EXAMINING OF THE FACTS OF THE PRESENT CASE REVEA LS THAT, IT IS NOT THE CASE OF THE DEPARTMENT THAT, ANY BENEFIT IN RESPECT OF SUCH TRADING LIABILITY WAS TAKEN BY THE ASSESSEE BUT, THE REVENUE CONTENDS THAT SINC E THE BURDEN WAS NOT DISCHARGED OF EXISTENCE OF THE LIABILITY, IT BE TRE ATED AS CESSATION OF THE LIABILITY AND THEREFORE, SECTION 41(1) COULD BE INVOKED. FURT HER, STAND OF THE REVENUE IS THAT, WHEN IN RESPECT OF DEBT IN QUESTION, CONFI RMATION WAS CALLED FOR, A LETTER WAS PRODUCED OF THE CREDITOR WITH ITS ADDRES S BUT, WHEN THE SAME WAS VERIFIED, THE REPORT WAS THAT, PARTY COULD NOT BE T RACED AND THEREFORE, IT WAS NOT VERIFIABLE. 9. IN OUR VIEW, EVEN IF WE ACCEPT THE CONTENTION OF THE REVENUE THAT THE PARTY COULD NOT BE TRACED AND THEREFORE DEBT COULD NOT BE VERIFIED THEN ALSO, BY NO STRETCH OF IMAGINATION CAN IT BE HELD THAT IT WOULD SATISFY THE REQUIREMENT OF CESSATION OF LIABILITY. IN LEGAL PARLANCE, MERELY B ECAUSE THE CREDITOR COULD NOT BE TRACED ON THE DATE WHEN THE VERIFICATION WAS MAD E, SAME IS NOT A GROUND TO CONCLUDE THAT THERE WAS CESSATION OF THE LIABILI TY. CESSATION OF THE LIABILITY HAS TO BE CESSATION IN LAW, OF THE DEBT TO BE PAID BY THE ASSESSEE TO THE CREDITOR. THE DEBT IS RECOVERABLE EVEN IF THE CREDI TOR HAS EXPIRED, BY THE LEGAL HEIRS OF THE DECEASED CREDITOR. UNDER THE CIRCUMSTA NCES, IN THE PRESENT CASE, IT CAN HARDLY BE SAID THAT THE LIABILITY HAD CEASED . IF THE LIABILITY HAD NOT CEASED OR THE BENEFIT WAS NOT TAKEN BY THE ASSESSEE IN RES PECT OF SUCH TRADE LIABILITY, IN OUR VIEW, THE CONDITIONS PRECEDENT WERE NOT SATI SFIED FOR INVOKING SECTION 41(1) THE ACT IN THE INSTANT CASE. 10. THE TRIBUNAL HAS RIGHTLY RELIED UPON THE DECISI ON OF DELHI HIGH COURT IN CASE OF SHRI VARDHMAN OVERSEAS LTD. (SUPRA). THE D ISCUSSION OF THE DECISION OF DELHI HIGH CO WAS RELEVANT, FOR CONSIDERATION OF THE FACTS OF THE CASE IN ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 9 ORDER TO FIND OUT AS TO UNDER WHAT CIRCUMSTANCES IT COULD BE SAID THAT THERE IS CESSATION OF LIABILITY. FURTHER, THE DECISION OF DE LHI HIGH COURT IS AFTER CONSIDERING THE VIEW TAKEN BY THE APEX COURT CASE O F CIT V. SUGAULI SUGAR WORKS (P.) LTD. [1999J 236 ITR 518/102 TAXMAN 713. 9. I FURTHER FIND THAT THE SUPREME COURT IN THE CAS E OF CIT V. SUGAULI SUGAR WORKS. (P.) LTD. (236 ITR 518) HAD CONSIDERED THE ISSUE CO NCERNING CESSATION OR REMISSION OF LIABILITY AND WHETHER THE CESSATION OF LIABILITY CAN OCCUR BY REASON OF OPERATION OF THE RESPECTIVE LAW. IN THE SAID JUDGMENT THE SUPREM E COURT REFERRED TO THE DECISION OF HON'BLE BOMBAY HIGH COURT IN J.K. CHEMICALS LTD. V. CIT (62 ITR 34), THE RELEVANT OBSERVATIONS ARE AS UNDER: 'THE QUESTION TO BE CONSIDERED IS WHETHER THE TRANS FER OF THESE ENTRIES BRINGS ABOUT A REMISSION OR CESSATION OF ITS LIABILITY. TH E TRANSFER OF AN ENTRY IS A UNILATERAL ACT OF THE ASSESSEE, WHO IS A DEBTOR TO ITS EMPLOYEES. WE FAIL TO SEE HOW A DEBTOR, BY HIS OWN UNILATERAL ACT, CAN BRING ABOUT THE CESSATION OR REMISSION OF HIS LIABILITY. REMISSION HAS TO BE GRA NTED BY THE CREDITOR. IT IS NOT IN DISPUTE, AND IT INDEED CANNOT BE DISPUTED, THAT IT IS NOT A CASE OF REMISSION OF LIABILITY. SIMILARLY, A UNILATERAL ACT ON THE PA RT OF THE DEBTOR CANNOT BRING ABOUT A CESSATION OF HIS LIABILITY. THE CESSATION O F THE LIABILITY MAY OCCUR EITHER BY REASON OF THE OPERATION OF LAW, I.E., ON THE LIA BILITY BECOMING UNENFORCEABLE AT LAW BY THE CREDITOR AND THE DEBTOR DECLARING UNE QUIVOCALLY HIS INTENTION NOT TO HONOUR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY THE CREDITOR, OR A CONTRACT BETWEEN THE PARTIES, OR BY DISCHARGE OF TH E DEBT THE DEBTOR MAKING PAYMENT THEREOF TO HIS CREDITOR. TRANSFER OF AN ENT RY IS NEITHER AN AGREEMENT BETWEEN THE PARTIES NOR PAYMENT OF THE LIABILITY. W E HAVE ALREADY HELD IN KOHINOOR MILLS CO. LTD. V. CIT (1963) 49 ITR 578 (B OM.) THAT THE MERE FACT OF THE EXPIRY OF THE PERIOD OF LIMITATION TO ENFORCE I T, DOES NOT BY ITSELF CONSTITUTE CESSATION OF THE LIABILITY. IN THE INSTANT CASE, TH E LIABILITY BEING ONE RELATING TO WAGES, SALARIES AND BONUS DUE BY AN EMPLOYER TO HIS EMPLOYEES IN AN INDUSTRY, THE PROVISIONS OF THE INDUSTRIAL DISPUTES ACT ALSO ARE ATTRACTED AND FOR THE RECOVERY OF THE DUES FROM THE EMPLOYER, UND ER S. 33C(2) OF THE INDUSTRIAL DISPUTES ACT, NO BAR OF LIMITATION COMES IN THE WAY OF THE EMPLOYEES. ' FROM THE OBSERVATIONS AS CONTAINED IN THE JUDGEMENT OF THE SUPREME COURT, I FIND THAT IT IN FACT THE COURT WENT A STEP AHEAD AND HEL D THAT EVEN UPON THE EXPIRY OF THE PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATIO N ACT, THE DEBT OR LIABILITY WILL NOT STAND EXTINGUISHED BUT IT WOULD ONLY PREVENT THE CR EDITOR FROM ENFORCING THE DEBT AND IN THAT VIEW OF THE MATTER THE DEEMING PROVISIONS O F SECTION 41(1) COULD NOT BE INVOKED ON THE PREMISE THAT THE LIABILITY HAD BECOM E TIME-BARRED. 10. I FURTHER NOTE THAT IN ANOTHER DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS VARDHAMAN OVERSEAS LTD (343 ITR 408) FACT S INVOLVED WERE SIMILAR TO ONE INVOLVED IN THE APPELLANT'S CASE. FACTS INVOLVED IN THIS CASE WERE; THE LIABILITIES IN QUESTION WERE TRADING LIABILITIES AND NOT WORKMEN D UES. BEFORE THE AO, THE ASSESSEE WAS UNABLE TO FURNISH CONFIRMATIONS FROM THE CREDIT ORS WHICH APPEARED TO BE OLD AND THE ASSESSEE WAS UNABLE TO FURNISH THE COMPLETE ADD RESSES OF ALL THE CREDITORS. THE OUTSTANDING CREDITORS WERE THEREFORE ASSESSED AS IN COME U/S 68. ON APPEAL THE CIT(A) THOUGH DELETED ADDITION U/S 68 BUT CONFIRMED THE ADDITION BY INVOKING SECTION 41(1) OF THE ACT. ON APPEAL THE ITAT FOUND THAT IN THE ASSESSEE'S BOOKS, THE AMOUNTS PAYABLE TO THE CREDITORS WERE NOT WRITTEN B ACK BUT SHOWN AS OUTSTANDING TO THE PARTIES AND THEREFORE SECTION 41(1) WAS HELD IN APPLICABLE. ON APPEAL THE HIGH COURT OBSERVED THAT TO INVOKE SECTION 41(1) IT WAS NECESSARY TO SHOW THAT THE ASSESSEE WAS ACTUALLY GRANTED REMISSION OF TRADING LIABILITIES FOR WHICH DEDUCTION WAS EARLIER ALLOWED. THE HIGH COURT FURTHER HELD THAT I T WAS NOT ENOUGH THAT THE ASSESSEE ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 10 DERIVED SOME BENEFIT OF TRADING LIABILITY BUT SUCH BENEFIT SHOULD NECESSARILY ARISE ON ACCOUNT OF REMISSION OF THE LIABILITY. THE COURT NO TED THAT THE ASSESSEE HAD NOT TRANSFERRED THE OUTSTANDING AMOUNTS FROM THE CREDIT ORS' ACCOUNT TO ITS PROFIT & LOSS ACCOUNT BUT THE AMOUNTS WERE SHOWN AS ' LIABILITIES ' IN THE BALANCE SHEET AND THE ASSESSEE HAD ACKNOWLEDGED THE DEBTS AS DUE TO THE C REDITORS. THE HIGH COURT THEREFORE HELD THAT SECTION 41(1) WAS NOT APPLICABL E. I FIND THAT THE FACTS INVOLVED IN THE DECISION OF DELHI HIGH COURT WERE SIMILAR RATHE R FACTS INVOLVED IN ASSESSEE'S CASE BRINGS ITS CASE ON MUCH STRONGER FOOTING BECAU SE IN THIS CASE THE ASSESSEE NOT ONLY ACKNOWLEDGED LIABILITY IN THE BALANCE SHEET BU T WAS ABLE TO FILE CONFIRMATIONS FROM CREDITORS AS WELL. THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF VARDHAMAN OVERSEAS LTD IS THEREFORE FULLY APPLICABL E IN THE PRESENT CASE. 11. THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH C OURT IN THE CASE OF CIT VS VARDHAMAN OVERSEAS LTD (SUPRA) WAS REITERATED BY CO ORDINATE BENCH OF THE SAME COURT IN A SUBSEQUENT DECISION IN THE CASE OF CIT V S JAIN EXPORTS (P) LTD (217 TAXMAN 43) WHICH WAS RENDERED AFTER THE DECISION OF THE SAME COURT IN THE CASE OF CIT VS CHIPSOFT TECHNOLOGY (P) LTD (SUPRA). IN VIEW OF. THIS FACTUAL & LEGAL POSITION AND THE D ECISIONS DISCUSSED IN THE FOREGOING, I THEREFORE FIND THAT THE LONE DECISION IN THE CASE O F CIT VS CHIPSOFT TECHNOLOGY (P) LTD (SUPRA) RELIED UPON BY THE AO IN FACTS WAS NOT APPLICABLE TO APPELLANT'S CASE. INSTEAD THE RELIANCE PLACED BY THE LD. A.RS ON THE SUBSEQUENT DECISIONS OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS ALVARES & THOMAS (SUPRA), HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS LAIN EXPORTS (P) L TD (SUPRA) WERE MORE APPROPRIATE IN THE APPELLANT'S CASE. 12.IT IS TO BE FURTHER OBSERVED THAT THE PROPOSITIO N PUT FORTH BY THE HON'BLE DELHI & KARNATAKA HIGH COURTS WAS ALSO LAID DOWN BY THE HON 'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SITA DEVI LUNEJA (325 I TR 593) WHEREIN THE HON'BLE HIGH COURT WHILE ALLOWING THE ASSESSEE'S CLAIM OBSERVED AS FOLLOWS: 'AFTER HEARING LEARNED COUNSEL FOR THE APPELLANT AN D GOING THROUGH THE IMPUGNED ORDER, WE DO NOT FIND ANY MERIT IN THE INS TANT APPEAL. IT IS THE CONCEDED POSITION THAT IN THE ASSESSEE'S BALANCE SH EET, THE AFORESAID LIABILITIES HAVE BEEN SHOWN, WHICH ARE PAYABLE TO T HE SUNDRY CREDITORS. SUCH LIABILITIES, SHOWN IN THE BALANCE SHEET, INDICATE T HE ACKNOWLEDGEMENT OF THE DEBTS PAYABLE BY THE ASSESSEE. MERELY BECAUSE, SUCH LIABILITY IS OUTSTANDING FOR THE LAST SIX YEARS, IT CANNOT BE PRESUMED THAT THE SAID LIABILITIES HAVE CEASED TO EXIST. IT IS ALSO CONCEDED POSITION THAT THERE IS NO BILATERAL ACT OF THE ASSESSEE AND THE CREDITORS, WHICH INDICATES THAT TH E SAID LIABILITIES HAVE CEASED TO EXIST. IN ABSENCE OF ANY BILATERAL ACT, T HE SAID LIABILITIES COULD NOT HAVE BEEN TREATED TO HAVE CEASED. IN VIEW OF THESE FACTS, THE CIT(A) AS WELL AS THE ITAT HAVE RIGHTLY COME TO THE CONCLUSION THA T THE ASSESSING OFFICER HAS WRONGLY INVOKED THE EXPLANATION I OF SECTION 41 (1) OF THE ACT AND MADE THE AFORESAID ADDITION ON THE BASIS OF PRESUMPTION, CONJECTURES AND SURMISES. IT HAS BEEN FURTHER FOUND THAT THE ASSESSING OFFICE R FAILED TO SHOW THAT IN ANY EARLIER YEAR, ALLOWANCE OF DEDUCTION HAD BEEN IN RE SPECT OF ANY TRADING LIABILITY INCURRED BY THE ASSESSEE. IT WAS ALSO NOT PROVED TH AT ANY BENEFIT WAS OBTAINED BY THE ASSESSEE CONCERNING SUCH TRADING LI ABILITY BY WAY OF REMISSION OR CESSATION THEREOF DURING THE CONCERNED YEAR. THUS, THERE DID NOT ACCRUE ANY BENEFIT TO THE ASSESSEE WHICH COULD BE D EEMED TO BE THE PROFIT OR GAIN OF THE ASSESSEE'S BUSINESS, WHICH WOULD OTHERW ISE NOT BE THE ASSESSEE'S INCOME. IT HAS BEEN FURTHER FOUND AS FAC T THAT THE ASSESSEE HAD FILED THE COPIES OF ACCOUNTS OF SUNDRY CREDITORS SI GNED BY THE CONCERNED CREDITORS. IN VIEW OF THIS FACT, IN OUR OPINION, TH E ITAT HAS RIGHTLY COME TO THE CONCLUSION THAT CONFIRMATION FROM THE CREDITORS WER E PRODUCED. ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 11 5. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY ILLEGAL ITY IN THE IMPUGNED ORDER PASSED BY THE ITAT AND IN OUR OPINION, NO SUBSTANTI AL QUESTIONS OF LAW, AS RAISED BY THE REVENUE IN THIS APPEAL, ARISE FROM TH E ORDER OF THE ITAT.' 13. THIS DECISION OF THE PUNJAB & HARYANA HIGH COUR T WAS FOLLOWED BY ANOTHER BENCH OF THE SAME HIGH COURT IN THE SUBSEQUENT JUDG MENT RENDERED IN THE CASE OF CIT VS SPEEDWAYS TYRE LTD (364 ITR 401). MOREOVER, IT IS TO BE NOTED THAT THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS NI TIN 5 GARG (208 TAXMAN 16) CAME TO IDENTICAL CONCLUSIONS. IN THE CASE DECIDED BY TH E HON'BLE GUJARAT HIGH COURT FACTS INVOLVED WERE ALMOST SIMILAR TO FACTS INVOLVED IN T HE APPELLANT'S CASE. WHILE DECIDE THE APPEAL THE HIGH COURT TOOK NOTE OF THE FACT THA T THE ASSESSEE HAD NOT WRITTEN BACK THE OUTSTANDING LIABILITIES IN ITS BOOKS BUT C ONTINUED TO DISCLOSE THE OUTSTANDING AMOUNTS AS LIABILITIES IN THE BALANCE SHEET FROM YE AR ON YEAR. ACCORDING TO THE HON'BLE HIGH COURT MERELY BECAUSE THE AMOUNTS REMAI NED OUTSTANDING FOR MANY YEARS, IT COULD NOT BE INFERRED THAT THE LIABILITIE S HAD CEASED TO EXIST. MERELY BECAUSE THE ASSESSEE WAS ALLOWED THE DEDUCTION OF TRADING L IABILITIES IN THE EARLIER YEARS AND THE BALANCES WERE CARRIED FORWARD IN THE SUBSEQUENT YEARS, DID NOT PROVE THAT THE TRADING LIABILITIES HAD CEASED TO EXIST. THIS DECIS ION WAS FOLLOWED BY THE COORDINATE BENCHES OF THE SAME HIGH COURT WHILE DECIDING THE A PPEALS IN THE CASES OF CIT VS PURIDEVI M. CHAUDHARY (41 TAXMANN.COM 329), CIT VS BHOGILAL RAMJIBHAI ATARA (222 TAXMAN 313) & CIT VS MATRUPRASAD C PANDEY (59 TAXMA NN.COM 428). 14.THE LD. A.RS RELIANCE ON THE DECISION OF THE HON 'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS TAMIL NADU WAREHOUSING CORPORATION ( 292 ITR 310) ALSO APPEARS TO BE RELEVANT SINCE THE FACTS OF THE ASSESSEE'S CASE WERE SIMILAR TO THE FACTS OF THE DECIDED CASE. THE HIGH COURT IN THE DECIDED CASE FO UND THAT THE ASSESSEE HAD DISCLOSED IN ITS BALANCE SHEET THE LIABILITIES OUTS TANDING TO THE TRADE CREDITORS WHICH WERE OLD AND BROUGHT FORWARD FROM EARLIER YEARS. TH E AO ASSESSED THE OUTSTANDING LIABILITIES U/S 41(1). THE HON'BLE HIGH COURT UPHEL D THE ITAT'S ORDER ALLOWING RELIEF ON THE GROUND THAT THERE WAS NO EVIDENCE THAT THERE WA S CESSATION OF LIABILITY. THE COURT FOUND THAT IN FACT THE ASSESSEE HAD ACKNOWLEDGED TH E LIABILITIES BY DISCLOSING THEM AS PAYABLES IN THE BALANCE SHEET. FOLLOWING THE FOREGO ING DECISION OF THE MADRAS HIGH COURT, THE HON'BLE JURISDICTIONAL ITAT, KOLKATA BEN CHES IN THE FOLLOWING CASES DELETED ADDITIONS MADE U/S 41(1) IN RESPECT OF THE OLD & OU TSTANDING CREDITORS. ITO VS M.L. SARKAR & BROS (ITA NO. 1550/KOI/2010) ITO VS AMUSAR SERVICES & SUPPLIERS PVT LTD (ITA NO . 609/KOI/2012) ITO VS MULTIWYN INDUSTRIAL CORPORATION (ITA NO. 21 65/KOI/2010) ON CLOSE EXAMINATION OF THE FOREGOING HON'BLE ITAT DECISIONS, I FIND THAT IN ALL THE 3 CASES THE ASSESSING OFFICERS HAD INVOKED SECTION 41 (1) OF THE INCOME TAX ACT; 1961 IN RESPECT OF OLD TRADE CREDITORS ON THE GROUND THA T EITHER THE ASSESSEE DID NOT FURNISH THE COMPLETE PARTICULARS OF THE CREDITORS BROUGHT F ORWARD FROM THE EARLIER YEARS OR THAT THE NOTICES ISSUED U/S 133(6) REMAINED UN-SERVED OR NON-COMPLIED. THE CIT(A) & ITAT HOWEVER HELD THAT SO LONG AS THE ASSESSEE DISC LOSED THE AMOUNTS OUTSTANDING IN ITS BALANCE SHEET AND HAD ACKNOWLEDGED THE LIABI LITIES AS DUE, PROVISIONS OF SECTION 41(1) HAD NO APPLICATION AND THEREFORE ADDI TIONS WERE NOT TENABLE. FROM THE LEGAL PRINCIPLES AS CULLED OUT IN THE ABOV E JUDGMENTS, THE POSITION WHICH EMERGES IS THAT BEFORE THE DEEMING PROVISIONS OF SE CTION 41(1) ARE INVOKED, THE BURDEN IS CAST ON THE LD.AO TO BRING ON RECORD SOME TANGIBLE AND CREDIBLE MATERIAL TO PROVE THAT THE ASSESSEE HAD IN FACT ENJOYED BENEFIT IN THE FORM OF REMISSION GRANTED BY THE CREDITOR(S). MOREOVER IT IS ALSO NECESSARY F OR THE ASSESSING AUTHORITY TO SHOW THAT BENEFIT IN THE FORM OF REMISSION WAS DERIVED B Y THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. IT IS OBSERVED THAT IN THE PRESENT C ASE THE ASSESSEE HAS NEVER DENIED ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 12 ITS OBLIGATION TO PAY THE OUTSTANDING AMOUNTS TO TH E CREDITORS. THE MATERIAL FACT WHICH WAS APPARENT FROM THE AUDITED ACCOUNTS WAS THAT THE ASSESSEE NEVER CLAIMED THAT IT HAD NO LEGAL OBLIGATION TO PAY TO THE SUNDRY CREDIT ORS. APPLYING THE RATIO LAID DOWN IN THESE DECISIONS TO THE APPELLANT'S CASE, I THEREFOR E FIND THAT BOTH ON FACTS AS WELL AS IN LAW THE ASSESSEE HAS PROVED THAT NO MATERIAL WAS AVAILABLE WITH THE LD.AO WHICH IN ANY MANNER WHICH ESTABLISHED THAT THE CREDITORS HAD GRANTED REMISSION OF LIABILITIES TO THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT T O A.Y. 2001-02. THE LD. AO DID NOT BRING ON RECORD ANY TANGIBLE MATERIAL TO PROVE THAT THE CREDITORS HAD GRANTED REMISSION OF LIABILITIES DURING THE RELEVANT PREVIO US YEAR BECAUSE OF WHICH THE ASSESSEE'S LIABILITIES CEASED TO EXIST IN FY 2000-0 1. I THEREFORE AGREE WITH THE SUBMISSIONS OF THE LD.A.RS, AND HOLD THAT ADDITION OF RS.12,97,47,322/- U/S 41(1) WAS NOT SUSTAINABLE IN LAW. THE LD. AO IS ACCORDING LY DIRECTED TO DELETE THE ADDITION MADE U/S 41(1) OF THE ACT. THESE GROUNDS ARE THEREFORE ALLOWED IN FAVOUR OF TH E APPELLANT-ASSESSEE. 3. WE HAVE HEARD BOTH THE PARTIES REITERATING THEIR RESPECTIVE STANDS AGAINST AND IN SUPPORT OF IMPUGNED SECTION 41(1) RE MISSION / CESSATION OF LIABILITY INVOLVING THE AMOUNT OF 12,97,47,322/-. THE INSTANT PROCEEDINGS APPEAR TO BE SECOND ROUND OF LITIGATION BETWEEN THE PARTIES QUA THE VERY ISSUE BEFORE THIS TRIBUNAL. EARLIER CO-ORDINATE BENCH HAD REMITTED THE INSTANT ISSUE BACK TO THE ASSESSING AUTHORITIES FOR AFRESH ADJUDI CATION (SUPRA). 4. THE ASSESSING OFFICER TOOK UP CONSEQUENTIAL PROC EEDINGS. THERE IS NO DISPUTE ABOUT THE ASSESSEE TO HAVE BEEN CARRYING FO RWARD THE IMPUGNED LIABILITY IN ITS BOOKS FOR A TIME SPAN OF ALMOST TH REE DECADES. IT IS AN ADMITTED FACT THAT THE DEPARTMENT DID NOT RAISE ANY ISSUE IN ALL INTERVENING ASSESSMENT YEARS IN QUESTION. IT EMERGES THAT ASSESSING OFFICE R HAD ISSUED SUMMONS TO SIX DIRECTORS OF THE CONCERNED ENTITIES ON TEST CHE CK BASIS IN THE INSTANT SECOND ROUND. FOUR OF THE SAID SIX ENTITIES DIREC TORS PUT IN APPEARANCE. THEY EXPRESSED THEIR IGNORANCE ABOUT ANY SUCH TRADING TR ANSACTIONS WITH THE ASSESSEE IN THEIR RESPECTIVE STATEMENTS. THIS MADE THE ASSESSING OFFICER TO ISSUE A SHOW-CAUSE DATED 12.03.2015 PROPOSING TO TR EAT THE ABOVE SUM AS A MERE BOOK ENTRY AS CEASED U/S 41(1) OF THE ACT. THE ASSESSEE STATED REITERATED THE FACT OF HAVING CLAIMED THE IMPUGNED LIABILITY IN ITS BOOKS ALMOST THREE DECADES EARLIER FOR THE FIRST TIME FOLLOWED B Y SIMILAR TREATMENT IN THE INTERVENING ASSESSMENT YEARS WITHOUT ANY CHANGE REL EVANT IN FACTS. ITS CASE WAS THAT NONE OF ITS CREDITORS HAD EVER REMITTED TH EIR RESPECTIVE SUMS SO AS TO ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 13 ATTRACT SECTION 41(1) OF THE ACT. IT HIGHLIGHTED TH E FACT THAT ABOVE RANDOM CREDITORS HAD SUPPORTED ITS CASE AS PER THEIR WRITT EN REPLIES IN RESPONSE TO THE RESPECTIVE SUMMONS. ALL THIS FAILED TO CONVINCE THE ASSESSING OFFICER. HE NOTICED THAT ONE OF THE SAID WRITTEN REPLIES DID NO T CONTAIN EVEN CONCERNED PARTYS SIGNATURES. HE THEREAFTER NARRATED THE ENTI RE BACKDROP AND QUOTED FOUR OF THE TESTED CHECK PARTIES STATEMENTS TO CONCLUDE THAT THE IMPUGNED LIABILITY WAS NOT GENUINE ONE SO AS TO BE TAKEN AS SUBSISTING UPTO IMPUGNED ASSESSMENT YEAR. HE TOOK COGNIZANCE OF THE FACT THE THAT SAID FOUR DIRECTORS HAD EXPRESSED THEIR COMPLETE IGNORANCE ABOUT ANY CO RRESPONDING TRANSACTIONS TO HAVE TAKEN PLACE IN THE PAST. RELEV ANT INTERVENING PERIOD HAD ALSO NOT SEEN ANY PAYMENT FROM THE TAXPAYERS SIDE FOR A VERY LONG PERIOD OF TIME AS PER THE ASSESSING OFFICER. HE WAS THEREFORE OF THE VIEW THAT NEITHER THE CREDITORS IN QUESTION HAD TAKEN ANY STEPS TO RE COVER THEIR RESPECTIVE DUES NOR THE INSTANT TAXPAYER HAD DISCHARGED EVEN A SING LE PENNY OF THE IMPUGNED LIABILITY. ALL THIS FORMED SUFFICIENT REASON FOR HI M TO OPINE THAT THE ASSESSEE HAD NO INTENTION TO PAY THAT MONEY IN QUESTION. HE ALLE GED CREDITORS NON CONFIRMATION AS WELL AS LACK OF THEIR IDENTITY IN H IS ASSESSMENT ORDER BASED ON AN ASSUMPTION THAT THEY HAD EITHER VANISHED OR THER E WAS NO EFFORT AT THEIR BEHEST TO CLAIM THIS LIABILITY SUM. THE ASSESSING O FFICER WAS FURTHER OF THE OPINION THAT HON'BLE DELHI HIGH COURTS DECISION IN CIT VS. CHIPSOFT TECHNOLOGY PVT. LTD. ON 20.07.2012 IN ITA NO. 598/2011 HAD MADE IT CLEAR THAT SECTION 41(1) EXPLANATION SUFFICIENTLY INDICATED THE SAME T O BE INCLUSIVE PROVISION SINCE THE LEGISLATURE HAD NOT USED MEANS CLAUSE THEREIN. HE THEREFORE MADE THE IMPUGNED ADDITION U/S 41(1) ON CESSATION OF TRA DING LIABILITY OF 12,97,47,322/- IN QUESTION. 5. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) HAS RE VERSED THE ASSESSING OFFICERS ACTION IN HIS ABOVE EXTRACTED DETAILED DI SCUSSION. THIS LEAVES THE REVENUE AGGRIEVED. ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 14 6. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY A RGUES IN THE LIGHT OF ASSESSING OFFICERS FINDINGS THAT ASSESSEES IMPUGN ED LIABILITY IS NOT A GENUINE ONE FIRST OF ALL AS PER THE FOUR PARTIESS DIRECTOR S STATEMENTS. HE THEREAFTER SUBMITS THAT IT CAN BE SAFELY ASSUMED THAT THE LIAB ILITY IN QUESTION AS CEASED U/S. 41(1) OF THE ACT. WE DO NOT FIND MERIT IN EITH ER OF THESE TWO ARGUMENTS. CASE FILE REVEALED THAT THE ASSESSEE HAS THROUGHOUT BEEN CLAIMING THE IMPUGNED LIABILITY FOR A TIME SPAN OF ALMOST THREE DECADES WITHOUT ANY SUCH OBJECTION FROM DEPARTMENT. RELEVANT SUNDRY CREDITOR S LIST RUNS INTO 96 PARTIES; AMOUNT AND ADDRESS-WISE, PARTICULARLY IN PAPER BOOK PAGES 55 TO 56 AS ON 31.03.2001. THE ASSESSEE PARTLY PAID THE SUM IN CAS E OF FIVE OF THE SAID PARTIES INVOLVING GROSS AMOUNT OF 21,95,04,000/-. PAPER BOOK PAGES 93 TO 95 AND 57 TO 59 CONTAINS THE SUMMARIZED STATEMENT OF L IABILITY IN QUESTION AS TO 31.03.2000 AND FROM 01.04.1989 TO 31.03.2013 INVOLV ING THE SUM OF 12,87,24,079/-; RESPECTIVELY. 7. CASE FILE FURTHER SUGGESTS THAT THE IMPUGNED LI ABILITY CLAIM HAS NOWHERE BEEN DOUBTED IN PRECEDING OR SUCCEEDING ASSESSMENT YEARS INVOLVING REGULAR ASSESSMENT AT LEAST IN ASSESSMENT YEARS 1998-99, 20 00-01, 2003-04 AND 2004-05. THE CIT(A)S CLINCHING FINDINGS THAT FOUR DIRECTORS OF CORRESPONDING ENTITIES HAVE BEEN APPOINTED IN FINANCIAL YEAR 2001 -02 ONLY WHEREAS THE IMPUGNED LIABILITY DATES BACK TO ALMOST 30 YEARS; H AVE GONE UNREBUTTED FROM THE REVENUE SIDE. WE THEREFORE DO NOT SEE ANY MERIT IN REVENUES ABOVE TWIN SUBMISSIONS. ITS FORMER PLEA THAT THE IMPUGNED LIAB ILITY IS NOT GENUINE AT THIS BELATED STAGE CARRIES NO WEIGHT. HON'BLE KARNATAKA HIGH COURTS DECISION IN CIT VS. ALVARES & THOMAS (2010) 69 TAXMAN 257 (KAR) HOLDS THAT MERE NONE VERIFICATION OF SUCH A LIABILITY FOR OR FOR THAT AN Y DOUBT RAISED THEREUPON DOES NOT ATTRACT CESSATION OF LIABILITY PRINCIPLE U/S 41 (1) OF THE ACT AS THE SAME HAS TO BE A CASE OF CESSATION IN LAW ONLY. HON'BLE GUJA RAT HIGH COURTS JUDGMENT IN CIT VS. NITIN S GARG (2012) 22 TAXMAN 59 (GUJ) HAS PLACED RELIANCE ON M UCH A CELEBRATE JUDGMENT OF HON'BLE APEX COURT IN CIT VS. SUGAULI SUGAR WORKS (P) LTD. (1999) 236 ITR 518 (SC) TO HOLD THAT THE MERE FACT OF A LIABILITY HAVING ITA NO.1907/KOL/2016 A.Y.2001 -02 ACIT, CIR-36, KOL. VS. M/S SOORAJMULL N AGARMULL P AGE 15 CONTINUED TO BE SHOWN FOR VERY MANY YEARS WOULD NOT ATTRACT SECTION 41(1) SINCE IT IS FOR THE ASSESSING OFFICER HAS WHO HAS T O SHOW THAT CONCERNED ASSESSEE HAS DRAWN ANY BENEFIT BY WAY OF CESSATION OR REMISSION THEREOF. WE FURTHER MAKE IT CLEAR THAT CIT(A)S ABOVE EXTRACTED DETAILED DISCUSSION HAS EXAMINED ALL THE FACTS AS WELL AS THE RELEVANT LEGA L POSITION AT LENGTH WHICH HAS NOWHERE BEEN REBUTTED FROM THE REVENUE SIDE. WE THEREFORE CONCLUDE THAT THE CIT(A) HAS RIGHTLY REVERSED THE ASSESSMENT FINDINGS HOLDING THE AMOUNT IN QUESTION OF 12,97,47,322/- TO BE A CASE OF CESSATION OF LIABILI TY U/S 41(1) OF THE ACT. 9. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 20 /07/2018 SD/- SD/- ( %) (' %) (M.BALAGANESH) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 20 / 07 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT,CIRCLE-36, AAYAKAR BHAWAN, POORVA,8 TH FLOOR, 10, SHANTIPALLY , KOLKATA-107 2. /RESPONDENT-M/S SOORAJMULL NAGARMULL 8 B.B.D BAG(EA ST), KOLKATA-001 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA (SENT THROUGH E-MAIL) 5. 7 ''3, 3, / DR, ITAT, KOLKATA (SENT E-MAIL) 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,