DCIT, New Delhi V. M/s. B.A. Properties Pvt. Ltd., New Delhi

ITA 219/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3809 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS MONA MOHANTY
• Assessee Lawyers: B L GUPTA ITP

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER & SHRI B.K. HALDAR, ACCOUNTANT MEMBER ITA NO. 219/DEL/2011 ASSESSMENT YEAR: 2007-08 DCIT, VS. B.A. PROPERTIES PVT. LTD., CENTRAL CIRCLE-19, 292, TAGORE PARK EXTENSION, ROOM NO. 319, MODEL TOWN-1, ARA CENTRE, E-2, NEW DELHI. JHANDEWALAN EXTENSION, AABCB7917M NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : MRS. MONA MOHANTY, SR. DR RESPONDENT BY : B.L. GUPTA, I.T.P. ORDER PER I.P. BANSAL, J.M. THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER PASSED BY LD. CIT(A) DATED 27.10.2010 FOR A.Y. 2007-08. GROUNDS OF APPEAL READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING TH E ADDITION OF RS. 28,68,287/- MADE BY THE AO ON ACCOUNT OF UNC LAIMED UNSECURED LOAN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING T HE FACT THAT ITA NO. 219/D/2011 2 THE CASE OF THE ASSESSEE IS ALSO COVERED U/S 28(IV) OF THE INCOME TAX ACT, 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING TH E FACT THAT THE SO CALLED CREDITORS WERE FOUND TO BE NONEST DUR ING THE COURSE OF ENQUIRIES. 4. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND NOT TE NABLE IN LAW AND ON FACTS. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F THE HEARING OF THE APPEAL. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY A SUM OF RS. 28,68,28 7/- SHOULD NOT BE ADDED TO ITS INCOME BEING AMOUNT REPRESENTING UNSEC URED LOANS SHOWN AS PAYABLE AS THEY WERE OUTSTANDING FOR A LON G PERIOD AND THERE APPEARS TO BE NO OBLIGATION OF THE ASSESSEE T O REPAY THE SAME. THE ASSESSEE VIDE ITS REPLY REPRODUCE IN THE ASSESS MENT ORDER HAD SUBMITTED THAT SEC. 41(1) WAS NOT APPLICABLE TO THE SE LOANS, THEREFORE, THERE WAS NO QUESTION OF ANY TAXATION. IT WAS ALSO SUBMITTED THAT NO EXPENSES WERE CLAIMED IN THE EARLIER YEARS, THEREFO RE, SEC. 41(1) IS NOT APPLICABLE. THE REPLY OF THE ASSESSEE WAS NOT F OUND TO BE SATISFACTORY BY THE AO AND ACCORDING TO AO THE ASSE SSEE WAS NOT SERIOUS IN THE COMPLETION OF ASSESSMENT. THEREFORE , AO ADDED THE SAID AMOUNT TO THE RETURNED LOSS OF RS. 11,127/- AN D INCOME OF THE ITA NO. 219/D/2011 3 ASSESSEE WAS FINALLY ASSESSED AT RS. 28,57,160/- AS ACCORDING TO AO EVEN IF THE AMOUNT IS RECEIVED IN THE NATURE OF CAP ITAL THAT WILL CHANGE ITS CHARACTER WHEN THE SAID AMOUNT BECOMES A SSESSEES OWN MONEY BEING UNCLAIMED BECAUSE OF LIMITATION OR OTHE RWISE AND IN SUCH CASES COMMONSENSE DEMANDS THAT THE AMOUNT SHOU LD BE TREATED AS INCOME OF THE ASSESSEE. THE AO OBSERVED THAT SI MILAR OBSERVATIONS HAVE BEEN MADE BY HONBLE SUPREME COUR T IN THE CASE OF CIT VS. SUNDRAM IYENGAR & SONS LTD. 222 ITR 344 (SC). IN THIS MANNER, THE ASSESSMENT OF THE ASSESSEE HAS BEEN FRA MED BY THE AO. 3. THE ADDITION WAS CHALLENGED IN AN APPEAL FILED B EFORE CIT(A). THE ADDITION WAS AGITATED ON THE GROUND THAT SEC. 4 1(1) WAS NOT APPLICABLE. LD. CIT(A) HAS DECIDED THE ISSUE VIDE AFOREMENTIONED IMPUGNED ORDER DATED 27.10.2010. LD. CIT(A) HAS OB SERVED THAT AO HAS ADDED THE SAID AMOUNT ON APPLICATION OF SEC. 41(1) OF THE ACT THAT DESCRIBES CESSATION OF LIABILITY. REFERRING TO SEC. 41(1) SHE HAS OBSERVED THAT FOR APPLICATION OF SEC. 41(1) THE TRA NSACTION HAS TO FULFILL THE FOLLOWING CRITERIAS: - (A) THE ASSESSEE HAS INCURRED A TRADING LIABILITY . (B) THIS TRADING LIABILITY HAS BEEN ALLOWED DEDUCTI ON IN AN EARLIER YEAR, AND ITA NO. 219/D/2011 4 (C) SOMETHING HAS, LATER ON, BEEN RECOVERED IN RES PECT OF SUCH LIABILITY, OR SUCH LIABILITY HAS EITHER BEEN R EMITTED OR HAS CEASED TO EXIST. 4. SHE OBSERVED THAT WHETHER THE LIABILITY IS A TRA DING LIABILITY OR NOT WILL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF A PARTICULAR CASE. IT HAS NOT BEEN DISCUSSED BY THE AO IN HIS O RDER AS TO WHETHER OR NOT THESE LOANS REPRESENTED A TRADING LIABILITY. THE RELIANCE BY THE AO ON THE DECISION IN THE CASE OF CIT VS. T.V. SUND RAM IYENGAR LTD. (SUPRA) IS MISPLACED AS THE FACTS OF THE ASSES SEES CASE ARE DIFFERENT. ACCORDING TO HER IT IS A SETTLED LAW TH AT A DEBT WAIVED OR FORGIVEN BY A CREDITOR CANNOT, NORMALLY, BE TREATED AS THE INCOME OF THE DEBTOR. IN THIS MANNER, LD. CIT(A) HAS DELETED THE ADDITION THE DEPARTMENT IS AGGRIEVED, HENCE HAS FILED AFOREMENTI ONED APPEAL ASSAILING THE DELETION MADE BY LD. CIT(A). 5. AT THE OUTSET, IT WAS SUBMITTED BY LD. AR THAT S IMILAR ADDITION WAS MADE IN THE CASE OF ASSOCIATE CONCERN OF THE AS SESSEE NAMELY RENU CONSTRUCTIONS PVT. LTD. AND RELIEF WAS GRANTED BY THE CIT(A) AND THE DEPARTMENT HAS RAISED SIMILAR GROUNDS AGAIN ST SUCH DELETION AND THE APPEAL OF THE DEPARTMENT WAS DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 25.03.2011 IN ITA NO. 220/DEL/2011 FOR A.Y. 2007- ITA NO. 219/D/2011 5 08 IN THE CASE OF DCIT VS. RENU CONSTRUCTIONS PVT. LTD. A COPY OF THE SAID ORDER WAS ALSO GIVEN TO LD. DR. 6. IN THE SAID CASE REVENUE HAD RAISED SIMILAR FIVE GROUNDS IN WHICH THE REVENUE HAD ASSAILED THE DELETION OF AN A MOUNT OF RS. 47,05,387/- ON THE GROUND THAT ASSESSEE DID NOT CAR RY ANY BUSINESS ACTIVITY FOR LAST MANY YEARS AND IT WAS SHOWING UNS ECURED LOANS PAYABLE AT RS. 47,05,387/-. THOSE LOANS WERE OUTST ANDING FOR A NUMBER OF YEARS AND IT WAS OBSERVED BY THE AO THAT THERE WAS NO OBLIGATION ON THE ASSESSEE TO PAY BACK THOSE LOANS AND, THEREFORE, THE AMOUNT CONSTITUTE INCOME IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF T.V. SUNDRAM IYENGAR & SONS PVT. LTD. (SUPRA). CIT(A) REFERRING TO SEC. 41(1) AND T HREE INGREDIENTS THEREOF HAD DELETED THE ADDITION AND OBSERVED THAT THE AFOREMENTIONED DECISION IN THE CASE OF T.V. SUNDRAM IYENGAR & SONS (SUPRA) WOULD NOT BE APPLICABLE TO THE FACTS O F THE CASE AND THE TRIBUNAL ON THESE FACTS, CONSIDERING THE SUBMISSION S OF THE DEPARTMENT HAD COME TO A CONCLUSION THAT THE LIABIL ITY IN THAT CASE WAS OF CAPITAL IN NATURE WHICH WAS NOT WRITTEN OFF IN THE PROFIT AND LOSS ACCOUNT. THE FINDING RECORDED BY THE AO THAT ASSESSEE WAS NOT CARRYING ON BUSINESS WAS CONTRADICTORY ITSELF AS HE HAS ASSESSED THE BUSINESS LOSS OF RS. 13,927/-. THAT WAS NOT A TRAD ING LIABILITY ITA NO. 219/D/2011 6 ALLOWED IN THE PAST, IT WAS NOT WRITTEN OFF TO THE CREDIT OF PROFIT AND LOSS ACCOUNT WHOLLY OR PARTLY AND, THEREFORE, THERE WAS NO REASON TO COME TO THE CONCLUSION THAT THE LIABILITY HAD CEASE D TO EXIST AND THE ASSESSEE CONSEQUENTIALLY GOT SOME BENEFIT IN RESPEC T OF THE LIABILITY ALLOWED IN THE PAST. AND IN THIS MANNER, IT WAS HE LD THAT NO ERROR HAS BEEN COMMITTED IN THE IMPUGNED ORDER AND THE DEPART MENTAL APPEAL WAS DISMISSED. IN THE SAID DECISION ONE OF US (J.M .) IS A PARTY. RELYING UPON THE AFOREMENTIONED DECISION, IT WAS TH E CASE OF LD. AR THAT THE ISSUE RAISED BY REVENUE IN THE PRESENT APP EAL IS SQUARELY COVERED BY THAT ORDER AND THE APPEAL OF THE DEPARTM ENT SHOULD BE DISMISSED. 7. ON THE OTHER HAND, LD. DR RELYING UPON THE ORDER OF AO AND GROUNDS OF APPEAL FILED BEFORE US, PLEADED THAT ADD ITION HAS WRONGLY BEEN DELETED, THEREFORE, THE ORDER OF CIT(A) SHOULD BE SET ASIDE AND THAT OF AO BE RESTORED. 8. WE HAVE HEARD BOTH THE PARTIES. WE HAVE CAREFUL LY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS ORDER PASSE D BY CIT(A). FROM THE FACTS OF THE ASSESSEES CASE AND THE FACTS MENTIONED IN THE AFOREMENTIONED DECISION OF TRIBUNAL IN THE CASE OF DCIT VS. RENU CONSTRUCTIONS PVT. LTD. (ASSOCIATE CONCERN OF THE A SSESSEE), IT APPEARS ITA NO. 219/D/2011 7 THAT THE FACTS ARE IDENTICAL AND THE ADDITION WAS A LSO MADE BY THE AO ON SIMILAR GROUNDS. THE GROUNDS OF APPEAL RAISED B Y THE REVENUE WERE ALSO SAME. THEREFORE, THE ISSUE RAISED BY REV ENUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE AFOREMENTIONED OR DER OF THE TRIBUNAL. FOR THE SAKE OF COMPLETENESS THE SAID OR DER IS BEING REPRODUCED IN ITS ENTIRETY: - THE REVENUE HAS TAKEN FIVE GROUNDS IN THE AP PEAL, THE SUM AND SUBSTANCE OF WHICH IS THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DEL ETING THE ADDITION OF RS. 47,05,387/-, MADE BY THE A O IN RESPECT OF UNCLAIMED UNSECURED LOANS AND THAT HE FAILED TO APPRECIATE THAT THE AMOUNT REPRESENTS INCOME U/S 28(IV) OF THE INCOME-TAX ACT, 1961. 2. THE FINDING OF THE AO IN THIS REGARD IS THAT T HE ASSESSEE HAS NOT BEEN CARRYING ON ANY BUSINESS AC TIVITY FOR LAST MANY YEARS, TILL IT IS SHOWING UNSECU RED LOANS PAYABLE AT RS. 47,05,387/-. THESE LOANS HAVE RE MAINED OUTSTANDING FOR A NUMBER OF YEARS AND, THEREFO RE, IT APPEARS THAT THERE IS NO OBLIGATION ON THE ASSES SEE TO PAY BACK THESE LOANS. THE AMOUNT CONSTITUTES IN COME IN VIEW OF THE DECISION OF HONBLE SUPREME COU RT IN ITA NO. 219/D/2011 8 THE CASE OF T.V. SUNDARAM IYENGAR & SONS LTD., 222 ITR 344. 3. THE FINDING OF THE LD. CIT(APPEALS) IS THAT THE AO HAS ADDED THIS AMOUNT PRESUMABLY U/S 41(1) OF THE ACT, WHICH COMES INTO OPERATION IF (I) THE ASSESSE E HAD INCURRED A TRADING LIABILITY; (II) THE LIABILIT Y HAS BEEN ALLOWED AS DEDUCTION IN ANY EARLIER YEAR OR THIS Y EAR; (III) IT HAS BEEN RECOVERED IN THE YEAR OR IT HAS CEASED TO EXIST OR HAS BEEN REMITTED. THE CASE OF T.V.SUNDARAM IYENGAR & SONS LTD. (SUPRA) HAS BEEN DISTINGUISHED. SINCE NONE OF THE CONDITIONS MENT IONED ABOVE HAS BEEN SATISFIED, THE ADDITION HAS BEE N DELETED. 4. BEFORE US, THE LD. DR EXPLAINED THE FINDINGS O F THE AO AND THE LD. CIT(APPEALS). HEAVY RELIANCE HAS BEEN PLACED ON THE ORDER OF THE AO TO ARGUE THAT THE IMPUGNED ORDER MAY BE SET ASIDE AND THE ORDER OF THE AO MAY BE RESTORED. NO AUTHORIZED PERSON ATTEN DED ON BEHALF OF THE ASSESSEE. THEREFORE, WE PROCEED ON THE BASIS OF ASSISTANCE GRANTED TO US BY THE LD. DR . ITA NO. 219/D/2011 9 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IN THE CASE OF T.V. IYENGAR & SONS (SUPRA), THE FACTS WERE THAT DEPO SITS WERE RECEIVED FOR SUPPLY OF GOODS. WITH THE EFFLU X OF TIME, CREDIT BALANCES IN THESE ACCOUNTS WERE W RITTEN OFF TO THE CREDIT OF PROFIT AND LOSS ACCOUNT. T HE HONBLE SUPREME COURT HELD THAT THE ASSESSEE HAS BECOME RICHER BY THE AMOUNT WRITTEN TO PROFIT AND LOSS A CCOUNT ON ACCOUNT OF TRADING TRANSACTIONS. THE FACT S OF THIS CASE ARE CLEARLY DISTINGUISHABLE AS ADMITTEDLY THE AMOUNTS CONSTITUTED LOANS, A CAPITAL LIABILITY . FURTHER, THE AMOUNTS HAVE NOT BEEN WRITTEN OFF TO THE CREDIT OF PROFIT AND LOSS ACCOUNT. 5.1 COMING TO THE PROVISION CONTAINED IN SECTION 41(1), THE ADMITTED POSITION IS THAT THE LIABI LITY IS CAPITAL IN NATURE. IT HAS NOT BEEN YET WRITTEN OFF TO PROFIT AND LOSS ACCOUNT. THE FINDING OF THE AO T HAT THE ASSESSEE HAS NOT BEEN CARRYING ON BUSINESS IS CONTRADICTED BY HIM WHEN BUSINESS LOSS OF RS. 13,9 27/- WAS ALLOWED. THUS, IT IS NOT A TRADING LIABIL ITY ALLOWED IN PAST. IT HAS NOT BEEN WRITTEN OFF TO THE CREDI T OF PROFIT AND LOSS ACCOUNT, WHOLLY OR PARTLY. THEREFORE, THERE IS ITA NO. 219/D/2011 10 NO REASON TO COME TO THE CONCLUSION THAT THE LIABI LITY HAS CEASED TO EXIST AND THE ASSESSEE CONSEQUENTIALLY GOT SOME BENEFIT IN RESPECT OF THE LIABILITY ALLOWED IN THE PAST. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO SUCH ERROR IN THE IMPUGNED ORDER, WHICH REQUIRES MODIFICATION FROM US. 6. IN THE RESULT, THE APPEAL IS DISMISSED. 9. IT MAY BE ADDED HERE THAT IT HAS NEITHER BEEN TH E CASE OF AO NOR OF CIT(A) THAT THE SAID AMOUNT COULD BE ASSESSE D U/S 28(IV) OF THE ACT. THE REVENUE CANNOT MAKE OUT A NEW CASE WH ICH IS NOT EVEN THE CASE OF AO OR CIT(A). THEREFORE, WE FIND NO SU BSTANCE IN THE GROUND TAKEN BY THE REVENUE ON WHICH THE SUSTENANCE OF ADDITION HAS BEEN SUPPORTED BY APPLICATION OF SEC. 28(IV) OF THE ACT. SUCH GROUND HAVING NO MERIT IS DISMISSED. 10. IN VIEW OF ABOVE DISCUSSION, THE DEPARTMENTAL A PPEAL HAVING NO MERIT IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17.6.2011 SD/- SD/- (B.K. HALDAR) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17.6.11 *KAVITA ITA NO. 219/D/2011 11 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR