ITO, Ward - 3(4), Kolkata, Kolkata V. M/s. Panihati Castings Pvt. Ltd., Kolkata

ITA 1920/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48203 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 08-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-10-2010
• Court: TRIBUNAL
• Department Lawyers: S SINHA
• Assessee Lawyers: S S GUPTA

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER %& %& %& %& ' ' ' ' / ITA NO . 1920/KOL/2010 () *+/ ASSESSMENT YEAR : 2007-08 (-. / APPELLANT ) I.T.O., WARD-3(4), KOLKATA - ( - - VERSUS - . (01-./ RESPONDENT ) M/S.PANIHATI CASTINGS PVT. LTD., KOLKATA (PAN: AABCP 7228 H) -. 2 3 #/ FOR THE APPELLANT: SHRI S.SINHA 01-. 2 3 #/ FOR THE RESPONDENT: SHRI S.S.GUPTA #4 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER DATED 30.07.2010 OF THE CIT(A)-I, KOLKATA PERTAINING TO A.YR. 2007-08. 2. THE ONLY ISSUE RAISED BY THE REVENUE IS RELAT ING TO THE DELETION OF RS.2,60,28,151/- MADE BY THE AO U/S 41(1) OF THE IT ACT. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AO WHILE DOING THE SCRUTINY ASSESSMENT HAS ADDED AN AMOUNT OF RS.2,60,28,151/- BY OBSERVING AS UNDER :- I HAD GONE THROUGH THE SUBMISSION OF THE ASSESSEE AND FOUND THAT SECTION 41(1) OF THE INCOME-TAX ACT, APPLICABLE IF THE FOLL OWING TWO CONDITIONS ARE SATISFIED: CONDITION ONE : IN ANY OF THE EARLIER YEARS A DEDUC TION WAS ALLOWED TO THE TAX PAYER IN RESPECT OF LOSS, EXPENDITURE (REVENUE OR C APITAL EXPENDITURE) OR TRADING LIABILITY INCURRED BY THE ASSESSEE. 2 CONDITION TWO : DURING THE PREVIOUS YEAR, THE TAX P AYER (A) HAS OBTAINED A REFUND OF SUCH TRADING LIABILITY; (B) HAS OBTAINED SOME BEN EFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREO F. THE ASSESSEE WAS GIVEN REPEATED OPPORTUNIT Y TO PRODUCE THE NAMES AND ADDRESSES FOR SUNDRY CREDITORS FOR GOODS OF RS. 1,74,58,648/- SUNDRY CREDITORS FOR EXPENSES OF RS.85,53,961/- VIDE LETTE R NO.3138 DTD. 27.03.2009 WHICH WAS RECEIVED BY THE ASSESSEE ON 02.04.2009, V IDE ORDER SHEET DTD. 24.07.2009 AND FINALLY SHOW-CAUSE LETTER NO.1831 DT D. 01.09.2009 WHICH WAS DULY RECEIVED BY THE ASSESSEE ON 22.09.2009. THE ASSESSEE HAD COMPLETELY FAILED TO PRODUCE THE NAMES AND ADDRESSES OF THE SUNDRY CREDITORS FOR GOODS AND EXP ENSES ALONG WITH BILL NO., AMOUNT AND DATE OF CREDIT AROSE. FROM THE ABOVE SUBMISSION OF THE AS SESSEE, IT WAS FOUND THAT THE TRADING LIABILITY OCCURRED DURING F.Y. 95-96 AND TH E GENUINENESS OF SUNDRY CREDITORS ARE NOT PROVED. IN VIEW OF THE ABOVE, SUNDRY CREDITO RS FOR GOODS OF RS.1,74,58,648/- SUNDRY CREDITORS FOR EXPENSES OF RS.85,53,961/- AND SUNDRY CREDITORS FOR OTHERS OF RS.15,542/- TOTALING RS.2,60,28,151/- ARE TREATE D AS CESSATION OF LIABILITY U/S 41(1) OF THE IT ACT, 1961 AND ADDED INTO THE COMPUT ATION OF INCOME. 3.1. ON APPEAL THE LD. CIT(A) HAS DELETED THE S AME AFTER TAKING INTO CONSIDERATION OF THE VARIOUS SUBMISSIONS AND THE CASE LAWS RELIED UP ON BY THE ASSESSEE AND AFTER NARRATING THE PROVISIONS OF SECTION 41(1) OF THE IT ACT BY OBSERVING AS UNDER :- A PERUSAL OF THE ABOVE PROVISIONS CLEARLY PROVIDE THAT IN ORDER TO DEEM INCOME U/S 41(1) EITHER THE ASSESSEE SHOULD OBTAIN SOME REFUND OF SUCH LIABILITIES OR SOME BENEFIT BY WAY OF REMISSION OR CESSATION. IT IS AN UNDISPUTED FACT THAT THE APPELLANT H AS GOT NO REFUND OF SUCH LIABILITIES. SUCH IS NOT THE CASE OF AO ALSO. SIMILARLY, AS PER EXPLANATION 1 TO SEC.41(1) REMISSION OR CESSATION SHALL INCLUDE THE ACT OF ASSESSEE BY WAY OF WRITING OFF S UCH LIABILITIES IN HIS ACCOUNTS. IT IS ALSO A FACT THAT THE ASSESSEE HAS NOT W RITTEN OFF SUCH LIABILITIES IN ACCOUNTS. SUCH IS ALSO NOT THE CASE OF AO. THUS WHEN THE LIABILITIES AROSE LONG BACK IN EARLIER FINANCIAL YEARS, THE ASSESSEE IS ACKNOWLEDGING THESE LIABILITIES IN ITS ACCOUNTS AND THERE IS NO UNILATERAL ACT OF ASSESSEE IN WRITING OFF SUCH LIAB ILITIES, RESPECTFULLY, FOLLOWING THE DECISIONS AS RELIED UPON BY THE ASSESSEE, I HOL D THAT NO ADDITION, UNDER THESE CIRCUMSTANCES, CAN BE MADE U/S 41(1) OF THE INCOME TAX ACT, 1961. IN THE RESULT, THIS GROUND OF APPEAL IS ALLO WED. 3.2. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 3 4. AT THE TIME OF HEARING BEFORE US THE LD DR APPEARING ON BEHALF OF THE REVENUE HAS AGITATED THAT THE LD. CIT(A) HAS ERRED ON THE F ACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.2,60,28,151/- WHICH WAS MADE BY THE ASSESSING OFFICER U/S 41(1) OF THE I.T.ACT, 1961 AS CESSATION OF LIABILIT Y ON ACCOUNT OF SUNDRY CREDITORS. HE CONTENDED THAT THE LD. CIT(A) HAS ERRED IN ACCEPTIN G THE ASSESSEES EXPLANATION THAT MERELY BECAUSE THE LIABILITIES WERE OUTSTANDING FOR NUMBER OF YEARS, THE SAID LIABILITY DO NOT CEASE TO EXIST AND THERE IS NO REMISSION OR CESSATION OF SUCH LIABILITIES WITH THE MEANING OF SECTION 41(1) OF THE IT ACT WITHOUT APPR ECIATING THE FACTS THAT THE ASSESSEE COMPANY DID NOT FURNISH ADDRESSES OR OTHER DETAILS AND FAILED TO PROVE THE EXISTENCE OF SAID SUNDRY CREDITORS. HE FURTHER SUBMITTED THAT TH E LD. CIT(A) HAS ERRED IN ACCEPTING THE ASSESSEES CONTENTION THAT THE LIABILITIES STIL L EXISTED AND SAME WERE TO BE PAID AS AND WHEN FINANCIAL CONDITION OF THE COMPANY WOULD I MPROVE WITHOUT APPRECIATING THE FACT THAT THE AO HAS BROUGHT SUFFICIENT EVIDENCE ON RECORD TO PROVE THAT THE LIABILITIES HAD CEASED TO EXIST. THEREFORE, HE REQUESTED TO SET ASIDE THE ORDERS OF THE LD. CIT(A) AND TO RESTORE THE ORDER OF THE AO. 5. ON THE OTHER HAND, THE LD. AR APPEARING O N BEHALF OF THE ASSESSEE STRONGLY RELIED ON THE ORDERS OF THE LD.CIT(A). HE FURTHER S UBMITTED SEVERAL CASE LAWS IN SUPPORT OF THE ACTION OF THE LD. CIT(A) IN THE FORM OF PAPER BOOK CONTAINING 91 PAGES. 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREFUL PERUSAL OF MATERIALS AVAILABLE ON RECORD INCLUDING THE CASE LAWS CITED BY THE LD. COUNSEL OF THE ASSESSEE AND CASE LAWS RELIED ON BY THE LD. CIT(A), KEEPING IN VIEW O F THE FACT THAT THE LD. DR COULD NOT BRING ANY CONTRADICTORY DECISION TO THE OBSERVATION S MADE BY THE LD. CIT(A). WE FIND NO INFIRMITY IN THE ORDERS OF THE LD. CIT(A) TO BE INTERFERED WITH AND WE UPHOLD THE SAME. 4 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10.06.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 10.06.2011. #4 2 0& 5#&*6- COPY OF THE ORDER FORWARDED TO: 1. M/S.PANIHATI CASTINGS PVT. LTD., 67A, ASUTOSH MUKHE RJEE ROAD, KOLKATA- 700025. 2 THE I.T.O., WARD-3(4), KOLKATA 3. THE CIT, 4. THE CIT(A)-I, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA 1& 0/ TRUE COPY, #4(;/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)