Sh. Rajesh Bhatia, Delhi V. DCIT, New Delhi

ITA 2022/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0225 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 02-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 05-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: K R MANJANI
• Keywords: Application of stay
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI J.S. REDDY , ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 202 2 /DEL /2013 ASSESSMENT YEAR : 200 7 - 200 8 SHRI RAJESH BHATIA VS. DCIT, CENTRAL CIRCLE - 17, NEAR KAMLA NAGAR, NEW DELHI. NEW DELHI. (PAN AAHPB 6307 N ) (APPELLANT) (RESPONDENT) DATE OF HEARING : 02 .0 7 .2015 DATE OF PRONOUNCEMENT : 22 .0 7 . 2015 ASSESSEE BY : SRI K.R. MANJANI, ADVOCATE RESPONDENT BY: SRI VIKRAM SAHAY, SR. D.R. ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER 1. THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF THE CIT(A) - I V , NEW DELHI DATED 05 . 0 2 .201 3 IN APPEAL NO. 140 / 12 - 13 FOR AY 200 7 - 0 8 . ITA NO. 2 02 2 /DEL/201 3 2 2. THE SOLE GROUND RAIS ED BY THE ASSESSEE IN THIS APPEAL READS AS UNDER: - LEARNED CIT(A) HAS ERRED ON FACTS AS WELL AS IN SUSTAINING ADDITION OF RS.6,94,272/ - OUTSTANDING IN THE BOOKS IN THE NAME OF SHRI AMIR MOHAMMAD (WRONGLY WRITTEN AS AMIT CHAND IN THIS YEAR). LD. CIT(A) S OBSERVATION THAT APPELLANT HAS WRITTEN BACK LIABILITY IN THE NAME OF SHRI AMIR MOHAMMAD AND CREATED NEW LIABILITY IN THE NAME OF SHRI AMIT CHAND IS A FIG OF IMAGINATION WITHOUT ANY BASIS AND WITHOUT ANY EVIDENCE. 3. BRIEFLY STATED THE FACTS GIVING RISE T O THIS APPEAL ARE THAT THE ASSESSEE FILED HIS RETURN FOR AY 2007 - 08 ON 31.07.2007 , DECLARING AN INCOME OF RS.68,780/ - AND THE CASE WAS SELECTED FOR SCRUTINY. AFTER ALLOWING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE, THE AO HELD THAT NEITHER ANY SUPPORTING DOCUMENTS RELATING TO TRANSACTION HELD WITH SHRI AMIR MOHD N OR ANY CONFIRMATIONS OF THE SAME HAVE BEEN FILED TILL COMPLETION OF ASSESSMENT PROCEEDING AND THE AO MADE AN ADDITION OF RS.6,94,272/ - 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) , WHICH WAS ALSO DISMISSED BY PASSING THE IMPUGNED ORDER. NOW, THE EMPTY HANDED ASSESSEE IS BEFORE THIS TRIBUNAL WITH THE SOLE ISSUE/GROUND AS REPRODUCED HEREINABOVE. 5. WE HAVE HEARD ARGUMENTS ON BOTH THE SIDES AND CAREFUL LY PERUSED THE RELEVANT MATERIAL P LACED ON RECORD. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THERE WAS A TYPOGRAPHICAL MISTAKE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE , ITA NO. 2 02 2 /DEL/201 3 3 WHEREIN WRONG NAME WAS WRITTEN AS SHRI AMIR CHAND WHEREAS THE CORRECT NAME WAS SHRI AMIR MOHD WHICH WAS CORRECTLY SH OWN IN THE DETAILS OF BOOKS OF ACCOUNTS FILED BEFORE THE AO. THE LD. COUNSEL FURTHER SUBMITTED THAT SHRI AMIR MOHD WAS OLD CREDITOR AND ON ACCOUNT OF DISTURBANCES AND UNSETTLED POSITION IN AFGANISTAN, THE ASSESSEE WAS NOT ABLE TO KNOW HIS PRESENT WHEREABOU TS AND THEREFORE, ASSESSEE WAS UNABLE TO SUBMIT ANY CONFIRMATION OR ANY OTHER DETAILS FROM THE SAID CREDITOR AS REQUIRED BY THE AO . THE LD. COUNSEL REITERATING ITS EXPLANATION AND SUBMISSION BEFORE AO AND SUBMITTED THAT GOODS WERE PURCHASED FROM SHRI AMIR MOHD OF AFGANISTAN ABOUT 10 YEARS BACK AND THIS CREDIT WAS SHOWN OUTSTANDING IN BOOKS OF ACCOUNTS OF THE ASSESSEE . 6. LD. COUNSEL VEHEMENTLY CONTENDED THAT THE ASSESSING OFFICER AND THE CIT(A) WERE NOT CORRECT IN HOLDING THAT THE SAID LIABILITY WAS CEASED DURING THE YEAR UNDER CONSIDERATION BECAUSE IT CANNOT BE DONE UNILATERALLY AND UNLESS THE ASSESSEE IS COMPLETELY SATISFIED THAT THE DUE AMOUNT WILL NOT BE CLAIMED BY THE RELEVANT CREDITOR SHRI AMIR MOHD OR ANY OTHER PERSON THEN THERE WAS NO QUESTION OF PR ESUMING THAT THE LIABILITY HAS CEASED. LD. COUNSEL FURTHER TOOK US THROUGH PAPER BOOK OF THE ASSESSEE CONTAINING 12 PAGES AND SUBMITTED THAT THE ASSESSEE SHOWN SHRI AMIR MOHD AS CREDITOR IN THE BALANCE SHEET WRITE FROM F YS 2004 - 05 TO 2006 - 07 WHICH IS RELE VANT TO ASSESSMENT YEAR UNDER CONSIDERATION 2007 - 08 . T HEREFORE, THE AUTHORITIES BELOW WERE NOT CORRECT AND ITA NO. 2 02 2 /DEL/201 3 4 JUSTIFIED IN HOLDING THAT THE LIABILITY HAS BEEN CEASED DURING THE RELEVANT FINANCIAL PERIOD. THE LD. COUNSEL FURTHER POINTED OUT THAT THIS LIABILITY OF RS.6,94,272/ - WAS OFFERED TO TAX BY THE ASSESSEE IN AY 2013 - 14 AND TAX HAS BEEN PAID THEREON THEREFORE, THE ADDITION MADE BY THE AO AND UPHELD BY THE CIT(A) IS NOT SUSTAINABLE FOR AY 2007 - 08 IN ACCORDANCE WITH PROVISIONS OF THE ACT. THE LD. COUNSEL PO INTED OUT THAT THE ASSESSEE S PAPER BOOK PAGE S 6 TO 12 WHEREIN AT PAGE 8 IN THE COMPUTATION OF INCOME IMPUGNED AMOUNT HAS BEEN OFFERED TO TAX AS INCOME FROM OTHER SOURCES. 7 . LD. COUNSEL ALSO SUBMITTED A COPY OF THE DECISION OF THE ITAT DELHI G BENCH IN THE CASE OF SHRI SUNIL KUMAR BHATIA VS. ACIT DATED 11.10.2013 FOR AY 2007 - 08 IN ITA NO.2020/DEL/2013 AND SUBMITTED THAT IN THE SIMILAR FACTS AND CIRCUMSTANCES SIMILAR KIND OF ADDITION HAS BEEN ORDERED TO BE DELETED BY THE TRIBUNAL AS THE ASSESSEE SHRI SUN IL KUMAR BHATIA OFFERED SIMILAR AMOUNT TO TAX IN AY 2013 - 14. 8 . REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) DID NOT DISPUTE THIS FACT THAT THE IMPUGNED LIABILITY WAS SHOWN IN THE NAME OF SHRI AMIR MOHD IN HIS BOOKS OF ACCOUNT OF THE AS SESSEE IN THE BALANCE SHEETS AS ON 31.03.2004, 31.03.2005, 31.03.2006 AND 31.03.2007. THE LD. DR HAS ALSO NOT DISPUTED THIS FACT THAT IN THE SIMILAR YEARS THIS LIABILITY OF RS.6,94,272/ - WAS SHOWN IN THE NAME OF SHRI AMIR MOHD , THEREFORE , THIS CONTENTION O F THE ASSESSEE IS FOUND TO BE ACCEPTABLE THAT THE NAME OF SHRI AMIR CHAND IN THE ITA NO. 2 02 2 /DEL/201 3 5 BALANCE SHEET AS ON 31.03.2007 WAS MENTIONED BY MISTAKE AND THIS LIABILITY IS ACTUALLY RELATED TO CREDITOR SHRI AMIR MOHD. THE LD. DR HAS ALSO NOT DISPUTED THIS FACT THAT THE ASSESSEE HAS OFFERED THIS LIABILITY TO TAX IN AY 2013 - 14 AND TAX HAS BEEN PAID THEREON. THE LD. DR FAIRLY ACCEPTED THAT IN THE SIMILAR SET AND CIRCUMSTANCES IN THE CASE OF SHRI SUNIL KUMAR BHATIA ITAT DELHI G BENCH IN THE ORDER DATED 11.10.2013 (SUPRA) HA S ALLOWED THE APPEAL OF THE ASSESSEE ON THE SIMILAR ISSUE. 9 . ON CAREFUL CONSIDERATION OF ABOVE SUBMISSION, AT THE VERY OUTSET, WE OBSERVE THAT THE ITAT DELHI G BENCH IN THE CASE OF SHRI SUNIL KUMAR BHATIA (SUPRA) HAS HELD AS UNDER: - 3. AT THE TIME OF H EARING BEFORE US, IT IS STATED BY THE LEARNED COUNSEL THAT THE ASSESSING OFFICER MADE THE ADDITION OF `7,94,592/ - IN RESPECT OF THE LIABILITY SHOWN BY THE ASSESSEE IN THE NAME OF SHRI BANARSI LAL S/O SHRI LAXMAN DAS IN ITS BALANCE SHEET. HE SUBMITTED THAT THE LIABILITY IS WITH REGARD TO GOODS PURCHASED BY THE ASSESSEE FROM THIS PARTY IN THE EARLIER YEARS AND THE CREDIT WAS OUTSTANDING IN THE BALANCE SHEET OF 31ST MARCH, 2007. HE SUBMITTED THAT THE ASSESSEE HAS NOT DENIED THE LIABILITY. HOWEVER, DURING ASSES SMENT PROCEEDINGS, THE ASSESSEE COULD NOT PRODUCE THE CONFIRMATION FROM THE CREDITOR BECAUSE OF UNREST IN AFGHANISTAN AT THE RELEVANT TIME. HE STATED THAT AFTER THE RESTORATION OF NORMALCY IN AFGHANISTAN, THE ASSESSEE TRIED TO TRACE THE ABOVE PARTY AND SIN CE HE WAS UNABLE TO TRACE THE PARTY, THE ASSESSEE HIMSELF HAS WRITTEN BACK THE LIABILITY TO ITS PROFIT & LOSS ACCOUNT ON 10.04.2012. HE, THEREFORE, SUBMITTED THAT AS PER EXPLANATION (1) TO SECTION 41(1), THE WRITING BACK OF THE LIABILITY IS TO BE TREATED A S INCOME OF THE PREVIOUS YEAR ENDED ON 31ST MARCH, 2013. HE ALSO STATED THAT THE ASSESSEE HAS CREDITED THE ABOVE LIABILITY TO THE PROFIT & LOSS ACCOUNT AND WILL INCLUDE IN ITS INCOME IN THE RETURN WHICH IS LIKELY TO BE FILED SHORTLY. ITA NO. 2 02 2 /DEL/201 3 6 4. LEARNED DR, ON THE OTHER HAND, STATED THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE, CORRESPONDENCE OR DETAIL WHICH MAY JUSTIFY THAT THE LIABILITY WAS EXISTING AS ON 31ST MARCH, 2007 AND HAS CEASED ONLY DURING THE FY 2012 - 13. SHE FURTHER STATED THAT DURING ASSESSMENT PROC EEDINGS, THE ASSESSING OFFICER ALLOWED OPPORTUNITY TO THE ASSESSEE TO FURNISH THE CONFIRMATION FROM THE CREDITOR BUT THE SAME WAS ALSO NOT FURNISHED. THE PURCHASE WAS MADE TEN YEARS BACK AND THE WHEREABOUTS OF THE CREDITOR ARE NOT KNOWN, THEREFORE, THE ASS ESSING OFFICER RIGHTLY TREATED THAT THE LIABILITY HAS ALREADY CEASED. BY WRITING OF THE LIABILITY IN THE FY 2012 - 13, THE ASSESSEE HIMSELF HAS ADMITTED THE CESSATION OF LIABILITY BUT THE ASSESSEE IS ONLY TRYING TO POSTPONE THE PAYMENT OF TAX ON SUCH LIABILI TY. SHE, THEREFORE, SUBMITTED THAT THE ORDER OF LEARNED CIT(A) SHOULD BE SUSTAINED. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES AND THE FACTS O F THE CASE, IT IS EVIDENT THAT NOW THE CONTROVERSY IS VERY NARROW BECAUSE IT IS THE STAND OF BOTH THE PARTIES THAT THE LIABILITY HAS CEASED. THE ONLY DISPUTE IS WITH REGARD TO THE YEAR OF CESSATION OF LIABILITY. AS PER ASSESSING OFFICER, THE LIABILITY CEAS ED IN THE FINANCIAL YEAR ENDED ON 31ST MARCH, 2007 WHILE, AS PER ASSESSEE, LIABILITY CEASED IN THE FINANCIAL YEAR ENDED ON 31ST MARCH, 2013. THE ASSESSEE HAS WRITTEN BACK THE LIABILITY IN ITS BOOKS OF ACCOUNT FOR THE FY 2012 - 13. THAT SECTION 41(1) READS AS UNDER: - 41. (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 - MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, (A) THE FIRST - MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF , THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME - TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR ITA NO. 2 02 2 /DEL/201 3 7 (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF WHICH LOSS OR EXPENDITURE WAS INCUR RED BY THE FIRST - MENTIONED PERSON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRED TO IN CLAUSE (A) BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRUING 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 - SECTION, 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 REMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUS E (B) OF THAT SUB - SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS.] [EXPLANATION 2]. FOR THE PURPOSES OF THIS SUB - SECTION, 'SUCCESSOR IN BUSINESS' MEANS, (I) WHERE THERE HAS BEEN AN AMALGAMATION OF A COMPANY WITH ANOTHER COMPANY, THE AMALGAMA TED COMPANY; (II) WHERE THE FIRST - MENTIONED PERSON IS SUCCEEDED BY ANY OTHER PERSON IN THAT BUSINESS OR PROFESSION, THE OTHER PERSON; (III) WHERE A FIRM CARRYING ON A BUSINESS OR PROFESSION IS SUCCEEDED BY ANOTHER FIRM, THE OTHER FIRM;] [(IV) WHERE THERE H AS BEEN A DEMERGER, THE RESULTING COMPANY.]. 6. FROM THE ABOVE, IT IS EVIDENT THAT MAIN SECTION I.E. 41(1) WOULD BE APPLICABLE WHERE THE ASSESSEE HAS OBTAINED SOME BENEFIT IN RESPECT OF ANY TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. IT IS A SETTLED LEGAL POSITION THAT MERELY BECAUSE A LIABILITY HAS BECOME TIME BARRED OR IS OUTSTANDING FOR A LONGER PERIOD, IT CANNOT BE PRESUMED THAT THERE IS A REMISSION OR CESSATION OF THE LIABILITY. EXPLANATION (1) TO SECTION 41(1) IS A DEEMING PROVISION B Y WHICH REMISSION OR CESSATION OF LIABILITY WOULD BE PRESUMED IN THE YEAR IN WHICH THE DEBTOR HAS WRITTEN OFF THE LIABILITY IN HIS BOOKS OF ACCOUNT. IN OUR OPINION, IN THE CASE OF THE ASSESSEE, EXPLANATION (1) TO SECTION 41(1) WOULD BE SQUARELY APPLICABLE FOR THE FY 2012 - 13. ADMITTEDLY, THERE CANNOT BE CESSATION OF LIABILITY TWICE. THEREFORE, WHEN AS PER ITA NO. 2 02 2 /DEL/201 3 8 EXPLANATION (1) THERE WOULD BE CESSATION OF LIABILITY IN THE FY 2012 - 13 I.E. RELEVANT TO THE ASSESSMENT YEAR 2013 - 14, IN OUR OPINION, THE ADDITION FOR THE SAME CANNOT BE MADE BY PRESUMING REMISSION OR CESSATION OF LIABILITY IN THE YEAR UNDER CONSIDERATION I.E. AY 2007 - 08. WE, THEREFORE, DELETE THE ADDITION OF `7,94,592/ - MADE BY THE ASSESSING OFFICER. 10 . IN VIEW OF ABOVE, WE ARE INCLINED TO HOLD THAT WHEN THE ASSESSEE HAS SHOWN THIS LIABILITY AS CREDITOR IN THE PREVIOUS ASSESSMENT YEAR IN THE NAME OF SHRI AMIR MOHD THEN THIS INADVERTENT MISTAKE IN THE ENTRY OF NAME CANNOT CREATE ANY DOUBT ABOUT THE EXISTING LIABILITY OF ASSESSEE DU RING THE RELEVANT PERIOD UNDER CONSIDERATION . W E FURTHER OBSERVE THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES , THE ITAT DELHI G BENCH HAS ALLOWED APPEAL OF SHRI SUNIL KUMAR BHATIA BY ORDER DATED 11.10.2013 (SUPRA) AND THE PRESENT CASE IS SQUARELY COVERED IN FAVOUR OF THE AS SESSEE BY THIS ORDER. WE MAY ALSO POINT OUT THAT WHEN THE ASSESSEE HAS OFFERED IMPUGNED LIABILITY TO TAX IN AY 2013 - 14 AND TAX HAS BEEN PAID THEREON THEN THE SIMILAR ADDITION CANNOT BE UPHELD FOR AY 2007 - 08 AN ADDITION MADE BY THE AO AND UPHELD BY THE CIT( A) CANNOT BE HELD AS SUSTAINABLE AND THUS, IN ACCORDANCE WITH LAW AND WE DIRECT THE AO TO DELETE THE SAME. ACCORDINGLY, THE SOLE GROUND OF THE ASSESSEE IS ALLOWED. 11 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ITA NO. 2 02 2 /DEL/201 3 9 STAY APPLICATION NO.216/DEL/2014 FO R AY 2007 - 08 1 2 . SINCE BY THE EARLIER PART OF THIS ORDER, WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE FOR AY 2007 - 08, DELETING THE IMPUGNED ADDITION, THEREFORE, THE STAY APPLICATION OF THE ASSESSEE BECOMES INFRUCTUOUS AND WE DISMISS THE SAME. THE DECIS ION IS PRONOUNCED IN THE OPEN COURT ON 2 2 ND JULY, 2015. SD/ - SD/ - ( J.S. REDDY ) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 2 ND JULY , 2015. AKS/ - COPY FORWARDED TO : 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI