The DCITNavsari Circle, Navsari V. NSP Straw & Paper Products Pvt.Ltd., Navsari

ITA 1976/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85701 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 09-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD .., , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.1976/AHD/20111 ( / ASSESSMENT YEAR : 2007-08) ASST.COMMISSIONER OF INCOME-TAX NAVSARI CIRCLE, NAVSARI / VS. NSP STRAW & PAPER PRODUCTS PVT.LTD. DIGENDRANAGAR VANSADA DIST.NAVSARI ./ ./ PAN/GIR NO. : AAACN 8133 E ( # / APPELLANT ) .. ( $% # / RESPONDENT ) #& / APPELLANT BY : SHRI M.K. SINGH, SR.DR $% # '& / RESPONDENT BY : -NONE- ()'* / DATE OF HEARING 13/02/2015 +,-.'* / DATE OF PRONOUNCEMENT 20/02/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VALSAD, (CIT(A) IN SHORT) PERTAINING TO ASSESSMENT YEAR (AY) 2007-08. THE RE VENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.1976/AHD /2011 ASST.CIT VS. NSP STRAW & PAPER PRODUCTS PVT.LTD. ASST.YEAR 2007-08 - 2 - [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDITION OF RS .14,79,040/- MADE ON ACCOUNT OF DISALLOWANCE U/S.41(1) OF THE AC T FOR CESSATION OF LIABILITY. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ADDITION MADE BY THE A.O. [3] IT IS, THEREFORE, PRAYED TO SET ASIDE THE ORD ER PASSED BY THE CIT(A) AND THAT OF THE ORDER PASSED BY THE AO BE RE STORED. [4] THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ANY GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 28/07/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION OF RS.14,79,040/- ON ACCOUNT OF DISALLOWAN CE U/S.41(1) OF THE ACT FOR CESSATION OF LIABILITY. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE, ALLOWED THE APPEAL. AGGRIEVED BY THE ORD ER OF THE LD.CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING, NO ONE APPEARED ON BEHAL F OF THE ASSESSEE, HOWEVER AN APPLICATION FOR SEEKING ADJOURNMENT BY T HE AUTHORISED REPRESENTATIVE OF THE ASSESSEE IS PLACED ON RECORD. THE REQUEST FOR ITA NO.1976/AHD /2011 ASST.CIT VS. NSP STRAW & PAPER PRODUCTS PVT.LTD. ASST.YEAR 2007-08 - 3 - ADJOURNMENT WAS REJECTED AND THE APPEAL WAS TAKEN U P FOR HEARING IN THE ABSENCE OF THE LD.COUNSEL FOR THE ASSESSEE. 4. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO AND S UBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N. HE SUBMITTED THAT THE AO HAS GIVEN A FINDING THAT THE LIABILITY IS EX ISTING FOR MANY YEARS. THE ONLY REASON GIVEN BY THE ASSESSEE-COMPANY IS TH AT THE COMPANY IS DESIRED TO MAKE THE PAYMENTS TO THE CREDITORS, BUT THE FINANCIAL POSITION OF THE COMPANY DOES NOT PERMIT TO MAKE THE PAYMENT IMMEDIATELY. THE AO DID NOT ACCEPT THE EXPLANATION AS GIVEN BY THE A SSESSEE-COMPANY. 5. WE HAVE HEARD THE LD.SR.DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THE AO HAD MADE ADDITION BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT. THE FINDING OF THE AO CONTAINED IN PARAS- 5.2 & 5.3 ARE REPRODUCED HEREINBELOW:- [5.2]. THE CONTENTION OF THE ASSESSEE IS CAREFULLY CONSIDERED. IT IS CONCLUDED THAT EVEN IF THE FINANCIAL POSITION DOES NOT PERMIT AND ALSO INTENDED TO MAKE PAYMENT IN FUTURE, THE FA CT IS THAT THE SAID LIABILITY IS UNPAID/OUTSTANDING SINCE 31/03/20 05 IS NO MORE PAYABLE BY IT, BENEFITED IN RESPECT OF SUCH LIABILI TY BY WAY OF REMISSION OR CESSATION THEREOF SHALL BE DEEMED TO B E PROFITS AND GAINS OF THE BUSINESS OR PROFESSION AND CHARGEABLE TO TAX AS INCOME OF THAT PREVIOUS YEAR. ITA NO.1976/AHD /2011 ASST.CIT VS. NSP STRAW & PAPER PRODUCTS PVT.LTD. ASST.YEAR 2007-08 - 4 - [5.3]. IN VIEW OF THE ABOVE FACTS, THE AGGREGATE L IABILITY OF RS.1479040/- AS SHOWN ABOVE IS TREATED AS INCOME WI THIN THE MEANING OF SECTION 41(1) OF THE I.T. ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE-COMPANY. 5.1. HOWEVER, THE LD.CIT(A) IN PARA-4.3 OF HIS ORDE R HAS GIVEN A FINDING ON FACT AS UNDER:- 4.3. DECISION :- I HAVE CAREFULLY CONSIDERED THE RELEVANT FACTS, ARG UMENT ADVANCED AND DECISIONS CITED. THE ASSESSEE HAS SHOWN THE LI ABILITY AS OUTSTANDING IN ITS BOOKS OF ACCOUNT. THUS, THE AS SESSEE IS ACKNOWLEDGING THE LIABILITY. EVEN UNDER THE LIMITA TION ACT, THOUGH THE CREDITORS MAY NOT BE ABLE TO ENFORCE THE CLAIM FOR RECOVERY OF THE SUM, STILL IF THE ASSESSEE ACKNOWLE DGES THE LIABILITY, THE LIABILITY CANNOT BE SAID TO HAVE CEASED. IF TH E PROVISIONS OF SECTION 41(1) ARE TO BE APPLIED, IT IS FOR THE AO T O PROVE THAT THE ALLOWANCE OR DEDUCTIONS HAS BEEN MADE IN THE ASSESS MENT FOR ANY YEAR IN EFFECT OF LOSS OR TRADING LIABILITY INCURRE D BY THE ASSESSEE AND SUCH LIABILITY HAS CEASED OR THE ASSESSEE HAS O BTAINED WHETHER IN CASH OR IN ANY OTHER MANNER SOME BENEFIT IN RESP ECT OF SUCH LIABILITY. EXPLANATION(1) INSERTED TO SECTION(1) B Y FINANCE ACT-II WITH EFFECT FROM 1997 WILL ALSO NOT APPLY. FOR SUC H EXPLANATION TO APPLY, THERE SHOULD BE AT LEAST UNILATERAL ACT ON T HE PART OF THE ASSESSEE TO WRITE OFF SUCH LIABILITY IN ITS ACCOUNT . SINCE, THE ASSESSEE THE ASSESSEE HAS ACKNOWLEDGED THE LIABILIT Y THROUGH OUT AND SUCH LIABILITY IN SUBSEQUENT YEARS WAS EITHER S ETTLED BY RETURNING THE GOODS OR BY MAKING PAYMENT BY ACCOUNT PAYEE CHEQUES IS SUFFICIENT EVIDENCE TO HOLD THAT THE LIA BILITY HAS NOT CEASED AND HENCE ADDITION U/S.41(1) OF THE ACT IS N OT WARRANTED. I, THEREFORE, DELETE THE ADDITION MADE OF RS.14,79,040/- ON ACCOUNT OF ITA NO.1976/AHD /2011 ASST.CIT VS. NSP STRAW & PAPER PRODUCTS PVT.LTD. ASST.YEAR 2007-08 - 5 - ALLEGED CESSATION OF TRADING LIABILITY. THUS, THIS GROUND OF APPEAL IS ALLOWED . 5.2. THE AFORESAID FINDING OF THE LD.CIT(A) IS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. THE LD.CIT(A) HAS GIVEN A FINDING THAT IN SUBSEQUENT YEARS, THE ASSE SSEE HAS ACKNOWLEDGED THE LIABILITY THROUGHOUT AND SUCH LIABILITY WAS EI THER SETTLED BY RETURNING THE GOODS OR BY MAKING PAYMENT BY ACCOUNT PAYEE CH EQUES. THIS SPECIFIC FINDING OF THE LD.CIT(A) IS NOT REBUTTED B Y THE LD.SR.DR, THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE WIT H THE ORDER OF THE LD.CIT(A), SAME IS HEREBY SUSTAINED. THUS, GROUNDS RAISED IN THE REVENUES APPEAL ARE REJECTED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE DAY OF FEBRUARY, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 20/ 02 /2015 2*..,(.../ T.C. NAIR, SR. PS ITA NO.1976/AHD /2011 ASST.CIT VS. NSP STRAW & PAPER PRODUCTS PVT.LTD. ASST.YEAR 2007-08 - 6 - !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $% # / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-VALSAD 5. 7(8$45 , *45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<) / GUARD FILE. ! / BY ORDER, %7$ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 19.2.15(DICTATION-PAD 5- PA GES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..19.2.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.20.2.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20.2.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER