TEKSONS COOLING SYSTEMS PRIVATE LIMITED, THANE V. DEPUTY COMMISSIONER OF INCOME TAX 8(3)(1), MUMBAI

ITA 219/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4556 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 09-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGH
• Keywords: Wrong claim; Corroborative evidences; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.219/M/2018 ASSESSMENT YEAR: 2013-14 M/S. TEKSONS COOLING SYSTEMS P. LTD., KOLSHET ROAD, KAPURBAWADI, THANE 400 607 PAN: AAACT2546H VS. DCIT 8(3)(1), MUMBAI (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : MS. DINKLE HARIA, A.R. REVENUE BY : SHRI AMIT PRATAP SINGH, D.R. DATE OF HEARING : 15.01.2020 DATE OF PRONOUNCEMENT : 18.02.2020 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 03.10.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2013-14. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) WHEREIN THE LD. CIT(A) HAS SUSTAINED THE ADDITION OF RS.1,12,50,000/- AS MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 01.10.2013 DECLARING INCOME OF RS.1,57,70 ,740/-. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ITA NO.219/M/2018 M/S. TEKSONS COOLING SYSTEMS P. LTD. 2 UNDER CASS AND STATUTORY NOTICES WERE DULY ISSUED A ND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS SHO WN LIABILITY OF RS.1,12,50,000/- AS OTHER LONG TERM LIABILITIES AND ACCORDINGLY CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS AND SUPPORTING EVIDENCES IN CONNECTION THERE WITH. HOWEVER, THE A SSESSEE DID NOT FILE ANY DETAILS DESPITE SEVERAL OPPORTUNITIES. FINALLY, VIDE LETTER DATED 15.03.2016 THE ASSESSEE SUBMITTED THAT THE LIABILITY OF RS.1,12,50,000/- REPRESENTED CREDIT BALANCES OF PARTIES OF EARLIER YEARS AND ARE BEING SETTLED FROM TIME TO T IME. THE ORIGINAL BALANCES WERE OUTSTANDING SINCE THE COMPAN Y CLOSED ITS BUSINESS AND THE OUTSTANDING WERE APPROXIMATELY RS.1,98,00,000/- WHICH HAVE BEEN REDUCED TO RS.1,12 ,50,000/- OVER THE YEARS. THE BALANCE HAS BEEN CARRIED FORW ARD FROM PREVIOUS YEAR AND WOULD BE DISCHARGED AS PER AVAILA BILITY OF FUNDS. HOWEVER, THE SUBMISSION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO AND HE ADDED THE SAME UNDER SECT ION 41(1) OF THE ACT BY OBSERVING THAT THE LIABILITY HAS CEAS ED TO EXIST AND HENCE MADE ADDITION OF RS.1,12,50,000/-. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALS O AFFIRMED THE ORDER OF AO BY CONSIDERING THE CONTENTION OF TH E ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 4. I HAVE CONSIDERED THE SUBMISSION MADE BY THE AP PELLANT AND THE REASONS RECORDED BY THE AO. DURING THE COURSE OF APPELLATE PROCEEDINGS ALSO, THE APPELLANT WAS ASKED TO FURNISH THE DETAILS OF LONG-TERM LIABI LITIES AMOUNTING TO RS. 1,12,50,000 SHOWN OUTSTANDING IN THE BALANCE SHEET. HOWEVER, THE APPELLANT DID NOT SUBMIT ANY SUCH INFORMATION CLAIMING THAT SOFTW ARE HAS CRASHED AND THE DATA IS IRRETRIEVABLE. WHEN THE APPELLANT DOES NOT HAVE ANY RECORD OF THE LIABILITIES, HOW CAN IT CLAIM THAT THE LIABILITIES STILL EXIST. A PE RSON WHO IS WILLING TO HONOUR LIABILITIES MUST BE ABLE TO TELL ATLEAST AS TO WHAT ARE THE LIA BILITIES WHICH HE IS WILLING TO HONOUR, WHICH ARE THE PARTIES WHOSE CLAIM IS OUTSTA NDING AND WHAT IS THE REASON FOR NON-PAYMENT SO FAR. MERE FACT THAT THE LIABILITIES ARE SHOWN IN THE BALANCE SHEET IS NOT SUFFICIENT TO PROVE THE BONA FIDES OF THE CLAIM OF THE APPELLANT. IF THE APPELLANT ITA NO.219/M/2018 M/S. TEKSONS COOLING SYSTEMS P. LTD. 3 IS UNABLE TO FURNISH ANY DETAILS ABOUT THE LIABILIT IES CLAIM TO BE OUTSTANDING, THE AO HAS NO OTHER OPTION BUT TO CONCLUDE THAT THE LIABIL ITIES HAVE CEASED TO EXIST DURING THE PREVIOUS YEAR UNDER CONSIDERATION BECAUSE THE A PPELLANT'S CLAIM ABOUT THE EXISTENCE OF LIABILITIES HAS BEEN ALREADY ACCEPTED AT FACE VALUE IN THE EARLIER ASSESSMENT YEARS AND NO EVIDENCE TO THE CONTRARY IS AVAILABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY, ADDITION OF RS. 1,12,50,000/- MADE BY THE AO U/S 41(1) OF THE IT ACT IS HEREBY CONFIRMED. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE BUSINESS O PERATION OF THE ASSESSEE WAS CLOSED DOWN AND ASSESSEE DUE TO TH E FINANCIAL CRUNCH COULD PAY OFF THE LIABILITIES OUTSTANDING I N THE BOOKS OF ACCOUNTS. WE NOTE THAT AT THE TIME OF CLOSURE OF B USINESS , THE OUTSTANDING LIABILITIES WERE RS.1,98,00,000/- WHICH WAS REDUCED TO RS.1,12,50,000/- OVER THE YEARS. THE PLEA OF TH E COUNSEL OF THE ASSESSEE IS THAT THE LIABILITY HAS NOT CEASED T O EXIST AND THEREFORE THE ACTION OF THE AO TO ADD THE SAME UNDE R SECTION 41(1) CITING REASON THAT SAME HAS CEASED TO EXIST A ND IS BAD IN LAW. IN DEFENCE OF HIS ARGUMENT, THE LD. D.R. RELI ED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F PR. CIT VS. MAHALAXMI INFRA PROJECT PVT. LTD. IN ITA NO.1769 OF 2016 ORDER DATED 13.01.2019 WHEREIN THE HONBLE BOMBAY HIGH CO URT HAS HELD AS UNDER: 5. WE NOTICE THAT THE REVENUE HAS PROPOSED FOLLOWI NG ADDITIONAL QUESTION FOR OUR CONSIDERATION:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE TRIBUNAL WAS RIGHT IN DELETING THE ADDITIO N MADE BY THE AO U/S 41(1) ON ACCOUNT OF BOGUS CLAIM OF EXPENSES IN THE NAME OF LABOUR CONTRACTORS/SUB-CONTRACTORS WHICH ARE OUTSTA NDING FOR A NUMBER OF YEARS? (II) . (III) 6. IN SO FAR AS QUESTION NO.(I) IS CONCERNED, THE S AME ARISES OUT OF THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER SECTION 41(1) O F THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) ON ACCOUNT OF BOGUS CLAIM OF LIABILITY. THE TRIBUNAL WHILE GIVING RELIEF TO THE ASSESSEE, REFERRED TO THE DECISION OF THE SUPREME COURT AND OTHER DECISIONS HOLDING THAT MERELY BECAUSE PERIOD OF 3 Y EARS EXPIRED FROM ARISING OF THE ITA NO.219/M/2018 M/S. TEKSONS COOLING SYSTEMS P. LTD. 4 LIABILITY WOULD NOT AUTOMATICALLY MEAN THAT THE LIA BILITY HAS CEASED. WE DO NOT FIND ANY ERROR IN THE VIEW OF THE TRIBUNAL. 6. CONSIDERING THE FACTS OF THE CASE OF THE ASSESSE E IN THE LIGHT OF RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT , WE ARE INCLINED TO SET ASIDE THE ORDER OF LD. CIT(A) AND D IRECT THE AO TO DELETE THE ADDITION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.02.2020. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18 .02.2020. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.